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2.



Michael B. Smith

Chief Financial Officer and Managing Director, TEAI



3.



Thomas M. Ray III

Chief Executive Officer and President, Novistar



Bellwether Exploration Company

1.



J.P. Bryan

Chief Executive Officer



2.



Robert J. Bensh

Sr. Vice President-Finance



3.



Cliff M. West, Jr.

Sr. Vice President-Exploration and Explotation

<PAGE>

SCHEDULE 10.5

KEY PERSONNEL

MASTER SERVICES AGREEMENT



1.



Ann Kaeserman: Controller, TEAI



2.



Carol Cooley:



3.



Randy A. Bailey:



4.



Wayne Penello:



5.



Kim Yates:



Landman, TEAI

Senior Vice President, TOC

Vice President, Risk Management, TEMI



Senior Financial Analyst, TEAI



6.

Jim Abney: Director, Land, TEAI

</TEXT>

</DOCUMENT>

<DOCUMENT>

<TYPE>EX-11.16

<SEQUENCE>4

<DESCRIPTION>CONTRACT FOR THE PRODUCTION OF CRUDE OIL

<TEXT>

<PAGE>

EXHIBIT 10.16

TRANSLATOR NOTE:

The following additions (in bold) were included in the changes in the file

"cambios 10sep," but did not appear in the final Spanish version, so I have

deleted them from this final English version.

25.2.2 - The Parties agree that the Arbitration shall take place in the city of

Quito, Ecuador and, if it considers it appropriate, the Center may designate the

Arbitration Center of the Quito Chamber of Commerce as the place and the

facilities for the development of the arbitration proceeding.

25.3.1 If the disagreement or controversy is of a nature such that it cannot be

resolved by the Consultant as stipulated in Clause 25.1, or if one or both of



the Parties is not satisfied with the decision rendered by the Consultant,

unless it has been agreed that the opinion of the Consultant be binding,

PETROECUADOR and the Contractor agree to submit such a disagreement or

controversy to the arbitration of the International Center for the Settlement of

Investment Disputes (ICSID). (The Center)

Page 1 of 56

<PAGE>

CONTRACT FOR THE PRODUCTION OF CRUDE OIL AND ADDITIONAL HYDROCARBON EXPLORATION

IN THE CHARAPA MARGINAL FIELD OF PETROECUADOR

Dear Mr. Notary:

Within the registry of public instruments under your supervision, and using the

formalities of said style, please incorporate one which shows the Contract for

the Production of Crude Oil and Additional Hydrocarbon Exploration in Charapa

Marginal Field, to be signed by the Ecuadorian State Oil Company PETROECUADOR,

on the one hand; and the Consortium composed of the companies TECNIPETROL, INC.

and BELLWETHER INTERNATIONAL INC., on the other, containing the following

clauses:

FIRST -- PARTIES APPEARING:

The parties appearing for the signing of this contract are on the one hand the

Ecuadorian State through the intercession of the Ecuadorian State Oil Company,

PETROECUADOR, and its affiliate, the State Company for the Oil Development and

Exploration, PETROPRODUCCION, represented by economist Jorge Pareja Cucalon and

engineer Carlos Quiroz Soria in their roles as Executive President and manager,

respectively, duly authorized by the Administrative Council of PETROECUADOR and

the Board of PETROPRODUCCION, in that order, as shown in the attached documents,

hereinafter to be known as PETROECUADOR, and on the other, the Companies

TECNIPETROL, INC. y BELLWETHER INTERNATIONAL, INC., affiliates of TECNOLOGIA

INVERSIONES ECUADOR - TECNIE CIA. LTDA and BELLWETHER EXPLORATION COMPANY who

constitute the Consortium referred to as BELLWETHER - TECNIPETROL CONSORTIUM

represented legally and jointly by Eng. Carlos Paz y Mino and Dr. Jorge Paz

Durini respectively, as accredited by the documentation which shall also be

attached, and hereinafter known as the Contractor.

SECOND--BACKGROUND:

2.1 - Through Law Number 44, published in Official Record No. 326 of November

29, 1993, reformed by means of Law no. 49, published in the Official Record No.

346 of December 28 of the same year, the reforms to the Hydrocarbons Law were

issued, incorporating the modality of Contract for the Development of Crude Oil

and Additional Hydrocarbon Exploration in Marginal Fields, by means of which

PETROECUADOR delegates to the Contractor the ability to undertake the additional

development and exploration activities in marginal production fields currently

under development by its Ecuador Oil Exploration and Production Affiliate,

PETROPRODUCCION.

Page 2 of 56

<PAGE>

2.2 - According to what has been set forth in Article 2, reformed, of the

Hydrocarbons Law, the Ministry of Energy and Mines, through Ministerial

Agreement No 090 dated published in Official Registry Number 255 dated February

11, of the same year, qualified the Charapa Field as Marginal, subject Special

Bid No. 003-UCCM, based on the Technical, Economic and Legal Study for Deposits

Management, for the Qualification of Marginal Fields presented by PETROECUADOR

with official letter number 256-PEP-UCP-PPR-97/116805 of December 22, 1997, and

on the reports of the National Office of Hydrocarbons and the Office of Legal

Affairs of the Ministry of Energy and Mines, shown in the Memorandums Nos.

980091_DNH-CO-PT -Y-008-98 and 008-DAJ-JE-98, of January 8 and 9 of 1998, which



are respectively appended.

2.3 - The Special Bidding Committee, CEL, convoked in the month of April 1998

the First Round of the Special Bids for the Production of Crude Oil and the

Additional Exploration of Hydrocarbons in Marginal Fields on national territory,

for which purpose the said Committee approved the corresponding pre-contract

documents, and also issued the Basic Contracting Conditions, by means of

Executive Decree No. 1327-A, published in the Supplement of the Official

Register No. 305 dated April 27, 1998.

2.4 - For the purposes of presenting their Bid, the Companies TECNOLOGIA

INVERSIONES ECUADOR - TECNIE CIA. LTDA. and BELLWETHER EXPLORATION COMPANY

constituted the Consortium referred to as TECHNIE - BELLWETHER by means of the

Public Document made before he Third Notary of Quito Canton, Metropolitan

District on June 25, 1998, a certified copy of which is attached. XX

Following the qualification and selection process of the companies that

presented their offer in the bids for the Charapa Field, the CEL by means of

Resolution no. 579-CEL-99 of January 4, 1999 determined the first place in the

preference to be the offer presented by presented by the Companies composing the

TECHNIE - BELLWETHER Consortium.

2.5 TECNIPETROL, INC. is a company constituted within the scope of the laws of

the Republic of Panama, domiciled in Ecuador and inscribed in the Business

Register on the first of June of nineteen ninety-nine, affiliate of TECNOLOGIA

INVERSIONES ECUADOR- TECNIE CIA. LTDA; and the Company BELLWETHER INTERNATIONAL,

INC. is a Company constituted under the laws of the United States of America

domiciled in Ecuador and inscribed in the Business Register on the fourth of

June nineteen ninety-nine, affiliate of BELLWETHER EXPLORATION COMPANY.

By means of the Public Document made before the Thirty-Second Notary of the

Quito Canton, Metropolitan District on September 13, 1999, a certified copy of

which is appended, the Affiliated Companies that sign this Contract for the

execution thereof have constituted the Consortium referred to as the BELLWETHERTECNIPETROL CONSORTIUM.

Page 3 of 56

<PAGE>

2.6 - The Executive President of PETROECUADOR, with Official Letters Nos. 201UCP-99 2659 of July 19, 1999 and 199-UCP-99 2655 of July 19, 1999 respectively,

requested the report from the Attorney General of the State as to this

contracting and the opinion of the Armed Forces, whose favorable report and

opinion are recorded in the Official Letters Nos. 07331 of September 3, 1999 and

990148-DIN-4 of July 20, 1999, respectively, which are appended.

2.7 - The Special Bidding Committee, CEL, by means of Resolution No. 609-CEL-99

of September 12, 1999, which is appended awarded the present Contract to the

Consortium composed of the Companies TECNIPETROL, INC and BELLWETHER

INTERNATIONAL, INC. for the Development of Crude Oil and the Additional

Exploration of Hydrocarbons in the Charapa Marginal Field.

2.8 - The Administrative Council of PETROECUADOR and the Board of Directors of

PETROPRODUCCION, by means of Resolutions Nos. 367-CAD-99-10-28 of October 28,

1999 and 10.-110-PPR-99-10-22 of October 22, 1999, respectively, which are

appended, authorized the Executive President of PETROECUADOR and the Manager of

PETROPRODUCCION to enter into the present Contract.

THIRD -- INTERPRETATIONS AND DEFINITIONS

3.1



Interpretation



3.1.1 - Contractual interpretation: If the interpretation of one or more clauses

of this Contract is necessary, the Parties shall interpret them as per the

dispositions of Title XIII, Book IV of the Ecuadorian Civil Code, setting forth



that the titles and the order of the clauses and sub-clauses are only for

purposes of identification and reference, but not preeminence or preference.

3.1.2 - Any tolerance by the Parties regarding non-fulfillment of the

obligations set forth in this Contract under no circumstances shall imply a

change or alteration of these stipulations, and such a fact shall not constitute

a precedent for the interpretation of this Contract, nor a renunciation, nor a

source of rights in favor of the Party that did not meet its obligations.

3.1.3 - The stipulations appearing in this Contract shall prevail, in the event

of any discrepancy, over those appearing in the subcontracts with third parties,

additional agreements between the Parties, and in other documents which by their

legal, technical or economic nature, may be considered secondary in nature.

3.1.4 - The Parties leave express evidence of their acceptance that, in the

event of contradictions between this Contract and the legal, regulatory, or

Basic Contracting provisions, these latter dispositions shall prevail over this

Contract.

Page 4 of 56

<PAGE>

3.1.5 - Language: This Contract has been written by the Parties in the Spanish

language;. the said version shall be considered for all its effects as the only

valid version. In spite of this, the Contractor may notarize a version of this

Contract in another language under the proviso that if there is any difference

between both versions, the Spanish text shall prevail.

3.1.6 - For the best interpretation of this Contract, PETROECUADOR and the

Contractor agree to grant the meanings that are assigned later on to the

technical or specialized terms employed with the greatest frequency in this

instrument, indistinctly from the fact that they may be written in singular or

plural.

3.2 - Definitions:

3.2.1 - Fiscal Year: Refers to the twelve month period running between January 1

and December 31, both inclusive, for each year.

3.2.2 - Contract Area: Refers to the surface and its projection into the

subsurface the boundaries and specifications of which appear in Annex I/ii/.

3.2.3. Environmental Audit: Refers to the study that determines the conditions

affecting the environment, for a certain area, resulting from oil development

and exploration activities in the said area.

3.2.4 - Barrel: Refers to the Crude Oil production unit equal in volume to

forty-two gallons of the United States of America, measured at Standard

Conditions (STP), that is a temperature of sixty degrees (60 degrees) Fahrenheit

and a barometric pressure of fourteen point six nine five nine (14.6959) pounds

per square inch.

3.2.5 - Charapa Field: Refers to the one qualified as a Marginal Field by the

Ministry of Energy and Mines and is located in the Contract Area. It includes

the deposits and their surface projection, four drilled wells, flow lines and

central production station.

3.2.6 - Inspection and Delivery Center: Refers to the site where the Inspected

Crude Oil Production from the Charapa Field is measured and delivered, which is

located in the Charapa Central Station.

PETROECUADOR shall receive the volumes of Crude Oil corresponding to the Base

Curve and to its participation in the Incremental Production at the Inspection

and Delivery Center. The Contractor shall likewise receive the volume

corresponding to its participation in the incremental production at this Center.



If operatively appropriate, the Parties shall agree on new Inspection and

Delivery Centers, which shall be approved by the MEM.

Page 5 of 56

<PAGE>

3.2.7 Standard Conditions (STP): Refers to the normal conditions of a

temperature of sixty degrees (60 degrees) Fahrenheit and a barometric pressure

of fourteen point six nine five nine (14.6959) pounds per square inch.

3.2.8. Contract: Refers to the present instrument, including its qualifying

documents and annexes, which in their aggregate shall be referred to as the

"Contract for the Development of Crude Oil and Additional Exploration for

Hydrocarbons of the Charapa Field of PETROECUADOR."

3.2.9 - Contractor: Refers to the Consortium composed of the Companies

TECNIPETROL, INC and BELLWHETHER INTERNATIONAL, INC.

3.2.10 - Operating Costs: These are the production costs of the Contractor,

minus the amortization and depreciation. If the cost of operation for a given

period is divided by the inspected production of that same period, the unit

operation cost can be derived for that period.

3.2.11 - Base Curve Cost: This is the value of 1.70 U.S. dollars per barrel of

Crude Oil, applicable to the 1999 Fiscal Year, that PETROECUADOR will pay to the

Contractor to produce the volume of the Base Production Curve. This value shall

be updated annually at the start of each fiscal year, according to the variation

of the price index to the Producer Price Index- Series ID:wpssop3510 Seasonally

Adjusted Item: Finished Energy Goods Commodities of the United States of

America.

3.2.12 - Related Companies

Parent Company: Refers to the company or entity that directly or indirectly

controls the Affiliate or the Subsidiary, respectively.

Affiliate: Refers to a company or entity that is directly controlled by its

Parent Company.

Subsidiary: Refers to a company or entity that is directly controlled by the

Affiliate and indirectly by the Parent Company.

The term "control" for the above mentioned relationships shall be understood to

conform to that indicated in the Regulation on the Special Bidding System for

Additional Development and Exploration Contracts for Marginal Fields.

3.2.13 - Base Production Curve: This is the production profile of the Crude Oil

projected by PETROPRODUCCION for the Charapa Field, that appears in this

Contract as Annex II"

3.2.14 - DNH: National Office of Hydrocarbons

Page 6 of 56

<PAGE>

3.2.15 - Dollar: Refers to the monetary unit of the United States of America

(U.S. dollars)

3.2.16 - Main Conduits: Refers, in general, to the pipelines and other equipment

and facilities for the transportation and storage necessary to evacuate Crude

Oil, from its Intake Stations, to the exportation terminals or industrial

centers of the country.

3.2.17 - Secondary Conduits: Refers in general to the pipelines and other



transportation and storage equipment and installations necessary for the

evacuation of Crude Oil from the storage tanks in the Inspection and Delivery

Centers of the Contract Area to the Intake Station of the Main Conduits.

3.2.18 - EIA: (Environmental Impact Study) - This is the document by means of

which the Contractor makes known, from descriptive, analytical and predictive

multidisciplinary studies, the potential risks as well as the positive and

negative effects that may be caused to nature, to the ecosystems and to the

social organizations, by hydrocarbon operations, as well as the measures that

will be taken to prevent and to control and mitigate the risks and negatives

effects, as well as the actions necessary for rehabilitating the affected areas.

3.2.19 - Head Station for Main Conduits: Refers to the site where the set of

facilities for storing, measurement (inspection) and pumping of Crude Oil is

located, from where a Main Conduit starts. Currently, this station is located in

Lago Agrio; in the future other Head Stations can be built for new Main

Conduits.

3.2.20 - Effective Date: Refers to the date of registration of this Contract in

the Hydrocarbons Register of the DNH, from which its deadlines are counted.

3.2.21 - Act of God or Unavoidable Accident: Refers to the events which can

neither be resisted nor controlled by one or both Parties. This definition

covers, but is not limited to: earthquakes, seaquakes, floods, landslides,

storms, fires, explosions, work stoppages, strikes, social disturbances, acts of

war (whether declared or not), acts of sabotage, acts of terrorism, actions or

omissions on the part of any state authority, dependency or entity, any other

circumstance not mentioned in this Clause 3.2.21, which may be equally

impossible to resist and which is beyond the reasonable control of the Party

that invokes the occurrence of the fact and which causes the total or partial

obstruction or delay of compliance with the obligations of the Party in

question, under the stipulations of this Contract, and the concept defined in

Article 30 of the Ecuadorian Civil Code.

3.2.22 - Associated Gas: Refers to the mixture of hydrocarbons coming from Crude

Oil Deposits located in solution in the deposit and which are transformed into

the gaseous state at surface pressure and temperature conditions.

3.2.23 - Free Natural Gas: Refers to the mix of hydrocarbons coming from Gas

deposits, which remain in a gaseous state at the deposit and surface pressure

and temperature conditions

Page 7 of 56

<PAGE>

3.2.24 - MEM:



Ministry of the Sector, or Ministry of Energy and Mines.



3.2.25 Parties: Refers to the Ecuadorian State through PETROECUADOR and

PETROPRODUCCION, on the one part and the Contractor on the other.

3.2.26 - PETROECUADOR: Is the State Oil Company of Ecuador, with legal

personality, its own equity, administrative, economic, financial and operating

autonomy, domiciled in the city of Quito. When PETROECUADOR is mentioned, it

shall be understood that reference is made to this company and its Affiliates,

as far as applicable.

3.2.27 PETROPRODUCCION: Refers to the State Company for Exploration and

Production of Oil of Ecuador, affiliate of PETROECUADOR with a legal

personality, its own equity, administrative, and operating autonomy, domiciled

in the city of Quito, which shall be responsible for the administration, followup and coordination of the Contract.

3.2.28 - Crude Oil: Refers to the mix of hydrocarbons that exists in the liquid

phase in deposits and that remains in a liquid state on the surface under

Standard Conditions.



3.2.29 - Development Plan: Refers to the set of activities and their

corresponding estimated investments that the Contractor undertakes to make and

in the event that Commercially Viable Crude Oil deposits are discovered as a

result of the execution of the additional exploration activities, it will be

submitted to the approval of the MEM.

3.2.30 - Minimal Plan for Additional Exploration and Investments: Refers to the

collection of activities offered by the Contractor and that it is obligated to

execute, for its account and risk, in the Contract Area during the first three

years of validity, for the purpose of defining structures for new discoveries of

reserves which are indicated in Annex III with their respective estimated

investments.

3.2.31 - Five Year Plan: Refers to the document containing the collection of

projected activities and estimated investments, proposed by the Contractor

during the Contract, for the five fiscal years subsequent to the date of

submission of the said plan. This plan must be updated annually.

3.2.32 - Term and Deadlines:

Term: refers to the period running between one date and another, including both

weekends and holidays, at the national level and in the city of Quito.

Deadline: is the period running between one date and another, in which only

working days are taken into account.

Page 8 of 56

<PAGE>

3.2.33. Horizontal Well: Refers to a well drilled from the surface with

directional control and intentionally detoured from vertical for the purpose of

intersecting the objective geological zone or zones, at a detour angle greater

than sixty (60) degrees from vertical and in order to penetrate a portion of the

geological section in a horizontal or quasi horizontal plane, within the said

section at a distance of more than 300 feet.

3.2.34 - Reference Price (Pi/t/): Refers to the final weighted average monthly

price corresponding to the immediately preceding month for direct external cash

sales of Crude Oil made by PETROECUADOR, including incidental or "spot" and long

term sales, adjusted in quality equivalent to the Crude Oil produced in the

Contract Area. These prices shall be expressed in the terms FOB Ecuadorian port

(main export terminal) and in Dollars per Barrel.

In the event that PETROECUADOR does not realize external sales in the respective

period, the Reference Price shall be established based on a basket of crudes,

agreed upon by the Parties, whose prices shall be obtained from specialized

publications of recognized prestige.

3.2.35 - Average Sales Price from PETROECUADOR (PM): Refers to the latest

average monthly price corresponding to the immediately preceding month, for

direct external sales of Crude Oil, realized by PETROECUADOR in cash, including

incidental or "spot" sales and long term sales. These prices shall be expressed

in FOB Ecuadorian port terms (main export terminal) and in dollars per barrel.

3.2.36 - Inspected Production: Refers to the Crude Oil of the Contract Area,

measured in barrels at the Inspection and Delivery Center, subtracting the

volume of water and sediments (BS&W), duly certified by the DNH.

3.2.37 - Incremental Production: Refers to the volume of Inspected Crude Oil

that exceeds the Base Production Curve.

3.2.38 - Annual Budget and Activities Program: Refers to the Collection of

activities and estimated investments that the Contractor must present annually

by October 31 of each Fiscal Year and that it proposes to realize in the



following Fiscal Year. The said Annual Programs and Budgets must be presented

in conformity with the Minimum Production Activities and Investments Plan and

the Minimum Plan for Additional Exploration and Investments for the respective

periods.

3.2.39 - Minimum Production Activities and Investments Plan: Refers to the

collection of activities offered by the Contractor and that it is obligated to

execute in the Charapa Field, within the first three (3) years of validity of

the Contract, and that is included in Annex IV, with its respective estimated

investments.

Page 9 of 56

<PAGE>

3.2.40 - Reconditioning: Refers to the operation performed on a well to assure,

restore or improve the Crude Oil production of an open (drilled) deposit for

production of the well. It also refers to the closing or abandonment operation

of a completion in a deposit in order to attempt a new completion in the same or

another deposit, from the said well. These operations include, but are not

limited to, stimulations (acidifications, fracturing), installation or recovery

of a pumping system, repairs or maintenance works, opening of windows,

deepening, recompletion or plugging of the well.

3.2.41 - Possible Reserves: Refers to the hydrocarbon volumes which may

originate from formations identified as suitable for the accumulation of

hydrocarbons, but which have still not been drilled.

3.2.42 - Probable Reserves: Refers to the hydrocarbon volumes which through

geological interpretation, geophysics and deposit engineering studies are

presumed to exist in areas adjacent to the proven zones of the same deposit, and

which may be recovered.

3.2.43 - Developed Proven Reserves: Refers to the volumes of Crude Oil which can

be recovered through the available wells with the existing equipment and

operating conditions.

3.2.44 - Undeveloped Proven Reserves: Refers to the proven reserves which are

expected to be recovered through new wells or by means of the existing wells,

which for this purpose must be completed in areas which are currently not in

production or have not been drained.

3.2.45 - Total Proven Reserves: Are constituted by the total of the developed

proven reserves and the undeveloped proven reserves.

3.2.46 - Emergency Situations: Are those extraordinary circumstances qualified

as such by the Ministry of Energy and Mines and which occur or are envisioned as

occurring, within or outside the Country, and which lead to the adoption of

necessary and immediate actions to avoid detriments that affect or may affect

the normal operating conditions envisioned in this Contract or the persons who

render services to any of the Parties or the goods owned by these or third

parties, and the goods owned by them or by third parties, without prejudice to

that set forth in the Hydrocarbons Law and the National Security Law.

3.2.47 - Sucre: Refers to the monetary unit of the Republic of Ecuador.

3.2.48 - Production Rate: Shall have the highest efficiency fixed by the DNH on

the base of the characteristics and individual size of the deposits, production

characteristics and number of wells and facilities in a way that can be

preserved for a given period under principles of balanced relationships between

reserves and production. The procedure for fixing the Production Rate is

included as Annex 5.

Page 10 of 56

<PAGE>



3.2.49 - Calendar Quarter: The period of three (3) consecutive months starting

on the first of January, the first of April, the first of July and the first of

October of each fiscal year, respectively.

3.2.50 - Production Unit:



Barrel



3.2.51 - Condensed Gas deposits: Refers to those Gas deposits that, upon being

developed, will produce gas and liquids in a ratio not exceeding one hundred

thousand standard cubic feet of gas for each Barrel of liquids, according to

measurements made on the surface under normal conditions of pressure and

temperature.

3.2.52 - Gas deposits: Refers to those deposits of hydrocarbons that, in deposit

conditions of pressure and temperature, contain only hydrocarbons in the gaseous

state.

3.2.53 - Commercially Viable Crude Oil Deposits: Refers to those deposits of

Crude Oil that, in the judgment of the Contractor are commercially viable and

are included in the Development Plan or Plans.

For the definitions not included in this Contract or within the legal framework

composing it, the Parties shall refer to the definitions contained in the law,

regulations relating hereto, the Basic Contract Conditions and definitions

generally accepted in the international oil industry.

FOURTH - PURPOSE:

4.1 - The purpose of this contract is the Production of Crude Oil and the

Additional Exploration of Hydrocarbons in Contract Area of the Charapa Field in

order to increase current production and integrate new reserves.

4.2 - To meet the purpose of this Contract, the Contractor, under its exclusive

responsibility and risk, must carry out the activities and make the investments

required with the use of adequate technology.

FIFTH - RIGHTS OF THE PARTIES:

5.1 - The hydrocarbon deposits located within Ecuadorian territory represent

national resources owned and controlled by the State. Therefore, the Ecuadorian

State is the sole and unconditional owner of all hydrocarbon deposits and

substances that accompany them, in any physical condition in which they may be

found.

Page 11 of 56

<PAGE>

5.2 - This Contract does not grant the Contractor any right of ownership over

the surface, subsurface or over any type of resource, whether natural or not,

which may exist in the Contract Area, nor over any areas to be expropriated in

favor of PETROECUADOR for the execution of this Contract, nor over its rights of

way, nor over the works performed therein. As a consequence, the boundaries of

the Contract Area have the sole end or purpose of determining surface space and

its projection down to the subsurface in which the Contractor must operate.

5.3 - PETROECUADOR shall have the right to receive from the Contractor the

volumes of Crude Oil corresponding to it both from the Base Production Curve and

for its percentage share in the Incremental Production.

5.4 - The Contractor shall have the right to its share in the Crude Oil

production and to freely dispose of it in conformity with this Contract, with

the exception of that set forth in Article 33 of the Hydrocarbons Law; and to

receive the recompense for the Cost of the Base Production Curve. The rights of

the Contractor arising from this Contract do not include ownership rights over



the underground hydrocarbon reserves resulting from the additional exploration

and production works.

5.5 - The Contractor has the exclusive right to develop the activities under

this Contract within the Contract Area.

5.6 - The Contractor has the right, free of charge, to make use of the

infrastructure and assets which PETROECUADOR currently owns in the Contract

Area, with the Contractor being responsible for their care, proper use,

maintenance, and restoration of the infrastructure and assets in question in

such a way that upon the expiration of the Contract, it may restore the field to

PETROECUADOR with all of its infrastructure and assets in conditions similar to

how they were delivered, except for natural wear and tear due to normal use.

5.7 - In the execution of its activities and works, the Contractor shall have

full autonomy for its administration or management.

SIXTH - OBLIGATIONS OF THE PARTIES:

6.1 - The Contractor undertakes the following:

6.1.1. - To carry out the technical, administrative and economic operations

under its responsibility as well as meeting with all of the obligations

arising from the Law, Regulations, Contract Conditions and this

Contract, assuming all of the risks inherent in the production and

additional exploration operations in the Contract Area. As a result,

failures of a technical nature and their consequences, arising

<PAGE>

from an action of the Contractor or its subcontractors shall be its

exclusive responsibility.

6.1.2. - To execute the Minimum Program for Production Activities and

Investments committed to for the first three (3) years, in order to

increase the Crude Oil production over the Base Production Curve in the

Charapa Field

6.1.3



- To execute, during the first three (3) years of effectiveness of this

Contract, the Minimum Plan for Additional Exploration and Investments

which will enable the realization of new Crude Oil discoveries and the

resulting increase of the reserves of the Contract Area.



6.1.4. - In order to increase Crude Oil production, the Contractor shall utilize

modern techniques which represent a greater level of technical and

economic efficiency in the operation.

6.1.5. - To provide the capital or financial resources necessary for fully

complying with the Minimum Program for Production Activities and

Investments and with the Minimum Plan for Additional Exploration and

Investments in accordance with the annual Programs and Budgets.

6.1.6



6.1.7 -



- To preserve the environment, during the execution of its activities and

works, applying the most advisable techniques used in international oil

practices and in compliance of the legal, regulatory and administrative

provisions, as well as valid international agreements ratified by

Ecuador regarding the prevention and control of environmental pollution

and the conservation of icthyological and agropecuary resources.

To immediately undertake the decontamination efforts in the event of

environmental pollution caused during the performance of its activities

without detriment to other responsibilities to third parties or

authorities having competence. For this purpose, the Contractor shall

acquire the respective insurance policies covering the hazards pursuant

to environmental protection. In all cases, the Contractor shall take



all necessary precautions, since it shall be solely responsible for any

impact caused by it on the environment.

6.1.8 -



To meet and develop, in a permanent and uninterrupted manner, the

activities set forth in the Minimum Program for Production Activities

and Investments, in the Minimum Plan for Additional Exploration and

Investments, and in the Annual Activity and Investment Budget Programs

presented by the Contractor and approved by the MEM, unless these must

be suspended or interrupted due to Acts of God, Unavoidable Accident,

or Emergency Situations.

Page 13 of 56



<PAGE>

6.1.9 -



When for technical reasons, the Contractor determines it is appropriate

to undertake Reconditioning involving the opening of windows for

directional or horizontal drilling in the well subject to the said

works, it shall be understood that such Reconditioning shall be

equivalent to two (2) of those offered by the Contractor.



6.1.10 - When as a result of the execution of Reconditioning or treatment works

on the Charapa 1 well, the Contractor affects the formation and

consequently loses or lessens the current production of Crude Oil from

the well in a considerable amount, the Contractor shall have the

obligation, at its cost, to drill a replacement well to the same depth

of the affected well. If the volume of reserves to be recovered by the

said well does not justify its drilling, the Contractor must agree with

PETROECUADOR on another location for the replacement well.

6.1.11 - To keep PETROECUADOR constantly informed by means of its

PETROPRODUCCION affiliate and the Oil Contracting Unit of the progress

of all activities undertaken during the term of this Contract, for

which it must present periodic reports as set forth by the Hydrocarbon

Operation Regulations. It must further provide copies or originals, as

required of electrical, sonic, radioactive and other profiles, seismic

tapes and streamers, well samples, cores, formation samples, maps,

sections, topographical, geological, geochemical and drilling reports,

geological and geophysical interpretations, evaluation reports on the

deposits found in the Contract Area, and in general, any other

information of a scientific, technical, economic, environmental or

legal nature obtained through its work.

6.1.12 - To provide to authorized functionaries of the Ecuadorian State or from

PETROECUADOR, as well as the members of the Armed Forces, responsible

for the safety of the oil installations, in accordance with the

covenant made for this purpose, the facilities necessary for the

performance of their duties and obligations regarding this Contract,

including, in field operations, transportation, lodging, food and other

services, in conditions equal to those provided by the Contractor to

its own personnel, taking into consideration the facilities available

for the efficient compliance and execution of said obligations. The

costs incurred by the Contractor in providing said facilities shall be

posted, as necessary, according to the Accounting Regulations. State or

PETROECUADOR functionaries must abide by the Contractor's rules for

industrial safety and environmental protection.

6.1.13 - To preserve complete records of all the technical and environmental

operations conducted under this Contract.

Page 14 of 56

<PAGE>

6.1.14 - Respect the rights related to industrial property, holding PETROECUADOR

harmless from claims or payments of indemnities resulting from noncompliance or non-observance by the Contractor regarding said



obligations.

6.1.15 - Take the necessary measures, in its operations, for preserving the

health, conservation and safety of life, property, vegetation, fishing,

navigation, disposal of water and effluents, as well as the health and

safety of the personnel under its responsibility.

6.1.16 - The Contractor shall deliver to PETROECUADOR, during the first three

years of effect of the Contract, by March 31 of each year, the annual

contribution that was offered for training.

6.1.17 - To receive students or graduates from technical or higher education

institutions related to the hydrocarbon industry, in the number, time

and dates agreed with PETROECUADOR, so that they may engage in

practicums and studies in the working fields of the Contract Area and

at the Contractor's Offices in Ecuador. During performance of the

practicums, students shall be covered by the accident policy that the

Contractor has for its own employees. The Contractor shall be

responsible for the transportation, lodging, feeding, minor medical and

emergency services which shall be provided under the same conditions as

to the Contractor's personnel in Ecuador.

The time for said practicums and study, and the number of persons

conducting them, shall be established in such a manner that they do not

interfere with the efficient performance of the Contractor's

activities. The Contractor shall further provide monthly economic

assistance for each student no smaller than two minimum vital salaries.

It shall be understood that no dependent relationship whatsoever shall

exist between those who carry out said practices and study, neither

with the Contractor nor PETROECUADOR. The students or graduates shall

prepare the corresponding reports on the said practicums and studies

and shall furnish a copy to the Contractor. During their stay in the

Contractor's facilities, the students must abide by its industrial

safety and environmental protection regulations.

6.1.18 - To take those actions it considers most suitable or pertinent in

Emergency Situations, notifying their occurrence to PETROECUADOR within

the following three days.

6.1.19 - To protect and hold PETROECUADOR free of any judicial action or claim

resulting from the non-observance or non-compliance with any of its

obligations arising from this Contract, whether with its workers,

subcontractors, suppliers or third parties whether or not related to

the Contract.

Page 15 of 56

<PAGE>

6.1.20 - To pay the taxes, levies and contributions in conformity with the

corresponding laws and regulations in effect in Ecuador on the date of

the signing of the Contract, with the exceptions established under the

laws and regulations.

6.1.21 - To register this Contract in the Hydrocarbons Registry of the DNH

within the first thirty (30) days counted from its signing.

6.1.22 - To maintain and conserve, in a good state, the existing access roads in

the Contract Area, that the Contractor uses for its operations. Likewise,

maintain and conserve in a good state, the roads that the Contractor will

construct for this purpose in the future. In the case of the sections of

the access roads shared by the Contractor with other users, the

maintenance costs required for this shall be shared with the other

contractors and organizations that operate in the affected area, during

the validity of this Contract.



6.1.23 - To provide, renew and keep in effect the guarantees and contract the

insurance provided under the law, in regulations and in this Contract.

6.1.24 - To deliver to PETROECUADOR the volumes of Crude Oil, both of the Base

Production Curve and those corresponding to PETROECUADOR in the

Incremental Production, in accordance with their percentage share in this

Contract .

Due to the fact that the current production of the Charapa Field comes

from a sole well and as of the date of the signing of the Contract was

below the volume projected by PETROECUADOR for the Base Production Curve

corresponding to the first year of validity of the Contract, the

Contractor shall have a maximum period of thirty (30) days reckoned from

the date of the assumption of operations to raise the production volume

to the level of the Base Production Curve; until this level is achieved,

the Contractor shall deliver the actual production of the Field.

6.1.25 - To present the corresponding Development Plan for the approval of the

MEM, upon informing PETROECUADOR, and in case commercially exploitable

Crude Oil deposits are found as a result of the additional exploration.

6.1.26 - To comply with the legal and regulatory provisions in effect, and with

the contractual stipulations, relating to the Development Plan, the Annual

Programs and Budgets and to the Five Year Plan.

6.2



PETROECUADOR undertakes the following:

Page 16 of 56



<PAGE>

6.2.1 -



To pay the stipulated compensation to the Contractor in the manner,

terms, amount and other conditions set forth in the Ninth Clause of

this Contract.



6.2.2. - To furnish the Contractor for its use, for the purposes of this

Contract, the goods, equipment, machinery and facilities according to

Annex VI "Inventory, Inventory, Technical Inspection and Asset

Valuation."

6.2.3 -



To respond in a timely manner to the requests, proposals and

requirements of the Contractor and make the corresponding remarks or

approvals within the terms and deadlines set forth in this Contract.



6.2.4 -



To make available to the Contractor all communications and

transportation routes, whether extant or under construction.



6.2.5 -



To provide the fuel required and requested by the Contractor for its

operations, by means of PETROCOMERCIAL, at national market prices.



6.2.6 -



To notify the Contractor, as soon as it is made aware, of any claim or

legal proceeding that may affect the Contractor's rights under this

Contract in such a way that the latter may adopt the measures it

considers most suitable to defend its interests.



6.2.7 -



To protect and keep the Contractor free of any judicial action or claim

that results from the non-observance or non-fulfillment of any of its

obligations arising from activities performed for PETROECUADOR, either

with its workers, its subcontractors, suppliers or third parties,

whether or not related to the Contract Area, prior to the Effective

Date of the present Contract.



6.2.8



To assume the environmental responsibility for damages caused prior to

the Effective Date of this Contract and reimburse the Contractor for

all the costs that are required for their remedy, as set forth in



Clause Eleven

6.2.9 -



To request from MEM, at the request of the Contractor, the declaration

of public utility in conformity with Article 91 of the Hydrocarbons

Law.



6.2.10 - To grant a favorable report for the import of equipment, machinery and

tools and other materials necessary for fulfillment of the objective of

this Contract, in conformity with Article 87 of the Hydrocarbons Law

and other applicable laws.

6.2.11 - To provide to the Contractor the available technical information

related to the Contract Area and, without cost other than that

established by the Board of PETROPRODUCCION, the available technical

information of other areas.

6.3 - The Parties shall have the following obligations in common:

Page 17 of 56

<PAGE>

6.3.1 - If, as a result of the execution of the Minimum Program for Production

Activities and Investments and/or of the Minimum Plan for Additional

Exploration and Investments for the Charapa Field, the proven reserves

increase significantly and the total production of Crude Oil of the

Charapa Marginal Field exceeds three hundred percent (300%) of the

production of the Base Curve, the Parties agree that the X3

participation factor of the Contractor shall be equal to fifty point

nine percent (50.9%) of the production exceeding three hundred percent

(300%).

6.3.2 - To interpret and execute this Contract in good faith.

6.3.3 - To meet with the requirements set forth by the MEM and other state

dependencies regarding the performance of this Contract.

6.3.4 - To enter into additional and modifying Contracts, as well as others that

suit their interests.

6.3.5 - As incumbent upon them, the Parties shall comply with that set forth in

Article 31 of the Hydrocarbons Law in the execution of this Contract.

6.3.6 - If the Parties so agree, upon the making of a written agreement, they

may delegate to the other Party the marketing of the volume of Crude Oil

belonging to them under this Contract. The said agreement must specify

the mutual obligations, among others it shall mention the place of

physical delivery of the respective volume share of Crude Oil, sales

conditions and payment periods. In addition, the agreement shall

establish the corrections for API quality for determination of price and

volume compensations, in conformity with Clause 9.6, as well as the

adjustment for the fee for transport through the Main Conduit, if

applicable.

6.3.7 - All others indicated in the Law, Regulations, Contracting Conditions and

this Contract.

6.4 - Responsibilities:

6.4.1 - The Contractor assumes full responsibility before the State and

PETROECUADOR regarding the obligations acquired by virtue of this

Contract, from its Effective Date. The Contractor assumes similar

responsibility regarding the obligations of its subcontractors and of

its related companies in activities linked with the performance of this

Contract. Likewise, the Ecuadorian State and PETROECUADOR assume full

responsibility for their contractual obligations.



SEVENTH - TERM:

Page 18 of 56

<PAGE>

7.1 - This Contract shall have a duration of 20 years, counted from its

Effective Date.

7.2 - The production operations of the Contractor must begin and continue

without interruption in the Contract Area within the first eight (8) days

counted from the Effective Date of this Contract. Nevertheless, in order to

guard against interruption of the operations and to increase the production from

the assumption of the operations by the Contractor, PETROPRODUCCION and the

Contractor shall coordinate the transfer of the operations, extending the term

if necessary.

The Additional Exploration Activities shall be developed within an nonextendible term of three (3) years counted from the official date of approval of

the Environmental Impact Study, which must be prepared by the Contractor within

the first six (6) months counted from the Effective Date of the Contract.

Nevertheless, the said term shall be extended only in the event that the

Contractor is performing the drilling or tests for an exploratory well, until

the completion of the said works.

EIGHTH - ACT OF GOD OR UNAVOIDABLE ACCIDENT:

8.1 - None of the Parties shall be answerable for noncompliance, suspension or

delay in the performance of the obligations set forth in this Contract, nor will

it be obligated to indemnify the other Party for any losses caused when the noncompliance, suspension or delay are due to Acts of God or Unavoidable Accident

duly corroborated as stipulated in the Eighth Clause herein. In this case, the

Party alleging the said situation must notify the other within the maximum

period of ten days of the occurrence of the said fact with indication of the

estimated time of suspension and shall present the corresponding justifications.

The Act of God or Unavoidable Accident, shall extend over the number of days

that are justified and shall apply to the rights and obligations affected by

such an event.

However, the mutual obligations set forth in this Contract shall not be

considered extinguished due to the occurrence of the Act of God or Unavoidable

Accident, rather only suspended.

Once either of the Parties has invoked the Act of God or Unavoidable Accident,

it will take effect even though it does not imply tacit acceptance by the other

Party, which shall have the right to impugn it using the resources provided in

this Contract and pertinent legislation.

8.2 - The burden of proof of the Act of God or Unavoidable Accident shall fall

on the party invoking it.

8.3 - Even in the event of Acts of God or Unavoidable Accidents, should there be

any production in the Contract Area, the Parties shall have the right to

participate in it as per

Page 19 of 56

<PAGE>

the Ninth Clause of this Contract, except in the case envisioned in Article 180

and numeral 2 of Article 181 of the Political Constitution of the Republic of

Ecuador.

8.4 - The occurrence of Acts of God or Unavoidable Accidents may give rise to



the revision of the work schedule proposed by the Contractor, without detriment

to restarting the compliance of its obligations as soon as possible after the

impediment has been removed. The obligations not affected by the Act of God or

Unavoidable Accident shall be met in a timely manner, as per the specifications

of this Contract.

In the event that due to lack of transport capacity in the Main Conduits, the

Contractor cannot transport more than 50% of the volume of the Crude Oil

corresponding to his Participation, calculated in relation to the Production

Rate of the Field, the suspension of the delay in the execution of the Minimum

Program for Production Activities and Investments shall not be considered as

non-fulfillment of the contract. Once the problem of lack of transport capacity

has been resolved, the Contractor shall have the right to recover the loss

sustained due to this reduction. The Parties shall agree on the most adequate

manner for the Contractor to recover such loss.

8.5 - In circumstances of the Act of God or Unavoidable Accident, the Contractor

shall inform the MEM as to the event, within a maximum period of ten days and

shall take the corresponding actions for renewing the activities as soon as

possible.

8.6 - If Act of God, Unavoidable Accident or other Emergency Situations arise,

which in the Contractor's opinion require immediate attention, the Contractor

shall take all actions and shall make all the expenditures it deems necessary or

advisable to safeguard its interests and those of PETROECUADOR, as well as those

of their respective workers, although said expenditures have not been included

in the Annual Schedule and Budget in effect for the corresponding fiscal year.

The actions undertaken must be notified to PETROECUADOR and the MEM within the

term of ten (10) days following the taking of the action.

8.7 - The duration of the suspension of activities due to Acts of God or

Unavoidable Accident shall not be imputed to the term of the production period

or the additional exploration period, as applicable. As a consequence of this,

the expiration dates for both periods shall be postponed in a time span equal to

the duration of the Acts of God or Unavoidable Accident.

If the Contractor has been producing in the production period, the extension of

said period shall be applicable only when the Act of God or Unavoidable Accident

diminishes the production or evacuation of Crude Oil by more than fifty per cent

(50%) with regard to the daily average of the thirty (30) days prior to the

occurrence of the Act of God or Unavoidable Accident, in which case the

Contractor shall maintain its right to the corresponding share in the Crude Oil

that it was unable to produce or evacuate during the Act of God or Unavoidable

Accident.

Page 20 of 56

<PAGE>

When the reduction of production or evacuation of Crude Oil does not exceed

fifty percent (50%) with respect to the daily average over the thirty (30) days

prior to the occurrence of Act of God or Unavoidable Accident, the Parties may

recover the loss sustained for the reduction, by increasing production.

NINTH--INCOME FROM THE CONTRACTOR

9.1

The percentages of participation offered by the Contractor (Annex VII)

were the following:

X1=52.9%

X2=51.9%

X3=50.9% (to be negotiated in the range of +/- 1%)

As a result of the negotiation, the details of which are recorded in the Summary

Minutes thereof appearing as Annex VIII, it was agreed to keep X3 at 50.9%; and



to reduce the share of the Contractor for X2, by one percentage point, to 50.9%.

Consequently, only two shares shall apply for this Contract:

X1= 52.9%; and

X2=X3=50.9%

9.2



The Contractor, for the execution of this Contract, shall receive:



The Base Cost Curve in United States of America Dollars in conformity with

Clause 3.2.11: and,

The volume of Crude Oil corresponding to its share in the Incremental Production

over the Base Curve, in accordance with the percentages X1 and X2 stipulated in

Clause 9.1. Consequently, for the present Contract only two shares shall apply:

X1 for an initial increase (delta)Q1 of up to 310 barrels per day and X2 (equal

to X3) for any increase in production achieved by the Contractor above

(delta)Q1.

9.3

The following formulas shall be applied to determine the amounts that the

Contractor must receive according to Clauses 9.1 and 9.2.

9.3.1



Income by Base Curve Cost:

ICBt = CB (Ipt / Ipt-1) QBt



(1)



where

Page 21 of 56

<PAGE>



9.3.2



ICBt



=



Income by Base Curve Cost (US$)



CB



=



Base Curve Cost



Ip t



=



Consumer price index of the United States of America published

by the Bureau of Labor Statistics, Producer Price Index Commodities series ID: wpssop3510 Seasonally Adjusted, Item:

Finished energy goods, for the year 1



Ipt-1



=



Consumer price index of the United States of America published

by the Bureau of Labor Statistics, ....... Price Index Commodities series ......... Seasonally Adjusted, corresponding

to the preceding year and during the contract period.



QBt



=



Value in Barrels, of the volume of production of the Base Curve

for a period t; specified in Annex II of this Contract.



(US$/ bbl)



Share of the Contractor in the Incremental Production.The determination of the Volume of Crude Oil in the Incremental

Production over the Base Curve, is given by the following expression:

PCt



=



Xt (delta) QTt



-



QBt)



(2)



where

PCt



=



Participation of the Contractor, in volume of the Incremental

Production (bbls);



Xt



=



Participation of the Contractor in the Inspected Incremental

Production (delta)QTt -QBt) in decimal fraction, corresponding

to the period t;



QTt



=



Value in Barrels of the total Inspected production volume of

the Contract Area, corresponding to the period t;



QBt



=



Value in Barrels of the production volume in accordance with

the Base Curve, corresponding to the period t;



The participation of the Contractor, Xt is given by the following expression:

X t



=



X 1* (delta)Q1t + X3 * (delta)Q3\\t\\

---------------------------------------QTt - QBt



(3)



Page 22 of 56

<PAGE>

where:

(delta)Q1t corresponds to a first increase of production given by the

expression:

(delta)Q1t



=



QTt



(delta)Q1t



=



310



- QBt



where



QTt



*



(QBt



where



QT t ** (QB t



+ 310)

+



310)



(delta)Q3t = (delta)Q2t corresponds to any additional increase in production

over Q1t given by the expression:

(delta)Q3t = (delta)Q2 t



= 0



where



QT t



*



(QBt



+ 310)



(delta)Q3t = (delta)Q2 t = QTt - QBt - (delta)Q1t where QT t > (QB t + 310)

Consequently the total production, for any period t, is given by the expression:

QTt



=



QB t



+ (delta)Q1 t



+ (delta)Q3 t



(4)



Consequently, the share values for the Contractor will be:

X1= 52.9% for the first production increase (delta)Q1, of up to 310 bppd average

during the period t and;

X2= X3 = 50.9% for any additional increase over (delta)Q1

9.4



Application Example



The example presented here following will serve to illustrate the correct form

of application of the formulas established in the preceding Clauses 9.1, 9.2 and

9.3.

Considering the first year of the contract, when the value of the Base Curve is

QB=210 BPD and supposing that Base Curve CB (Ip\\t\\Ip\\t\\-/1/) = US$1.80/

barrel, and one period t = 90 days in which the total inspected production of

the Contract Area reaches 75,600 barrels, the following values are obtained for

the Contractor's share:

.



Base Curve Value .............



QB = 210 BPD



.



Total Production Value .......



QB = 840 BPD (QT=75,600/90)



. (delta)Q1 = 310 BPD and

(delta)Q2 = (delta)Q3 = QT- QB- (delta)Q1 = 840 - 210 - 310 = 320 BPD

* Greater than

** Less than

Page 23 of 56



<PAGE>

hence meeting the condition that QT ** (QB + 310)

Consequently, during the period t = 90 days:

.



Income of the Contractor by Base Curve Cost

ICB\\t\\ = CB (Ip\\t\\/Ip\\t\\-1) QB\\t\\ = $1.80 x 210



.



=



US$ 387/day or

US$ 34,020 in

90 days



Share of the Contractor in the Incremental Production over the Base Curve,

and inasmuch as X1 = 52.9%, and X3 = X2 = 50.9%, it is:

X\\t\\



=

=

=



(X1*(delta)Q1 + X3*(delta)Q3) / (QT-QB)

(0.529*310 + 0.509*320) / (840 - 210 )

0.5188



PC\\t\\



= X\\t\\ (QT\\t\\ - QB\\t\\ )

= 0.5188 (840 - 210)

= 327 BPD

or that which is equivalent, during the period t = 90 days, at a total oil

volume to be received by the Contractor of:

327 x 90 = 29,430 barrels

The volume of PETROECUADOR is: 75,600 - 29,430 = 46,170 barrels, that

include the production corresponding to the Base Curve and its share in the

Incremental Production.

9.5



Based on that established in the Clauses 9.2 and 9.3, the determination

of the income of the Contractor in any time period, t, is given by the

following formula:

I t



=



ICBt



+



PC t



*



PVt



(5)



where

It



=



PVt



9.6

**



Total income of the Contractor in any period t, in US Dollars

=



Sales price in US$/ bbl. It is clarified that for tax purposes,

the Contractor may in no case declare a PVt value less than the

Reference Price. When the sale is done in a location other than

Balao, the corresponding transport rate must be discounted from

the Reference Price.



DETERMINATION OF THE REFERENCE PRICE OF THE CRUDE OIL OF THE CONTRACT

AREA

Greater than

Page 24 of 56



<PAGE>

The parties shall adjust the price of the Crude Oil coming from the Contract

Area, for its quality (degrees API), in relation to the Average Sales Price,

applying the following formula:

Pi\\t\\ =



PM (1 + KDC/ 100)



(6)



where:

Pi\\t\\ =

Barrel

PM =



Price adjusted for quality in a certain period t, in dollars per



Average Sales Price of PETROECUADOR in dollars per Barrel.



DC = Difference between the quality of Crude Oil originating from the Contract

Area (CC) and the average quality corresponding to the crude exported by

PETROECUADOR (CM). Measured in degrees API.

DC =



CC - CM



K



Correction coefficient for the quality (degrees API)



=



K =



1.1, if 25(degrees) API * CC * 35 (degrees) API



K =



1.3, if 15(degrees) API * CC *** 25 (degrees) API



K =



1.1 and DC = 10 if CC ** 35 (degrees) API



CC = Quality of the crude oil produced in the Contract Area.

CM = Average quality of the Crude Oil exported by PETROECUADOR.

The coefficient K may be revised by agreement of the Parities, if after an

unbroken period of at least twelve (12) months it does not reflect market

realities. In the event that disagreements arise over this point, such

disagreements shall be submitted for resolution by a consultant, who must render

a verdict within the term granted for such.

9.7



PAYMENT PROCEDURE FOR THE BASE CURVE COST



The Base Curve Cost shall be paid provisionally by PETROECUADOR to the

Contractor on a quarterly basis and settled annually. The said payments shall

be made in dollars or, if agreeable to the Parties, in kind upon equivalency in

dollars in the manner stipulated in Clause 9.6; nevertheless, if the payments

are not made in dollars within the period of forty-five (45) days subsequent to

the end of each quarter, the Contractor shall receive the

Page 25 of 56

<PAGE>

amount of the Base Curve Cost, in Crude Oil, coming from the share corresponding

to PETROECUADOR in this Contract.

9.8



SETTLEMENT OF SHARES



The settlement of the share in the Incremental Production of Crude Oil of the

Parties, in the Contract Area shall be done quarterly in a provisional manner

and annually in a definitive manner.

9.9 - CONTRACTOR TAX BASE:

The contractor's tax base for any period "t" is provided by the following

expression:

BIt = It - COSTSt



(7)



where:

It =



Contractor's earnings during the period (t) given by expression.



COSTSt =



Costs incurred by the Contractor during period t.



9.10 - TAXES AND LABOR SHARE



The labor share for the Contractor's employees is given by the following

expression:

PLABt = 0.15 BLt



(8)



And the taxes paid by the Contractor are given by:

TAXt = 0.25 (Blt - PLABt)



(9)



9.11 - CONTRACTOR'S NET PROFIT

The contractor's net profits for the year (t) are given by the following

expression:

UNt = Blt - PLABt - TAXt



(10)



9.12 - GENERAL DISPOSITIONS OF THE ECONOMIC MODEL:

Page 26 of 56

<PAGE>

9.12.1 - The Contractor may freely dispose of its share in the Crude Oil, except

for that set forth in Article 33 of the Hydrocarbons Law.

9.12.2 - In application of what has been stated in Article 33 of the

Hydrocarbons Law, the Ministry of Energy and Mines may require the contractors

to supply a part of their crude oil for the supply of the internal market and

national petrochemical plants. In this event, the crude oil shall be valued at

the Reference Price adjusted for quality and transportation.

9.12.3 - Without prejudice to that stipulated in Clause 6.1.24, the volume of

Crude Oil received by the State shall under no circumstances be lower than that

being received while the field was under PETROPRODUCCION operation; consequently

volume less than the Base Production Curve cannot be received.

9.12.4 - The investments made by the Contractor in the execution of its

activities in compliance with the Minimum Exploitation and Investment Program

and the Additional Exploration and Investment Plan shall be made for its own

account and risk. In the event that the production is not increased or that no

commercially viable deposits are found, PETROECUADOR shall not pay anything to

the Contractors for these reasons.

9.12.5 - The Contractor have the right to maintain, control and operate bank

accounts in any currency, both within the country and outside its borders, as

well as make free use of the funds in said accounts.

9.12.6 - If PETROECUADOR makes no external oil sales during the respective

period, the Reference Price shall be established based on a basket of crude

oils, as agreed by the Parties, whose prices shall be obtained from specialized,

prestigious publications.

TENTH - TAX SYSTEM, LABOR SHARE AND CONTRIBUTIONS

10.1 - For tax purposes, labor share and contributions, the Contractor shall be

governed by that established in the Internal Tax System Law, the Law Reordering

Economic Matters in the Tax - Financial Area, the Law for the Reform of Public

Finances, the Labor Code, the Hydrocarbons Law, the Municipal System Law, the

Company Law and other applicable laws and regulations.

10.2 - The Contractor's total income - shall represent Base Curve Cost paid by

PETROECUADOR, plus the Contractor's share in the Incremental Production computed



at the sale price, however, for tax purposes this cannot be less than the

Reference Price adjusted in conformity with Clause 9.6 as applicable.

10.3 - Calculation method: The tax base, labor share and income taxes shall be

obtained as follows, subject to the Laws in effect relating thereto:

Page 27 of 56

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10.3.1 - For the Contractor's Gross Income, it shall make the deductions

envisioned in the applicable laws, mentioned in Clause 10.1. Among others, the

deductions mentioned in Title I of the Internal Tax Law and in the Cost

Accounting Regulations applicable to Contracts for Marginal Fields (Annex IX).

10.3.2 - The fifteen percent (15%) which constitutes the labor share shall be

applied on the result indicated in Clause 10.3.1, and the balance shall

represent the tax base.

10.3.3 - Finally, the twenty-five percent (25%) corresponding to income tax

shall be imposed on this final value, indicated in Clause 10.3.2, which is the

tax base, the payment of which shall be done as set forth in the Law Reordering

Economic Affairs in the Tax-Financial Area and the Law for Reform of Public

Finances.

10.4 - Contribution for the Use of Water and Construction Materials: The

Contractor shall pay, according to Article 52 of the Hydrocarbons Law, for

preferential use of water and construction materials found in the Contract Area

and belonging to the State, the amount of sixty thousand Dollars (US$ 60,000) a

year during the production period. Said contributions shall be paid in advance

during the month of January, each Fiscal Year, by means of a deposit in the

Banco Central del Ecuador to be credited to the account of PETROECUADOR. The

deposits shall be made in Sucres at the exchange rate applicable at the time of

the transaction.

In case the Contractor must pay additional values to third parties for the use

of materials or water, it may deduct these values from the established

contribution.

10.5 - Contribution to the Superintendency of Companies: The Contractor shall

pay the annual contribution of up to one per thousand (1/1,000) on the total

assets provided in Article 455 of the Corporate Law in conformity with the

standards dictated by the Superintendent of Companies.

10.6 - Tax on Total Assets: The Contractor shall pay the tax of one point five

per thousand (1.5/ 1,000) on the total assets, intended for the municipalities

as set forth in Chapter III of Law No. 006 of the Tax and Financial Control.

10.7 - Proportional Payment: If the first or last payment year for the

contributions determined in this Tenth Clause do not correspond to an entire

Fiscal Year, these shall be paid in proportion to the number of months

corresponding to said Fiscal Year. When the exploration period or the production

period do not begin on January one, the first payments shall be made within

thirty (30) days from the start of the respective period. When the Contractor

does not pay the given contributions in this Tenth Clause on the given dates,

the corresponding legal interest will be charged.

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<PAGE>

10.8 - Fund for Amazon Regional Eco-development and for Strengthening its

Sectional Organizations: The Contractor shall pay on its share in the Crude Oil

produced in the Contract Area, the tax established under Law No. 10, published

in the Official Register No. 39 of September 21, 1992, and its amendment

incorporated into Law No. 20, published in the Official Register No. 152 of

September 15, 1997.



10.9 - The Law Creating Substitute Income for the Napo, Esmeraldas and Sucumbios

Provinces: The Contractor shall pay on its share in the Crude Oil that is

transported by the Trans-ecuadorian Oil Pipeline the tax stipulated under Law

No. 40, published in the Supplement of the Official Register No. 248 of August

7, 1989.

10.10 - Exemptions: As per reformed Article 54 of the Hydrocarbons Law, the

Contractor shall be exempt from paying exploration fees, surface rights,

royalties and compensatory project contributions, as well as contributions for

technological research. It will also have a right to other exemptions

contemplated in other pertinent legal bodies, applicable under this Contract.

10.11 - Modifications of the Tax Code: In the event of any modification to the

tax code, in effect on the date of the signing of this Contract, including the

creation of new taxes or labor shares, or the interpretation of said code having

economic consequences on this Contract, a factor corresponding to the

percentages of participation that absorbs the increase or reduction of the tax

burden or of the labor share mentioned earlier shall be included. This

correction factor shall be calculated between the Parties and approved by the

MEM.

10.12 - Notary Fees: The Contractor shall be responsible for paying the notary

fees and expenses incurred by the formalization of this Contract and of the ten

(10) certified copies of the instrument which it shall furnish to PETROECUADOR.

ELEVEN - ENVIRONMENT

11.1 - The Contractor must make in a manner parallel to the execution of the

production operations in the Charapa Field, but prior to starting the additional

exploration activities:

a)



Within the first three months from the Effective Date of the Contact, an

Environmental Audit of the Charapa Field and;



b)



Within the first six (6) months from the Effective Date of the Contract, an

Environmental Impact study (EIA), in accordance with the Reference Terms

established in the Environmental Regulations for Hydrocarbon Activities in

Ecuador, issued under Executive Decree No. 2982, published in the Official

Register No. 766 of August 24, 1995.



11.1.1 - Environmental Audit

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The Contractor undertakes to perform, at its cost, and in a period of no more

the ninety (90) days reckoned from the Effective Date of this Contract an

Environmental Audit of the Charapa Field, which shall be supervised by

PETROECUADOR and must be approved by the Subsecretary for Environmental

Protection.

This Audit shall contain an Inventory and Diagnostic (Baseline) to determine the

environmental situation and pollution level existing as of the date in which the

Contractor assumes the operations in the Charapa Field

This Audit shall include the description of the existing natural resources,

particularly forests, flora and wildlife, geographic, social, economic and

cultural aspects of the populations or communities existing within the area of

influence of the Charapa Field, as well as the recommendations for necessary

environmental remedies that must be executed by the Contractor at the cost of

PETROECUADOR and paid against the presentation of the corresponding invoices.

The payment to the Contractor may be done in Crude Oil, at its equivalent value

in dollars, to be charged to the share of PETROECUADOR in the production of the



Charapa Field.

As a requirement for starting the remedial works, the Contractor shall present

the corresponding budget that must be approved by PETROECUADOR within a maximum

period of fifteen (15) days; once this period has expired, the silence of

PETROECUADOR shall be understood as acceptance of the Budget presented by the

Contractor, which may then proceed with the execution of the corresponding

works.

During the execution of the remedial works the Environmental Production Unit of

PETROECUADOR shall perform the corresponding follow-up.

11.1.2 - Environmental Impact Study (EIA)

This study constitutes a prior requirement to the Additional Exploration

operations in the Contract Area, shall be performed in conformity with the

reference terms approved by the MEM and the INEFAN and, among others shall

contain:

-



A description and technical evaluation of the direct and indirect effects

which are liable to be caused in the physical, biotic and social

environment, over the short and long term, for the operations that are

scheduled to be developed in the Contract Area.



-



A detailed environmental management plan whose performance avoids exceeding

the maximum tolerable levels and reduces to an acceptable level the

foreseeable negative effects indicated in the previous paragraph. This plan

shall include contingency and emergency programs, and,

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<PAGE>

-



An abandonment plan for the Contract Area.



11.2 - Once the Contractor has presented the Audit as well as the EIA, the MEM

must approve or reject them within a term of sixty (60) days. If no

pronouncements are made, the Study is understood to have been approved.

11.3 - Said studies referred to in Clause 11.2 shall serve as the basis for

future Socio-environmental audits to be conducted twice a year by the

Undersecretary of the Environment of the MEM in order to insure that the

Contractor's operations are conducted without affecting human settlements and

the environment.

11.4 - The Contractor shall conduct at its own expense any environmental

mitigation work related to its intervention in the Contract Area, within the

terms and other conditions set forth in the reports of the Socio-environmental

Audits performed by the Undersecretary of Environmental Protection.

11.5 - Two (2) years prior to the expiration of the Contract for the reason

stipulated in letter b) of Clause 27.1, the parties must contract an Integral

Environmental Audit of the Contract Area, which must be completed prior to the

six (6) months immediately before the expiration of the Contract. The execution

costs of this last audit shall be paid by the Parties in equal proportions.

11.6 - The companies conducting the audits and EIA referred to in this Clause

Eleven must be previously qualified by the MEM.

11.7 - The Contractor shall not be responsible for environmental damage existing

prior to the Effective Date of this Contract, which if present shall be the

exclusive responsibility of PETROECUADOR.

TWELFTH - PLANS, PROGRAMS AND BUDGETS:



12.1 - The activities, both of the Minimum Exploration and Investment Activities

Schedule and of the Minimum Plan for Additional Exploration Activities and

Investments, which must compulsorily be met by the Contractor and that

correspond to the firm bid, shall be included as Annexes III and IV of this

Contract, it being understood that the corresponding investments are estimates.

12.2 - During the first Effective Year of the Contract, or fraction of the year,

the Annual Activities and Budget Schedule shall be approved by MEM within the

term of thirty (30) days reckoned from the Effective Date of the Contract. If

the validity of the Contract commences after October 31, the annual budget shall

be added to the immediately following Fiscal year.

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12.3 - For the Fiscal Years subsequent to the year of the signing of this

Contract, the Contractor shall present, by October 31st of each year and during

the term of this Contract, for the knowledge of PETROECUADOR and approval of the

MEM, the Annual Activities and Budget Schedule that it intends to make for the

following year within the Contract Area, setting forth the activities to be

carried out, the estimated costs, the possible production and the Crude Oil

reserves it hopes to obtain.

The MEM shall approve or observe the Annual Activities and Budget Program

submitted within thirty (30) days of its presentation. Remarks, should there be

any, shall be communicated to the Contractor, which shall present the document

anew within the following thirty (30) days after having received notification

from the MEM. If the Ministry of Mines and Energy does not make any

pronouncements during the thirty (30) days following the Contractor's

presentation of the Annual Activities and Budget Program, it shall be understood

to have been approved.

12.4 - Furthermore, the Contractor shall present annually, for the approval of

the MEM, the updated five-year program of the activities to be undertaken,

including the investment programs and budgets.

12.5 - The Development Plans resulting from the Additional Exploration works

shall include the following aspects, among others:

a)



Estimates of recoverable Crude Oil reserves and the recovery factor;



b)



Results of initial production tests conducted in the drilled well or

wells;



c)



Number and description of the development wells to be drilled;



d)



Prediction of production and behavior of the wells of the field;



e)



Necessary production facilities and additional infrastructure work;



f)



Estimated production investments;



g)



Costs of production, transport and sales;



h)



Programs and investments for protection and preservation of the

environment;



i)



Activity schedule; and,



j)



Other activities discussed, agreed and approved by the Parties.

Page 32 of 56



<PAGE>

12.6 - With prior approval from the MEM, the Contractor may reform the yearly



programs and budgets that have previously been approved, provided these reforms

do not reduce the total activities committed to in Annexes III and IV of this

Contract.

THIRTEENTH -- PRODUCTION RATE:

13.1 - Before the starting date of production for a new deposit, the Contractor

shall propose to the MEM for its approval, the production rate based on

conventional studies or deposit simulation studies in agreement with what has

been stipulated in Executive Decree No. 543, published in the Official Register

No. 135 of March 1, 1985, and with the "Technical Criteria for the Calculation

of Production Rates" set forth by the National Hydrocarbons Office, and the

Hydrocarbon Operations Regulations.

13.2 - The Ministry of Energy and Mines shall proceed to fix the Production

Rate. Until the Ministry of Energy and Mines determines this Rate, the

Contractor shall provisionally apply the rate proposed by it as established in

Clause 13.1.

13.3 - At any time, the Contractor may propose to the Minister of Energy and

Mines a review of the Production Rate according to the procedure established in

Clause 13.1.

13.4 - If the ministry of Energy and Mines should impose, for any reason

whatsoever, a restriction on Ecuador's total production rate, said restriction

would be proportionally applied to the production rate of all the producers of

crude oil in Ecuador.

13.5 - The volume of Crude Oil production affected by the reduction of the

Production Rate in conformity with the preceding Clause 13.4 shall be recovered

by the Contractor in a period equal to the time during which the restriction

persisted.

13.6 - The Contractor may request from the National Hydrocarbons Office an

extended period for well production tests, so as to establish the technical

parameters that substantiate its request for the fixing of the Production Rate.

13.7 - The volume of Crude Oil coming from any type of well production test that

can be Inspected, shall be distributed among the parties in conformity with the

Ninth Clause of this Contract.

13.8 - In the event of any disagreements concerning the fixing of the Production

Rate, the Contractor may request that the DNH select an independent technical

expert to issue a technical opinion with respect to the disagreement. The

expert's report shall provide a reference for the Minister of Energy and Mines

to ratify or rectify the opinion of the DNH. The costs of the expert appraisal

shall be covered by the Contractor.

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<PAGE>

FOURTEENTH -- UNIFIED PRODUCTION:

14.1 - If during the performance of this Contract deposits common to two (2) or

more areas of the Contract should appear, the Contractor shall be under

obligation, by virtue of what has been set forth in Articles 85 of the

Hydrocarbons Law and 58 of the Hydrocarbon Operations Regulations, to enter into

unified production operating contracts in order to achieve greater efficiency

and economy in the operation.

14.2 - Should no agreement be reached in the designation of the operator of the

shared deposit, the MEM shall be responsible of making a provisional ruling in

regard to the operator of the unified field.



14.3 - The Parties agree that for the appointment of the operator they shall

request that the MEM take the following into consideration:

a)



Who made the discovery;



b)



The location of a significant part of the recoverable reserves of the

commercial deposit in common within the Contract Area, and;



c)



Whoever shows the greatest efficiency and economy in the operation.



14.4 - All agreements for the unified development of shared deposits agreed

between the Parties shall be approved by the MEM.

FIFTEENTH -- INSPECTION AND DELIVERY CENTER

15.1 - The Inspection and Delivery Center is that which is defined in Clause

3.2.6.

15.2 - The costs and expenses as well as the losses produced as a consequence of

transportation from the center of collection of the production of the Contract

Area to the Inspection and Delivery Center shall be assumed by the Contractor.

15.3 - The delivery, reception and payment of the volumes of Crude Oil

originating from the Contract Area shall be done according to the procedures set

forth by the DNH.

15.4 - The Parties shall fix the location for the physical delivery of the

volumes of Crude Oil corresponding to each one of them, commensurate with

operating convenience,

SIXTEENTH - TRANSPORTATION

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<PAGE>

16.1 - If necessary, the Contractor may employ the existing storage and

transportation facilities belonging to PETROPRODUCCION from the Contract Area to

the Inspection and Delivery Centers once it has effected the treatment and

separation of the Crude Oil.

16.2 - PETROECUADOR shall provide, subject to payment of the corresponding

rates, the storage and transportation facilities it has available from the

Inspection and Delivery Center to the initial station of a Main Duct or its

interconnection to the same.

For operation and cost reasons, the parties may agree that the Charapa Station North Lago Agrio Station transfer line be operated by the Contractor. In this

case, the responsibility for the maintenance shall be under the responsibility

of the Contractor and there shall be no need for the payment of any transport

rate between the Parties.

16.3 - If required, the Contractor shall build, at its own cost, the separation,

treatment and storage facilities for Crude Oil, and if the production conditions

so require it, the construction of transportation conduits and Inspection and

Delivery Centers.

16.4 - Without prejudice to that set forth in Article 64 of the Hydrocarbons

Law, PETROECUADOR shall assure to the Contractor the same rights possessed by

other producers for the evacuation of their Crude Oil. Therefore, the

evacuation volume shall be in proportion to the Production Rate fixed for the

Contractor with respect to the total for the Production Rates fixed for the

other producers who use the Main Pipelines.



16.5 - The transportation rate for Main and Secondary Oil Pipelines belonging to

PETROECUADOR shall be determined by the MEM.

16.6 - The transportation rate for Main or Secondary Oil Pipelines not owned by

PETROECUADOR shall be agreed to between the Contractor and the operator of the

transportation system in question. Should there not be an agreement, it shall be

fixed by the MEM.

SEVENTEENTH - GUARANTEES

17.1 - The Contractor shall provide PETROECUADOR with the bank guarantee for

fulfillment of the investments, the guarantee of the Parent Company, and the

guarantee for the Proper use of the Goods and Equipment, as established in this

clause. Subsequently, the Contractor shall provide the corresponding guarantees

in conformity with the Hydrocarbons Law and other applicable legal norms.

17.2 - INVESTMENT COMPLIANCE GUARANTEE. In order to guarantee the fulfillment of

the activities and works that it is obligated to perform during the first three

(3) years in the Contract Area, in conformity with the Minimum Program for

Production Activities and Investments and the Minimum Plan for Additional

Exploration and

Page 35 of 56

<PAGE>

Investments, the Contractor shall provide an irrevocable and unconditional

guarantee for immediate collection and payment, written according to the

guideline approved by the CEL, in U.S. Dollars, for 20% of the total estimated

value as appears in Annexes III and IV, which shall be for the sum of TWO

MILLION THREE HUNDRED FORTY THOUSAND DOLLARS (US$ 2,340,000.00), a certified

copy of which appears as Annex X of this Contract.

If the bank guarantee is granted by a bank that is not domiciled in the country,

it must have the backing of a bank legitimately authorized to operate in

Ecuador.

This guarantee shall be reduced by April 1 every year in direct proportion of

the fulfillment of the activities of the Minimum Program for Production

Activities and Investments and of the Minimum Plan for Additional Exploration

and Investments.

17.3 - JOINT AND SEVERAL GUARANTEE.

As set forth in the Regulation on the Special Tendering System for the Contracts

for Production and Additional Exploration of Marginal Fields, the joint and

several guarantee of the Parent Company of the companies signing this Contract

shall be attached as Annex XI.

17.4 - GUARANTEE FOR PROPER USE OF THE GOODS AND EQUIPMENT

The Contractor shall provide in favor of PETROECUADOR and its Affiliated Company

PETROPRODUCCION the guarantee indicated in Annex XII of this Contract, which

shall assure the proper use of the goods, equipment machinery, installations,

infrastructure and other assets according to the inventory appearing in Annex

VI.

EIGHTEENTH -- INSURANCE

18.1 - For its own benefit and for safeguarding of PETROECUADOR, for the

protection of its personnel, machinery, equipment and other assets under its

administration in the Contract Area, the Contractor shall contract the necessary

insurance policies, having the limits, deductibles, modalities and other



conditions required by the law and by this Contract.

policies must be accepted by PETROECUADOR.



The terms of these



18.2 - The Contractor shall likewise be obligated to contract and maintain

insurance policies covering civil liability for personal or material damage

caused directly or indirectly to third parties, including functionaries and

State employees and those of PETROECUADOR as a result of its obligations in the

Contract Area, as well as to hold PETROECUADOR harmless against any recovery,

claim or lawsuit that could be brought against it as a claim for damages and

losses by the Contractor or its subcontractors during the execution of this

Contract.

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<PAGE>

18.3 - The indemnifications paid under insurance policies contracted under this

Contract, shall serve to immediately repair or to replace the goods,

installations, equipment and other damaged, destroyed or subtracted assets. If

there is insufficient insurance, the Contractor shall cover the difference.

18.4 - If the insurer fails to pay any claim for loss and damages to goods,

installations, equipment and other insured assets, alleging that such damages

were caused or committed deliberately or by inexcusable faults or omissions by

the executive or supervisory personnel of the Contractor, the cost for repair or

replacement shall be for the account of the latter.

18.5 - In the insurance policies that it contracts, the Contractor shall include

coverage for material responsibilities caused by deliberately committed acts,

omissions or inexcusable faults, by the personnel, executive or not, or

supervisory personnel of the Contractor.

18.6 - The Contractor shall require its insurers to include in all the policies

an express clause by virtue of which they waive their right of subrogation

against PETROECUADOR.

18.7 - All the insurance policies necessary for the complete execution of this

Contract must be subject to the provisions of Ecuadorian law and, in addition,

be based on the practices generally accepted by the international petroleum

industry.

18.8 - It shall be the exclusive responsibility of the Contractor to require of

all its subcontractors or suppliers of goods and services that they must

contract the insurance policies that the Contractor considers necessary to

comply with their respective obligations arising from this Contract.

18.9 - To cover the goods located in the country, the Contractor shall take out

the insurance policies in the Ecuadorian insurance market, with the exception of

those risks for which there is no coverage in the country, in which case they

are to be contracted overseas.

18.10 - The Contractor shall deliver to PETROECUADOR authentic copies of the

insurance policies contracted in Ecuador; and in the case of policies contracted

overseas it shall deliver to the entire satisfaction of PETROECUADOR, coverage

notes or certificates for each and every one of these contracted policies, duly

granted and signed by the respective insurance companies.

18.11 - In the case where for reasons imputable to the Contractor or its

subcontractors, the necessary insurance policies were not contracted in a timely

manner; or the Contractor has not made the payment of the premiums corresponding

to such policies, the damages, and losses that occur, as well as the risks,

shall be the exclusive responsibility of the

Page 37 of 56

<PAGE>



Contractor who must cover them immediately, and shall not be permitted to allege

the right to claim any type of reimbursement from PETROECUADOR.

18.12 - The Contractor shall require from the national and foreign insurers who

grant the respective insurance policies, sufficient accreditation to the

satisfaction of PETROECUADOR so that these are sufficiently backed with the

corresponding reinsurances.

18.13 - The Contractor shall maintain the contracted insurance policies in

effect, at the annually updated values.

18.14 - Under the terms contained in the preceding clauses, the Contractor shall

contract insurance policies that cover, at least the following risks:

- Breakage of the machinery

- Civil responsibility

- Fire and annexed lines

- Robbery

- All Contractor risk

- All risk of construction and mounting, including the drilling, completion

and reconditioning of the wells; electronic equipment; and, transport.

- Blowout, fire and well blowout and fire, covering the normal and

extraordinary costs of:

- Control of fire and/or blowout

- Redrilling

- Recompletion

- Well reconditioning

- Cleaning and removal of debris

- Decontamination of the affected area

18.15 - The Contractor shall also acquire to the satisfaction of PETROECUADOR,

the insurance policies needed to cover the hazards of environmental pollution

and impact on ecosystems. These policies shall be valid from the start of the

operations of the Contractor until the termination of the Contract.

18.16 - The Contractor may additionally have, at its own discretion, other

insurance policies that it considers suitable for the performance of its

activities.

NINETEENTH:



ACCOUNTING



19.1 - The Contractor shall keep accounting records of its investments, costs

and expenses related or originating from its activities under this Contract, and

shall be subject to the hierarchy and order of the following laws, regulations

and procedures.

Page 38 of 56

<PAGE>

.

.

.

.

.



Laws governing the Internal Tax Code and Economic Reorganization, in the TaxFinance Area; and Rationalization of Public Finances;

General Regulations Applicable under Laws governing the Internal Tax Code in

the Tax-Finance Area;

Cost Accounting Regulations, as applicable to this type of Contract, issued

by Decree Number 1322, published in the Official Register No. 299, of April

17, 1998;

The present Contract; and

Accounting principles generally accepted in the international petroleum

industry.



19.2 - The accounting records to be kept by the Contractor shall be in Spanish

and bimonetary; accounting ledgers shall use the Sucre and the Dollar, as

appropriate.



TWENTIETH:



SUPERVISION AND CONTROL



20.1 - During the term of this Contract and in order to insure faithful

compliance with the obligations, PETROECUADOR shall have the right to inspect

the activities of the Contractor as well as those of its subcontractors, for

which it shall have access to the technical information generated.

20.2 - Without detriment to the terms set forth in Article 56 of the revised

Hydrocarbons Law, the audits for each Fiscal Year shall be initiated no later

than three (3) months following the termination of the Fiscal Year to be

audited. For the purpose of these audits, the Contractor shall place at the

disposal of the MEM all documentation related to this Contract. These Audits

shall be conducted by the DNH in accordance with the terms established in

Article 11 of the Hydrocarbons Law.

20.3 - The MEM, through the Undersecretary of the Environment, shall carry out

the socio-environmental control of operations for which the Contractor is

responsible under the terms of this Contract.

20.4 - The DNH shall carry out the technical-economic control of the operations

for which the Contractor is responsible.



TWENTY-FIRST:



SUBCONTRACTS



21.1 - Without affecting the terms established in Articles 50 and 51 of the Law

of National Security, the Contractor may chose its own subcontractors and may

negotiate and subcontract, at its own risk and responsibility, any works or

services necessary to carry out this Contract.

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<PAGE>

21.2 - The Contractor shall choose subcontractors from suitable companies and

shall give preference to Ecuadorian firms in order to stimulate the provision of

services by domestic companies, providing that these domestic companies offer

quality goods and services at internationally competitive prices and

availability.

21.3 - The Contractor may not employ the services of subcontractors to which

PETROECUADOR has objected.

21.4 - The Contractor shall include in its subcontracts stipulations obliging

the subcontractors to abide by all of the legal provisions and terms of this

Contract that are applicable to them.

21.5 - The subcontractors, in Ecuador, shall be subject to the laws of the

Republic of Ecuador.

21.6 - In the event that the Contractor subcontracts with foreign companies to

perform works or provide services that by their very nature must be carried out

in Ecuador, the said companies must establish legal residence in the country or

appoint a legal representative in those cases where the law so requires it.

TWENTY-SECOND:



CONTRACTOR PERSONNEL AND LABOR RELATIONS



22.1 - The Contractor shall contract national personnel subject to that

prescribed in subparagraph a) of Article 31 of the Hydrocarbons Law; and the

minimum number of foreign personnel necessary for the complete and efficient

fulfillment of the purpose of this Contract.

22.2 - If the Contractor feels it is necessary, it may contract PETROPRODUCCION

workers who have not been relocated to other fields by this branch. In the



event that the Contractor contracts these workers, the labor relationship with

PETROPRODUCCION shall be extinguished and the Contractor shall not assume the

labor responsibility incumbent on PETROPRODUCCION.

22.3 - The Contractor and subcontractors are autonomous companies and, as such,

their personnel shall be contracted at their exclusive risk and they shall be

solely responsible for any labor or employer obligations arising from or related

to the Work Code, the Law of Compulsory Social Security, or from the individual

or collective contracts they have entered into with their personnel. Therefore,

PETROECUADOR shall not be liable, even jointly, for any labor claim that may

arise as a result of trials or lawsuits, whether individual or collective, on

behalf of the workers of the Contractor or its subcontractors.

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<PAGE>

22.4 - The Contractor and subcontractors shall submit information that contains

data on all of the domestic and foreign personnel for whom they are responsible

to the Joint Command of the Armed Forces, and shall not hire any persons that

are later vetoed by this Command.

TWENTY-THIRD:



GOODS AND IMPORTS



23.1 - The Contractor shall furnish the goods, materials, equipment and other

fixed assets or goods required for the execution of this Contract, according to

the Minimum Program for Production Activities and Investments, the Minimum Plan

of Additional Exploration and Investments, and the Annual Activities Programs

and Budgets.

23.2 - When acquiring goods, the Contractor shall give preference to domestic

products, providing they are similar in technical quality, price and

availability.

23.3 - Regarding imports: the importation and temporary clearing through customs

of goods needed to execute this Contract shall be carried out according to the

Hydrocarbons Law, the Organic Customs Law and other pertinent legal

dispositions.

23.4 - The goods, machinery and equipment to be temporarily employed may enter

and leave Ecuador by applying the Temporary Importation Regimen or similar

methods established in related legislation. In these cases, the Contractor shall

only account in its books the value of the use of these goods in the appropriate

proportion related to the amount of time the goods spend in the country, as well

as expenses related to importing, transporting and insuring the goods. These

costs shall be reasonable in relation to the value of similar expenditures in

the international market.

23.5 - During the term of this Contract, the Contractor shall not alienate,

encumber or withdraw, any part of the goods, machinery or equipment acquired for

the purposes of this Contract, without the prior notification of PETROECUADOR

and authorization from the MEM.

23.6 - The Contractor shall keep all goods, machinery, equipment, tools,

installations and other movable and immovable objects acquired for purposes of

this Contract in good operating conditions. To this end, two (2) years prior to

the expiration of this Contract, or earlier if necessary, the Contractor shall

carry out, at its own expense, a technical inspection of all the facilities

within the Contract Area. The Contractor shall hire a specialized firm to

conduct this inspection and shall be obligated to make all of the repairs or

replacements determined or resulting from said technical inspection, with the

exception of the normal wear resulting from use during the term of this

Contract.

23.7 - In accordance with Article 29 of the Hydrocarbons Law, upon the



expiration of the Contract all goods, machinery, equipment and other assets and

infrastructure that the Contractor may have acquired or developed for the

fulfillment and execution of this

Page 41 of 56

<PAGE>

Contract shall be returned, at no cost and in good condition, to the State

through PETROECUADOR or its subsidiary, PETROPRODUCCION.

Commercial renting or leasing shall not be allowable during the last five (5)

years of the Contract, unless those instruments stipulate the compulsory

acquisition of goods by the Contractor within said time frame.

The goods imported under the temporary Importation Regimen shall not be subject

to the terms established in Article 29 of the Hydrocarbons Law.

TWENTY-FOURTH:



INFORMATION AND CONFIDENTIALITY



24.1 - The Ecuadorian State is the owner of all the technical information

generated during the execution of the Contract and shall have access to all

economic information.

24.2 - The Contractor shall submit the original of all technical information and

information related to investments, cost, and charges incurred in the execution

of this Contract as it is generated to the MEM through the Oil Contracting Unit,

and shall forward a copy to PETROPRODUCCION. The Parties shall expressly and

mutually notify each other of any documents that are confidential in nature.

24.3 - The blueprints, designs, drawings, data, technical and scientific reports

and any other information related to contracted operations and services shall be

treated as confidential by the Parties. Therefore, their content, in whole or in

part, shall not be disclosed to third parties in any way whatsoever, without a

prior written agreement between the Parties. The documents of a confidential or

reserved nature shall conserve that quality until five (5) years after the

conclusion of the Contract.

24.4 - The stipulations of Clause 24.3 shall not apply to the information that

the Parties are under obligation to furnish, according to the law and the terms

of this Contract, nor to the information that the Contractor must supply to its

related companies, auditors, legal advisors, financial institutions or due to

the requirement of domestic or foreign regulating authorities. However, the

Contractor must notify PETROECUADOR in advance.

24.5 - The Contractor and PETROECUADOR may supply the confidential information

referred to in Clause 24.3 to their functionaries, workers, agents,

representatives, directors, arbiters, consultants and subcontractors. However,

they shall take all necessary measures to insure that these parties comply with

the same obligations of confidentiality with respect to the confidential

documents to which they may have access.

TWENTY-FIFTH:

25.1



CONSULTING AND ARBITRATION



Consulting:

Page 42 of 56



<PAGE>

25.1.1 - Disagreements between the parties concerning matters of a technical

nature that involve economic aspects and vice versa, arising from the

application of this Contract, except for those matters that, that by reason of

this Contract or the law, must be decided through arbitration, shall be referred

to the legal representatives of the Parties for resolution.



25.1.2 - If within ten (10) days of having referred the disagreement to the

legal representatives of the Parties, the said disagreement has not been

resolved, the Parties shall submit the said disagreement as well as those themes

mutually agreed upon, to a Consultant.

25.1.3 - The Consultant must be appointed by agreement between the parties

within a period of ten (10) days counted from the date on which the legal

representatives of the Parties should have resolved the dispute. If the parties

cannot come to an agreement regarding the nomination, the Consultant shall be

appointed by the Arbitration Center of the Quito Chamber of Commerce, which must

select an expert in the matter under dispute, who is not related to either of

the Parties.

25.1.4 - The Parties shall furnish the Consultant with all verbal or written

information and other evidence required to reach a solution to the disagreement.

The opinion of the Consultant shall have the effect that the Parties have

mutually agreed upon prior to the appointment of the Consultant. In the event

that the Parties agreed that the opinion is to be binding, they shall request

the opinion of the Attorney General of the State in conformity with subparagraph

three of Article 4 of the Law on Arbitration and Mediation; in this case the

resolution shall have the character of an arbitration finding. If the Parties

do not so agree, the opinion shall only serve as a reference and shall not be

binding on the Parties, in accordance with Number 9.16 of the Basic Contracting

Conditions for Contracts for the Production of Crude Oil and Additional

Hydrocarbon Exploration carried out in the marginal fields of PETROECUADOR. In

all cases, the expenses arising from the Consultant's participation shall be

mutually borne by both Parties.

25.1.5 - The appointed Consultant shall prepare and present its report in

writing on the matter submitted to its consideration, within the period of

forty-five (45) days reckoned from its acceptance. The Parties may extend this

period by mutual agreement, if the Consultant so requests.

25.2 Rules for International Arbitration. - In the event that a disagreement or

controversy is submitted to arbitration as stipulated in Clauses 25.3 the

parties agreed that the said arbitration proceeding shall be subjected to the

following rules, in addition to the specific rules for each respective case.

25.2.1 - Waiver of ordinary jurisdiction. - As provided in Article 4 of the Law

on Arbitration and Mediation, the Parties freely and voluntarily resolve to

waive the ordinary

Page 43 of 56

<PAGE>

jurisdiction for carrying out the arbitration agreed upon herein, therefore

undertaking to respect the content of the finding.

25.2.2 - The Parties agree that the Arbitration shall take place in the city of

Quito, Ecuador.

25.2.3 - Any Arbitration Tribunal constituted in conformity with this agreement

shall be composed of three (3) arbiters. Each party shall appoint one (1)

arbiter and these two (2) arbiters shall by common accord appoint a third

arbiter who shall be the President of the Tribunal. If one of the parties does

not appoint an arbiter within the thirty (30) days following the appointment of

the first arbiter, or if the two (2) arbiters appointed by the parties do not

name the third arbiter within the thirty (30) days following the appointment of

the second arbiter, the respective appointment or appointments shall be made in

accordance with the Rules of the Center. The three (3) arbiters must be

Ecuadorian citizens or citizens of countries maintaining diplomatic relations

with the Republic of Ecuador and with the countries where the parties composing

the Contractor are constituted, they must be citizens of signatory countries of

the Convention, not have any interest or economic relationship with the Parties



and the President of the Tribunal may not be of the nationality of either of the

Parties.

25.2.4 - Any Arbitration Tribunal constituted in conformity with this Contract

shall apply the Ecuadorian legislation in effect on the date of the making of

the present Contract and apply the arbitration rights.

25.2.5 - The Spanish language shall be the language used in any arbitration

proceeding. All the materials used in the hearings, complaint, response to the

complaint, arbitration finding and their grounds must be in Spanish.

25.2.6 - It is hereby agreed that the right of the Parties to submit any dispute

to the Arbitration Center in accordance with this Contract shall not be affected

by the fact that a total or partial indemnification has been received from a

third person with respect to any loss or damage that is an object of the

dispute.

25.2.7 - The absence or recalcitrance of either of the Parties in the

arbitration shall not be cause for preventing or obstruction of the arbitration

proceeding in any manner or at any of its stages.

25.2.8 - Any arbitration finding pronounced in accordance with any arbitration

proceeding carried out in conformity with this Contract shall have the effect of

a final judgment. It shall be definitive and binding for the Parties, without

right of appeal of any type, shall be executed by an ordinary judge, in

conformity with Article 32 of the Law on Arbitration and Mediation and the

international covenants and treaties in effect in Ecuador.

25.2.9 - Any arbitration finding that requires the payment of money, must be

paid in dollars of the United States of America, free of any deduction, or in

Sucres at the exchange rate at

Page 44 of 56

<PAGE>

the time of payment. Furthermore, in the event that any finding that requires

one of the Parties to pay an amount of money, that Party must recognize the

corresponding late interest from the date of noncompliance or violation of this

Contract, if the arbitration finding so determines, and in addition, pay the

late interest from the date of the ruling until the date on which payment is

made in full.

25.2.10 - The arbiters shall be authorized to prescribe precautionary measures.

The Arbitration Tribunal shall be authorized to request the aid of public,

judicial, police and administrative functionaries for the execution of the

precautionary measures, without the need to appeal to any ordinary judge.

25.2.11 - The standards of the Law on Arbitration and Mediation, Civil Code and

Civil Procedures Code of the Republic of Ecuador shall be applied supplementary

to all that provided in the norms and regulations of the respective Arbitration

Center.

25.2.12 - All Arbitration proceedings shall be confidential.

25.2.13 - The Parties indicate as their domiciles those that are indicated in

this Contract in the city of Quito for all summons and notifications of the

arbitration.

25.2.14 - The fees and expenses of the members of the Arbitration Tribunal, as

well as the charges applicable for the use of the services of the Center shall

be borne equally by the Parties in any arbitration proceeding carried out under

this Contract.

25.2.15 - The parties agree that that stipulated in Clause 25 shall be kept in

effect and shall be binding on the Parties, even in the event that this Contract



becomes null and void.

25.3 - International Arbitration

25.3.1 If the disagreement or controversy is of a nature such that it cannot be

resolved by the Consultant as stipulated in Clause 25.1, or if one or both of

the Parties is not satisfied with the decision rendered by the Consultant,

unless it has been agreed that the opinion of the Consultant be binding,

PETROECUADOR and the Contractor agree to submit such a disagreement or

controversy to the arbitration of the International Center for the Settlement of

Investment Disputes (ICSID).

The arbitration shall be carried out as stipulated in the Agreement on the

Settlement of Differences Relative to Investments between States and Nationals

of Other States, published in the Official Record No. 386 of March 3, 1986

provided that this Agreement are kept in effect for Ecuador.

25.3.2 - PETROECUADOR has been registered at the ICSID since the year 1988, as a

party appointed by the Republic of Ecuador, as inferred from the Certificate

granted on the day of

Page 45 of 56

<PAGE>

April 27, 1999 by the General Secretary for Foreign Relations of the Ministry of

Foreign Relations, what appears as Annex XIII.

25.3.3 - The Contractor is composed of companies of United States and Panamanian

nationality.

25.3.4 - Any arbitration proceeding that is initiated in accordance pursuant to

this Clause 25.3 shall tried subject to the ICSID Rules in effect on the date in

which the arbitration proceeding is initiated and shall observe the common rules

stipulated in Clause 25.2.

TWENTY-SIXTH:



TRANSFER OR CESSION



The Contractor may not cede or transfer the rights and obligations of this

Contract without the prior knowledge of PETROECUADOR and the authorization of

the MEM. Therefore, any cession or transfer made without the fulfillment of this

essential requirement shall be null and void, without detriment to the MEM

declaring the Contract void. In any case, the transfer or cession shall be

subject to the terms established in Article 79 of the Hydrocarbons Law and in

Executive Decree Number 809 and its revisions.

TWENTY-SEVENTH:



CAUSES FOR TERMINATION AND NULLITY



27.1 - This Contract shall be terminated for the following reasons:

a)



The failure to fulfill the purpose of this Contract.



b)



The expiration of the established period.



c)



At any time before expiration of the contract period by mutual

agreement between the Parties.



d)



In the event that the economic conditions of the Contract are not

profitable, the Contractor shall request the approval of PETROECUADOR

to declare this Contract terminated, provided it has faithfully

performed all the obligations undertaken in this Contract.



e)



By a declaration of nullity issued by the MEM for the reasons and under

the procedures set forth in Articles 74, 75 and 76 of the Hydrocarbons



Law.

f)



If, after the third year of this Contract, the Contractor does not

achieve a 50% increase in production over the Base Production Curve.

Page 46 0f 56



<PAGE>

g)



Due to filing for bankruptcy by any of the corporate entities composing

the consortium.



h)



Due to the extinction of the legal entity of any of the corporate

entities composing the consortium.



i)



Due to a final ruling made by a competent judge or arbiter; and



j)



Due to any other cause provided in the law.



27.2 - In cases of non-fulfillment that may constitute a cause for termination

and nullity in conformity with the provisions of the Hydrocarbons Law, the

following procedures must be followed:

27.2.1 - PETROECUADOR shall notify the non-fulfillment to the Contractor, so

that it may respond with the period of ten (10) days. Nevertheless, the

Contractor shall take actions tending to remedy, correct or rectify the failure

or non-fulfillment that gave rise to the claim within the period of thirty (30)

days. If such actions have been taken and this period proves insufficient for

the Contractor to be able to remedy, correct or rectify the said failure or nonfulfillment and it so demonstrates, PETROECUADOR shall concede to it a period

additional to that granted, at the petition of the Contractor.

27.2.2 - The following procedure shall be required to declare nullity:

a)



If within the periods mentioned in number 27.2.1 the Contractor does

not resolve such failures or non-fulfillment, PETROECUADOR shall

request the Ministry of Energy and Mines to declare this Contract null

and void.



b)



Prior to the declaration of the nullity of the Contract, the MEM shall

notify the Contractor so that, within a period of no less than thirty

(30) days nor more than sixty (60) days from the date of the

notification, it complies with the obligations not met or dispels the

charges that have been brought.



c)



Once nullity has been declared, the Contractor shall immediately return

the contracted area to the State and shall deliver all the equipment,

machinery and other production and exploration elements, and industrial

and transport installations, free of any charge to PETROECUADOR and, in

addition, the surety bonds and guarantees provided under the Law and

the Contract shall automatically be lost, which shall revert in favor

of the State.



27.2.3 - The procedures established in the pertinent laws and regulations and

in absence of these, those agreed upon by the parties shall be followed in the

other causes of termination.

Page 47 of 56

<PAGE>

TWENTY-EIGHTH:



APPLICABLE LAW, DOMICILE, JURISDICTION AND NEGOTIATION



28.1 - Applicable Legislation: This Contract shall be governed exclusively by

Ecuadorian legislation and the laws in effect at the time the making of this

Contract shall be considered to be incorporated within it.



The Contractor expressly declares to have a complete understanding of all

Ecuadorian legislation applicable to Contracts for the Production of Crude Oil

and Additional Exploration for Hydrocarbons in Marginal Fields.

28.1.1 - Legal Framework: Includes, without being limited to, the legal

standards established in Annex XIV, which are applicable to this Contract:

28.2 - Domicile, Jurisdiction and Competence: The Parties submit to the laws of

Ecuador and establish their residence in the City of Quito as set forth in

Article 3 of Law No. 44 published in the Official Register 326 of November 29,

1993. This provision shall prevail even after this Contract has expired, up to

the moment in which the operating permit of Contractor in Ecuador has been

legally canceled, without taking the causes for termination into consideration.

28.2.1 - In the event of disputes that may arise due to the application of this

Contract, the Contractor, pursuant to Ecuadorian legislation, expressly

renounces the right to use diplomatic or consular resources, or to resort to any

domestic or foreign jurisdictional mechanism not provided in this Contract, or

to an arbitration that is not recognized by Ecuadorian law or provided in this

Contract.

28.2.2 - The Parties agree to use the means established in this Contract for

settling doubts or controversies that may arise during its validity. The Parties

also agree to observe and comply with any rulings made by authorized

consultants, arbiters, judges, or courts, in related cases, according to the

stipulations of the Contract.

TWENTY-NINTH- COMMUNICATIONS AND NOTIFICATIONS

29.1 - COMMUNICATIONS

All the communications or notifications that contain requests, suggestions,

opinions, acceptances, authorizations, reports, studies, balances, inventories

and other documents that the Parties interchange between themselves or that they

present to the MEM and/or PETROECUADOR, for purposes of this Contract shall be

written in the Spanish language. If there are technical reports, which due to

their nature require presentation in another language, these must be translated

into Spanish.

Page 48 of 56

<PAGE>

29.2 - The documents presented by the Contractor to PETROECUADOR or to the MEM

by virtue of this Contract shall be subject to that set forth in Article 82 of

the Hydrocarbons Law.

29.3 - Written notification between the Parties shall be conducted in Spanish

and shall be forwarded to the following addresses:

MEM

Santa Prisca No. 221 y Av. 10 de Agosto

FAX: 580724

Telephone: 570-877

Quito, Ecuador

PETROECUADOR

Edificio Matriz

Alpallana y 6 de Diciembre

FAX: 593-2-569738

Telex: 022213

Telephone: 563-060

Apartado Postal 17.11.5007

Quito, Ecuador



UCP

Unidad de Contratacion Petrolera

Av. Amazonas 4600 y Pereira

Edif. Casa Vivanco 6to. Piso

FAX 593-2-262375

Telephone: 265246-265247

Quito, Ecuador

PETROPRODUCCION

Av. 6 de Diciembre 4226 y Gaspar Canero

FAX: 449000

Telephone: 440333 to 342

Quito, Ecuador

CONTRACTOR:

TECNIPETROL, INC.

Av. Republica de El Salvador 970, Piso 7

Telefonos: 466770 - 466802

FAX: (593-2) 466802

Quito, Ecuador.

Page 49 of 56

<PAGE>

BELLWETHER INTERNATIONAL, INC.

Whymper 1105 y Diego de Almagro

Telefonos: 222057 - 508123 - 501354

FAX: (593-2) 501902

Quito, Ecuador.

THIRTIETH:



QUANTITY AND NOTARY EXPENSES



30.1 - Given its nature, this Contract is not liable to quantification on the

date that it is granted. Therefore, the present Public Instrument is of an

indeterminate quantity.

30.2 - The expenses required for the making of this Contract, including the cost

for ten (10) certified copies to be delivered to the Oil Contracting Unit, shall

be paid by the Contractor and the respective procedures shall be for his

account.

THIRTY-FIRST:



QUALIFYING DOCUMENTS



The following documents are qualifying documents of the present Contract:

a)



Certified copies of the appointment and formal investiture of the executive

president of PETROECUADOR and appointment of the manager of

PETROPRODUCCION;



b)



Certified copy of the instrument constituting the Bellwether-Tecnipetrol

Consortium made before the Thirty-Second Notary on September 13, 1999.



c)



Certified copy appointment or powers of attorney of the Legal

Representatives of the companies composing the Contractor, who appear in

the document mentioned in clause 2.4;



d)



Certified copy of the documents listed in the numerals 2.2, 2.4, 2.5, 2.6,

2.7 and 2.8 of the Second Clause.



e)



Certificates from the Superintendency of Companies accrediting the legal

existence of the companies composing the Contractor and their residence in



Ecuador.

f)



Certified copy of the Resolution of the Special Bid Committee accrediting

the approval of this Contract, its awarding in favor of the Contractor and

the approval for its signing;



g)



Certified copies of the Resolutions of Administrative Council of

PETROECUADOR and the Board of PETROPRODUCCION authorizing the

Page 50 of 56



<PAGE>

Executive President of Petroecuador and the Manager of that Affiliate to

sign this Contract; and

h)



Certified copies of the official letters that request the favorable report

of the Attorney General of the State and the opinion of the Joint Command

of the Armed Forces regarding this Contract in the aspects set forth by

law, contained in clause 2.6.



THIRTY-SECOND:



ANNEXES



The following are an integral part of this Contract and are appended as ANNEXES:

Delimitation of the Contract Area and Ecuadorian Oil Cadastral Map, certified by

the Military Geographic Institute and the National Office of Hydrocarbons;

Base Production Curve of the Charapa Field;

Minimum Plan for Additional Exploration and Investments;

Minimum Program for Production Activities and Investments;

Procedure for fixing the Production Rate;

Inventory, Technical Inspection and Valuation of Assets

Contractor's Offer, (Envelope 2)

Negotiation Record (the Minutes)

Cost Accounting Regulations applicable to Marginal Fields;

Investment Guarantee;

Joint Guarantees of the Parent Company

Guarantee of Proper Use of Goods and Equipment

Certificate granted on April 27, 1999 by the General Secretary of Foreign

Relations of the Ministry of Foreign Relations.

Legal Framework

Page 51 of 56

<PAGE>

You, Mr. Notary Public shall please add any other stylistic formalities

necessary to make this Contract perfectly valid.

Dr. Jorge Paz Durini, and Dr. Jaqueline Silva inscribed in the Bar Association

of Pichincha under Matriculation Nos. 2582 and 3154, respectively.

Page 52 of 56



<PAGE>

ANNEX XIV. Legal Framework

Hydrocarbon Legislation

Codification of the Hydrocarbons Law (DS 2967. RO 711: 78.11.15.)

Law No. 101, reforming the Hydrocarbons Law (RO 306: 82.08.13.)

Law No. 08, reforming the Hydrocarbons Law (RO 277: 85.09.23.)

Law Decree No. 24, reforming the Hydrocarbons Law (RO 446: 86.05.29.)

Special Law No. 45, of the State Oil Company of Ecuador (PETROECUADOR) and its

Subsidiary Companies (RO 283: 89.09.26.), its reforms and pertinent regulations.

Law No. 44, reforming the Hydrocarbons Law (RO 326: 93.11.29.)

List of errata published in the RO 344: 93-12-24

Law No. 49, reforming the Hydrocarbons Law (RO 346: 93.12.28.)

Law Reforming the Hydrocarbons Law (Supplement RO 523: 94.09.09.)

Law Reforming the Hydrocarbons Law No. 98-09 (RO 12: 98.08.26)

Regulation of the Law No. 101 (DE 1491. RO 427: 83.02.07.) and its reforms (DE

1770. RO 509: 83.06.08.) and (DE 3136-A. RO 753: 87.08.20.)

Regulation for application of the Law No. 44 (DE 1417. RO 364: 94.01.21.), and

its reforms (DE 2360. RO 595: 94.12.22.)

Regulation of the Special Bidding System for Contracts for Production and

Additional Exploration of Marginal Fields (RO 419: 94-04-13).

Basic contracting conditions for the Special Bidding for Contracts for Crude Oil

Exploration and Additional Hydrocarbon Production in Marginal Fields (RO S 305:

98-04-27).

Cost Accounting Regulation applicable to Contracts for Exploration for Crude Oil

and Additional Hydrocarbon Production in Marginal Fields (RO 299: 98-04-17).

Regulation on Hydrocarbon Operations (AM 1311. RO 681: 87.05.08.), and its

reform (AM 189. RO 123: 89.02.03.)

Page 53 of 56

<PAGE>

Procedure for Fixing Production Rates (DE 543. RO 135: 85.03.01.), and its

reform.

Regulation to Article 79 of the Hydrocarbons Law on Cession of the Rights and

Obligations of Hydrocarbon Exploration and Production Contracts (DE 809. RO 197:

85.05.31.), and its reforms.

Executive Decree No. 976, RO 274: 82-06-29

Regulation for the scheduling of Crude Oil Shipments (RO 257: 98-02-13)

Tax Legislation:

Law for the Reform of Public Finances (RO S 181: 99.04.30.).



Law Reordering Economic Matters for the Tax-Finance Area (Law 98-17) (RO S 78:

98.12.01.).

Tax Code (DS 1016-A. RO - Supplement



958: 75.12.23.).



Law No. 006, on Tax and Financial Control (RO 97: 88.12.29.) and its Regulation

(DE 393. RO S 118: 89.01.27.)

Law No. 56, on the Domestic Tax System (RO - Supplement 341: 89.12.22.) and its

Regulation.

Law No. 63, Reform of the Law No. 006 (RO 366: 90.01.30.)

Law



No. 72 (RO 441: 90.05.21.).



Law No. 40, that creates Substituting Revenue for the Provinces of Napo,

Esmeraldas y Sucumbios (RO 248 S 89.08.07.).

Law No. 122, that creates the Development Fund of the Provinces of the Amazon

Region (RO 676: 91.05.03.).

Law No. 51, Reform of the Law the Domestic Tax System (RO 349: 93.12.31.).

Decree - Law No. 05, Reform of the Laws No. 51, No. 56 and Tax Code (RO 396:

94.03.10.)

Law No. 10, of the Fund for Regional Amazon Eco-development and Reinforcement of

its Sectional Bodies (RO 30: 92.09.21.), its reform Law No.20 (RO 152:

97.09.15.) and

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<PAGE>

its Regulation (DE 461. RO: 121:93.02.03.)

Legislation on the Environment:

Roads Law (DS 1351. RO 285: 64.07.07.) and its Regulation (AM 0282. RO 378:

71.12.24.).

Health Code (DS 188. RO 158: 71.02.08.).

Law for the Preservation of Reserve Zones and National Parks (DS 1306. RO

301:71.09.02.)

Environmental Regulation for the Hydrocarbon Operations in Ecuador (DE 2982. RO

766: 95.08.24.)

Law on Waters (DS 369. RO 69: 72.05.30.) and its Regulation (DS 40. RO 233:

73.01.26.).

Reform to the Maritime Police Code (DS 945. RO 643: 74.09.20.).

Law on Prevention and Control of Environmental Contamination (DS 374. RO 097:

76.05.31.).

Instruction for the Preparation of Environmental Impact Reports and Studies (AM

764. RO 330: 85.12.09.)

Law No. 74, on Forestry and on conservation of Natural Areas and Wild Life (RO

64: 81.08.24.), reformed, and its Regulation (DE 1529. RO 436: 83.02.22.),

reformed.

Norms for the Prevention, Control and Rehabilitation of the Environment in the



Hydrocarbon Exploration and Production Activities in the National Parks or

equivalents (AM 1743. RO OO4: 88.08.16.)

Regulation for the Prevention and Control of Environmental Contamination,

relative to water resources (AM 2144. RO 204: 89.06.05.)

Regulation for the Prevention and Control of Environmental Contamination caused

due to emission of noises (AM 7789. RO 560: 90.11.12.).

Regulation for the Prevention and Control of Environmental Contamination

relating to ground resources (AM 14629. RO 989: 92.07.30.).

Regulation for the handling of solid wastes (AM 14630. RO 991: 92.08.03.).

Page 55 of 56

<PAGE>

Various Legal Provisions:

Political Constitution of the Republic of Ecuador.

Law on Arbitration and Mediation, (RO 145: 97.09.04.).

Law No. 147, on the Facilitation of Exports and Aquatic Transport (RO 901:

92.03.25.).

Law No. 99, Organic Customs Law (RO 359: 98.07.13.)

Law on the Status of Aliens (DS 1897. RO 382: 71.12.30.) and its Regulation (DE

1991. RO 473: 86.07.07.).

Law No. 50, on Modernization of the State, Privatizations and Providing of

Public Services by Private Initiative (RO 349: 93.12.31.) and its Regulation.

General Insurance Law (Law No. 74 RO 290: 98.04.03.)

Codification of the National Security Law (DS 275. RO 892: 79.08.09) and its

Regulation (DE 2264. RO 642: 91.03.14.).

Regulation for the application of Articles 18 and 57 of the Industrial Promotion

Law, 50 and 51 of the Law for Promoting Small Industry, 87 and 88 of the Law for

Promoting the Automotive Industry (DE 976. RO 274: 82.06.29.).

Codified Regulation for the Determination and Collection of Contributions that

companies subject to the control and supervision of the Superintendency of

Companies must pay annually to the latter (ADM 90154. RO 442: 90.05.22.).

Ministerial Accord that fixes the minimum wage for workers working in the

production of crude oil and natural gas, its processing, packing and marketing.

Page 56 of 56

</TEXT>

</DOCUMENT>

<DOCUMENT>

<TYPE>EX-11.17

<SEQUENCE>5

<DESCRIPTION>MASTER SERVICE AGREEMENT

<TEXT>

<PAGE>

EXHIBIT 10.17