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CONFIDENTIAL

DOE v. UNOCAL

SUBJECT TO PROTECTIVE ORDER



PRODUCTION SHARING CONTRACT

Description Date signed/issued

1 Production Sharing Contract 9th July 1992

2 Memorandum of Understanding 9th July 1992

3 Side letter (No. 3/23/92 - 1620) 9th July 1992

4 Letter from TOTAL concerning the NAY MIN YAUNG RIG 9th July 1992

5 Supplementary Letter 24th Dec 1993

6 Supplementary Letter No. 2 30th Jan 1995

7 Notification No. 5 (Extraordinary) /92 Permit to conduct petroleum exploration and production 9th July 1992

8 Myanmar Investment Commission Permit (Permit No. 055/92), together with superseded 1-page Permit of 8th July 1992 27th Jan 1995



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PRODUCTION SHARING CONTRACT

FOR APPRAISAL DEVELOPMENT

AND PRODUCTION OF PETROLEUM

IN THE MOATTAMA AREA

BETWEEN

MYANMA OIL AND GAS ENTERPRISE

AND

TOTAL MYANMAR EXPLORATION AND

PRODUCTIN



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SECTION PAGE





PREAMBLE 4

1 DEFINITIONS 7

2 SCOPE 13

3 TERMS 14

4 RELINQUISHMENT 16

5 MINIMUM EXPENDITURE COMMITMENT 17

6 WORK PROGRAMMES AND EXPENDITURES 18

7 DISCOVERY AND APPRAISAL 21

8 DEVELOPMENT AND PRODUCTION 24

9 COST RECOVERY AND PROFIT OIL OR GAS

ALLOCATION 27

10 ROYALTY 34

11 BONUSES 35

12 VALUATION OF PETROLEUM 38

13 NATURAL GAS 41

14 DOMESTIC CRUDE OIL REQUIREMENT 43

15 EMPLOYMENT AND TRAINING 44

16 TITLE OF ASSETS 45

17 RIGHTS AND OBLIGATIONS OF MOGE AND

CONTRACTOR 47

18 MANAGEMENT COMMITTEE 53

19 STATE PARTICIPATION AND PAST COSTS 54

20 FORCE MAJEURE 57

21 GOVERNING LAW 58

22 CONSULTATION AND ARBITRATION 59

23 BANKING 60

24 INSURANCE 62

25 TERMINATION 63

26 BOOKS AND ACCOUNTS AND AUDITS 64

27 GENERAL PROVISIONS 65









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ATTACHMENTS PAGE



ANNEXURE "A" DESCRIPTION OF CONTRACT AREA 69

ANNEXURE "B" MAP OF CONTRACT AREA 70

ANNEXURE "C" ACCOUNTING PROCEDURE 71

ANNEXURE "D" GUARANTEE 87

ANNEXURE "E" MANAGEMENT PROCEDURE 88

ANNEXURE "F" MEMORANDUM ON PARTICIPATION 91



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PRODUCTION SHARING CONTRACT

FOR APPRAISAL DEVELOPMENT AND PRODUCTION

OF PETROLEUM IN THE MOATTAMA AREA

BETWEEN

MYANMA OIL AND GAS ENTERPRISE

AND

TOTAL MYANMAR EXPLORATION AND PRODUCTION



THIS CONTRACT entered into and delivered as Yangon, The Union of Myanmar on the 14 day of July Nineteen Hundred and Ninety Two by and between THE MYANMA OIL AND GAS ENTERPRISE, an enterprise organized and existing under the laws of the Union of Myanmar (hereinafter referred to as the âMOGEâ which expression shall, unless repugnant to the context or the meaning thereof, be deemed to include its successors and permitted assigns), represented by the purpose of this Contract by THE MANAGING DIRECTOR, MYANMA OIL AND GAS ENTERPRISE,



of the one part



and



TOTAL MYANMAR EXPLORATION AND PRODUCTION, a company existing under the Laws of France (hereinafter referred to as the âCONTRACTORâ which expression shall, unless repugnant to the context or the meaning thereof, be deemed to include its successors and permitted assigns), represented for the purpose of this Contract by its Choirman of the Board,



of the other part



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5



WITNESSETH



WHEREAS, The Union of Myanmar is the sole owner of all natural resources within her territory and offshore areas and has the right to develop, extract, exploit and utilize the natural resources in the interest of the people of all the national groups; and



WHEREAS, MOGE is an enterprise formed by the Government of the Union of Myanmar and is concerned with exploration and production of âPetroleumâ within the Union of Myanmar both onshore and offshore; and



WHEREAS, MOGE has the exclusive right to carry out all Petroleum operations in the Union of Myanmar and throughout the area corresponding to blocks of M5 and M6 located in offshore Myanmar (Moattama) and described in Annexure âAâ and outlined on the map which is Anexxure âBâ, both attached hereto and made a part hereof, which area is hereinafter referred to as the as the âContract Areaâ; and



WHEREAS, CONTRACTOR is of sound financial standing and possesses technical competency and professional skill for carrying out exploration, appraisal, and development works and other âPetroleum Operationsâ as hereinafter defined; and



WHEREAS, the parties each has the right, power and authority to enter into this Contract; and



WHEREAS MOGE has made two gas discoveries in the Contract Area, namely the 3DA-X and # DA-1 Structures.



WHEREAS, MOGE and CONTRACTOR mutually desire to enter into this agreement for a Production Sharing Contract in relation to the Contract Area:



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WHEREAS MOGE and CONTRACTOR have entered into on this same 9th day of July nineteen hundred and ninety two a Memorandum of Understanding, hereinafter referred to as "MOU"; WHEREAS this Production Sharing Contract and the MOU describe and constitute together the agreement of the parties in relation to the Project for appraisal, development and production of the two gas discoveries made by MOGE in the CONTRACT Area; NOW, THEREFORE, for and in consideration of the premises and the mutual covenants hereinafter set out, it is agreed as follows:Section 1- Definitions



In this Contract words in the singular include the plural and vice versa, and except where the context otherwise requires the following terms shall have the meaning set out as follows :



1.1 "Accounting Procedure" means the procedure and reporting requirements set forth in Annexure "C".



1.2 "Affiliate" means company, any party order the legal entity ;



a) in which CONTRACTOR holds directly or indirectly at least fifty percent (50%) of the shares entitled to vote, or



b) which holds directly or indirectly at least fifty percent (50%) of CONTRACTOR's shares entitled to vote, or



c) in which at least fifty percent (50%) of the shares entitled to vote are owned directly or indirectly by a company, party on legal entity, which owns directly or indirectly at least fifty percent (50%) of the shares of CONTRACTOR entitled to vote.



1.3 "Appraisal Period" means the period which CONTRACTOR deems necessary to determine whether the Discoveries are Commercial Discovery.



1.4 "Appraisal Programme" means a programme submitted by CONTRACTOR pursuant to Section 6.2, under which CONTRACTOR will evaluate and delineate the Discoveries, or pursuant to sections 7.2, under with CONTRACTOR will evaluate and delineate on Other Discovery.



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1.5. "Associated Gas" means Natural Gas found in association with Crude Oil if such Crude Oil can by itself be commercially produced.



1.6. " Average Daily Gross Production Rate" means"



. for Gas : the total cubit feet produced in each calender month divided by the days in the said month



. for Crude Oil : the total barrels of Crude oil produced in each calendar month divided by the days in the said month.



1.7. Barrel" means a quantity or unit of forty- two (42) US gallons liquid measure, at or corrected to a temperature of sixty degrees (50") Fahrenheit with normal atmospheric pressure at sea level.



1.8 " Budget" means an estimate of income and expenditure





1.9. "Calendar Year" or " Year" means a period of twelve (12) consecutive months commencing with January 1st and ending with December 31st next following, according to the Gregoian Calender



1.10. " Commencement of Commercial Production" means, in relation to any Development and Production Area, the date on which regular and continuous sales of Natural Gas commence or the date on which regular and continuous shipments of crude oil ( excluding test production) commence



1.11. " commercial Discovery" means



in relation to the Discoveries that such Discoveries have been determined commercial by contractor is accordance with section 7.7.1 and 13.3 herein:



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in relation to the hydrocarbons in liquid form that

may be discovered during the performance of the

Appraisal Pro£ram, and in relation to any Other

Discovery of Petroleum under this Contract that

such Petroleum consist of an accumulation or

accumulations of Petroleum which CONTRACTOR, after

conducting appraisal operations to assess the

quantity and quality of the Petroleum present, the

place and the depth of its location, the required

potential expenditure, prices prevailing in the-

world market, and other relevant factors, decides

to develop and produce.



1.12."Contract Area* means the offshore area described

in Annexure "A" and shown on the map in Annexure

"B".



The Contract Area extends to ail depths within its

lateral boundaries.



1.13."Contract Year" means a period of time (normally of

three hundred and sixty-five (365) consecutive

days) commencing with the Effective Date. i



1.14."Cost Petroleum" means Petroleum out of which

Contractor may recover the costs and expenses of

the Petroleum Operations pursuant to Section 9.4.



1.15."Crude Oil" means crude mineral oil, asphalt,

ozokerite, casing head petroleum spirit, and ail

kinds of hydrocarbons and bitumens whether in

solid, liquid or mixed forms, including condensate

and other substances extracted or separated front

Natural Gas.





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1.16. "Cubic Foot" means a quantity or unit of vapor

saturated Natural Gas contained in one (1) cubic

foot of space at a temperature of sixty degrees

(60') Fahrenheit and pressure of 14,735 psia (30

in Hg).





1.17. "Deliverv Point" means (a) for Natural Gas the

point of delivery to the Gas Transportation

Company as determined in section 2.2 of the MOU

and (b) the point of export, Myanmar, for Crude

Oil made available for export sale, (c) the agreed

point of delivery within the relevant Development

and Production Area for royalty Crude Oil

delivered to MOGE pursuant to Section 10.1. and

Crude Oil made available for the Myanmar domestic

market pursuant to Section 14.1 ;as the case may

be. |



1.18. "Development and Production Area means the area

established by CONTRACTOR in accordance with

Section 8.3. by notifying M0GE in writing that

CONTRACTOR has made a Commercial Discovery and

furnishing a map describing an area describing of

ail or a portion of the Contract Area believed by

CONTRACTOR to contain the Commercial Discovery.

Once designated a Development and Production Area

shall extend to ail depths within its lateral

boundaries.



1.19. "Development and Production Operations" means ail

operations and related administrative and other

activities, within or outside the Contract Area,

which are carried out following approval of a

Development Plan for a Development and Production

Area in connection with the extraction,

separation, processing, gathering, transportation,

storage, treatment and disposition of Petroleum

from such Development and Production Area.



1.20. "Development and Production Period" means, in

relation to each Development and Production Area,

the period specified in Section J.5.



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1.21 "Development Plan" means a plan for development of

a Commercial Discovery prepared by CONTRACTOR and

approved in accordance with Section 8.6, including

any amendments thereto.



1.22 a) "Discoveries" means the discoveries of

accumulations of Natural Gas already made by

MOGE in the Contract Area.



b) "Other Discovery" means any other discovery of

accumulation or accumulations of Petroleum

which in the opinion of CONTRACTOR may be

capable of being produced in commercial

quantities.



1.23 "Effective Date" means the date following execution

of this Contract and of the MOU by the Parties, on

which the last act necessary to give this Contract

and MOU the full legal effect has been taken.



1.24 "Exploration Operations" means operations which are

conducted under this Contract for or in connection

with the exploration for Petroleum including,

without limitation, geological, geophysical and

other technical surveys and studies, the review,

processing and analysis of data, the drilling of

exploratory and appraisal wells.



1.25 "Field" means an underground accumulation of

hydrocarbons or two (2) or more such accumulations

overlying one another in connected or separate

horizons or reservoirs, related to one single or

several combined geological traps, and which must

be considered as a unit for the purpose of

Petroleum Operations.



1.26 "Financial Year" means the Financial Year of the

Government of the Union of Myanmar and extending

for a period of twelve (12) months commencing with

lst April and ending with 31st March next

following. (initials)





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1.27. "Foreign Exchange" [underlined] means currency other than that of the

Union of Myanmar but acceptable to the Union of Myanmar.

1.28. "Natural Gas" [underlined] means all gaseous hydrocarbons produced

from wells, including wet mineral gas, dry mineral gas, casing head

gas and residue gas remaining after the extraction or separation

of liquid hydrocarbons from wet gas.

1.29. "Operating Costs" [underlined] means all of the costs and expenditures

borne and incurred by CONTRACTOR in or in connection with the

conduct of Petroleum Operations pursuant to this Contract,

determined and accounted for in accordance with Annexure "C".

1.30. "Petroleum" [underlined] means and includes both Crude Oil and

Natural Gas, as well as any other hydrocarbon produced in association

therewith.

1.31. "Petroleum Operations" [underlined] means all operations under this

Contract, including, without limitation, Exploration, Operations,

Development and Production Operations, all associated planning,

design, administrative, engineering, construction and

maintenance operations, and any other operations and activities

otherwise contemplated under the provisions of this Contract.

1.32. "Work Programme" [underlined] means a programme mutually agreed

by MOGE and CONTRACTOR itemizing the Petroleum Operations

to be conducted within or with respect to the Contract Area or

Production Area and the time schedule thereof.











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SECTION 2 - SCOPE



2.1. This Contract is a Production Sharing Contract. In accordance with the provisions herein contained, MOGE shall have and be responsible for the management of the operations contemplated hereunder.



2.2 CONTRACTOR shall be responsible to MOGE for the execution of such operations in accordance with the provisions of this Contract and is hereby appointed and constituted the exclusive company to conduct Petroleum Operations in the Contract Area. CONTRACTOR shall provide all the financial and technical assistance required for such operations. CONTRACTOR shall carry the risk of Operating Costs required in carrying out operations and shall therefore have an economic interest in the development of the Petroleum deposits in the Contract Area. Such costs shall be included in Operating Costs recoverable as provided in Section 9.4. The interest expenses incurred by the CONTRACTOR to finance its operation hereunder shall no be cost recoverable from Cost Petroleum.



2.3. During the term of this Contract the total production achieved in the conduct of such operations shall be divided in accordance with the provisions of Section 9.7. - 14 -



SECTION 3 - TERM [underlined]



3.1 Unless sooner terminated in accordance with the terms hereof,

this Contract shall remain in effect during the Appraisal Period

and any Development and Production Period.

3.2 The Appraisal Period shall begin on the Effective Date and shall

consist of an initial term which shall continue for two (2) years

from the commencement of Petroleum Operations as specified in

Section 6.1.

3.3 If drilling operations (including testing) are in progress at the end

of the Appraisal Period, the current period shall be automatically

extended until sixty (60) days after completion of such drilling

operations.

3.4 CONTRACTOR shall notify MOGE thirty (30) days before the

end of the Appraisal Period (as eventually extended) whether it

intends or does not intend to retain the Contract Area as per

Section 13.3.

3.5 The Development and Production Period shall commence with

respect to any Development and Production Area on the date that

CONTRACTOR gives notice of Commercial Discovery relating to

such Area and shall continue until the expiration of twenty (20)

years from the date of completion of development in accordance

with the Development Plan for such Development and Production

Area.

As regard the Development and Production Period related to the

Discoveries, it shall furthermore continue until expiration of the

related Export Gas Sales Agreement (or any extension thereof)

referred to in Section 6 of the MOU.





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SECTION 4 - RELINQUISHMENTS [prior text is underlined]



There will be no relinquishment of area throughout the term of the

Contract except as provided in Section 13.3.















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SECTION 5 - MINIMUM EXPENDITURE COMMITMENT



5.1 Subject to the provisions hereof, CONTRACTOR shall commence Petroleum Operations promptly after adoption of the initial Work Programme and Budget pursuant to Section 6.2 and the issuance of all permits, clearances and licences necessary for the commencement of field operations. As soon as possible following the Effective Date, CONTRACTOR shall file such documents as shall be required to effect registration as a foreign corporation authorized to do business in Myanmar.



During the term of Appraisal Period, CONTRACTOR shall spend a total of not less than ten million United States Dollars (US $ 10,000,000).



5.2 If CONTRACTOR fails to fulfill the minimum expenditure commitments described herein for Appraisal operations during the Appraisal Period as may be extended, CONTRACTOR shall fulfill its obligation by paying the amount of deficiency to MOGE in cash at the end of the Appraisal Period.



5.3 CONTRACTOR shall on the Effective Date provide, in the forms shown in Annexure "D" a Parent Company Guarantee issued by TOTAL in respect of the minimum expenditure commitment of CONTRACTOR under Section 5.1.



















(initials)





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SECTION 6 - WORK PROGRAMMES AND EXPENDITURES





6.1 Unless otherwise provided herein, CONTRACTOR shall

conduct Petroleum Operations in accordance with

approved Work Programmes and Budgets and shall

commence Petroleum Operations hereunder not later

than three (3) months after the Effective Date,

subject to Section 6.2.



6.2 MOGE will provide CONTRACTOR as soon as practicable

after Effective Date with all data and information

available to MOGE in relation to the Contract Area.

Within sixty (60) days after receipt of such data

and information CONTRACTOR shall prepare and submit

to MOGE for approval a Work Programme setting forth

the Petroleum Operations which CONTRACTOR proposes

to conduct during the first Contract Year and a

Budget with respect thereto. Such Work Programme

will comprise the Appraisal Programme for the

Discoveries.



6.3 At lease ninety (90) days before the end of the

first Contract Year and every Contract Year

thereafter, CONTRACTOR shall prepare and submit to

MOGE for approval a proposed Work Programme and

Budget for the next succeeding Contract Year.



6.4 Should MOGE wish to propose a revision as to

certain specific features of the said Work

Programme and Budget, it shall within thirty (30)

days after receipt thereof so notify CONTRACTOR

specifying in reasonable details its reasons

thereof. Promptly thereafter, the parties will meet

and endeavour to agree on the revision proposed by

MOGE. In any event, any portion of the Work

Programme as to which MOGE has not proposed a

revision shall in so far as possible be carried out

as prescribed therein.



6.5 It is recognized by the parties that the details of

a Work Programme may require changes in the light

of existing



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circumstances and as such the CONTRACTOR with the approval

of MOGE may make such changes provided they do not change

the general objective of the Work Programme.

6.6. MOGE agrees that the approval of a proposed Work Programme

and Budget will not be unreasonably withheld.

6.7. The tentative Work Programme and Budget estimated for the

initial term of the Appraisal Period shall be set forth by the

CONTRACTOR as follows subject to the provisions of Section

5.1 :



Appraisal Period [_] (Initial Term) Tentative [_]

Budget Estimate [_]

Work Programme [_] (US $ Million) [_]



ã» Existing data and seismic

interpretation and 2 wells 8

ã» Support of operations 2

__

S/TOTAL 10



Contingent programme [_]



ã» 2 wells and additional seismic 12

ã» Support of operations and

study of commerciality 3

__

S/TOTAL 15



_____________________________________________________________

TOTAL Appraisal Period 25



_____________________________________________________________





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6.8. a) CONTRACTOR will also perform seismic reprocessing and

reinterpretation on the Contract Area within the initial

term of the Appraisal period in order for CONTRACTOR to

determine if additional seismic and/or exploration well

may be justified.

(b) CONTRACTOR will also drill one additional well to be

defined by CONTRACTOR on the 3 DA-1 bright spot

structure, should the decision to develop the 3 DA-X

structure be taken.















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SECTION 7 - DISCOVERY AND APPRAISAL



7.1. The CONTRACTOR shall notify MOGE not later than

thirty (30) days after any significant Other

Discovery of Petroleum within the Contract Area.

This notice shall summarize all available details

of such Other Discovery and particulars of any

testing programme ta be undertaken.



7.2. If the CONTRACTOR considers that a discovery merits

appraisal the CONTRACTOR shall submit to the MOGE

as soon as is practicable after completion of the

exploration well in question a detailed appraisal

work programme and budget to evaluate whether the

Other Discovery is a Commercial Discovery.



7.3. This Work Programme shall describe the location,

nature and estimated size of the Other Discovery.

The Appraisal Work Programme shall also include a

plan of ail drilling, testing and evaluation to be

conducted in the Contract Area.



7.4. If MOGE requests any changes to the Appraisal Work

Programme and Budget, then MOGE shall so notify the

CONTRACTOR in writing within fifteen (15) days of

receipt thereof and the CONTRACTOR and MOGE shall

meet within fifteen (15) days after receipt by the

CONTRACTOR of MOGE's written notification as to

these requested changes to endeavour to agree on a

revised Appraisal Work Programme and Budget. The

Work Programme and Budget approved and adopted

shall be CONTRACTOR's proposal as modified by

agreed changes adopted thirty (30) days after

receipt by the CONTRACTOR of MOGE's written

notification of requested changes.



7.5. After adoption of the Appraisal Work Programme and

Budget, the CONTRACTOR shall diligently evaluate

the Other Discovery in accordance with such

programme without undue interruptions.



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7.6. Within ninety (90) days after the evaluation is completed, but in

any event prior to the expiration of the Appraisal Period (or any

extension thereof pursuant to Section 3), the CONTRACTOR

shall notify and report to MOGE all relevant technical and

economic data relating thereto.

7.7.1. The CONTRACTOR shall make a determination as to whether

the Discoveries are Commercial Discovery on the following

basis :

a) a study of commerciality is to be performed taking into

consideration all pertinent operating and financial data

collected during the performance of the Appraisal Work

Programme and otherwise, including but not limited to

Natural Gas and/or Crude Oil recoverable reserves,

sustainable production levels and other relevant technical

and economic factors, according to generally accepted

international petroleum industry practice, the applicable

Laws of Myanmar and the provisions of this Contract,

b) all the conditions listed under Section 2.1.a) of the MOU

are met.

7.7.2. For the determination as to whether an Other Discovery of

Natural Gas is a Commercial Discovery, the provisions of Section

7.7.1.(a) above will apply, together with the provisions of Section

8 of the MOU.

7.8. The CONTRACTOR shall make a determination as to whether a

discovery of Crude Oil is a Commercial Discovery on the basis of

whether that Other Discovery can be produced commercially

after consideration of all pertinent operating and financial data

collected during the performance of the Appraisal Work

Programme and otherwise, including but not limited to Crude Oil

and/or Natural Gas recoverable reserves, sustainable production

levels and other relevant technical and economic factors,





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according to generally accepted international petroleum industry

practice, the applicable Laws of Myanmar and the provisions of

this Contract.









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SECTION 8 - DEVELOPMENT AND PRODUCTION

8.1

If the CONTRACTOR reports that Discoveries are Commercial Discovery under Section 7.7.1. or that an Other Discovery is Commercial Discovery under Sections 7.7.2. or 7.8. above, a Development Plan shall be prepared by the CONTRACTOR and submitted to the MOGE as soon as is practicable after Commercial Discovery is notified.

8.2

The Development Plan shall be prepared on the basis of sound engineering and economic principles in accordance with generally accepted international petroleum industry practice, shall be designed to ensure that the Petroleum deposits do not suffer an excessive rate of decline of production or an excessive loss of reservoir pressure and shall adopt the optimum economic well spacing appropriate for the development of those Petroleum deposits.

8.3.

The Development Plan shall contain:

a) details and the extent of the proposed Development Area relating to the Commercial Discovery, which area shall correspond to the geographical extension of the Commercial Discovery plus a reasonable margin, and shall be designated as the Development Area for the Commercial Discovery concerned;

b) proposals relating to the spacing, drilling and completion of wells, the production and storage installations, and transportation and delivery facilities required for the production, storage and transportation of Petroleum;

c) proposals relating to necessary infrastructure investment, and employment of Myanmar nationals, and use of

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Myanmar materials, products and services in

accordance with Section 17 herein;



d) a production forecast and an estimate of the

investment and expenses involved, and



e) an estimate of the time required to complete each

phase of the Development Plan.





8.4 MOGE may require the CONTRACTOR to provide within

thirty (30) days of receipt of the Development Plan

such further information as is readily available

and as MOGE may reasonably need to evaluate the

Development Plan for any Development Area.



8.5 If MOGE does not request in writing any changes to

the Development Plan within ninety (90) days after

receipt thereof, the plan shall be deemed approved

and adopted by the MOGE.



8.6 If MOGE requests any changes to the Development

Plan, then the CONTRACTOR and MOGE shall meet

within fifteen (15) days of receipt by CONTRACTOR

of MOGE's written notification as to these

requested changes to agree on changes to the

Development Plan. Revision to the Development Plan,

agreed within a further period of ninety (90) days

shall be incorporated in a revised plan which shall

then be deemed approved and adopted.



8.7 After the Development Plan has been adopted the

CONTRACTOR shall submit to MOGE for discussion

ninety (90) days before the end of each subsequent

Financial Year a detailed statement of the

Development Work Programme and Budget for such

subsequent Financial Year; for the first full

Financial Year and the portion of the year

preceding the first full Financial Year a detailed

statement of the Development Work Programme and

(initials)



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Budget therefor shall be submitted within ninety (90) days after

the date of adoption of the Development Plan under Section 8.5.

Each such annual detailed statement on the Development Work

Programme and Budget therefor shall be consistent with the

Development Plan adopted under Section 8.5 or as revised

pursuant to Section 8.5 and 8.8.

8.8. The CONTRACTOR may at any time submit to MOGE revisions

to any Development Plan or Development Work Programme and

Budget. These revisions shall be consistent with the provisions of

Section 8.2. and shall be subject to the approval procedure set

forth in Section 8.5. and Section 8.6.

8.9. The CONTRACTOR shall commence Development Work not

later than three (3) months after the date of adoption of the

Development Plan under Section 8.5. and Section 8.6.

8.10. Where MOGE and the CONTRACTOR agree that a mutual

economic benefit can be achieved by constructing and operating

common facilities (including, but not limited to, roads, pipelines

and other transportation, communication and storage, facilities),

the CONTRACTOR shall use its reasonable efforts to reach

agreement with other producers and MOGE on the construction

and operation of such common facilities, investment recovery and

charges to be paid.

8.11 If subsequent to the designation of a Development Area, the

extent of the area encompassing the Commercial Discovery or

another such area over or underlying it is reasonably expected to

be greater than the designation in the Development Plan under

Section 8.3. the Development Area shall be enlarged accordingly,

provided that the area covered shall be entirely within the

Contract Area or, otherwise, ot being then awarded to any

person other than MOGE.





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SECTION 9-COST RECOVERY AND PROFIT OIL OR GAS ALLOCATION



9.1. CONTRACTOR shall provide all funds required to conduct Petroleum Operations under this Contract and may recover its costs and expenses only out of Cost Petroleum in the manner and to the extent permitted under Section 9.4. CONTRACTOR shall have the right to use free of charge Petroleum produced from the Contract Area to the extent it considers necessary for Petroleum Operations under this Contract.



9.2. Petroleum produced and saved and not used in Petroleum Operations (hereinafter referred to as âAvailable Petroleumâ or âAvailable Natural Gasâ or âAvailable Crude Oilâ as may be applicable) shall be measured at the Delivery Point and allocated as set forth in this Section.



9.3. CONTRACTGOR may take such portion of Available Petroleum from the Contract Area as is necessary to discharge CONTRACTORâs obligations to pay the royalty specified in Section 10.



9.4. CONTRACTOR shall recover all costs and expenses in respect of all Petroleum Operations hereunder to the extent of and out of a maximum of fifty percent (50 %) per Quarter of all Available Petroleum from the Contract Area; provided, however, that costs and expenses of Development and Production Operations in respect of any Development and Production Area shall be recovered only from Available Petroleum produced from such Development and Production Area. Such Petroleum to which CONTRACTOR is entitled for the purpose of recover its costs and expenses is hereinafter referred to as âCost Petroleumâ. Such costs and expenses shall be recovered out of Cost Petroleum in



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the later part of the Quarter in which such expenditures are

incurred or in the Quarter in which Commencement of

Commercial Production first occurs within the Contract Area.

9.5. To the extent that in a Quarter costs or expenses recoverable

under Section 9.4. exceed the value of all Cost Petroleum from

the Contract Area for such Quarter, the excess shall be carried

forward for recovery in the next succeeding Quarter and in each

succeeding Quarter thereafter until fully recovered, but in no

case after termination of this Contract.

9.6. The Petroleum Valuation provisions of Section 12 shall be used

for determining the value and quantity of Cost Petroleum to

which CONTRACTOR is entitled hereunder during a Quarter.

9.7. With respect to the Development and Production Area, Available

Petroleum not taken for purposes of payment of royalty under

Section 10 nor taken as Cost Petroleum, as described in Sections

9.4. and 9.5., in a Quarter shall be allocated between MOGE and

CONTRACTOR according to the following incremental scale,

based on average daily production over the Quarter from the

relevant Development and Production Area:

a) Available Natural Gas Sharing [prior text underlined]

The incremental scale for the Available Natural Gas

Sharing will depend on the average Export Market Gas

Price (E) during the corresponding quarter.

To determine the incremental scale to be used, the price (E),

expressed in US Dollars per million british thermal units

($/MMBTU), will be adjusted as follows:



EC = E x lO/l [note that the C and O are subscripts]

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Where:



I is the arithmetic average of the figures for the

Consumer Price Index published by the United States

Department of Labor, Bureau of Labor Statistics, for

the corresponding quarter.



Io is the value of I for the reference period which is

the last quarter of 1991.



EC is the adjusted price.



If EC is greater or equal to 2.9., the following incremental scale will be applied:



Available Natural Gas MOGE Contractor

- Share Share



Up to 300 millions cubic 60 % 40 %

feet per day (MMscfd)



Between 301 and 600 MMscfd 70 % 30 %



Between 601 and 900 MMscfd 80 % 20 %



Above 900 MMscfd 90 % 10 %





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a.2) If Ec is less or equal to 2.6 the following incremental scale will be applied:



Available Natural Gas | MOGE Share | CONTRACTOR Share



Up to 300 millions cubic feet per day (MMscfd) | 40 % | 60 %



Between 301 and 600 MMscfd | 55 % | 45 %



Between 601 and 900 MMscfd | 75 % | 25 %



Above 900 MMscfd | 90 % | 10 %



a.3) If Ec is comprised between 2.6. and 2.9., the following linear formulas will be applied:



Available Natural Gas



Up to 300 millions cubic feet per day (MMscfd):

MOGE Share: 40 % + 20 % (Ec - 2.6)/0.3

CONTRACTOR Share: 60 % - 20 % (Ec -2.6)/0.3



Between 301 and 600 MMscfd:

MOGE Share: 55 % + 15 % (Ec - 2.6)/0.3

CONTRACTOR Share: 45 % - 15 % (Ec - 2.6)/0.3



Between 601 and 900 MMscfd:

MOGE Share: 75 % + 5 % (Ec - 2.6)/0.3

CONTRACTOR Share: 25 % - 5 % (Ec - 2.6)/0.3



Above 900 MMscfd:

MOGE Share: 90 %

CONTRACTOR Share: 10 %





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b) Available Crude Oil MOGE CONTRACTOR

Share Share



Up to 35,000 Barrels per day 60 % 40 %



Between 35,001 and 70,000 Barrels per day 70% 30%



Between 70,001 and 100,000 Barrels per day 80% 20%



Between 100,001 and 200,000 Barrels per day 82.5% 17.5%



In excess of 200,000 Barrels per day 85% 15%



9.8 a) Natural Gas will be disposed of pursuant to the provisions of Section 2.2 of the MOU.



b) Subject to its obligations under Section 14, CONTRACTOR shall receive each Quarter at the Delivery Point and may separately dispose of Crude Oil to which it is entitled pursuant to Section 9.4 plus its share of the balance of Petroleum as stipulated in Section 9.7. Title and risk of loss shall pass to CONTRACTOR at such Delivery Point. CONTRACTOR shall have the right to export freely all Petroleum to which it is entitled.



9.9 CONTRACTOR shall conduct a review of Production Programme prior to the Commencement of Commercial Production from any Development and Production Area and shall establish production at the maximum efficient rate needed to achieve the maximum ultimate economic recovery of Petroleum from that Development and Production Area in accordance with generally accepted standards of the international petroleum industry.CONFIDENTIAL

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9.10. Prior to Commencement of Commercial Production from a Development and Production Area concerning Crude Oil, MOGE and CONTRACTOR shall agree on a procedure for liftings of their respective entitlements of Crude Oil, such procedure to contain reasonable provisions for underlift and overlift and for each Party to have the right to accumulate and lift economic cargoes.



9.11. The provision regarding payment of Income Tax imposed upon CONTRACTOR under the applicable provisions of the Income Tax Laws of the Union of Myanmar shall be applied as follows:



a) CONTRACTOR shall be subject to the Myanmar Income Tax Laws and shall comply with requirements of the Law and shall comply with requirements of the Law in particular with respect to filing of returns, assessment of tax, and keeping and showing of books and records.



b) CONTRACTORâs annual taxable income for Myanmar Income Tax purposes shall be an amount equal to the CONTRCTORâs net income attributable to the Profit Gas or Profit Oil allocated to the CONTRACTOR pursuant to Section 9.7. For such purposes, insofar as proceeds from the domestic market supply pursuant to Section 14 are involved, only actual proceeds received by CONTRACTOR shall be considered, and CONTRACTORâs contribution to the Research and Development Fund pursuant to Section 15.7 and bonuses pursuant to Section 11 not yet recovered shall be deductible from CONTRACTORâs income.



c) The CONTRACTOR shall pay Myanmar Income Tax on the annual net taxable income as defined in Section 9.11.(b) above in accordance with the provisions of the Income Tax Laws of the Union of Myanmar and subject to the entitlements under the provisions of the Union of



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Myanmar Foreign Investment Law (The State Law and

Order Restoration Council Law n° 10/88).

d) MOGE shall assist the CONTRACTOR to obtain proper

official receipts evidencing the payment of

CONTRACTOR's Myanmar Income Tax. Such receipts

shall be issued by a duly constituted authority for the

collection of Myanmar Income Taxes and shall state the

amount and other particulars customary for such receipts.

Provisional receipts shall be issued within ninety (90) days

following the commencement of the next ensuing Financial

Year and final receipt shall be issued not later than ninety

(90) days after provisional receipts have been issued.

e) As used herein, Myanmar Income Tax shall be inclusive of

all Taxes on Income payable to the Union of Myanmar.

















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SECTION 10 - ROYALTY



10.1. CONTRACTOR shall pay to the Government a royalty equal to ten percent (10 %) of the value of Available Petroleum from the Contract Area, determined in accordance with Section 12, and adjusted by deducting an amount equal to the cost of transportation from the Delivery Point to the usual point of export.





10.2. a) Royalty for Crude Oil



Royalty shall be paid in whole or in part in cash or in kind at the option of the Government. In the absence of such option on the part of the Government, Royalty accruing during a Quarter shall be paid in cash within thirty (30) days after the end of that Quarter. CONTRACTOR shall be given at least one hundred and eighty (180) days prior notice of an option by the Government to take Royalty in kind and such option shall be effective for a minimum period of one year. Unless otherwise agreed by the Government and CONTRACTOR, Petroleum Royalty taken in kind by the Government shall be delivered at the Delivery Point and shall be supplied in regular and even liftings so as not to disrupt CONTRACTOR's lifting schedules.





b) Royalty for Natural Gas



Royalty shall be paid in accordance with Section 4.d) of the MOU.





10.3. Royalty shall not be recoverable from Cost Petroleum.



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SECTION 11-BONUSES



11.1. Signature Bonus



CONTRACTOR shall within ten (10) days after the Effective Date pay to MOGE as a Signature Bonus the sum of US Dollars fifteen Million (US$ 15,000,000). Such amount shall not be credited to CONTRACTORâs minimum expenditure commitment under Section 5.1. and shall not be recoverable from Cost Petroleum under Section 9.



11.2 Production Bonus



CONTRACTOR shall pay the following Production Bonuses to MOGE with respect to the Development and Production Area:



11.2.1. Natural Gas



(a) US Dollars Five Million (US$ 5,000,000) upon approval of the Development Plan.



(b) US Dollars Two Million US$ 2,000,000) within thirty (30) days after the first date when total average daily Natural Gas Production from the Development and Production Area over any consecutive ninety (90) days period reached one hundred and fifty (150) million cubic feet per day (MMscfd)



(c) US Dollars Three Million (US$ 3,000,000) within thirty (30) days after the first date when total average daily Natural Gas Production from the Development and Production Area over any consecutive (90) days period reached Three Hundred (300) MMscfd.



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(d) US Dollars Four Million (US$ 4,000,00) within thirty (30) days after the first date when total average daily Natural Gas Production from the Development and Production Area over any consecutive ninety (90) days period reached. Six Hundred (600) MM scfd.



(e) US Dollars Five Million (US$ 5,000,000) within thirty (30) days after the first date when total average daily Natural gas Production from the Development and Production Area over any consecutive ninety (90) days period reached Nine Hundred (900) MM scfd.



(g) US Dollars Ten Million (US$ 10,000,000) within thirty (30) days after the first date when total average daily Natural gas Production from the Development and Production Area over any consecutive ninety (90) days period reached One Thousand and Two Hundred (1 200) MM scfd.



11.2.2. Crude Oil



(a) US Dollars two Million (US$2,000,000) within thirty (30) days after the first date when total average daily Crude Oil Production from the Development and Production Area over any consecutive ninety (90) days period reached twenty five Thousand (25,000) Barrels per day.



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(b) US Dollar three Million (US$ 3,000,000) within thirty (30) days after the first date when total average daily Crude Oil Production from the Development and Production Area over any



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consecutive ninety (90) days period reached Fifty Thousand (50,000) Barrels per day.



(c) US Dollars four Million (US$ 4,000,000) within thirty (30) days after the first date when total average daily Crude Oil Production from Development and Production Area over any consecutive ninety (90) days period reached one hundred Thousand (100,000) Barrels per day.



(d) US Dollars five Million (US$ 5,000,00) within thirty (30) days after the first date when total average daily Crude Oil Production from the Development and Production Area over any consecutive ninety (90) days period reached One Hundred Fifty Thousand (150,000) Barrels per day.



(e) US Dollars Ten Million (US$ 10,000,000) within thirty (30) days after the first date when total average daily Crude Oil Production from the Development and Production Area over any consecutive ninety (90) days period reached Two Hundred Thousand (200,000) Barrels per day.



11.3. Production Bonuses paid in accordance with this Section 11.2. shall not be recoverable from Cost Petroleum.



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SECTION 12 â VALUATION OF PETROLEUM



12.1 Terms used in this Section shall have the following meanings:



(a) âArms Length Salesâ means sales on the international market in freely convertible currencies between willing and unrelated sellers and buyers, excluding sales between Affiliates, sales between governments or government owned entities, sales affected by other commercial relationships between seller and buyer, transactions involving barter, and more generally any transactions motivated by considerations other than the usual commercial incentives.



(b) âReference Crudeâ means crude oil(s) produced in Asia which is comparable gravity and quality to the Crude Oil valued hereunder. The appropriate crude oil comprising Reference Crude shall be selected and agreed by MOGE and CONTRACTOR prior to commencement of Commercial Production from any Development and Production Area.



(c) âReference Crude Priceâ means the average FOB point of export price for Reference Crude during the relevant time period, as quoted in Plattâs Oilgram Price Report or such other publication as MOGE and CONTRACTOR may agree, adjusted as necessary to exclude non-Arms Length Sales and to reflect thirty (30) day payment terms and differences in gravity and quality between the Reference Crude and the Crude Oil being valued hereunder.





(d) âTransportation Costâ means the transportation cost determined by reference to the Average Freight Rate Assessment (âAFRAâ) last published to the London Tanker Broker and Association, or such other published Crude Oil.



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freight rate as MOGE and CONTRACTGOR may agree, applicable to voyages between the points specified, using vessels of appropriate size.



12.2 For the purpose of Section 9 and Section 10 a US Dollar value per Barrel of Crude Oil shall be determined each Quarter. Such value shall be the Fair Market Value determined in accordance with Section 12.3 or Section 12.4 whichever is applicable.



12.3 If at least thirty percent (30 %) of all the Crude Oil sales by CONTRACTOR during the relevant Quarter are Arms Length Sales, Fair Market Value for all Crude Oil shall be the price actually received by CONTRACTOR is such sales, adjusted to reflect Free of Board (âFOBâ) point of export delivery terms and thirty (30) day payment terms.



12.4 If less than thirty percent (30 %) of all the Crude Oil sales by CONTRACTOR during the relevant Quarter are Arms Length Sales, the Fair Market Value shall be the volume-weighted average of:



(a) The price actually received by CONTRACTOR during the relevant Quarter is Arms Length Sales, if any, adjusted to reflect FOB point of export delivery terms and thirty (30) day payment terms; and



(b) The Reference Crude Price applicable for Crude Oil sold by CONTRACTOR during the relevant Quarter in non-Arms Length Sales, adjusted to a Yangon point of export basis by adding the Transportation Cost of the Reference Crude from its point of export to the market in which Myanmar Crude Oil would normally be sold and substracting the Myanma Crude Oil would normally be sold.



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12.5 Within twenty (20) days following the end of each Quarter, CONTRACTOR shall determine Crude Oil value in accordance with this Section and shall notify MOGE. Unless within twenty (20) days after receipt of such notice MOGE notifies CONTRACTOR that it does not agree with CONTRACTORâs determination, and specifies in such notice the basis for such disagreement, the CONTRACTORâs determination shall conclusively be deemed to have been accepted.



12.6 In the event MOGE shall have timely notified CONTRACTOR, within the above-described twenty day period, that it disagrees with CONTRACTORâs determination of Crude Oil value, MOGE and CONTRACTOR shall meet to discuss the CONTRACTORâs determination. Should MOGE and the CONTRACTOR fail to reach agreement on the Crude Oil value within seventy-five (75) days after the end of the Quarter in question, the parties may submit the value determination (and the selection of the crude oil to comprise Reference Crude if not previously agreed) to a mutually agreed expert. Falling agreement the matter shall be settled in accordance with the provisions of Section 22.



12.7 The allocation of Crude Oil for Section 9, Section 10, and Section 14 shall be based on the value last determined or, in the event of a dispute pursuant to Section 12.6, the average of the value determined by CONTRACTOR and the value proposed by MOGE. When a new value is determined, that value shall be applied retroactively for the Quarter in which the sales used in the determination occurred, and appropriate adjustments shall then be made in allocations of the parties to reflects the retrospective application of the new Crude Oil value.



12.8 Natural Gas produced and sold during a Quarter shall be valued at the weighted average ânet bank priceâ defined in Section 3 of the MOU.



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SECTION 13- NATURAL GAS



13.1 Any Associated Gas Produced from the Contract Area, to the extent not used in operations hereunder, may be flared if the processing or utilization thereof is not economical. Such flaring shall be permitted to the extent that the gas is not required to effectuate the economic recovery of Petroleum by secondary recover operations, including repressing and recycling.

13.2 In the event CONTRACTOR considers that the processing and utilization of Associated Gas is not economical, then MOGE may choose to take and utilize such Natural Gas, free of charge, that would otherwise be flared, all costs of taking and handling to be for the sole account and risk of MOGE.

13.3 However if upon completion of the Appraisal Programme, CONTRACTOR considers that the Discoveries (or any Other Discover) are significant but not then economical for development but may become so within (7) years, it may retain the Contract Area and at any time within such seven (7) years period re-evaluate the economic viability of development and declare a Commercial Discovery. Then, or at any time at the request of MOGE, MOGE, and CONTRACTOR shall jointly make every effort to establish as soon as possible an economically viable gas project based on the Discoveries (or any Other Discovery) and shall negotiate appropriate terms for such a project. CONTRACTOR shall relinquish such Contract Area upon request of MOGE if a Development Plan has not been proposed within the seven (7) years period of retention.

Notwithstanding the foregoing, the retention of the CONTRACT AREA beyond the expiration date of the Appraisal Period shall not preclude exploration for Crude Oil by MOGE in that area. Should



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however MOGE wish to drill wells which would penetrate the reservoirs constituting the Discoveries (or any Other Discovery), MOGE shall advise CONTRACTOR and CONTRACTOR shall have the option to drill such wells at MOGE's cost and risk.



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43SECTION 14 - DOMESTIC CRUDE OIL REQUIREMENT



14.1 The CONTRACTOR shall after Commercial Production of Crude Oil commences, fulfill its obligation toward the supply of the domestic Crude Oil market in Myanmar by making a share of its entitlement available to MOGE CONTRACTOR's obligatory share of the domestic market obligation will be in the proportion that CONTRACTOR's entitlement to Crude Oil under Sections 9.4 (for recovery of Operating Cost) and 9.7 (for division of remainder) bears to all Crude Oil produced in the Union of Myanmar. The price MOGE shall pay Contractor for such Crude Oil up to a quantity not to exceed twenty percent (20%) of the Crude Oil allocated to CONTRACTOR under Section 9.7 hereof shall be the equivalent to 10% (ten percent) of fair Market Value. The currency of payment shall be US Dollars. For any amount of Crude Oil in excess of that limit required to satisfy CONTRACTOR's domestic market obligation, the price shall be the fair Market Value as determined in accordance with Section 12 hereof, and the currency of payment shall be US Dollars.



14.2 CONTRACTOR's obligation under this Section 14 shall not exceed the extent to which the Government of the Union of Myanmar shall make available US Dollars which may be remitted abroad in payment of any such Crude Oil payable in US Dollars.CONFIDENTIAL

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SECTION 15-EMPLOYMENT AND TRAINING



15.1 In conducting Petroleum Operations, hereunder, CONTRACTOR shall select its employees and determine the number thereof, CONTRACTOR shall endeavor to employ qualified Myanmar Citizens to the maximum extent possible.



15.2 CONTRACTOR shall spend a minimum of US Dollars Fifty Thousand ($ 50,000) per Year during the Appraisal Period of this Contract for one or more of the following purposes:



(a) the purchase for MOGE of advanced technical literature, data and scientific instruments;



(b) to send qualified Myanmar nationals to selected accredited universities;



(c) to send selected MOGE personnel to special courses offered by accredited institutions of higher learning or other recognized organizations in the fields of petroleum science, engineering and management.



15.3 Upon commencement of the Development and Production Period for the first Development and Production Area, CONTRACTORâs minimum expenditure commitment under this Section shall be increased to US Dollars One Hundred Thousand ($ 100,000) per Year.



15.4 The expenditure of sums for the purposes specified above shall be made pursuant to detailed annual training programmes to be prepared by CONTRACTOR and submitted to MOGE for approval. CONTRACTOR shall submit the first proposed Training Programme to MOGE within four (4) months after the Effective Date.



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15.5 If training expenditures pursuant to an approved Training Programme fall short of the minimum training expenditure obligations for a Year or if MOGE and CONTRACTOR do not agree on a Training Programme for any Year, the deficiency shall be carried forward and expended in succeeding Years. If training expenditures in any Year exceed the minimum training expenditure obligation for that Year the excess shall be credited to the training expenditure obligations for succeeding Years.



15.6 All expenditures made pursuant to this Section 15 relating to Training and Education, including any payments made to MOGE pursuant to Section 15.5, shall be fully recoverable from Cost Petroleum pursuant to Section 9.



15.7 The CONTRACTOR shall establish a Research & Development Fund in the sum of Point Five (0.5) percentage of its share of Profit Oil and the expenditure of this Fund will be determined in consultation with MOGE.



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SECTION 16-TITLE OF ASSETS



16.1 CONTRACTORâs physical assets which are acquired for purposes of the Petroleum Operations shall become the property of MOGE, and shall be cost recoverable by CONTRACTOR pursuant to Section 9, upon importation into Myanmar or upon acquisition in Myanmar. Data, information, reports and samples acquired or prepared by CONTRACTOR for the Petroleum Operation shall become the property of MOGE, and shall be cost recoverable by CONTRACTOR pursuant to Section 9, when acquired or prepared.



16.2 The physical assets, referred to in Section 16.1 shall remain in the custody of CONTRACTOR during the term of this Contract and CONTRACTOR shall have the unrestricted and exclusive right to use such assets in the Petroleum Operations free of charge subject to the provisions of Section 17, CONTRACTOR may retain and freely use, within or outside Myanmar, copies of all data, information and reports and representative portions of all samples, including but not limited to geologic, core, cutting and Petroleum samples.



16.3 The provisions of Section 16.1 shall not apply assets rented or leased by CONTRACTOR or its Affiliates; or to assets owned by CONTRACTORâs Contractors, Subcontractors, Affiliates or other parties.



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SECTION 17-RIGHTS AND OBLIGATIONS OF MOGE AND CONTRACTOR



17.1 MOGE shall:



(a) have and be responsible for the management of the operations contemplated hereunder, however MOGE shall assist and consult with CONTRACTOR with a view to the fact that CONTRACTOR is responsible for the execution of the Work Programme;



(b) i) except as provided in Section 17.2 (d) below and in Section 9.11, assume and discharge all Myanmarâs taxes imposed upon CONTRACTOR, its Contractors and Sub-contractors, including import and export duties, customs duties, sales tax and other duties levied on materials, equipment and supplies brought into Myanmar by CONTRACTOR, its Contractors and Sub-contractors;



ii) Assume and discharge all exactions applicable under the Laws of the Union of Myanmar in respect of property, capital net worth and operations, including any tax imposed upon sales, gross receipts or transfers of property or any levy on or in connection with operations performed hereunder by CONTRACTOR, its Contractors or its Sub-contractors;



iii) MOGE shall not be obliged to pay taxes on tobacco, liquor, and import and export duties, customs duties and sales tax and any other taxes charged on goods and services or levied upon articles imported for



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personal use by the CONTRACTORâs, its Contractorsâ and Sub-contractorsâ employees engaged in Petroleum Operations under this Contract;



(c) assist and expedite CONTRACTORâs execution of the Work Programme by providing at cost, facilities, supplies and personnel including, but not limited to, supplying or making available all necessary visas, work permits, transportation, security protection and rights of way and easements as may be requested by CONTRACTOR and made available from the resources under MOGEâs control. In the event such facilities, supplies, or personnel are not readily available, then MOGE shall promptly secure the use of such facilities, supplies and personnel from alternative sources. Expenses thus incurred by MOGE at CONTRACTORâs request shall be reimbursed to MOGE by CONTRACTOR and included in the Operating Costs. Such reimbursements will be made in US Dollars computed at the rate or exchange prevailing at the time the expense was incurred as set by the Union of Myanmar Foreign Trade Bank or local currency as appropriate in accordance with prevailing regulations;



(d) have title to all original and interpreted data resulting from the Petroleum Operations including but not limited to geological, geophysical, petrophysical, engineering, well logs and completions status reports and any other data as CONTRACTOR may compile during the term hereof for which CONTRACTOR is entitled to retain copies;



⬠to the extent that it does not interfere with CONTRACTORâs performance of the Petroleum Operations use the equipment which becomes its property by virtue of this Contract solely for the Petroleum



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Operations envisaged under this Contract and, if MOGE wishes, use such equipment for any alternative purpose. In both cases MOGE shall first obtain approval from the CONTRACTOR;



(f) have the right to ask for immediate removal and replacement of any of the CONTRACTORâs employees at the cost of the CONTRACTOR, if in the consideration of the MOGE the employee is incompetent in his work and/or unacceptable to MOGE by reason of his acts or behaviour;



(g) appoint its authorised representative with respect to this Contract.



17.2 CONTRACTOR shall:



(a) Advance all necessary funds and purchase or lease all material, equipment and supplies to be purchased or leased with Foreign Exchange pursuant to the Work Programme;



(b) Furnish all technical requirements, including but not limited to foreign personnel, required for the performance of Work Programmes, payment whereof requires Foreign Exchange;



(c) Furnish such other funds for the performance of Work Programmes that requires payment in Foreign Exchange, including payment to any third parties who perform services;



(d) Be responsible for all Income Tax and other levies if any, for which expatriate personnel of CONTRACTOR is liable under the Income Tax Laws of the Union of Myanmar for the portion of their income in Myanmar:



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(e) be responsible for execution of Work Programmes which shall be implemented in a work manlike manner and bye approprixte scientific methods, and CONTRACTOR shall take the necessary pracautions for protection of navigation and fishing and shall prevent environmental pollution. It is also understood that the execution of the Work Programme shall be exercised so as not to conflict with the Laws of the Union of Myanmar;





(f) be entitled to export all leased or rented property brought into Myanmar and paid for with Foreign Exchange ;





(g) have the right to sell, assign, transfer, onvey or otherwise dispose of all or any part of its rights and interest under this Contract to an Affliate or other parties only with the prior written consent of MOGE. Such consent by MOGE on this matter shall not be unreasonably withheld ;



(h) have the right of access to and from the Contract Area and to and from facilities wherever located at all times ;



(i) submit to MOGE daily (where applicable), weekly and monthly progress reports ;



(j) submit to MOGE copies of all such interpreted geological, geophysical, drilling well, production and any other data and reports as it may compile durin the term hereof ;



(k) prepare and carry out plans and programmes for industrial trainin and education of Myanmar nationals selected b MOGE from its staff for all job classifications with respect to operations concomplated hereunder ;



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(l) appoint authorised representative for Myanmar with respect to this Contract, who shall have an Office in Yangon; such representative to represent CONTRACTOR in the conduct of Petroleum Operations hereunder;



(m) give preference to such goods and services which are available in Myanmar or rendered by Myanmar nationals approved by MOGE, provided such goods and services are offered at comparable conditions with regard to quality, price, availability at the time and in the quantities required; such payments shall be made in US Dollars, or local currency as appropriate in accordance with prevailing regulations;



(n) procure such goods and services of a value higher than one (1) million United States Dollars for the execution of the Work Programme through international tender and approved by MOGE unless otherwise agreed upon by both parties;



(o) allow duly authorised representatives of MOGE to have access to the Area covered by this Contract and to the operations conducted thereon. Such representatives may examine data, books, registers and records of CONTRACTOR, and make a reasonable number of surveys, drawings and tests for purpose of enforcing this Contract. They shall, for such purpose, be entitled to making reasonable use of machinery and instruments of the CONTRACTOR. Such representatives shall be given reasonable assistance by the agents and employees of the CONTRACTOR so that one of their activities shall endanger or hinder the safety or efficiency of the operations. The CONTRACTOR shall offer such representatives all privileges and facilities accorded to its own employees in the Contract Area and shall provide



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them, free of charge, the use of reasonable office space while they are in the Contract Area and transportation facilities for them to and from the Contract Area for the purpose of facilitating the objectives of this Clause.



(p) have the right to use and have access to and MOGE shall furnish all geologic, geophysical, drilling, well, production and other information held by MOGE or any other governmental agency or enterprise, relating to the Contract Area including well location maps;



(q) have the right to use and have access to, and MOGE shall make available so far as possible all geological, geophysical, drilling, well, production and any other information now or in the future held by it or any other governmental agency or enterprise, relating to the areas adjacent to the Contract Area.



(r) regarding safety of Personnel, Materials and protection of environment, raised to CONTRACTOR's Petroleum Operations, be wholly responsible to promise safety precautions and safe working practices.



(s) prior to the Operations commencement date, nominate a person to act as a Safety Officer of CONTRACTOR who shall be the representative directly responsible for the safe performance in accordance with the prescribed Safety Policies.



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SECTION 18 - MANAGEMENT COMMITTEE



18.1 MOGE retains by this Contract all rights of Management but recognises that CONTRACTOR is responsible for the execution of the Work Programmes. For the purpose of the proper implementation of this Contract, the Parties shall establish a Management Committee ("The Management Committee") within forty-five (45) days from the Effective Date. The Management Committee shall have overall supervision and Management of Petroleum Operations including Approved Work Programmes and Budgets. The Duties and Responsibilities of the Management Committee shall be as prescribed in Annexure "E". ï  54 ï

SECTION 19 - STATE PARTICIPATION AND PAST COSTS



19.1 MOGE shall have the right to demand from CONTRACTOR that a percentage of up to fifteen percent (15 %) undivided interest in the total rights and obligations under this Contract be offered.

19.2 The right referred to in Section 19.1 shall lapse unless exercised by MOGE not later than three (3) months after CONTRACTOR's notification by registered letter to MOGE of Commercial Discovery ; MOGE shall make its demand known to CONTRACTOR by registered letter.

19.3 CONTRACTOR shall make its offer by registered letter to MOGE within one (1) month after receipt of MOGE's registered letter referred to in Section 19.2. CONTRACTOR's letter shall be accompanied by a copy of this Contract and a Draft Operating Agreement embodying the manner in which CONTRACTOR and the MOGE shall cooperate. The main principles of the Draft Operating Agreement are contained in Annexure "F" to this Contract.

19.4 The offer by CONTRACTOR to MOGE shall be effective for a period of six (6) months. If MOGE has not accepted this offer by registered letter to CONTRACTOR within the said period, CONTRACTOR shall be released from the obligation referred to in this Section. UYP 000

19.5 In the event of the acceptance by MOGE of CONTRACTOR's offer, MOGE shall be deemed to have acquired the undivided interest on the date of CONTRACTOR's notification to MOGE referred to in Section 19.2.

19.6 For the acquisition of undivided interest in the total of the rights and obligations arising out of this Contract, MOGE shall reimburse CONTRACTOR an amount equal to the percentage of

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the sum of Operating Costs which CONTRACTOR has incurred for and on behalf of its activities in the Contract Area up to the date of CONTRACTOR's notification to MOGE mentioned in Section 19.2, the same percentage of the Signature Bonus paid to MOGE referred to in Section 11.1 of this Contract and the same percentage of the amount referred to in Section 11.2 of this Contract.



19.7 At the option of MOGE the said amount shall be reimbursed:

(a) either by transfer of the said amount by MOGE within three (3) months after the date of its acceptance of CONTRACTOR's offer referred to in Section 19.3, to CONTRACTOR's account with the banking institution to be designated by it, in the currency in which the relevant costs have been financed; or

(b) by way of "Payment out of Production" of fifty percent (50%) of MOGE's production entitlements under this Contract valued in the manner as described in Section 12 of this Contract, commencing as from the beginning of Commercial Production.



19.8 At the time of its acceptance of CONTRACTOR's offer the MOGE shall state whether it wishes to reimburse in cash or out of production in the manner indicated in Section 19.7.



19.9 CONTRACTOR will reimburse to MOGE the CONTRACTOR's participating interest share (aftter exercise by MOGE of its right to participate) of US Dollars forty million (US$ 40,000,000) representing the costs incurred up to Effective Date by MOGE in relation to the Contract Area.

This amount shall be reimbursed by way of "Payment out of Production" of fifty percent (50%) of CONTRACTOR's production entitlements under this Contract valued in the manner describedCONFIDENTIAL

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in Section 12 of this Contract, commencing from the beginning of Commercial Production.

This amount shall be added to Operating Costs and recovered in accordance with Section 9.4.



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57SECTION 20 - FORCE MAJEURE 20.1 Neither party shall be liable for any failure to perform this Contract which is caused by or the results of war, political disturbances, Riots or Civil Commotions, total or partial breakdown or stoppage of air planes, steamships or other means of transportation, fires, thefts, floods, earthquakes, epidemics, or any other cause beyond its control. 20.2 If operations are delayed, curtailed or prevented by such causes, then the time for carrying out the obligations thereby affected, the term of this Contract and all rights and obligations hereunder, shall be extended for a period equal to the period thus involved. The period involved will be determined by mutual agreement. 20.3 The party whose ability to perform its obligation is so affected shall notify the other party thereof in writing, stating the cause and both parties shall do all reasonably within their power to remove such causes.SECTION 21 - GOVERNING LAW 21.1 The Laws of Myanmar shall apply to this Contract. Failing provisions of the local Laws principles of international law shall apply. 21.2 No term of provisions of this Contract, including the agreement of the Parties to submit to Arbitration hereunder, shall prevent or limit the Government of the Union of Myanmar from exercising its inalienable rights.SECTION 22 - CONSULTATION AND ARBITRATION 22.1 Periodically, MOGE and CONTRACTOR shall meet to discuss the conduct of the Petroleum Operations envisaged under this Contract and will make every effort to settle amicably any problem arising therefrom. 22.2 If any dispute, question or difference should arise between the parties to this Contract, in regard to their rights and obligations thereunder which cannot be settled amicably, such dispute shall be settled in Geneva, by Arbitration, through two Arbitrators, one of whom shall be appointed by the CONTRACTOR and the other by MOGE. Should the Arbitrators fail to reach an agreement then the dispute shall be referred to a third Arbitrator who shall be an Umpire nominated by the Arbitrators. If the Arbitrators fail to agree on the appointment of an Umpire then MOGE and CONTRACTOR shall request the President of the International Court of Justus, The Hague, to designate the Umpire. The majority decision of the Arbitrators or, failing which, the decision of the Umpire shall be final and binding upon both parties.SECTION 23 - BANKING 23.1 CONTRACTOR shall supply all funds necessary for Petroleum Operations in Myanmar in freely convertible currency from abroad except to the extent that Myanmar currency is generated in connection with the performance of the Petroleum Operations. 23.2 CONTRACTOR shall have the right to open and maintain foreign bank accounts without restriction and to freely receive abroad, remit abroad, retain abroad and use without restriction the entirety of the foreign exchange proceeds which are received from export and local sales of its shared of Petroleum from the Contract Area or which are in any way generated in connection with performance of the Petroleum Operations. 23.3 CONTRACTOR shall be entitled to purchase Myanmar currency at authorized banks whenever required for the Petroleum Operations, and to convert into freely convertible foreign currency any excess Myanmar currency which is not the needed for local requirements. 23.4 The rate of exchange for transactions referred to in Section 23.3 shall not be less favourable to CONTRACTOR than the effective rate applicable for similar transactions undertaken by an private or state enterprise on the date the transaction is initiated Normal bank commissions and costs of transfers relating to currency conversions or remittances shall be borne by CONTRACTOR. 23.5 CONTRACTOR shall be entitled to pay it foreign-controlled Contractors and Subcontractors and its expatriate employees in foreign currency abroad, and such contractors, subcontractors and expatriate employees shall be entitled to receive and retain such foreign currency abroad.23.6 The provisions of Sections 23.2, 23.3, 23.4 and 23.5 shall also apply to CONTRACTOR's expatriate employees and CONTRACTOR's foreign controlled contractors, subcontractors and their expatriate employees. 23.7 Unless otherwise expressly agreed, all payments by CONTRACTOR to MOGE or the Government hereunder and all payments by MOGE or the Government to CONTRACTOR hereunder shall be made in US Dollars at a bank in Myanmar or abroad as specified by the recipient.SECTION 24 - INSURANCE 24.1 As to all operations performed by the CONTRACTOR under this Contract, the CONTRACTOR shall secure and maintain insurances in accordance with Section 19 of the Union of Myanmar Foreign Investment Law and Rule 15 of the procedures relating to the Union of Myanmar Foreign Investment Law. The CONTRACTOR shall furnish MOGE with Certificated of Insurance evidencing such coverage and containing a statement that such insurance shall not be materially changed or cancelled without at least thirty (30) days prior written notice. 24.2 The CONTRACTOR shall require that its subcontractors procure similar insurances to those required to be procured by the CONTRACTOR and such additional insurances as CONTRACTOR shall deem appropriate, all to be evidenced by Certificates of Insurance. 24.3 To eliminate controversy, the expense and inconvenience thereof, as between MOGE and the CONTRACTOR, it is agreed that the insurance policies shall be endorsed so that the underwriters, insurers and insurance carriers or each with respect to this Contract shall not have any right of recovery against either of the parties hereto or their representatives in any form whatsoever; and the rights of recovery with respect to this operation are mutually waived. All policies of insurance herein provided and obtained or required by either party shall be suitably endorsed to effectuate this waiver of recovery.64



SECTION 25 - TERMINATION



25.1 This Contract may be terminated by the CONTRACTOR by giving not less than ninety (90) days written notice to MOGE provided, however, CONTRACTOR may not so terminate this Contract during the Appraisal Period prior to spending on Petroleum Operations the minimum expenditures required hereunder unless CONTRACTOR pays to MOGE the unexpended portion of the minimum expenditure as specified in Section 5.



25.2 The Contract shall be terminated in its entirety by MOGE if irrefutable evidence is brought that the CONTRACTOR is involved willingly with political activities detrimental to the Government of the Union of Myanmar. On such termination, the unexpended portion of the minimum expenditure as specified in Section 5, and all equipment purchased by the CONTRACTOR and brought into Myanmar under Section 16.1 shall pass to MOGE.



25.3 Subject to earlier termination upon notice by CONTRACTOR pursuant to Section 25.1, this Contract shall automatically terminate in its entirety as follows:



(a) If there is no Commercial Discovery of Petroleum in the Contract Area as per Sections 7.7, and 13.3.;

(b) At the end of the Production Periods relating to all Production Areas within the Contract Area.SECTION 26 - BOOKS AND ACCOUNTS AND AUDITS 26.1 Subject to the requirements of Section 17.2 CONTRACTOR shall be responsible for keeping complete books and accounts with the assistance of MOGE reflecting all Operating Costs as well as monies received from the sale of Crude Oil, consistent with modern petroleum industry practices and proceeding as described in Annexure "C" attached hereto. Should there be any inconsistency between the provisions of this Contract and the MOU on the one hand, and the provisions of Annexure "C" on the other, then the provisions of this Contract and of the MOU shall prevail. 26.2 MOGE and the Government of the Union of Myanmar shall have the right to inspect and audit CONTRACTOR's books and accounts relating to this Contract for any Financial Year covered by this Contract. Any exception must be made in writing within sixty (60) days following the completion of such audit. Such audit shall be performed within two (2) Financial Years after the closing of the related Financial Year.CONFIDENTIAL

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SECTION 27-GENERAL PROVISIONS



27.1 Notices



(a) Notices and other communications required or permitted to be given under this Contract shall be deemed given when delivered and received in writing either by hand or through the mails, or by prepaid telax or cable transmission, appropriately addressed as follows:



To MOGE:



i) By hand or mail:

MYANMA OIL AND GAS ENTERPRISE

74/80, Minye Kyawswa Road,

YANGON, MYANMAR



Attention: MANAGING DIRECTOR



ii) By cable: âYENANâ YANGON



iii) By telex: MYCORP 21307 BM



iv) By fax: 95 1 22 964/22 965



to CONTRACTOR:



i) By hand or mail:

TOTAL MYANMAR EXPLORATION AND PRODUCTION

Attention: Mr. J.M. BEUQUE

Cedex 47

92069 PARIS LA DEFENSE-FRANCE



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ii) By Cable addressed to Mr J.M. BEUQUE

24 Cours Michelet - LA DEFENSE 10

PUTEAUX - FRANCE



iii) By Telex: 615 700 TCFP

addressed to Mr J.M. BEUQUE



iv) By Fax: 42 91 30 12



(b) MOGE and CONTRACTOR may change its address or addresses by giving notice of the change to each other.





27.2 Language of Text



This Contract is made and entered into in the English Language.





27.3 Effectiveness



This Contract is legally binding on and from the Effective Date.





27.4 Covenant against undue influence



The CONTRACTOR warrants that no gift or reward has been made, nor will be made, to any officials or employees of the Government of the Union of Myanmar.





27.5 Secrecy



(a) CONTRACTOR undertakes to maintain in strictest secrecy and confidence all data and information purchased or acquired from MOGE as well as during the course of operations in the Union of Myanmar. The CONTRACTOR understands fully that this undertaking and obligation is







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WITNESSES:



1. CMDR. THEIN TUN [signature]

Director General, Energy Planning Department



2. U SOE MYINT [signature]

Deputy Director General, Energy Planning Department







Signed, sealed and delivered on behalf of

TOTAL MYANMAR EXPLORATION AND PRODUCTION





Thierry DESMAREST [signature]

Chairman of the Board







WITNESSES:



1. Jean-Marie BEUQUE [signature]

Chief Executive Officer Far East



2. Guy ROMEU [signature]

Manager General Affairs Far East



[seal]



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[header in very tiny text - illegible]



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ANNEXURE A [underlined]



This Annexure "A" is attached to and made in integral part of the

Contract between MYANMA OIL AND ENTERPRISE and TOTAL

MYANMAR EXPLORATION AND PRODUCTION :



DESCRIPTION OF CONTRACT AREA



Coordinates of Offshore Blocks M5 and M6



Point n°|Latitude|Longitude

|(North) |(East)

A|15'24'00"|93'21'00"

B|14'40'00"|93'21'00"

C|15'24'00"|94'49'00"

D|14'40'00"|94'49'00"

E|15'24'00'|96'15'00"

F|14'40'00"|96'15'00"



Approximate Area in Square Miles



Block M5 5105 (Area A B C D)

Block M6 4988 (Area C D E F)



The Contract Area here described is shown on "Annexure B" of the

Contract.





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ANNEXURE B



This Annexure "B" is attached to and made an integral part of the Contract between MYANMA OIL AND GAS ENTERPRISE and TOTAL MYANMAR EXPLORATION AND PRODUCTION dated: 9.24.1997



MAP OF CONTRACT AREA



[map]



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71This Annexure "C is attached to and made an integral part of the Contract between MAYANMA OIL AND ENTERPRISE and TOTAL MAYANMAR EXPLORATION AND PRODUCTION.



ACCOUNTING PROCEDURE



ARTICLE 1 - GENERAL PROVISIONS





This accounting procedure applies to and shall be observed in the establishement, keeping and control of all accounts, books and records of accounts under the Contract.



The Contract and this Accounting Procedure are intended to be correlative and mutually explanatory. Should however any discrepance arise, then the provisions of the Contract shall prevail



The Parties agree that if any procedure established herein proves unfair or inequitable to any Party, the parties shall meet and endeavour to agree on the changes necessary to correct that unfairness or inequity.



For the purpose of the present Accounting Procedure, the term "CONTRACTOR" shall also include CONTRACTOR's Affiliates as may be necessary according to the context.



1.1 Definitions



1.1.1 The terms used in this Accounting Procedure have the same meanings as set out for the same terms in the Contract and otherwise in accordance with the provisions of the contract.

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1.1.2 âCapital Expendituresâ means expenditures incurred for the purchase of tangible physical assets which by generally accepted international accounting principles of the international petroleum industry are classified as capital and the cost of which is amortizable. Such assets include but are not limited to:



drilling and well equipment including wellheads, casing, pipe, flow lines and pumps;



gathering systems including pipe, field, storage, and crude oil separation and treatment plants and equipment;



pipelines for the transportation of Petroleum to the point of export, sale or delivery;



storage tanks and loadings facilities at the point of export, sale or delivery; and



any other plant, equipment or fixtures in the Union of Myanmar reasonably necessary to carry out Petroleum Operations.



1.1.3 âControllable Materialâ means Material which the CONTRACTOR subjects to record control and inventory in accordance with good international petroleum industry practice.



1.1.4 âMaterialâ means any equipment, machinery, materials, articles, supplies and consumables either purchased, or leased, or rented, or transferred by CONTRACTOR and used, in the Petroleum Operations.



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1.2 Books and Records



Books and records of account will be kept in accordance with a generally accepted and recognized accounting system consistent with modern petroleum industry practices and procedures and in English language and US Dollars, supplemented and supported by such books, records, or entries in other currencies as may be necessary for completeness and clarity and to implement the Contract in accordance with its terms.





1.3 Currency Exchange



Any costs incurred or proceeds received, in a currency other than US Dollars including the currency of the Union of Myanmar shall be converted into US Dollars computed at the prevailing rate of exchange on the day on which the costs or expenditures were paid or the proceeds were received.





1.4 Independent Auditor



The CONTRACTOR shall in consultation with MOGE, appoint an independent auditor of international standing, to audit annually the accounts and records of Petroleum Operations and report thereon, and the cost of such audit and report shall be promptly delivered to the MOGE and shall be chargeable under the Contract.





ARTICLE 2 - PETROLEUM COSTS



2.1 Petroleum costs



The Parties shall maintain "Petroleum Costs Account" in which there shall be reflected all Petroleum Costs incurred in







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connection with the Petroleum Operations carried out under the provisions of the contract.



Such Petroleum costs shall be recoverable by the CONTRACTOR in accordance with the provisions of the Contract and as further set out below. Without limiting the generality of the foregoing , the cost and expenditures considered in 2.2 to 2.12 hereafter are included in the Petroleum Costs.



Petroleum Costs shall be recoverable in the following manner:



(a)Petroleum Costs,including all intangible drilling costs, with the exception of the Capital Expenditures, inccurred in respect of the Contract Area, shall be recoverable either in the Financial Year in which these Petroleum Costs are incurred or the Financial Year in which Commercial Production occurs, whichever is the later;



(b) Capital Expenditure incurred in respect of each Development Area Shall be recoverable at the rate of twenty five percent (25%) per annum based on amortization at that rate starting either in the Financial Year in which such Capital Expenditures incurred for the Financial Year in which Commercial Production from the Development Area commences, whichever is the later.



(c)Capital Expenditure, including but not limited to expenditure for aircraft, camps, offices, warehouses, vehicles, workshops, power plants, tools, and equipment, incurred outside of Development Area, shall be recoverable at the rate of twenty five (25%) per annum, based on amortization at the rate starting either in the Financial Year in with such Capital Expenditure is incurred, or the Financial Year in which Commercial



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production from any Development Area commences,

whichever Is the later, and shall be recoverable

from any Development Area(s).



2.2 Labour and related costs



2.2.1 Contractor's locally recruited employees based

in the Union of Myanmar



The actual cost of all Contractor’s locally

recruited employees who are directly engaged

in the conduct of Petroleum Operations in the

Union of Myanmar. Such costs shall include the

costs of employee benefits and Government

benefits for employees and taxes and other

charges levied on the CONTRACTOR as an

employer, transportation and relocation costs

within the Union of - Myanmar and costs of the

employee and such employee's family (limited

to spouse and dependent children) as statutory

or customary for the CONTRACTOR.



2.2.2 Assigned personnel



The cost of the personnel of Contractor

resident In and working in the Union of

Myanmar for the Petroleum Operations. The cost

of these personnel shall be as per rates

which represent the CONTRACTOR'S actual cost

according to CONTRACTOR'S usual practice.



Such rates shall not include free furnished

accommodation in the Union of Myanmar, medical

and dental treatment of the employee and

immediate family, local schooling expenses and

any other local employment cost paid by the

CONTRACTOR. Such Costs shall he charged

separately to the Petroleum costs Account.







76 As early as possible in each financial year, the

CONTRACTOR shall advise the applicable rates

referred to above for each subsequent Financial Year.

These rates may be subject to revision from time to time

at the CONTRACTOR's initiative if actual costs change.



2.2.3 Personnel of the CONTRACTOR's based in

CONTRACTOR's Home Country working for Petroleum

Operations on a time sheet basis



Such personal shall be charged at rates which

represent the CONTRACTOR's actual cost. These rates include all costs incidental to the employment of such

personnel, but do nat include transportation and living

expenses they may incur for the performance of such

work In case the work is performed outside

CONTRACTOR's Home Country, the hoerly rate will be

charged from the date such personnel leave the town

where the usually work in CONTRACTOR's Home

Country through their return thereto, including days

which are not working days in the country where the

work is performed, and excluding any holiday

entitlement derived by the employee from his

employment in CONTRACTOR's Home Country. No

charge will be made for overtime.



As early as possible in each financial year, the

CONTRACTOR shall advise the hourly rates for each

subsequent Year.They may be subject to revision from time to time at the CONTRACTOR's initiative.78



2.2.4 Other personnel



Personnel working outside the Union of Myanmar for the CONTRACTOR's home country who are not on a time sheet basis shall be deemed compensated by the administrative overheads set forth in subpart 2.11 below.



2.2.5 Provisions common to Subparts 2.2.2 and 2.2.3



Subparts 2.2.2 and 2.2.3 above have been agreed upon considering the present structure of the CONTRACTOR. Should the CONTRACTOR be changed, or should the CONTRACTOR change their present structure or organization, these subparts shall be revised accordingly.



2.2.6 Employees training expenses



Training expenses for the CONTRACTOR's employees resident in the Union of Myanmar and the CONTRACTOR's contribution to training under Section 15 of the Contract.



2.3 Material



2.3.1 The cost of Material shall be charged to the Petroleum Costs Account on the basis set forth below.



The CONTRACTOR does not guarantee the Material. The only guarantees are the guarantees given by the manufacturers or the vendors, as long as they are in force.CONFIDENTIAL

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2.3.1.1 Except as otherwise provided in Subpart 2.3.1.2 below, Material shall be charged at the actual Net Cost incurred by the CONTRACTOR. Net cost shall include, but shall not be limited to such items as the vendor's invoice price, packaging, transportation, loading and unloading expenses, insurance costs, duties, fees and applicable taxes less all discounts actually received.

2.3.1.2 Material shall be charged at the price specified hereinbelow:

a) New Material (Condition "A") shall be valued at the current international Net Cost which shall not exceed the price prevailing in normal arm's length transactions on the open market;

b) Used Material (Conditions "B", "C" and "D" and junk Material):

i) Material which is in sound and serviceable condition and is suitable for reuse without reconditioning shall be classified as Condition "B" and priced at seventy-five percent (75 %) of the current price of new Material defined in a) above;

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79ii) Material which cannot be classified as Condition "B" but which after reconditioning will be further serviceable for its original function shall be classified as Condition "C" and priced at fifty percent (50%) of the current price of new Material as defined in a) above. The cost of reconditioning shall be charged to the reconditioned Material provided that the value of Condition "C" Material plus the cost of reconditioning do not exceed the value of Condition "B" Material;



iii) Material which has a value and which cannot be classified as Condition "B" or Condition "C" shall be classified as Condition "D" and priced at a value commensurate with its use.



iv) Material which is usable and which cannot be classified as Condition "B" or Condition "C" or Condition "D" shall be classified as junk and shall be considered as having no value.



2.3.2 Inventories



At reasonable intervals, inventories shall be taken by the CONTRACTORCONTRACTOR shall give sixty (60) days' written notice of intention to take such inventories to allow the MOGE to choose whether to be represented when the inventory is taken, or not to be represented (in which case the MOGE shall elect to accept the inventory taken by the CONTRACTOR).



2.4 Transportation and employee relocation costs



2.4.1 Transportation of Material and other related costs, including but not limited to origin services, expediting, crating, dock charges, forwarder's charges, surface and air freight, and Customs clearance and other destination services.



2.4.2 Transportation of employees as required in the conduct of Petroleum Operations, including employees of the CONTRACTOR's whose salaries and wages are chargeable under subparts 2.2.2 and 2.2.3 of this Accounting Procedure.



2.4.3 Relocation costs to the Contract Area vicinity of employees permanently or temporarily assigned to Petroleum Operations. Relocation costs from the Contract Area vicinity, except when an employee is reassigned to another location classified as a foreign location by the CONTRACTOR. Such costs include transportation of employee's families and their personal and household effects and all other relocation costs in accordance with the usual practice of the CONTRACTOR.



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2.5 Services



2.5.1 The actual costs of contract services, professional consultants, and other services performed by third parties.



2.5.2 Costs of use of facilities and equipment for the direct benefit of the Petroleum Operations, furnished by the CONTRACTOR or third parties at rates commensurate with the cost of ownership, or rental, and the cost of operations thereof, but such rates shall not exceed those currently prevailing in normal arm's length transactions on the open market for like services and equipment.



2.6 Damages and losses to material and facilities



All costs or expenses necessary for the repair or replacement of Material and facilities resulting from damages or losses incurred by fire, flood, storm, theft, accident, or any other cause. The CONTRACTOR shall furnish the MOGE written notice of damages for losses for each occurrence or loss involving more than one hundred thousand US Dollars (US $ 100,000) as soon after the loss occurrence or as practicable.



2.7 Insurance and claims



2.7.1 Premiums paid for insurance to cover the risks related to Petroleum Operations according to the CONTRACTOR's practice, which is in compliance with international petroleum practice.





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2.7.2 Actual expenditure incurred in the settlement of all losses,

claims, damages, judgments, and other expenses (including legal expenses as set out below) for the benefit of the Petroleum Operations.



2.8 Legal expenses



All costs or expenses of litigation or legal services otherwise necessary or expedient including but not limited to legal counselâs fees, arbitration costs, court costs, cost of investigation or procuring evidence and amounts paid to settlement or satisfaction of any such litigation or claims. These services may be performed by the CONTRACTORâs legal staff and/or an outside firm as necessary.



2.9 Charges and fees



All charges and fees which have been paid by the CONTRACTOR with respect to the Contract.



2.10 Offices, camps and miscellaneous facilities



Cost of establishing, maintaining and operating any offices, sub-offices, camps, warehouses, housing and other facilities such as recreational facilities for employees. If these facilities serve more than one (1) contract area the costs thereof shall be allocated on an equitable basis.



2.11 General and administrative expense



2.11.1 The services for all personnel of the CONTRACTOR as

per subpart 2.2.4 as well as the contribution of the CONTRACTORâs to the Petroleum Operations of an







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intangible nature shall be deemed compensated by an annual overhead charge based on a sliding scale percentage.

2.11.2

The basis for applying this overhead charge shall be the total Petroleum Costs incurred during each Financial Year or fraction thereof.

The sliding scale percentage shall be the following:

For the first five million US Dollars: |4%|

For the next three million US Dollars: |2%|

For the next four million US Dollars: |1%|

Over twelve million US Dollars: |0.5%|

2.12 Other expenditures

Any reasonable expenditure not covered or deals with in the foregoing provisions which are incurred by the CONTRACTOR for the necessary and proper performance of the Petroleum Operations and the carrying out of its obligations under the Contract or related thereto.

2.13 Credits under the contract

The net proceeds of the following transactions will be credited to the accounts under the Contract:

(a) the net proceeds of any insurance or claim in connection with the Petroleum Operations or any assets charged to the accounts under the Contract;

(b) revenue received from outsiders for the use of property or assets charged to the accounts under the Contract which

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have become surplus to Petroleum Operations and

have been leased to mitigate losses;



(c) any adjustment received by the CONTRACTOR from the

suppliers manufacturers or their agents in

connection with defective equipment or material the

cost of which was previously charged by the

CONTRACTOR under the Contract;



(d) rentals, refunds or other credits received by the'

CONTRACTOR which apply to any charge which has

been made to the accounts under the Contract;



(e) proceeds from all sales of surplus Materials

charges to the account under the Contract, at the

net amount actually collected.



2-14 No duplication of charges and credits



Notwithstanding any provision to the contrary in

this Accounting Procedure, it is the intention that

there shall be no duplication of charges or credits

in the accounts under the Contract.





ARTICLE 3 - FINANCIAL REPORTS TO THE MOGE



3.1 The reporting obligations provided for in this Part

shall apply to the CONTRACTOR and shall be in the

manner indicated hereunder.



3.2. The CONTRACTOR shall submit to MOGE within thirty

(30) days of the end of each Quarter :



3.2.1 A report of expenditure find receipts under

the Contract by budget item showing :





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a) actual expenditure and receipts for the Quarter in question;



b) actual cumulative expenditure to date



c) latest forecast of cumulative expenditure at Year end;



d) variances between budget expenditure and actual expenditure, and explanations therefor.



a cost recovery statement containing the following information:



a) recoverable Petroleum Costs brought forward from the previous Quarter, if any;



b) recoverable Petroleum Costs incurred during the quarter;



c) total recoverable Petroleum Costs for the Quarter (a) plus b) above]



d) quantity and value of Cost Oil taken and separately disposed of by the Contractor for the Quarter;



e) amount of Petroleum recovered for the Quarter and



f) amount of recoverable Petroleum Costs to be carried forward into the next Quarter, in any







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3.3 After the commencement of production the CONTRACTOR shall, within thirty (30) days after the end of each month, submit a production report to the MOGE showing for each Development Area the quantity of Petroleum :



a) held in stocks at the beginning of the month ;

b) produced during the month ;

c) lifted, and by whom ;

d) lost and consumed in Petroleum Operations ;

and

e) held in stocks at the end of the month.



3.4 A lifting Party shall submit, within thirty (30) days after the end of each month, a report to the MOGE stating the quantities and sales value of each Petroleum sales made to that month.







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ANNEXURE "D"





This Annexure "D" is attached to and made an integral part of the Contract between MYANMA OIL AND GAS ENTERPRISE and TOTAL MYANMAR EXPLORATION AND PRODUCTION





dated :







FORM OF SECURITY



Date:_ _ _ _ _ _ _ _



MYANMA OIL AND GAS

ENTERPRISE

YANGON

TEE UNION OF MYANMAR



By this letter TOTAL guarantees to make available to its fully owned subsidiary TOTAL MYANMAR EXPLORATION AND PRODUCTION such capital finance, assets, machinery, equipment, tools, technical expertise or specialists as may be required by TOTAL MYANMAR EXPLORATION AND PRODUCTION in its performance of committed work and expenditure obligations undertaken by the said subsidiary pursuant to the terms of a Production Sharing Contract covering offshore appraisal signed on.........



This guarantee shall come in force at the date said Production Sharing Contract, duly executed by said subsidiary, comes itself into force, and this guarantee shall remain in force for so long as committed work and expenditure obligations remain unperformed by said subsidiary.







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ANNEXURE 'E'



This Annexure "E“ is attached to andmade an integral part of the Contract between MYANMA OIL AND GAS ENTERPRISE and TOTAL MYANMAR EXPLORATION AND PRODUCTION.





dated:





MANAGEMENT PROCEDURE



1. MOGE retains by this Contract all rights of

Management but recognises that CONTRACTOR is

responsible for the execution of the Work Programme

To obtain the benefits of mutual cooperation and to

coordinate their efforts under the Contract, MOGE and

CONTRACTOR shall establish a "Management Committee"

(herein called the Committee) composed of Four (4)

representatives appointed by MOGE and Pour (4)

representatives appointed by CONTRACTOR. One of the

MOGE's representatives shall act as Chairman of the

Committee.



2. The initial appointment of representatives to the

Committee shall be made by MOGE and by CONTRACTOR, by

notice given to the other within thirty (30) days

after the Effective Date, advising the names of their

respective representatives and such appointments may

be changed thereafter from time to time by similar

notice from the changing party to the other.



3. All decisions required to be taken by the Management

Committee shall be taken by the unanimous vote of the

representatives present at the meeting, it being

understood that no such decisions shall be valid

unless at least one representative of MOGE one

representative of the CONTRACTOR is present at the





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-89-



meeting. Decisions taken by the Committee shall be

recorded in minutes signed on behalf of both MOGE

and CONTRACTOR and shall be binding on the parties

hereto.



4. He Committee shall meet whenever required by MOGE or

by CONTRACTOR, subject to 15 days prior notice to

its members required which notice shall include the

agenda for the meeting.



5. The Committee shall have the following functions and

responsibilities under this Contract:



a) to provide the opportunity for and to encourage

the exchange of information, views, ideas and

suggestions regarding plans, performance and

results obtained under the Contract.



b) to review and approve Work Programmes and

Budgets proposed by CONTRACTOR, taking into

consideration any revisions thereto proposed by

MOGE and further revisions by both parties.



c) to coordinate on all technical, financial

administrative and policy matters of interest to

both parties,



d) in case of discovery of Petroleum to review and

approve proposal for the appraisal and

development of such discovery.



e) to consider and act upon recommendations made to

the Committee by its sub-committees.



f) to cooperate towards implementation of the

Contract in accordance with its terms.





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6. To facilitate the discharge of its functions, the

Committee shall appoint sub-committees composed of

representatives of both MOGE and the CONTRACTOR such

as but not limited to :



a) Technical Sub-committee to review and consult

upon work programs and any variation thereof, to

supervise all safety procedures to be used in the

conduct of Petroleum Operations, to advise the

parties on the progress of the current Work

Programme, pertaining to exploration, development

and production, and to perform any other task that

the parties may ascribe by common agreement.



b) Procurement Sub-committee to review and recommend

the international tender being applied for

purchase of equipment and the selection of sub-

contractors and supplies of services for Petroleum

Operations hereunder.



c) Accounting' Sub-committee to review the incomes

and ; expenditures related to Petroleum Operations

i£ accordance with this Contract and any questions

arising thereto.



d) Petroleum Valuation Sub-committee to set the

value, the International Market Price FOB Myanmar

per barrel of Crude Oil for purposes of Cost

Recovery and division of net sales proceeds. The

valuation shall be based upon enquiries made by

MOGE and CONTRACTOR internationally for ] the

specific type of quality of Crude Oil such as API

gravity, sulphur content, viscosity, pour-point,

etc... The valuation of Natural Gas will be

determined as per Section 12.8.





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ANNEXURE "F"



This Annexure "F" is attached to and made an integral part of the Contract between MYANMA OIL AND GAS ENTERPRISE and TOTAL MYANMAR EXPLORATION AND PRODUCTION.



dated



MEMORANDUM ON PARTICIPATION



The operating agreement between CONTRACTOR and MOGE referred to In Section 19.3. shall embody, inter, alia, the following main principles:



1. CONTRACTOR shall be the sole Operator of the venture

under properly defined rights and obligations.



2. Authorised representatives of both parties shall meet

periodically for the purpose of conducting the

venture's operations. Decisions shall be takes, by

majority vote except in cases which shall require the

unanimous consent of the parties and which shall

include the decision to terminate the main Contract.

However if either of the parties wishes to withdraw

from the venture it shall transfer without cost its

undivided interest to the other party.



3. Both parties shall have the obligation to provide or

cause to be provided their respective proportions of

such finance and in such currencies as may be

required from time to time by the Operator for the

operations envisaged under the main agreement. The

effects of a party's failure to meet calls for funds

within the prescribed time limits shall be provided.







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4. The Operator shall prepare the annual Work Programme

and Budgets which shall be submitted to the authorized

representative of both parties for decision prior to

their submission to MOGE in accordance with the

provisions of the main Contract.



5. Appropriate Sole Risk provisions.



6. Subject to adequate lifting tolerances each Party shall

offtake at CONTRACTOR's point of export its production

entitlement. However, if MOGE is not in a position to

market such quantity wholly or partly it shall in

respect of tie quantity which it cannot market itself

have the option under an adequate notification

procedure : either to require CONTRACTOR to purchase

that quantity, or to lift that quantity at a later date

under an adequate procedure within a period of time

defined in such related procedure.



This paragraph 6 is applicable only for hydrocarbons in

liquid form.

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MEMORANDUM OF UNDERSTANDING

AND

PRODUCTION SHARING CONTRACT

FOR APPRAISAL, DEVELOPMENT

AND PRODUCTION OF PETROLEUM

IN THE MOATTAMA AREA

BETWEEN

MYANMA OIL AND GAS ENTERPRISE

AND

TOTAL MYANMAR EXPLORATION AND PRODUCTION



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[the 2 lines of text below are centered on the page, inside a box]



MEMORANDUM OF UNDERSTANDING

FOR THE MOATTAMA GAS PROJECT



This Memorandum of Understanding (hereinafter "MOU") records the

agreement reached this [7th] day of [July] 1992 by and

between:



THE MYANMA OIL AND GAS ENTERPRISE, an enterprise

organized and existing under the Laws of Union of Myanma

(hereinafter referred to as the "MOGE" which expression shall,

unless repugnant to the context or the meaning thereof, be deemed to

include its successors and permitted assigns), represented for the

purpose of the MOU by THE MANAGING DIRECTOR, MYANMA

OIL AND GAS ENTERPRISE,



of the one part [in italics]



AND



TOTAL MYANMAR EXPLORATION AND PRODUCTION, a

company existing under the Laws of France (hereinafter referred to

as "TOTAL" which expression shall, unless repugnant to the context

or the meaning thereof, be deemed to include its successors and

permitted assigns), represented for the purpose of this MOU by its

Chairman of the Board,



of the other part [in italics]



both MOGE and TOTAL hereinafter sometimes referred to either

individually as "Party" or collectively as "Parties".





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[note - what appears above to be "7th" and also "July" are handwritten

above a line}

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WHEREAS MOGE has made two gas discoveries (hereinafter the "Discoveries") offshore Myanmar in the MOATTAMA area, namely the 3DA-X and 3DA-1 Structures on Blocks M5 and M6;



WHEREAS it is the desire of MOGE that the Discoveries be appraised and developed and TOTAL is willing to do same;



WHEREAS it is the intent of the Parties that if commercially is declared the produced gas be exported to Thailand (’Export Market"), a part of such produced

gas being however allocated to Myanmar domestic market ('Domestic Market');



WHEREAS the discovered gas is assumed to be dry but it is the intent of the Parties that the Project includes the development and production of the liquid hydrocarbons that may be discovered during the appraisal works;



WHEREAS MOGE and TOTAL has executed on this same [--] day of July 1992 a Production Sharing Contract for the appraisal development and production of Petroleum in the Moattama area (hereinafter "the PSC");



WHEREAS the purpose of this MOU is to establish, together with the PSC. the basis of the Project structure and concepts and the main contractual and fiscal terms agreed by the Parties for the implementation of the MOATTAMA GAS PROJECT as hereinafter described



SECTION 1 - DEFINITIONS



For the purpose of this MOU and wherever used herein any terms defined in the PSC and not otherwise defined herein shall have the meanings set







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forth in the PSC. The terms used below shall have the following meanings in this MOU :



1.1. "Contractor" means CONTRACTOR under the PSC.



1.2. "Effective Date" means the date following execution

of the PSC and of this MOU by the Parties, on

which the last act necessary to give the PSC and

this MOU the full legal effect has been taken.



1.3. "Project" means the MOATTAMA GAS PROJECT.



1.4. "Proved Natural Gas Reserves" means the estimated

quantities of Natural Gas winch geological and

engineering data demonstrate with reasonable

certainty to be recoverable in future years from

the reservoirs under existing economic and

operating conditions, that is-prices and costs as

of the date the estimate is made. For the purpose

of this definition, there is 90 per cent chance

that the actual quantity will be more than the

amount estimated as Proved Natural Gas Reserves and

10 per cent chance that it will be less.



SECTION 2 - DESCRIPTION- OF THE STRUCTURE OP THE PROJECT



2.1. Phases of the Protect



The whole Project is structured in 3 Phases :



Phase 1

The appraisal work and the study of commerciality.



Phase 2

The field development and pipeline construction

phase.



Phase 3

The production and gas transportation phase.





97

Phases 2 and 3 are conditional upon the results of Phase 1.



A Tentative Project Schedule is attached hereto as Annex 1. This Tentative Schedule is based on the hypothesis that Commercial Discovery can be determined within eighteen (18) months from Effective Date.



a) Phase 1 will start after Effective Date. The appraisal work is necessary to establish the commerciality of the Discoveries.



The appraisal concerns the gas discoveries in the Contract Area, as it is defined in the PSC. There are 2 structures discovered by MOGE, the 3DA-X structure and 3DA-1 bright spot structure. The largest one is the 3DA-X structure and a successful appraisal of the structure is considered at this stage as an essential step in the process of establishing the commericality of the Discoveries; therefore the appraisal work described below and in the PSC, concerns essentially the 3DA-X structure.



As stated in section 6.2. of the PSC, the Contractor shall provide MOGE with a detailed appraisal work programme after full review of all data and information available in relation to Contract Area. At this stage the minimum appraisal work programme consists in the drilling of 2 wells and depending on the results of the 2 wells, 1 or 2 additional wells and additional seismic may be required for the evaluation of the reserves.



The term of the Appraisal Period is two (2) years. Eighteen (18) Months is the minimum time estimated necessary to complete the appraisal week. ARIMCO FTAA/P.39

Environmental Protection and Industrial Safety:



The CONTRACTOR shall prepare a plan of mining so that its damage to the environment will be minimal. To the extent reasonably possible, control of pollution and the transformation of the mined-out area or materials into economically and socially productive forms must be done simultuaneously with mining. An appropriate Environmental Impact Statement (EIS) must be made according to the form prescribed by proper government authorities and shall be required component of any of the feasibility studies of the mine.



These activities must be reflected clearly in the appropriate Work Program.



13.4 Rights of the CONTRACTOR during the Development, Construction and Production Period. - THE CONTRACTOR shall:



(a) Have the right to conduct Mining Operations in the Mining Area in accordance with the terms and conditions hereof.



(b) Have the right of possession of the Mining Area, with full right of ingress and egress and the right to occupy the same.



(c)(i) Subject to the provisions of Presidential Decree No. 512, not be prevented from entry into private lands by surface owners and/or occupants thereof when prospecting, exploring and exploiting for minerals therin.



(ii) Have the right to require the GOVERNMENT at the CONTRACTOR's own cost, to purchase or acquire the surface areas over the Mining Area or the right to purchase the surface areas for and on behalf of the GOVERNMENT, at such price and terms as may be acceptable to it provided that it shall be reimbursed by the sale by public auction or tender of the surface rights at the termination of this Agreement.



(d) Have the right to use and have access to all declassified geological, geophysical, drilling, productin and other information held by the GOVERNMENT or any agency or enterprise thereof now or in the future, relating to the contract Area.



(e)(i) Have the right to sell, assign, transfer, convey or otherwise dispose of all its rights, interests and obligations under this Agreemnt, subject to the approval of the Secretary, which approval will not be unreasonably withheld, except that no such approval would be required under section XVIII hereof.



[Signature] [illegible page number]



(iv) The revenues derived from the gas sales will allow each

segment of the Project, as defined below, to have an

acceptable rate of return on the investment normally

determined as 15 % in real terms.

(v) The various main Agreements, which are listed in

section 6 below, will have been executed and be in full

force and effect.

MOGE and the Contractor shall jointly make every effort so

that the above conditions can be met as soon as practicable

after the completion of the Appraisal Program ; however, if

these conditions are not met before the end of the Appraisal

Period, then the Contractor may retain the Contract Area as

stated in Section 3.4. of the PSC.

2.1. b) The field development and pipeline construction Phase will

only start when the Discoveries are declared Commercial

Discovery.

2.1. c) The production and gas transportation Phase will start when

the development and construction and completed.

2.2 Sales and Delivery Points [preceding is underlined]

Sales and Delivery Points are defined as follows:

Export Gas Sales Point

The Export Market Gas to Thailand will be delivered and

sold to PTT at Thailand border near the Three Pagodas Pass.

It will be transported there through an Offshore/Onshore

Export Pipeline.



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100



- Domestic Gas Sales Point

The Domestic Market Gas will be delivered and sold to

MOGE at the inlet of the Domestic Pipe. The Domestic Gas

Sales Point, to be decided later, can be either on the

production platform (in this case the Domestic Gas Sales

Point is identical to its Delivery Point defined below), or at a

junction point of the Export Pipe with the Domestic Pipe. In

this last case the Domestic Market Gas will use a portion of

the Export Pipe.

- Delivery Point to the Gas Transportation Company

("Delivery Point")

The produced gas offshore is delivered after appropriate

processing to the Gas Transportation Company, as defined

below. The Delivery Point is therefore at the inlet of the

Export Pipe, ex Field.

2.3. Segments of the Project [underlined]

There are 2 segments in the Project :

a) The Petroleum Production segment.

b) The gas transportation segment.

There will be 2 separate entities (Joint Venture and Company), one

for each segment of the Project:

2.3. a) The Petroleum Production Joint Venture :

The Contractor will perform the appraisal of the Contract Area

as defined in the PSC, and if the Discoveries are proved to be

Commercial Discovery, it will develop the field and produce it.

The produced gas will be transported by the Gas

Transportation Company and sold by MOGE and Contractor to

the Export Market and Domestic Market.





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2.3 b) The Gas Transportation Company:



This Company will transport the produced gas from the Delivery Point to

Export and Domestic Gas Sales Points as defined above.



After the Discoveries are proved Commercial Discovery, the Company will

construct the Export Pipe to the Thailand border, and transports the gas

produced in the Contract Area and eventually from other surrounding

contract areas.



The Gas Transportation Company term shall extend as long as there is gas

to be transported to Thailand through the Export Pipe.



Each segment of the Project will be subject to specific contractual terms.



SECTION 3 - REVENUES DISTRIBUTION BETWEEN PETROLEUM PRODUCTION AND GAS TRANSPORTATION



The Export Market Gas Price (E) at the Thailand border will be the reference. This price will be splitted into:



A Transportation Tariff (T) for the Export Gas from the Delivery Point to the

Thailand border (Export Gas Sales Point).



A âNet Backâ price (NB) for the gas ex-Field defined as follows: NB = E-T.



The value of the Domestic Market Gas will be equal to the gas price ex-Field (NB) plus a transportation tariff calculated as a function of the portion of the Export Pipe used by the Domestic Market Gas, if any. So this tariff will be only a fraction (f) of the Export Market Gas one, and the Domestic



UYP 00002562







102 ⢠9



Market Gas value (D) is : D = NB + (f) x (T). If the Domestic Gas Sales

Point is identical to the Delivery Point, f will be equal to zero.



According to this scheme:

ã» The valuation of Natural Gas for the Gas Production Joint Venture

will be equal to the gas "Net Back" price ex-Field (NB) defined above.

ã» The Gross Revenues of the Gas Transportation Company will be

equal to the sum of Export Market Gas transportation revenues i.e.

Export Gas quantity multiplied by transportation tariff (T), plus the

Domestic Market Gas transportation revenues i.e. Domestic Market

Gas quantity multiplied by transportation tariff (T), multiplied by the

fraction (f) applied for Domestic Market Gas, plus the revenues of the

transportation of any gas produced in other surrounding contract

areas, and transported to Thailand through the Export Pipe, or a

portion of it.



The Transportation Tariff (T), which will be at any time a fraction of

the Export Gas Price, will be determined so that both segments of the

Project will have a similar rate of return in real terms.



SECTION 4 - CONTRACTUAL AND FISCAL TERMS FOR [underlined]

PETROLEUM PRODUCTION AND GAS TRANSPORTATION [underlined]



a) Petroleum Production Joint Venture



The contractual and fiscal terms applicable to this Joint Venture are

defined in the PSC entered into between MOGE and TOTAL for the

Appraisal, Development and Production of Petroleum in Moattama

Contract Area.



The valuation of the Natural Gas for the PSC fiscal accounts will be

the "Net Back" (NB) defined in Section 3 above.



UYP 00002563









103 The costs incurred up to Effective Date by MOGE in relation to the

Contract Area shall be reimbursed to MOGE in the manner defined

in Section 19.9. of the PSC.

According to the PSC, the Contractor is subject to the provisions of

the Union of Myanmar Foreign Investment Law. The taxable income

is as defined in the PSC.

b) Gas Transportation Company:

A Company subject to the entitlements under the provisions of the

Union of Myanmar Foreign Investment Law and of the Union of

Myanmar Income Tax Laws will be established.

c) Fiscal terms applicable to the Petroleum Production Joint Venture

and to the Gas Transportation Company.

The Petroleum Production Joint Venture and the Gas Transportation

Company will be granted the following fiscal terms:

Tax Holiday : 3 years starting from the Financial Year in

which Commercial Production commences.

Income Tax Rate : 30 % inclusive of all taxes on income payable

to the Union of Myanmar. No other tax will be imposed on the

Foreign Participants in the Project except income tax imposed

on expatriate personnel of Contractor for the portion of their

income in Myanmar.

Depreciation rate for capital assets : 25 % per year.

If any material change occurs after Signature Date to the economic

benefits of the Petroleum Production Joint Venture and of the Gas

Transportation Company due to the promulgation of new laws or

regulations, adjustments will be made to maintain the economic





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104

regulations, adjustments will be made to maintain the economic

benefits at the same levels as if such laws or regulations had not been

promulgated.

d) Domestic Market Gas

The Domestic Market Gas quantities (Qd) delivered each year to

Myanmar, according to a long term contract, will be a part of

Myanmar and MOGE revenues for the corresponding year, which will

be taken "in kind". The Myanmar and MOGE total revenues (R) in a

year are :

- From the Petroleum Production joint venture :

The Royalty, the Cost Petroleum and Profit Share of MOGE,

the various Bonuses, and the Income Tax.

- From the Gas Transportation Company :

The Income Tax and MOGE profit share.

The value of the Domestic Market Gas (D) is determined above in

Section 3 ; this value (D) multiplied by the Domestic Market Gas

quantity (Qd) is the part of Myanmar and MOGE revenues which are

taken "in kind". The remaining revenues : (R) - (Qd) x (D) will be

taken "in cash" i.e. paid to Myanmar and MOGE by the Foreign

Participants in the Project.



SECTION 5 - OPERATORSHIP AND PARTNERSHIP [underlined]

a) Operatorship

TOTAL will be the Operator for the whole Project during its 3 Phases

under the PSC and for the Gas Transportation Company.









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MOGE participation



MOGE may acquire up to fifteen percent (15%) participation share in both segments of the Project. This right shall be exercised in accordance with section 19 of the PSC



The rights and obligations of MOGE in the Gas Transportation Company to be established shall be in proportion to its participation share.



Foreign participation



The following principle will apply:

- Each Foreign Participant will have the same participation share in the 2 segments of the Project.



- Moge and TOTAL agree that Petroleum Authority of Thailand Exploration and Production (PTT(EP)) will have a right to participate in both segments of the Project with a participation share of up to 30% of the aggregate Foreign Participants share.



- TOTAL intention is to keep a participation share of 39% at least of the aggregate Foreign Participants share.



- The remaining of the Foreign Participants share can be offered to a third party or parties, with the approval of MOGE, which shall not be unreasonably withheld.



_Operations under both the PSC and Gas Transportation Company will be conducted under Joint Operating Agreements to be established on the basis of international standard practices.



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SECTION 6 - SUMMARY OF THE MAIN AGREEMENTS BETWEEN THE VARIOUS PARTICIPANTS IN THE PROJECT



As explained above, the contractual relationship among the various participants will be materialized in the following agreements



- The Petroleum operations and Pipeline construction and exploitation:



PSC Production Sharing Contract between the Gas Production Joint Venture participants and MOGE.



POA Production Operating Agreements between the Gas Production Joint Venture participants



GPPOA Gas Pipeline Participation and Operating Agreements betweeen the Gas Transportation participants and MOGE and Myanmar Government.



The Gas sales and transportation:



EGSA Export Gas Sales Agreement between the Gas Production Joint Venture participants and PTT (Petroleum Authority of Thailand Production)



EGTA Export gas Transportation Agreement between the Gas Production Joint Venture participants and the Gas Transportation Company.



DGSA Domestic Gas Supply Agreements between the Gas Production Joint Venture participants and MOGE.



DGTA Domestic Gas Transportation Agreement between the Gas Production Joint Venture participants and the Gas Transportation Company



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SECTION 7- OTHER CONSIDERATION ABOUT DOMESTIC GAS



Early Production Scheme (EPS)



TOTAL, as operator for the Project, is ready to study at the time of the commercially study, the technical and economical feasibility of an EPS to be implemented in conjunction with the export scheme in order to accelerate the delivery of Domestic Gas at the inlet of the Domestic Market Gas Pipeline.



Domestic Gas Pipeline.



During the Commercially Study, MOGE and the Contractor will study in detail gas reserves availability and gas demand forecast for the domestic market in Myanmar.



If the study concludes that a deficit exists. domestic pas may be delivered from the Contract Area through the Domestic Gas Pipeline.



TOTAL considers that the Domestic Gas Pipeline falls within the category of investments which should be financed through loans from international financial institutions whose function is to support and permit the realization of projects which are vital for the economy of a country.



At the time of the commercially study, TOTAL, as Operator, is willing to assist MOGE, at MOGE's request, in arranging such a financing.



Should such a financing proved not to be available or feasible, MOGE and the Contractor will consider the possibility of including the Domestic Gas Pipeline in the Project. Provided that this additional



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[header in very tiny text - illegible]



- 15 [unsure about 2nd digit,5 or 6?]



investment will not prevent the declaration of commerciality and

consequently the field development decision, it will be included in the

Gas Transportation company.

In this case, the definition of the Domestic Gas sales point will have

to be amended and the Domestic Gas transportation tariff adjusted

accordingly.



SECTION 8 - NATURAL GAS DISCOVERIES OTHER THAN THE [underlined]

DISCOVERIES [underlined]



If any Other Discovery of Natural Gas (other than the Discoveries) is made

within the Contract Area as a result of additional exploration works made

by Contractor as provided for in Section 6.8. of the PSC, it is hereby agreed

that for the purpose of the determination of whether such Other Discovery

is Commercial Discovery under Section 7.7.2 of the PSC :

a) the integration within the Project of the reserves related to such

Other Discovery will be studied as a first priority with the objective

to optimize the use of the facilities already in place or to be put in

place, in particular the Export Gas Pipeline ;

b) the conditions listed under Section 2.1.a.) above will apply. However

the minimum production plateau defined as per section 2.1.a) (i) of

this MOU and the minimum duration of 20 years applicable to the

long term firm gas sales contracts as per Section 2.1.a) (ii) and (iii) of

this MOU, will not be required.



SECTION 9 - TERM [underlined]



This MOU will come into force on Effective Date. It will terminate at the

termination of the PSC as stipulated in Section 25 of the PSC.



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IN WITNESS WHEREOF, this MOU has been executed at Yangon, the Union of Myanmar as of the day and year abovementioned.



Signed, sealed and delivered

on behalf of

THE MYANMA OIL AND GAS ENTERPRISE



U PE KYI

Managing Director

[illegible signature]



WITNESSES:



1. CMDR. THEIN TUN

Director General, Energy Planning Department

[illegible signature]



2. U SOE MYINT

Deputy Director General, Energy Planning Department

[illegible signature]



Signed, sealed and delivered

on behalf of

TOTAL MYANMAR EXPLORATION AND PRODUCTION



Thierry DESMAREST

Chairman of the Board

[illegible signature]



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WITNESSES:



1. Jean-Marie BEUQUE

Chief Executive Officer Far East

[illegible signature]



2. Guy ROMEU

Manager General Affairs Far East

[illegible signature]



[seal] [seal]



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ACTIVITY DESCRIPTION| 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 |



APPRAISAL | | | | | | | | | |

| | |development decision | | | | |



DEVELOPMENT | | | | | | | | | |



Basic Engineering | | | | | | | |



Long Lead Items Delivery | | | | | | | |



PLATFORMS | | | | | | | |

Contract award | | | | | | | |

Detail design/Procurement | | | | | | | |

Fabrication transport & lasial (WP1,2,3,4) | | | | | | | |



PLATFORMS | | | | | | | |

Contract award | | | | | | | |export to Thailand &

Detail Design Procurement | | | | | | | | domestic delivery

Fabrication Transport & Installation | | | | | | | |



ING QUARTER PLATFORM | | | | | | | |

Contract award | | | | | | | |

Detail Design Procurement | | | | | | | |

Fabrication Transport & Installation | | | | | | | |



EXPRESSION PLATFORM | | | | | | | |

Basic engineering | | | | | | | | Compression on service

Long Lead Items | | | | | | | |

Contract award | | | | | | | |

Detail Design /Procurement | | | | | | | |

Fabrication, Transport & Installation | | | | | | | |



BILLING | | | | | | | |



PETTIE | | | | | | | |

Basic Engineering & Survey | | | | | | | |

Pipe fabrication & Procurement | | | | | | | |

Pipe com(field-T-Yangon-Khaa lan) | | | | | | | |



UYP 00002572[very tiny text header - illegible]



[foreign text - ? Arabic]

MYANMA OIL AND GAS ENTERPRISE



CABLE:YENAN P.O. BOX Na,1049

TELEX:MYCORP BM 21307 74/80 MIN YE KYAW SWA ROAD

TELE:AUTO 22874 (5) Lines No.................. YANGON, MYANMAR

82266 (9) Lines

Letter No. 3/23/92 (1620)



Date: 9th July, 1992.





SIDE LETTER



This Side-Letter is attached to and made an integral part of the

Memorandum of Understanding ("MOU") and the Production Sharing

Contract ("PSC") concerning the MOATTAMA AREA

CONFIDENTIAL

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_____________

SUBJECT TO PROTECTIVE ORDER





















It is agreed that, the Parties understanding of the Myanmar Income Tax regime that will be applicable to taxable income resulting from Petroleum Operations and Transportation Operations under the Contract is as follows:



1. The applicable Myanmar Income Tax rate is 20%.



2. TOTAL'S gross Income for Myanmar Income Tax purposes will be equal to the value of TOTAL's share of Petroleum as determined under the Production Sharing Contract for export and domestic sales;



The Gas Transportation Company (to be established) Gross Income will be the Gross Revenues as defined in the MOU.



3. Deductions from TOTAL's gross income in computing TOTAL's taxable income subject to Myanmar Income Tax will include all expenses incurred in Petroleum Operations under the PSC, including both cost recoverable and non-cost recoverable expenditure but excluding expenditures not allowable under the Myanmar Income Tax Law.



Deductions from the Gas Transportation Company gross income in computing Gas Transportation Company taxable income subject to Myanmar Income Tax will include all expenses incurred in Transportation Operations but excluding expenditures not allowable under the Myanmar Income Tax Law.



Capital Expenditures will be depreciated at the rate established in the Permit issued by the Foreign Investment Commission, and such depreciation will be included in such deductible items;



4. Notwithstanding the above, TOTAL and the Gas Transportation Company shall be exempt from Myanmar Income Tax for the period of three (3) Financial Years including the Financial Year in which Commencement of Commercial Production occurs for the above mentioned Contract and TOTAL will be allowed to consolidate its taxable income from all contracts into one joint tax return. Tax losses carried forward will be accumulated until expiration of the tax exemption period stated above and thereafter TOTAL and the Gas Transportation Company will be allowed such losses to offset its taxable income from any contract;



5. Following payment of Myanmar Income Tax, TOTAL, the Gas Transportation Company and their shareholders shall be exempt from any other taxes on income (to the extent attributable to income derived under the Contract) or withholding on dividends or other distributions similarly attributable;

(initials)

UYP 00002574 (initials)









114[very tiny print ?header - illegible]



6. TOTAL's and the Gas Transportation Company's

expatriate personnel employed under the contract and

residing in Myanmar shall be taxed on their income

received in Myanmar at rates no higher than the rates

applicable to the national citizens of Myanmar.

7. TOTAL (and the Gas Transportation Company when

established) will be issued a Permit under the Foreign

Investment Law and in consequence will be subject to

all the provisions of the said Law including those of

Article 21 concerned with tax reliefs.



This Side Letter shall inure to the benefit of and be binding

upon the Parties hereto and their respective successors and

assigns. It is agreed that any assignment of all or part of

TOTAL's Participating Interest pursuant to the Contract shall be

exempt from all taxes, assessments or duties.



In the foregoing correctly sets forth our agreement, please so

indicate by signing in the space provided below.



Agreed and accepted For and on behalf of

for and on behalf of MYANMA OIL & GAS ENTERPRISE

TOTAL Myanmar Exploration

& Production





[signature] [signature]

MR. T. DESMAREST U PE XYI

PRESIDENT MANAGING DIRECTOR





[initials] UYP 00002575

[initials]



115Total



TOTAL MYANMAR EXPLORATION AND PRODUCTION

Yangon, July 9th 1992

MYANMA OIL AND GAS ENTERPRISE

Attention U PE KYI

Managing Director



Subject: MOTTAMA GAS PROJECT



Dear Sir ,



MYANMA OIL AND GAS AND ENTERPRIS (MOGE) and TOTAL MYANMAR EXPLORATION AND PRODUCTION have signed this 9th day of July, 1992 a Production Sharing Contract and a Memorandum of Understanding for the implementation of the MOATTAMA GAS PROJECT.



We are pleased to confirm you that in relation with the aboveand following our discussions on this matter TOTAL accepts to purchase the NAY MIN YAUNG rig from MOGE on a as is where is basis, subject to finalization of an appropriate purchase agreement and related formalities, under the following names:



- TOTAL will pay one (1) million United States dollars (including all and any taxes if any) when ownership of the rig (free of any liens or encumbrances whatsoever) is transferred from MOGE to TOTAL, by a legal document effecting the transfer.



-TOTAL will make its best efforts to sell the rig. The selling price (all and any taxes excluded if any) will be shared between MOGE to TOTAL, by a legal document effecting the transfer.



MOGE: 80%

TOTAL: 20%



In case of loss of the rig, the insurance compensation will be shared on the same basis.



- As soon as ownersip of the rig is transferred to TOTAL. Total will bear all future maintenance and Insurance costs, and moving costs, if any.



This letter is made in two original; In order to indicate your acceptance of the above, please return to us one original duly signed by yourself and indicated below,



Yours faithfully [signature] [signature].



T Desmarest

Charman of the Board



Agreed for MMAYANMA OIL AND GAS ENTERPRISE U PE KYI

Managing Director



116 CONFIDENTIAL

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SUBJECT TO PROTECTIVE ORDER









SUPPLEMENTARY LETTER







Date: 24 December 1993





This Supplementary Letter is attached to and made an integral part of the Memorandum of Understanding ("MOU") and the Production Sharing Contract ("PSC") concerning the MOATTAMA AREA both dated the 9th July, 1992 and hereinafter together referred to as the "Contract" between MYANMA OIL AND GAS ENTERPRISE (hereinafter referred to as the "MOGE", which expression shall be deemed to include its successors and permitted assigns) and TOTAL MYANMAR EXPLORATION AND PRODUCTION (hereinafter referred to as "Contractor" which expression shall be deemed to include its successors and permitted assigns).



Further various discussions between the Parties in relation with the unexpected presence of nitrogen in the Contract Area, and in accordance with Section 27-6 of the PCS, it has been agreed as follows:



I. Section 4 b) of the MOU is amended to read as

follows:



*b) Gas Transportation Company:



A Company subject to the entitlements under the provisions of the Union of Myanmar Foreign Investment Law and of the Union of Myanmar Income Tax Laws will be established.



In addition, the Gas Transportation Company's Capital Expenditures and pre-operating expenses incurred before Commencement of Commercial Production of the Discovery namely 3 DA-X (hereinafter "YADANA") shall be multiplied by an uplift coefficient of one point zero seven five (1.075); the resulting amount shall be deducted from the Gas Transportation Company's gross income in accordance with the provisions of this Contract.



For each subsequent gas field discovered in the Contract Area, and before a Development Plan of such Other Discovery is adopted, CONTRACTOR and MOGE shall define an uplift to be applied to expenses linked with the development of such Other Discovery and the resulting amount shall be deducted from the Gas Transportation Company's gross income in accordance with the provisions of this Contract. Such uplift shall depend on the molar percentage of the non-hydrocarbon gas produced with the Natural Gas, according to the following sliding scale:



Inert Gas Content % Uplift Coefficient

___________________ __________________



UYP 00002577

from 0% up to 5% 1.000

over 5% up to 10% 1.015

over 10% up to 15% 1.030

over 15% up to 20% 1.045

over 20% up to 25% 1.060

over 25% up to 30% 1.075 (initials)

over 30% up to 35% 1.090 (initials)

(initials)











117



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2











II. Section 9-4 of the PSC is amended to read as

follows:





*9.4. Contractor shall recover all costs and expenses in respect of all Petroleum Operations hereunder to the extent of and out of a maximum of fifty percent (50%) per Quarter of all Available Petroleum from the Contract Area; provided, however, that the costs and expenses of Development and Production. Operations in respect of any Development and Production Area shall be recovered only from Available Petroleum produced from such Development and Production Area. Such Petroleum to which CONTRACTOR is entitled for the purpose of recovering its costs and expenses is hereinafter referred to as "Cost Petroleum." Such costs and expenses shall be recovered out of Cost Petroleum in the later part of the Quarter in which such expenditures are incurred or in the Quarter in which Commencement of Commercial Production first occurs within the Contract Area.



In addition, CONTRACTOR's Capital Expenditures and pre-operating expenses incurred in Petroleum Operations hereunder before Commencement of Commercial Production of YADANA shall be multiplied by an uplift coefficient of one point one zero five (1.105); the resulting amount shall be recoverable at the same rate as permitted under this Contract.



For each subsequent gas field discovered in the Contract Area, and before a Development Plan of such Other Discover is adopted, CONTRACTOR and MOGE shall define an uplift to be applied to expenses linked with the development of such Other Discovery and the resulting amount shall be recoverable at the same rate as permitted under this Contract. Such uplift shall depend on the molar percentage of the non-hydrocarbon gas produced with the Natural Gas, according to the following sliding scale:





Inert Gas Content (%) Uplift Coefficient

_____________________ __________________





from 0% up to 5% 1.000

over 5% up to 10% 1.021

over 10% up to 15% 1.042

over 15% up to 20% 1.063

over 20% up to 25% 1.084

over 25% up to 30% 1.105

over 30% up to 35% 1.126



UYP 00002578



III. All other terms and condition of the Contract not

expressly amended by this Supplementary Letter

shall remain unchanged and in full force and

effect.



(initials) (initials)

(initials) (initials)













118



CONFIDENTIAL

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SUBJECT TO PROTECTIVE ORDER

















5









This Supplementary Letter shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and assigns.







For and on behalf of For and on behalf of

TOTAL MYANMAR EXPLORATION AND MYANMA OIL AND GAS

PRODUCTION ENTERPRISE



(signature) (signature)



Name Thierry DESHAREST Name (unreadable)

Title Chairman of the Board Title ( " ) & Director

Myanma Oil & Gas

Enterprise



Witnesses: Witnesses:



(signature) (signature)



Jean-Haris EEUQUE (unreadable)

Chief Executive Officer Far East Director (Financing)

Myanma Oil and Gas

Enterprise



















UYP 00002579



(initials)

(initials)









119





CONFIDENTIAL

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_____________

SUBJECT TO PROTECTIVE ORDER



















SUPPLEMENTARY LETTER NO.2







This Supplementary Letter is attached to and made an integral part of the Memorandum of Understanding (MOU) and the Production Sharing Contract (PSC) concerning the Maottama Area both dated 9th July 1992, as supplemented by the Supplementary Letter dated 24th December 1993, these three documents hereinafter together referred to as the "Contract" between MYANMA OIL AND GAS ENTERPRISE (hereinafter referred to as the "MOGE" which expression shall be deemed to include its successors and permitted assigns) and TOTAL MYANMAR EXPLORATION AND PRODUCTION (hereinafter referred to as "CONTRACTOR" which expression shall be deemed to include its successors and permitted assigns).





Following various discussions between the Parties in relation with the undergoing negotiation of the Export Gas Sales Agreement ("EGSA") to be entered into with Petroleum Authority of Thailand, as provided for in the Section 6 of the MOU, and with a view to facilitate a prompt finalization of such EGSA, it has been agreed as follows:





1. MOGE hereby expressly accepts and agrees that the

duration of the EGSA shall be thirty (30) years from

the Commencement of Commercial Production which

shall correspond to the Contractual Delivery Date

under the EGSA.



As a consequence and in accordance with Section 3.5

of the PSC, the Development and Production Period

related to the Discoveries shall continue until such

term of the EGSA, or any extension thereof.





2. Section 9.7 a) Available Natural Gas Sharing of the

PSC is complemented with the following paragraph a4)

to be added after paragraph a3):



a4) Regarding the Discoveries, the Available

Natural Gas Sharing shall be as follows -





- until and including the twentieth (20th)

year after the Commencement of Commercial

Production, paragraph a1) a2) and a3) here

above will be applied.



- starting from the beginning of the twenty

first (21st) year after the Commencement of

Commercial Production, the following

incremental scale will be applied:



(initials)







UYP 00002580















120





Available Natural Gas MOGE CONTRACTOR

Share Share



Up to 300 millions cubic 60 % 40 %

feet per day (MMscfd)



Between 301 and 600 MMscfd 70 % 30 %



Between 601 and 900 MMscfd 80 % 20 %



Above 900 MMscfd 90 % 10 % >>



3. All other terms and conditions of the Contract not expressly amended by this

Supplementary Letter No.2 shall remain unchanged and in full force

and effect.



4. This Supplementary Letter No.2 shall have effect from the date of signature

of the EGSA, and shall inure to the benefit of and be binding upon the

Parties and their respective successors and assigns.









For and on behalf of For and on behalf of

TOTAL MYANMAR EXPLORATION MYANMA OIL AND GAS

AND PRODUCTION ENTERPRISE



[signature] [signature]



Name :[printed name] Name :U PE KYI



Title :[printed title] Title :Managing Director



Witness :[signature] Witness :[signature]



Date : 30-01-1995 Date : 30/1/95







UYP 00002581





[initials]







121

GOVERNMENT OF THE UNION OF MYANMAR



MINISTRY OF ENERGY



Notification No. 5 (Extraordinary) / 92CONFIDENTIAL

DIE v. UNOCAL

SUBJECT PROTECTIVE ORDER



GOVERNMENT OF THE UNION OF MYANMAR

MINISTRY OF ENERGY

Notification No. 5 (Extraordinary)/92.

Yangon 10th Waxing Day of Waze 1345.

Myanmar Era

9th July, 1992)



In accordance with Section 4 of the State-owened Economic Enterprises Law, 1989, the Governmente of the Union of Myanmar grants permission to the Myanma Oil and Gas Enterprise of the Union of Myanmar and Total Myanmar Exploration and Production of France to conduct petroleum exploration and production in the undermentioned Moattama Offshore area of the Union of Myanmar in joint venture on production sharing basin.



Description of Area Moattama Offsore Block "M-5 and M-6" for Exploration and Production in the Union of Myanmar



|A| 15 24' 00" |93° 21' 00"|

|B| 14 40' 00" |93° 21' 00"|

|C| 15 24' 40" |94° 49' 00"|

|D| 14 40' 00" |94° 49' 00"|

|E| 15 24' 00" |96° 15' 00"|

|F| 14 40' 00" |96° 15' 00"|



By Order



[signature]

Khin Adaung Thein

Minister,

Government of the Union of Myanmar

Ministry of Energy



uyp 00002583



123[seal] superceded by replacement PERMIT [illegible handwriting] January 27, 1995 [seal]

The Union of Myanmar Foreign Investment Commission



PERMIT



Permit No. 055/92 Date 8th July 1992



The Union of Myanmar Foreign Investment Commission issues this Permit under Section 10 of the Union of Myanmar Foreign Investment Law-



(a) Name of Promotor.. DIRECTOR GENERAL ENERGY PLANNING DEPARTMENT

(b) Citizenship.....MYANMAR.......................................................................... (c) Address......... No 74/80 MINYE KYAW SWA ROAD,....................................

.................. YANGON, UNION OF MYANMAR.............................................. (d) Name and address of principal organization MYANMA OIL AND GAS

ENTERPRISE, NO. 74/80 MINYE KYAW SWA ROAD, YANGON

(e) Place of incorporation..... YANGON .........................................................

.......................................UNION OF MYANMAR.......................................

(f) Type of business in which investment is to be made APPRAISAL,

DEVELOPMENT AND PRODUCTION OF PETROLEUM..................................

(g) Place (s) at which investment is permitted .MOATTAMA OFFSHORE..........

BLOCK M-5 & M-6 OF UNION OF MYANMAR...........................................

(h) Amount of foreign capital......MINIMUM OF US $ 10 MILLION..................

(i) Period for bringing in foreign capital........1992 JULY to 1994.............

.............................................................................................................

(j) Total amount of capital (Kyat)......AS PROVIDED IN THE CONTRACT

....................................................................................................

(k) Permitted duration of investment.INITIAL 2 YEARS FOR APPRAISAL AND

20 YEARS OF COMMERCIAL PRODUCTION AS PROVIDED IN THE CONTRA

(l) Name of the economic organization to be formed in Myanmar..AS PROVIDED

IN THE CONTRACT; AT PRESENT, PRODUCT SHARING CONTRACT FOR APPRA.

DEVELOPMENT AND PRODUCTION OF PETROLEUM IN THE MOATTAMA AR.

BETWEEN MYANMA OIL AND GAS ENTERPRISE AND TOTAL MYANMAR

EXPLORATION AND PRODUCTION



[signature] UYP 00002584

Chairman

The Union of Myanmar Foreign Investment Commission



124

[seal] The Myanmar Investment Commission [seal]



PERMIT



Permit No. ...............055/92....... Date 27th JANUARY, 1995



The Myanmar Investment Commission issues this Permit under Section (1)

of the Union of Myanmar Foreign Investment Law -

(a) Name of Promoter....DIRECTOR GENERAL, ENERGY PLANNING DEPARTMENT

(b) Citizenship ................................................................................................

(c) Address ...........23 PYAY ROAD, YANGON....................................................

..................................................................................................................

(d) Name and address of principal organization...MINISTRY OF ENERGY,..........

.............................23 PYAY ROAD, YANGON...............................................

(e) Place of incorporation........YANGON...........................................................

.........................................MYANMAR.........................................................

(f) Type of business in which investment is to be made...................................

APPRAISAL, DEVELOPMENT AND PRODUCTION OF PETROLEUM...................

(g) Place (s) at which investment is permitted .................................................

MOATTAMA OFFSHORE BLOCKS M-5 & M-6...............................................

(h) Amount of foreign capital.....US $ 455 MILLION..........................................

(i) Period for bringing in foreign capital..........................................................

...........................4 YEARS ( 1995 - 1998 ).................................................

(j) Total amount of capital (Kyat) ...................................................................

..........................EQUIVALENT OF US $ 455 MILLION .................................

(k) Permitted duration of investment 30 YEARS...............................................

(l) Name of the economic organization to be formed in Myanmar .................

TOTAL MYANMAR EXPLORATION AND PRODUCTION SA............................







[signature]

Chairman

The Myanmar Investment Commission



UYP 00002585



125[Signature page in Burmese] CONFIDENTIAL

DOE v. UNOCAL

_____________

SUBJECT TO PROTECTIVE ORDER



















GOVERNMENT OF THE UNION OF MYANMAR

MYANMAR INVESTMENT COMMISSION

653-691 Merchant Street, Yangon



Our Ref: Ya Ka-1/087/9-12581 Tel: 72009. 77855

Dated 27 January 1995 Fax: 095-01-82101

Tlx: 21368 INVEST BM







Subject: Decision of the Myanmar Investment Commission

on the Proposal for "Appraisal, Development and

Production of Petroleum" under the name of

"Total Myanmar Exploration and Production SA"



Reference: Ministry of Energy letter No. 008/43-1/Hta,

dated 9-1-95



1. The Myanmar Investment Commission, at its meeting 1/95 held on 12-1-95 had reviewed the proposal for extension of investment period in "Appraisal Development and Production of Petroleum" under the name of "Total Myanmar Exploration and Production SA" under Production Sharing Contract dated 9-7-92 and the supplementary Letter dated 24-12-93 between Total Myanmar Exploration and Production SA and Myanmar Oil and Gas Enterprise. After careful review, it was deliberated that the proposed extended term be approved in principle for implementation and the proposal be submitted to the Cabinet meeting for final approval.



2. The Cabinet, at its meeting (3/95) held on 18-1-95 resolved to permit the extended term of the said project. Hence, the "Permit" is herewith re-issued in accordance with Chapter VI, Article 10 of the Union of Myanmar Foreign Investment Law and Chapter VI, Paragraph 13 of the Procedures relating to the said Law, Terms and conditions to the "Permit" are stated in the following paragraphs.



3. The permitted duration of the project shall be extended up to 30(Thirty) years of commercial operation. The amount of investment for the project shall be United States Dollars 455 million.



4. The exemptions, reliefs and other appropriate privileges granted for the project shall be the same as those prescribed in vide letter No. Na Ya-7/175/92(169) dated 8-7-92 issued by the Commission.



5. Total Myanmar Exploration and Production SA shall have to sign Supplementary Letter No. 2 with Myanmar Oil and Gas Enterprise for the operation. After signing such Supplementary Letter No. 2 (5) copies of such Letter shall be forwarded to the Commission.



6. Total Myanmar Exploration and Production SA, in consultation with the Department of Company Administration, Directorate of Investment and Company Administration shall file the increment of its capital, if necessary.



7. The official date of operation shall be reported to the Commission.



8. The Commission approves periodical appointments of foreign experts and technicians from abroad as per Proposal.





UYP 00002587



















127

[header in very tiny text - illegible] [* below is illegible letter or number]



_____________________________________________________________________________

[*] In order to evaluate foreign capital in terms of kyats and for the purpose of its registration in accordance with the provision under Article-24 of the Union of Myanmar Foreign Investment Law, it is compulsory to report as early as possible in the following manner -

(a) the amount of foreign currency brought into Myanmar, attached with

the necessary documents issued by the respective bank where the

account is opened.

(b) the detailed lists of the type and value of foreign capital defined under

Article-2(h) of the Law, other than foreign currency, to the Chairman,

Foreign Capital Evaluation Sub-Committee.

10. After all types of foreign capital (foreign currency and other types of

foreign capital) have been brought into Myanmar, a report shall have to be

submitted to the Commission as prescribed, vide letter No. Na-Ya 9/101/92 (416) dated 3-12-92 [Annexure(1)].

11. Total Myanmar Exploration and Production SA shall be responsible for the preservation of the environment at and around the area of the project site.

Hence it shall observe the directive issued by the Commission vide letter

No. Ya Ka-1/129,94(0440) dated 30-6-94 [Annexure (2)] to undertake all

proper treatment systems and other necessary environmental control systems.

12. Total Myanmar Exploration and Production SA shall follow the procedures

prescribed by the Commission, vide letter No. Ya Ka-1/408/94(0424) dated

29-6-94 [Annexure (3)] to expedite the clearance of imports of capital and inter-industry use goods brought in as capital investment and raw materials required during the initial 3-year operation period.

13. Total Myanmar Exploration and Production SA in consultation with

Myanmar Insurance, shall effect such types of insurance defined under Chapter

VII. Paragraph 15 of the Procedures relating to the Union of Myanmar Foreign

Investment Law.



By Order,



[signature Brig ; Gen:]



Brig.-Gen. D. O. Abel

Secretary

(Minister, Ministry of National Planning

and Economic Development)



Director General [_]

Energy Planning Department [_]

Ministry of Energy [_]



cc: 1. Office of the Chairman of State Law and Order Restoration Council.

2. Office of the State Law and Order Restoration Council.

3. Office of the Government of the Union of Myanmar.

4. Ministry of National Planning and Economic Development.

5. Ministry of Finance and Revenue.

6. Ministry of Trade.

UYP 00002588

___



__________________________________________________________________________

__________________________________________________________________________







128



["_" used above in brackets to indicate that previous text is underlined] CONFIDENTIAL

DOE v. UNOCAL

SUBJECT TO PROTECTIVE ORDER



7. Ministry of Energy.

8. Ministry of Foreign Affairs.

9. Ministry of Home Affairs.

10. Ministry of Labour.

11. Chairman, Committee for Assisting the Myanmar Investment Commission (Governor, Central Bank of Myanmar).

12. Chairman, Foreign Capital Evaluation Sub-Committee (Director General, Central Equipment Statistics and Inspection Department).

13. Director General, Customs Department.

14. Director General, Internal Revenue Department.

15. Managing Director, Myanmar Insurance.

16. Director General, Directorate of Trade.

17. Director General, Immigration and Manpower Department.

18. Director General, Directorate of Labour.

19. Chairman, Union of Myanmar Chamber of Commerce and Industry.

20. Director, Department of Company Administration, Directorate of Investment and Company Administration.



UYP 00002589



129 CONFIDENTIAL

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____________

SUBJECT TO PROTECTIVE ORDER











Confidential









Government of the Union of Myanmar



Myanmar Investment Commission



653/657 Merchant Street, Tangon







Our Ref: Ta Ka-7/100/94 (0470) Talar : 21368 INVEST BM



Dated : 7th July, 1994 Tal : 72890







Subject : Performance report of the Permitted



Enterprises on their Initial State of



Implementation.







The Myanmar Investment Commission upon



approval of the Cabinet, has issued Permit No. 055/92



dated 27-1-95 on your proposal.



Since the progress of the Initial Stage of



implementation is to be monitored and reported to the



Commission, it is hereby requested to report to the



Commission Office as per attached form.









(initials)



(Elaine Khino)



Joint Secretary



Myanmar Investment Commission





___________________________





___________________________









UYP 00002590







Confidential







130



CONFIDENTIAL

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SUBJECT TO PROTECTIVE ORDER



Report on the Performance of the Petroleum Enterprises

(Initial Stage)



1. Name of Enterprise ______________



2. Foreign Investment Permit No. and Date ______________



3. Date of Signing Contract (J.V Agreement;______________

BOT Agreement; Lessee Agreement;

Production Sharing Agreement etc.)



4. Date of Incorporation/Registration ______________



5. Date of Approval of other ______________

Government Agency 1)



6. Date of Export/Import Registration ______________



7. Amount of the Land Use Premium/

Deposit Fees/ Premium Payment

and Date of Payment ______________



8. Amount of Performance Guarantee

and the Date of Issue ______________



9. Amount of Capital Brought in

(Currency: Assets; Tangible and

Intangible) _______________



10. Date of Ground-breaking/

Construction/ Renovation etc. _______________



11. Progress in Construction;

Renovation, Exploration etc. _______________



12. Exported Date of Commencement

of Operation _______________



Note:



1) To specify

- License to operate on Hotel/Business and that of Tourism Business by the Directorate of Hotel and Tourism.



- License to carry out fishery, or as joint Venture by the Fisheries Dept.



- Registration at the Directorate of Regional Industrial Coordination and Industrial Inspection (Industrial Enterprises)



To Note - Should implementation is not affected according to the schedule as specified in the agreement, to state the

reason.





UYP 00002591



131







Union of Myanmar Foreign Investment Commission

653/691 Merchant Street, Yangon



Our Ref: Na Ya 9/101/92 (416)

Date : 3rd December, 1992.



Subject : Instructions for evaluation and registration of foreign equity capital

in terms of Kyat for permitted enterprises under Foreign Investment Law.

[both lines above are underlined]



1. Chapter 12, article 24 of the Union of Myanmar Foreign Investment Law

[underlined]

states that "The Commission shall evaluate the foreign capital in terms

of kyat in the manner prescribed, and register it in the name of investor. In so

registering, the type of foreign capital and the type of foreign currency evaluated shall be stated."

2. In addition, Procedure Relating to the Union of Myanmar Foreign Investment Law, Chapter 11, paragraph 24 prescribes that "In evaluating foreign capital in terms of kyat for the purpose of registration by the Commission, the following shall be carried out:

(a) to cause to be brought in foreign currency in any type of foreign

currency acceptable to the Myanma Foreign Trade Bank, and to

evaluate the same at the prevailing official rate of exchange;

(b) to cause the value of the types of foreign capital other than the

foreign currency to be stated in any type of foreign currency

acceptable to the Myanma Foreign Trade Bank and to scrutinize

whether the value of the respective foreign currency so stated is

appropriate or not, and to evaluate such values as scrutinized

at the prevailing official rate of exchange".

3. For the implementation of the above mentioned Law and Procedures, the

following methods are being carried out by the Commission:

(a) Foreign Currency. [underlined] The Myanma Foreign Trade Bank (MFTB)

or Myanma Investment and Commercial Bank (MICB) issues pay in

slip/credit



Translated Copy [underlined]





UYP 00002592 [diagonally stamped going up right margin]









132

- 2 -



advice form to the investors when they deposit their foreign capital

in foreign currency, cheque, bank draft or in any form of inward

remittance to their account. Copies of those bank slips/credit

advices have to be submitted to the Commission without fail,

the Commission shall evaluate and register the foreign capital in

terms of Kyat by using the rate of exchange, prevailing at the date

of issue of the pay in slips/credit advices.

(b) Machineries, equipment and raw materials, etc: [prior text is underlined]

Invoices, packing list for machineries, equipment, raw materials

and such brought in as foreign capital by enterprises are to be

submitted initially to the Foreign Capital Evaluating Committee.

After scrutinizing the appropriateness of the value of the

machineries, equipment and raw materials which is stated in terms

of any kind of foreign currency, the Foreign Capital Evaluating

Committee with its recommendation submits the evaluation, together

with the shipping invoice and packing list to the Commission for

its endorsement. The enterprise must submit the bill of entry or

import declaration at the Customs Department for clearance of

machineries, equipment and raw materials from the Wharf. After

clearance, the copies of bill of entry/import declaration must be

forwarded to the Commission without fail. The Commission will

register the capital in terms of Kyat based on the c.i.f, c & f or

f.o.b which is to be paid in foreign exchange at the prevailing

rate of exchange on the day of submission of the bill of entry/

import declaration and by referring to the contract. For

clearance of machineries, equipment and raw materials by special

order, the copies of the latest bill of entry/import declaration

received from the Customs Department have to be forwarded to the

Commission.



Translated Copy [underlined]





UYP 00002593







133

[header in very tiny text - illegible]



- 3 -



(c) Services and other expenses: [u] Hiring of experts and technicians

and payment to sub contractors are to be carried out in accordance

with the contract. For those service charges which are paid abroad,

the copies of payment voucher, means of payment and date of

payment are to be submitted to the Commission.

4. As the amount of foreign capital is to be evaluated in terms of kyat,

the equivalent amount of foreign currency stated in the proposal or contract

would not be stipulated. For special cases, it can be evaluated either in kyat

or in foreign exchange according to the contract.

5. After completing the contribution of the amount of foreign capital in

terms of kyat as stated in the original proposal either by pay [?]n slips and

or bill of entry/import declarations, the foreign investment enterprises are

required to submit the statement of foreign capital remitted to the Commission.



5d. x x x

Brigadier D. O. Abel

Secretary,

(Minister for Planning and Finance)



_____________________________

______________________________________



c.c (1) Chairman,

Foreign Capital Evaluation Committee.





Translated Copy [u]







UYP 00002594







134





[Note - underlined text followed by a "u" in brackets]CONFIDENTIAL

DOE V. UNOCAL

SUBJECT TO PROTECTIVE ORDER



-1-



(2) Director General

Customs Department.



(3) Director General

Directorate of Trade.



(4) Managing Director

Myanma Foreign Trade Bank.



(5) Managing Director

Myanma Investment and Commercial Bank.



(6) .................

.........................



UYP 00002595



135[header in very tiny text - illegible]



GOVERNMENT OF THE UNION OF MYANMAR

MYANMAR INVESTMENT COMMISSION

653-691, Merchant Street, Yangon



Our Ref: Ya Ka-1/139/94 ( 0440 )

Dated, 30th June 1994



SUBJECT : PROTECTION OF ENVIRONMENT [last 3 words underlined]



1. The Myanmar Investment Commission, at its meeting 0/94 held on 17th June 1994, has resolved that all projects established with the permission of the Commission shall be responsible for the preservation of the environment at and around the area of the project site. The enterprises are entirely responsible that they shall be able to control pollution of air, water and land, and other environmental degradation and that can keep the project site environmental friendly.

2. Consequently it is hereby notified that all projects already permitted by

the Commission under the Union of Myanmar Foreign Investment Law, 19[xx],

shall compulsorily install Sewage Treatment Plant, Industrial Waste Water Treatment Plant and other pollution . control procedures [xxxxx] and abide with the sanitary and hygenic rules and regulations set by the authorities concerned.

3. In the future proposals that are to be submitted to the Commission, either

under the Union of Myanmar Foreign Investment Law or the Myanmar Citizens Investment Law, shall incorporate the provision in their contracts that they shall undertake proper sewage and industrial waste water treatment systems and other environmental control systems. The systems so used shall be in accordance with the rules and regulations specified by the respective Development Committee, and local authorities.



[signature]

Brigadier General D.O. Abel

Secretary

(Minister for National Planning

and Economic Development)



UYP 00002596







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[please note 2 illegible areas in paragraph 2 - both represented by xx in brackets]CONFIDENTIAL

DOE V. UNOCAL

SUBJECT TO PROTECTIVE ORDER



-2-



All permitted enterprises



1. Chairman, State Law and Order Restoration Council

2. Office of the State Law and Order Restoration Council

3. Office of Government of the Union of Myanmar

4. All Ministries

5. Tangun City Development Committee

6. Mandelay City Development Committee

7. Union of Myanmar Chamber of Commerce & Industry

8. Union of Myanmar Economic Holdings Ltd.



UYP 00002597



137