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 Execution Copy





























PRODUCTION SHARING





CONTRACT

















Between








THE KURDISTAN REGIONAL GOVERNMENT OF IRAQ











and











Repsol YPF Oriente Medio S.A.




















(Piramagrun Block)


 Production Staring Contract Piramagrun











Table of Contents





Clause 1- Definitions; Construction 2


Definitions 2





Construction 16





Clause 2 - Scope 19





Exclusive Right J9


Compliance J9





Permits 20


Best Practices 20





Sole Risk 20


Auxiliary Rights 20





Liability Attribution 21





Clause 3- Contractor; Participating Interests


21


Contractor 21


Participating Interests 21





Clause 4 - Government Interest


21


General 21





Assignment 22





Clause 5 - Operator; Joint Operating Agreement 24





Operator 24


Joint Operating Agreement 25





Clause 6 - Term


26


General 26





Exploration Rental 26


Exploration Period 26





Sub Periods 27


Extensions of Sub-Periods 27





Expiration of Exploration Period 28


Guaranteed Amount 29





Development Period 29





Termination of Production Operations 29


Clause 7 - Relinquishment 30





Mandatory and Considered Relinquishment 30





Voluntary Relinquishment 31





General Qualifications 31


Cleanup 31





Effect of Relinquishment 32

















i!


 Production Staring Contract Piramagrun








Clause 8 - Management Committee 32


Establishment 32


functions 33


Regular Meetings; Venue 33


Extraordinary Meetings 33


Action by Members without Meeting 33


Agenda; Minutes 33


Chairman 34


Quorum 34


Voting 34


Subcommittees 35


Clause 9 - Guarantees 35


First Sub Period Obligations 3S


Second Sub-Period 3S


Gas Plan Guarantees 36


Accession 36


Clause 10 - Minimum Exploration Work Obligations 36


Commencement 36


Minimum Work Obligations 36


First Sub-Period 36


Second Sub-Period 37


Qualifications 37


Clause 11 - Exploration Work Programs 39


General 39


Details 39


Approval by Management Committee 39





Clause 12 - Discovery; Appraisal; Development 40


Discovery Report; Relinquishment 40


Appraisal Work Program and Budget 40


Appraisal Report and Declarations 41


Development Plan - Crude Oil 42


Clause 13 - Development Work Program 43


General 43


Development Work Program and Budget 43


Production Work Program and Budget 44


Production Rental 44


Clause 14 - Natural Gas 45


Definitions 45


General 46


 Production Staring Contract Piramogrun








Flaring 47


Gas field Holding Period Application 47


Gas field Holding Period 48


Gas field Holding Period Rental 49


Early Termination and Relinquishment 49


Governm ent Priority Rights SO


Domestic Gas Morketing Operations SI


Consideration of Gas Disposition Plans - Export and Domestic S2


Gas Export Plan S3


Domestic Gas Plan S3


Development Plan S4


Gas Development Period S4


Surplus Associated Gas S4


Gas Pipelines 55


Clause 15 - Accounts; Operations 55





Accounts 55


Audit 56


Clause 16-Other Contractor Rights and Obligations 57


Permanent Representative S7


Conduct of Petroleum Operations S7


Information and Reports S7


Requirement for Petroleum Operations S7


Supervision S7


Access to facilities S8


Use of facilities S8


Loss or Damage S8


Intellectual Property Rights S8


Litigation S8


Production Rates 59


Lifting 59


Regional Consumption Requirements 59


Clause 17 - Use of Land and Existing Infrastructure 60


General 60


Third Party Lands 60


Infrastructure 61


Petroleum Operations 61


Adjoining Properties 62


Access 62


Clause 18-Government Assistance 62











IV


 Production Staring Contract Piramogrun








Clause 19 - Assets and Materials 63


Genera) 63


Procurement Procedures 63


Clause 20 - Title to Assets 63





Title Transfer 63


Leased Assets; Subcontractor Assets 64


Clause 21 - Use of Assets 64


Right 64


No Transfer by Government 64


Contractor Redeployments 64


Clause 22 - Subcontractors; Expatriates 64


Genera) 64


Loco) Preference 64


Procurement Procedures 65


Clause 23 - Personnel; Training; Assistance 65


Expatriate Work Permits 65


Loco) Preference 65


Ministry Capacity BuiJding Payments and in Kind Assistance 66


Training 66


Training Expense Allocation and Payment 66


Environment fund Payments 67


Clause 24 - Royalty 67


Definitions 67


Obligation 67


Royalty Rate 68


Delivery 68


Payment in Cosh 68


Clause 25 - Recovery of Petroleum Costs 69


Definitions 69


Cost Recovery 69


Valuation of Available Petroleum 69


Contractor Entitlement to Cost Oi) 69


Contractor Entitlement to Cost Gas 70


Recovery Waterfall; Limitations 70


Delivery 70


Ring Fence 71


Clause 26 - Profit Petroleum 71


Definitions 71








v


 Production Staring Contract Piramogrun








Calculation of R factor 71


entitlements 72


Delivery Entitlements 73


Production Estimates 74


Annual Production Report 74


Cost Recovery for Government Costs 74


Clause 27 - Valuation and Metering 74


Valuation of Crude Oil 74


Valuation of Natural Gas 75


Production Statement 75


Measurement 7S


Clause 28 - Sales Assistance 76


Clause 29 - Currency; Financial Provisions 77





Reference Currency 77


Currency Conversion 77


Payments; No Offset against Government 77


Payments to fund for Revenue Sharing 78


Currency Assurances 78


Clause 30 - Customs 79





Clause 31 - Taxes 80


General 80


Income Tax 80


Exemptions 81


Withholding for Iraq Nationals 81


Double Tax Treaties 81


VAT Cost Recovery 81


Independent Obligations 81





Clause 32 - Bonuses; Capacity Building Payments 81


Capacity Building Bonus 81


Pro

Capacity Building Payments 82


Capacity Building Account 85


No Cost Recovery 86





Clause 33 - Pipelines 86


Crude Oil Pipelines 86


Gas Pipelines 88


Clause 34 - Unitisation 88








vl


 Production Staring Contract Piramagrun








Clause 35 - Indemnification; Insurance 88





Liabitily 88


indemnification 88





Notice of injuries and Emergencies 89


Consequentiai Damages Limitation 90





insurance 90





Clause 36 - Records; Confidentiality 91


information 91





Confidential information 91





No Trading 92


Clause 37 - Environmental; Worker Safety and Health 93





GeneraI 93





EIR 94


EiA 94





EMMP 95


Self Monitoring Reports 95





Relinquished Areas 95


National Parks and Nature Reserve Areas 95





Expenditures 96


Pre-existing Conditions 96





Suspension of Operations 96





Clause 38 - Decommissioning 97


Acknowledgement of future Law 97





Decommissioning Plan and Budget 97





Decommissioning Reserve Fund 97


Clause 39 - Assignment; Change of Control 99





General 99





Assignment to Affiliates and other Contractor Entities 99


Assignments to Third Parties 99





Government 100


Change of Control 100





Taxes 100





Clause 40 - Force Majeure


101


Definition 101


f//«t 101





Clause 41 - Sovereign Immunity 103





Clause 42 - Dispute Resolution 103





Cxclmlon 103














vii


 Production Staring Contract Piramagrun








Notice of Dispute 104


Negotiation 104


Mediation 104


Arbitration 104


Expert Determination 105





Clause 43 - Fiscal Stability 106


Genera) 106


Acknowledgment of Future Laws 106


Change of Tax Law 106


Disputes 107


Clause 44 - Communications; Notices 107


Clause 45 - Termination 108





Genera) 10B


Contractor Termination Rights 109


Automatic Termination 109


Corrupt Practices ioivs 109


Other Grounds for Termination 109


Consequences of Termination 111





Clause 46 - General Provisions 112


Counterparts 112


Amendments; Waivers 112


Regionai OH and Gas Councii Approval 113


Costs 113


Effective Date 113


Governing Law 113


Entire Agreement 113











ANNEXES:


Annex A


Map of Contract Area


Annex B Accounting Procedure


Annex C Form of Guarantee


 PRODUCTION SHARING CONTRACT











Thu Production Sharing Contract (this "Contract' ) H between:




<21 REPSOl YPF ORUNTC Ml DIO S.A., a tooedod andnima Incorporated and cluing


under the laws ol the Kingdom of Spain, whose registered Office is at Paseo de la


Catttllana 278/280 Madrid 28046 (the ''Contractor' and a 'Contractor Entity"!








Recitals


A. The Government has determined that this Contract will facilitate the development of


the petroleum wealth of the Kurdistan Region In a way that achieves the highest benefit


to the people of the Kurdistan Region and all of Iraq, will promote the economic


development of the Kurdistan Region and Iraq and the social welfare of its people, uses


the most advanced techniques, and accesses best market principles to encourage


Investment.


B. The Government enters into this Contract pursuant to the Government's rights and


authorities under the Constitution of Iraq and the Kurdistan Oil and Gas law 2002. In


accordance with the Constitution of Iraq, the prevahng Laws of the Kurdistan Region


comprise the Kurdistan Region law and, with regard to a matter wholly within the


exclusive jurisdiction of the Government of IreQ. the federal laws of Iraq.


C. The Contractor and the Government each aliens its ongoing commitment and


adherence to the Prmoplei and Crdena of the Extractive Industries Transparency


Initiative |£ITI|.


0. The Contractor has assured the Government that the Contractor has. together with its


Affiliates:


(1) the financial capability, and the technical knowledge and technical ab*ty. to


carry out Petroleum Operations in the Contract Area under the terms of this


Contract; and


(2) a record of compliance w-th the principles of good corporate ertuensfep.


1. This Contract is a production sharing contract. The object of this Contract is for the


Contractor to undertake Petroleum Operations in the Contract Area at the Contractor's


sole risk and expense


f. Neither the Contractor, nor any Contractor Entity writ receive any compensation lor its


servwes. nor any reimbursement ol its expenditures under this Contract, except for the


share ol Petroleum from the Contract Area to which it may become entitled undei this


 Pro4*um 5f •---« C>OKOCf ^9>94<,ll








Connki If there is no Commercial Discover* in the Contract Area. Of if the production


achieved from any Production Area is insufficient to reimburse the Contractor or any


Contractor Entity, each Contractor Entity anil bear its own losses without any obligation


of the Government to provide any reimbursement or other compensation.


G. It is the policy of the Government to: (1) ensure that Natural Gas is first made available


to satisfy the consumption requirements and needs of the people of Iraq. (2) determine


and control al eaports of Natural Gas produced in the Region, and (3) act. directly or


indirectly through a designated Affiliate of the Government or other designee of the


Government, as the aggregator of all Natural Gas produced in the Region for e*port.


H. Nothing In this Contract Is intended to confer any right upon the Contractor other than


those rights e.pressly granted In this Contract. This Contract does not transfer


ownership of any Petrolrum m the ground to the Contractor or any Contractor Entity.


I. The Contractor and Repsol VPF. S A. have provided the Government with a letter of


representations and warranties dated concurrently herewith |the 'Repsol letter of


Representations') as an Inducement for the Government to enter into this Contract,


and upon which the Government is relying In entering into this Contract.


J. Concurrently with the signing of this Contract, Repsol VPF. S.A. has delivered a


guarantee in favour of the Government as required by this Contract.





K. Prior to this Contract. Repsol Eaptoracion S.A delivered a Confidentiality and Pre-


Contractual Understandings Agreement, which continues In accordance with its terms


and is not impaired by this Contract, eacept as eapressly set forth herein.











Clause 1 - Definitions: Construction


Pwmi


I 1 Unless otherwise specified:


Abroad means outside of the Kurdistan Region and other parts of Iraq





Accounts is defined In clause 1S.1


Accounting Procedure means the Accounting Procedure attached to this Contract as


Anne* B and constituting an integral part of this Contract-


Act of Insolvency means, in respect of any Person, its insolvency, winding up.


dissolution. admmistr at«n or bquidatmn. me making by it of any arrangement or


composition with its tied tors or the Ukmgof possession by an Encumbrance ol, or the


appointment ol a receiver or administrative receiver over, the whole or any substantial


part of tls property or assets or its ceasing or threatening to cease to carry on business


and any equivalent or analogous procedures by whatsoever name known and in


whatsoever Jurisdiction. The "winding up' of a Person also includes the amalgamation,


reconstruction, reorganisation |by way ol voluntary arrangement, scheme of


arrangement or otherwise), administration, dissolution, liquidation, merger or


consolidation of that Person and any equivalent or analogous procedure under the law














2


 Production Sha/U\g Contract Piramoflfu/i








of any jurisdiction in which that Person <\ incorporated. domiciled, or resident or cattle*


on business or has assets.


Adjacent Contract Area is defined In clause 34.1.


Adjustment Date is defined In clause 27.7.1.


Affiliate means, in lelatlon to any Prison |the 'first Person'!, another Person that is:


|a( the ultimate holding company of such first Person and any subsiduiiy (other


than the first Person) of the first Person’s ultimate holding company; or


(b) >f the first Person is not a subsidiary of another company, any subsidiary of the


first Person


for the purpose of tfws definition, 'holding company* and 'subsidiary' hare the


meanings given to those eipressions in Section 11S9 of the Companies Act 2006


ICngUnd)


Annual Reconciliation Statement is defined m clause 32.9.


Agreed Rato means interest compounded on a monthly basis, at the rate per annum


equal to the three month term. London Interbank Offered Rate (UBOR rate) for U.S.


dollar deposits, as published the Financial Times llondon Edition) or if not published,


then by The WaR Street Journal (New Vork Edition), plus 4.00V applicable on the first


International Business Day prior to the due date of payment and thereafter on the first


Business Day of each succeeding calendar month. If the aforesaid rate is contrary to any


applicable usury taw. the rate of interest to be charged shal be the maximum rate


permitted by such applicable law.


Applicable law means, as ol any lime of determination, Kurdistan Region law and


federal laws ol Iraq recognised by the Government as applicable in the Kurdistan


Region.


Appraisal and Appraisal Operations means appmuol work Ibelng part ol £»ploration|


and a program carried out following a Discovery for the purpose of delineating the


Reservoir to which that Discovery relates in terms ol measurement of thickness and


lateral extent and estimating the quantity ol recoverable Petroleum therein, and


Includes geological, geophysical, aerial and other surveys, stratigraphic tests, the drilling


ol shot holes, core holes. Appraisal Wells and other related holes and wells, and the


purchase or acquisition of Assets and Materials therefor


Appraisal Area means the area defined in clause 12 4.


Appraisal Report means. In respect ol a Appraisal Operations In respect ol a Discovery, a


report in such form as required by the Government and thot Includes:


(a) geological conditions, such as structural configuration, physical properties, and


stratigraphy;


(b) the thickness and extent of Reservoir rocks.


(e) petrophysical properties of the Reservoirs.


(d) type of substances obtained;


(c) Volume* of Crude O-l end Natural Gas rautuBy «* place;











I


 Coe: reef








(0 the chemical composition, the physical properties and Quality of any Ctude Oil


discovered;


(g| pressure, volume and temperature analysis ol the reservoir fluid;


(h) the productivity indices for wells tested at various rates of flow;


(i) Crude Oil characteristics, including oil gravity, sulphur percentage, sediment


and water content and product yield pattern;


(j) Natural Gas composition;


fk| estimates of recoverable reserves;


(l) the estimated production capacity of the Reservoirs;


(m) production forecast per well;


(n) a preliminary estimate of recoverable reserves; and


(o) such other information as reasonably required by the Government or generally


provided in such reports in accordance with Best Practices.


Appraisal Work Program is defined in clause 12.4.


Approved means approved by the Management Committee and the Government


Approved Budget means a Budget that has been approved by the Management


Committee and the Government together with an Approved Work Program


Approved Domestic Gas Marketing Work Program and Budget is defined in clause 14.1.


Approved Gas field Appraisal Work Plan and Budget is defined In clause 14.1


Approved Work Program means a Work Program that has been approved by the


Management Committee and the Government


Approved Work Program and Budget means an Approved Work Program together with


a Budget with respect thereto that hat been approved by the Management Committee


and the Government.


Arm's-length $ale|>) means, m respect of sales of Petroleum, a sale in freely convertible


currencies between sellers and buyers having no direct or indirect relationship or


common interest whatsoever with each other that could reasonably influence the sales


pnee. The following are not Arm's length Sales


(a) sales between or among any of the Contractor Entities and their respective


Affiliates:


(b) sales mvofvmg the Government or the Government of Iraq;


(c) sales involving swaps or cuhanget: and


(d) transactions which are not a routine sales practice in the international od and


gas industry.


Assets means equipment and other property, whether real or personal, owned or


leased, used or eapected to be used by the Contractor in connection with Petroleum


Operations.





Assets and Materials a defined in clause 19 1


 Mroduction sharing Comma Puamogiun








Assign one Alignment »mib any transfer. conveyance. novation. merger | Inc lu«fclg


'rmr>f triangle" mergers!. Encumbrance 01 other dealing in any manner whatsoever or


howsoever accompbshed or characterised (whether legaly. beneficiaBy. or otherwise,


into any form of trust or fiduciary holding, and whether conditionally or not) Assignee


means a Person accepting an Assignment from n Party, and Assignor means the Party


mating an Assignment to another Person.


Associated Gas means Natural Gas found in association with Crude Oil, either dlisolycd


in the Crude Oil or at Gas-cap Gas. that is recovered as Natural Gas at the surface by


separation or other primary field processes.


Audit Request Period .s defined in clause 15 J(a)


Available Crude Oil is defined in clause 2S.1.


Available Gas is delmed in clause 25.2.


Available Petroleum -s defined in clause 25.3.


Barrel means a quantity of 42 US gallons as a unit to measure liquids, at a temperature


of 60‘ f ahrenhelt and pressure of 14.7 psi.


Base Exploration term is defined in clause 6.3.


Best Practices means standards that are no less stringent than the best practices,


methods, and procedures in carrying out petroleum operations consistent with a


reasonable degree of prudence, as evidenced by the best practices of experienced


operators In the exploration, development, and production of petroleum principally


aimed at ensuring;


(a) conservation of Petroleum resources, which implies the ut Aset on of methods


and processes to manmise the recovery of Petroleum in a techmeaBy and


economically sustamabie manner, control of reserve decime. and minimisation


of losses at the surface.


(b) operational safety, including the use of methods and processes that promote


occupational security and the prevention of accidents.


(c) environmental protectmn and worker safety, including best methods and


processes which minimise the ■npect of Petroleum Operations on the


environment.


(d) that aB materials, resources, and supplies are available to meet the


Contractor*s obligations hereunder under normal conditions and anticipated


abnormal conditions:


(e) that sufficient engineermg. design, construction and safety personnel are


avadable. are adequately experienced and trained to conduct Petroleum


Operations, and provide requeed framing property and within Applicable Law.


manufacturer's guidelines and specifications, and are capable of responding to


abnormal conditions and anticipated abnormal conditions:


(0 that appropriate rronitor-ng and testing is done to ensure that Assets are


capable of functioning, and will continue to function, as designed and to


provide assurance that Assets will function properly under normal conditions


and anticipated abnormal conditions;


 Product** >*•/••« Ceermcr P*omav**








l(| that appropriate protector device! and deign features arc provided to ensue*


that safe. rehab*. long term Petroleum Operations can be achieved:


(h) that eauipment is operated at all times ,r a manner compliant with Appbcab*


law. applicable Permits, and tho Contract, m accordance with all


manufacturers' warranties, and in a manner safe to worker!, the general public,


the environment, plant and Aisets;


(I) notwithstanding the requeements of the ASM! toiler & Preisure Vessel Code


Section VM. that at pressurised equipment handling hydrocarbons (whether


such Asset is new or used I is subject to hydraubc pressure testing prior to use.


and


(l) that tub and complete records of accounts are kept and maintained.


Budget means an estimate of mcome and eapenditure approved, or as the contest may


require, to be approved by the Management Committee in accordance with this


Contract in respect of at Petroleum Operations included in a Work Program.


Calendar Year means a period of |2 consecutrve Months, beginning 1 January and


ending on II December of the same year.


Capacity Building Account means a segregated bank account with a reputable bank m


the name of. and maintained by. the Government for the purposes set forth in Clause


12.16.


Capacity Building Bonus defined in clause 12.1-


Capacity Buddrng Payment means the ob (at>on of each Contractor Entity to pay an


amount equal to the Capacity Building Value.


Capacity Building Payment Monthly Statement s defined In clause 12.7.


Capacity Building Value means during any period for each Contractor Entity:


la) zero USS until the R fat tor is first equal to one; and


(b) after the first time that the R factor equals or exceeds one |R t 1). and


notwithstanding If the actual R factor determined with respect to a period


occurring after the first time the R Factor equals or exceeds one may be less


than 1:


(1) an amount In USS equal to the value, determined In accordance with


clause 27. of JS*« of the Profit Petroleum attributed to such Contractor


Entity.


Chairman is defined In clause H D


Change of Control is defused m clause 19.10.


Change of Tax law Is defined In clause '13.4.


Commercial Discovery means a Discovery, after taking Into account available technical,


operational, commercial, and financial data, including recoverable reserves of


Petroleum, sustainable regular production levels and other material technical,


operational, commercial and financial parameters, which is expected to result in both


full recovery of Petroleum Costs and a reasonable return on Investment.


 Prodorhon Sha/lHQ Contrail Pitamogrun








Commercial Production means Production of Petroleum under an Approved Production


Work Program and Budget ot regular production and vale or other disposition.


Constitution of Iraq means the permanent constitution o( Iraq approved by the people


ot Iraq in the general referendum ot IS October 2005.


Contract means this production sharing contract.


Contract Area means, as ot the Effective Date, the area shown on the map in Anne» A.


as such area may be relinquished or otherwise redured in accordance with this Contract,


Contract Year meant a period ot 12 consecutive Months starting from the Effective Date


or any anniversary of the said Effective Date. In the case of the final Contract Year of this


Contract, the Contract Year will end on the termination date.


Contractor means all the Contractor Entities, together.


Contractor Entity means, as at any time of determination. Repsol and Us respective


Permitted Assignees and successors. The Government t not a Contractor Entity. A Public


Company or other Person that is a Government Interest Holder is not a Contractor Entity


solely by virtue of being a Government Interest Holder.


Control is defined in clause 39.10(b|.


Corrupt Practices laws means, as applicable:


|a) the laws of the Kurdistan Region and of Iraq in respect of bribery, kickbacki,


and corrupt business practices;


(b) the principles of the laws of the Kingdom of Spain in respect of bribery,


kickbacks, and corrupt business practices.


(e) the principles of the Foreign Corrupt Practices Act of 1977 of the United States


of Amer«a (Pub L ho 95 211 tt 101 104 el »*«). as amended;


(d| the principles of the OECO Convention on Combating Bribery of Fore*n Public


Officials in International Business Transactions, signed in Paris on 17 December


1991. wtwch entered into force on 15 February 1999. and the Convention's


Commentaries, and


(e) the principles of the UK gnbery Act 2010.


Cost Gas is defined m clause 25 9.


Cost Oil it defined m cUuse 25 J


Cost Petroleum is defined m clause 25 11


Cost Recoverable means recoverable by I he Contractor as Petroleum Costs ir


accordance with the provisions of this Contract (including the Accounting Procedure!.


Crude Oil means al quid hydrocarbons (me ludmg crude mineral od. condensate,


asphalt, oiokerite. and bitumens) in both sokd and liquid form in its natural state or


obtained Irons Natural Gat by condensation or eatraction


Cumulative Costs n defined m clause 26 1.


Cumulative Revenues Is defined in clause 26 1.


Data means records, information, or data of any sort, whether raw, derived, processed,


interpreted or analysed, obtained or produced pursuant to this Contract, Including


 Production Shoring Cofit'act piromoon/n








geological. geophysical, petrophysical, engineering, drilling, production, well location,


well log, core sample and completion status records, Information and data.


Date of Commencement ol Commercial Production meant the date at o» which the


Management Committee determines that Commercial Production it fait achieved in the


Contract Area.


Decommissioning Com meant all the com and expenditures incurred by the


Contractor when carrying out Oecommisiioong Operations, including those defined io


the Accounting Procedure.


Decommissioning Operations mean closing down, decommissioning, abandoning, or


•holly or partly removing Assets and Materials in or from the Contract Area, keeping


Assets and Materials in the Contract Area in a safe condition following cessation of


production pending abandonment, and restoration of land in the Contract Area.


Decommissioning Plan and Work Program is defined in clause 18 3.


Decommissioning Reserve Fund Is defined in clause 38.6 and includes all contributions


paid Into such fund and all interest accumulated in such fund.


Delivery Point means the point after extraction either as specified In an Approved


Development Plan for a Production Area, or at such other point (including a point of sale


in respect ol Natural Gas| which may be agreed by the Parties, at which Petroleum


produced and saved is metered for the purposes of clause 37.5, valued for the purposes


of clause 27.1, and, In the case of Crude Oil, available to be lifted by a Party


Development Costs meant all the costs and expenditures incurred by the Contractor


when tarrying out Development Operations in accordance with an Approved


Development Work Program and Budget (subfect to clause 3 61


Development and Development Operations means, m respect of a Production Area, all


operations or works conducted in accordance w*h an Approved Development Plan and


Budget up to the Debvery Point with a to developmg a Production Area


Development Period d the period during the term of this Contract (a) that is not the


I ipiot jt*>n Period or a Gas Field Holding Period and (b| durmg wh«h the Contractor it


entitled to conduct Development Operations


Development Plan means a plan prepared by the Contractor m accordance with Best


Practices, and which includes detaib of:


(a) the delimitation of Use Production Area, taking into account the results ol the


Appraisal Report regarding the importance of the Petroleum Field within the


Appraisal Area;


|b) drilling and completion of Development WeBs.


(c) drilling and completion of Injection Wells:


Id) the sequencing and timing of the development of Reservoirs.


(e) the eipected First Production of Petroleum;


(f) laying ©f pipelines;




and infection facilities for the production;


 sae/mg CdMtoct Pifomojuux








(It) treatment and transportation of Petroleum lo processing and storage facilities;


(i) the < onstruillon of transportation pipeline* iniide of outside the Contrail


Area;


(]) construction of storage faculties for Petroleum;




||) training commitment m accordance with clause 23;


(m) preliminary decommissioning and site restoration plans;


(n| a detailed forecast of annual capital e.penditures. operating expenditures. and


abandonment eapenditures.


(o) each Contractor Intlly's source of capital; and


(p) any other operations and expenditures not expressly provided for in this


definition, but the Contractor expects will be reasonably necessary for


Development Operations, Production Operations, and delivery ol Petroleum


and disposition of Natural Gas produced from the Contract Area,


Development Work Program and Budget means the Work Program and Oudgel


prepared by the Contractor pursuant to clause 13.2.


Discovery means the f.ndlng of a previously unknown accumulation!*! of Petroleum m


one or more Reservoirs within the Contract Area and which have, for the first t.me, been


demonstrated through dulling to contain Petroleum that can be recovered at the


surface m a How measurable by conventional petroleum industry testing methods and


may be considered *or Appraisal.








or type, arising out of or relatrg


ten all or an* of the Part.es





Domestic Gas Marketing Operations a defined in clause 14 1


Domestic Gas Plats is defined m clause 14.!.


Domestic Market >s def red in clause 14.1.


effective Date >s defused in clause 46.8.


CHS Monitors mean accredited professionals, including certified safety professionals


certified usdustrial hygienists. registered occupational hygienists or their equivalents


IMS Standards n defined m clause 37.2.


CIA as defined m clause 17 7.


Cl« is defined m clause 17*


IMMP s defined m clause 37 J.














•nterevl. or any Mu secure, preferential right, esuity or restr«t«n. any agreement to


give or to create any of tfse foeegomg and any transaction which. * legal terms, is not a


 Cornea '-•"•sa'-'i














(•.ifcnrtri !<•« n tfefmed in cbi.se 21 II.


IlfltHM "h«i any employee r>ot aort>#»* resident m Hie lurtobi Regon or Iraq


• ho is employed by either Contractor Entities or Subcontractors for purposes o»this


Contract and Mho is engaged on terms which provide for the payment of passages to


and from the Kurdistan Region or Iraq.


Expert means, with respect to a Dispute, an independent person with appropriate


qualifications and experience who:


la) has been agreed upon between the Parties to the Dispute; or


(b) has been nominated by President of the Energy Institute in London. England, on


the application of any Party to the Dispute failing agreement within 14 days of


either:


(1) approval by the Management Committee of the Terms of Reference,


or


(1) the date the Parties receive notice that the Expert is unable or


unwilling to complete the reference to Expert determination





Exploration means such geological, geophysical, aerial and other surveys as may be


contained in an Approved Work Program and Budget with a view to discovering


Petroleum in the Contract Area previously not known to have existed using geological,


geophysical and other methods and the dn Wng of Exploration WeKsl. and -chides (a)








Exploration Celts means Petroleum Costs incurred by the Contractor Ent t.es when


carrying out (.p oral on Operations in accordance with an Approved Exploration Work


Program and Budget (lubiecf to ebuse 2.6).


Exploration Operations means any and aB operations conducted m respect ol





Exploration, including Appraisal Operations.





Exploration Period .s defined in clause 6.3.





Exploration Rental is defined in ebuse 6.2


Exploration Work Program and Budget means an exploration work program and budget


prepared pursuant to ebuse 11.1 or 11











Capon Plan Evaluation Period * defined m clause 14 27





Extended Exploration Term

first Exploration WeM n defused in ebuse SO 3(d).














10


 Production Sharing Contrail Piramogtw





First Production mean* the moment when Commercial Production of Crude Oil or Non-


Associated Gas fas the case may be) first commences, by (lowing at the rate forecast in


the Development Plan without interruption for a minimum of 48 hours.


First Sub-Period is defined in clause 6.4(a).


force Majeure is defined in clause 40.1.


force Majeure Estimate is defined in clause 40.11.


Gas means Natural Gas. both Associated Gas and Non-Assoc iated Gas. and all of its


constituent elements produced from any Well in the Contract Area Gas may be


produced from Natural Gas Weis or in association with Crude 04 Irom Crude 04 Wells.


Gas-cap Gas means free gas that overlies and is in contact with significant quantities of


Crude 04 in a Reservoir.


Gas laport Plan is defined in clause 14.1.


Gas field means an area in the Contract Area consisting ol a single reservoir or muklple


reservoirs all grouped on. or related to. the same mdrvMual geological structural feature.


strat«raph< conditions, or both, which either:


(j| n a Oocovery of Non-Associated Gas: or


(b) Is 4 Discovery of Crude 04 with Associated Gas that cannot be a Commerce


Discovery without n plan for the economic disposition (excluding flaring or re


injection) of the Associated Gas, and notwithstanding that ixjuds and


condensates are Included In the detention of Crude 04 |i e . a condensate


Reservoir

Gas field Holding Period .s defined in clause 14.10.


Gas field Molding Period Application n defused in clause 14 $


Gas field Molding Period Rental -s defined m clause 14.1)


Gas Marketing Costs means costs and expenditure incurred by the Contractor m


accordance w*h a Domestic Gas Marketing Work Program and Budget.


Gas Marketing Operations is defined m clause 14.1.


Government is defined in the preamble


Government Business Day means a day between the hours of 9 00am ard 1 00pm


when the offices of the Government are legally required to be open to conduct the


business of the Government.


Government Interest is defined in clause 4.1


Government Interest Holder is defined m clause 4.2














11


 Cotiract








I of Iraq "fj"i the Federal Government of the Republic of Iraq, which hold!


office under the Convolution of Iraq and any minister, ministry, department, sub¬


division. agency, authority, council, committee, or other constituent element thereof





a Guar. in the form and content as set forth in Ar.nei C.





Guarantecd Amount means either the First Sub-Period Guaranteed Amount or the


Second Sob Per«d Guaranteed Amount, as applicable.


Holding Period larly Termination Notice is defined in clause 14.28


Income Tax and Incomes Taxes mean, in respect of any Person. Tales imposed by


Kurdistan Region laws on the income of such Person.


International Banking Day means, in respect of a Party making a payment and a Party is


to receive a payment, a day on which banks are open to conduct business by electronic


transfer of funds in both the place from where the funds are to be sent and the place


where the funds are to be received.





International Market Price is defined in clause 27.2.


Iraq means the entirety of the Repubbc of Iraq, including the Kurdistan Region.


loin! Operating Agreement means an agreement between the Contractor Entities for


the purpose of regulating the relationship between the Contractor Entities in respect of


this Contract.


Kurdistan Region means the Federal Region of Kurdistan recognised by the Constitution


of Iraq and having the same meaning as 'Region' in the Kurdistan Region Oi’ and Gas


Law.


Kurdistan Region law means laws ol the Kurdistan Region and the laws of any


governmental authority of any district, sub district, municipality, territorial, or other


political subdivision of the Kurdistan Region.


Kurdistan Region Oil and Gas law means the Oil and Gas law of the Kurdistan Region


Iraq (law No. 22 of 20071.


laws means any statutes, rules, codes, regulations, decisions, proclamations, notices,


directives, constitutions, instruments, rules of court, guidance, or any other instrument


of any governmental, intergovernmental, or supranational body, agency, department or


of any regulatory, self-regulatory or other authority or organisation having the force and


effect Of a law.


ICIA <1 defined in clause 42.4.


loss or Expense means any liability, loss, claim, settlement payment, cost and expense,


interest, award, judgment, damages (Including consequential, Indirect, and punitive


damages), fees or other charge and, to the extent permitted by applicable law, any court


filing fee, court cost, arbitration fee or cost, witness fee, and each other fee and cost


(including attorneys' fees, other professionals' fees, and disbursements! of investigating


and defending or asserting a claim (including a claim for indemnification!


Management Committee is defined in clause 8.











12


 Production Sharing Contract PiramOQiun








MIR ('Minimum Efficient Rate'l meant In respect ol a Reservoir. the maximum rale ol


production of Crude Oil, without excessive decline ol production or excessive loss ol


Reservoir pressure. in accordance with good oil-field practice and the provisions ol


dauio 16.16.


Minimum Exploration Obligations -t delmed in clause 10.2.


Minimum Financial Commitment meant:


(a) In reaped ol the First Sub Period, the amounta set out in clause 10.3; and


(b) In reaped ol the Second Sub Period, the amounts set out in clause 10.4.


Month means a calendar month according to the Gregorian calendar.


Natural Gat means a mixture ol hydrocarbons and varying quantities ol non-


hydroc.rbons that exist either In the gaseous phase or in solution with Crude Oil in


natural underground Reservoirs remaining alter the extraction ol liquid hydrocarbons


(Including condensates) Irom wet gat.


Natural Gat BOC means 6.000 standard cubic leet ol Natural Gas to one Barrel of Crude


Oil.


Non-Aisoclated Gat means Natural Gat that It lound in a Reservoir either (a) without


association with Crude Oil, or (b) In association w.th quantities ol Crude Oil that, without


a plan of dupoiltlon of the Natural Gat other than by daring or reinjection, by itself


cannot be commercially produced


Notice ol Dispute is defined Irs clause 42 2.


Notice of Carly Termination of Gas field Holding Period it defined m clause 14 14


Oil Field means an area within the Contract Area consisting of a single Reservo* or


multiple Reservoirs alt grouped on. or related to. the same individual geoOgKel


structural features, stratigraphic conditions, or both, and that (a) may become part of a


single Production Area for Crude Oil and (b) is not a Gas Field





the entity designated by the Contractor pursuant to clause S as the


'Operator'.


Original Contractor Entity is defined in clause 41.4


Parties mean the Government and each Contractor I ntity. and Party any of the


Contractor Entities or the Government. The Government or a Public Company m its


capacity as holder of al or part of the Government Interest is Party only m respect of


such Government Interest.


Permit means a licence, permit, consent, authorisation, or other permission of the


Government or any relevant public authority m the Kurdistan Region m respect of


Petroleum Operations.


Permitted Assignee means, as applicable: (a) an Assignee that has received an


Assignment m compliance with clause 39. or. |b) in the case of the Government Interest,


an Assignee of the Government Interest that received an Assignment thereof m


compliance with clause 4.


 Production Sha'ina Contract Pttamog'un








Person means an individual or a corporation, limited liability company, partnership


twhethet or not having separate legal personality). joint venture. trust. unincorporated


orgamsalmn. association. government. agency or political subdivision thereof or any


other entity


Petroleum meant:


(a) any naturally occurring hydrocarbon *s a gaseous or bqud state.


(b) any mature of naturally occurring hydrocarbons in a gaseous or liquid state: or


(e) any of the foregoing that has been returned to a Reservoir.


Petroleum Costs means all costs and expenditure incurred by the Contiactoi in respect


of Petroleum Operations that the Contractor Is entitled to recover under this Contract.


Petroleum Held meant a Cat field or an Oil Field.


Petroleum Operations means all Exploration Operations. Gas Marketing Operations.


Development Operations, Production Operations, and Decommissioning Operations,


and any other activities or operations related to any of such operations authorised,


required, or contemplated by this Contract or Applicable law.


Pipeline Coils Is defined In clause 335.


Production Area means on area within the Contract Area:


(a) encompassing the areal closure of a Petroleum bearing Reservoir outlined


following Appraisal; and


(b\ which is delineated and designated as a ‘production area' in an Approved


Development Plan.


Production Bonus is defined in clause 32.2.


Production Costs means all the costs and eipenditure incurred by the Contractor


entities m carrying out the Production Operations m accordance with an Approved Work


Program and Budget |sub)ect to dause 2.6) which the Contractor it entitled to recover


as a Petroleum Cost.


Production Operations means operations and all act . ties related thereto carried out by


the Contractor for Petroleum production from a Production Area from the start of


Commercial Production, such as extraction, injection, simulation, treatment, storage


wrthm the Production Area. Idling, and related operations No operations or activities of


the Contractor after the Debvery Pomt are within the scope of the definition.


Production Rental is defined Ms clause 13 6.


Production Work Program and Budget means a Work Program and Budget prepared for


Production Operations pursuant to clause 13.4.


Profit Gas is defined Ms clause 2S9.1.


Profit OH n defined in clause 2S.B 1.


Profit Petroleum a defined m clause 26 1











14


 Production Sharing Contract fira-nopru/i








Public Company meant: {a| any entity created by the Kurdistan Region Oil and Gat law,


including the Kurditfan Exploration and Production Company; lb) a legal entity


ettablithed by Kurdistan Region law at a teparate legal entity, whether ot not fully


autonomous and whether or not hawing independent tourcet of revenue, to undertake


commercial actiwitiei on behalf of the Government, which legal entity cannot be


declared bankrupt under Kurdittan Region law; and (c| any teparate and autonomous


company organised under Kurdittan Region law which it COntfOlled, directly or


indirectly by a wholly Government-owned and controlled entity, by the Government,


the Parliament of the Kurdistan Region, or which is under the guidance of the


Government ot the Parliament of the Kurdistan Region Iwhether ot not in any such case


partially or fully funded by the Government or the Parliament of the Kurdistan Region).


A deportment, division, or agency of the Government, whether or not operating under a


separate name, is not a Public Company.


Quarter means a period of three consecutive Months starting on the first day of each of


January, April, July, and October.


Regional Tax law means any Kurdistan Region law in respect of Taxes


Relevant Day Is defined in clause 40.11(a).


Repsol is defined In the preamble.


Repsol letter of Representations is defined in the preamble.


Reservoir means a subsurface rock formation containing an Individual and separate


natural accumulation of producible Petroleum characterised by a single natural pressure


system.


Revenues is defined its clause 26 1


Rights Sale is defined m clause 12.10 2


R factor is defined in clause 26 1


Royalty is defined in clause 24.4


Royalty Crude Oil is defined m clause 24 1


Royalty Gas is defined in clause 24.2.


Royalty Petroleum a defined in clause 24.1


Royalty Rjte is defined in cUuse 24.6.


Second laplorjtion Well is defined in clous* 10 4(b)-


Second Sub Period is defined in clause 6.4(bl


Second Sub Period Guaranteed Amount is defined .n clause 9 2.


Semester means a period of 6 consecutive Months starting from the first day of each of


January and July.














IS


 Coettac! twtmaqo.'t








Subcontractor means any Person providing services or undertaking work* relating to the


Petroleum Operation* on behalf of. the Contractor, any Contractor Entity, or the


Operator, whether directly or induectlv a! any contracting tier


Sub-Period and Sub-Period* are delmed in clause 6 4


Tea or Taxes mean* aO current or future levies. dute*. payment*, charge*, im pout ion*,


imposts. withholding*, fee*, taie* (mehiding value added taa or other tale* or


transaction based tan. corporation taa. income taa. capital gam* taa. stamp duty, land


taa. registration taa. capital and wealth taa. profit taa. dividend taa or withholdings,


transfer taa. customs duties, branch or permanent establishment tai or withholdings,


taa on income from movable capital and fixed taa on transfers) or contributions, in each


case as imposed by Kurdistan Region law.


rule Transfer Date I* defined in clause 20.1


USS and US Dollar* meant the legal currency (dollar) of the United States of America


Vice Chairman is delmed m clause I«.l-


Well means a borehole, made by dolling in the course ol Petroleum Operations.


Categories of Weds are defined


(a) Exploration Well means a well other than an Appranal Well drilled for the


purposes ol tearchmg for undiscovered Petroleum accumulations on any


geological entity!**) (be it of ttructural. stratigraphic, facies, or pressure


nature) to at leait a depth or stratigraphy level spec died m the Work Program.


(b) Appraisal Well means a well drilled lor the purpose of delineating and


evaluating the extent, the production capacity, the potential and commercially


of recoverable reserves of a Discovery in a geological ttructure or feature


established by an Exploration Well.


(c) Development Well means a well drilled, deepened, or completed after the dale


of approval of the Development Plan pursuant to Development Operations or


Production Operations for the purposes of producing Petroleum increasing


production, sustaining production or accelerat -g extraction of Petroleum


Including production WeUs. Injection Wells, and dry Well*


(d) Injection Well means a well drilled within a Production Area which injects


Natural Gas or a fluid in order to enhance the recovery of Petroleum by


pressure maintenance or by improving the quality of the Reservoir.


Work Program mean* any of the following: an Exploration Work Program, a Ga»


Marketing Operations Work Program, a Development Work Program, a


Decommissioning Work Program, or any other program wfuch details the Petroleum


Operations to be conducted by the Contractor and the schedule lor performing such


program.








Unless the context otherwise requires or is specifically otherwise stated:


(a) headings are to be ignored:


 Production Sho/tna Commit Htamogtun








(b) "including' and similar wards do not imply any limitation*; and


|c) singular includes plural and vice versa.


1.3 Reference to a "clause" I* to a clause ol this Contract, and reference to a 'paragraph' is


to a paragraph in the Accounting Procedure.


1.4 Reference to "gross negligence' and "grossly negligent* mean* with respect to any


Person, a marked and flagrant departure from the standard of conduct of a reasonable


and prudent person acting in the circumstances at the time of the purported


misconduct, or such wanton and reckless conduct as constitutes in effect an utter


disregard for harmful, foreseeable, and avoidable consequences.


1.5 Reference to "participating Interest' means, In respect of each Contractor Entity, its


undivided share, expressed as a percentage, of its participation m the rights and


obligations of the Contractor under this Contract where such rights or obligations are


not joint with the other Contractor Entitles.


1.4 Reference to:


(a) 'significant* means important enough, from the perspective of a reasonable


person in the Government's position, to merit attention, and it inchrdes a lesser


level of significance than does the term "material'; and


lb) 'material' means of such a nature that knowledge of the item would affect a


Person's decision.


1.7 The Contractor will be considered to have 'knowledge' in respect of a matter pertammg


to this Contract or Petroleum Operations if such knowledge «s held or ought reasonably


to be held by any Contractor Entity, the Operator, any Subcontractor, or an* consultant,


or agent of any Contractor Entity, the Operator, or Subcontractor.


1.8 A reference to conduct includes an omission, statement, or undertaking, whether or not


Hi writing


1.9 Reference to any contract, agreement, instrument, guideline or document includes any


amendments, restatements, and replacements thereof


1-10 References to a law or any provision of law are references to that provision as


amended, extended or re-enacted and include all laws and official requirements made


under or deriving validity from it or enacting such modification


1 11 In computing any period of time, the day of the act. event or default from which such


period begins to run shall be included. AH references to time are to the time in Erb*


Unless specifically provided otherwise:


la) any payment faHmg due on a day that is not an International Banking Oay wdl


be due and payable on the foBowmg International Banking Oay:


lb) any notice or other communication to Government that is received on a day


that is not a Government Business Oay or after J: 10 pm on a Government


Business Oay wdl not be considered received, unless acknowledged by the


recipient, until the ne»t foiowin* Government Business Oay.











17


 Cor rrair








1.12 The language wh«h governs me interpretation of this Contract a the Enghth language.


l.U Ambiguitws are to be resolved. where appropriate. with reference to principles and


practices general accepted to the international petroleum industry. * there it ever any


confbct between or among standards of performance for the Contractor, the most


stringent ttandard will apply. In no eeent wiB the Contractor be required to take an


action that is prohibited unde' Applicable law.


1.14 Any Joint Operating Agreement between Contractor Entities including at approved by


the Government in accordance with claute 5. it only binding at between tuch Contractor


I ntitlci, It not relevant lor the construction or interpretation of this Contract, and does


not establish any approved course of dealing as between the Government and any


Contractor Entity or the Contractor.


I.ll Nothing In tlm Contract constitutes or implies any contractual relationship or other


relationship between |i) the Contractor or any Contractor Entity and |il) the Government


of Iraq, any region ol Iraq (other than the Kurdistan Region), or any governorate or other


political or administrative subdivision ol Iraq.


1.16 No Party shall construe any provision in this Contract as establishing that any Contractor


Cntlty Is an employee, agent, or representative ol the Government or any public


authority In the Region or in Iraq.


1.17 This Contract does not establish, and no Party shall construe this Contract to have


established, a partnership, or other form of association or fiduciary relationship


between the Government and any other Person, including any Government Interest


Holder.


1.1B Any enumeration of a Party's rights and remedres set forth in this Contract is not


intended to be exhaustive. A Party's exercise of any r^ht or remedy under this Contract


does not preclude the eiercise of any other right or remedy. Each Party's rights and


remedies are cumulative and are in addition to any other right or remedy set forth in


this Contract, any other agreement between the relevant Parties, or which may now or


subsequently exist at law or in equrty. by law. or otherwise


1.19 The Government does not confer any rights or assurances to any Party or Government


Interest Holder other than as expressly set forth in this Contract. There are no unphed


rights, permissions, or assurances provided to any Contractor Entity or Government


Interest Holder.



































It


 Production Sharing ContraIt Piiamagrun








Clause 2 - Scope





EXCIUSIVI RiOHt


2.1 The Government grants to the Contractor the exclusive right to conduct Petroleum


Operations In the Contract Area on behall of the Government (or the term of this


Contract.


2.2 Hatural resources other than Petroleum are excluded from the scooe of th<» Contract,


even rf the Contractor discovers any such resources in the conduct of Petroleum


Operations.


2.3 Nothing in this Contract conveys any right, title, or interest to the Contractor or any


Contractor Entity in Petroleum before the Delivery Point.





CcuniA«ct


2.4 The Contractor is responsible to the Government for the conduct of Petroleum


Operations.


IS Each Contractor Entity shall at ad times comply, and procure that each Subcontractor


complies, with the Kurdistan Region Oil and Gas law and ad other Applicable tax No


provision of this Contract wfl: la I excuse the Contractor or a Contractor ( nlity Of any


Subcontractor from compliance with Applicable la«v. or |b) impair any right or privilege


of the Government under Appbcable Law.


24 Subiect to clause 40 (force Mo/ei.re). the Contractor shall: (a) conduct Petroleum


Operations only In accordance with on Approved »Vor» Program and budget: and (b) not


suspend or abandon performance of Petroleum Operations except in accordance with


an Approved Work Program and Budget.


2.6.1 In cases of emergency, the Contractor shall undertake such additional efforts


and incur such additional expenditures as the Contractor considers necessary


to protect life, the environment, or property


24.1.1 The Contractor shall promptly report ns Incurrence of such additional


expenditures to the Management Committee.


24.1.2 Such additional expenditure will be Cost Recoverable.


i 6.2 The Contractor Is entitled to incur expenditures not Identified In an Approved


Budget, provided that: (a) the aggregate amount of such expenditures do not


exceed 10% of such Approved Budget in any Calendar Year; and (b| the


Contractor hat pfonpfly reported Ihe incurrence of such excess expenditures


to the Management Committee.


244.1 Excess expenditures incurred in compliance w*h and within the limits


set fo»th in clause 2.6.2 w« be Cost Recoverable.


2444 Any expenditure above the 10% threshold wdl only be recoverable by


the Contractor with the unanimous approval of the Management


Committee.











19


 PHHtucIwn Sharing Contrail Pitanutgiun








PtXMltS


2.7 Upon the Contractor's request, the Government shall provide or procure the provision


of all Permits lor Petroleum Operations to be performed in accordance with an


approved Work Program and Budget, Including those relating to any extension and


renewal periods l( the Government determines that a Permit Is required from the


Government ol Iraq and unless the Government otherwise Instructs, the Government


shall be responsible for securing such Permit on behalf of the Contractor, provided that


the Contractor shall provide all necessary assistance.





Btsr PxAcrtCfS


2.8 In performing Petroleum Operations, the Contractor shall do so at all times in


accordance with Best Practices, Including:


(a) using all technical, human and material resources reasonably required for


execution of the Petroleum Operations in accordance with Best Practices; and


(b) Implementing all appropriate management and administration techniques for


execution of the Petroleum Operations in accordance with Best Practices.


Sost Risk


2.8 The Contractor shall conduct all Petroleum Operations at Its sole cost and risk.





1*1 The Contractor shall provide all funding for the performance of its obligations


hereundor.


i.j.i If no Commercial Discovery is determined, or if production of Petroleum i


insufficient to reimburse the Contractor, the Contractor oil bear all losses


arising under or related to this Contract.


UJ Each Contractor Entity shall only haw the right to receive and disoose of its


share of the Petroleum produced and saved from the Contract Area as


reimbursement of costs incurred and compensation for services rendered


pursuant to this Contract.


Auuuait RxShTS


2.10 The Contractor is entitled to:





(a) access and operate freely within the Contract Area and wherever Assets and


Materials of a Contractor Entity or Subcontractor may be located.


(b) freely use access roads located within the Contract Area and outsde the


Contract Area for the construction, installation, maintenance, operation and


removal of pipelines and other facilities required for the Petroleum Operations:


(c) use in Petroleum Operations sand, gravel, and water belonging to the public


domain by prior arrangement with the relevant authorities and on payment of


the generjfty prevailing charge for such resources m the locality of use.


(d) employ qualified Expatriate and local personnel and retam Subcontractors for


the conduct of Petroleum Operations in accordance with clauses 22 and 21


(provided any Expatriate personnel working m the Kurdistan Region wdl require


 Proajcttoo St or *4 Contract P+amo***


j Permit, not to be unreasonjbly withheld or delayed, and the Government w«U





procure any Permits required from the Government of Iraq);


(e) import any goods, materials, equipment required for the Petroleum Operations


in accordance with clauses 19, 22. and 30: and


(f) use land or property belonging to the Kurdistan Region outside of the Contract


Area on reasonable commercial terms to the extent made available, and th#


Government wl assist the Contractor securing the use by the Contractor of any


private property in the Kurdistan Region.





LiAa*iM AvrawgfiO*


2.11 The conduct of a Subcontractor of any Contractor Entity (at any tier) or of the


Operator wil be binding upon, and cons*Jered to constitute the conduct of the


Contractor.











Clause 3 - Contractor; Participating Interests





Coaiaactoe


3.1 The obfcg ationt ol the Contractor cewlilute joint jnd several obligations of the


Contractor Entitles, r.cept onl, -here specifically provided otherwise.





P*at*>»«Tia6 latiaitt or linoi


3.2 As of the Effective Date, the Contractor has an 80* participating interest








Clause 4 - Government Interest


Giaiaai


4.1 The Government has a participating interest of 20* In Petroleum Operations and all


other rights, duties, and obligations of the Contractor (eircept as provided in this clause


4), carried by the Contractor (the 'Government Interest’).


4.2 No holder of all or any part of the Government Interest la 'Government Interest


Holder') (including the Government), in such capacity:


(a) Is a Contractor Entity; or


(b) has any obligation of liability to the Contractor or any Contractor Entity


whatsoever. Including any obligation or liability to contribute any share of


Petroleum Costs and any other obligation or liability arising out of or related to


Petroleum Operations, all of which are carried by the Contractor.


No default or failure to perform of a Government Interest Holder under this Contract


may be considered a breach of this Contract by the Contractor or any Contractor Entity


or invoked by the Government to terminate this Contract as to the Contractor or any


Contractor Entity.


4.3 Subject to clause 4.4, a Government Interest Holder is not, If that n Its only capacity


under this Contract, entitled to any notices under this Contract from the Contractor or








21


 Production Sharing Contiait PUamagtun








entitled lo provide .my consents, except, In each case as specifically provided otherwise,


but a Government Interest Holder has rights under clause 42.





4.4 Any term of this Contract may be waived or amended without prior notice and consent


of a Government Interest Holder, unless such waiver or amendment would change any


right or obligation of a Government Interest Holder.


*4.1 Any waiver or amendment which purports to change any right or ob (aton of a


Government Interest Holder is only effective with prior notice to and the


consent of such Government Interest Holder.


44.1 The consent of a Contractor Entity is not required for the Government to waive





or amend this clause 4, unless such waiver or amendment would materially


alfect a right or interest of a Contractor Entity.





4.9 A Government Interest Holder is not an indispensable party for any Onpute between the


Parties, unless a determination of such Dispute would change or impair the r*hts of a


Government Interest Holder under this Contract.





AssiONMirrt


4.4 The provisions of clause 39 do not apply svith respect to any assignment by any holder of


a Government Interest of all or any part of its Government Interest


4.7 An Assignee of a Government Interest Holder ~il have, in respect of the Government


Interest which has been Assigned, the same rights and ob gat axis as the Assignor of


such Government Interest prior to the Assignment.


48 The Government may at any time designate a Pub' C Company as a Government Interest


Holder without the consent of, or prior notice to. any other Party A Public Company as


holder of the Government Interest will be lndrvidua»y liable (and not>ointly and


severally liable with the Contractor) for any obligations to the Government under this


Contract.


4.4.1 The Government shall provide the Contractor with a rsotxe notifying the


Contractor of such designation of a PubI* Company by the Government, and


the Contractor shall be entitled to rely on such notxe for all purposes under


this Contract,


*.4.t A Public Company will not be required to sign any formal assignment o«


accession agreement encept as required by the Government.


4.4.3 Only lor the purposes of clause 37 of the lurdistan Region Oil and Gas law


whenever and to the extent the Government interest n held By a Pubic


Company, the Government Interest will be deemed held by the Government.


4.44 As a consequence of any deemed ownership as set forth m clause 44 I. the


Government:


(a) Incurs no liabilities or obligations (directly. Indxectly. or inpl

any other Party solely by virtue of such deemed holding; and














22


 Production Storing Contract Pxamogiun








(b) dovs not gjtrj-tee. and must not be considered to have implicitly


gu aranteed. Joy obligation of a Public Company as a Government


Interest Holder solely by virtue of such deemed holding.


4-9 Subject to clause 4 12. the Government may at any time Assign all or part of its


Government Interest to a Person that is not a Public Company arithout the consent of


my other Party.


4-9.1 Such Assignee must sign an assignment agreement as required by the


Government


4.9.4 The Government wdl provide the Contractor with a notice of such assignment


by the Government, and the Contractor shall be entitled to rely on such notice


for al purposes under this Contract.


*40 Subtect to clause 4 12. a Public Company |a> a Government interest Holder) may Assign


part or al of its Government Interest to another Pubfcc Company, to the Government, or


any other Person without the consent of. or prior notice to. the Contractor or any


Contractor £nlity. but shall not make any such Assignment of al or any part of its


Government Interest wdhout the prior consent of the Government and m accordance


with any assignment and novation or other agreements and conditions required and


approved by the Government.


4.10.1 Any Assignment by a Public Company of all or part of its Government InterMl


to another Public Company or any other Person wdhout the prior consent of


the Government or in accordance with the requirements of the Government


will be void.


The Public Company shal promptly notify the Contractor of any assignments of


the Government Interest held by such Public Company, and Ihe Contractor wfll


be entitled to rely on such notice for a» purposes under this Contrart-


a.ll Subject to clause 4.12. a Government Interest Holder that is not the Government or a


Public Company may Assign part or aH of its Government Interest to any other Person


without the consent of. or prior notice to. the Contractor or any Contractor Entity.


Such Government Interest Holder shab not make any Assignments without the


prior notice to and consent ol the Government and only m accordance with any


assignment and novation or other agreements and conditions required by the


Government


«.iil Any Assignment by a Government Interest Holder without the prior consent ol


the Government and m accordance with the requirements of the Government


wil be vod


4ju The Assignor and the Assignee shad |Omtly and promptly notify the Contractor


of any Assignments of the Government Interest pursuant to this clause 4 11.


and the Contractor w« be entitled to rely on such notice for al purposes under


this Contract.














21


 *.c*wiCoe riser








4.11 No p>o> non of this Contract prohibits a Contractor Entity from at any time offer*"* to


acquire or acquiring a> or any part of the Government Interest from any Person that u a


Government Interest MoWer.


•4*4 H at any time a Government Interest MoWer (including the Government and a


Pubbc Company) intends to offer to Assign al or part of its Government


Interest to any Person that is not a PublA Company or the Government, thy


applicable holder of the Government Interest may notify the Contractor of the


availability of the Government Interest


«-«4 No Contractor Intrty has or may have any preemption or similar priority rights


in respect of the Government Interest, and a Government Interest Holder is


never required by thts Contract to tel and ast




•4* The Government reserves the right (but is not obbgated to any Party with respect


thereto| either to cancel or terminate any Assignment of al or part of the Government


Interest to any Person, if the Government at any time determines that such Assignment


•as contrary to Appbcable law or public pokey


«.U.i Upon any eierose by the Government of As rights under this clause 4.13. the


Government Interest wM automatically revert to the Government.


uu The Government's r*hts under this clause 4.11 are eachisive to the


Government, are not sobiect to a claim from any Contractor Entity, and clauses


41 and 4J do not apply wAh respect to this clause 4.13.


4.13.1 The Government rapressly reserves all sovere*n immunities in respect of any





Dispute arising out of or relating to the exercise of its fights under this clause


4.13. and any Dispute with respect to this clause 4 between the Government


and any Government Interest Holder may exclusively be resolved m accordance


with Kurdistan Region laws before a competent authority In the Kurdistan


Region located in Erbil.








Clause 5 - Operator; Joint Operating Agreement


Operator


5.1 The Contractor designates Repsol. and Repsol agrees to act. as Operator on behalf and


in the interest of the Contractor under this Contract.


s.i.i The Contractor authorises the Operator to represent the Contractor and to take


such actions as agent on behalf of Contractor and to exercise such rights,


privileges and posvers and to comply with such obligations under this Contract


as arc attributed or imposed to Contractor by the terms of this Contract. In


such capacity, the Operator will, subject to the terms and conditions of this


Contract and to the extent agreed in the Joint Operating Agreement, have all of


the rights, privileges, powers, and responsibilities of the Contractor as set forth


in this Contract, including responsibility for the conduct of all Petroleum


Operations and other activities of Contractor as contemplated by this Contract.


 P'oaj







The Government may deal with. and rely on. the Operator lor all purposes under this


Contract.


»* i The obigationt. bib

obligation*, lutaMies. act* and omnuoni of the Contractor.


tJ.I The conduct of the Operator wil be binding upon, and constaered to


constitute, the conduct of the Contractor.


The Contractor shal at any time hove the nght to appoint another Contractor Entity o*





the Operator, upon giving the Government not less than 30 days' prior written notice of


such appointment.


The Contractor shall cause the Operator not to resign, and the Contractor shall not


remove an Operator until such time as a substitute Operator has Been appointed by the


Contractor and notice therefor has been given to the Government.


Upon any change of Operator pursuant to clause 5.3. the replaced Operator will be


released and discharged of all its rights and obligations as Operator hereunder, and the


replacement Operator will be considered to have assumed all such obligations, rights,


and privileges


Without limiting the Government's rights under clause 45, if either of the following


occurs and on not less than 30 days' prior notice from the Government, the Contractor


shall appoint a replacement Operator as soon as is reasonably practicable:


(a) an Act of Insolvency has occurred in respect of the Operator unless, within such


30 day notice period, the Contractor hat established to the satisfaction of the


Government that the Act of Insolvency does not apply and the Government


cancels its notice; or


|b) the Contractor is not fuming its obkgationt under th.s Contract as a


consequence of the acts or omit no ns of the Operator.


If the Contractor, in accordance with clause 5.6. does not comply with the obligation to





propose another Operator within 30 days from the date when the Government gave


nolcr to the Contractor, the Government w>l be minted to eiercise its rights under


clause 45 to terminate this Contract.








A Contractor Entity shal not enter into any total Operating Agreement, eacept 4 the


terms of such iotat Operating Agreement


(a) have been approved by the Government;


lb) are in full compliance with AppScable Law as of the date of the approval by the


Government;


(e) are consistent with the provisions of the Contract; and





(d) otherwise comply with the requeements of clauses 5.9 through 5 11.





A Joint Operating Agreement must provide for the termination and release of any and


al Encumbrances, pre-emption rights, trust arrangements, and al other types of claims


or rights impairing the transferability of the participating interest of a Contractor Entity








IS


 Pioducuan Jfcorlng Contract Piiamagit/n








by Ihc Government in the event o( any termination of a Contractor Entity by the


Government pursuant to this Contrail


S.10 A Joint Operating Agreement mutt provide that a Contractor Entity party to such Joint


Operating Agreement shall not mate an Alignment:


(a) which would rriult in the Assignee holding leu than a S« participating intereit;


(b) which would result In the Assignor, if the Assignor is Aligning less than 100*4


of it» Interests, holding let* than a S% participating interest;


(c) without the content of the Government in accordance with this Contract; and


(d) unleit the proposed Assignee hat entered into an instrument satisfactory to


each of the Contractor Entitles and the Government so as to assume and to


perform the obligations of the Assignor.


VII The Contractor thall submit to the Government for approval any agreement to amend





any Joint Operating Agreement








Clause 6-Term


QlNIftAl


VI The term of this Contract computet an t.ploration Period and a Development Period. In


respect of a Discovery of a Gas field, the term of this Contract may also comprise a Gas


field Molding Period as provided In clause 14 {Natural Gat\.





Cinotiio* IUntm


6.2 Prom the first day of the Exploration Period until expiry of the I iploratiOf Period, the


Contractor shall pay to the Government an annual surface rental lor the Contract Area


of USS10.00 per square kilometre per Contract Tear I'lxploration Rental*).


n.i The Exploration Rental is due and payable in arrears on or before each


anniversary of the Effective Date and on the last day of the (ipioraton Period


o> termination of this Contract (whichever is earlier), and is subfect to prorat on


in any Contract Tear during which there has been a relinquishment or eip

the laploration Period, based on actual number of days m such Contract Tear.


6JJ Exploration Rental will not be Cost Recoverable





Exnoiaton Pmoo


63 The Exploration Penod is for a base term of five Contract Tears from the Iffrctrvr Oate


(the "Base Exploration Terns').


*.».i The Base I iptoraton Term Is extendable on a yearly basis m accordance with


clauses 6 S and 6 6 up to a maximum term of 7 Contract Tears (the Base


Exploration Term as so extended, the 'Extended Exploration Term*)


6t.l The Exploration Period is subject to further extension beyond the Extended


Exploration Term as provided in clauses 6.6 and 6.7


 Production Sharing Contrail Pnamagrun








6.S.S The exploration Period is subject to early termination as provided In this


Contract.





Sua-PtniODS


6.4 The Exploration Period consists o( two sub periods (each such sub period, as it may be


extended, a Sub-Period*), each ol svhich is extendable pursuant to clauses 6.5 and 6.6,


provided the Exploration Period may not exceed the Extended Exploration Term except


as provided in clauses 6.6 and 6.7:


(a) a first Sub-Period of three Contract Years from the Effective Oate (“First Sub-


Period'); and


(b) a second Sub-Period of tsvo Contract Years beginning from the fust day of the


Second Sub-Period ('Second Sub-Period*).





Exiinsions oi Sui-Ptaioos


*.» Subject to clauses 6.5.1, 6.5.2, 6.S.3, and 6.7, the Contractor will be entitled to


extensions, each of no more than one Contract Year, of the then current Sub-Penod. If


the Contractor has notified the Government of a Discovery of Crude Oil or of a Gas field


In such Sub Period in accordance with clauses 12.1 and 12.2 (Discovery Report;


Relinquishment), but reasonably considers that additional work is necessary before


deciding whether to;


(a) submit a proposed Appraisal Work Program and Budget in respect of such


Discovery In accordonce with clause 12.4 | Appraise! Wort Program and


Budget}; or


(b) in respect of a Discovery of Crude Oil. declare such Discovery to be a


Commercial Discovery.


H i The Base Exploration Term plus the extensions provided in accordance with this


clause 6.5 may not exceed the Extended Exploration Term.


tu To be entitled to exercise its right to an extension pursuant to this clause 6 5.


the Contractor must notify the Government at least 30 days before the end of


the applicable Sub-Period (as it may have been extended pursuant to this


clause 6.5) of its intention to exercise such right of extension, the proposed


duration of such extension, ar.d the proposed Work Plan and Budget for such


extension.


6A.J The Contractor *4 not be entitled to an extension unless there is an Approved


Work Program and Budget with respect to such extension.


•4 Subject to clause 6.7. if at the end of the Extended I xploration Term the Contractor


wishes to conduct additional Exploration Operations, the Contractor wig be entitled to


an extension of the Exploration Period of one year beyond the Extended Exploration


Term, provided;


(a) the Contractor has notified the Government, at least 30 days prior to the end of


the applicable 5ub-Period. ol the Contractor's exercise of such entitlement and


proposed Work Program and Budget with respect thereto;


 tioajcticn Store*) Cot foe T Peamoqrurt








|b) the Contractor's proposed Work Program and Budget lor with extension a


acceptable to the Government; and


|c) the Contractor H not in breach ol any material obligation or doty under this


Contract or Applicable law.


I* I Subject to clause 6.7. upon the expiration ol *n extension under this clause 6.6


.md if the Contractor considers It hat still not completed its evaluation ol the


Contract Area, the Contractor will be entitled to a second extension ol one


Contract Year; provided:


(a) that the Contractor hat notified the Government thereof at least 30


days before the latt day of the first extension; and


(b) the Contractor's propoted Work Program and Budget u acceptable to


the Government for such extension.


6.6.2 The Contractor It not entitled to any tingle extension under thn clause 6 6 of


more than one Contract Year, and the Contractor is not entitled to more than


two extensions pursuant to this clause 6.6,


The Contractor will not be entitled to any extensions under ciautet 6.5, 6 6, or 6.6.1:


(a) unless the Government it satisfied that the Contractor hat fulfilled lit Approved


Work Program (including Minimum Exploration Obligations) In respect of the


preceding Sub-Period or extension, at applicable; or


(b) If the Contractor is in material breach ol any obligation or duty under thn


Contract or Applicable law.








The Exploration Period will expire at the end of the First Sub-Period (as it may be


extended pursuant to ciautet 6.5 and 6.6). and this Contract will terminate, unless:


(a) the Contractor has notified the Government at least 30 days before the expiry


of the First Sub Period of the Contractor's intention to enter into the Second


Sub-Period, or





|b) clause 6.5 n applicable.





The Exploration Period will exp.re at the end of the Second Sub-Period (as it may be


extended pursuant to clauses 6.5.6.6. and 6.11.1).





The Contractor may termmate thn Contract at any time during the Exploration Period


(as it may be extended puriuanl to clauses 6.5.6.6. and 6.7) upon 30 days' prior notice


to the Government.





The Exploration Period will expire on the earlier of the first day of the |a| Gas Field


Molding Period and |b) Development Period.


6-ii.x Sub|ect to clause 6.7, the Exploration Period will be automatically extended


during the pendency of the Government's consideration of a Gas Field Molding


prrod Application in accordance with clause 14 {Natural 60s), if the


Exploration Period would otherwise expire during such consideration period


 Prodjit+A Co-use:








UU If the Government denws * Cn field Molding Period Application. the


exploration Period wJ not be shortened. extended. or otherwise affected


solely because of such denial





OvaaAMtiio Amoumi


•.11 If this Contract Is terminated during the exploration Period, and il the Contractor has r»o«


completed the Minimum C .plo-aton Oblations relating to the then current Sub-


Period. Including additional m.nenum work oblations in respect of any applicable


extensions of the appUaWe Sub Period, then the Contractor shall pay to the


Government the applicable Guaranteed Amount (if any).


Oivttorr/tro Petioo


6.13 Subject to extension .ts provided ns clause 6.14. the Development Period for:


(a) all Commercial Discoveries of Crude Oil Is 20 years from the date of the first


declaration of a Commercial Discovery of Crude Oil by the Contractor pursuant


to clause 12 6(a); and


(b) all Gas fields is 20 years from the last day of the Gas field Molding Period.


6.i».i II the Contiactor consider that a Discovery of Crude Oil is a Commercial


Discovery, the Contractor will have the exclusive right to develop and produce


such Commercial Discovery of Crude Oil pursuant to the terms of this Contract.


s.tl.l If the Contractor agrees a Gas Export Plan or a Domestic Gas Plan with the


Government and there is an Approved Development Plan with respect thereto


as provided in clause 14 {Natural Gos). the Contractor ■»* have the excluvw


right to develop and produce the Gas Fields sublet to such Approved


Development Plan pursuant to the terms of this Contract


6.14 If Commercial Production from a Production Area (whether an 04 field or a Gat field) is


still possfele at the end of the Development Period, the Contractor wdi be entrtled to an


automatic extension of the Development Period in respect of such Production Area


6.i«.i The term of any such extension of the Development Period will be 5 Years.


6-14.2 To be eligible for an extension under this clause 6 14. the Contractor must


notify the Government of the Contractor's Intention to exerene its right to an


extension at least 180 days before the end of the Development Period, and the


Contractor must not be in material breach of any obligation under th-s Contract


or Applicable Law.





Ul Upon not less than 90 days' prior notice to the Government, the Contractor may





terminate Production Operations for any Production Area.


6.15.1 Upon such termination, the Production Area shall be (onsidered relinquished


to the Government.


5.15.2


This Contract will terminate on the date svhen the Contiactor notifies the


Government that Production Operations for all Production Areas are stopped,


will not be resumed, and the Contractor has relinquished all Production Areas


 Production ihanna Contract Puamagrurt








»WJ Termination of Productton Operations will not relieve a Contractor entity of any


liabilities or obligations under a gas sales and purchase agreement with the


Government (or any Public Company or other Affiliate of the Government, or


otherwise, as designated by the Government! In respect of any Gas Export Plan


or Domestic Gas Plan, except as otherwise provided In the relevant


agreements


Clause 7 - Relinquishment


M AhOATOftV AKD CO*SI01»IO Rllll.aulH.MtNI


7.1 By no later than the last day of the Base E xploration Term (without any extensions), and


subject to clauses 7.7. 7 8, and 7.10, the Contractor shall relinquish 25% of the Contract


Area that is then not (a) the subject of Appraisal, |b) a Gas Held subject to a Gas Field


Holding Period, or |c) a Production Area


T.i.i At the end of the first extension to the Base Exploration Term (if any) granted


pursuant to clause 6.S or clause 6.6. the Contractor shall relinquish 2516 of the


remaining Contract Area that Is then not (a) the subject of Appraisal, lb) a Gas


Field subject to a Gas Field Holding Period. o» Ic) a Production Area.


7.1.7 The Contractor shall give the Government not less than 10 days' prior notice of


the boundaries of the portion of the Contract Area to be relinquished.


7.2 As of the first day of the Development Period or a Gas Field Holding Period, whichever a


first to occur, all of the remaining area of the Contract Area will be considered to be


relinquished that is then not (a) a Gas Field subject to the Gas Field Holding Period, or


(b) a Production Area.


7.1 The Contractor shall relinquish a Discovery as provided m clause 12J. and a Discovery


will be considered relinquished as provided in clause 12.4.5.


7.4 On not less than 30 days’ prior notice to the Contractor by the Government, the


Contractor shall relinquish a Production Area if, in respect of such Production Area:


(a) for reasons other than Force Majeure in accordance with clause 40 (Force


Majeure), the Contractor has ceased normal production of such Production


Area for more than 180 consecutive days; or


(b) if the Contractor has failed to resume Petroleum Operations in such Production


Area within 90 days' following the occurrence of an event entitling the


Contractor to claim Force Majeure in accordance with clause 40 (Force


Majeure).


7.5 If the Contractor has notified the Government of its intention to terminate Petroleum


Operations in a Production Area in accordance with clause 6.15 (Termination of


Production Operation), the Contractor shall relinquish the Production Area effective as


of the date of the expiration of the 90-day notice period with respect thereto as


provided in clause 6.15.


7.6 To the extent not set forth in this clause 7. Gas Fields will be considered relinquished as


provided in clause 14 (naturalGot).


During the Exploration Period, the Contractor my relinquish jl or any pjrt of the


Contract Area on not less than 90 days' prior notice to the Government of its intention


to relinquish and the boundaries of the portion off the Contract Area to be relinquished.





F-t.t The Government sha* credit any voluntary relinquishments during the:


(a) First Sub Period against the Contractor's mandatory reinquishments


obligations under clause 7.1;


(b) the first extension of the First Sub-Period against the Contractor's





mandatory relinquishments obligations under clause 7.1.1


Our mg the Development Period, the Contractor may relinquish a Production Area for


Crude 03 as provided in clause 6.IS (Termination of Production Operations).


Durmg a Gas Field Holding Perod. the Contractor may relinquish the Gas Field on not





less than 90 days' pror notice to the Government The rel nquishment will be effective


as of the last day of such 90-day notice period











For the application of clause 7.1:


(a) except as provded m clause 7.11. the Contractor is entitled to determine the


area, shape, and location of the Contract Area to be kept; and


(b) the Contractor is entitled to retam for 24 months that part of the Contract Area


which contains a Discovery and wh

together with any other Discovery within the Contract Area, constitute a


Commercial Discovery of Crude Oil.


for the application of clauses 7.1. 7.7, and 7.8, the re: nQu;s~ed portions of the Contract


Area must be contiguous and be of a shape and sue of which wd: read fy permit


delineation.








Pnor to relinquishment of any area, the Contractor shall, in accordance with Best


Practices. Applicable Law. and the CHS Standards:


(a) perform all necessary clean-up activities to restore such area as nearly as


possible to the condition in which it existed on the Effective Date, including


removal off such Assets and Materials, facilities, or instaBation as the


Government may reasonably instruct;


(b) safety cap aB WeBs and. unless otherwise instructed by the Government, and


contingent upon safety and additional cost considerations, ensure that any


WeB technicafy capable of production is left in a condition that it may be re


entered for further testing or completion; and


(c) take pH actions to prevent hazards to the natural environment, human bfe. or


property


 £#«Ct 09 ftll<*QU&MV£fvT





7 IJ This Contract w*Jl


(a) upon the ryhnqunhnient (whether rn jndJtory. considered, or voftunt jry) of


the entire Contract Area; and


ib) with respect to alt relinquished areas immediately upon reinqucshment.


and the Contractor shall have no further rights with respect to such areas


7.14 No relinquishment by the Contractor will rebeve the Contractor from any babifct«t


arising from or related to the relinquished Contract Area or off any continuing


obhg Jtiom of the Contractor under thts Contract. A relinquishment that constitutes


a termination of this Contract wi be governed by clause 45.14.


7.15 If the Contractor relinquishes t*e entire Contract Area during the Eapioratvor ?c od


without having fulfilled its Minimum Eaplorat>on Obligations with respect to the


then current Sub-Period, the Contractor shall promptly pay to the Government the


applicable Guaranteed Amount (if any).


7.14 Upon any relinquishment of any Gas Field when the Contractor retains rights under


this Contract to conduct Exploration Operations or Production Operations. the


Government and any contractors of the Government and their representatives a~d


subcontractors will have the absolute right to move freely within the Contract Area,


provided no such Person causes any unreasonable interference in ongoing


I Kploration Operations or Production Operations of the Contractor.








Clause 8 - Management Committee





EtlMlttHMIN!


8.1 Within 30 days following the Iffectne Date. the Contractor and the Government shad:


(a) establish a Management Committee for the purpose of providing orderly


direction of ad matt cm pertaining to the Petroleum Operation! and Work


Programs: and


(b) try notice to the other, each nominate its respective members of the


Management Committee and thee alternates.


8.j The Management Committee shad comprise two members designated by the


Government and two members designated by the Contractor.


tj i A Government Interest Holder (solely m respect of such capacity) is not entitled


to representation on the Management Commfttre


jj Upon 10 days' prior notice to the other, each of the Government and the Contractor


may replace any of its members of the Management Commntee.


Decisions of the Management Committee are to be made at the meetings.


 Connect Pvoki«ii<








llUKIMI


14 The Management Committee shaB review, deliberate, decide, approve, and give advice,


suggesions and recommendations to the Parties regarding the following subject


matters:


(a) Work Programs and Budgets:


(b) the Contractor's activity reports;


(e) production levels proposed by the Contractor.


(dl Accounts of Petroleum Costs:


(e) procurement procedures for potential Subcontractors;


(f) Development Plan and Budget for each Production Area;


(g| any matter having a material adverse affect on Petroleum Operations: and


(h) any Other subject matter that the Contractor and the Government are wiling to


consider.





Riouiai Mf (linos; Vl NUI


8.S Unless otherwise agreed by the Management Committee, all meetings of the


Management Committee will take place In the Kurdistan Region, alternately at the


offices of the Government and those of the Contractor, at least < a I twice rath Contiact


fear prior to the date of the first Commercial Discovery and (b) three times each


Contract Vear thereafter.





» Mcuimqs


Luiaaoaoi


■A Cither the Government or the Contractor may c*U an e.traordmary meeting of the


Management Committee to discuss important issues or developments related to


Petroleum Operations where


(a) the meeting of the Management Committee w* have a quorum m accordance


with clauses « 11 through 1 11. but not all members of the Management


Committee are present, subject to reasonable notice

10 days): or


(b) al members of the Management Committee wIB be present at the meetmg.


without notice.


4-6.1 The Party caBmg an extraordinary meeting shall speedy the matters to be


discussed at the meeting





Acik>n e> Moaeeis wiihout M(tim«


8.7 Any action required or permitted to be taken at a meeting of the Management


Committee may be taken without a meeting if the action is evidenced by the written


consent of the members approving such action and delivered to the Contractor





Aoevoa; MmultS


8.8 The Contractor shall (a) prepare the agendas for meetings of the Management


Commillee in accordant r with instructions of the Chairman and (b| provide such











Si


 agendas to the Government and the members at lead IS dan before the date of the


meeting.


• a l Each agenda must include any subject matter proposed by either the


Government or the Contractor.





• a l The Contractor shall be responsMe lor preparing and keeping minutes oI the


decisions made at the rneetings.


aa I The Contractor shall send a copy ol such minutes to the Government and the


members lot review and approval. The Government and the Contractor shad


review and approve or disapprove such minutes within 10 days alter receipt ol


the draft minutes.


a a-* Unless either the Government or the Contractor notd.es the other of

disapproval ol the minutes within such 10-day period, the minutes wid be


considered approved by the Government and the Contractor at the end ol such


10-day period.








The chairman ol the Management Committee shad be one of the members designated


by the Government (the ‘Chairman’).





*-»-» The vice-chairman ol the Management Committee shad be one ol the members


designated by the Contractor (the 'Vice-Chairman';.


1.9.2 In the absence ol the Chairman or his alternate, the Vice-Chairman shall act as





the Chairman.





■.10 Each ol the Contractor and the Government may send advisers and experts to meetings


ol the Management Committee.


P.io.l Unless the Government agrees otherwise, the cosls ol the Contractor’s advisors


and experts incurred in attending meetings ol the Management Committee will


not be Cost Recoverable.





QuoaoM


•.11 The Management Committee cannot validly deliberate, unless each ol Ihe Government


and the Contractor is represented by at least one ol Its members or Its alternate.





1.12 II at least one member or its alternate representing each ol the Government and the


Contractor is not present, the Management Committee must be adfourned


(.11 II the meeting is adjourned pursuant to clause 8 12. Ihe Party present at the adjourned





meeting shall then notify the other Party ol a new date, time, and location for the next


meeting.


Votmo


(.14 Each ol the Government and the Contractor will have one vole In the Management


Committee. The two members appointed by the Government, and the two members


appointed by the Contractor, are required to vote as a single block A vote cannot be


fractionalised.








24


 ?'oa*







• IS An abstaining vote will be considered at a vole m support of the voing member.


•■IS Unanimous approval of the Management Committee is required for all matters, eicept


as set forth in clauses 8.18 and >19.


».l» If the Management Committee cannot reach unanimous agreement on a matter, the


Management Committee shall meet a second time within 14 days to attempt to reach a


unanimous decision.


t.l> Eicept as provided m clause 8.19. t the Management Committee n unable to reach a


unanimous agreement at the second meetmg. the vote of the Government shall be


considered the tie-breaking vote.


lit The Contractor shall have the tie-breaking vote during the Eiptoratttn Period m respect


of approval of the Eiploration Work Program and Budget.


SoacoMMims


■ 10 The Management Committee may request the creation of a technical Subcommittee or


any other subcommittee to assist it.


*-ie.i Any such sub committee sha> be composed of a reasonable number of eaperts


from the Government and the Contractor.


I.29J After each meeting, the technical subcommittee or any other subcommittee


sha> deliver a written report to the Management Committee.


I.M.S Any costs incuired by the Contractor for meetings of the Management


Committee and in respect of technical subcommittees or any other sub¬


committees w<> be Cost Recoverable


Clause 9 - Guarantees


Iran Sua-Piaioo Oiiumom


9.1 Concurrently with the sprung of this Contract, the Contractor shall cause to be delivered


to the Government a jomt and several payment guarantee of Sepsol VPf. SA. the


ultimate parent company of the Contractor.


»-i.i Such guarantee must be (a| m form and content acceptable to the Government


and (b) m respect of the Contractor's obhgatior to pay the Capacity Building


Payment and the Contractor's payment obligation pursuant to clause 10.5.3


(such obl^atons of the Contractor, the 'first Sub-Period Guaranteed


Amounts*) in respect of the first Sub Period.


Stcono Sus-Ptnoo


9.2 Not later than 60 days after the first day of the Second Sub-Period, the Contractor shall


proyide the Government, unless the Government waives this clause 9.2 pursuant to


notice received by each Contractor Entity within 30 days following start of the Second


Sub-Period, with a icxnt and several guarantee of the ultimate parent companies of each


Contractor Entity, m form and content as set forth in Eafubit C and otherwise acceptable


 Irrtwrnofl Sharing Contrail Puamagrun








lo the Government, with respect to the Contractors payment obligations pursuant to


clause 10,5.4 (such obligation of the Contractor, the "Second Sub-Period Guaranteed


Amount*}.


*M II a Contractor Entity does not have an ultimate parent company, the


Government the Contractor Entity shall cause a controlling beneficial


shareholder or other Person with sufficient credit Quality In the opinion of the


Government and otherwise acceptable to the Government to be a party to


such Guarantee.


til If the Government does not receive such guarantee within JO days fallowing


start of the Second Sub Period as provided In this clause 9.2. the Government


may notify the Contractor to suspend all operations In the Contract Area until


the requirements of this clause 91 have been satisfied.





G»» PlAtl GUAHANtllt


« 1 tach Contractor Entity shall deliver such guarantees or other form of credit as are


required In respect of any gas sales and purchase agreement entered into among the


Parties for the sale of Natural Gas to the Government or any other Person.








Accission


*.4 In the event of an Assignment by a Contractor Intit* to a third party in accordance with


clause 39, an ultimate parent company ol such Assignee acceptable to the Government


must accede to the applicable guarantee, effective as of the effective date of the


Assignment, as a condition precedent to the approval of the Assignment by the


Government.








Clause 10 - Minimum Exploration Work Obligations


Commencement


10.1 The Contractor shall start Exploration Operations within 30 days of the Management


Committee's approval of the Exploration Work Program and Budget in accordance with


clause 3.


Minimum Woni ObiiQauons


10.7 The Contractor shall perform geological, geophysical and drilling works as provided


under clauses 10.3 ffint Sub-Period) and 10.4 (Second Soft Period| (such works, the


"Minimum Exploration Obligations''!.


fiHSt Sua-Ptmoo


10.3 Subject to clause 10.S [Qualifications). during the fust Sub Period the Contractor shall


(a) carry out geological and geophysical studies, comprising:


(1| the compilation of a technical database;


(2| the performance of a remote sensing study; and


(3| a field visit to verify initial geological and geophysical work and remote


sensing results and plan for two dmienslonol seismic acquisition; and








3G


 PtoPutlion itaru\g Coauact Puamogiun








(b) perform field work comprising structural, stratigraphic and lithologic mapping


and sampling;


(c) acquire, process and interpret 150 line kilometres of two dimensional seismic


data, or n three dimensional seismic data program by agreement between the


Parties, committing for this purpose a minimum financial amount consistent


with Best Practices and commensurate with market conditions in the Kurdistan


Region for seismic services; and


(d) drill one Exploration Well (the "first Exploration Weir), including testing and


coring as appropriate, and commit for this purpose a minimum financial


amount of USSIS.000,000


Sicunu Sua-Piaioo


10.4 If the Contractor has notified the Government that the Contractor will enter into the


Second Sub-Period in accordance with clause 6 9 (fxpirotion of Exptorotioo Period).


then, subject to clause 10.5 (Qua/i/i'catrons). during the Second Sub-Per od the


Contractor shall:


(a) acquire, process and interpret further seismic data (being either two


dimensional or three dimensmnal). if the Contractor considers that the results


from the first Exploration Well paitify the acquisition of further seismic data;


and


(b) drill one I.pk.rat.on Well (the 'Second Exploration Weir), including testing


and cormg as appropriate, jnd commit for this purpose a minimum financial


amount of USS15,000,000, unless the Data from the first Exploration Well


demonstrates that there Is no reasonable technical cose lor drilling the Second


Exploration Well In the Contract Area


QUAUMCAIONS


10.i In respect ol the Minimum Exploration Obligations under clauses 10.3 and 10 <1, this


clause 10.S applies.


10.S.l The Contractor shall satisfy the Minimum Exploration Obligations for a Sub-


Penod, even if satisfaction will require the Contractor to spend more than the


Minimum financial Commitment for such Sub-Period


io.s.j If the Contractor has satisfied Its Minimum Exploration Obligations for a Sub-


Period without having spent the total Minimum Financial Commitment for such


Sub-Period, the Contractor will be considered to have satisfied its Minimum


Exploration Obligations for such Sub-Period


lot.I If this Contract is terminated during the First Sub Period, and if the Contractor


has expended less than US$15,000,000 as required by clause 10.3(d), and if


clause 10.S.2 or clause 10.5.6 ,s not applicable, then thr Contractor shall pay


the Government an amount equal to the difference between (x| USSIS.OOO.OOO


and

Plan and Budget in respect of the Minimum Work Obligations for the First Sub


Perod The Contractor shall make such payment on the Termination Date, and


the Contractor's obligation to make such payment will survive termination of


thrt Contract.


 r-04»t<>c» Cocliaa Piiomogtun








HI* If thn Contract a MWilrt d-'«*<« !*• Second Sub Per«*3. and i the





10.4J6). and if clause 10.S 2. clause 10 Si,e* 10 S • n a« appfcable. then the


between (■) USSIS.000.000 and (*) the amount Mittal* expended in





accordance with the Approved Work Plan and lodge! m respect of the


Minimum Work Obligations for the Second Sub Period. The Contractor shall


make such payment on the Termination flat", and the Contractor’s obligation


to make such payment will survive termination of this Contract.


The Contrattor shall drill each Exploration Well to Ihe depth set forth in the


10.S.S


Approved Iiploration Work Program, unlett


(a) formation is encountered at a letter depth than originally anticipated;


(b) basement is encountered at a letter depth than originally anticipated;


(c) in the Contractor*! reasonable opinion, continued drilfcig of the


Exploration Well is too haratdous because ol abnormal or unforeseen


conditions;


(d) it is impractical to continue drilling with the Contractor's Assets,


because insurmountable technical problems have been encountered


(e) Petroleum formations have been encountered, penetration of which





Exploration Well cannot be drilled to the depth required by the


Approved Exploration Work Program.


(f) the Governmenl and the Contractor agree to terminate the driling


operation; or


fgl the Government confirms that the drilling obligation has been fulfilled.


io.»» If the Conttactor stops dulling lot any of the reasons set forth in clause 10.S.S:


(*» the Exploration Well will be considered to have been drilled to the


depth required by the Apptoyed exploration Work Program; and




Well win be considered to have been satisfied.


Any geological or geophysical work carried out or any seismic data acquired,


processed or interpreted or any Exploration Well drilled or any other work


performed In excess of the Minimum I tploratlon Obligation! and any amounts


spent In excess of the total Minimum 1 inancial Commitment In any given Sub-


Period, shall be carried forward to Ihe next Sub-Period or any extension period


and shall be taken into account to satisfy the Minimum E xplotation Obligations


and the total Minimum financial Commitment lor such subsequent Sub-Period


or extension period.


Exploration Oblations performed m the first Sub-Period »l


‘•A* The Mnn.it

















38


 P'Oijit'GO Star*e Contract Piamnjmrt








(j) lo the •■lent, m the Fint Sub Period, the Contractor has performed


the Minimum Exploration Obligations required for the Second Sub-


Priod. and


lb) if the Contractor has notified the Government that the Contractor enH


enter into the Second Sub Period m accordance with clause 6.8.








Clause 11 - Exploration Work Programs


GtnttAi





11.1 Within 90 days folQ«mg the Effective Oate. the Contractor shal prepare and submit to


the Management Committee a proposed work program and budget m respect of


Eiploraton Operations (the 'Exploration Work Program and Budget*) for the


remainder of the Calendat Year.


11.2 Thereafter, no later than 1 October in each Calendar Year, the Contractor thaB submit a


proposed laploration Work Program and Budget to the Management Committee lor the


following Calendar Year.


11.3 The Contractor shall not conduct any Exploration Operations unless there is an


Approved Exploration Work Program and Budget.


Otius





11.4 Each (iploration Work Program and Budget shall include details of. but not Be limited


lo, the following:


(a) work to Be undertaken;


(b) materials, goods and equipment to be acquired;


(c) cost estimate of services to be provided. Including services by third parties


(including Affiliates of a Contractor Entityl; and


(d) estimated expenditures, broken down by cost centre in accordance with the


Accounting Procedure.


ArrnovAi av M*ka6(mi*i Cuwwntit





11* The Management Committee shall meet within 60 days following its receipt of


Contractor's proposed Exploration Work Program and Budget, and either approve,


approve with conditions, or reject the proposed Exploration Work Program and Budget


II 6 WUhin such 60 day period, the Government may notify the Contractor of any


modification to the proposed Exploration Work Program and Budget requested by the


Government, and the Contractor shall promptly notify the Government of the


Contractor's comments to the Government's requests.


11.6.1 If there Is a deadlock In respect of the approval of a proposed Exploration Work


Program and Budget, then clause 8 19 will apply.




















39


 *0*Wf*A SAftSMf C---tttct tm








Clause 12 - Discovery: Appraisal: Development





Drscovm Ri»o«t; Rumoun-vtht


12.1 The Cor.trjttor shall notify th* Government of a Oniover. within 41 hour* of


completing tests confirming the presumed emtence of the Dim Over*.


12 2 WUhin 30 days fobowing notification of the Oncovery to the Government pursuant to


clause 12.1. the Contractor shal debver a comprehensive report (the 'Oiscovery


Report"| to the Management Committee and the Government The Oncovery Report


must detail al technical Data then available to the Contractor together with:


(a) the Contractor's opeuon on the commercial potential of Ihe Discovery, and


(b) a statement as to whether the Contractor |I) intends to conduct Appraisal


Operations with respect to such Oncovery. (2) w!R request an extension


pursuant to clause 6. or (1) both of the foregoing


I1J.I The Contractor shall promptly provide such other information relating to the


Oncovery as the Government reasonably requests.


»lI H the Contractor notifies the Government m the Oiscovery Report that the Contractor


does not mtend to conduct Appraisal Operations, the Contractor shall send a not*e of


relmqunhment to the Government wrthm not more than 10 days foRowmg the date of


the Discovery Report.


il.l t In such notce of relmqunhment. the Contractor mutt provide 30 days' notice


lo Ihe Govcrnmen! of the relinquishment of an area contammg. al a mm>mum.


Ihe geological structure or feature in which the Discovery was made


12.1.2 Such relinquishment will be effective as of the last day of such 30-day notice


period and will be credited to the Contractor's mandatory relinquishment


obligations under clause 7.1.


ll.t.i If Ihe Contractor fails to deliver a notice of relinquishment as provided in this


clause 12.3. an area containing, at a minimum, the geological structure or


feature in which the Discovery was made will be considered relinquished as of


the 90” day fallowing the date of the Oiscovery Report.





Annhaisai Wokk Phooicam «*o Buodtr


12.4 If the Contractor has stated an intention in the Discovery Report to conduct Appraisal


Operations, within 60 days following the dale of the Discovery Report the Contractor


shall submit to both the Management Committee and the Government the Contractor's


proposed Work Program for Appraisal of the Discovery |the 'Appraisal Work Program*)


and proposed Budget with respect to such proposed Appraisal Work Program.


U«l The Contractor shall include in such proposed Appraisal Work Program:


(a) the area to be Appraised (the 'Appraisal Area'), the surface of which


may not e«ceed tsvice the surface of the geological structure or


prospect to be appraised; and


(b) the date the Contractor will start Appraisal Operations and the dale


the Contractor expects to complete Appraisal Operations.


 Production ihanng Contract Plro/nagru/i








12.4.2 The Management Committee and the Government mint comp ete their


respective review of the proposed Appraisal Work Program and Budget within


30 days of its receipt by the Management Committee arid the Government.


12*4_J If the Government requires any modification to the proposed Appraisal Work


Program and Budget, the Management Committee shal meet to discuss the


proposed Appraisal Work Program and Budget and the requeed modifications


thereto withm 60 days from As receipt of the Government's required


modifications


12.4.4 If the Management Committee does not receive a proposed Work Program and


Budget for Appraisal Operations within 60 days after the date of the Discovery


Report, at any time thereafter thr Government may send a notice to the


Contractor setting forth that the Discovery will be considered as relinquished as


of the date set forth in such notice (which may not be less than 30 days), unless


the Management Committee has received a proposed Work Program and


Budget for Appraisal Operations.


12.4.4 If the Management Committee has not received such proposed Work Program


Budget for Appraisal Operations within the period set forth in the notice from


the Government to the Contractor as set forth in clause 12.4 4, the Discovery


will be considered relinquished as of the last day of the notice period (subject


to clause 40 (Force Mojeur*)).


AerMAisai Rironi and Diciaraiions


II I The Contractor shall subm.t »is Appraisal Report to the Management Committee within


90 days following completion of the Approved Appraisal Work Program.


I* 4 Together with its Appraisal Report, in respect of each Discovery the Contractor shal


submit a declaration to the Management Committee specifying that the Contractor has


concluded one of the foBowmg:


(a) the Discovery is a Commercial Discovery of Crude Oil:


lb) the Discovery is not a Commercial Discovery of Crude Oil or a Discovery of a


Gas F«ld;


(C) I he Discovery is a Discovery of Crude Oil that may become a Commercial


Discovery of Crude Od. sub|ect to additional Exploration or Appraisal within or


outside of the Appraisal Area.


Id) the Discovery is a Gas Field and stating that the Contractor either intends to (1)


submit a Gas Field Molding Period Application in accordance with clause 14.8


IGos FieM Molding Period Application), or (2) the Contractor is refasquishmg the


GasFwId


U 1 If. with respect to a Discovery the declaration of the Contractor pursuant to clause 12.6


H that:


(a) the Discovery is not a Commrrciaf Discovery of Crude Oil or a Discovery of a


Gas Field, then clause 7.3 will apply: or














41


 Production Sharing Contract PitaniOQiun








(b) the Discovery is a Discovery of a Gas field, and the Contractor intend* to


submit a Gas Field Molding Period Application in accordance with clause 14


{Nolutal Goal, then clause 14 will apply.


12.8 If, with respect to a Discovery the declaration of the Contractor pursuant to clause 12.6


is that the Discovery is a Commercial Oucovery of Crude Oil or that the Oiscovery may


become a Commercial Discovery of Crude Oil subject to additional Exploration or


Appraisal within or outside of the Appraisal Area, then the Government shall examine


the Appraisal Report and any studies, conclusions, and other Data that it may obtain


within a reasonable period o* time, taking into account the declaration submitted by the


Contractor in accordance with clause 12 6


12-8.1 The Management CommAtee and the Government may each obtain opinions,


reports and studies, including a feasibility study, from independent third


parties.


12-8-2 If. in the view of each of the Maisagement Committee and the Government, the


results of the Appraisal Report, studies or independent third party opinions


confirm that the Discovery is a Commercial Discovery of Crude Oi. then, unless


the Contractor has termesated the Contract or eaercised its rights to


relinquishment, the Management Committee thal eAher:


(a) in the case of a Commercial Discovery, declare a Commercial Discovery


of Crude 04 and instruct the Contractor to submit a proposed


Development Plan m accordance w«h clause 12.9; or


(b) subject to Clause 24 iUmtnohon). m the case of Discovery that may


become a Commercial Discovery subject to additional I iploratxsn or


Appraisal within or outside of the Appraisal Area. Instruct the


Contractor to submit its proposed Appraisal Work Program and Budget


to the Management Committee within 30 days.





Divttoi'Mtrat Plan - Cnuot On


12 0 If the Management Committee has declared a Commercial Discovery of Crude Oil


pursuant to clause 12.8. the Contractor shall submit a proposed Development Plan for


Crude Oil to the Management Committee and the Government within 180 days


following the date of the Appraisal Report submitted pursuant to clause 12.5.





12 10 The Government shall endeavour to complete its review of the Contrattor’s proposed


Development Plan within 60 days after receipt of such plan by the Government


12.10.1 The Development Period for each Commercial Discovery within a Development


Pljn will be extended for the number of days in excess of such 60 diy period


that it takes for the Government to approve the Development Plan


12 11 If the Government requests any modifications to the Development Plan, and If the


Contractor notifies the Government of any objections or has other concerns with any


such requested modifications, then the Government and the Contractor shall meet at


soon as practical to attempt to reach agreement on a Development Plan.


12.11.1 The Contractor and the Government shall endeavour to have such meeting in


all events within 60 days of receipt by the Contractor of the Government's











42


 written notification of requeued modification* accompanied by all the


document* juitifymg *uch rcqueU.





11.11.1 If the Contractor and the Government are able to agree on change* propoted


by the Government or any other modification*, and there arc no further


requeued change* on the part of the Government, the Contractor *hall


formally lubmit the agreed Development Plan to the Management Committee,


and the Management Committee *hall promptly approve the Development


Plan.


ti ll If the Contractor doe* not deliver a Development Plan in accordance with clau*e 12.9,





the Government may *end the Contractor a warning notice that the Contractor i* In


breach of t lame 12.9 and that failure to comply within 30 day* from the date of *uch


notice can retult in relinqulihment of an area containing, at a minimum, the geologn.il


itructure or feature in which the Di*covery wa* made.


11.11.1 If the Contractor doe* not deliver a Development Plan in accordance with


claute 12.12, the Government may *end the Contractor a notice that the


Contractor i* in breach of clause 12.9 and that failure to comply within 15 day*


from the date of luch notice will re*ult In relinqui*hment of an area containing,


at a minimum, the geological itructure or feature in which the Discovery wa*


made.


11.11.1 If the Contractor doe* not deliver a Development Plan in accordance with


claute 12.12.1, an area containing, at a minimum, the geological structure or


feature In which the Discovery wa* made will be convdered relinquished a* of


the IS'"' day lobowing the date of the notice *ent m accordance with claute


12.12.1.


Clause 13 - Development work Program





Gc*t*«i





1U The Contractor shall perform Development Operation* m accordance with a


Development Ptan approved by the Government and the Management Committee and


an Approved Development Work Program and Budget.


is.li This clause 13 apphe* to Gat field* and Oil field*





11 1 Within 90 day* following approval ol a Development Plan by the Management


Committee and the Government, the Contractor *haU prepare and tubmit to the


Government and to the Management Committee a propo*ed Work Program and Budget


for Development Operate*** (the 'Development Work Program and Budget') to be


carried out in the Production Area lor the ripec ted duration of the Development


Operation*.


IMA No later than 1 October m each following Calendar year, the Contractor ihaB


*ubruit to the Management Committee update* m retpect ol it* Development


Work Program and Budget.








43


 Production iharwq Contract Pirnmoon/n








nil Inch Develoqmcnt Work Program and Budget shall Include detail of the


following:


(a) work* to Be carried out;


(b) Asset* and Material* to be acquired;


(c) service provider* and services to be provided by third partle* and


Affiliate* of a Contractor Entity;


Id) in the ca*e of no production, the estimated ttart date for production;


and


(e) expected Petroleum Costs.


13.3 If the Government con*ider* that modifications must be made to the Development


Work Program and Budget:


(a) the Contractor shall communicate its comments on any such requeued


modification* to the Government as promptly as reasonable; and


(b) the Management Committee shall meet to diicuss the Development Work


Program and Budget and the Government's proposed modifications thereto


within 60 day* from its receipt of the proposed Development Work Program


and Budget


Pnoouctio* Work Paooa»M ano Buooti


13 * No later than 1 October of the Calendar Year preceding the estimated start date lor


production as set forth in an Approved Development Plan, and thereafter no later than 1


October in each Calendar Year, the Contractor shall prepare and subm.t to the


Management Committee a proposed Work Program for Production Operations Ithe


Production Work Program and Budget") for ;n» follow -sg Cu> dar Year.


1M1 To enable the Management Committee and the Government to forecast


Petroleum Costs, the Contractor shall include details of the following n the


proposed Production Work Program and associated Budget:


(a) works to be carried out;


(b) Assets and Materials to be acquired.


(c) type of services to be provided, distinguishing between thud parties


and Affiliates of Contractor Entities; and


(d) all expected Petroleum Costs.


13.5 If any modification to a proposed Production Work Program and Budget or Approved


Production Work Program and Budget is requested by the Government, the


Management Committee shall meet to discuss the Production Work Program and


Budget and proposed modification* thereto. The Contractor shall communicate its


comments on any such requested modifications to the Government prior to such


meeting.


P«00UCII0N RtNVAl


li b From the flrtt day of First Production from any Production Area (whether in respect of


an Oil Field or a Gas Field) in the Contract Area, the Contractor shall pay to the


 PmM* rw* vt'*4 Coe tract PWumognrA








Government. «s i'imti, an annul surface rental l 'Production Rental*) for the Contract


Area, ol US$100 00 per square kilometre per Contract Tear The Contractor shall pay the


Production Rental on the (irst day ol the first Month following First Production and


continuing thereafter on each anniversary thereof Production Rental payments will not


be Cost Recoverable.








Clause 14 - Natural Gas


DiriNinoNs


14.1 As used in this Contract:


'Approved Domestic Gas Marketing Work Program and Budget" is a Work Program for


Domestic Gas Marketing Operations and associated Budget that has been approved by


the Management Committee and the Government.


"Approved Gas Field Appraisal Work Plan and Budget" means an Approved Work Plan


and Budget for the Appraisal of a Gas field.


'Domestic Gas Marketing Operations' means Gas Marketing Operations solely in


respect of the Domestic Market for Natural Gas. In all events carried out pursuant to and


in accordance with an Approved Oomestic Gas Marketing Work Piogram and Budget.


'Domestic Gas Plan* means a plan for the sale or other disposition of Natural Gas to the


Domestic Market.


'Domestic Market" means sales or other gas protects with " the Region where the


entirety of the Natural Gas is Intended for consumption with.n Iraq


'Export Gas Marketing Operations' means al Gas Marketing Operations m respect ol


an Export Market for Natural Gat.


‘Export Market' means sales ol Natural Gat. 'Cludmg lor transportation outside ol the


borders ol Iraq, whether the dehvenes or po

borders ol Iraq where the ultimate destesation ol the volumes sold is outside ol Iraq A


sale to the Government (whether directly or indirectly through a Pubic Company or


other Alllllate ol the Government designated by the Government)meet>nc the


loregoing criteria will be within this dellnltiors.


*Gas (upon Plan' means a plan lor the sale 01 other disposition ol Natural Gas to an


0>port Market, including a sale of Natural Gas to the Government, a Public Company, or


otherwise, in accordance with a gas sales and purchase agreement with the Contractor


Entitles, at proposed by the Government.


'Gat Marketing Operations' means any activity relating to the evaluation ol markets or


projects lor the potential delivery, sale, processing, compression, and transportation ol


Natural Gas, including evaluations ol potential markets and projects, the quantities ol


Natural Gas that could be sold, delivery specifications and requirements, production


costs, transportation arrangements, and all other activities generally relevant to the


Identification ol a sale or other disposition of Gas from the Contract Area, and Includes


such activities as they may relate to Gas from other Natural Gas producers In the Region.


 Production Shoring Coni'ait Piromooiu/i








"Gas Marketing Operations" dans not Include the actual entry mto .my contract or


contracts (or the sale, dedication, designation, commitment, or other disposal of Gay


(tom in* Contract Area








IW>M


,4.J Thu (Uum >4 applies to (a} Gat (including Attociated Gail from the Contract Area and


(trial Gat fields.


14.3 K technically and economicaly justified. and subject to clause 14.6, the Contractor may


(reely use Gat that it produced from the Contract Area for Petroleum Operation* m


accordance with an Approved Work Plan and Budget.


14.4 If technically and economically justihnd. the Contractor thall, in priority, uie Aiiodated


Got (tom an Oil field in an Oil field for the purpose of enhancing recovery of Crude Oil In


accordance with Best Practices.


14.3 The Contractor Entitles each acknowledge that it it in their interest to sell, dedicate,


designate, commit, or otherwise dispose of their respective entitlements to Gas


produced (torn the Contract Area on a |olntly dedicated basis together with the


Government.


U.t.l Notwithstanding the lilting entitlements of a Contractor Entity under this


Contract, a Contractor Entity shall not land is not authorised to| sell, dedicate,


designate, commit, or otherwise dispose or ship its entitlement to Gai. except


on a jointly dedicated basis together with the Government.


ta.s.i A Contractor Entity *>»U not lard it not authorised to) to sei. dedsate.


designate, commit, or or otherwise dispose of or ship the Government's o*


Government Interest Holder's entitlement to Gas.


!•-» « Neither the Government, nor a Government Interest Holder has any right to


sei. dedicate, designate, commit, or or otherwise dispose of or ship a


Contractor Entity's entitlement to Gas. except, m the case of Associated Gas. as


provided in clause 14.37.


laA.a Jhe Government controls and determeses the interests of each Government


Interest Holder m respect of the sale, dedication, designation, commitment, or


other disposal or shipment of Gas. A Government Interest Holder shall not


commit, or otherwise dispose or ship its entitlement to Gas (and no


Government Interest Holder it authorised to sei. dedicate, designate, commit,


or otherwise dispose of or shg, Us entitlement to Gas|. except on a jorntly-


dedicatrd basis together with the Government


»«»» No Contractor Entity isobhgated to sei. ded«ate. designate, commit, or


otherwise dispose of or ship its entitlement to


(a) Non Associated Gas to the Government or any other Person, except


on such terms as are acceptable to the Contractor Intdyr. or


(b) Associated Gas to the Government or any other Person, except as


provided m clause 14.37.














46


 *O0.«CI*A c««riser - Pva-oprurs








llti The Government mil not sell, dedicate, designate, commit. o> otherwise


dispose of or sh* its entitlement to Gas (me hiding. M respect of the


Government, pursuant to clause 12 1U except on a |Otntly dedicated bans


together with the Contractor Int.tws


I4».» The Government may * «"v time by not

Field or Gas r.elds as exclusively dedicated and reserved for the Domestic


Market or the Export Market.





14.s.a Nothing In this Contract prohibits the Government from inviting the Contractor


Entitles to participate In any Person organised to undertake all or any part of a


Gas Ixport Plan or Domestic Gas Plan.





flAHIKO


ia.6 flaring of Natural Gas Is prohibited, except:


(a) in accordance with an Approved Work Program and applicable Permits; or





(b) in ari emergency.


14 7 The Contractor shall submit any request for a Permit for flaring to the Government.


14.7.1 The Contractor must Include in such request for a Permit:


(a) an evaluation of reasonable alternatives to flaring that have been


considered by the Contractor together with information on the


expected amount and quality of Natural Gas to be flared and the


proposed duration of the requested flaring; and


(b) its consideration a«d plant for taking ad commercially reasonable


measures to ensure the extractors of natural gasoline and other


liquids from Associated Gas to be flared


>4 11 The Government may refuse to grant such Permit m the Government's sole





discretion, including in circumstances where the request reasonably shows that


flaring would be in the economic interest of the Parties or is necessary for the


production of Petroleum, and the Government has no implied duty to provide


any Permit for flaring.





1«A If the Contractor submits a declaration in accordance with 12.6(d) in respect of a





Discovery of a Gas Field, the Contractor may. not less than 90 days thereafter, submit a


written application (a ‘Gas Field Molding Period Application*) to the Government to


hold such Discovery as a Gas Field for a penod at set forth in clause 14.10.


14.a.l The Contractor will not be entitled to submit a Gas Field Molding Period


Application in respect of a Gas Field after the It" anniversary of the Effective


Date, and the Government will have no obligation or duty, and no implied


obligation or duty, to consider a Gas field Holding Period Application received


after such date or to grant a Gas Field Holding Period with respect thereto.


14.4.7 If the Contractor does not submit o Gas Field Holding Application within such


90-day period, and effective as of the 120”’ day following the date the











47


 rtoajcx-an Ster**q Coetiaa Piamtgiu*








Contractor luBotillfd Its Appraisal Report and declaration in accordance with


clause 12 6

(al lh* entire Contract Area when there Is no other Discovery and no


taploration Operations: or


(b) the structures containing the Gas Field, when the Contract is entitled


to conduct further EipOration Operations or there o a Discovery


14 * The Contractor must include In a Gas Field Holding Period Application:


the proposed delineation and related surface area of the Gas Field;


(a)


(b) the estimated reserves In the Gas Field:


(e) a proposed Gas Fwld Appraisal Work Plan and Budget, if either: (II the


Government has notified the Contractor that the Government requires


additional Appraisal Operations, or (2) the Contractor wishes to undertake


further Appraisal Operations; and




Government has notified the Contractor that the Gas Field has been designated


14.» I by the Government as exclusively dedicated for the Domett* Market


Nothing m this clause 14.9 precludes the Government from instructing the


Contractor to prepare a Domestic Gas Marketing Work Plan and Budget at a


late- date





Gas Fltio HocOiNQ Pl»»00


14 10 Upon the Government's approval of a Gas field Molding Application and additional


submissions in accordance with clause 14.9, the Contractor will be entitled to hod the


subject Gas Field lor a period as set forth by the Government In a notice to the


Contractor setting forth Its approval of a Gas field Holding Period Application (such


period, as it miry be shortened or extended In accordance wdh this Contract, the “Gas


field Holding Period*) as set forth in clause 14.11


14 ll The Government shall set forth a Gas field Holding Period It accordance with this clause


14.11.


14.11.1 If the date the Contractor has submitted a Gas field Molding Application is


before the S" anniversary of the Effer Uve Date, then the Government shall


provide a Gas field Molding Period of four years (such period terminating on


the 9" anniversary of the Effective Oalel


14.11.2 If the date the Contractor has submitted a Gat field Molding Application Is on or


after the 5" anniversary of the Effective Date and before the 6" anniversary of


the Effective Oote. then the Government shall provide a Gas Field Molding


Period of three years (such period terminating on Ihe 9” anniversary of the


Effective Date),


14.H.I If the date the Contractor has submitted a Gat field Molding Application Is on or


after Ihe 6*' anniversary of Ihe Effective Dale and before ihe 7"' anniversary of


Ihe lifer live Dole, then the Government shall provide a Gas field Holding


 Plixljcl-oo JH'







Period of two yean (such period terminating on the 9'* mwMrr of the


Effective Date}.


14.11.4 If the date the Contractor ha* submitted a Gas field Holding Application is on or


after the 7n anniversary of the effective Date and before the ann.versary of


the effective Date, then the Government shall provide a Gas field Holding


Period of one year (such period terminating on the 9 anniversary of the


effective Date).


ini) If the date the Contractor has submitted a Gas f *eld Ho Id mg Application

after the 8" anniversary of the effective Date. In accordance with clause 14 8 1


the Contractor will not be entitled lo a Gat field Molding Period


14.12 If the Contractor submits a declaration in accordance with 12.6(d) in respect of


subsequent Oiscovenes of Gas fields, the Contractor may in respect of each such


subsequent Oocovery and not less than 90 days thereafter, submit Gas field Molding


Period Application lo the Government to hold such Discovery as a Gas field within the


enisling Gat Held Molding Period.


14.11.1 The Contractor must include in such Gas field Molding Period Application the


some information as provided in clause >4.9,


14)1.1 The Contractor is not entitled to separate Gat field Molding Periods for each


Gas field, and is entitled to only one Gas field Holding Period for all Gas fields.


14)1.1 If the Contractor does not timely submit a Gas field Molding Period Application


In tespect of an additional DivcovttY of a Gas field, such Discovery of a Gas


field •« not be entrtled to a Gas field Molding Period





Gas fuo Hocoma Ptaioo fUniAi


14.13 from the first day of the Gas field Molding Period until eipiry of the Gas field Holding


Period, the Contractor tha« pay to the Government an annual surface rental for that


portion of the Contract Area that is subject to the Gas field Holding Period of US$10.00


pet square kilometre per Contract Year (the 'Gas field Holding Period Rentari


14)11 The Gas field Molding Period Prntal is due and payable as arrears on or before


each anniversary of the Iffectrve Date and on the last day of the Gas f ield


Molding Period or termination of this Contract (whichever is ear her), and is


subject to proration Ms any Contract Year during which there has been a


relinquishment or ripay of the Gas field Molding Period, based on actual


number of days m such Contract Year.


14)S) Gas field Holding Period Rental wii not be Cost Recoverable.


£»aiT Tiiu.v.1 ics anoRtUNQUiSMMlNl


14.14 If the Contractor fails to undertake and complete all work contemplated by and in


accordance with an Approvrd Gas field Appraisal Work Plan and Budget with respect to


a Gas field, the Government may provide not less than 90 days’ prior notice (a 'Notice


of Early Termination of Gas field Molding Period*) to the Contractor that the Gas field


Molding Period will terminate at the end of such 90-day notice period, unless the











49


 Production Staring Confrnrl Piramagrun








Contractor completes. within such period, all such required work In accordance with the


Approved Gas Field Approval Work Plan and Budget.


14.14.1 In any such notice of termination, the Government must provide reasonable


detail of ail work that the Government considers that the Contrar tor has not


completed.





GoVltNMINI PHIOHII* Riohis


I4.lt The Government (directly or indirectly through a Public Company or an Affiliate of the


Government designated by the Government, or other designee of the Government! has


the reclusive tight:


(a) to conduct all Export Gas Marketing Operations with respect to Natural Gas;


and


(b) to purchase for resale to Export Markets the entitlement of each Contractor


Entity to Natural Gas.


14 ill The Contractor shall not (and each Contractor Entity shall not and Is not


authorised to:


(a) conduct any E«port Gas Marketing Operations, or


(b) enter into any agreements for the sale, designation, dedication,


commitment, or other disposal of Natural Gas to Export Markets,


except to the Government (directly or indirectly through an Atf at* of


the Government designated by the Government or o«n*r drs rre of


the Government).


14.16 The Government has no obligation to fnd an I .port Market for all or any Natural Gas


produced from the Contract Area.


14.16.1 The Government will incur no kabibty whatsoever to the Contractor or to any


Contractor Entity or to any Government Interest Holder, if the Government


does not provide a Gas C.port Plan that n acceptable to all other Parties.


14.17 Except as provided as clause 14 17 I. all expenses meurred by the Government in


respect of Export Gat Market mg Operations are solely for the account of the


Governnsent.


14-17.1 The Contractor shah reimburse the Government for all expenses incurred by


the Government in its conduct of Export Gas Marketing Operations:


(a) within JO days after receipt of an invoice therefor; and


(b) provided that the Parties have signed a gas sales and purchase


agreement


Mill Payments made by the Contractor to the Government pursuant to clause


14.17.1 w* be Cost Recoverable


14.18 The Contractor shall provnJe an assistance reasonably requested by the Government


with respect to the Government's Eaport Gas Marketing Operations.


14-ia.i Expenses incurred by the Contractor in providing assistance to the Government


in accordance w*h thn clause 14 18 wdl only be Cost Recoverable if such








50


 "icduttiae ferns:: p«31*■!«!<.«








expenses are ."eluded m an Approved Work Plan and Budget. o*. if such


expenses are not included m the Approved Woek PUn and Budget or exceed the


amounts set lorth ui the Approved Budget, as provided in clauses 14.18.2 or


14.18.3.


h ii i Individual lino-Item e«ponses In any Calendar Year of more than that set forth in


the Aoproved Budget but less than 10% over such line-item amount will be Cost


Recoverable, if the Contractor has notified the Government of all such expenses


as soon as practical.


ta • Individual line-item expenses in any Calendar Year of more than 10% of the line


item amount set lorth in the Approved Budget will only be Cost Recoverable only


if each such line item expense of more than 10% is approved by the Government


before the expense Is incurred, unless the Government othersvise agrees


Domisue G*s Mahxiiing Oi'ihahons


14.19 The Contractor and the Government:


(a) are each entitled to conduct Domestic Gas Marketing Operations, and


(b) shaB cooperate and coordinate in their Domestic Gas Marketing Operations.


14 20 Expenses incurred by the Contractor in its conduct of Domestic Gas Marketing


Operations aril only be Cost Recoverable if such costs are escluded in an Approved


Domestic Gas Marketing Work Program and Budget.


lull Al expenditure incurred by the Contractor in the performance of Domestic Gat


Marketing Operations pursuant to an Approved Domestic Gas Marketing Work


Program and Budget will be Cost Recoverable.


14,10.1 The Contractor shall Include In each proposed Domestic Gas Marketing Work


Program all details at required by Government, including:


(a( works to be carried out;


(b) type of services to be provided, distinguishing between third parties


and Affiliated companies of each Contractor Entity; and


(c) categories of general and administrative expenditure


14.10> No later than 1 October of the Calendar Year preceding each Calendar Year In


which the Contractor proposes to conduct any Domestic Gas Marketing


Operations, the Contractor shall prepare and submit lo the Management


Committee and the Government a proposed Domestic Gas Marketing Work


Program and Budget for the following Calendar Year


14.20.4 If the Government requests any modification to the Domestic Gas Marketing


Work Program and Budget, the Government and the Contractor shall meet to


discuss the proposed Domestic Gas Marketing Work Program and Budget and


proposed modifications thereto promptly alter the Contractor's receipt of the


Government's requested modifications of the proposed Domestic Gas


Marketing Work Program and Budget. The Contractor must communlcatr its


comments lo the Government in respect of any modifications requested By the


Government before such meeting.


 Production Sharing Conducr Piiamagtvn








14.jos It the Government and the Contractor are not able to agree on the


modifications proposed by the Government. e>censes incurred by the


Contractor wall not be Colt Recoverable


lijl* Individual line-time expenses in any Calendar Year of more than that set forth





in the Apsroved Budget but less than 10% over such line-item amount will be


Cost Recoverable, if the Contractor has notified the Government of all such


expenses as soon as practKal.





j4«r» Individual line-item expenses in any Calendar Year of more than 10% of the


Sne-item amount set forth in the Approved Budget will only be Cost


Recoverable only if each such line-item eipcnse of more than 10% is approved


by the Government before the expense 0 incurred, unless the Government


otherwise agrees.





Neither the Government, not the Contractor:


(a) has any oblation to find a Domestic Market for Natural Gas produced from


the Contract Area; or





(b) w* incur any fcabifcty whatsoever to any Party (or any Government Interest


Holder), if such Party does not provide a Domestic Gas Plan that is acceptable


to all other Parties.





14 22 Thr Contractor is rot obligated or otherwise responsible for a-'r eiper d lure incurred by


the Government in the Government's conduct of any Domestic Gas Marketing


Operations.





CoNSiDtMtioN Of Gas DiscotitiON Piahs- Earoat ano DowittK


14.11 Neither the Contractor, nor tho Government has any obbgation to agree to any Gas


Export Plan or Domett* Gas Plan proposed by the other Party.


itjtj The Contractor and the Government must both agree on any Gas ( 40041 Plan or


DomestK Gas Plan.


14.2S-2 A Government Interest Holder has no right to evaluate, consider, or otherwise


approve a Gas Export PUn or a DomestK Gas Plan, and each Government


Interest Holder will be bound by the decision of the Government and the


Contractor with respect thereto


14.2* The Government has no obligation to consider any Domestic Gas Plan proposed by the


Contractor, unless the Government has designated a Gas fiefd as exclusively reserved


for the Domestic Market.


14.24-1 No provision of this Contract prohds.ts the Government from considering and


approving a Domestic Gas Plan proposed bv the Contractor.


14.25 The Parties may agree on both a Gas I iport PUn and a DomestK Gas PUn. or may agree


a DomestK Gas PUn on a standby basts M the event the Government does not propose a


Gas Export Plan.


 Production iha'U\g Contract Piiamagiun








0»\ li*o«i PlAN


14.2* The Government mutt provide a proposed gas sale and purchase agreement as pari ol


the Govcrnmcnfi proposed Gat Eiport Plan


14 *7 The Contractor wl have no! Ion than 90 days from the date that the Government first


provdri a Gas Export Plan to the Contractor I such 90-day period. as it may be eitended


by the Government pursuant to Clause 14.27.1. the 'Eiport Plan Evaluation Period'! to


evaluate the Gas Eiport Plan, make any recommendations with respect thereto, and


consider the requirements of a Development Plan that would be necessary to enable the


Contractor to determine whether Gas Eiport Plan renders a Gas Field economic for the


Contractor to develop


IDl i The Government may agree to eitend the Eiport Plan Evaluation Period for


such period as the Government sets forth in a notice to the Contractor.


1427.2 If the Eiport Plan Evaluation Period eitends beyond the last day of the Gas


Holding Period, the Gas Holding Period will be extended for such vacess days


14 21 If. at the conclusion of the Eiport Plan Evaluation Period, the Contractor and the


Government have not agreed a Gas Eiport Plan as proposed by the Government, the


Government may send a notice (a ‘Holding Period Early Termination Notice') to the


Contractor that the Gas Field Holding Period will terminate as of the date set forth in


such notice.


142* i The datr set forth in the Holding Period Earfy Termination Notice may not be


earlier than the scheduled eipiry of the Gas Field Holding Period and may not


be earlier than the *0 days after the datr ol the notice.


14.28.2 If at the conclusion ol the notice peiiod as set forth >r. the Kokh** Period I arly


Termination Notice land any c.tensions thereto provided by the Government


to the Contractor In a subsequent notice), the Contractor and the Government


have not agreed on a Gas Eiport Plan, the Gas Field Holding Period shall


terminate and all Gat Firlds sub|e«t to the Gas Field Holding Period will be then


be considered as fully relinquished to the Government.


14.28.J The Contractor and Ihc Government will only be convicted to have agreed to


a Gas Eiport Plan proposed bv the Government when the Parties (as sellers)


have signed a gas sales and purchase agreement with the Government |or any


Affiliate of the Government nr other Person designated by the Government as


contemplated by the Gas Eiport Planl as the purchaser


Domistic G*s Pian


14.29 If the Government notlf.es the Contractor that the Government has designated a Gas


Field as reserved for Domestic Markets, the Contractor shall:


(a) propose a Work Program and plan for Domestic Gat Marketing Operations and


associated Budget;


(b) carry out Domestic Gas Marketing Operations In accordance with an Approved


Domestic Gas Marketing Plan and 8udget; and


(c) propose a Domestic Gas Plan at any time.


 Production iha'Uyg Conti act PnamaQiun





14.10 II the Government has detonated the Gat field as exclusively reserved for Domestic


Markets, the Government shall give reasonable consideration to a Domestic Gas Plan


proposed by the Contractor





DtVtIOPMINt Pc«*


14.11 Within 90 days alter Government and the Contractor have agreed to a Gas Export Plan


or a Domestic Gas Plan, the Contractor shall prepare and deliver a Development Plan for


the Development of the Gas fields in the Contract Area, Including the sequencing and


timing of the development of the Gas fields and the expected first Production


corresponding to the required delivery requirements under the applicable agreed plan.


14.32 If the proposed Development Plan is not satisfactory to the Government, the


Government shall so notify the Contractor and meet with the Contractor to discuss the


proposed Development Plan.


14.33 If the Government has not approved a Development Plan within 1H0 days following


agreement of a Gas Export Plan or Domestic Gas Plan, as applicable, the Government


may send the Contractor a notice |the 'Gas Development Period Early Termination


Notice'') setting forth a date, which must not be less than 30 days from the date of the


Gas Development Period Early Termination Notice, that the Gas field will be considered


relinquished as of the date set forth In such notice unless the Government has accepted


a Development Plan for the Gas field


14.34 If at the conclusion of the 30-day notice period as set forth in the Gas Development


Pcnod Early Termination Notice land any extensions thereto provided by the


Government to the Contrac tor in a subsequent notice), the Government has not


accepted a Development Plan proposed by the Contractor, all Gas fields will Be


considered at fully relinquished to the Government- If the Contractor is not then


entitled to any rights to produce and develop Crude Oil. this Contract will thereupon


terminate.


14.IS If the Contractor does not develop a Gas field within the perods as set forth in


Approved Development Plan, subject to clause 40 (force Mojeure). the Government may


send the Contractor a Gas Development Period Early Termination Notice setting forth a


date, which must not be less than 30 days from the date of the Gas Development Period


Early Termination Notice, that the Gas field wil be considered reSrsquished as of the


date set forth In such notice.


Gas DivuohMtm Ptmoo


14.36 The approval of the Development Plan for a Gas field by the Government wiS entitle the


Contractor to retain its rights in respect of the Gas field subject to such Elevetopment


Plan for the duration of the Development Period.








Surplus AiSOCiAiio Gas


14.17 The Contractor shall, at the request of the Government on not less than 90 days' prior


notice, deliver to the Government all Associated Gas produced that is not (a) used in the


Petroleum Operations, Ib) re injected. permitted to be flared in accordance with


clause 14.6.or |d) sold in accordance svith a Gas Export Plan or a Oomestic Market Plan.











54


 Production Sharing Contiait PUamagrun








l«.IT.l The Contractor shall separate, gather, compress. and deliver Mich Associated


Gav to the Government at a delivery point at the boundary of the Contract Area


or gas protecting plant as agreed between the Government and the Contractor,


free of charge to the Government.


lUM If at any time there Is a regional main gat pipeline, the Contractor thall


transport and deliver the Associated Gas to such tie-in point as It determined


by the Government, meeting pipeline specifications, unlett it Is uneconomic.


14.IT,I All expenditures Incurred by the Contractoi up to such agreed delivery point.





Including pipeline construction and operation, compression, treatment, and


processing, will be Cost Recoverable.





14.38 the Government will be solely |a| responsible for collecting, treating, compressing, and


transporting from the agreed delivery point all Associated Gas delivered to the


Government pursuant to clause ld.JB, and |b) liable for allcotlt. expenses, and


liabilities In respect of such Associated Gas after the agreed del.very pool


14.39 Each Contractor l nlity's entitlement to Associated Gas Irons an Od field wil be


governed by the duration allowed lor the production ol Crude Od under clause 6.13 and


6.14.





Gas Pinuhts


14.40 the Contractor land no Contractor (may or Government Interest HoWerl is not entitled


to (and shall not| ship or otherwise transport Natural Gas outside of the Contract Area,


except on a joint dedicated, common stream basis with each other Contractor Entity and


the Government.


14 41 the Contractor is not authorised to construct any pipelines for the transportation of


Natural Gas to the Export Market or the Domestic Market, except in aci ordarce a


Gas Export Plan or a Domestic Gas Plan, as applicable, arid the applicable Approved


Development Plan and Approved Work Plan and Budget.








Clause 15 - Accounts; Operations


Account


1S.1 The Contractor shall maintain in accordance with the Accounting Procedure and


accepted accounting practices generally accepted in the international Petroleum


Industry and. to the extent compatible with such practices. In accordance with US


Generally Accepted Accounting Principles or International Financial Reporting Standards,


(in either case consistently applied|, at its business office In the Kurdistan Region, all


records of account and such other records in respect of the work performed under this


Contract, the costs incurred, and the amount and VJlue of all Petroleum produced and


saved from the Contract Area (the "Accounts").


The Accounts must reflect In detail all expenditure-, incurred and revenues


received.


 fioaj(l>ol> Corfreer fromsqiuft








111] The Contractor shall keep copies of the Accounts for the entee term of this


Contract.


is l I Al Accounts shall be prepared in the English language.


it i a The Contractor shall record and maintain the Accounts in USS


It i t The Contractor shall make the Accounts available at its offices •" Kurdistan


Region at all reasonable times for inspection and audit by representative! of


the Government, including independent auditors that may be employed by the


Government.


!t 2 In addition to all other reports required by this Contract, within 90 days following the


end of each Calendar Year, the Contractor shal submit to the Government a detailed


statement of |a| all Petroleum Costs incurred in respect of such Calendar Year and (b|


calculations of Prof* Petroleum pursuant to clause 26.


Iti I The reports must be accompanied by a report of RepsoTs ultimate parent


company's auditors confirming the accuracy of such statement.


It J1 The Contractor shall provide the Government with such production statements


and reports as required pursuant to clause 16.4.


Auon


IS.I The Government is entitled:


(a) to inspect and audit the Accounts with respect to each Calendar Year at any


limn within a period of five Calendar Years following the end of such Calendar


Year (the 'Audit Request Period’); and


(b) to appoint an auditor of International standing familiar with international


petroleum industry accounting practice to undertake or assist the Government


with respect to any audit.


15.4 The Contractor shall pay all coils and fees of an auditor appointed by the Government


pursuant to clause IS.3(b). which colts and expenses will be Cost Recoverable.


15.5 The Contractor thall provide all tupporting records and information requested by the


Government in tupport of a Government audit.


15.6 If. as a consequence of an audit, the Government considers that there Is significant


mistake or Irregularity in respect of the Accounts, the Government shall notify the


Contractor of such mistakes or irregularities within 6 Months following the date the


Government completes the audit. If the Government falls to notify the Contractor of any


audit exceptions within such six-month period, the relevant Accounts sub|cct to the


Government’s audit will be presumed to be correct.


15 » Within 60 days of any notification from the Government pursuant to clause 15.6. the


Contractor shall either (a) make necessary corrections, adjustments or amendments, or


(b) notify the Government of the Contractor's objections, concerns, or other comments


with respect thereto.


 Production 5hoeing Contract PiramOQwn








is.y.1 If the Contractor notifies the Government of objections, concerns, or other


comments as provided in clause IS.7, the Government shall, within 30 days


following receipt of such notice, notify the Contractor of the Government's


response to the Contractor's objections, concerns, or other comments.


15 8 Any Dispute between the Parties under clauses 15.1 through 15.7 that cannot be settled


amicably within 60 days of the Government's final notue undrr clause 15.7 is subject to


resolution by an Expert in accordance with clause 47








Clause 16 - Other Contractor Rights and Obligations


PUtMANtNI RlMfSCNTAlIVI


IS I within 90 flays following the Effective Date, each Contractor Entity shall open an office


and appoint a permanent representative in the Kurdistan Region.


Coupon 01 PitnoilUM Ofi**no*»i


in J The Contractor shall be responsible for the conduct, management, control and


administration of Petroleum Operations in accordance with this Contract.


It I In conducting its Petroleum Operations, the Contractor may use any Affiliate of each


Contractor Entity, its and their Subcontractors, and the employees, consultants, and


agents of each of the foregoing.


IhfOIMAIWN ANO Rteuits


16.4 The Contractor shall provide the Government with periodic Data and activity reports


relating to Petroleum Operations The Contractor shall include details of the following in


such period Data and activity reports:


(a) information and Oata regarding all Petroleum Operations performed during the


Calendar Year, including any quantrtwt of Petroleum produced and sold;


(b) Data and information regarding any transportation faoMies built and operated


by the Contractor:


(e) a statement specifying the number of personnel, thee title, their nationality as


weB as a report on any medical servers and equipment made available to such


personnel; and


(d) a descriptive statement of all Assets deployed since the previous report,


including aB costs assoculed therewith.


■iquwi wim roe PttioituM OnisiOM


14 S The Contractor may freely use any Petroleum produced withm the Contract Area for the


Petroleum Operations.





Suet avis ion





16 6 The Contractor shall at all times provide reasonable asvstance as may reasonably be


requested by the Government during its review and verification of Accounts and records


 Production Sharing Contract PUomagrun








and of any other information refating to Petroleum Operations at the offices, worksites


or any other facilities of the Contractor


16.6.1 Upon giving reasonable prior notice to the Contractor, the Government may


send a reasonable number of representatives to the work sites or any other


facilities of the Contractor in the Kurdistan Kegion to perform such reviews and


verifications.


16.6.2 The representatives of the Government shall at all times comply with any safety


regulations imposed by the Contractor, and the Government shall use


reasonable efforts to ensure that such reviews and verifications do not hinder


Petroleum Operations.


Acciss to f aciuiiis


16.7 For the performance of the Petroleum Operations, the Contractor, any Affiliate of each


Contractor Entity, its and their Subcontractors and the employees, consultants and


agents of each of the foregoing shall at all times be granted free access to the Contract


Area and to any facilities for the Petroleum Operations located within or outside of the


Contract Area or within or outside the Production Area, for the purpose of carrying out


the Petroleum Operations.





Usi or Faciuiks


16.8 Upon notice from the Government, the Contractor shall make available to a reasonable


number of representatives of the Government those of the Contractor's facilities which


are necessary to enable such representatives to perform then tasks related to this


Contract and the Kurdistan Region O.l and Gas law including, in case of works to be


performed ors work sites, transportation, accommodation and board, under the same


conditions as those provided by the Contractor for its own personnel.


It* Notwithstanding clause lit. the Government shal indemnify and hold harmless each


Contractor Entity agamst at losses and Eapenses in respect of any claim, demand, action


or proceeding brought agamst any Contractor Entity by any representative of the


Government in connection with the access to or use of the facilities by such


representatives, eacept lot any losses or Eipenscs caused by the gross ncgkgence or


w»ul misconduct of any Contractor Entity, any of its Subcontractors, or any of their


respective employees or agents


loss o« Dawaci


16.10 The Contractor shall be responsible foe any loss and Iipcnse or other damage caused to


third parties by any Contractor Entity or its Subcontractors or the* respective personnel


in the conduct of Petroleum Operations or otherwise m accordance with Kurdistan


Region laws


lauuictuAt Pioetaiv Rants


16.11 The Contractor shall not infringe on any intellectual property rights of any other Person.


briflATion





16.12 The Conlr.il lor shall as soon as reasonably practicable inform the Government of any


litigation relating to Petroleum Operations or this Contract.


 Production Storing Contract Pnamagrun








PHOOUCIIO* RAYfcS


16 13 In connect»on with .1 gtner*l decision to reduce production across Iraq, the Government


may require the Contractor to set the production rate of Reservoirs below the MCR for


such Reservoirs as provided for In the Development Plan.


16.11.1 If the Government issues a requirement as provided in clause 16.16. the


Government shall allocate any such reduction fairly and equitably among the


various production arras then producing in the Kurdistan Region, pro rota their


respective production ratei as of such allocation date, and with a view to


prudent allocation among such blocks.


I11 iinO


16.14 Thp Government and, sublet to clauses JJ.UIaJ and (6 . each Government Interest


Holder, and each Contractor Entity have the right and the obligation to take in kind and


separately sell or otherwise dispose of their respective shares of Petroleum in


accordance *'» clauses 2S. 26 and 27.


It It Not lest than 12 Calendar Months prior to the Date of start of Commercial Production


from any Development Area. Contractor shaB submit to the Management Committee


and the Government for respective approvals proposed procedures and terms in respect


of the scheduling, storage, and lifting of Petroleum by each Contractor Entity, the


Government, and each Government Interest Holder from each Production Area,


me hiding rights of Wing Parties, notification time, manmum and minimum quantities,


duration of storage, scheduling, conservation, spillage, habihtiet of the Parties, and


penalties for over and under lifting, safety and emergency procedures None of the


Government, the Contractor, a Contractor Entity, or a Government Interest Holder may


lift any Petroleum until such procedures and agreements have been established by


agreement of the Contractor and the Government.


fit CIGNA! CONtUMFIION RtQUIlUMINtS


16.lt The Contractor Entities shall tell and deliver to the Government, upon written request of


the Government, any amounts of Crude Oil that the Government shall request to meet


Kurdlitan Region Internal consumption requirements.


is.io s The Government shall pay the International Market Price for such Crude Oil.


The Contractor Entities and the Government shall enter into a sales agreement


covering such purchase and sole containing normal commercial terms


prevailing in th* International petroleum Industry.


16.161 The Government shall provide the Contractor Entities with not less than 180


days' advance written notice of its intention to buy such Crude Oil.


16 16.s On such notice, the Government shall specify the volume of Contractor's


entitlement required, the particular quality desired (where more than one


Petroleum quality is produced m the Contract Area) and the duration for which


such Petroleum wdl be purchased.


u 16 a On such notice, out of the total quantity of Crude OB to which the Contractor n


entitled from the Contract Area m a Calendar Tear, each Contractor Entity shat


 Protlutuon iharwg Contract Pnomogtun








providr lor the period requeued by Government up to such Contractor Entity's


pro rata ihare ot Crude Oil.


16.16.0 The Government It entitled to trade ouch Crude 0.1, whether tor a quality that


mneto the Government'! requirement! or otherwise


16.17 In caie of war or imminent apprehension of war or grave national emergency, the





Government may requisition all or a part of the Petroleum production from the Contract


Area and require the Contractor to maximise ouch production The provisions of clause


16.16.1 regarding delivery, price, and payment shall alio apply to any Crude Oil so


requisitioned from the Contractor.





16.18 If the Government imposes an obligation on the Contractor or the Contractor Entities to


sell to the Government In accordance with clauses 16.16 or 16.17, the Government shall


use reasonable endeavours to impose such obligation proportionally among the


operators then producing in the Kurdistan Region baied on each operator's production


rate.








Clause 17 - Use of Land and Existino Infrastructure


GttttfcAl


17.1 Thr Government shall make available to the Contractor any **”d the Kurdistan Region


outside of thr Contract Area which the Government n satis? ed is reasonably required


for Petroleum Operations. The Contractor *hatl have the right to buid and maintain,


above and below ground, any facilities required for the Petroleum Operatic”*


Tmi«c> Pahty Lanos


17.2 If it becomes necessary for conduct of the Petroleum Operations to occupy and ute any


land in the Kurdistan Region belonging to third parties, the Contractor shall endeavour


to reach amicable agreement with the owners of such land. If such amicable agreement


cannot be reached, the Contractor shall notify the Government.


17.2.1 On receipt of such notification:


(a) the Government shall determine the amount of compensation to be


paid by the Contractor to the owner, if occupation will be for a short


duration; or


(b) the Government shall expropriate the land or property in accordance


with Kurdistan Region law, if such occupation will be long lasting or


makes it henceforth impossible to resume original usage of such land


or property.


17.2.2 Any property rights shall be acquired by and recorded in the name of the


Government, but the Contractor shall be entitled free use of the land or


property for the Petroleum Operations for the term of this Contract.


17.2.3 The amount of the compensation in clause 17.2(a) shall be fair and reasonable,


in accordance with clause 29 of the Kurdistan Region Oil and Gas law, and shall


take into account the rights of the owner and any effective use of the land or


property by its owner at the time of occupation by the Contractor.


 '<»<*!» We/m* Caerrod mmagnm





i»4 4 Al reasonable costs. expenditures and fa.' and reasonable compensation (as


required pursuant lo clause 19 ©f the Kurdistan Reg-on Oil and Gas law) which


resufts from such expropriation sha* be pa-1 b» the Contractor and ■« be Cost


Recoverable.


iMHAStKUCIUM


17-3 for its Petroleum Operations, the Contractor ihall have the right In the Kurdistan Region


to use. sub|ect to Applicable Law, any railway, tramway, road, airport, landing Held,


canal, river, bridge, or waterway, any telecommunications network and any existing


pipelines or transportation intrastructure, on terms no less favourable than those


ottered to other Persons and, unless generally in torce, to be agreed


174 The Government shall have the right in the Kurdistan Region to build, operate and


maintain roads, railways, airports, landing strips, canals, bridges, protection dams, police


stations, military Installations, pipelines

telecommunications networks in the Contract Area, provided this does not increase the


costs, or compromise or have a material adverse ettect on the performance ot the


Petroleum Operations. It the construction, operation and maintenance of such facilities


by the Government results In increased cost or expense tor the Contractor then such


cost and expense will be Cost Recoverable.


17.S Under national emergencies due to environmental catastrophe or disaster, or internal or


external war, the Government shall have the right to request to use any transportation


and communication facilities Installed by the Contractor. Any associated costs, e.pen-.rs


or liabilities Incurred by the Contractor wilt be Cost Recoverable.








17.6 In the conduct of Petroleum Operations, the Contractor has the r*ht m the Kurdistan


Region, subfect to compSanee with applicable Kurdistan Region law and CMS Standards,


to clear land, excavate, dri*. bote, construct, erect, place, procure, operate, emit and


discharge, manage and maintain ditches, tanks. weds. trenches, access roads,


excavations, dams, canals, water mams, plants, reservoirs, basms. storage and disposal


facilities, primary distillation units, extraction and processing umts. separation units,


sulphur plants and any other facilities or mitaiiations for the Petroleum Operations, in


addition to pipelines, pumping stations, generators, power plants, high voltage lines,


telephone, radio and any other telecommumcationt systems, as we* at warehouses,


offices, sheds, bouses for personnel, hospitals, schools, premises. d*es. vehicles,


railways, roads, bridges, airlines, airports and any other transportation facilities,


garages, hangars, workshops, foundries, repae shops and any other auriiary faculties


for the Petroleum Operations and. generally, everything which «s required for its


performance of the Petroleum Operations The Contractor has the right to select the


location for these faedities.


17.7 for the conduct of Petroleum Operations, the Contractor shall have the right in the


Kurdistan Region, subiect to compliance with applicable Kurdistan Region law and IMS


Standards, to remove and use the topsoil, fully grown tmiber. clay. sand. lime, gypsum,


stones (other than precious stones) and other vmilar substances as required for Its


Petroleum Operations.


 rvamoqrun





U-t Sj6k

th* r>ghl in th* Kurdnlan Brgon to take or u** a«» watec neceivary for the Petroleum


Operationi. provided it doet not damage any rutting .rngawm or namgation tytieres


and that Und. houtet or watering points belonging to th.rd parties are not deprived of


thee use


Aoioiiiino Paotiauc*


17.» Upon request of the Contractor, the Government »h*!. prohibit the construction of


residential or commercial buildings in the vicmrty of fat- ties used for the Petroleum


Operations that may be declared dangerous due to Petroleum Operations and to


prohibit any interference with the use of any facilities required for Petroleum


Operations.


Acctss


17.10 Access to the Contracl Area may be granted pursuant to an access authorisation, as


defined In. and consistent with, the Kurdistan Region Oil and Gas law to authorised third


parties on reasonable terms and conditions {including coordination!, including Persons


authorised to construct, install and operate structures, facilities and installations, and to


carry out other works, provided that nothing In such access authorisation or in this


clause 17.10 authorises the holder of an access authorisation to drill a Well or to


perform any Petroleum Operations in the Contract Area.


17.11 The Government shall give the Contractor adequate advance notice of any access


authorisation In respect of the Contract Area and shall not grant any access


authorisation in respect of the Contract Area until it has taken into account any


submissions made by the Contractor not in such a way that there is undue interference


with or hindrance of the rights and acthrities of the Contractor.








Clause 18 - Government Assistance


U 1 To the eitent allowed by Applicable Law and at the specific request of the Contractor.


the Government thill«ake al necessary steps to assist the Contractor Entities in. but not


limited to. the following areas:





<•> securing any necessary Permits for the use and installation of means of


transportation and communications;





lb) secur«ng ref ulatory Permits in matters of customs, import, or export;


(Cl securing entry and wit visas, work and residence permits as well as any other


administrative Permits for each Contractor Entity's, its Affiliate's and its


Subcontractors' f fpatriate personnel (including their family members) working


in the Kurdistan Region and any other part of Iraq during the implementation of


this Contract;


(dl securmg any necessary Permits to send Abroad documents. Data or samples for


analysts or processing for the Petroleum Operations:


(e) relations with federal and local authorities and administrations, including for


the purposes of the remainder of this clause 18.1;


(0 secure* any necessary


tal Permits;


 IrrttfrllOfl iha'ing Conuact Ptiamagrun








(g| obtaining any other Permits requested by any Contractor Entity for the


Petroleum Operation*;


(h) acceit to any entiling Oflta and information. Including Oata and information


relating to the Contract Area held by previous operatori or contractor!; and


(I) providing all necessary lecurity for Petroleum Operation*.





18.7 The Contractor *hall pay reasonable and (unified enpeniei Incurred by the Government


with reipect to iti undertaking! under this clause 18 against an Invoice received therefor


from the Government Such payments will be Co»t Recoverable.








Clause 19 - Assets and Materials


GtntiAi


19 1 The Contrai tor »hall supply, or procure the supply of. Asset*, materials, and


consumable* required for Petroleum Operations ("Aiieti and Material*').


191 Thr Contractor shall provide Assets and Materials in accordance with the relevant


Approved Work Program and Budget.


P«ocuniA»iNi Pdociouhis


19.1 As toon as possible after the Effective Date, the Contractor shall provide the


Management Committee with a copy of its procedures 'or procurement of Assets anS


Materlals and services for the Petroleum Operations as required by clause 8 4|r).


including the criteria for tender evaluation


i».».i Such procedure* and criteria mutt provide for fan and transparent tender


evaluation and be m accordance with Best Practices and Applicable law.


19.4 If the Management Committee does not request any modifications to the procurement


procedure* within 10 day* alter receiving twch procedure*, the procedures shall be


considered approved by the Management Committee


19.5 The Contractor shall give priority to Asset* and Material* that are readily avadable in the


Kurdistan Region and other part* of trad to the e.tent their price, grade, quality,


quantdy. specification*, purchase, delivery and other commercial and technical terms


are comparable In all material rrspects with those otherwise available to the Contractor.


Clause 20 - Title to Assets


Tint Taanifta


70.1 ''Title Tramfcr Date'' means the earlier of:


(a) the first date on which the "R” factor, as calculated In accordance with clause


26, is equal to 1.00; or


(b) the termination of this Contract.











6i


 Proa*it+* censer Pea «•«*.«








20.2 Subject to clause 21. on the Title Transfer Date, all Assets of the Contractor a Contractor


Entity, or the Operator lor any of thee respective Affiliates) in the Kurdistan Region «■


become the property of the Government


20 I Until the Title Transfer Oate. all Assets in the Kurdistan Region are the property of the


Contractor, the applicable Contractor Entity, any Affiliate of a Contractor Entity, the


Operator, or a Subcontractor, as the case may be.


Uasio Assets; SuacontiACtoa Assits


20 4 The provisions of clause 20 2 ■! not apply to any Assets


(a) leased by the Contractor, a Contractor Entity, or the Operator in accordance


with an operating lease that has been approved by the Management


Committee; or


|b) belonging to or leased by a Subcontractor or an Affiliate of such Subcontractor


Clause 21 - Use of assets


It rent


21.1 Whether before or after the Title Transfer Date and whether before or after recovery of


the cost of any Assets, the Contractor, each Contractor Entity, and the Operator shall at


all times have the exclusive right to use all Assets in the Kurdistan Region for Petroleum


Operations free of any charge by the Government.


No ThantttK Goviii*mi hi


212 During the term ol this Contract, the Government sha! not transfer or otherwise


dispose of any Assets without having lece «cd prior notice ol the Contractor's consent.


Conikacior RtosnorMims


21J The Contractor may freely move any Assets and Materials from any relinquished portion


of the Contract Area to the remaining part of the Contract Area or from any other


contract area in the Kurdistan Region with respect to whKh the Contractor is a party to a


production sharing contract with the Government for use m petroleum operations


under such contract.








Clause 22 - Subcontractors





GUHMI


22 I The Contractor shall ensure in accordance with Best Prac««cet that each Subcontractor


has al requisite experience and quabfications.





locai Patiiaiaci


12.2 The Contractor shall give priority to Subcontractors from the Kurdistan Region and other


parts of Iraq lo the eatent their competence, rates, experience, reputation,


qualifications, specialties, financial capacity. avadabAty. delivery and other commercial


 Product** Ui+fMf Cttffftcr rramagrv*








terms are. in the Contractor's vole opinion, comparable * all material respects with


those provided by foreign companies operating .n the inter national petroleum industry,


and will not cause any Contractor Entity or its AfMutes to violate any law applicable to


It. including Corrupt Practices Laws.


ni\ A Subcontractor will not quabfy as *#rom the Kurdistan Region and other parts


of Iraq* unless it is organised under Applicable law or the laws of Iraq,


domiciled in Iraq, and mayority owned and Controfted by cdUens of the


Kurdistan Region or Iraq





PltOCUMMINf Pmoci twits


22.1 The Contractor shall select its Subcontractors m accordance wRh the procurement


procedures approved by the Management Committee pursuant to clause 19 1


IIJ.1 Each contract with Subcontractors must include a provision that obligates such


Subcontractor to comply w«h Corrupt Prattles laws fel the Subcontractor's


performance of the contract


22 4 The Contractor shall provide the Government with copies of each contract with


Subcontractors where the contract amount exceeds the bm»t set by the Manager|


Committee from time to time








Clause 23 - Personnel; Training; Assistance


ExrAiniAtt Wohk Permits


23.1 Any Expatriate personnel working in the Kurdistan Region wiE require issuance of a


Permit from the Government (such Permit not to be unreasonably delayed or wrfhhetdl


and the Government shall obtain any Pern t required by the federal go^r^nrr! cl Iraq


LOCAI PttftRENCE


23.2 For the Petroleum Operations, the Contractor shal give, and shal require fts


Subcontractors to give, preference to citizens of the Kurdistan Region and othc' parts of


Iraq to the extent such citizens have the technical capaodity. qualifications, comprfencr


and experience required to perform the work, are available atcompct t .e


compensation rates, and their employment would not cause the Contractor any


Contractor Entity, any of its Affiliates, or any of ;ts Subcontractors to v»o»ate any law


applicable to it.


23.3 Each Contractor Entity and its Affiliates and Subcontractors have the r.gM to h re


Expatriate personnel whenever the personnel from the Kurd star. Reg or jnd ot*er parts


of Iraq do not have the requisite technical capability, qualifications or viper mce for


positions to be filled as required pursuant to clause 23.2.


23.3.1 In the event any Expatriate personnel or a member of such Cipatnate's family


engages in an activity or commits an act in breach Kurdistan ftrfion law. the


Contractor shall, at the request of the Management Committee, tale the


necessary steps to repatriate such individual(s).














6S


 Production Sharing Contract Pitamogturt








MinistryCapacii* Buiioino Paymints and In Kind Assisi ancc


114 The Contractor shall give reasonable consideration to the secondment ol Government


personnel to the Contractor and o( the Contractor's personnel to the Government


during the various phases ol the Petroleum Operations. The Government and the


Contractor shall agree on terms and conditions lor such secondment, and any costs


associated therewith will be Cost Recoverable.


Ill Par the first live Contract Years, the Contractor shall pay to the Government US$250,000


in advance each Contract Year I or the recruitment personnel, whether Irom the


Kurdistan Region other parts ol Iraq or Abroad, to the Ministry ol Natural Resources.


The selection ol such personnel shall be at the discretion ol the Minister ol Natural


Resources. Such costs will be Cost Recoverable.


JIB The Contractor shall promptly provide to the Government such technological and


logistical assistance to the Kurdistan Region petroleum sector as the Minister ol Natural


Resources may request, up to the value ol US$1.000,000. including geological


computing hardware and soltware and such other equipment. The Contractor and the


Government shall agree the lorm ol such assistance All costs ol the Contractor


associated therewith will be Cost Recoverable


Training


23.7 The Contractor shall train all Its personnel from the Kurdistan Region and other parts ol


Iraq directly or Indirectly Involved In the Petroleum Operations lor the purpose ol


improving their knowledge and professional qualifications In order that such personnel


gradually reach the level of knowledge and inalMsianal qualification held by the


Contractor Entities' Eipatriate workers with an equivalent resume


11.1.1 Such training shall also include the transfer ol knowledge ol petroleum


technology and the necessary management experience so as to enable the


personnel Irom the Kurdistan Region and other parts ol Iraq lo apply advanced


and appropriate technology in the Petroleum Operations, to the eitent


permitted by Applicable law and agreements with third parties, and subject lo


appropriate confidentiality agreements.


21 • The Contractor shall submit its plan lor the recruitment, integration, and Iramutg ol


personnel Irom the Kurdistan Region and other parts of Iraq to the Management


Committee lor gt approval Such training plan: |a) must take into consideration the


requirements ol clause 2 J.7. and |b| may include training lor the Government's


personnel, depending on the eitent lo which the amount aRocatrd to the training plan


in accordance with clause 21.10 is available after taking .nto consideration the training


of the Contractor Entities' Kurdistan Region and other Iraqi personnel.


23.9 Within 90 days ol the Effective Date, the Contractor shall submit to the Management


Committee a proposed training plan lor the remainder of the Calendar Year. Thereafter,


no later than 1 October in each Calendar Year, the Contractor shall submit a proposed


training plan to the Management Committee lor the following Calendar Year.





Thawing Exmmse AuOCAIion ano Paimini


23.10 The Conlrai tor shall allocate lor training the amount ol:


 ftcsjc'.-zo u«><« Coruaa P*amw*





(a) USS1SO.OOO lo* each Contract Yrar duimf the I upbration Period. and


(b) US$300,000 for each Contract Yrar durmg the Development Period


aiu To the ectent any amount allocated for a Contract Tear n not utiloed m a


Contract Year, the Contractor shall pay the ututUned allocation to the


Government with*. 60 days after the end of the appbcable Contract Year.


23.11 Each Contractor Entity shall be responsible for the traininf costs »h«h such Contractor


Entity may incur in respect of the personnel it employs from the Kurdistan Region and


other parts of Iraq.


2S.H.1 Ai such reasonable costs w Jl be Cost Recoverable.


Ulll Costs incurred by the Contractor for tr arise* programs for the Government's


personnel shal be borne by the Contractor only to the Meal that they are


included in the Contractor's approved training plan pursuant to clause 31 i.


and wifl be Cost Recoverable.


2l.ll i The cost of al other training programs for the Government's personnel wit be


the Government's responsibility.


23.12 The Contractor shal pay to the Government:





(a) USS1S0.000 m advance each Contract Year dur.ng the E.ptcaUon Penod. and


(bj US$300,000 .n advance for each Contract Year during the Development Penod


21.11 The Government will credit all such payments to the environment fund to be e-.rabiished


by the Government for the benefit of thr natural environment of the Kurdistan Region,


pursuant to the Kurdistan Region Oil and Gas Law (the “Environment fund').


21 14 Payments by the Contractor pursuant to clause 23.12 will be Cost Recoverable.





Clause 24 - royalty





DlllNIIIONS


14 I "Royalty Crude Oil" means Crude Oil. regardless of gravity, produced and saved from


the Contract Area.


24.2 "Royalty Gas" means Gas produced and saved from a Gas Field.


24.3 "Royalty Petroleum* means Royally Crude Oil and Royalty Gas.


OSUGMIO*


24.4 The Contractor shall pay to the Government a portion of Petrolrum produced and saved


from the Contract Area, either m kind or in cash as directed by the Government, as


provided in this clause 24 (such payment, the "Royalty*}.


 Production Conner








24 4 i The Government be competed lo have elected to receive the Royalty in


cash. unless the Government has given not less than 90 days' prior notice to


the Contractor oT the Government's election to receive the Royalty in kind.


24a 2 II the Government has elected to recerve the Royalty in kind, the Contractor





shal deliver to the Government at the Delwery Point the quantity ol Royalty


Petroleum equal m value to the Royally payable with respect thereto. Title and


Risk ol loss ol Royalty paid m kind wdi transfer to the Government at the


Delivery Point.


14.4.1 ll the Government has elected to receive the Royalty in kind, the Government


may require the Contractor to assist In the sale ol all or part ol the Royalty


received in kind pursuant to clause 2R.


24.s The Royalty is payable on all Royalty Petroleum





14.1.1 No Royally is payable In respect ol Associated Gas from an Oil Field.





RovAitr Ram


24 b The Contractor shall calt Plate the Royalty dally by applying the following rale (as


applicable the 'Royalty Rate 'l lo the Royally Petroleum produced and saved on that


day (or:


(a) 10* lor Royally Crude Oil; and


(b) 10* (or Royally Gas.





Duivter


24.7 ll the Royalty is payable in kind, the Contractor shall deicer to the Government at the


Delivery Pomt each day a volume of Crude Oil or Natural Gas. as applicable, equal to the


applicable Royalty Rate multiplied by the apphcable quantity ol Royalty Petroleum.


24.8 ll the Royalty is payable in cash, the Contractor is entitled to take delivery at the


Delivery Pomt of the quantity of Royalty Petroleum corresponding to the vahre ol the


Royalty Petroleum determined in accordance with clause 24.6.


24* i Subject to clause Id (Mature! Gos) in respect ol Natural Gas. the Contractor wi


be entitled to freely seR such Royalty Petroleum.


!«• 2 Title and risk of loss to Royalty Petroleum with respect to which the Contractor


hat taken delivery under this clause 24.7 will pass to the Contractor Entities at


the Delivery Point in accordance with their participating interests.


44* Disposition ol paid m-kmd Royalty Gas by the Government is governed by clause 14


IfMlurolGosI


Pavmini i* Cash





24.10 II the Royalty It payable In cash, the Contractor shall:


(a) value Royalty Crude Oil at the International Market Price tor each Month and


Quarter in accordance with clause 27;


(b) value Royalty Gas (or each Month and Quarter in accordance with clause 27;








sa


 Production Sharing Contract Piran\ogiun








(c) calculate the Royalty payable bated on the valuations of Royalty Crude 03 and


Royalty Gas for each Quarter, and


(d) pay to the Government the applicable Royalty quarterly, in arrears. within JO


days of the end of each Quarter.








Clause 25 - Recovery of Petroleum Costs


DiriNiriONs


111 'Available Crude 03* mean aR Crude 03 and Allocated Gai produced and saved from


the Contract Area after deduction of any quantities of Crude 03 to be delivered to the


Government for payment of Royalty in kind or detracted to the Contractor in respect of


the payment of Royaky in cash pursuant to clause 14.


25 1 'Available Gas" means al Gas produced and saved from a Gas field m the Contract


Area, euept for Gas that a used in Petroleum Operations, re infected, flared in


accordance with clause 14.6, or is not used or sold


25.3 "Available Petroleum* means Available Crude Oil and Available Gas


Cost Rtcovtev


25.4 The Contractor is entitled to:


(a) recover Petroleum Costs in accordance with this clause 25 and the Accounting


Procedures; and


(b) allocate, as between the Contractor Intities. to each Contractor Entky its


proportionate share of A.a4able Petroleum in accordance with the respective


participating interest of such Contractor Entity in relation to the aggregate


participating interests of the other Contractor Entities.


15 5 Cost Recovery by the Contractor Entities in any period wdl be achieved by a Contractor


Entity when it has taken delivery of its participating interest share of Avadable


Petroleum from the Contract Area of equivalent value (as determined pursuant to this


Clause 2S) to the Petroleum Costs to be recovered by the Contractor in accordance with


this Contract.


V*lU»l«OU o# AtlUMI PtT«OUUM


25 • The Contractor shall value Available Crude 03 at the International Market Price obtained


al the Oelraery Point by the Contractor Cnttfiei and the Government.


25.7 The Contractor shall value Available Gas at the actual prices obtained at the point of sale


in accordance wkh clause 145 in accordance with a Gas E sport Plan or Domestic Gas


Plan The 'po.nl of sale" wlfl be such pomt as identified by the Parties in relevant Gas


Ecport Plan or Oomestic Gas Plan.


CoutaacToe E.iituum to Cost Os


It a Subject to the Accounting Procedure, from the first Production from any Production


Area in the Contract Area and thereafter from al Production Areas, the Contractor (and


 Production iha/ing Contiaa Pttamogrun








each Contractor Entity) is entitled to recover all Petroleum Costs from up to 40% of


Available Crude Oil (such amount. ‘'Cost Oil") within any Calendar Year,


n.1.1 Available Crude Oil that is not Cost Oil is "Profit Oil".








CONTHACIOA INIItlfcMINT TO COST GAS


2*9 Sublet to the Accounting Procedure, from first Production from any Production Area in tbr





Contract Area and thereafter from all Production Areas, the Contractor {and each


Contractor Entityl is entitled to recover Petroleum Costs from up to 50% of Available


Gas (such amount, "Cost Gas'') produced within any Calendar Year.





IV.*. 1 Available Gas that is not Cost Gas is "Profit Gas**.


Ricovm. W»U*iau; liraiiAiions





25.10 Petroleum Costs arc Cost Recoverable under clauses 25.8 and 25.9 In the following


order:


(1) Production Costs;


(2) Exploration Costs Including Appraisal costs within the Contract Area).





(3) Gas Marketing Costs;


(4) Development Costs;


(5) Crude Oil Pipeline Costs; and lastly





(6) Decommissioning Costs.





25.11 The Contractor b land the Contractor f n!-r o arc - -t entitled to recover aggregate


Petroleum Com dorm* any Calendar Year, eiprewed in luaMMi of Petroleum, m


e«cet» ol the percentage! of AvaAable Petroleum as set forth m cUuses 25 > arsd IS *.


mil If m any Calendar Year. Cost Oil and Cost Gas (Cost Od and Cost Gas. together





or either. 'Cost Petroleum'| Is not suHKIent to abo* the Coni/actor CntiGes to


ret over ab Petroleum Costs lor such Calendar Year, the amount of Petroleum


Costs not retovered m suth Calendar Ye»» may be (a) carried forward


Indefinitely to subsequent Calendar Tea's and |b) charged to Cost Petroleum


(as apphcable) until the earher of ful recovery of all Petroleum Costs or





It III The Government never hat any obbgation or liability to the Contractor or any





Contractor In I it y in respect of Petroleum Costs that are not recovered by any


Contractor Int

It li t An, Petroleum Cottt that are subject to Oispute and have not been f.naby





resolved by the Part.es thab not be included as Cost Petroleum untd hnaby


resolved by the Partws or pursuant to clause 42 (Dopufe PrsoArhon!








Damn


15.12 each Contractor Enirty may lake debvery of its proportionate share of Petroleum from





the share of AvaBable Petroleum abocabte to the Contractor for the recovery of


Petroleum Costs at the Delivery Po.nl-














70


 Ptodottian Sharing Contract Piton'OQiun








2S.12.1 Title and risk of loss of such Available Petroleum will transfer to such


Contractor Entity at the Delivery Point.





Ring fiset


25.11 Subject to clause 38.4, Petroleum Costs under this Contract are not recoverable against


other areas in the Region in which any Contractor Entity Is party to a production sharing


contract or has any other interest








Clause 26 - Profit petroleum


Dl'INIIIONS


M.l Under this Contract:


(a) "Cumulative Costs* means, as of any time of determination, total Petroleum


Costs actually Incurred by the Contractor from the Effective Date to such time


of determination,


(b) "Cumulative Revenues* means, as of any time of determination, total


Revenues actually received by the Contractor Entities from the Effective Date to


such time of determination, howsoever characterised, including Revenues


characterised at recovery of Petroleum Costs. Profit Petroleum, or otherwise.


(c) "Profit Petroleum" means Profit Oil and Profit Gas.


(d) "Revenues" means funds actually received by the Contractor Entities in respect


their respective shares of Petroleum from the Contracf Area


(e) "R factor* means a ratio calculated:


R-I./Vl


svhere:


R ■ theR factor;


x= Cumulative Revenues; and


V = Cumulative Costs.


Calculation or R Facio*


26.2 Within 30 days from the first day of each Semester starting on the l" of January of the


Calendar Year following the Calendar Year in which first Production occurs, the


Contractor shall calculate the R Factor at of the last day of the preceding Semester and


promptly notify the Government thereof.


21.1 From first Production until the end of the Calendar Year In which First Production


occurs, the R Factor shall be deemed to be less than one.


214 The Contractor shall include, in its notification In accordance with clause 36.3,


comprehensive detail in respect of each element of Cumulative Revenues and


Cumulative Costs supporting each calculation of the R Factor.














71


 ProOjcttcn Star*? Co*tract


26.5 The calculation of the R factor wii apply to all Production Area* in the Contract Area for





untfl a new R factor calculation has been made in accordance with clause 26.2.





KlViTltMtfcTS


26.6 from first Production and as and when Petroleum is being produced:


(a) the Contractor is to be attributed and allocated a percentage share of Profit


Petroleum, in consideration for the Contractor's investment in the Petroleum


Operations:


(b) each Contractor Entity is to be attributed and allocated a percentage share of


the Contractor's share of Profit Petroleum in accordance with each Contractor'll


participating interest:


(c) the Government Interest Holders are to be attributed and allocated a


percentage share of Profit Petroleum in accordance with the participating


interest of the Government Interest: and


(d) each Contractor Entity shall pay Capacity Building Payments based on the value


Of Profit Petroleum attributed to each Contractor Entity.





26 7 The total amount of Proto Petroleum which wii be attributed and allocated to the


Contractor and the Government Interest Holders from first Products in accordance


with thee respective participating interests is:


(•) foe Profit Od. an inoun! equal to th* quantrt.es of Petroleum remit** from


the appl-cation of the relevant percentage as indicated below to the da«»»


volume of production of Profit Oil w.thm the Contract Area at the


corresponding Delivery Point:


*R" Factor Total Amount


R < or = 1 32%





1 < R< or = 2.25 32 - |(12 16| »

R > 2.25 16%





and





(b) for Profit Gas. equal to the quantities of Gas resulting lions the application of


the relevant percentage as indicated below to the dally volume of production


of Profit Gas within the Contract Area at the corresponding Delivery Point:





*R" Factor Total Amount





R

l«R




R » 2.7S 19%











JA H Profit Petroleum which is attributed and allocated neither to the Contractor or


Government Interest Holder in accordance with clause 26.7 Is to be attributed and


allocated to the Government.











72


 Hoajd Starry Cost's:: ■ *»•••«•«(*»








it * When the Contractor n unable to calculate the R Factor lor the relevant Semester


before an allocation ol Profit Petroleum for such Semester must be made, then the


Contractor shab apply the allocation of Profit Petroleum applicable to the previous


Semester. Upon the calculation of the R Factor for the relevant Semester:


(a) if the attribution and allocation of Profit Petroleum m the previous Semester





and the relevant Semester is the same, then no ad|ustment shall be made, and


(b) .f the attribution and abocation of the Profit Petroleum m the two Semesters a


different, then the Contractor shall make any adjustments to the Parties' and


Government Interest Holders’ respective shares ol Profit Petroleum to restore


them to the posdion that they would have been m had the R Factor for the


relevant Semester been available from the start of such Semester.


it 10 Subject to clause 21.102. if the Contractor makes an error in the calculation of the R





Factor, resulting in a change m the Contractor's percentage share of Profit OH. Profit


Gas. or both, the necessary correctmn shal be made and any adjustments shall apply


from the Semester in which the error occurred


»*-»• i The Party having benefited from a surplus of Profit Petroleum shal surrender


such surplus to the other Party, begmmng from the first day of the Semester


following the Semester in wtuch the error was recognised.


26.10 2 Cach lifting of Petroleum relating to such error by the Party receding the





surplus shall not eiceed 2S% of the share of Profit Petroleum to which such


surrendering Party is entitled.





Dtuvtnr Fn mu Mints


26.12 Subject, in the case of Gas. to clause 14 INalutal Go»), each Contractor Entity is entitled


to receive at the Delivery Point, take In kind, and to e>port freely its individual share of


the Contractor's entitlement to Profit Petroleum In accordance with its participating


Interest, and to retain Abroad any proceeds from the sale of all such Profit Petroleum.


26 II Subject, in the case of Gas. to clause 14 \Holurol Gait, each Government Interest Holder


Is entitled to receive at the Delivery Point, take in kind, and to export freely its individual


share of the Government Interest entitlement in accordance with Its participating


Interest, and to retain Abroad any proceeds from the sale of all such Profit Petroleum


26 14 The Contractor shall deliver quantities of Profit Petroleum due to the Government at the





Delivery Point.


26.11 Title and risk of loss to Profit Petroleum will pass to each Party and Government Interest


Holder at the outlet llange of the Delivery Point.


26.lt The Government Is not entitled to increase the share of Profit Petroleum to which the


Government Is entitled In any Calendar Tear because of the Government's payment of


Incomes Taxes on behall of all or any Contractor (ntities pursuant to clause 31.2.2.


 Piodoclion ihariiyg CooKaci Ptiamog'M








Pkooucuon Estimates


26.17 At least 21 days before Contractor's estimated date ol first Production and 30 days


before the first day of each Semester thereafter, the Contractor shall deliver to the


Government the Contractor’s:


(a) production forecast for the ne«t four Semesters; and


(b) forecast of the Quantities of Crude Oil and Natural Gas to which each Party and


the Government Interest Holders will be attributed and allocated during the


nc»t four Semesters.


26.18 The Contractor shall endeavour to produce in each Semester not less than the forecast





quantity for such Semester.





Annum Pioouciion Rimohi


26 It Within 90 days following the end of each Calendar Year, the Contractor shall prepare


and deliver an annual production report to the Government.


is.to.i The Contractor shall set forth in such annual production report the quantities of


Crude Oil and Natural Gas to which each Party and the Government Interest


Holder is entitled to be attributed and allocated, the quantities of Crude Oil and


Natural Gas lifted by each Parly and Government Interest Holder, and the


resulting over-lilt or under-lift position of each Party and Government Interest


Holder as at the end of such Calendar.


Cos* Rtcoviav to* Goviunmini Cosh


26.20 Ary costs or expenditure incurred by the Contractor es respect to the bftesg of the


Government's or Government Interest Holder's share of Petroleum will be Cost


Recoverable.








Clause 27 - Valuation and Metering


VaiuaiKMi o» Cauoe O*


*7.1 The Contractor shall determine the value of Crude Od produced es the Contract Area at


the end of each Month and each Quarter at the Delivery Point based on the


International Market Price.


*7 2 'International Market Price' means the wcghted average price per Barrel, expressed in


lft$. obtained by the Contractor at the Delivery Point, by netback if necessary, during


the Quarter or Month ending on Use date of valuation for Arm's Length Sales of Crude


Od.


Ill.l The Contractor shall provide evidence to the Government that the sales ol


Crude Oi for purposes of determining International Market Price are Arm's


Length Sales.


*7.1.* Any Dispute as to whether any sales are or are not Arm’s length Sales may be


referred by the Contractor Of the Government to an Expert for decision


pursuant to clause 42.











74


 Atojutlion Sharing Commit Plramaprun








tut In the event that there either n no lifting of Crude Oil in the relevant Quarter or


Month, or no Arm's length Sale*, the appKable 'International Market Price'


lor vuch Quarter or Month shall be the weighted average price per Barrel


obtained during that Quarter or Month from equivalent sales of Crude Oil ol


the lame or under gravity and qualrty Iron other production areat m the


Kurdistan Region told in market* competing with Crude Oil produced from the


Contract Area, taking into account gravdy and quality difference* and


treniportaton and other pot! Delivery Font cotts.


IU* for purpotet of claute 27 2 1. the Government and the Contractor *hell. prior


to the *tart of f ir*t Production, agree on a baiket of Crude Od from other


producer* in the Kurdittan Region comparable to those produced In the


Contract Area and *old in the mternational market.


*»J.» Price* obtained shai be adiuitrd to account for any variation* *uch at quality,


tpecific gravity, tulphur content, trantportation co*ts. product yield, tcatonai


variation* in price and demand, general market trend* and other term* of tale


Valuation or Naiuiai Gas


27J The Contractor thall determine the value of Natural Ga* the end of each Month and


each Quarter at the Delivery Point bated on the actual price received from gat tale*


contract* entered into in accordance wAh claute 14 (Natural 6os|.


Pnooucnon StATtMlNI


274 By the 10,h day of each Month, the Contractor »hall provide a statement to the


Government (together with the Capacity Building Payment Monthly Statement a*


required by claute 32.7| thowmg the Contractor'* calculation* of the value of Petroleum


produced and told from the Contract Area for the previou* Month. Each *uch statement


mutt include:


(a) quantltirt of Crude Oil told by the Contractor Entities during the orcceding


Month commuting Arm't Length Sale* together with corresponding sale prices;


(b) quantities of Crude Oil told by the Contractor Entitiei during the preceding


Month that do not fall in the category referred to In (a) above, together wAh


vale price* applied during *uch Month;


(C) Inventory In storage belonging to the Contractor Entities at the beginning and


at the end of the preceding Month; and


(d) quantite* of Ga* told by the Contractor Entities and the Government together


with sale prices reehted during the preceding Month.


MiASuUMCNt


27.S The Contractor thall measure all Petroleum at the DeSvery Point in accordance with Best


Practices and Applwabie law.


HJJ The Contractor shall mstal and operate all metering equipment.





ItSJ The meters must be to fiscal meter standards in accordance with Best Practices.


 PHNiuctioo Sharing Contract 7>»n







ir.s.i The Contractor shall periodically Inspect and test the accuracy of the


Contractors metering equipment using meant, and methods in accordance with


Doit Practices.


17.M All measurements shall be ad|Ulted to a pressure of Id.73 pounds per square


Inch and a temperature of 60' fahrcnhelt.


27.6 The Government may at any time inspect the metering equipment installed by the


Contractor and all records, charts, measurements, and test Data at all reasonable times


27.7 ll any metering equipment is defective or not functioning properly, the Contractor shall





promptly notify the Government upon the discovery thereof and use all reasonable


endeavours to repair, adjust, correct, or replace it promptly (and in any event within IS


d«Yi).


17.7.1 The 'Adjustment Date" means the last date that the metering equipment was


known or agreed to have been measuring correctly, or if not knosvn or agreed,


the date that is midway between the date the defect was discovered and the


last date the equipment was known to have measured correctly.


17.7.1 The results from the defective equipment shall be disregarded for the period





from the Adjustment Oate until the date the defective equipment is repaired or


replaced, and the measurement for such period shall be estimated:


(a) if check measuring equipment Is Installed and registering accurately,


then by using the measurements recorded by such check measuring


equipment;


(b) if check measuring equipment is not installed or not registering


accurately, then by correcting the error if the percentage oI error is


ascertainable by verification, calibration or mathematical calculation


or


(c) if neither method is feasible, then by estimating the volume or


quantity delivered (or both) based on deliveries during trie preceding


comparable period of time when the metering equipment was


registering accurately.


271 The Parties shall resolve any Dispute arising under this clause 27 by Eipert


determination in accordance with the provisions of clause d2.








Clause 28 - Sales Assistance


11 I The Government may at its option and upon at least 90 days’ prior notice require the


Contractor to market aU or part of the Government's share of Crude Oi produced from


Oil fields in the Contract Area. In such event the Government and the Contractor shall


enter into an appropriate agency contract with reference to international petroleum


practice.


28.2 As soon as possible after receipt of any such notice from the Government under clause


28.1. the Contractor shall provide the Government al information available to it


concerning possible purchasers of the Government's Crude Oi. the price therefor, and








76


 Production Staring Contract PiramoQiun








olhrr t«?rm* and conditions of sale. With transmittal of such information Contractor shall


sprcify thr time within which the Government must determine whether or not


Contractor should oroceed with such sale.


id 1 The Contractor's obligations in respect of Natural Gas are governed by clause 14


(Noti/ro/Gosl.


Clause 29 - Currency; Financial Provisions


Rtitatnce Cuibcnci


29.1 The US$ shall be the unit of currency (01 all payments (whether revenue or cost),


bookkeeping, records, the Accounts, reporting, and all other purposes under this


Contract.


CuRRfHCV CONVIRSIOH


29.2 Payments in currencies other than USS shall be translated into US$ at the average daily


selling and buying rates of exchange ol the Calendar Month preceding the Calendar


Month in which the due date (or payments (alls, as such average rate can be calculated


from the aforesaid daily rates of exchange published by the Central Bank of Iraq.


29 j Any currency conversion to be made under this Contract shall be at the exchange rate of


the Central Bank of Iraq, provided such exchange rate applied to the Contractor Entities


shall not be less favourable than the rate offered by other private, commercial or


industrial banks m the international market. In the absence of the Central »ank o* Iraq


or in the even; that the Central Bank of Iraq a unable to provide the relrvant exchange


rate, any currency conversion to be made under this Contract shai be at the exchange


rate of a reputable commercial bank carrying on business in the international market


and approved by the Parties


29.4 The Contractor shall record any gam resulting from the exchange of currency as revenue


and credit such amounts to the Accounts, and any loss will be Cost Recoverable.


Rosa tars; No Ouui ttuti Go.n«-i«!


29.9 A Party makmg a payment to the Government, including to the Capacity Budding


Account or to any revenue sharing account as agreed between the Government and the


government of the ftepubl* of Iraq. shaB: (a) make such payment in USS on or before


the dale when due in cleared funds by wire transfer from a reputable bank m


accordance with wire IrsstruCtxons provided by the Government; and (b) shall pay all


payments without (and free and clear of any deduction for) set-off or counterclaim.


MSI If any payment is due to be paid to the Government on a day that is not an


International Banking Day. then the payment will be due on the next following


International Banking Day.


29.s.2 If a Party fails to make any payment to the Government when due, such Party


shall pay interest on such unpaid amount, compounded monthly, al the Agreed


Rate from the date when due to. but not including, the date when paid.











77


 Frc*3jZ'*cr> Star*q Contract »-•<«a«r.'i








29.4.9 Each Contractor Cnltty acknowledges and accepts that a fundamental principle


of this Contract It that the Contractor and each Contractor Entity mutt pay


amounts owed by It at and when required.


29.4.« Each Contractor Entity waives any right to raise by way of set of or invoke at a


defence to lit obligations to make any payments to the Government at


required by this Contract, whether in law or equity, any failure by the


Government or any Contractor Entity to pay amounts due and owing unde» any


claim the Operator, a Contractor Entity, or any other Person may ha.r ayn-n


the Government, whether such claim arises under or relates to this Contract or


otherwise


29.4.4 The making of any payment to the Government, or the acceptance or us* of


any payments by the Government, does not impair the rights of the Contractor,


any Contractor Entity, or the Government under clause 15 or English law


29.4.6 Each Party receiving a payment from another Party under this Contract snail


upon receipt of a not>ce requesting a receipt therefor, endeavour to provide


the other Party with a notice of receipt of such payment.


Pa'mints to Fund »o« Rcvinui Siiahwo


29.6 Upon receipt of an Instruction and wire instructions therefor from the Government jne


in the event of the establishment of a fund for revenue sharing between Its* federal


government of Iraq and other regions (including the Kurdistan Region) and govrrno’ales


of Iraq, the Contractor shall pay into such fund:


(a) any Royalty payable in cash due to the Government pursuant to the provisions


of clause 24;


(b) proceeds from the sale of any Crude Oil undertaken by a Contractor Entity on


behalf of the Government pursuant to clause 28 to which the Government a


entitled pursuant to clause 26. and


(e) all Production Oonuset


CuRathcr Asiuhancis


29.7 Each Contractor Entity shall at ad times be entitled to freely convert into USS or any


other foreign currency any Iraqi dinars received in the framework of the Petroleum


Operations and to Ireefy transfer the same Abroad. The conversion rate shall be as


provided under clauses 292 and 29 I.


29 I Each Contractor Entity shall have the right to be pad. receive, keep, transfer, and use


Abroad, without any restrictions, al proceeds of its share of Petroleum.


29 * Each Contractor Entity and its Subcontractors shall have the right to freely open and


maintain bank accounts for Petroleum Operations within or outside the Kurdistan


Region and other parts of Iraq.


29 10 Each Contractor Entity shall have the right to pay in any freely convertible currency all its


financial requirements for the Petroleum Operations and to convert these currencies to


Iraqi dinars in any bank in the Kurdistan Region or other parts of Iraq, at the same


ricMange rate as provided under clauses 29.2 and 29.3.


 Prod*







29.11 £*ch Contractor Entity shall hivr the right. wrthout any

Abroad and to freely dispose of


(j) any proceeds received M the Kurdutan Region or other parts of Iraq from the


sale of Petroleum;


(b) any proceed* received from other operation and activities carried out under


this Contract in the Kurdistan Region or other parts of Iraq.


29.12 Each Contractor Entity shall have the right to pay m any foreign currency its


Subcontractors and its Expatriate personnel, either in the Kurdistan Region, other parts


of Iraq, or Abroad.


M-12-i Subcontractors and Expatriate personnel shaB be obliged to transfer to the


Region the amount of foreign currency required for their local nerds and shaB


have the right to repatriate and the proceeds of the sale of the* belongings in


accordance with the regulations *s force in the Region.


29.13 Each Contractor Entity's Affibates. Subcontractors and then personnel shall equally





benefit from the same rights as such Contractor Entity and its personnel as regards this


clause 29.


29.ll i Where the Contractor, or any subcontractors of Contractor, has guaranteed the





fuB and proper discharge by any lapatriate Employee engaged *i Petroleum


Operations of his liability to the personal Income Tax under Kurdistan Region


la*, that employee srifl be entrtled to receive the whole or any part of his


remuneration in the country in which he is normaBy resident.


2B.14 In respect of the assurances provided m clauses 29.6 through 29.11. the Contractor shaB





comply With the procedures and formalities inquired by Appl

foreign exchange.








Clause 30-Customs


10.1 All services. Assets and Materials, vehicles, tools, spare parts, consumables, products,


and other Items Imported Into the Kurdistan Region by the Contractor, any Contractor


Entity, its Affiliates, any Subcontractor or any agent of any o( the foregoing, for use or


consumption m the Petroleum Operations shall be admitted free and exempt from any


and all Taxes on Import.


so.i.i The Contractor, any Contractor Entity, its Affiliates, its Subcontractors, and any


agent of any of the foregoing shall have Ihe righl to re export from the


Kurdistan Region, free from all Taxes on export, any Assets and Materials,


equipment, goods, machinery, vehicles, tools, spare parts, consumables,


products, and other Items that are no longer required for the Petroleum


Operations, except where title has passed to the Government In accordante


with clause 20.


30.2 The Contractor, any Contractor Entity, its Affiliates, any Subcontractor, and any agent of


any of the foregoing, and the employees of the Contractor, a Contractor Entity or its


Affiliates, and Subcontractors (Including then family membersl shall have the right to


freely import Into the Region and other parts of Iraq and re-export from Ihe Kurdistan








79


 Production Sharing Contract Plramagrun








Ro|lon and other parts of Iraq any personal belonging and furniture free and exempt


from any faxes on import or export. The sale In the Kurdistan Region and other parts of


Iraq of personal belongings and furniture of Expatriates must comply with Kurdistan


Region Law.


90 1 Hath Contractor Entity and its Affiliates shall be entitled to freely export (subject, in the


case of Natural Gas. to clause 141 from the Kurdistan Region, free of any Taxes, any


Petroleum to which it is entitled pursuant to the provisions of this Contract.


10 4 The Government shall indemnify the Contractor, any Contractor Entity, its Affiliates, any


Subcontractor or any agent of any of the foregoing, and their personnel (including their


family members! for any import or export Taxes referred to in clauses 30.1, 30.2 or 30.3.








Clause 31 - Taxes


Gimxai


31.1 Except as expressly provided In this clause 31, and without prejudice to the exemptions


expressly provided for in clause 30, each Contractor Entity, its Affiliates and any


Subcontractor shall, for the entire duration of this Contract, be exempt from all Taxes as


a result of Its Income, Assets, and activities under this Contract.


si.l.i The Government shall Indemnify each Contractor Entity upon demand against


any liability to pay any Taxes assessed or Imposed upon such Contractor Entity


which relate to any of the exemptions granted by the Government under this


clause 31.


Imomi Tax


31.2 Each Contractor Entity wdi be subject to Income Tax on its income from Petroleum


Operations.


MJ-l Each Contractor Entity shall, in accordance with Applicable law. prov de a


return to the appropriate Kurdistan Region tax authorities in accordance with


Kurdistan Region law of its income subject to Income Tax. together wdh a


calculation of the amount of Income Tax due.


»»J I The Government shall pay all Income Tax directly to the applicable Kufdrstan


Region authorities for the account of each Contractor Entity in accordance with


the Contractor Entity's tax return. The Government shall pay such Income


Taxes from the Government's share of Profit Petroleum.


• I J* The Government thal. wrthxn 90 days after the end of each tax year, provide to


each Contractor Entity tax receipts from the appropriate Kurdistan Region


authorities confirming the payment in ful of the Contractor Entity's Income Tax


for such tax year and that no Income Tax is owing.


Il l As of the Effective Date, the Income Tax rate for companies under Kurdistan Region law


is IS* of taxable income














to


 PttMluctioo Sharing Canliail Ptramagiun








Eximmion*


114 Each Contractor Entity, its Affiliates, and foreign Subcontractor shall be exempt from any


withholding tax on any interest or dividend paid by such Contractor Entity, Affiliate, or


Subcontractor.


Ill Each Contractor Entity and its Affiliates shall be exempt from Additional Profits Tax,


Surface Tax. and Windfall Profits Taxes, as each of the foregoing is referred to in clause


40 of the Kurdistan Region Oil and Gas law. or any successor equivalent Tax.


Wuhhoiomo *0« ImQ Nationals


116 Each Contractor Entity shall pay or withhold (and shall cause each Subcontractor to pay


or withhold) the personal Income Tax and social security contributions for which such


Contractor Entity or Subcontractor is obligated to pay or withhold In respect of its


employees who are Iraqi nationals, pursuant to the law of Taxation (law No. S of 1999)


and otherwise in accordance with Applicable law. A Contractor Entity or Subcontractor


Is only obligated in respect its own employees who are Iraqi nationals, and n not liable


under this clause 31.6 with respect to employees of any other Person


Douait Tax Tat«rits


II.7 Double tax treaties, to the extent recognised by the Government as effective In the


Region, will have effect to give relief from Taxes to, but not limited to, the Contrar tor


Entitles, Subcontractors, and their respective employees in accordance with the


provisions of such double tax treaties, but will not impose an additional burden of


taxation on any such Contractor Entity. Subcontractor, or employee





VAT Cost Rtcovtai


Il.« Any Tax that is a value added or similar type of Tax wilt be considered as a Petroleum


Cost and wiB be Cost Recoverable, rf not otherwise recovered under Applicable law





iuotnr Osuoanoas


ll.» The provisions of this clause II apply individually to each Contractor Entity. There is no


liabihty. duty, or obligation referred to in this clause 11 that it a jo.nl and several (.ability


of the Contractor Entities together








Clause 32 - Bonuses: Capacity Building Payments


Cxrxc.IT Bunome Bonus





12.1 Within 10 days of the Effective Oate the Contractor shall pay USS6S.000.000 (the


'Capacity Budding Bonus') to the Government for deposit in the Capacity Bu.ld.ng


Account.


Pxooucuoh Bonusis





32.2 Each Contractor Entity shall pay to the Government the amounts as provided in clauses


32.4 and 32.5 separately for. and In respect of. each Production Area (such payments


pursuant to clauses 32.4 and 32.SI, each a 'Production Bonus', and collectively.


“Production Bonuses').











81


 Producnan war-9 Coarrocr








12.1 for purposes of calculating the cumulative jwou-i of production in order to determine


whether a Production Bonus n payable. Natural Gas 801 la) does not include Natural


Gas used lor Petroleum Oserat.ons (including re-injection), but (b) does include flared








Ml In respect of production of Crude Od and Natural Gas from the Contract Area the


Contractor shad pay the foBowmg Production bonuses to the Government within 30


days of the following relevant occurrence


(a) USS3.WO.OOO on First Production.


(b) USSS.000.000 when production teaches a cumulative amount of 10.000.000


Barrels ol Crude Oil and Natural Gas BO£;


(e) US$10,000,000 when production reaches a cumulative amount of 2S.000.000


Barrels of Crude Oil and Natural Gas BOE. and


(d) US$20,000,000 when production reaches a cumulative amount of SO.OOD.OOO


Barrels of Crude Oil and Natural Gas BOE.


Cataciiv Buicome PaiMiaH


32.6 Each Contractor Entity shad pay Capacity Building Payments to the Government m


accordance w«h clauses 12.7 through 12 16(b).


M* I Each Contractor Entity is separately liable (and not jointly and severally liable


with any other Contractor Entity) to the Government for its obligations, duties


and liabilit.es under clauses 12.7 through 32.16(b).


12 7 On or before the 10'" day of each Month m the Development Period. the Contractor


shall provide to the Government, together w.|h the monthly production statement


prepared by the Contractor in accordance with clause 27 4 and paragraph 6 I. and the


monthly valuation statement in accordance with clause 2S and paragraph 7.1. a


statement (the "Capacity Building Payment Monthly Statement") setting out the


Contractor's calculation of the Capacity Building Value attributable to each Contractor


Entity for the preceding Month.


52.7.1 In each Capacity Building Payment Monthly Statement, the Contractor shi i


detail each item taken into account in making its calculation of the Capacity


Building Payments due from each Contractor Entity, the quantities of Profit


Petroleum produced during the Month covered by such Capacity Budding


Payment Monthly Statement, the volumes of such production sold, the


Capacity Building Value attributed to such sales, and the Capai rty Build mg


Payment required to be paid with respect thereto by each Contractor Entity.


12.8 Except as provided in clauses 32.8.1 and 32.8.2, and sub net to clause 29.S. or. the same


date on which the Contractor provides the Contractor Entity's Monthly Statement to the


Government in accordance with clause 32 7. each Contractor Entity shat pay to the


Government the Capacity Budding Payment stated as owed by such Contractor Entity in


the Capacity Building Payment Monthly Statement


52*1 If the Contractor Entity has sold 4s Prol4 Petroleum to (a| the Government or a


Public Company I or a company or an entity owned and controBed. directly or


indirectly, by a Public Company or the Government!, or |b) the State Oil











82


 PaxSher-i* Center Pmamagnat








Marketing Organisation (SOM0) O' any Person owned or controlled by the


Government of Iraq, then (41 the Contractor Entity will onV be obtagatrd lo pay


the Capacity Building Payment when and to the extent the Contractor Cntlty ha*


received payment by such Person


u.s.i Clause 32.8.1 does not apply when a Contractor Entity sells its share of Profit


Petroleum to any Person not identified in clause 32.8.1.


12.V Within 30 calendar days following the date on wh*h the Contractor delivered the final


[ nd-of-Vear Statement (as defined in Paragraph 10 of Annex B| to the Government for


each Calendar Year in accordance with clause 26.19 and paragraph 10 of the Accounting


Procedure, and based on the information In such final End of Year Statement, the


Contractor shall provide lo the Government. In respect of each Contractor Entity, a


reconciliation of the actual aggregate amount of the Capacity Building Value and the


actual aggregate of the Capacity Building Payments payable by each Contractor Entity


for such Calendar Year period (the 'Annual Reconciliation Statement")


ll.a.i If the results of an Annual Reconciliation Statement show that a Contractor


Entity was, in the aggregate over the Calendar Year period covered by the


Annual Reconciliation Statement, obligated to pay Capacity Building Payments


in an amount less than the actual aggregate Capacity Building Value attributed


to such Contractor Entity for such Calendar Year period, within 30 calendar


days following the same dale on which the Contractor sent the Annual


Reconciliation Statement to the Government such Contractor Entity shall pay


(sub)ect to the same exceptions as provided in clauses 32.8.1 and 32.8.2) the


amount of the underpayment assVsowr. in the Annual Reconciliation


Statement.


HJJ Subtect to clous* IJ.9 2 1, if the results of an Annual fteconofcation Statement


show that a Contractor (ntity hat, •* the aggregate over the Calendar Year


period covered by the Annual fteconcdiotion Statement, made Capacity Building


Payments in excess of the Capacity Building Value attributed to it during such


Calendar Year period, such Contractor Entity may submit an invoice to the


Government lor reimbursement of excess Capacity Building Paymentv


Si9-1.1 The Contractor EntAy must send an invoice to the Government within


60 days following the date of the Annual ReconcBiation Statement. If


the Contractor Entity fails to send an invoice within such 60 day


period, the Contractor Entity will be considered to have waived any


claim lor reimbursement





«MJ W*hm 30 days of receipt of such invoice, the Government shed either:


(a) pay such mvoke in fuB. or (b) notify the Contractor EMity that the


Contractor Entity «u be enbtled to deduct IS* of the amount


otherwise payable from the next following Capacity Building Payments


untd the amount of the invoke has been paid m fuB.





UMI The right to receive payment under clause J2.9-2.2. either in full or by


way Of set off against future Capacity Budding Payments as provided in


this clause 12.9. will be a Contractor Entity's only remedy in reseed of


any overpayment of Capacity Building Payments, and the Government











S3


 PtoOocuao Sharing Contract Pltamogtun








will have no obligation to moke any reimbursement or other


compensating payments to an affected Contractor Entity.


12.10 The Government may enter into one or more Rights Sales without the consent of the


Contractor or any Contractor Entity.


>2.101 The Government shall provide timely notice to a Contractor Entity of any Rights


Sales to the eaten! that such Rights Sale may require the Contractor Entity to


make Capacity Building Payments to an account other than the Government or


the Capacity Building Account.


>2.10.2 A "Rights Sale" means an Assignment of the Government's rights to receive the


Capacity Building Payments


>2 11 Subject to clause 32.12. and notwithstanding any other provision of this Contract, any


lifting agreement, any sales or marketing agreement, or any other agreement: if a


Contractor Entity talk to pay a Capacity Building Payment in full when due. the


Government wl automatically be entitled, on not less than 60 days' prior notice to the


defaulttftg Contractor Entity and the Contractor in the case of the first default, and not


less than JO days' «s the case of any subsequent default, to:


[,i| lift, at the Delivery Point, such amount of the defaulting Contractor Entity's


Profit Petroleum as h equal to the value thereof in default; and


(b) continue to lift up to IS* of such defaulting Contractor Entity's Profit


Petroleum for the remainder of the Development Period.


>2.li.l The rights of the Government to sell or otherwise dispose of KaturalGas wb be


subject to clause 14.


>2.12 A defaulting Contractor Entity will have a singlr cure period o( 30 days only in respect of


Its first default.


>2.12.1 II the defaulting Contractor Entity pays the drlaultrd Capacity Building


Payments In full plus Interest at the Agrred Rale within such 30-day cure


period, the Government shall not eaercise Its lifting rights under clause .12.11 in


respect ol such defaulting Contractor Entity.


>2.12.2 In the case of any subsequent default by the same defaulting Contractoi I ntitv.


the Government may c.erclse its right to lift, whether or not the defaulting


Contractor Entity cures Its default within the 10 day cure period or otherwise.


12 II The lifting rights of the Government pursuant to clauses 32 11 and 32.12 are eaerc.sable


by way of set-off. without first resort to legal process, and without any liability or claims


of the defaulting Contractor Entity, the Contractor the Operator, or any other Person,


and notwithstanding any other provision of this Contract, any provision in any lifting


agreement, any provision of any Joint Operating Agreement, or any other agreement to


which the Contractor or a defaulting Contractor Entity is a party.


1211.1 Each Contractor Entity shall ensure that all agreements in respect of the lifting


or sole (Including swaps or other sales arrangements) of Profit Petroleum of


such Contractor Entity sets forth the Government's priority rights as set forth in


clauses 32.11 through 32.13.


 Production Sharing Contract Puamogtun








11,11,1 Any Dispute between a Contractor Entity and the Government in respect of a


claim that the Government, in e.ercising Hs rights under clauses 32.11 through


32.13. w.B be subject to:


(a) resolution m accordance with the lilting agreement among the


Contractor Entities and the Government in the same manner as any


other overlrft or undertift is to be resolved between the parties


thereto: and


(b) clause 14 m respect of Natural Gas.


12 14 A defaulting Contractor Entity shall indemnify the Government from any loss or Expense


that may in any way arise from the exercise by the Government of its rights in respect of


such default** Contractor Entity under clauses 32.11 through 32.13.


M.14.1 The Government will retain control over the defence of. and any resolution or


settlement relating to. such loss or Eapcnse.


M.m A defaulting Contractor Entity shall cooperate with the Government and


provide reasonable assistance in defending any claims against the Government


IMU A claim for a loss or Expense as set forth in a notice from the Government to a


defaulting Contractor Entity wil be conclusively deemed to be a loss or


Expense 4 the Contractor Entity fails to dispute the Government's liability by


the end of a 30-day period following the effective date of the notice from the


Government The Contractor Entity shall promptly pay the deemed loss or


lapense on demand.


52.14.4 The Government's rights under clauses 32.11 through 32.14 are not eaduslve


and are without prejudice to any other rights or remedies the Government may


have under law or this Contract.


32.15 Any Dispute between the Government and a Contractor Entity m respect of the


calculation of Capacity Building Value and the Capacity Building Payment due with


respect thereto that cannot be settled amicably within 60 days of the Government's


final notice under clause 15.7 Is subject to resolution by an E«pert In accordance with


clauses 15.8 and 42.


Ca’aciiy Buiidinc Account


32.16 To the extent permitted by laws ol the Kurdistan Brglon or at otherwise agreed with


the Government of Iraq, the Government will


(a) maintain the Capacity BuiWmg Account.


(b) instruct the Contractor and the Contractoc Entities, at applicable, to make all


Capacity Build.ng Bonuses and Capacity Buildmg Payments to the Capacity


Building Account m accordance w.th wife instructions therefor pcovided by the


Government;


(c) apply funds from the Capacity Budding Account to fund infrastructure and


capacity buildmg projects in the Kurdistan Region selected by the Government


in us sole discretion, and


 Coe riser Pammagn*








(d) period icaRy publish reports of the Government's appbcation of funds from the


Capacity Building Account m sufficient detail to identify the projects to which


the Government has appbed the funds therein





No Cost Rtcovtar


32.17 No Capacity Building Bonus. Produtt^n Bonus, or Capacity Building Payment wil be


Cost Recoverable.








Clause 33- Pipelines


Cauoc Ob Pwumis


III The Government shal obtain any required Permits for the transportation of Crude Oil m


the Kurdistan Region and in Iraq, as well as any necessary Permits and easement rights


for the construction of any pipelines and related facilities required for the Petroleum


Operations.


II 2 The Government undertakes to transfer to the Contractor its rights for transportation of


Crude Oil by p

■merest The Contractor is entitled to design, construct, operate, and maintain pipelines


and any related facAties m the Kurdistan Region for the transportation of Crude Oil


produced under thn Contract.


33.3 Prior to the construction of any Crude Oil pipeline and rotated facilities as provided m


clause 33.2, the Contractor shall submit the following information to tnr Management


Committee in respect of any pipeline project:


|a) proposed pipeline route and related facilities;


(b) forecasted pipeline flow rate and capacity;


(c) estimate of capital costs and operating costs of the pipeline and related


facilities;


(d) proposed financing schedule;





(e) construction schedule;


(f) general technical description of the pipeline and related facilities;


(g| construction plans and tests;


(h) preventive measures for damage to the environment and third parties; and


(i) any other information relating to the pipeline project.


The Management Committee shall examine all the above information and shall, within


90 days, approve or disapprove the proposed pipeline pro|ecl


33.4 Subject to available capacity, tie-in agreements, and pipeline crude oil minimum quality





specifications, the Contractor shall permit third parlies to transport their Petroleum


through any Crude Od poelme constructed by the Contractor on terms to be agreed


between the Contractor and such third party.


JJ.a.1 Such terms must be reasonable commercial terms and must not discriminate


among potential third party users.


 Production ihoruio Contract ■ Piiamogrun








11.4.2 The Contractor and the Government shall always have priority of access to such


pipelines.


»».» All costs associated with the design, construction, operation, and maintenance of Crude


Oil pipelines and related facilities by Contractor upstream of the delivery point of the


pipeline under this clause 33 ('Pipeline Costs*! will be Cost Recoverable.


1J.0 The Contractor shall have the absolute right, without any exceptions and for the entire


duration of this Contract, to use, free of Tax or tariff Imposed by the Government, any


Crude Oil pipeline and related facilities constructed by the Contractor In accordance


with this clause 33 to: (a| transport Crude Oil produced from any Production Area and


lb) operate and maintain such Crude Oil pipeline and related facilities.


II 7 All tariff and other payments to the Contractor from third party shippers (which include


all payments in respect of ship or pay obligations) lor use of any pipeline and related


facilities under this clause 33 shall be applied to the recovery of Petroleum Costs until all


Pipeline Costs have been fully recovered by the Contractor pursuant to the provisions of


this Contract.


IS.7.1 The Government will only be entitled to receive tariffs paid by third party


shippers for their use of the Crude Oil pipeline and related facilities after


Pipeline Costs have been fully recovered by the Contractor.


si.7.2 Except as provided In clause 33.7.3. the Incremental costs of providing


transportation services for thud party shippers up to the transportation


delivery point will be considered Pipeline Costs and .« be Cost Recoverable.


MJJ Incremental costs veil not be Cost Recoverable in respect of payments to


shippers lor lost or unaccounted for Crude Oil. indemnities, damages lot breach


of contract, costs and batxlities from Crude Oil purchase contracts, non¬


contractual labilities, personal injury, third-party enveonmental Claims, and


any other form of expense that is not a direct operating expense.


JJ.S Upon recovery by the Contractor of all Pipeline Costs, the operating and maintenance


costs of any pipeline and its related facilities shall be borne by the Contractor, be


considered Petroleum Costs, and win be Cost Recoverable


!U The Government shall have the same rights as the Contractor lor use. free of charge, of


any pipeline and related facibtiet constructed by Contractor under this clause 13 for the


transportation of the share of Petroleum to which the Government » rotated under this


Contract.


JJ.10 The Contractor shall bear the cost of operation and maintenance ol any Crude On


pipehne and related facilities constructed by Contractor under this clause 11 and all risks


of accidental loss or damage to such pipeline and related facilities while they are


required for Petroleum Operations


RU Tale to pipelines and related fa&htiei m the Kurdistan Region belongs to «*»


Government-














87


 Production Sharing Contract Puamagrun








Ga% PiuiiNII


33-12 The Contractor has no right and it not authorised to conitrucl Natural Gat plpcl.net or


to thip Natural Gat, except in accordance with an agreed Domestic Gas Plan or an


agreed Gas Export Plan and related Approved Development Plan. Plpel.net and related


facilities for the transportation of Natural Gat are governed l>v clause 14 INoturo) Gos|.








Clause 34 - Uniiisaiion


M l If a Reservoir extends beyond the Contract Area into an adjacent area fan ' Adjacent





Contract Area'I wfuch is the subiect of another Petroleum Contract (at defined by the


Kurdistan Region 01 and Gas law). or in the event a Reservoir of an Adjacent Contract


Area extends into the Contract Area, the provisions ol clause 47. Paragraph Second, of


the Kurdistan Region Oil and Gas law «* apply.


HI The Contractor must agree with the contractor of the Adjacent Contract Area upon a





schedule for reaching agreement of the termt of the un.t.tat.on of the Reservoir, based


on reliable technical, operational, and economical parameters and

Best Practices.





Clause 35 - Indemnification: Insurance





LiAStur*





35.1 Subject to the other provisions of this Contract, the Contractor, in its capacity as the


entity responsible for the execution of the Petroleum Operations within the Contract


Area, shall be liable to third parties to the extent provided under Applicable law for any


Loss and Expense caused fo such third parlies in the conduct of Petroleum Operations.





15 2 Notwithstanding the other provisions ol Ifns Contract and except as provided in clause


35.2.1. the Contractor will not be liable to the Government or a Government Interest


Holder, or any governmental authorities, bodies, courts, or political subdivisions in the


Kurdistan Region for any Loss or Expense resulting from the Contractor's conduct of


Petroleum Operations (other than personal injuries, Industrial illness, or death).





15.2.1 Clause 35.2 does not apply In respect of any loss or Expense arising out of o«


related to (a>the wilful misconduct or gross negi^ence of the Contractor, or


|b)a material failure to conduct Petroleum Operations in accordance with the


terms of this Contract-





In OIMHUKXIlOV


15 1 The Contractor shall indemnify the Government against al loss and Expense arising


under any clams, demand, action, or proceeding brought or instituted against the


Government By any:


(a) employee of the Contractor or of any Subcontractor or by any dependent


thereof, for personal injuries, industrial «ness. death or damage to personal


property sustained in connection with, related to or arising out of the


performance or non-performance of this Contract regardless of the fault or


 firodoCttoo ihoriAQ CoM'Qct ruomoQti/n








negligence in whole or In part o( any entity or individual other than the


Government; and


lb) a with respect to all claunv demands. actions. or proceed!ngs made by thud


parties era mg oat of or reUted to Petroleum Opera tom





any employee of the Contractor or of any Subcontractor or by any dependent thereof





Ma t The Contractor shal cooperate with the Government and provide reasonable





third parties, including any employee of Ihe Contractor or o( any Subcontractor


or by any dependent thereof, againsl the Government.


»s.« J A claim for loss or Expense in respect of any claim, demand, action, or


proceeding made by third patties against the Government (including those made


by any employee of the Contractor or any Subcontractor or by any dependent


thereof), as set forth In a notice from the Government lo the Contractor will be


conclusively considered a loss or Expense payaUIr by Ihe Contractor if. (a| the


Contractor consents thereto, or (b| the Contractor fails to dispute the


Government’s liability. In whole or in part, by the end ol a 10 day pci.od


following receipt of the notice from the Government to the Contractor. The


Contractor shall promptly pay such loss or Expense on demand.





Noiret or imvaiiSAHO (MiaoincMi


»» S The Contractor shad take a* accessary steps to respond to. and shad promptly notdy the


Government ol. emergency and other events (ncludmg personal mpirws. e.»los>crs.





Such notice sha« include a summary description of the circumstances and steps talen


and planned by Ihe Contractor to control and remedy the situation.


tt.l.l The Contractor shall provide such additional reports to the Government as are





reasonably necessary in respect o! the effects of such events and the course of


ad actions taken to prevent further loss and to mitigate deleterious effects.


•1.0 In the even! of emergency situations as set out m clause 15 5 and at the request ol the


Contractor, the Government shall assist the Contractor to the extent possible in any


emergency response, remedial, or repair effort by: (aI making available any labour,


materials, and equipment In reasonable quantities requested by the Contractor that are


not othcrw.se readily available lo the Contractor and (b| facilitating the measures taken


by Ihe Contractor to bnng Into the Kurdistan Region personnel and Assets and Materials


to be used m any such emergency response or remedial or repair effort


»»*« The Contractor shall reimburse the Government’s reasonable and necessary





costs incurred M such efforts, which reimbursed amounts shall be considered


Petroleum Costs and wdl be Cost Recoverable, unless the emergency was


caused by the gross negkgence or wilful misconduct of the Contractor or a


breach of the Contractor's obligations hereunder.











8<*


 Ptoajti** Vi*** Cot)nod pmvoognm








ii*j Any assistance that the Government pio.iCes will be without prejudice and in


addition to ary indemnification rights the Government may have under this


Conti.m or Applicable law.


CONSIQUIHtlKl DaMAOIS LlMliatlON


IS ? Except as expressly provided otherwise, no Party will be liable to another Party under


the Contract for or In respect of any indirect, incidental, consequential, or exemplary


loss or damages, Including with respect to the Contractor, any liability or damages with


respect to actual or alleged damage to any Reservoir within the Contract Area (and any


extension of such Reservoir outside of the Contract Area), and any loss of Petroleum


production by the Contractor, unless caused by the svilful misconduct or gross


negligence of the Contractor.


iNSUHANCt


JS.8 The Contractor shall obtain and maintain any insurance required by applicable Kurdistan


Region law. In accordance with Best Practices, and any Insurance required by the


Management Committee, which insurances, at a minimum, must provide sufficient


cover for:


(a) loss of and damage to Assets and Materials; and


(b) personal injury, damage to third parties, and pollution caused by or arising


from Petroleum Operations.


lit The Contractor shall ensure that all insurance policies shall name the Government as an


additional insured party and Include a waiver of subrogation protecting the Government


against any loss o> Expense resultmg from any Petroleum Operation conducted by or on


behalf of the Contractor under this Contract, to the extent that the Contractor is liable


for such loss or Expense under this Contract.


IS * I The Contractor it not obl^ated to purchase insurance cover for any claims


arising from negligence or wrfful misconduct of the Government or of any


Public Company or of any of their respective subcontractors or personnel.


11.10 Upon the Government's written request, the Contractor shall provide the Government


with Insurance certificates, including necessary drra s. for any insurance poky


maintained by the Contractor.


11.11 Each Contractor Entity shall be responsible lor the filing of all claims made under any


Insurance policy maintained by such Contractor Entity which relates to this Contract.


Any premiums and payments relating to such Insurance policies (other than political risk


Insurance) shall be considered Petroleum Costs and will be Cost Recoverable.


15.12 In any insurance policy which is required by this Contract, the amount for which the


Contractor Itself Is liable will, in the event of any Insurance claim, be considered a


Petroleum Cost, and will be Cost Recoverable Political risk insurance is never Cost


Recoverable, unless such uninsured amount Is contrary to Best Practices or Applicable


law.

















90


 Pradocttan Staring Contia







Clause 36 - Records; Confidential it v


Information


36.1 Thr Contractor shall keep .ill record*. Data and Information relating lo the Petroleum





Operation! In accordance with Kurdistan Region Law* and Beit Practice!.


361 Upon the Government ! written request. the Contractor shall provide the Government


with sample! of any rocki or any other items extracted during the Petroleum


Operations.


It I The Government shall have title to all Data and information, whether raw. derived,


processed, Interpreted or analysed, obtained pursuant to this Contract.


16 « tach Contractor [ntlty shall have the right, without any limitation, to send Abroad





copies of all reports and Data, magnetic tapes and other Data relating to the Petroleum


Operations. Magnetic tapes or other Data, the original of which must be analysed and


processed Abroad, may be transported out of the Kurdistan Region.


16.1 Any representatives authorised by the Government and notified to the Contractor shall,





upon reasonable prior written notice, have reasonable access to any Information and


Data relating to the Contract Area In the possession of the Contractor which the


Contractor Is obliged to provide lo the Government pursuant to this Contract It Is


understood that, when exercising luch right, the Government shall ensure It does not


unduly Interfere with or hinder the Contractor's rights and activities.


30.0 The Contractor shall provide the Government with aU information, analyse! reports,





tapes. Data, and other information:


(a) as it is obliged to provide the Government pursuant to this Contract: and


(b) upon the request of the Government and upon termination o* this Contract, m


resoect of Petroleum Operations as requested by the GovernmenL








I* 1 Except a provided in clause 36.8. each Party ihab la I keep all Data and information


relating to this Contract and the Petroleum Operations confidential during the entire


term of this Contract and (b) not divulge or disclose such Data or information to third


parties without the specdic consent of the other Parties, such consent not to be


unreasonably withheld or delayed. The foregoing confidentially obhgalion does not


apply to information or Data which:


(a) is or. through no fault of the disclosing Party, becomes part o« the pubfcc


domain (information known to other contractors m the Kurdistan Region or


elsewhere is not presumptrvely in the publ« domam|;


(b) is known to the recipient at the date of dtsclosure:


(e) is required to be furnished in compliance with any law appi*able to H. by a


competent governmental authority with |urisdiction over such Party or its


Affiliates, by a court order or any other legal proceedings with jurisdiction over


such Party or an Affiliate, or


 production tharing Comma Piramagrun








(«J) is required lo Or dmlosed pursuant to the rule* Of regulations ol any


government or frto|"Hfd stock exchange having |uritd«t

Entity or »n Affiliate


J6.8 Not wit I standinf the f oregoesg 1% douse 16.7. in accordance with Best Practices and


subject to cfaute Jd.f.l, such Data and information may be disclosed to:


(a| Affiliates of each Contractor Entity:


(b) employed, officers and directors of each Contractor [ntlty and their respective


Affiliated Companies for the purpose of the Petroleum Operations. sub|ect to


each such entity taking customary precautions to ensure such Information is


kept confidential:


(c) consultants or agents retained by any Contractor Entity or Its Affiliates for the


purpose of analysing or evaluating information or Data;


(d) banks or financial institutions retained by any Contractor Entity or its Affiliates


•nth a view to financing Petroleum Operations, mduding any professional


con suit ants retained by such Bank or financial institution;


(e) bono /ide prospective assignees of a participating interest under th* Contract


(including any Person with whom a Contractor Entity or an AffAate of such


Contractor Entity are conducting bono /hfe negotiations directed towards a


merger, consolidation or the sale of a material portion of its or such Affiliate's


equity ownership interests!:


(0 prospective or actual Subcontractors and suppliers engaged by a Party where


disclosure of such information is essential to such Subcontractor's or supplier's


agreement to work for such Parly: and


(gl any other Person or entity with the prior consent of the non disclosing Party.


ISJ.I No Contractor I ntlty may make a disclosure pursuant to clauses 16.8 (c|. (d|.





(e), or |f|, unless the recipient has entered into a confidentiality undertaking no


less encompassing than the provisions hereof.


It 9 Any Data and information relating to relinquished or surrendered areas under this


Contract shall become the exclusive property of the Government, The Government will


have the right to use such Data and Information for any purpose, and in particular for


the purpose of promoting such relinquished areas, Each Contractor Entity shall be


entitled to keep copies of such Data and information and to use such Data and


Information for any purpose.





No Tmoiho


IB to Subject to the provisions of this clause 36, the Contractor may not sell nor eichange any


Data related to Petroleum Operations without the approval of the Government, which


approval shall not be unreasonably withheld or delayed where, In the Contractor's


reasonable opinion, such sale or exchange would benefit Petroleum Operations.


 Production ihanng contract Ptrqmopn/n








Clause 37 - Environmental; Worker Safety and Health


OtNIIAl


17 1 The Contractor shall carry out Petroleum Operations, and procure that they ate carried


out, in such a manner as to:


(a) protect the natural environment and ensure that Petroleum Operations result


in minimum ecological damage or destruction;


(b) ensure the safety, health and welfare of Persons in or affected by Petroleum


Operations;


(c) manage the resources in a way which has long term benefits to the Kurdistan


Region and the Contractor;


(d) maintain in safe and good condition and repair, the Contract Area and all


structures, facilities, installations, equipment and other property, and other


works, used or to be used in Petroleum Operations:


(e) ori the earlier of: (i| the termination of this Contract; and

required for Petroleum Operations; and, in either case, eacept with the consent


of the Government; or unless this Contract otherwise provides, abandon,


decommission, remove or dispose of the properly and other works mentioned


In paragraph |d), clean up the Contract Area and make it good and sale, and


protect and restore the natural environment;


(f) control the flosv and prevent the waste or escape of Petroleum, water 01 any


product used In or derived by processing Petroleum;


Igl prevent the escape of any muture of water or driilusg fluid with Petroleum;


(h) prevent damage to Petroleum-bearing strata ns or outside the Contract Area;


(l) eicept with the consent of the Government, keep separate each Reservoir


Discovered in the Contract Area, and such of the sources of water discovered in


the Contract Area as the Government directs,


||| prevent water or any other matter enter mg any Reservoir through wells in the


Contract Area, eacept when required by. and us accordance with, the


Development Plan and Best Pract

(h| minimise interference with pre-ea>stusg rghts and actiwtws, and


(I) remedy in a timely fashion any damage caused to the natural environment.


17.2 The Contractor shall Implement a health, safety and envuonment program and take


necessary measures to ensure hygiene, health and safety of Us personnel carrying out


Petroleum Operations in accordance with Best Practices ('IMS Standards').


17.3 The INS Standards must be no less stringent than those set out m the relevant World


Bank Group Environmental, Health, and Safety Guidelines


(http //www.ifc.org/ifceit/sustainaBility.nsf/Content/EHSGuidelnesf-





171 The measures the Contractor must take include the foMowing:


(a) supplying first aid and safety equipment for each work area and maintaining a


healthy environment for personnel:


 Production Staring Contract Puamogiun








(b) reporting to the Government within 71 hours ol such accident, an. accident


where personnel has been Injured while engaged In Petroleum Operations and


resulting In such personnel being unable to return to work;


(C) implementing a per.ml to work procedure around hazardous Assets and


Materials and installations;


(d) providing safe storage areas for e.plotives, detonators and any other


dangerous products used in the operations;


(e) supplying fire extinguishing equipment In each work area;


(f) measures for the purpose of taking control of any blow out or fire which could


damage the environment or Petroleum Held, in accordance with Best Practices;


and


|g| measures for the purpose of preventing any Involuntary injection of fluids in


Petroleum formations and production of Crude Oil and Natural Gas at rates


that do not conform to MER.


Within 90 days from the Effective Date, the Contractor shall propose CHS Monitors to


the Government to conduct periodic monitoring ol the Petroleum Operations of the


Contractor's health, safety, and eisv-onmerst program


IM.I The Government me. at any t me. appoint such EMS Monitors as it wishes


IM1 The Contractor shall pay the reasonable lees and expenses of the £MS Monitors.


ir.S.J The fees and expenses of the [MS Monitors wifl be Cost Recoverable.








Within 180 days of the Effective Date, the Company must deliver a comprehensive and


detailed environmental impact report <*tlR“) prepared in accordance with Best


Practices.


»r.6.l The Government may require that such CIR be reviewed and validated by a


recognised independent environmental consultant selected by the Government


(at the cost of the Contractor, which costs will be Cost Recoverable), and may


post the report on the Government's website to Invite public comments.








The Contractor must provide an environmental Impact assessment ('’ElA') report


together with its Development Plan and a final CIA not less than 180 days before the


scheduled start of decommissioning operations or the scheduled expiration of this


Contract, whichever is earlier.


*>.».» " lhe Contractor does not cause the final ElA to be delivered in accordance


with this clause 37.7. then the Government will be entitled to produce such ElA


and the Contractor shall pay all costs in respect therewith (which costs will be


Cost Recoverable)


 Production iharing Contract Pitamogiun








1MMP


57.8 The Co(ii|>iiny must provide an environmental management and monitoring plan (the


■'EMMP') satisfactory in all respects to the Government, before the Government will


authorise start of Petroleum Operations.


57.8.1 Such IMMP must establish such procedures as may be reasonably necessary to


continuously determine and assure that:


(a) all Petroleum Operations are in compliance with and do not violate the-


requirements ol Applicable law or this Contract,


(b) no haiardous substances or solid wastes are disposed ol or otherwise


released on or to any property except in compliance with the I MS


Standards;


(c) no haiardous substance will be released on or to any property in a


quantity equal to or exceeding that quantity which would require


reporting under Applicable law or the CMS Standards, and


|d) no waste or haiardous substance is released so as to pose an


Imminent and substantial endangerment to public health or wellare or


the environment.


Stt> MohiroeiNb Records


57.9 The Contractor shall provide sell monitoring reports to the Government following


Repsol's standard practice as set forth In the following Repsol documents, each of which


has been provided to the Government:


(a) DGU HS£ Due Diligence, dated 1 November 2009;


(b) OGU Haiard identification Study, dated 1 January 2010;


(O DGU MSE Bridging Document, dated 1 January 2010; and


Id) DGU Environmental. Social, and Health Impact Assessment, dated 1 Ally 2009.


MimqummAmas


17 10 Prior to relinquishing a portion of the Contract Area, the Contractor shall take


reasonable measures to abandon the area to be rebnquished In accordance with Best


Practices and the EMS Standards in similar physical and ecological environments.


S7.ie.t Such measures shal include removal or closure in place of facilities and Assets


and Materials together with reasonable measures necessary for the


preservation of fauna. Bora and ecosystems, ad in accordance with Best


Practices m similar physical and ecologcal environments. The Contractor shall


only be responsible for site restoration or environmental damage to the eaten!


the same pertains solely and directly to Petroleum Operations conducted


pursuant to th.* Contract.








57.11 The Contractor shall ta*r reasonable measures in accordance with Appfccable law. Best


Practices, and the CMS Standards in similar physical and ecological environments to


minimise any .inverse material impact on national parks and nature reserves which may


arise directly as a resull of the Petroleum Operations.


 Pmtocuan Sharing Contract Puamogru*








Emnpituats


17.1* Anv reasonable e.pendilure incurred by the Contractor in relation with thu clause 17


will be Cost Recoverable.





7IH1HIMI CoNOltlONS


17.11 7h* Contractor it not responsible tor and wUI bear no cost. opens* or Uabihty lor


claim*, damage* or lone* arising out of or related to any pre-cuiting environmental


condition* or any act* of unrelated third parties.


II.Il l The Contractor shall *ubmit to the Government, for the Government'*


approval, a baieline environmental study of the Contract Area within 180 day*


of the effective Date.





SuSl'tNSION or OeiRATION*


17.14 The Government may. on not less than 24 hour*' notice, order the Contractor to


vilipend all or any part of iti operationi pending conchillon of a Government


Investigation Into the circumstance* of any Incident, Including possible violation* of IMS


Standard*. Involving:


(a) per*onal Injury to any person In connection with the Project:





|b) an emission of haiardous substances or other release of hazardous substances


causing damage, injury, claims, or a threat ol any of the foregoing constituting a


potential violation of IMS Standards:





Ul the presence in. on. under, or migrating from any part of the Contract Area |o'


surface water on of greondwatec ucvSer the Contract Area o» any substance at a








present i". on or


(*> i of We (Hi Standards





17.lt On not less than JO days' prior notice to the Contractor. We Government may order the


Contractor to suspend a* or any part of its Petroleum Operations when the Government


has determined Wat the Contractor has either significantly or persrstenlty failed to


satisfy the (MS Standards or is conducting project operations m a grossly negligent


manner that could endanger its employee*, third parties, or Ihe environment Any


suspenuon order under this clause *7.15 w* not be lifted unld Ihe Government 1s


satisfied that the Contractor has a plan (satisfactory in ad respects to the Government)


to come Into full compliance with the CHS Standard*.


17 It On not lei* than 10 days' prior notice to the Contractor, the Government may order the





Contractor to »uspend all oi any pari of Petioleum Operation* until the Contractor has


fully paid all outsland.ng liabilities arising from or related to significant environmental


damage* or personal Injuries, in either case caused by Petroleum Opriat-on* in breach


of the Contractor's obligation* hereunder or Applicable law.


Clause 38 - Decommissioning





AcikOwuociMcnt o» futuet Law


M l The Contractor acknowledges (hat (here wil Mel* be eatensrae future regulation of


Decommissioning Operations under Applicable law.


Mil The Contractor acknowledges and accepts that Appbcable law may obhgate the


Contractor, and possibly the shareholders and ultimate parent company of


each Contractor Entity, to post bonds or guarantees and to be table lor unpaid


decommissioning obligations.


UI The Contractor shall undertake Decommissioning Operations m accordance with Best


Practices m similar physical and ecological environments The Contractor shall submit to


the Management Committee and the Government for thee respective approvals, in


accordance with clause 8.4. a detailed plan and work program for decommissioning the


Production Area facilities and s>tr restoration (the 'OecommittlonMg Plan and Work


Program■) and forecasted Budget no later than 24 Months before the date estimated by


the Contractor for the end of Commercial Production from each Production Area.


Mil The Management Committee shal provide comments. 4 any. on the


Decommissioning Plan withm »0 days after receipt


ui 1 The Contractor's completion of Decommissioning Operations m accordance, in


al material respects, with the Decommissioning Plan lor a Production Area


disproved by (he Management Committee and the Government wl satisfy al


of the Contractor's obligations with respect to the performance of


Decommissioning Operations for such Production Area.


58.3 The Management Committee shall meet within 60 days following its receipt of


Contractor's proposal to examine and approve the Decommissioning Plan and Budget


38.4 The Contractor shall not undertake Decommissioning Operations unless the


Government has approved the Decommissioning Plan. Work Program, and Budget.


38.5 The Contractor shall on the first anniversary of the submission of the first


Decommissioning Work Program and Budget and annually thereafter (or at such


extended periods as may be agreed by the Government) during the term of this


Contract, submit to the Government revised Decommissioning Work Programs and


Budgets taking into account changes in the Development Plan and advances in Best


Practices.


D(COMMISSIONING RtStKvt FukO


38.6 To enable the Contractor to recover the costs associated with Decommissioning


Operations, the Contractor shal either establish a segregated fund to fund


decommissioning and site restoration (a 'Decommissioning Reserve fund') at a


financial institution satisfactory to the Government and under such escrow or trust


terms as the Government may requee. or provide such corporate or third party


guarantees or bonds as the Government may require In accordance with Applicable law.











97


 The Decommission mg Reserve Fund must be established before the final 10


Calendar Years of the term of the Production Operations of a Production Area.





nit Once established, the Contractor shall make regular contributions to the


Decommissioning Reserve Fund based upon estimated decommissioning and


site restoration costs in accordance with Best Practices.


UlJ The Contractor shall pay its contributions to the Decommissioning Reserve


Fund m US$-





18.7 If. at the end of the term of the Production Operations of a Production Area, the


Government decides to take over production operations in the Production Area:


la) the Government shall become liable for Decommissioning Operations in such


Production Area:


lb) the contributions and any interest accumulated in the Decommissioning


Reserve Fund, to the eatent that such contnbutions have been recovered as


Petroleum Costs, shall be delivered and paid over to the Government; and


(c) the Government shall release the Contractor and the Contractor Entities from


any ob"gations relating to Decommissioning Operations and shall indemnify


the Contractor and the Contractor Entities for any costs, lubities. expenses,


claims or obligations associated therewith to the eatent permitted by


Applicable Ir* (mehiding any caps on such liabdlty as may be required by


Applicable la* or Government policyl


>8.8 II the Contractor undertakes Dccommissiorvog Operations in a Production Area, the





Contractor may use the contributions and any interest accumuiaird m the


Decommissioning Reserve Fund for the Decommissioning Operations.


189 If the Decommissioning Reserve Fund is paid to the Conlractor and the


Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs for


the Contract Area, the Contractor shall pay the balance and the Contractor Emilies, or


any of their Affiliates, may recover such balance from an» other area which is the


subject of another Petroleum Contract (as defined by the Kurdistan Region Oil and Gas


Law) jnysvhere in the Kurdistan Region and. to the extent the balance Is not recoverable


as aforesaid, such remaining balance shall be paid bv the Government to the Contractor.





18 10 II the Decommissioning Reserve Fund is paid to the Contractor and the


Decommissioning Reserve Fund exceeds all Decommissioning Costs (or the Contract


Area, the balance shall be transferred to the Government.


>8.11 Any expenditure Incurred by the Contractor in relation with this clause 18. including any


contributions to the Decommissioning Reserve Fund, shall be deemed Petroleum Costs


and will be Cost Recoverable.























M


Clause 39 - Assignment: Change of Control





GtatAAi


39.1 Clauses )IJ through 39.6 do not apply to Government Interest Holders in respect ol the


Government Interest The consent ol any Government Interest Holder, in its capacity as


Government Interest Holder, is not reouired lor any Assignment by a Contractor Entity


39.2 Cnept as provided m clause J9.3. no Contractor Entity may Assign to any Person, in


•hole or in part, any ol its rights, privileges, duties or obfagabons under this Contract


without the prior consent ol the Government, which consent the Government shall not


unreasonably withhold or delay.


39.3 Any Assignment ol al or any part ol a Contractor Entity's rights, obligations, or interests


under this Contract without the prior consent ol the Government or that otherwise .s m


breach ol this Contract or AppUcabie law «d be void as to the Assignee and the


Assignor wit remain liable under this Contract.


39.4 No consent ol the Government n respect ol an Assignment by a Contractor Entity is


valid unless in writing and signed by the Prime Minister and the Minister ol Natural


Resources ol the Kurdistan Region.


39.5 No Contractor Entity is entitled to male an Ass«nment when d or the Contractor is in


default under any obfcga«>on under this Contract.


AswoNMtnr to Amimres *hd orrna Cownacioa Inruns


IV t A Control lor Entity that is not in default under any obligation under tftrt Contract >s


entitled lo Assign lls rights, privileges, duties and obligations under this Contract to an


Alllllntr or lo another Contractor Entity, provided the assignee enters into an agreement


with the Government, acceptable in lorm and content to the Government, to be bound


by the terms and conditions ol this Contract.


•«a.i If a Contractor Entity Assigns any of its rights, privileges, duties or obligations


under this Contract lo an Affiliate of such Contractor Entity, the Assignor will


remain |omtiy and severally liable with the Assignee for the performance by the


assignee of all obligations, duties, and liabilities pertaining to the Assignment





Assionmcmis 10 Tmao Rahims


39.7 A Contractor Entity proposing lo Assign all or any part of its rights, obligations, and


Interests under this Conlracl shall request the consent of the Government and the other


Contractor Entitles, and accompany such request with:


(■) evidence of the technical and financial capability of the proposed third party


assignee and its controlling (directly or indirectly) shareholders;


(b) a letter of representations and warranties from the proposed assignee in form


and content acceptable to the Government including a representation that the


proposed assignment will not to the knowledge of such Contractor Entity after


reasonably diligent myestlgatlon violate any Corrupt Practices laws applicable


to the Contractor Entity, and














99


 Production iha'Uig Contrail Piiamagiun





(c) .1 letter of representations from the assignor In form and content satisfactory to


the Government, including a representation that the proposed assignment will


not to the knowledge of such Contractor tntity after reasonably diligent


Investigation violate any Corrupt Practices laws applicable to the Contractor


Entity.


it h for any Assignment to be effective, the Parties and the relevant thud party. If any, must





enter into a binding and enforceable instrument of assignment and novation with the


Government, which must include ar. undertaking by the assignee to fulfil the obligations


under this Contract which correspond to the assigned participating interest.








GOVt«NMtNI


IV 9 Except as provided in clause 4 in respect of the Government Interest, and as provided in


clauses 32.6 through 32.14. the Government shall not Assign all or any part of its rights


and obligations under this Contract to any Person.





C"»noi ot CoNtaoi


19.10 "Change of Control' means:


(a) any direct or indirect change of the identity of the Person who Controls a


Contractor Entity (whether through merger, sale of shares or of other equity


Interests, or otherwise, through a single transaction or series of transoctlons.


from one or more transferors to one or more transferees!; where





(b) "Control" means the power (including contingent powers! to casts* Contractor


Entity to do, or not do, an act that may otherwise be in the interest of such


Contractor Entity to do or not do. and whether such power is cere mb**


pursuant to shareholders agreements. Imartcmg agreements, voting rights


agreements, management agreements, board memberships, direct or


beneficial ownership, or *n any other duect or indirect way for thrs purpose,


and without liraitmg the foregosng. any Person that owns 50* of the


outstanding voting securities (or equivalent ownership interests), determined


after accounting lor all securities that are convertible into voting securities, ol


any other Person *i be conclusively considered to control such other Person.





39.11 A Contractor Entity sha«: (a) promptly notify the Government when such Contractor


Entity eipects to be subject to a Change m Control and (b) request the consent of


Government with respect to such Change of Control.





Tams


39.12 If a Contractor Entity Assigns all or part of its nghts. obligations, and interests under this


Contract, m compliance with this clause W. or is subject to a Change of Control


accomplished with the Government's consent, neither such Assignment nor Change of


Control wil constitute a usable event at to the assignor, assignee, or any other Person


under Kurdatan Reg»on law.




















100


 ?ro4*




Clause 40 - Force Majeurc





Duiniiion





'force Maleore' means any event (1) that n unforeseeable, Insuimountable. and


iriesittible. not caused by any error or omission by the Contractor acting at a reatonable


and prudent operator and solely and directly cautcd by circumstances beyond the


control ol the Contractor at a reatonable and prudent operator, and (2) which prevents





Contract. Such events '"elude:





la) war. whether declared or not. cmI war. rnturrectioa. noli. c.4 commotion,


terrorism. any other hostile acts, whether internal or external.


lb) itr*ei or other labour conflicts:





|c) accident or blowoutt;


(d) quarantine reitrlctloni or epidemict;


(n) any act. avent, happening or occurrence due to natural < iiutet, in parlicular,


but without limitation, floods. ttormi. cyclonet, firm, lightning, earthquakes, d-


lack of woter nrcettaiy for Petroleum Operation*, and


|f) any actl or ordert of any competent foreign governmental authority validly


aliening Jurisdiction over the Contractor or a Contractor I "lily





Intel


40.1 No delay, drfault. breach or omiitron of the Contractor or a Contractor I ntrty to the


performance of an, of thee respeche obhgat«ns under thn Contract w* be considered


a material breach ol tho Contract H such delay, default, breach or cnauo" is die to


force Mateur*.


40 J The Contractor than promptly notify the Government of the occurrence ol a force


Maieure (vent and late ail reasonably appropriate meaiucei to perform itt obligation


under thn Contract to the e.tent poiiible.


40.4 The time reiutting from any luch delay or curtailment in the execution of luch


obligation. Increated by the time neceiiary to repair any damage resulting from or


occurred during tuch delay or curtaflment. shaB be added to any time period provtoed


under thn Contract |mc hiding the Eaptoration Period and any citension thereto, any


Sub Per«d and any extension thereto and any Development Period and any eatenuon


thereto)


40 S The Government and the Contractor shall meet ai toon at possible after the rotficatoo


of force Manure with a view to uwng reasonable endearours to mitigate the effects








40 t An event affecting a Contractor Int-t, era be constoered force Uajeure affectmg the


of the Contractor's obi«atom under thn Contract. The app bcauon or potenbal





application of an, law applicable to a Contractor Cat*, or an, of m A mates, other


than Kurdntan Region law or other laws of the Republic of Iraq, which could result in a


criminal or end penalty or sanction, is not force Majeure











101


 Production Jftoruta Contract Pnamagrun








*0 t The 'o I low mg events or circumstances wl not constitute Force Majeure:


U) any event of circumstance arising in connection with any Assets and Materiab


or faculties other than the Assets and Materiab and ItcAMl oI the Contractor


or a Contractor Entity or a Subcontractor;


(b) the breakdown or fadure of any Assets caused by normal wear and tear Of


caused by the failure of the Contractor to maintain such Assets or to maintain a


suitable stock of spares;


Ic) any event or circumstance affecting any third party.


(d) any event or circumstance which comprises or results from any wdful


misconduct or gross negligence of the Contractor, or any act or omission by the


Contractor which could have been prevented or overcome by the eiereise by


the Contractor of the standard of a reasonable and prudent operator acting m


accordance wdh Best Practices;


If) the imposition of sanctions by the Government due solely to the failure of the


Contractor to comply with any Applicable Law;


If) change of Apphcabte Law; and


|g| the inability or the fadure of the Contractor to raise sufficient financing for the


performance of the Contractor's obligations hereunder.


40.8 The Contrailor will not be entitled to relief in accordance with this clause AO. or having


become entitled will cease to be so entitled, to the eitent that the Contractor fads to


comply with the requirements of this clause 40. unless such fa iute wools tse:‘ qjj ' >


is Force Ma|cure.


•O f The Contractor shall, to the greatest c«lenl possible, continue to perform its obligations


In accordance with this Contract to the extent not prevented, Impeded, or delayed by


Force Ma|cure.


10.10 II Force Majeure occurs, the Contractor shall take reasonable endeavours to bring the


:orce Manure to an end and to resume fuk and proper performance of the obAgation to


which the force Manure relates


*0.11 The Contractor shall gme nalcr (a "force Manure estimate') to the Government at


each of the following times


|a) forthwith after the day

knew or ought reasonably to have known of the inability to perform an


obligation in accordance wdh this Contract for which relief rs sought.


|b) within 7 days from the Relevant Oay and on the last day of each subsequent


period of 7 days thereafter; and


|c) forthwith after the Contractor anticipates that it will be able to resume


performance of the covenant or obhgation for which relief n sought


MU lech force Manure Estimate shall contain the Contractor's good faith best estimates of


the fokowing information;


la) full particulars of and the reasons for the force Majeure event;











102


 fndattl--- U«r»t0 Contract








(b) the r.prara e.tent of the Contractor*, mab'*y to perform any covenant or


oblation In accordance with this Contract.





(I) the expected dural** ol the force Mahore Iren the Miwi Day end the


e>ee«led date that performance oI Ih* covenant or obtgal.on la which the


lorte Mayeo" "late* wdi be resumed (whether merer-entaty or m whole):





Id) the kiom wh«h the Contractor propose* to fata to brmg the farce Manure


erent to an end and to resume fud and proper per lor mane a ol the oblation to


wh

Khedele thereof.





ao II The Contractor that ensure that each subsequent force Majctirr Estimate wntl contain


any ol the aboye .nlormation not previously given notice ol. a full report conflrmmg or


updatmg and amplifying the Information contained in any previous force Manure


(sinuate* and such further information as the Government may reasonably request











Clause 41 - Sovereign immunity


41 1 Thrs clause 41 does not apply to the Government m respect of any Dnputr arising out of


or related to |a) the exercbe of rights by the Government as set forth m clauses 32.11


and 32 12. (b| clause 4.13; or (e) clause 4 to the e.tent the Dispute is between the











411 (ach Parly hereby fudy and irrevocably waives any claim lo immunity for itself or any of


its aneli Thu waiver includes any claim to immunity from;


(a) any expert determination, mediation, or arbitration proceedings commenced


pursuant lo clause 42;


(b) any judicial, administrative or other proceedings lo aid the eipcrt


determination, mediation, or arbitration proceedings commenced pursuant to


clause 42; and


(c) liny effort to confirm, enforce or execute any decision, settlement, award,


judgment, service of process, execution order, or attachment (but not any pre


ludgmenl attachment) that results from an expert determination, mediation,


arbitration or any judicial, administrative, or other proceedings commenced


pursuant to this Contract.


Clause 42 - Dispute Resolution


Exclusion


421 This clause 42 does not apply to any Dispute arising out of or relating to the exercise ol


rights by the Government as set forth m clauses 32 II through 32 13. whKh Disputes


shall be subject to the exclusive jurisdiction of the courts of the Kurdistan Region located


In Erbil.














103


Notxioi Damn





42.2 Subject to the provisions of clause 42.1. • Party oho desires to submit a Dispute IOr


resolution which has not been resolved by negotiation shall commence the Dispute


resolution process by providing each other Party that Is a party to the Dispute wdh a


notice ol the Dispute (a 'Notice ot Dispute').


42.2-1 A Notice of Dispute must (a| identify the parties to the Dispute, contam a brief


statement of the nature of the Dispute, and the relief requested and (b|


request negotiations among the senior representatives of the parties to the


Dispute as set forth in clause 42.3.


NtooiiAiioa


42.i The parties to the Dispute shai first seek to settle the Dispute by negotiation between


senior representatives with authority to negotiate the settlement of the Dispute Such


senior representatives shall meet at a mutually acceptable date. time, and place to


attempt to resolve the Dispute.


Mtoutio*


42.4 If the Dispute is not resolved by negotiation in accordance with clause 42 J within 60


days after the date of the receipt by each party to the Dispute of the Notice of Dnpute


or such further period as the parties to the Dispute may agree in writing, any party to


the Dispute may seek settlement of the dnpute by mediation in accordance with the


London Court of International Arbitration (*ICIA'| Mediation Procedure. wh«h


Procedure shall be deemed to be incorporated by reference into this clause, and the


parlies to such Dispute shall submil to such mediation procedure


A4BII*«TI0N


42.5 If the Oispute is not settled within the earlier of |a) 60 days of the appointment of the


mediator, or such further period as the parties to the Dispute may Otherwise agree


under the mediation procedure under clause 42.4. and |b) 120 days after the delivery of


the Notice of Dispute, any party to the Dispute may refer the Dispute lo. and seek final


resolution by. arbitration under the ICIA Rules, which Rules are Incorporated by


reference into this clause 42.5.


42.1.1 An election by a Parly lo refer a Dispute to arbitration shall be construed as


meaning such Dispute shall be resolved by binding arbitration under the LCIA


Rules.


42.1.2 l*cept as specifically provided otherwise, no Oispute is subject to decision by


any court, and the Government specifically does not submit to the jurisdiction


of any court outside of the Kurdistan Region.


«2.S.i Any arbitration shall be conducted by three arbitrators.


42.1.4 II the parties lo the Oispute are the Government and all the Contractor Entities,


the Government and the Contractor shall each appoint one arbitrator. If the


parties to the Dispute are the Government and more than one. but not all the


Contractor Entities, the Government shall appoint one arbitrator and such


Contractor Entities shall appoint one arbitrator. If the parlies to the Dispute are











104


 Froc^-.Kn Starry Coetiac!





the Government and on* Contractor Entity. the Government and such


Contractor £"«>*» sha« *»<► appoint one arbitrator.


Ull The two arbitrator* so appointed shall. in good faith. use aU reasonable


endeavours to agree on the appointment of the third arbitrator, who wil chair


the arbitral tribunal, m cate of failure to appoint an arbitrator or to agree on


the appointment of the third arbitrator, the Rules ol the ICIA shall apply.


The seat of arbitration than be London. England The language to be used in


an, prior negot^tion. mediation and m the arbitration than be English. The


arbitral award may be enforced by any court of competent jurisdiction. Any


award sha« be rrpretied m US$.




appeal, including to the Courts of England on ittuet of law.





Cimii DiiuuniTioa


42 t An, Dispute between all or an, of the Parties in retpect of dautet IS «. 27-2 and 27.7.


and any Dispute the disputing partiet agree to refer to an Eipert. shall be submitted to


an Eipert in accordance with tfwt clause 42.6-


42 7 The Management Committee thal prepare and agree appropriate terms of reference


("Terms of Reference*) for the Eipert m retpect to a Dispute to be submitted for


resolution b, the Eipert.


«»7.i The Terms of Reference must set forth the duties of the Eipert.


*7.7.7 The Terms of Reference must require the Expert to use reasonable endeavours


to issue an opinion within 4S days of the Expert's receipt of the Terms of


Reference and the information referred to in clause 42.2.


«7.7.J The Management Committee shall promptly provide the Expert with approved


Terms of Reference.





47.8 Each Party to the Dispute shall have the right to provide the Eipert with any written


information which such Party considers relevant, provided such written information Is


provided to the Expert within 45 days after the Expert's appointment.


47.8.1 Such information shall be provided to each other Party at the same time and


each such other Party shall be entitled to provide comments on such


information to the first Party and the Expert svithin 30 days after receiving such


information.


*7.8.7 The Expert may consider any information the Expert considers useful to reach a


decision.


47 II Subject to the provisions of clause 15.9. any decision of the Expert shall be final and shall





not be subject to any appeal, except in the case of manifest error or fraud.


47.10 Each Party to the Dispute shall pay an equal share of the costs and expenses of the


Eipert.











10S


 Production Iha/tog Cootnui Piramagrun








Clause 43 - Fiscal Stability


GlNEDAl


43.1 Thr Government shall maintain the liability ol (he fiscal conditions ol this Contract, as


they molt from Applicable law In (orce ai ol the Effective Dale, for the entire duration


of this Contract in accordance with thl» clause 43.


43 2 The provisions of the clause 4J do not apply lo Government Interevl Holders.


AcknoivitDOMtNt or fuiuiu Laws


43 I The Coniractor acknowledge! that the Government has advised it may propose laws


which could have a beneficial or detrimental effect upon the fiscal position of the


Contractor, including laws the primary purpose of which may be:


(a) the protection of the environment to the standards of the European Union,


(b) the promotion of the health and safety of citizens of the Kurdistan Region to


the standards of the European Union;


(e) the promotion of the health and safety of personnel engaged In Petroleum


Operations to the standards of the European Union;


(d) the regulation of hazardous substances, including the transportation and


disposal thereof, to the standards of the European Union:


(e) decommissioning of petroleum facilities, including Wells and refineries, to the


standards of the European Union and Alberta. Canada:


(I) regulation of pipelines, end


(g) the regulation of companies


The introduction of such laws wdl not entitle the Contractor or any Contractor Entity to


any rights to any alteration to the terms ol this Contract


ChuSI or Tu Law


43.4 If. at any time after the Effective Date


(a) there a any change to Regional Ta« laws m force on the Effective Date (a


'Change of Tai law'l. and


(b) the focal position of the Contractor Entities under tho Contract o materuly


either beneficially or detrimentaBy affected by such Change of Ta« law; then


(e) the Contractor and the Government shall negotiate to alter the terms of thb


Contract so as to place the Contractor Entities in the same overall economic


position (takesg mto account home country ta«es| as that which the Original


Contractor Entity I'Origlnal Contractor Entity' means Repsol) would have been


without any Change ol Tai Law


43.5 The Government wdl under no cecumstances be liable to any Party or Person for any


consequential or indued losses because ol any Change of Ta« law.














106


Oseutts


m Ha Party believes that a Change ol Tax law has beneficially or detrimentally affected the


Contractor Int ty a> provided in 43.4. and upon that Contractor Entity's request,


the Government shall meet with the Contractor Entities to decide on any necessary


measures or making any appropriate amendments to the terms of this Contract to place


the Contractor Entities in the position (taking into account home country Taies for the


Original Contractor Entityl as the Original Contractor Entity was in poor to the


occurrence of the Change of Ta« law.


*17 Should the Government not agree with the Contractor in respect of the effect of the


Change of Tai Law. withm 90 days of the request of the Party referred to in clause 436


(or such other period as may be agreed by the Partieil. a Party may refer the Dispute to


arbitration as provided Ml clause 42 without first referring the matter to negotiation and


mediation.


Clause 44 - Communications: Notices


44.1 A Party giving any notice or making any request, demand, or other communication to


another Party (each a 'notice*) shall do so m writing, eipress the notice m English,


address such notice as provided in clause 41 2. and use one of the following methods to


deliver such notice, each of wh

(a) personal delivery;


(b) email; and


(c) internationally recognised air courier, with all (res prepaid, and. in the case of


any notice to the Government, with a reputable international air courier


company with an establishment in Erbil in the Kurdistan Region.


*a.2 Any notice or communication not provided in English is not valid unless acknowledged


and accepted by the recipient.


*« 3 Each Party shall address notices In respect of this Contract.





To the Government:





Attention; Mis Excellency the Minister of Natural Resources


Address: Ministry o( Natural Resources


Kurdistan Regional Government


(rbil, Kurdistan, Iraq








Email: mnr(® krgoil.com


























107


 Product** c---tfet








To a Contractor Entity:


REPSOL YPF ORIENTE MEDIO S.A


Attention Mr. Martin George tarrowman


Address: Al Fattan Maaa. Qff

Dubai. United Arab lm»rafes


Telephone: *9714 28)2111





Fax: 4 9714 283 2100


Email: mgbarrowman@repsol.com


44 4 A notice is effective only if the Party giving or making the notice has complied with th.v


clause 44 and if the addressee has received the notice.


44.4.1 If a notice is delivered to the recipient in person, the notice will be considered


received by the addressee by the date set forth in the signed receipt.


44.4.2 If a Party sends a notice by an internationally recognised air courser in


accordance with this clause 44. the notice will be considered received by the


addressee by the date set forth in the signed receipt.


44.4.3 If a Party sends a notice by email and the email transmission is followed by


delivery of the Notice by air courier in accordance with this clause 44 or is


acknowledged by the recipient, the notke w be consdered to have been


delivered to the addressee when the email departed the gateway of the


sender.


<4 5 A Party may change ts address as set forth »n clause 44 2 by a pror not*e to the other


Party ifi accordance with this clause 44.








Clause 45 - Tcruinaiion


IfttM


4$ l The Government undertakes to exercise its termination rights under this clause 45 in a


reasonable and proportionate manner, having regard for the nature and severity of the


triggering act or event, the identity of the Person at fault, and the relative significjncc of


any adverse consequences to the Contractor or a Contractor Entity that may arise from


the Government’s exercise of its rights under this clause 45.


45.2 In any notice of termination given by the Government under this clause 45. the


Government must specify the grounds for exercising the termination right and the date


on which the Contract or the rights and interests of a Contractor Entity, as applicable,


will terminate.





45.3 The Contractor is not entitled to claim Force Majeore as a consequence of the


Government's exercise of its rights under this clause 45. and no obligation of the


Contractor will be suspended as a consequence of any Dispute with respect to the


Government's exercise of its rights under this clause 45.


 Pnaj Con rr SCI rmtmoqtuft








CONIRACION TMMINAtlO* RlOMH


45.4 The Contractor may terminate iHis Contract at any time during the Exploration Period


(at It may be extended pursuant to clauiei 6.5, 6.6, and 6.7) or the Gas field Holding


Per>od upon 30 days’ prior notice to the Government.


AUTOMATIC Tt«MINAIK>N


45.5 Till* Contract will automatically terminate the end of the Exploration Period (Including


any extensions at provided In clauses 6.S. 6.6, and 6.7| without notice to the Contractor


II, at of the last day of the Exploration Period, II:


(a) the Development Period hat not Hatted in reipect of a Oncovery of Crude Oil


or Gat field; or


(b) no Gat field Holding Period It applicable with reipect to a Gat field.





450 In accordance with claute 7.11, thlt Contract will terminate:


(a) upon the rellnqulihment (whether mandatory, contidered, or voluntaiyl of the


entire Contiact Area: and


(b) with reipect to all rellnqulthed areat Immediately upon relinquiihment, and


the Contractor lhall have no further rightt with reipect to tuch areat.





Conauri P»aciic«i Iawi


45.7 On not lett than 30 dayt' prior notice to the Contractor, the Government may terminate


thn Contract if a competent authority hat reasonably determined |tn a proceeding


applying due O'oecuV.


(a) that th* Contract hat been obtamed by the Contractor, or any Person act mg on


behalf of the Contractor, m violation of Corrupt Practice! Laws; or


(b) that a permit, approval, content, or warver m connection with th-t Contract or


Petroleum Operationt hat been obtained by the Contractor, or any Perton


acting on beha* of the Contractor, m violation of Corrupt PractKei lawt.


45.• Any final determmation. judgment, vane lion, or conviction (not subject to further appeal


on the issue). Inciti<*ag under a content order in which there *t a finding or admitwon of


the factual circunittancet deterged m claute 45.7(a) or (b) lor both), of a judicial or


regulatory authority in the United Statet of America. England, or a legal jurisdiction


where a Contractor Entity or rtt ultimate parent company it incorporated, with


jurisdiction over a Contractor Entity or an Affiliate of such Contractor Entity, wil be a


reasonable determination for the purposes of clause «5.J and wii be conclusively


determinative


45.9 Unless the Government hat cancelled a notice of teimination this Contract will be


terminated at of the end of luch JO-day notice period.





OlMfcH G*OUKDS »OK TlHMIKAIION


45.10 The Government may terminate this Contract, on not less than 90 days’ prior notice. If


the Contractor;


(a) fails to meet a material financial obligation In this Contiact;


 Production Shoring Contract Pi'omagrun








(b) during the First Sub-Period doe* not carry out drilling and seismic acquisition,


as detailed in clause 10.3 or, during the Second Sub Period |or earlier}, docs not


carry out drilling and seismic acquisition, as detailed In clause 10 4;


(c) Interrupts Production lor a period ol more than 90 consecutive days with no


cause or justification acceptable in accordance with this Contract or under Best


Practices, it being recognised that Force Ma/eure is an acceptable justilication


for such interruptions;


(d) unless such attraction or production is etprestly authorised or unavoidable as a


result ol operations carried out in accordance with Best Practices detracts or


produces any mineral or object which is not covered by this Contract and does


so wilfully or m a manner that constitutes gross negl

receiving notice thereof; or


|r) refuses to abide By any negotiation, mediation, arbitration or capert decision


under clause 42.


asae-t If. within the 90-day rsot

default identified in such notice to the satisfaction of the Government, or the


Government has agreed another remedy with the Contractor, inehjding


compensation, the Government shall cancel such notice of termination


as tat If, within such 90 day notice period, the conditions set forth in clause 4S • have


not been satisfied, the Government may. on not less than 30 days' not«e.


terminate the Contract, and. unless such notice is cancelled by the Government


before the end of Such 30-day period, this Contract will be terminated as of the


termination date set forth in the notice Irom the Government.


•* ti This Contract is subject to termination as provided In clause 14


as.12 Where the Contractor comprises only one Contractor Entity, the Government may


terminate the Contract on not less than 30 days’ notice to such Contractor Entity


following the occurrence ol an Act ol Insolvency, unless, within such 30-day period, the


Government cancels its notice based on evidence provided by the Contractor Entity that


the Insolvency Event has been dismissed, discharged, or otherwise is no longer


applicable


•*.H The rights and interests of an individual Contractor Entity will be automatically


terminated, without urior notice from the Government, II such Contractor Entity:


la} is subject to a Change of Control for which the Government has not given its


authorisation in accordance with clause 39.11; or


|b) has made or has purported to make an ass^nment of all or part of its mterests


hereunder (ineludmt under any proven of a joint operating agreement)


without the prior consent of the Government in accordance with clause 39.























110


 P/Mueiioft Jhnri»a Contract PuamoQiun








CONSIQUIllCtt Ol TlAMINAIlOH


*5.14 Upon termination or expiration ot this Contratt


(a) the Contractor land each Contractor f mltyl will no longer have, n ol the


elfectrve date ol such termination, any lurther tights and interests under thi*


Contract;


(b) all accrued rights and liabilities ol the Contractor and ol each Contractor Entity


Mill survive; and


(c) the provisions ol clauses 16.9, 10, 11, 15.1, 35.3, 15.4,15.7. 16. 38.7

42 will turvlve the termination or expiry ol thit Contract.


45.11 II the Government terminates the participating Interest* ol a Contractor Entity, but not





the Contract, and there are remaining Contractor Entities:


(a) tuch terminated Contractor Entity will no longer have, as ol the ellective date


ol such termination, any lurther rights and Interests under this Contract;


(b) all accrued right* and liabilities ol such terminated Contractor Entity will


survive; and


(c) as to and In respect ol such terminated Contractor Entity, the provisions ol


clauses, 16.9, 10,11,15.1, 15.1, IS 4. 15.7, 16, 38 7|c), 41. and 42 will survive


such termination,


45.1* II the participating Interests ol a Contractor Entity (or ol Contractor Entities) are





terminated, but the Contract it not terminated and there are remaining Contractor


Entities, the Government may oiler, on not less than 15 days' prior notice from the


Government to the other Contractor Entities, to assign and novate such terminated


Contractor Entity's participating interest, or any part thereat, to the remaining


Contractor Entities on such terns and in such amounts as the Government may


determine.


ism The Government has no obligation to make such allocation and may retain the


terminated interest, provided that the Government will use reasonable


endeavours to fed a new Buyer lor such interests


4* 17 No assignment, novation, transler. or other disposition ol a terminated Contractor


Entity's undivided mterests to another Contractor Entity pursuant to this clause 45 will


be a taaable event under Applicable Law as to the Contractor Entity receiving the


undivided interests ol a terminated Contractor Entity.


4* 14 Neither the Government, nor any Contractor Entity, wfl assume any hatsbties.


obligations, or duties ol a terminated Contractor Entity in respect ol the terminated


Contractor Entity's undivided interest arising or accrued prior to the Utter ol;


(a) the ellective date ol the termination of such Contractor Entity; and


(b) in the case ol assortment and novation to the remaining Contractor Entities,


the ellective date ol the reastignment and redistribution of the terminated


Contractor Entity's interests to another Contractor Entity


45.14 The Government will in no circumstances assume accrued UabilAies. obligations, or


duties ol a terminated Contractor Entity m respect of the terminated Contractor Entity's








III


 Production Jfrorutfl Contract PnamoQiun








undivided interest, whenever arising or accrued, ail accrued liabilities will remain the


vole obligation of the terminated Contractor Entity.


tin No termination under this Contract, deluding in this clause 45, lunits or impair* a Party**


right* under (nglnh taw or Appl







Clause 46 - General Provisions


Co*iNita*«ats


*6.1 The Contractor (ntitie* and the Government rnav execute th.* Contract in counterparts,


each of which con*titutet an origmal. and all of which, collectively, constitute only one


agreement. The signature* of all of such Parties need not appear on the same


counterpart, and delivery ol an executed counterpart signature page by facsimile or


electronic scan * a* effective a* executing and delivering this Contract m the presence of


the other Parties In proving this Contract, a Party must produce or account only lor the


executed counterpart of the Party to be charged.


AutHDUUTt; Warvtis


*6.2 The Government and the Contractor may amend this Contract only by a written


agreement of the Government and the Contractor that identifies itself as an amendment


to this Contract.


*6_i i A Government Interest Holder, in such capacity, is not entitled to be a party to


any agreement amending Chii Contract, unless the terms of such amendment


affact any right or obligation of such Parly as a holder of all or part of the


Government Interest.


*6.1.2 The Government shall notily Government Interest Holders of any proposed


amendments and signed amendments, and the Contractor will have no


obligation to notify Government Interest Holders ol any proposed amendments


and signed amendments,


*6.3 A Party may waive any condition or obligation of such Party In this Contract only by a


writing eiecuted by such Party. A waiver made on one occasion will be effective only In


that instance and only for the purpose stated A waiver once given Is not to be


construed as d waiver on any future occasion. No waiver or amendment in respect of


this Contract will constitute a waiver or amendment of any other agreement or contract,


except as expressly set forth in such waiver or amendment


*6.4 No failurp or delay by a Party in exercising any right hereunder, or In requiring the


satisfaction of any condition under, this Contract, and no act, omission, or course of


dealing between the Parties (or any other them), Vrill operate as a waiver or estoppel of


any right or condition or any provision, right, or condition of this Contract.


46.5 Any single or partial exercise of any light, power or remedy by a Party will not preclude


any other or future exercise thereof by such Party or the exercise by such Party of any


other right, power or remedy.














112


 Prodwtwn Saar*? Connect











46 6 The Government warrants that this Contract is approved for the purposes of the


Rurdnun Region Oil and Gas law.





Costs


46 7 lach Party sf'all bear all costs incurred by it in connection with the preparation and


negotiation of and entry into this Contract and all documents to be entered into


pursuant to it. Such costs will not be recoverable as Petroleum Costs.





Entcnvi Omi


46 * This Contract is effective as of the date set forth on the signature page (the -Effective


Date'}.


6OVt«Nltl0 l»W


46 9 This Contract, including any dispute arising therefrom, thereunder or in relation thereto


and the agreement to arbitrate in clause 42, is governed by English 'aw. Eiiept In


respect of Government Interest Holders, no term of this Contract is enforceable under


the Contracts (Rights of Third Parties) Act 1999 by a Person who is not a Party to this


Contract.


EWUtt AOMtMtHI


46.10 As of the Effective Date, this Contract and the Repsol letter of Representations


constitute the final, complete and exclusive expression of the Parties' agreement on the


matters contained in this Contract


<6JU AI prior and contemporaneous negotiations and agreements between the


Parties on the matters contained in this Contract are eipressly merged into and


superseded by thn Contract.


«s i0-i The provisions of this Contract may not be explained. supplemented or


Qualified through evidence of trade usage or a prior course of dealings.


**i«J In entering into this Contract no Party has relied upon any statement.


representation, warranty or agreement of any other Party or any other Person,


except for those eipressly contained in this Contract, in the Repsol letter of


Representations, and the Guarantee.


There is no condition precedent to the effectiveness of this Contract (eicept !ot


signature and delivery by the Government and the Contractor (ntrtiei)


46JU There are no representations or warranties, in each case other than those


eipressly stated m this Contract and the Repsol letter of Representations











fS.pnofi.-r pope/oKows /


 tor the Contractor and »»ch Contractor Entity:


EffccthwDatr i/i011


Re(*sol YPF Oriente Medio S.A




















 Effective Dal* 2011














►or jfxicn behalf c(iht GovtRNMtNT ot ?Ht Kurdistan Regioncf Iraq














ft*:...........................---.......


te: him Salih


Prime Minister


Kurciston Rcjlcool Government





On twfolf of «k* KtflOnal Council


For the 0»l andG*> Affair*of th* Kurdi>l«n ftrgion • Iraq




















Ashti Hiwraml


Minister of Natural Resources


KurdsUin Rcefanol Government


On behalf of the Ministry of Natural Re*our<** In tho





Kurdfeton Rotfon











for tho Contractor arvd rath Contractor Entity:














RtPSOl YPF Opiintc MioioS.A.





























/Jig'iolu'i pago to Ptoduttloo Sharing Contwt n/amagranj





 Production Sharing Contract Piromagrun























Annex A











Map showing coordinates of the Piramagrun Contract Area corner points

















































































































ii *•«->«
































































































































































































































A • I





 Annex B





Accounting Procedures











PARAGRAPH 1 - GENERAL PROVISIONS


1.1 Purpose





The puiposr of this Anne. 0 - Accounting Procedure* is to classify expenditures, define further


Petroleum Costs (In addition to those defined as such in the clauses of the Contract), and


prescribe the manner In which the Accounts shall be preoared and approved.


1.2 Definitions


Words and phrases to which a meaning has been assigned in clause 1 or other clauses of the


Contract shall have the same meaning when used In this Anne..








l.J Inconsistency


In the event of any inconsistency or conflict between the provisions of these Accounting


Procedures and the main body of the Contract, the provisions of the rajm body of the Contract


will control.





1.4 Accounting Records and Reports


1.4.1 The Contractor shall maintain the Accounts in accordance with clause IS and this


Accounting Procedure.


i.«.l Within 60 days of the Effective Datr, Ihe Contractor shall submil to and discuss with the


Government a proposed outline of charts of Accounts in accordance with generally


accepted standardsand recognixed accounting systems and consistent with normal


petroleum industry practice and procedures


1.4.s Within 90 days of receiving the above submission, the Government shall either provide


written notification of its approval of Ihe proposal or request in writing revisions to the


proposal.


t.4.4 Within 180 days after the Effective Dale, Ihe Contractor and the Government shall agree


on the outline ol charts ol Accounts which describe the basis of Ihe accounting system


and procedures to be developed and used under this Contract.


14.s Following such agreemenl, Ihe Contractor shall expeditiously prepare and provide Ihe


Govcrnmenl with formal copies ol Ihe comprehensive charts of Accounts and manuals


related lo the accounting, recording and reporting functions, and procedures which are,


and shall be, observed under Ihe Conlract.


mb Notwithstanding the generality of the foregoing, the Contractor shall provide regular


statements relating to the Petroleum Operations:


(a) Production Statements (Paragraph 6);


(b| Value of Production and Pricing Statements (Paragraph 7);


(c| Co»r Recovery and Share Account Statements (Paragraph 8|;


(d| Statements of Expenditures and Receipts (Paragraph 9);


 Production Sharing Contract Piromog'on








(e) Final End-of-Year Statements (Paragraph 10(; and


(0 Budget Statement* (Paragraph 12).


1.4,» All report* and statement* shall be prepared in accordance with the Contract, Applicable





law, and where there are no relevant provisions of either of these, in accordance with


Best Practices.








1.5 language and Units of Account


All Accounts shall be maintained and prepared in the English language and shall be recorded in


US Dollars. Where necessary for clarification, the Contractor may also maintain Accounts in


other currencies








1.6 Audit and Inspection Rights of the Government


The following provisions shall apply to any audit carried out in accordance with clauses 15.3 to


15.7:


it.I for purposes of auditing, the Government, acting reasonably, may examine and verify,


at reasonable times upon reasonable prior written notice to the Contractor, all


accounting records, including charges and credits relating to the Petroleum Operations,


such as records of account, accounting entries, supporting records and inventories,


vouchers, payrolls, invoices and any other documents, correspondence and records


including electronic records reasonably considered necessary by the Government to


audit and verify the charges and credits, values and treatments.


1.6.1 The auditors are entitled to visit and Inspect at reasonable times, all sites, plants.


facilities, warehouses and offices of the Contractor directly or indirectly serving the


Pelroleum Operations and to question personnel associated those Petroleum


Operations.


I* I Where the Government requires verification of charges made by an Aft. jtr of a


Contractor Entity, the Government shaH have the right to obtain an audit certificate for


such changes from an internationaby recogniied firm of public accountants acceptable


to both the Government and the Contractor.


1.6.4 Ai agreed adiustments resulting from an audit shai be promptly made .n the Accounts


and any consequential adjustments to payments due to the Contractor or to the


Government, at the cate may be. shall be made promptly


i*.« When issues are outstanding with respect to an audit the Contractor thai maintain the





relevant documents and permit inspection thereof until the issue n resolved.


1.7 Accrual Basis. Cash Mow Bath and Reports


AH Accounts shall be prepared on an accrual basis in accordance with generally accepted


accounting prmoptes used in the mternational petroleum industry





1J Values and Treatments


Values and treatments proposed by the Contractor relating to all Petroleum Costs shall be


subject to challenge by the Government in the course of audit to ensure that they are in


accordance with the provisions of this Accountmg Procedure.


 Production .shoring Contrail Ptramogrun








PARAGRAPH 2 - COSTS AND (XPINSCS


2.1 Segregation ol Costs and Expenses


JJ I Petroleum Com be segregated m accordance with the purposes for wh

(b| w>«»diww mcorred in cases of wingene, under the Contract:


(C| an, other purposes agreed in the Contract, and


(d| other items which have been agreed by the Government and the Contractor.


Mi All Petroleum Com recoverable under Paragraph 1 at Petroleum Operation* shall be


treated at net out In the balance ol this Paragraph 2.





2.2 Exploration Coil*


Exploration Com are all direct and allocated Indirect com and expenditure* Incurred In t arrylng


out the Exploration Operation!, including all direct and allocated indirect com and expenditure*


incurred m the tearch tor Petroleum In an area which is, or was at the time when such cotlt and


expense* were incurred, part ot the Contract Area, including:


(a| aerial, geophysical, geochemical, paleontological, geological, topographic al and seismic


surveys and studies and their interpretation and purchased geological and geophysical


information;


lb) stratigraphic test hole drilling and water well drilling;


(c) labour, materials, sucol es, and services used m dridmg and formation testing of writ


with the object of findrag Petroleum or Appraisal Web* eidudng an, costs of the


subsequent completion of sach wells as producing w»*s


(d| facdMies to the e.tent used in susport of the purposes described m (a). it»K and k».


Including access roads:


(e) that portion of al servxe expenditures and that portion of al general and adm.mstr atrve


expenditures deectty attributable to Exploration Costs or allocated thereto on a


consistent and equitable basis, and


(f) any other expenditure incurred in the search for and appraisal of Petroleum offer me


I Unlive Date and not otherivise covered under this Paragraph 2.2.


2.3 Gas Marketing Costs


Gas Marketing Costs are all direct and allocated indirect costs and expenditures Incurred m


carrying out Gas Marketing Operations in accordance with an Approved Gas Marketing Plan and


Budget and Include that portion of all service expenditures and that portion of all general and


administrative expenditures directly attributable to Gas Marketing Costs or allocated thereto on


a consistent and fair basis.


2.4 Development Costs


Development Costs are all direct and allocated indirect costs and e.pend.tures incurred m


carrying out Development Operations including all direct and allocated indirect costs and


expenditures incurred in:


(a) doling well* wh«h are completed as producing wel.s and dr.ibng w«»s for purposes of


producing from a Petroleum reservoir, whether these we«s are dr, or producing and


dnii «g wefts for the mpction of water or gas to enhance recovery of Petroleum.





S- 3


lb) io«»WM| wells *» way of mttaUafJon of casing or equipment or otherwise after • *•“


hat boon drilled for the purpose of bringing «*• '"•«> u» a* a producing well or as a


well for the injection of water or gat to enhance recovery of Petroleum


K) the costs of Petroleum production. transport and storage facilities such as pipelines,


enhanced recovery systems. Petrolruni storage taoMes and access roads for


Id) engineering and design studies for the webs and facades referred lo m (a), (bl. and |e):


and


|e) lhat portion of all service expenditures and that oortion of all general and administrative


expenditures directly attributable to Development Costs or allocated thereto on a


consistent and equitable basis, and any other expenditure Incurred in the Development


Operations and not otherwise covered under Paragraph 2.4.


2* Production Costs


Production Costs are all direct and allocated indirect costs and expenditures incurred in carrying


out Production Operations. Including ah direct and allocated indirect costs and e.penses incurred


in Petroleum Operations after f irst Production which are other than Exploration Costs. Gas


Marketing Costs. Development Costs and Decommissioning Costs Production Costs include that


portion of an service expenditures and that portion of al» general and administrative expenditures


directly attributable to Production Costs or allocated thereto on a consistent and equitable basis


2 4 Decommissioning Costs


carrying out Decommissioning Operations and include that portion of all service expenditures


and lhat portion of aU general and administrative expenditures directly attributable to


Decommissioning Costs or allocated thereto on a consistent and equitable basis, and the


Deiommissioning Reserve fund shall be determined on such basis. In advance of incurring such


costs as provided in clause )l and. lor the purposes of cost recovery, tne contributions to the


Decommissioning Reserve fond shall be recoverable m accordance with clause II


» » I Service expenditures are expenditures m support of Petroleum Operations including


warehouses, vehicles, motorixed rolling equipment, aircraft, fire and security stations,


workshops, water and sewerage plants, power plants, housing, community and


recreational facilities and furniture, tools and equipment used m these activities.


Service expenditures m any Calendar Year shall Include the costs incurred in such year to


purchase or construct, ot both, such facilities at well as the annual costs of maintaining


and operating such facilities


»•».» *" service expenditures shad be regularly allocated as specified in Paragraphs 2 2.2 2.


2.4. 2.S and 2.6 to Exploration Costs. Gas Marketing Costs. Development Costs,


Production Costs and Decommissioning Costs respectively and shall be separately shown


under each of these categories.


••• Where service expenditures are made in respect uf shared facilities, the basis of


allocation of costs to Petroleum Operations shall be consistent and equitable and shall


be spec died














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 frotacr«s« Sltanag Ccaitoct Utomograa








The foiegomg percentages may be reviewed but not nw often than annually.


and any approved appropriate adjustment shall be made, il necessary,


prospectively.


ra t t Development, Production and Decommissioning Operations Overhead


The overhead rates applicable to Development Operations, Production


Operations, and Decommissioning Operations shall be agreed between the


Parties and shall Incorporate the follosving guidelines:


(a) The Contiactor's charges must be charged at direct charges whenever


possible. Overhead charges exist only to compensate the Contractor's


Affiliates for costs which are properly allocable to Petroleum


Operations under the Contract but which cannot, without


unreasonable effort and/or release of confidential Oata proprietary to


the Contractor's Affiliates, be charged under any other section.


Overhead costs are billed monthly. Overhead must be commensurate


with services rendered and based on actual cost studies but may not


exceed an amount calculated as a percentage of certain annual


expenditures excluding exploration Costs.


(b| That percentage as well as the types of expenditures, which affect


overhead and those, which do not, shall be agreed among the Parties.


(c| The maximum percentage rates may be revised by mutual agreement


not more often than annually. The initial maximum percentage rates


and the types of expenditures to which they apply shall be agreed as


soon as the Parties possess reasonably reliable cost estimates for the


relevant Production Area.




(e) The Contractor shad upon request furnish at the end of each relevant


Calendar Year to the Government a confirmation by its statutory


auditor that the overhead costs actually charged do not duplicate any


other charges and that the method used its allocating overhead to


Petroleum Operations hereunder as opposed to other activities is


reasonable and m accordance wdh generally accepted accounting


practices.


(f) The Contractor must budget lor overhead charges


i*J A« general and administrative expenditures shall be regularly allocated as specified in


Paragraphs 23. 2.3. 2.4. 2.5. and 2.6 to Exploration Costs. Gas Marketing Costs.


Development Costs. Production Costs and Decommissioning Costs, respectively and shall


be separately shown under each of these categories.


PARAGRAPH 3 - COSTS. EXPENSES. EXPENDITURES AND CREDITS


3.1 Costs Recoverable Without Further Approval of the Government


The following Petroleum Costs incurred by the Contractor pursuant to the Contract as classified


under the headings referred to in Paragraph 2 shal be recoverable for the purpose of clause 25


of the Contract (except to the extent provided in Paragraph 4 or elsewhere in this Annei) without


the requirement for obtaining any further approval of the Government, subject to audit as


provided for in clause IS and in Paragraph 1.6














B-6


 Production Sharing Contract Piromogrun





H I Surface Rlghti





All direct com necessary for the acquisition, renewal or relinquishment of surface rights


acquired and maintained in force for the purposes of the Contract.


■ » i labour and Associated labour Costs


(a) The Contractor's locally recruited employees based in the Kurdistan Region:


Costs of all the Contractor's locally recruited employees who are directly


engaged In the conduct of Pettoleura Operations under the Contract ir the


Kurdistan Region. Such costs shall include the costs of salaries, wages, bonuses,


overtime, employee benefits and Government benefits for employees and levies


imposed on the Contractor as an employer, transportation and relocation costs


within the Kurdistan Region of the employee and such members of the


employee t family (limited to spouse and dependent children) as required by


Apphcabie law or customary practice in the Kurdistan Region. If such employees


are engaged in other activities in the Kurdistan Region, in addition to Petroleum


Operations, the cost of such employees shall be apportioned on a time sheet


basis accordmg to sound and acceptable accounting prirtcqsies




Contractor's employees directly engaged in the conduct ol Ihe Petroleum


Operations under the Contract, whether temporarily or permanently assigned,


irrespective of Ihe location of such employees, it be.ng understood thal M the


case of those personnel only a portion of whose time is wholly dedicated to


Petroleum Operations under the Contract, only that pro rata portion of


applicable salaries, wages, and other costs as delineated m Paragraphs 1.1 2(c).


(dI. (e), CQ and (g). shall be charged and the basis of such pro rata allocation


shall be specified.


(c| The Contractor's costs regarding holiday, vacation, sickness and disability


benefits and living and housing and other customary allowances applicable lo


the solarles and wages chargeable under Paragraph 3.1.2(b).


(d) Expenses or contributions made pursuant lo assessments or obligations imposed


under Applic able law which are applicable to the Contractor’s cost of salaries and


wages chargeable under Paragraph 3.1 2(b).


(e| The Contractor's cost of established plans for employees’ group life insurance.


hospltaliiation, pension, stock purchases, savings, bonus, and other benefit plans ol


a like nature customarily granted to the Contractor's employees, provided however


that such costs ate in accordance with generally accepted standards in the


international petroleum industry, applicable to salaries and wages chargeable to


Petroleum Operations under Paragraph 1 1 2{b).


(f| Actual transportation and travel expenses of employees of Contractor, including


those made lor travel and relocation of Ihe Expatriate employees, including their


families and personal effects, assigned to the Kurdistan Region whose salaries and


wages are chargeable to Petroleum Operations under Paragraph 3.1.2(b).


(II Actual transportation expenses of Expatriate personnel transferred to


Petroleum Operations from then country of origin shall be charged to the


Petroleum Operations. Transportation expenses of personnel transferred


from Petroleum Operations to a country other than the country of their


origin shall not be charged to the Petroleum Operations.











B - 7


 S*Cf»e4 C»«W«Kt








(21 "Transportation and travel expenses' at used in this sub paragraph (f)


meant the cotl ol freight and passenger tervice. meals, hotels. inturan

and other expenditures related to vacation and transfer travel and


authorued under the Contractor's standard personnel pofcoev The


Contractor shall ensure that all expenditures related to transportation


costs are equitably allocated to the activities, which have benefited from


the personnel concerned





(g) Reasonable personal expenses of personnel whose salaries and wages are


chargeable to Petroleum Operatone under Paragraph 3.1.2(b) and lor whKh


expenses such personne are reimbursed under the Contractor's standard personnel


policies. In Ihe event such expenses are nol wholly attributable to Petroleum


Operations, the Petroleum Operations shall be charged with only the applicable


portion thereof, which shall be determined on an equitable basis,


J.t.i Transportation and Employee Relocation Coils


The cost of transportation of employees, equipment, materials and supplies other than as


provided in Paragraph 3.1.2(f) necessary lor the conduct ol the Petroleum Operations under


the Contract along svith other related costs such as. but not limited to, import duties,


customs lees, unloading charges, dock lees, and Inland and ocean freight charges


l 14 Charges for Services


(a) Third Parties


The actual costs of contract services, services ol professional consultants, utilities,


and other services necessary (or the conduct ol the Petroleum Operations under the


Contract performed by third parties other than an Alllllate ol the Contractor.


lb) MtMates of the Contractor


(II Professional and Administrative Services Expenses: cost of professional


and administrative services provided by any Affiliates of the Contractor for


the direct benefit of Petroleum Operations, including services provided by


the producton. expkvation. legal, procurement, financial, assurance,


accounting and computer services divisions other than those covered by


paragraphs 3 14 (b||2). 3.1-6. and 3.15 (b) which Contractor may use m


heu of having its own employees. Such charges shall reflect the cost of


providing their services Such charges shall not include any element of


profit and shall be no more or less favourable than simdar charges for


other operations earned on by the Contractor and As Affihates The


charge out rate shell include al costs incurred by Affiliates me 4enul to


the employment of such personnel including all labour and associated


labour costs and the cost of maintaining and operating offices and


providing all support servKes for such personnel. Costs ol travel of such


personnel m respect of Petroleum Operations will be d.rectly charged The


charges lor such services shall not exceed those prevailing II performed by


non Affiliated third patties, taking into account the quality and availability


ol such services. Where the work is performed outside the home ollice


base of such personnel, the daily rate shall be charged from the date such


personnel leave the home office base where they usually work up to their


return thereto. Including days which are not working days In the location


where the work n performed, excluding any holiday entitlements derived


by such personnel from their employment at their home ollice base











B-S


 Prodvcfto» IVniJ (cMiotl








(21 Scientific or Technical Personnel cost of sc enl.' * or technical personne


wn

Petroleum Operations, which cost sha* be charged on a cost of service


basts and shall not include any element of profit. The chargeout rate shall


include all costs incurred by Aff ihates incidental to the employment of such


personnel including all labour and associated labour costs and the cost of


maintaining and operating offices and providing all support services lor


such personnel costs of travel of such personnel in respect of Petroleum


Operations will be directly charged The charges for such services shall not


eiceed those prevailing H performed by non affiliated third parties, taking


into account the quality and availably of such services. Unless the work


to be done by such personnel is covered by an approved Work Program


and Budget, the Contractor sha* not authonre work by such personnel


without approval of the Government





(31 Equipment and facilities use ol equipment and facilities owned and


furnished by the Contractor’s Affiliates, at rates commensurate with the


cost of ownership and operation; provided, however, that such rates sha*


not exceed those currently prevail.-g for the supply of like equipment and


facilities on comparable terms m the area where the Petroleum Operations


are being conducted and sha* be on an arm's length basis. On the request


of the Government, the Contractor sha* provide the Government with


evidence of such rates bee* on an arm's length basis. (If the Government


considers that any such rate is not on an arm's length basis then the


Government has the r«ht to refer the matter to an expert pursuant to


clause 42.2 and 42.« of the Contract). The equipment and fPClMiet referred


to herein sha* exclude major investment items such as (but not limited to)


drilling ngs. producing platforms. Oif treating facditie*. oil and gas loading


and transportation systems, storage and terminal facilities and other major


fact ties, rates for which sha* be subject to separate agreement with the


Government.





ns Communications


Cost of acquiring, leasing, instating, operating, repairing and maintaining communication





systems include* radio and microwave facilities withes and between the Contract Area and


the Contractor's nearest base facBity.


s.x.4 Office and Miscellaneous facilities


Hel cost to the Contractor of establishing, maintaining and operating any office, sub office,


warehouse, housing or other faciHy directly serving the Petroleum Operations. If any such


facility services more than one contract area the net costs thereof shall be allocated on an


equitable basts m accordance w.th Best Practtces.





11.» Ecological and Environment


(a) Costs incurred m the Contract Area as a result of legislation for archaeological and


geophysical surveys relating to identification and protection of cultural sites or


resources;


(b) Costs incurred « environmental or ecological surveys required by regulatory


authorities, including an environmental impact assessment commissioned pursuant


to clause 17.7 of the Contract and any other costs incurred in complying with the


requirements of clause J7;


(c) Costs to provide or have available pollution containment and removal equipment;








B - 9


 fro^ltoa IScnag Ccnzroct P*o»otr*a








(d) Costs ol actual control and cleanup ol od sp.lh. and ol such further mpouNkei


result mg therefrom at may be required b, applicable laws and regulations:


(e| Costs of restoration of the operating environment incurred pursuant to an approved


tcheme prepared In accordance with dame 38 of the Contract;


(f| Any cottt Incurred for the decommissioning of facilities and site restoration.


including any related activity required by the Government or other competent


authority or by the Contract; and


(g) Any contribution! made by the Contractor to the Decommissioning Reserve fund In


accordance with claute 18, when »uch contribution! are made.


id Material and Iqulpment Com


Colts of material! and supplies, equipment, machine!, tool! and any other goods of a similar


nature uced or consumed in Petroleum Operation! subject to the following:


|a| Acquliltlon Com - the Contractor thall only lupply or purchase material! for uie In


Petroleum Operation! that may be used in the foreseeable future. The


accumulation of surplus stocks and inventory shall be avoided so far as Is reasonably


practical and consistent with efficient and economical operations. Inventory levels


shall, however, take Into account the time lag for replacement, emergency needs,


weather conditions affecting operations and similar considerations,


|b) Componenti of costs, arm’s length transactions • except as otherwise provided in


paragraph 3.1.Bid), material purchased by the Contractor in arm’s length


transactions In the open market for use in the Petroleum Operations under the


Contract shall be valued to include invoice price less trade and cash discounts (If


any), licence fees, purchase and procurement lees plus freight and forwarding


charges between point of supply and po.nl of shipment, freight to port of


destination, insurance, tases. customs duties, consular fees, excise taxes, other


items chargeable against imported materials and. where applicable, handling and


transportation expenses from point of importation to warehouse or operating site.


Where an AffiSate of the Contractor has arranged the purchase, coordinated the


forwarding arsd expediting effort, its costs should not exceed those currently


prevaihsg in normal arm’s length transactions on the open market and in any case


shall not exceed a fee equal to i* of the value ol the materials added to the cost of


the materials purchased.


|c) flfO such material costs shall be charged to the accounting records and books in


accordance with the ‘first In, first Out' (f rfO) method;


Id) Material purchased from or sold to Afl*ates of the Contractor or transferred from


other activities of the Contractor to or from Petroleum Operations under this


Contract shal be valued and charged or credited at the prices specified in


Paragraphs 3.1^(dMl). 1.1 •MP).


<1| hew material, including used new material moved Irons inventory


(Condition *A*|. shall be valued at the current international net price which


shall not extend the price prevailing in normal aim’s length transactions in


the open market


(21 Used material (Conditions ‘B*. "C* and ‘D*):


(A) Material which is in sound and serviceable condition and Is


suitable for re use without reconditioning shall be classified as











B- 10


 Production .'"mm? Contcocl Pnomag/un








Condition ’O' and priced at 75!* ol the current price of new


material defined In Paragraph 3.1 H(d)(l|


(B) Material which cannot be climlfled at Condition *B“ but which


after reconditioning will be further serviceable for its original


function thall be dattlfied at Condition "C* and priced at not more


than SO1* of the current price of new material at defined in


Paragraph 3.1.8(d)(1). the coil of reconditioning thall be charged


to the reconditioned material provided that the value of Condition


•C' material plut the cott of reconditioning do not exceed the


value of Condition “O* material:


(C) Material which cannot be dattlfied at Condition *B' or Condition


-C- .hall be dattlfied at Condition 'O' and priced at a value


coinmenturate with itt ute by the Contractor If material it not fit


for ute by the Contractor it thall be ditpoted of at junk.


<3| Material involving erection com thall be charged at the applicable


condition percentage of the current knocked-down price of new material


at defined in Paragraph 3.1.8(d)(1).


(4| When the ute of material i. temporary and it. tervlce to the Petroleum


Operation, under the Contract doet not |Utlily the reduction In price at


provided for in paragraph 3.1.8(d|(2|(B), tuch material thall be priced on a


bant that will result in a net charge to the account! under the Contract


continent with the value of the tervlce rendered


(5| Whenever material it not readily obtainable at publl.hed ot lined o'rcet


becaute of national emergencies strikes, or other unusual cause, over


which the Contractor hat no control, the Contractor may charge Petroleum


Operations for the required material at the Contractor's actual cost


incurred In providtftg tuch material, m making it suitable for use. and in


moving it to the Contract Area: provided notice in writing is furnished to


the Government of the proposed Charge prior to charging Petroleum


Operations for tuch material and the Government shall have the right to


challenge the transaction on audit


(6| The Contractor doet not warrant the material furnished. In case of


defective material, credit shal not be patted to Petroleum Operations until


adjustment hat been received by (he Contractor from the manufacturers of


the material or their agents.


(7| Adjustments arising from material Inventories conducted in accordance


with Paragraph 5.2.


(e) Iquipmrnt of the Contractor thall not be charged at rates exceeding the average


commercial rates of non affiliated third partiet for equipment, facilities, installations


and utilities for use in the area where the tame are used. On request, the


Contractor shall furnish a list of rales and the bails of application. Such ratci shall


be revltetl when found to be either excettlve or Intuflicient. but not more than once


every 6 Months.


(f| Drilling tools and other equipment lost in the hole or damaged beyond repair may be


charged al replacement cost less depredation plut trantportation costs to deliver


likr equipment to the location where used











3- 11


 Production snoring Caution Hromogron








(g) Use of leased or hired machinery and/or equipment In the Petroleum Operations


thall be charged at lull cost to the Contractor This may include mobilisation and de¬


mobilisation charges, leave and hire lees, at well at other contractual costs.








UJ Rentals and Taxes


{a) All rentals ol every kind and nature levied by any Government and all Taxes imposed


in connection with the Contractor's aisets. Income or activities under the Contract


and paid directly by the Contractor or any Contractor Cntity (except where the


contrary is expressly provided In the Contract) with the exception ol Taxes


(described in clause 31.2), bonus payments. Capacity Building Payments, and any


other payments made under clause 32.


(b) II the Contractor, any Contractor [ntlty or any ol Its Allillated Companies is subject


to income or withholding Tax at a result ol services performed at cost lor the


Petroleum Operations under the Contract, its charges lor such services may be


increased by the amount required to cover such Taxes Igrossed up) including Taxes


on such gross up


■ HO Insurance and losses


Insurance premiums and costs Incurred lor Insurance earned I or the benelit ol the


Petroleum Operations provided that such Insurance It customary, affords prudent protection


against risk and is at a premium no higher than that charged on a competitive basis by


insurance companies which are not Allillated Companies ol the Contractor. Except in cases


ol failure to insure where Insurance coverage It required pursuant to the Contract, actual


costt and lostet incurred shall be recoverable to the extent not made good by insurance


unless such losses result tolely Irom an act ol wilful misconduct by the Contractor. Such coils


may include repair and replacement of property in the Contract Atea resulting Irens damages


or losses incurred by fire. Hood, storm, theft, accident or such other cause


i.i.ii legal Expenses


All reasonable costs and expenses resulting Irom the handling nvestigating. asserting,


defending, or settling ol any claim or legal action neccstary or npedwnt lor the procuring,


perlecting, retention and protection ol the Contract Area, and *s defending or prosecuting


lawsuits involving the Contract Area or any third party claim arising out of the Petroleum


Operations under the Contract, or sums paid in respect ol legal services necessary fv the


protection ol the joint interest ol the Government and the Contractor shall be recoverable.


Such expenditures shall include attorney’s lees, court costs, arbitration costs, costs of


investigation, and procurement ol evidence and amounts paid In settlement or satisfaction


of any such litigation and claims provided such costs ore not covered elsewhere in the Annex.


Where legal services are rendered in such matters by salaried or regularly retained lawyers


ol the Contractor Entities or their Affiliates, such compensation shall be Included Instead


under Paragraph 3.1.2 or 3.1.4(b) as applicable


U.U Claims


Expenditures made In the settlement or satisfaction ol any loss, claim, damage, judgment or


other expense arising out ol or relating to Petroleum Operations, except as may otherwise


be covered elsewhere in the Annex.























3- 12


 frolttw* S*cn** C---*oct








U.II Tniftiiis Costs


AM com and e*pen*es incurred by th# Contractor in the trjmmf of A* employee* engjfrd m


Petroleum Operations under the Contract


s.t t« General and Administrative Costs


The com described in Paragraph 2.8.1 and the charge described «n Paragraph 2 A 2


ills linking Charges and Currency Eichange losses


Charges and lees by the banks for money transfers, payments and lore^n exchange


transactions, as »rel as currency eichange losses incurred by the Contractor in connection


with the Petroleum Operations.


tut Other Expenditures


Other reasonable expenditures not cohered or dealt with In the foregoing provision of


Paragraph 3 which are necessarily incurred by the Contractor for the proper, economical and


efficient conduct of Petroleum Operations.


Credit Under the Contract


The proceeds, other than the proceeds from the sale of Petroleum received from Petroleum


Operations under the Contract, including the items isted below shall be credited to the Accounts


under the Contract for the purposes of dause 2S of the Contract:


III The proceeds of any Imurance ot claim or judical awards in connection with Petroleum


Operations under the Contract or any assets charged to the Accounts under the Contract


where such operations or assets have been insured and the premia charged to the


Accounts under the Contract-


1.1.1 legal costs charged to the accounts under Paragraph 3.1.11 and subsequently


recoverable by the Contractor.


l-l.s Revenue received from third parties for the use of property or assets the cost of which


has been charged to the Accounts under the Contract.


I. 1.4 Any adjustment received by the Contractor from the suppliers/manufacturers or their


agents in connection with a defective material the cost of which was previously charged


by the Contractor to the Accounts under the Contract.


iJ.S Rentals, refunds, including refunds of taxes paid, or othrr credits received by Ihe


Contractor which apply to any charge which has been made to the Accounts under the


Contract, but excluding any award granted to the Contractor under arbitration or expert


proceedings.


u* Costs originally charged to the Accounts under the Contract for materials subsequently


exported from the Kurdistan Region or transferred to another Contract Area within the


Kurdistan Region.


J. 2.7 Proceeds from the sale or exchange by Ihe Contractor of plant or facilities used In


Petroleum Operations the acquisition costs of which have been charged to the Accounts


under the Contract.


iJ.* Proceeds derived from the sale or license of any Intellectual property the development


costs of which were incurred pursuant to and arc recoverable under the Contract.


 Production Sharing Contract Ptromagrun








JJ.* Proceed! derived from the sale. exchange, leave, hire, transfer or disposal in any manner


whatsoever of any other item the com of which have been charged to Petroleum


Operations.


3.3 Duplication of Charges and Credits


Notwithstanding any provision to the contrary in this Accounting Procedure, there shall be no


duplication of charges or credits to the Accounts under the Contract








PARAGRAPH 4 - COSIS AND EXPENSES NOI10 BE TREATED AS RECOVERABLE


4.1 The following costs and expenditures shall not be included in the Petroleum Costs recoverable


under clause 2S:


(a) Taxes on income or profit paid to any Government authority except taxes and duties


that may be included in the costs of material and equipment purchased for the


Petroleum Operations;


(b) any payment made to the Government by reason of the failure of the Contractor to


fulfill its Minimum Exploration Obligations in respect of the relevant Sub-Period under


the Contract.


(c) the cost of any guarantee required under the Contract;


(d) bonuses. Capacity Building Payments, or other payments set out In clause 32 of the


Contract;


(e) costs of marketing or transportation of Petroleum beyond the Delivery Point (excluding


Gas Marketing Costs);


(0 attorney's fees and other costs ol proceedings in connecton with arbitration under


Clause 42 of the Contract or mter nationally recognised independent expert


determination at provided m the Contract or this Accounting Procedure.


(g| any interests, fees, costs and expenses paid by the Contractor for loans and any other


fores of financing or advances for the fesancesg of the Petroleum Costs entered mto by


the Contractor with thed parties or Affiliated Companies;


(h) any provision tor depreciation and/or amortisation, excluding any adiuitments m value


pursuant to Paragraph 3.14;


(i) dividends, repayment of equity or repayment of intercompany loans; and


(j) fmes and penalties imposed under law.


PARAGRAPH 5- RECORDS AND VAlUATlON Ot ASSETS


5.1 Records


Contractor shal maintain detailed records of property in use for Petroleum Operations under the


Contract « accordance with Best Practices for exploration and production activities





5.2 Inventories


»-».« inventories of property m use m Petroleum Operations shall be taken at reasonable


intervals but at least once a year with respect to movable assets and once every three


years with respect to immovable assets. The Contractor shall give the Government at


least 30 days written notice of its attention to take such inventory and the Government


shal have the r*ht to be represented when such inventory is taken.











B- 14


 u Sttcnxj CeVtocl Bi‘omao'0"








iJJ failure of Ibe Government to be represented at an inventory shall bind the Government


to accept the inventory taken by the Contractor.


»-*-» The Contractor shad clearly inform Government about the principles upon which


valuation of the inventory has been Based. The Contractor shall make every effort to


provide to the Government a full report on such inventory within thirty (30) days ol the


taking of the inventory. When an assignment of rights under the Contract takes place


the Contractor may. at the request of the ass^nee. take a special mventory provided


that the costs of such inventory are borne by the assignee


PARAGRAPH 6 - PRODUCTION STATEMENT


k.l Production Information


Without prejudice to the r^hts and obligations of the Parties under clause 16 of the Contract.


from the date of Firs* Production from the Contract Area the Contractor shal submit a monthly


production statement to the Government showing the following mformation separately for each


producing Development Area and m aggregate for the Contract Area


(a) the quantity of Crude Oi produced and saved:


lb) the quality characteristics of such Crude Oil produced and save.


(c) the quantity of Natural Gas produced and saved:


(d) the quality characteristics of such Natural Gas produced and saved.


(e) the quantities of Crude Oil and Natural Gas used for the purposes of carrying on dning


and production operations and pumping to field storage


(f) the quantities of Crude Oil and Natural Gas unavoidably lost;


(g) the quantities of Natural Gas llared and vented;


(h) the site ol Petroleum slocks held at the beginning of the calendar Month m question:


(l| the sire of Petroleum stocks held at the end ol the calendar Month in question,


(I) the quantities of Natural Gas reinjected into the Reservoir; and


(k) In respect of the Contract Area as a whole, the quantities of Petroleum transferred at


the Measurement Point. All quantities shown in this Statement shall be expressed in


both volumetric terms (Darrels of oil and cubic meters of gas) and In weight (metric


tonnes).


6.2 Submission of Production Statement


The Production Statement for each calendar Month shall be submitted to the Government no


later than 10 dayt after the end of such calendar Month





PARAGRAPH 7 - VAIUE Of PRODUCTION AND PRICING STATEMENT





7.1 Value of Production and Pricing Statement Information


The Contractor shall, for the purposes of clause 2S of the Contract, prepare a statement providing


calculations of the value of Crude Oil produced and saved during each Quarter and each Month.


This "Value of Production and Pricing Statement* shall contain the following information:


(a) the quantities and prices realised therefore by the Contractor In respect of sales of


Natural Gas and Crude Oil delivered to third parlies made during the Quarter and Month


In question; and











8 - IS


 Production Sparing contrail Pitomagrun








(b) the quantities and prices realised therefor by the Contractor in respect of sales of


Natural Gas and Crude Oil delivered during the Quarter and Month in question, other


than to third parties.





7.2 Submission of Value of Production and Pricing Statement


The Contractor shall submit the Value of Production and Pricing Statement for each Quartet and


each Month to the Government not later than 10 days after the end of such Quarter and Month





PARAGRAPH 8 - COST RECOVERY AND SHARE ACCOUNT STATEMENT


8.1 Cost Recovery Statement


The Contractor shall prepare with respect to each Quarter and each Month a Cost Recovery


Statement containing the following information:


(aj Recoverable Petroleum Costs carried forward from the previous Quarter and Month, if


any;


(b) Recoverable Petroleum Costs for the applicable Quarter and applicable Month;


(c) credits under the Contract for the applicable Quarter;


(d) Total Recoverable Petroleum Costs for the applicable Quarter and aopbcable Month


(Paragraph 8.1(a| plus Paragraph 8.1(b), net of Paragraph 8.1(c)):


(e) quantity and value of Petroleum applied to cost recovery pursuant to clause 2S taken by


the Contractor for the applicable Quarter and applicable Month; and


(f) amount of recoverable Petroleum Costs to be earned forward into the ne«t Quarter and


the neat Month (Paragraph 8.1(d) net of Paragraph 8 1(e)).


8.2. Cumulative Production Statement


The Contractor th*8 prepare with respect to each Quarter and each Month a Cumulative


Production Statement containing the following mformation


(a) the cumulative production position at the end of the Quarter preceding the Quarter and


Month in question;


(b) Production of (aport Petroleum for the Quarter and Month m question;


(e) the cumulative production position at the end of the Quarter and Month m question;


(d) the amount of Petroleum applied to Royalty pursuant to clause 24. cost recovery


pursuant to clause 2S and Proto Petroleum pursuant to clause 28 taken by the


Government and by the Contractor, respectively, during the Quarter and Month in


question: and


(e) the forecast of production and the share of Petroleum apphed to Royalty pursuant to


clause 24. cost recovery pursuant to clause 2S and Profit Petroleum pursuant to c louse


26 due to the Government and to the Contractor, respectively, lor the ne.t succeeding


Quarter and Month


8.3 Preparation and Submission of Cost Recovery and Cumulative Production Statements


t-j-i The Contractor shall submit provisional Cost Recovery and Cumulative Production


Statements, containing estimated information where necessary, on the last day of each


Quarter and Month for the purposes of clause 2S of the Contract.


•-*-* The Contractor shall submit f.nal quarterly Cost Recovery and Cumuiatrve Production


Statements wdhm 10 days of the end of the applicable Quarter and applicable Month.








8-16


 Production snaring Confroil 1'iromogrun








8.4 Annual Statement


for the purposes of clause 25 of the Contract, the Contractor shal submit an Annual Cost


recovery and Cumulative Production Statement within 90 days of the end of each Year The


Annual Statement must contain the categories of information fated in Paragraphs > 1 and S2 for


the Year in question, separated into the Quarters of the Year in question and showmg the


cumulative positions at the end of the Year - question with respect to cumulative unrecovered


Petroleum Costs and Cum jlat.ve Production.





PARAGRAPH 9 - STATEMENT Of EXPENDITURE AND RECEIPTS


9.1 The Contractor shall prepare with respect to each Quarter a Statement of Expenditure and


Receipts under the Contract. The Statement of Expenditure and Receipts must distinguish


between E xplot at on Costs. Gas Marketing Costs. Development Costs. Production Costs and


Decommissioning Costs and wi identify nujor items of expenditures within these categories. The


Statement of Expenditure and Receipts must show the following:


(a) actual expenditures and receipts for the Quarter in question;


(b) cumulative expenditure and receipts for the budget Calendar Year in question:


(c) latest forecast cumulative expenditures at the Calendar Year end: and


(d) Variations between budget forecast and latest forecast and explanations thereof.


9.2 The Contractor shall submit to the Government a Statement of Expenditure and Receipts for each


Quarter no later than 30 days after the end of such Quarter.


PARAGRAPH 10 - FINAl ENDOfYEAR STATEMENT


10.1 The Contractor shall prepare a final End-of-Year Statement containing information at required


for the Production Statement, Value of Production and Pricing Statement, Cost Recover und


Cumulative Production Statements, and Statement of Expenditures and Receipts, except based


on actual quantities of Petroleum produced and expenses incurred.


10.2 The final End-of Year Statement will be used to make any adjustments that are necessary to the


payments made by the Contractor under the Contract.


10.1 The Contractor shall submit its Final End-of-Year Statement of each Calendar Year to the


Government within 90 days of the end of each Calendar Year.








PARAGRAPH 11-AUDITS


Each tuch report and statement requited pursuant to Paragraphs 6 through 10 shall be considered true


and correct, unless the Government raises an exception thereto within the timeframe and under the


process set out In clause 15 of the Contract.





PARAGRAPH 12 - ANNUAL WORK PROGRAM AND BUDGET


Each annual Work Program and Budget to be prepared in accordance with clauses 11. 12. 13. and 14 ol


the Contract, in respect of Exploration Costs, Gas Marketing Costs. Development Costs, and Production


Costs must show:


|.i) forecast expenditures for the budget Calendar Year in question, including a quarterly


classification of such expenditures.





B- 17


 trotfMftoa Sharing CkVio<








lb) cumulative expenditures to the end ol such budget Calendar Tear; and


(c) a schedule showing the moil important mdrvdual item* of Development Cost* (if applicable) for


we* budget tear.





PARAGRAPH ||- TAX RECORDS AND HUNGS


11.1 Each Contractor Entity shall t.mtl* prepare and file all Tai return* and report* In accordance with


Applicable law. Nothing in thi* Paragraph II limit* the obf«ation of the Government to pay


Taie* on income on behalf of a Contractor Entity a* provided m the Contract for the purpoiet ol


clause 11.2 of the Contract, the net taxable profit* of each Contractor Entity from aH Petroleum


Operation* carried out under the Contract *haR be calculated m accordance wAh this Paragraph


11 and Applicable Law.


11.2 Each Contractor Entity shall maintain teparale Account* with reipect to the Petroleum


Operation* to enable the Government to verify and audit Ta.es payable by such Contractor Entity


for a tax period. Such Account* shall be prepared and maintained on a cash or accrual basis as


required by Applicable Law in respect of Taxes and maintained throughout the term of the


Contract and for a period of five years thereafter.


11.1 The Accounts of a Contractor Entity shall be credited with such Contractor Entity's share of all


revenues from or related to Petroleum Operations, including:


(a) if the Royalty is paid in cash pursuant to clause 24. revenues arising from the disposal of


Royalty volumes:


(b) revenues arising from the disposal of any Avadable Petroleum to which such Contractor


Entity is entitled for recovery of its Petroleum Costs in accordance with clause 25:


(c( revenue* from the disposal of Prof* Petroleum to which tuch Contractor Entity i»


entitled under clause 2b; and


(d) revenue* arising from the disposal of related Petroleum substances or from the


treatment, storage, or transportation of products for thud parties





11.4 A Contractor Entity may debit its Accounts for all Petroleum Cost* and other costs under this


Contract, Including


(a) the cost* of supple*, personnel and manpower expenses, and costs of services provided:


if the Royalty is pad M cash pursuant to clause 24. Royalty payments made and as


recorded m such entity's Accounts and determined in accordance with clause 24;


(<) general and admmistratrve expenditures for Petroleum Operations:


(d) deprecation of capital expenditure in accordance with Paragraph 13.6 below;


(e| losses of Assets resuRmg from damage. Assets which are renounced or abandoned during


the year. Assets which are transferred under clause 20.2. bad debts, indemnities pad to


third parties as compensation for damage:


(f| currency exchange losses realised in connection with the Petroleum Operations, bonuses.


Capacity building Payments, and other payments provided in clause 12. the Exploration


Rental provided m clause 6 2. the Production Rental provided m clause 11 6. the


abocaton to tracing provded in clause 23.10. the alocation to the Environment fund


provded m clause 23.12. the costs speeded m clause* 23.5. 23.4, 31 6 and 3b. 11. and


transportation and marketing costs beyond the Delivery Pomt; and











B- 18


 ?ro**







(K) losses carried forward from previous Tax periods.


13.$ The nrt profit of a Contractor Entity shall be equal to the difference between the amounts


credited and the amounts debited from its Accounts.


135.1 If such difference Is nrgatrve. It shall constitute a loss against which no income Ta.


will be payable.


13.S.2 If the amount Is positive, tt shall be grossed up to take account of the fact that such


entity1! corporate Income ta. a being settled out of the Government's share o* the


Profit Petroleum m accordance with clause 31.2. by applying the following formula


in order to provide such entity's net tauble profits for corporate income ta.


purooses:


Net Taxable Profits = Net Profits /HOP - Applicable Income Ta. Rate I


100


13 6 A Contractor Entity shad not record depreciation or amortdation charges, except as permitted by


Applicable Law and only with the prior written authorirabon of the Government






















































































B- 19


 Production Sharing Contract Picomagrun














Annex C


FORM OF GUARANTEE









































GUARANTEE





























[X]





and





[Y]




















IN FAVOUR OF

















The Kurdistan Regional Government of Iraq























(Piramagrun)





(Second Sub-Period Guaranteed Amount)


 Production Sharing Canicoii Piromogrun











GUARANTEE





(Second Sub-Period Guaranteed Amount)








This Guarantee, dated _ ___________, is by:


HI (xJallC 'I





and


121 |V| l-V'l


in favour of





The Ku«D«*tam Rigionai Government Of Iraq (the Government i





11 Definitions; Interpretation





I. 1.1 Unless defined in thn Guarantee, terms defined in the Contract have the same mean** in


this Guarantee.


II. 2 As used in this Guarantee:





'01/srness Day* means a day on »h

Spain. London, England and New York Crty, United States of America;


' Demand’ is defined m clause 2.3.


“Government* is defined in the preamble


“Guaranteed Obligations* is defined in clause 2 i





"Guarantors'' means |X and V| and •Guarantor" means either of (X or V).


'Person1' means anv individual, company, corporation, firm, partnership. Joint venture,


association, organisation, state or agency ol a state or other entity, whether or not having


separate legal personality.





1.2 Construction and Interpretation


i.i.t Any reference to a clause or anno Is, unless otherwise stated, to a clause or annex of


this Guarantee.


ill Any reference to a ’clause' is to a 'clause' of this Guarantee,


i.l.I Headings and sub-headings are for ease of reference only.


2. Guarantee


M Guaranteed Obligations


The Guarantors guarantee to the Government the due and Punctual payment ol the Second Sub-


Period Guaranteed Amount in the manner and currency prescribed by the Contract for payments


by the Contractor together w«h any mterest due with respect thereto as provided m the Contract


(the 'Guaranteed Obligations*)

















C-2


 Production Sharing Co Mr on Ptromagro n








1.2 Joint and Several


The liability ol each Guarantor under thin Guarantee is joint and several Every undertaking and


agreement contained In this Guarantee is to be construed as joint and several obligations of the


Guarantors.


2.1 Demand





A Guarantor will have no obligation In respect of a Guaranteed Obligation unless the Guarantor


lias received a written demand for payment (the ’Demand”). The Government may submit a


Demand to either or both Guarantors. A Demand must:


|a| make specific reference to this Guarantee;





lb) state the amount that is demanded and which components of the Guaranteed Obligations


are the subject of the Demand;


|c) state that the Government has not received payment of the relevant Guaranteed


Obligation from the Contractor Entity on the date on which it became due and payable;


and


Id) provide the Government's wire instructions for the payment of the Demand





2.4 Payment


A Guarantor shall make payment to the Government in accordance with a Demand by wire


transfer of cleared funds in US$ in accordance with the Government’s wire Instructions within S


Business Days after receipt of a Demand.





3. Nature of Guarantee


3.1 This Guarantee is an absolute, unconditional, and irrevocable guarantee of payment when doe


and not of Celection, and whether by acceleration or otherwise


3.2 The Government is not required to eiemse any right, assert any clam or demand, or enforce any


remedy whatsoever against the Contractor, a Contractor Entity, or any other Person before, or as


a condition to. eirrcmng any of the rights, powers, or remedies conferred upon the Government


by this Guarantee or by applicable law Without Smiting the generaSty of the foregomg. the


Government wd not be rrquired to (a) take any action or obt a«i judgment in any court agaesst


the Contractor, a Contractor Cnt.ty or any other Person, or (bl to make or «e any clam or proof


e, a winding up or dissolution of the Contractor, a Contractor Entity or any other Person.


I I I«cept as provided m clause 2.2. each Guarantor hereby e.pressly wanres presentment, demand,


protest, and notice of dishorsour m irspect of each Goaianteed ObVgalion


1.4 Subject to clause 6. the obligations of the Guarantors


(a) constitute continuing obbgatioos. notwithstanding any settlement of account or other


matter or thing whatsoever


(b) wd not be considered satis Bed by any m ter mediate payment of the Contractors


obtgationi in respect of the Guaranteed OOSgatons. and


(c) wd continue bs lull force and effect until the Guaranteed Obligations have been paid m ful


to. and received by. the Government in accordance with the Contract


I» Subject lo clause «. neither the oblations of the Guarantors pursuant to. nor the rights, powers,


and remedies conferred upon the Government by. this Guarantee or by law wd be Uncharged,


impaired, or otherwise affected by:


(a) the winding up. dnsofution. admeuslration. reorganhaton or moratorium of the


Contractor or any Contractor Entity or any change in its status, functmn. control, or


ownership;





C-3


 granted to the Contractor in respect of any of the Guaranteed Oblations;





(e) any change m the lime. manner, or place of payment of. or any other term of. all or any of


the Guaranteed Ob galoot, or any other eatennon or, compromise of the Contractor,


provided that none ol the foregoing increase* the amount o( the Goarantecd Obligations;


|d) any reduction, limitation, Impairment, or termination of any part ol the Guaranteed


Otmgal>oni for any reason, including any ctaim ol waiver, release. surrender. alteration, or


compromise;


if) any increase •" the amount payable in respect ol any Guaranteed Obt«ation. prov-Jed that











If) the termmation of the Contract or term of a Contractor Entity's rghu under the


Contract, or any withdraw a! or by the Contractor or a Contractor Entity of


As interests under the Contract;





(g| any direct or mdaect change in the ownership ol the Contractor Intity. including by


merger, amalgamation, by law. or otherwise;





(h) any transfer all of any part of the Contractor or a Contractor Entity's interests under or .n


respect ol the Contract;


(i) any dispute or claim the Contractor or a Contractor Entity may have against the


Government;


(j) the Insolvency or bankruptcy of. or similar event affecting, the Contractor or a Contractor





Entity; or


(k) any other cucunuUrlCP or combination aleireuntttamcs which might otherwise toistWut*


a defense avaCable to. or a legal or equitable dncharge ol. the Contractor or a Contractor


thirty





or setoff, counterclaim, recoupment.

















1.7 This Guarantee wit continue to be effective or be reinstated, if at any time any payment (m


whole or m part) of any of the Guaranteed Obligations n rescinded of must otherwise be restored


by the Government upon the «i solvency. bankruptcy, or reorganisation of the Contractor or a


Contractor Entity or otherwise, al as though such payment had not been made Any settlement




















la*


a.l The Guarantors shall make al payments to the Government free and clear of.


deduction for. any present or future Tares or other charges of any nature whatsoever mposed by


any taking authority





4.1 If any or deduction bora any payment to be made by a


shat:











C -4


 Production Jhormo Control! Piromagron








>1 pay directly to the relevant authority the full amount required to be so withheld or


deducted;


(b) promptly forward to the Government an official receipt or other documentation


satisfactory to the Government evidencing such payment to such authority; and


(c) pay to the Government such additional amount or amounts as s necessary to ensure that


the net amount actually received by the Government win equal the fullamount the


Government would have received had no such withholding or deduction been required


4 » If any Tates ore daectty asserted against the Government w«h respect to any payment recerved


by the Government Irons a Guarantor pursuant to thrs Guarantee, then:


la I the Government may pay ssaeh Tates, and


|b) the Guarantor shall mdemn.f, the Government against any loss or tipense which the


Government esc ms as a result or arising out of or in relation to any faikjre to pay or delay


in payetg any of any such Tat. and promptly pay such additional amounts (including, if


incurred as a result of Guarantor's or the Contractor's conduct, any penalties, interest, or


etpenses) as necessary so that the net amount received by the Government, alter the


payment ol such Tates Including any Tates on such additional amount). equal the


amount the Government would have received hod such Tates not been asserted


S. Notices


». I Address lor notkes to Guarantor


The Government shad:


la) male any Demand or prowde any notice or other com munition to a Guarantor .a


respect ol Ihrs Guarantee tfi wrding;


(b) address such Demand, nof-ce. or other communicatdn as provided in clause S.l(c) and


(c) use one of the following methods to deliver suth Demand Of other rsot.ee Of


communication, each of which, for purposes of this agreement, .s a writing (1) personal


delivery; (2) email (followed by delivery of ihr Oemand, notice or communication by air


courier); or <3| a reputable. Internationally recognised air courier, with all fees prepaid, and


sent to the Guarantors:





If to |X):


[XI


Attention:


Address:


Phone:





Email


If to (V)


IV)





Attention:


Address:


Phone:


Email:














C-5


 Production Sharing Controci Pttomttgrun








».2 Effectiveness as to Guarantor


111 A Demand, notice or other communication will be effective as to a Guarantor only if (a|


the Government has compiled with thil clause S and |b| such Guarantor has received


the Demand, notice, or other communication.


ul If a Demand, notice or other communication is personally delivered to a Guarantor, it


wll be considered received by the Guarantor by the date set forth in a signed receipt of


such delivery


121 If the Government sends a Demand, notice, or other communication to a Guarantor by a


reputable, internationally recognised air courier in accordance with clause 5.1, the


Demand, notice, or other communication will be considered received by the Guarantor


on the date set forth m a receipt signed by the Guarantor.





u.4 If the Government vends a Demand, notice, or other communication by email to a


Guarantor and the email transmission is followed by delivery of the Demand, notice, or


other communication the Guarantor by air courier in accordance with clause 5.1, the


Demand, notice, or other communication shall be considered to have been delivered to


the Guarantor when the email 1s received by the Guarantor.





S.J Notices to Government


A Guarantor shall give all notices or other communications to the Government in the same


manner as prescribed In the Contract for notices to the Government.





5.4 Change of Address


A Guarantor or the Government may change its address as set forth in clause 5 by a notice to the


other parties m accordance with this clause 5.








6.1 This Guarantee is effective as of the date set forth in the preamble.


6.2 Subject to clause 3.7, this Guarantee wil cease to be effective upon discharge of el of the


Guaranteed Obligations.








7. Representations and Warranties


Each Guarantor represents and warrants:


7.1 This Guarantee has been authorised by al necessary corporate action, and the Guarantor has «■


necessary power and authority to sign and perform its obligations hereunder.


7.2 This Guarantee n legal, vabd. and bssding as to such Guarantor


73 The Guarantor has received al authorisations and consents necessary lor the pronuen of thrs


Guarantee to the Government, and the validity and enlotceabdity agamst A. of this Guarantee


7.4 (icept as provided m the ne«t sentence, there is no Law apple able to 4 or agreement to which rt


is a party that (a) confWts with or prevents it from perform mg this Guarantee m accordance with


4s terms, or |b) affects the validity and enforceabibty agamst it of this Guarantee in accordance


w4h 4s terms No representation is made in respect of the laws ol the Kurdistan Region of Iraq or


the Republic of Iraq


7.6 The Guarantor is not a party to any administrative or judicial proceeding. Ideation, or art 4r a ton


that could affect the vabdity or enforceabibty of this Guarantee





Arbitration. Indemnification





a.i The Guarantors and the Government shall eidusrvety refer any dispute, clan, or controversy


 Pro4w







arising out ol o* in connection with this Guarantee |asc»udng * d'Wute. ‘Ul,n °* eo"«rov*«sy


relating to any non-contractual obigations arising out of or in connection *«h this Guarantee! to


and to be hr at, resolved by arbitration under the rules of the London Court of International


Arbitral**. which rules are incorporated by reference mto this clause 10.


■I The language of the arbitration wil be English, and an, award wM be wr«ten in the English


language


■ I The seat, or legal place, of the arbitration wil be London. I ngland.


■ « The arbitral tribunal will comprise one arbitrator cfirectly appointed b, the London Court of





International Arbitration.


■ 5 The Government ma, seek enforcement of an arbitra award by any court of competent


jurisd*tioe.


* 6 Any award must be eipressed in USS.


8 7 The arbitral award wdl be final and not subject to any appeal


8.S K any question of law arises during the arbitral proceedings or arises Out of an award, neither the


Government nor either Guarantor may make an application or br«S| an appeal to any court on a


question of law. and both the Government and the Guarantors expressly waive thee respective


rights to make an appfccation or bring an appeal under the Engksh Arbitration Act 19*7.


8.9 The Guarantors shall indemnify the Government from and against al costs and expenses


(mcludmg legal fees and any laces or duties) incurred by the Government in the enforcement and


protection of its r




9. Benefit; Assortment


9.1 This Guarantee mures to the benefit of the Government and its land any subsftjurnt| successors


and assigns, each of which shall be entitled to enforce this Guarantee against the Guaranlo-s





9.2 No Guarantor is entitled to assign or transfer all or any of its rights, benefits, or obligations under


this Guarantee unless the Government provides prior written consent to the Guarantor. The


Government is entitled to assign aB or any of its rights and benefits hereunder.





10. Severability


If at any time any provision of this Guarantee is determined to be illegal, Invalid, or unenforceable in any


respect under the laws of any |urisdlction. neither (a( the legality, validity or enforceable of the


remaining provisions hereof, nor |b) the legality, vabdity. or enforceab.llty of such provision under the


laws of any otlsrr jurisdctlon will, in any such case, in any way be affected or impaired thereby





11. Variation


11.1 This Guarantee may be amended only by a written agreement of the Government and the


Guarantors that identifies itseH as an amendment to this Guarantee.


11.2 The Government or the Guarantors may waive any provision in this Guarantee only by a writing


executed by such party.


11.3 A waiver or content made on one occasion will be effective only in that Instance and only lor the


purpose stated.


11.4 No failure or delay m exercising any right or remedy, or in requiting the satisfaction of any


condition, under this Guarantee by a Guarantor or the Government, and no act, omission or


course of dealing between the Government and a Guarantor, will operate as a wa.ver or estoppel


of any right, remedy, or condition.


 Production Shonng Contract Piromogron











12. Governing Law


This Guarantee and all matters arising from or connected with it are governed by English law.














f Signature page follows.I










































































































































































C-8


 Production Sharng Contract Piromagron








Date:











IX]





................-............---








Name:


Title:











m











®V-«---.....................---


Name:


Title:











Accepted and received for and on behalf of the


Government of the Kurdistan Region of Iraq:























Prime Minister


Kurdistan Regional Government


On behalf of the Regional Council


for the Oil and Gas Affairs of the Kurdistan Region - Iraq














&V:...........................


Minister of Natural Resources





Kurdistan Regional Government


On behalf of the Ministry of Natural Resources in the


Kurdistan Region











fSignoture page to Guarantee of/X/ (Y, et a)) in favour of the Government of the Kurdistan Region of Iraq


(Piramogrunf.J

















C-9