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MODEL PRODUCTION SHARING CONTRACT 2008



BANGLADESH OIL, GAS AND MINERAL CORPORATION

(PETROBANGLA)

3 KAWRAN BAZAR COMMERCIAL AREA

DHAKA-1215



ABBREVIATIONS

APPI



Asian Petroleum Price Index



AWP and B



Abandonment Work Program and Budget



BBL



Barrel



BCF



Billion Cubic Feet (109 Cubic Feet)



BTU



British Thermal Unit



CIF



Cost, Insurance and Freight



CST



Centi Stoke



EED



Energy Exploration and Development



EIA



Environmental Impact Assessment



EMP



Environmental Management Plan



FOB



Free On Board



HSFO



High Sulphur Fuel Oil at 180 Centi Stokes (maximum)



ICSID



International Center for the Settlement of Investment Disputes



IEE



Initial Environmental Examination



LIBOR



London Inter Bank Offered Rate



lkm



line kilometer



LNG



Liquefied Natural Gas



LPG



Liquefied Petroleum Gas



MCF



Thousand Cubic Feet



MMCF



Million Cubic Feet



MOEB



Million Oil Equivalent Barrels



NGL



Natural Gas Liquids



SCF



Standard Cubic Feet



SPE



Society of Petroleum Engineers



TCF



Trillion Cubic Feet (1012 Cubic Feet)



tvd



true vertical depth



UNCITRAL Rules



United Nations Commission on International Trade Law Arbitration Rules



WP and B



Work Program and Budget



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PREAMBLE

THIS CONTRACT is made and entered into in Dhaka this______(day)_____ day of

______(month)____, (year)________ AD.

BETWEEN

1.



THE PRESIDENT OF THE PEOPLE'S REPUBLIC OF BANGLADESH (represented by

the Energy and Mineral Resources Division, Ministry of Power, Energy and Mineral

Resources, Government of the People's Republic of Bangladesh) (hereinafter called "the

Government") and BANGLADESH OIL, GAS AND MINERAL CORPORATION, a corporation

established under The Bangladesh Oil, Gas and Mineral Corporation Ordinance, 1985

(Ordinance No. XXI of 1985 and as amended from time to time) (hereinafter referred to

as "Petrobangla") of the one part.

and



2.



[

], company organised under the laws of [

"Contractor") with its head office in [full address] of the other part.



] (hereinafter called



WHEREAS:

1.



All mineral resources including Petroleum within the territory, continental shelf and

economic zone of Bangladesh are vested in the People's Republic of Bangladesh; and



2.



The Government has, under the Bangladesh Petroleum Act, 1974 (Act No. LXIX of 1974)

as amended up to date, the exclusive right and authority to explore, develop, exploit,

produce, process, refine and market Petroleum Resources within the territory, continental

shelf and economic zone of Bangladesh and it has also the exclusive right to enter into

Petroleum Agreements with any person for the purpose of any Petroleum Operations;

and



3.



Petrobangla shall have the power to exercise rights, authorities and powers of the

Government to explore, develop, exploit, produce, process, refine and market Petroleum

in the territory, continental shelf and economic zone of Bangladesh and also to enter into

Petroleum Agreements with any person/company for the purpose of any Petroleum

Operations; and



4.



The Government and Petrobangla desire that exploration for Petroleum may be

accelerated with a view to exploring and discovering any Petroleum resources, which

may exist in the Contract Area in the overall interest of the People's Republic of

Bangladesh; and



5.



The Contractor has assured that it has the financial ability and technical competence

necessary for carrying out Exploration, Development and other Petroleum Operations;

and



6.



The Government, Petrobangla and Contractor mutually desire to enter into this Contract

with respect to the Contract Area.



NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set

out, IT IS HEREBY MUTUALLY AGREED as follows:



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ARTICLE 1

DEFINITIONS

The following words, expressions, terms used in this Contract shall unless otherwise expressly

specified in this Contract have the following respective meanings:

1.1



"Abandonment" or “Abandonment Operations” means

the removal and

abandonment of facilities, installations, structures, artificial islands, wells , bore holes or

any other items which are related to Petroleum Operations and which are disused or no

longer required for Petroleum Operations in respect of the Contract Area;



1.2



"Abandonment Costs" means, subject to Article 34 any cost, expense or other amount

incurred in closing down, decommissioning, abandoning, or wholly or partly removing

assets in the Contract Area, keeping assets in the Contract Area in a safe condition

following cessation of production pending abandonment and restoration of land or

seabed in the Contract Area. A cost, expense or other amount shall constitute an

Abandonment Cost only to the extent that it is a cost, expense or other amount that is

incurred in accordance with good international Petroleum industry practice or expressly

approved by Petrobangla and / or Government for inclusion as an Abandonment Cost of

the Contractor for the Contract Area, and is incurred prior to or within a reasonable time

after the cessation of Commercial Production as per approved Abandonment Plan;



1.3



"Accounting Procedure" means the Accounting Procedure set out in "Annex-B" hereto.



1.4



"Affiliated Company" or "Affiliate" means a company:

(i)



in which a Party hereto owns directly or indirectly share capital conferring a

majority of votes at stakeholders meetings of such company;



(ii)



which is the owner directly or indirectly of share capital conferring a majority of

votes at stakeholders meetings of a Party hereto;



(iii)



whose share capital conferring a majority of votes at stakeholders meetings of

such company and the share capital conferring a majority of votes at stakeholders

meetings of a Party hereto are owned directly or indirectly by the same party.



1.5



"Annex" means any integral part of this Contract identified herein as such and attached

hereto.



1.6



"Appraisal Area" means that area within the Contract Area, which is designated by

Contractor as part of its Appraisal Program pursuant to Article 8.2(b).



1.7



"Appraisal" or "Appraisal Program" means the proposal submitted by Contractor to

Petrobangla to appraise a Discovery pursuant to the provisions of Article 8.2.



1.8



"Article" means an Article in the main body of this Contract including amendments, if

any, to be made in the future.



1.9



"Associated Natural Gas" means all gaseous hydrocarbons produced in association

with Oil and separated there from.



1.10



"Available Condensate" shall have the meaning set forth in Article 14.2.



1.11



"Available Natural Gas" shall have the meaning set forth in Article 14.2.



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1.12



"Available Natural Gas Liquids (NGL)" shall have the meaning set forth in Article

14.2.



1.13



"Available Oil" shall have the meaning set forth in Article 14.2.



1.14



"Available Petroleum" means Available Oil, Available Natural Gas, Available

Condensate and Available Natural Gas Liquids collectively.



1.15



"Bangladesh" means The People's Republic of Bangladesh.



1.16



"Barrel" or "BBL" means a barrel consisting of forty-two (42) United States gallons

liquid measure, corrected to a temperature of sixty degrees (60°) Fahrenheit and to a

pressure of fourteen point seventy (14.70) lb./sq. inch.



1.17



"BTU" means one thousand fifty-five and fifty-six one thousandths (1,055.056) Joules.



1.18



"Budget" means an estimate of income and expenditure approved, or as the context

may require, to be approved by Petrobangla in accordance with Article 6, Article 13 and

Article 14 in respect of all Petroleum Operations included in a Work Program.



1.19



"Calendar Quarter" means a period of three (3) consecutive months under the

Gregorian Calendar beginning on the first day of January, the first day of April, the first

day of July or the first day of October.



1.20



"Calendar Year" means a period of twelve (12) consecutive months under the

Gregorian Calendar beginning on the first day of January and ending on the thirty first

day of December in the same year.



1.21



"Commercial Discovery" means a Discovery in the Contract Area determined to be a

Commercial Discovery in accordance with Article 8.



1.22



"Commercial Production" means production following Declaration of Commercial

Discovery of Oil or Natural Gas or both and delivery of such Oil or Natural Gas under a

regular program of production.



1.23



"Condensate" means those low vapor pressure hydrocarbons obtained from Natural Gas

through condensation or extraction and refers solely to those hydrocarbons that are liquid

at normal surface temperature and pressure conditions.



1.24



"Contract" means this Contract concluded between the Government, Petrobangla and

Contractor on [date ................].



1.25



"Contract Area" means the area specified in Article 3.1 hereof and delineated on the

map set out in “Annex-A”, as reduced from time to time in accordance with Article 5.



1.26



"Contract Year" means a period of twelve (12) consecutive months under the

Gregorian Calendar, within the term of this Contract, beginning on Effective Date or any

anniversary thereof.



1.27



"Contractor" means the Contractor specified in the Preamble hereto, including

assignee(s)

in accordance with Article 32 hereof and where the context so requires

includes Operator.



1.28



"Cost Recovery" means Cost Recovery in respect of Petroleum Operations in

accordance

with Articles 14.3, 14.4 and 14.5.



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1.29



"Credit" means an amount of income associated with Petroleum Operations that is not

resulting from the sale of Petroleum, and is to be applied as a reduction of recoverable

costs; and "Credited" or other variations of that term shall have similar meanings;



1.30



"Declaration of Commercial Discovery" means the Declaration of Commercial

Discovery made under Article 8.7.



1.31



"Development" or "Development Operations" shall, pursuant to Work Programs and

Budgets approved under this Contract, include, but not be limited to:

i)



all the operations and activities under this Contract with respect to the drilling of

other than Exploratory and Appraisal Wells and the deepening, plugging back,

completing and equipping of such wells, together with the design, construction

and installation of such equipment, lines, facilities, plants and systems relating to

such wells as may be necessary and consistent with sound international oil/gas

field practice and good economic practice;



ii)



all operations and activities relating to servicing and maintenance of lines,

systems, facilities, plants and related operations in order to produce and operate

any wells in a Production Area;



iii)



the taking, saving, treating, handling and storing of Petroleum within the Contract

Area, or other locations in Bangladesh as may be agreed by Petrobangla and

Contractor;



iv)



repressuring, recycling and other secondary or tertiary recovery projects;



v)



the design, engineering, construction and installation of pipelines and process

facilities.



1.32



"Development Plan" means a plan prepared by the Contractor for the development of

an Oil Field and/or Gas Field, or a group of Oil Fields and/or Gas Fields, which is reviewed

by the Joint Management Committee and approved by Petrobangla and such plan shall

include, but not be limited to, recoverable reserves, the development well pattern, master

design, production profile, market profile, detailed economic analysis and evaluation, time

schedule of the Development Operations and an estimate of development and operation

costs.



1.33



"Discovery" means the finding of a previously unknown accumulation(s) of Petroleum in

one or more reservoirs and which have for the first time been demonstrated through

drilling to contain Petroleum that can be recovered at the surface in a flow measurable by

conventional petroleum industry testing methods.



1.34



"Dollar" and "$" means currency of the United States of America.



1.35



"Effective Date" means the date on which this Contract is signed by the Government,

the Petrobangla and the Contractor.



1.36



"Exploration" or "Exploration Operations" means the search for Petroleum in the

Contract Area previously not known to have existed, using geological, geophysical and

other methods and the drilling of Exploration Well (s) and includes any activity in

connection therewith or in preparation therefore, and any relevant processing.



1.37



"Exploration Area" means all of the Contract Area outside all of the Production Area(s).



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1.38



"Exploration Period" means the period specified in Article 4 during which Contractor

shall conduct Exploration Operations at its sole risk and expense.



1.39



"Evaluation Report" has the meanings ascribed thereto in Article 8.5 and Article 8.6.



1.40



"Field" means an Oil Field or Gas Field or Field having both Oil and Gas.



1.41



"Force Majeure" has the meaning ascribed thereto in Article 27.



1.42



"Gas" means Natural Gas, both Associated Natural Gas and Non-Associated Natural Gas,

and all of its constituent elements produced from any well in the Contract Area and all

gaseous non-hydrocarbon substances therein. Gas may be produced from gas wells or in

association with Oil from oil wells.



1.43



"Government" means the Government of the People's Republic of Bangladesh.



1.44



"Gas Field" means, within the Contract Area, a Natural Gas reservoir or a group of

Natural Gas reservoirs within a common geological structure(s) or feature(s).



1.45



"Included Risk" means a risk relating to Petroleum Operations, other than political risks,

abandonment, business interruption or any other risks that do not affect or result from

the ongoing Petroleum Operations.



1.46



"Joint Management Committee" means the Committee consisting of representatives

of Petrobangla, and Contractor constituted under Article 12.



1.47



"Joint Review Committee" means the Committee consisting of representatives of

Petrobangla, and Contractor constituted under Article 6.



1.48



"LIBOR" means the London Inter-Bank Offered Rate for six-month deposits of United

States Dollars as published in The Financial Times, London, for the day or days in

question. Should The Financial Times not publish such rate, the rate published in The

Wall Street Journal, U.S.A. shall be applied.



1.49



"LNG" means Liquefied Natural Gas, which is primarily methane gas that has been

liquefied at a temperature of minus one hundred sixty one degree Centigrade (-1610 C)

and stored in heavily insulated containers to prevent vaporization.



1.50



"MCF" means one thousand (1000) standard cubic feet (SCF) of gas. One "SCF" is the

amount of gas necessary to fill one cubic feet of space at atmospheric pressure of

fourteen point seventy (14.70) pounds of pressure per square inch absolute at a base

temperature of sixty (60) degree Fahrenheit. "MMCF" means million cubic feet and

"BCF" means billion cubic feet and "TCF" means trillion cubic feet.



1.51



“Marker Price” means the price calculated under Article 15.7(i)b.



1.52



"Measurement Point" means the location in any Production Area or elsewhere in

Bangladesh as designated by Petrobangla, where the Petroleum is delivered for

transportation there from by truck, barge, railway, marine tanker or pipeline.



1.53



"Minimum Exploration Program" means the Minimum Work Program specified in

Articles 6.2 through 6.4.



1.54



"Month" means a calendar month according to the Gregorian Calendar.



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1.55



"Natural Gas" means Associated Natural Gas and Non-Associated Natural Gas.



1.56



"NGL" means Natural Gas Liquids, which are those hydrocarbons in Natural Gas that are

extracted in a process plant. Included in these hydrocarbons are Condensate and LPG

(i.e. Butane, Propane and Propane-Butane mixed).



1.57



"Non-Associated Natural Gas" means Natural Gas, which is produced either without

association with Crude Oil or in association with Crude oil which by itself cannot be

commercially produced.



1.58



"Oil" means any hydrocarbons produced from the Contract Area, which is in a liquid state

at the well-head or separated in a field separator, which is commonly known as crude oil

and includes crude mineral oil, asphalt, ozokerite and bitumen, both in solid and in liquid

form, in their natural state.



1.59



"Oil Field" means, within the Contract Area, an oil reservoir or a group of oil reservoirs

within a common geological structure(s) or feature(s).



1.60



"Operator" means the entity, which is designated as such, from among the entities

comprising Contractor, where it consists of more than one entity as described in Article

10.22.



1.61



“Participating Interest” means, in respect of each Party constituting the Contractor,

the undivided share expressed as a percentage of such Party’s participation in the rights

and obligations under this Contract.



1.62



"Party" means (a) the Government and/or Petrobangla or (b) Contractor and "Parties"

shall be construed accordingly.



1.63



"Petrobangla" means the Bangladesh Oil, Gas and Mineral Corporation, as specified in

the Preamble of this Contract.



1.64



"Petroleum" means:

i)



any naturally occurring hydrocarbon, whether in a gaseous, liquid or solid state;



ii)



any naturally occurring mixture of hydrocarbons, whether in a gaseous, liquid or

solid state; or



iii)



any naturally occurring mixture of a hydrocarbon or hydrocarbons, whether in a

gaseous, liquid or solid state, and one or more of the following:, hydrogen

sulphide, nitrogen, helium and carbon dioxide.



1.65



"Petroleum Operations" means the Exploration, the Appraisal, the Development, the

Production and Abandonment related operations along with other activities including

environmental considerations (IEE and EIA) and Environmental Management Plan (EMP)

related to those operations carried out under this Contract.



1.66



"Pipeline" means the items and facilities for transportation of Oil and/or Natural Gas

and/or Condensate and/or NGL enumerated in Article 16.



1.67



"Production Area" means the portion of the Contract Area being the area designated by

Contractor under Article 8 to encompass a particular Commercial Discovery.



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1.68



“Production” or "Production Operations" means operations and all activities related

thereto carried out for Petroleum production of an Oil Field and/or Gas Field from the

date of commencement of Commercial Production, such as extraction, injection,

stimulation, treatment, storage within the Production Area, lifting, and related operations,

but do not include any storage or transportation beyond the Measurement Point.



1.69



"Quarter" means a period of three (3) consecutive months in a Calendar Year.



1.70



"Reservoir" means naturally occurring discrete accumulation of Petroleum.



1.71



"Significant Discovery" means a discovery determined in accordance with Article 8 to

be a Significant Discovery for the purposes of that Article.



1.72



"Taka" means the unit of the currency of Bangladesh.



1.73



"Well" means a borehole, made by drilling in the course of Petroleum Operations.

Categories of Wells are defined below:



1.74



i)



"Exploration Well" means a well drilled for the purposes of searching for

undiscovered Petroleum accumulations on any geological entity(ies) (be it of

structural, stratigraphic, facies or pressure nature) to at least a depth or

stratigraphic level specified in the Work Program.



ii)



"Appraisal Well" means a well drilled for the purpose of delineating and

evaluating the extent, the production capacity, the potential and commerciality of

recoverable reserves of a Discovery in a geological structure or feature

established by an Exploration Well.



iii)



"Development Well" means a well drilled, deepened or completed after the

date of approval of the Development Plan pursuant to Development Operations or

Production Operations for the purposes of producing Petroleum, increasing

production, sustaining production or accelerating extraction of Petroleum including

production Wells, Injection Wells and dry Wells.



iv)



"Injection Well" means a well drilled within a Production Area by injecting Gas

or a fluid in order to enhance the recovery of Petroleum by pressure maintenance

or by improving the quality of the Reservoir.



v)



"One Well" means a well having a single entry through the Kelly including side

track(s).



"Work Program" means a program itemizing the Petroleum Operations to be conducted

within or with respect to the Contract Area or Production Areas and the time schedule for

accomplishing such operations.



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ARTICLE 2

SCOPE

2.1



This is a Production Sharing Contract. The object of this Contract is for the Contractor to

undertake the Exploration, Appraisal, Development and Production of Petroleum in the

Contract Area at Contractor's sole risk and expense and subject to the right of the

Government and Petrobangla to share in production according to the terms of Article 14.



2.2



Subject to the terms and conditions of this Contract, Petrobangla hereby appoints

Contractor as the exclusive agent to conduct Petroleum Operations in the Contract Area

during the term of this Contract. Contractor shall have the exclusive right from the

Effective Date to conduct Petroleum Operations in the Contract Area for a period as

stipulated in Article 4.



2.3



Contractor shall be responsible to Petrobangla for the execution of such Petroleum

Operations in accordance with the provisions of this Contract. The work to be done by

Contractor shall be subject to the general supervision and review of Petrobangla in

accordance with this Contract.



2.4



In performing Petroleum Operations, Contractor shall provide all financial requirements

and employ the advanced state of the art scientific methods, procedures, technologies

and equipment generally accepted in the international Petroleum industry.



2.5



Contractor shall receive no compensation for its services, nor any reimbursement of its

expenditures under this Contract, except for the share of Petroleum from the Contract

Area to which it may become entitled under Article 14. If there is no Commercial

Discovery in the Contract Area or if the production achieved from any Oil Field or Gas

Field developed by Contractor is insufficient to reimburse Contractor, Contractor shall

bear its own losses.



2.6



This Contract has been agreed and entered into by the Parties hereto under the terms of

the Bangladesh Petroleum Act 1974 (Act No LXIX of 1974) (as amended up to date).



2.7



Contractor shall conduct Petroleum Operations in accordance with an approved Work

Program and Budget and shall not wilfully and without just cause suspend any material

aspect of Petroleum Operations covered by an approved Work Program and Budget. In

the event of an emergency or extraordinary circumstances the Contractor shall notify

Petrobangla of such emengency or extraordinary circumstances within 72 hours and take

all actions deemed proper or advisable to protect life, assets, equipment, interest of

Petrobangla and Contractor and the environment, provided that any costs so incurred

shall be recoverable only if Contractor notify Petrobangla within thirty (30) days of the

actions taken and can prove to the satisfaction of Petrobangla that such actions and costs

were reasonably warranted by the circumstances.



2.8



Nothing contained in this Contract shall be deemed to confer any right to the Contractor

other than those rights expressly granted hereunder.



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ARTICLE 3

CONTRACT AREA

3.1



The Contract Area as of the Effective Date of this Contract comprises a total area of

[..........] square kilometers, as described in “Annex-A” attached hereto and delineated in

the map which forms part thereof.



3.2



Except for the rights expressly provided by this Contract, no right is granted in favor of

the Contractor to the surface area, sea-bed, sub-soil or to any natural resources or

aquatic resources.



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ARTICLE 4

CONTRACT TERM

4.1



The Initial Exploration Period shall be for ............. Contract Years from the Effective

Date. Contractor shall have the right to extension of the Exploration Period for up to two

successive periods of two (2) Contract Years each, provided Contractor has fulfilled its

obligations hereunder for the then current period.



[Note: In the case of Type-A blocks, the Initial Exploration Period shall be for four (4)

Contract Years.

In the case of Type – B blocks, the Initial Exploration Period shall be for five (5)

Contract Years. However if the Work Program consists of only Geological and

Geophysical survey with no commitment for exploratory drilling, the Initial

Exploration Period shall be limited to three (3) consecutive Contract Years. If the

Contractor wishes to continue after completion of the Geological and Geophysical

survey, the Contractor shall have to commit drilling of an exploration well backed

by requisite Bank Guarantee, within the remaining two years. Otherwise, this

Contract will terminate.]

However, if a Well is still being drilled or tested at the end of the Initial Exploration

Period, or any of the successive Exploration Periods, such period shall be extended for a

period sufficient to allow Contractor to complete the drilling or testing of such Well,

provided that such period shall not exceed one hundred and twenty (120) days in

aggregate.

4.2



Contractor's proposal for an extension shall be submitted to Petrobangla at least sixty

(60) days prior to the expiry of the then current period. Such proposals shall be

accompanied by a bank guarantee required by Article 7 covering the minimum work

obligation for the proposed extended period.



4.3



In the event there is no Commercial Discovery in the Contract Area by (a) the end of the

Exploration Period, or extensions thereof under Article 4.1, or (b) the end of the extended

Exploration Period under Article 4.4, if such extension has been granted, or (c) the end of

the extended Exploration Period under Article 4.5, if such extension has been granted,

then this Contract shall terminate on the latest of the above dates.



4.4



Where insufficient time is available to complete appraisal of a Discovery pursuant to an

Appraisal Program approved under Article 8.2 within the Exploration Period including

extensions thereof under Article 4.1, Contractor shall have the right upon prior written

request made not less than sixty (60) days from the end of the Exploration Period, to an

extension of the Exploration Period to enable Contractor to complete appraisal within the

time limit stipulation in the Appraisal Program approved under Article 8.2.



4.5



In the event Contractor has discovered in the Contract Area estimated recoverable

reserves of Natural Gas of at least .......BCF and proposes in writing to Petrobangla at

least sixty (60) days prior to the expiration of the Exploration Period, including extensions

thereof under Article 4.1, an extension of the Exploration Period to enable Contractor to

identify and develop a market and/or infrastructure for such Natural Gas and/or conduct

further exploration and appraisal drilling to increase the reserves of Natural Gas and/or to

conduct further exploration and appraisal drilling to increase the size of the recoverable

Natural Gas reserves to the level needed for an Gas utilization project, Petrobangla shall

grant Contractor an extension to the Exploration Period of up to five (5) additional

Contract Years for such purpose. The duration of extension, portion of Contract Area to

be retained, minimum work obligation, amount of Bank Guarantee to be posted and other



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conditions for the proposed extension shall be mutually agreed between Government

/Petrobangla and Contractor.



[Note: 125 Bcf for offshore and 250 Bcf for onshore blocks.]

4.6



In the event of Commercial Discovery, the production period shall be twenty (20) years

from the date of Petrobangla's approval of the Development Plan for an Oil Field and

shall be twenty-five (25) years from the date of Petrobangla's approval of the

Development Plan for a Gas Field.



4.7



If Commercial Production of an Oil Field or Gas Field remains possible beyond the

applicable term specified in Article 4.6, Petrobangla may grant the Contractor an

additional five (5) years extension on terms and conditions to be mutually agreed

between Petrobangla and Contractor.



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ARTICLE 5

RELINQUISHMENTS

5.1



Subject to Article 5.2 and 5.3, Contractor shall relinquish to Petrobangla a portion of the

Contract Area and rights to conduct Petroleum Operations therein as to:

a)



twenty-five percent (25%) of the original Contract Area defined in Article 3.1, not

later than the end of the ...............Contract Year,



[Note: For Type-A blocks, at the end of 4th Contract Years.

For Type – B blocks, at the end of 5th Contract Years. However if the Work

Program consists of only Geological and Geophysical survey with no commitment

for exploratory drilling, the Initial Exploration Period shall be limited to three (3)

consecutive Contract Years. If the Contractor wishes to continue after completion

of the Geological and Geophysical survey, the Contractor shall have to commit

drilling of an exploration well backed by requisite Bank Guarantee, within the

remaining two years.]

b)



an additional twenty-five percent (25%) of the original Contract Area defined in

Article 3.1, not later than the end of the .................Contract Year.



[Note: For Type-A blocks, at the end of 6th Contract Year; For Type-B blocks, at the end

of 7th Contract Year]

c)



all portions of the Contract Area (other than Production Area or Areas subject to

an extension pursuant to, Article 4.4 or Article 4.5) not later than the end of the

.....................Contract Year; and



[Note: For Type-A blocks, at the end of 8th Contract Year; For Type-B blocks, at the end

of 9th Contract Year]

d)



in the event of extension under Article 4.1 Article 4.4 and/or Article 4.5 all

portions of the Contract Area not designated as Production Areas not later than

the end of the last of such extension.



(e)



[In the case of Type – B blocks,] Contractor shall relinquish all of the Contract



Area if the Contractor does not commit to drill an exploration well after

completion of Geological and Geophysical survey during the first three (3) years of

the Initial Exploration Period. If the Contractor commits to drill exploration well(s),

the relinquishment shall be in accordance with Article 5.1 a, b, c and d.



[Note: This Clause (e) is applicable for Type – B blocks only.]

5.2



Contractor shall relinquish to Petrobangla rights to conduct Petroleum Operations in a

Production Area upon request of Petrobangla where, for reasons other than Force

Majeure, Contractor has ceased normal production of such Production Area for more than

one hundred and eighty (180) consecutive days.



5.3



Contractor may at any time relinquish voluntarily its rights hereunder to conduct

Petroleum Operations in all or any part of Contract Area upon giving Petrobangla at least

ninety (90) days prior written notice. Such voluntary relinquishments during the

Exploration Period shall be credited toward the relinquishments required by Article 5.1.

Should Contractor voluntarily relinquish the entire Contract Area, this Contract shall

terminate.



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5.4



No relinquishment shall relieve Contractor of accrued but unfulfilled obligations under this

Contract. In the event that Contractor desires to relinquish its rights hereunder to

conduct Petroleum Operations in all of the Contract Area without having fulfilled all

accrued minimum Exploration work obligations under Article 6 as well as all accrued

Appraisal obligation, Contractor shall pay Petrobangla prior to the date of such proposed

total relinquishment an amount equal to the amounts specified under Article 7.3

corresponding to all unfulfilled accrued items of work under the minimum Exploration

program under Article 6.



5.5



At least ninety (90) days in advance of a proposed relinquishment under Article 5.1 or

Article 5.4 Contractor shall notify Petrobangla of the designation and size of the portion or

portions of the Contract Area that Contractor proposes to relinquish.



5.6



To the extent practicable, each such relinquished individual portion shall be not less than

thirty percent (30%) of the total area being relinquished at such time, with each

relinquished portion forming a rectangle whose longest side is not more than three times

as long as the shortest side both along 5 munites east-west and north-south gridlines. In

any event each such relinquished portion shall be of sufficient size and shape to enable

Petroleum Operations to be conducted thereon by another party.



5.7



Prior to relinquishment of any area, Contractor shall:

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 of

such facilities, equipment or installation as Petrobangla may instruct;



b)



fulfill its obligations under Article 10.8; and



c)



take action necessary to prevent hazards to environment, human life or property.



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ARTICLE 6

MINIMUM EXPLORATION WORK OBLIGATION

6.1



Contractor shall commence Exploration Operations hereunder not later than sixty (60)

days after the Effective Date, and continue such Exploration diligently for the duration of

the Exploration Period and any extensions thereto.



6.2



During the Initial Exploration Period of ..................Contract Years, Contractor shall carry

out at least the following Minimum Exploration Program:



[Note: In the case of Type-A blocks, the Initial Exploration Period shall be for four (4)

Contract Years.

In the case of Type – B blocks, the Initial Exploration Period shall be for five (5)

Contract Year. However, if the Work Program consists of only Geological and

Geophysical survey with no commitment for exploratory drilling, the Initial

Exploration Period shall be limited to three (3) consecutive Contract Years. If the

Contractor wishes to continue after completion of the Geological and Geophysical

survey, the Contractor shall have to commit drilling of an exploration well backed

by requisite Bank Guarantee, within the remaining two years].

6.2.1 Mandatory Work Program

In addition to the bidded minimum work program in the Initial Exploration Period

specified below in Article 6.2.2 the Contractor shall be required to undertake and

complete the 2D seismic in grid size of………lkm x …………..lkm. covering the entire

Contract Area and drilling of 1 (one) exploration well up to the depth not less than 3300

meter tvd measured from seabed (herein after referred to as “Mandatory Work Program”)

during the Initial Exploration Period. The Mandatory Work Program should be carried out

earlier than or simultaneously with the bidded work program under Article 6.2.2 below.

6.2.2 Minimum Exploration Program (bidded):

(a)



Geological: ........................................................



(b)



Geophysical:

(i)



Carry out and process to state-of-the art standards at least -------------------sq. km. (3D) and -------------lkm (2D) of high resolution seismic program

commencing within ……… days after the Effective Date.



(ii)



Evaluate, integrate and map all seismic data related to the Contract Area



(c) Other surveys:

(Geochemical, Seabed Sampling, Gravity, Magnetic, Sea bed mapping etc.)……….

(d) Drilling:

At least (in figure) ______ (in words) _____ Exploration Well(s); each not less

than..........meter tvd, measured from sea bed.



[Note: 3300m tvd for Type – A blocks and 2200m tvd for Type – B blocks]



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6.3



During the 1st Extension to the Initial Exploration Period of 2 (two) Contract Years,

Contractor shall carry out at least the following Minimum Exploration Program:

(a)

(b)



(c)



Geological: ...........................................................

Geophysical:

(i)



Carry out and process to state-of-the art standard at least -------------------sq.km. (3D) and ------------- lkm (2D) of high resolution seismic program.



(ii)



Evaluate, integrate and map all seismic data related to the Contract Area.



Drilling:

At least (in figure) ______ (in words) _____ Exploration Well(s); each not less

than .............meter tvd, measured from sea bed.



[Note: 3300m tvd for Type – A blocks and 2200m tvd for Type – B blocks]

6.4



During the 2nd Extension to the Initial Exploration Period of 2 (two) Contract Years,

Contractor shall carry out at least the following Minimum Exploration Program:

(a)

(b)



(c)



Geological:.........................................................

Geophysical:

(i)



Carry out and process to state-of-the art standard at least -------------------sq.km. (3D) and/or ------------- lkm (2D) of high resolution seismic

program.



(ii)



Evaluate, integrate and map all seismic data related to the Contract Area.



Drilling:

At least (in figure) ______ (in words) _____ Exploration Well(s); each not less

than .........meter tvd, measured from sea bed.



[Note: 3300m tvd for Type – A blocks and 2200m tvd for Type – B blocks]

6.5



During an extension to the Exploration Period granted pursuant to Article 4.5, Contractor

shall use its best endeavours to achieve the objectives for which the extension was

requested and shall fulfill on a timely basis the minimun work obligation agreed between

Petrobangla and Contractor at the time of grant of such extension.



6.6



For purposes of the Minimum Exploration Program in Articles 6.2 through 6.4:

(a)



The obligations related to the first and second extensions to the Exploration

Period, will accrue only if Contractor continues to hold some part of the Contract

Area during any part of such extension; and



(b)



Additional Exploratory Wells drilled or seismic data acquired beyond the minimum

committed for any period may be carried forward to satisfy obligations to drill

Exploratory Wells or acquire seismic data during a subsequent period.



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6.7



Within ninety (90) days after completion of the Minimum Exploration Program under

Articles 6.2, 6.3 and 6.4 respectively, Contractor shall prepare and present to Petrobangla

a comprehensive technical evaluation of the Petroleum potential of the Contract Area,

based on its work to that date.



6.8



Within sixty (60) days after the Effective Date, Contractor shall submit a proposed Work

Program and Budget with full justification and detailed breakdown to Petrobangla for the

Contract Area for the first Contract Year. At least ninety (90) days prior to the beginning

of each subsequent Contract Year, Contractor shall submit a Work Program and Budget

with full justification and detailed breakdown for the Contract Area setting forth the

Exploration Operations that Contractor proposes to carry out during the ensuing Contract

Year. Each Work Program and Budget shall be reviewed by the Joint Review Committee

to be established by Government and Contractor promptly after the Effective Date. This

Committee, hereinafter referred to as the "Joint Review Committee" shall consist of eight

(8) members, three (3) of whom shall be designated by Petrobangla, one (1) by

Government and four (4) by Contractor. The Chairman of the Joint Review Committee

shall be designated by Petrobangla from among the members appointed by it. The Joint

Review Committee shall review and make recommendations, opinion or decision on the

proposed Work Program and Budget within forty-five (45) days following receipts thereof.



6.9



Following review by the Joint Review Committee, Contractor shall within fifteen (15) days

make such revisions as recommended by the Joint Review Committee and shall submit

the Work Program and Budget to Petrobangla for approval. Such Work Program and

Budget shall be deemed approved if no written objections are made by Petrobangla

within forty-five (45) days following receipt thereof. Expenditures not approved by

Petrobangla shall not be cost recoverable.



6.10



Should Petrobangla wishes to propose a revision as to certain specific features of such

Work Program and Budget, it shall within forty-five (45) days after receipt thereof so

notify Contractor specifying in reasonable detail its reasons therefore. Promptly

thereafter, the Parties shall meet and endeavor to agree within a maximum period of

thirty (30) days on the revision(s) proposed by Petrobangla. If, however, no agreement

is reached, Contractor may proceed with the Work Program and Budget as proposed,

including any amendments that may have been mutually agreed, provided that such

Work Program and Budget in any case meet the minimum work obligations of Contractor

under this Article 6 for the period it covers and complies with other provisions of this

Contract.



6.11



It is recognised by the Parties that the details of a Work Program or the Minimum

Exploration Program under this Article 6 may require alteration in light of changing

circumstances and nothing herein contained shall limit the right of Contractor to make

such changes after prior consultation with Petrobangla, provided such changes do not

materially alter the general objectives of the Work Program or Minimum Exploration

Program under this Article 6. However, Contractor shall not substantially revise or modify

an approved Work Program and Budget nor reduce the budget expenditures without the

prior approval of Petrobangla.



6.12



At the expiry of each phase of the Work Program under Article 6.2, 6.3 and 6.4

Contractor has the option to either:

(a) enter the next phase of the Exploration Period or extension period(s) and

continue Exploration Operations; or

(b) terminate this Contract upon payment of liquidated damages for unfulfilled

Minimum Work Obligations as per Article 7.3 and Article 7.4.



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ARTICLE 7

GUARANTEES

7.1 Within thirty (30) days of the signature of this Contract, and upon each request to

Petrobangla under Article 4.2 for extension of the Exploration Period, Contractor shall provide

Petrobangla from a scheduled bank in Bangladesh, mutually acceptable to the Parties, an

irrevocable and unconditional bank guarantee in form and substance as appended in “AnnexC” to Petrobangla securing Contractor's timely performance of the Mandatory Work Program

and bidded Minimum Exploration Program under Article 6 for the relevant period in

accordance with this Contract.

7.2



The respective amounts of such bank guarantees shall be:

a) For the Initial Exploration Period [.........Contract Years] US$ [................].



[Note: For Type-A blocks, Exploration Period will be 4 Years and Type-B blocks,

Exploration Period will be three (3)/ five (5) Years; ref: Article 4.1]

b) For the first extension to the Exploration Period [2 Contract Years] US $

[...............].

c) For the second extension to the Exploration Period [2 Contract Years] US $

[...............].

7.3



The relevant bank guarantee shall be reduced in accordance with the following schedule

upon delivery to the issuing bank of a certificate from Contractor countersigned by

Petrobangla that the corresponding item of work has been completed in accordance with

this Contract and that all technical data related thereto and a comprehensive technical

report thereon required by Article 6.7 has been delivered to Petrobangla:

[Schedule]

Note: Each identifiable item of work such as the seismic program and each Exploratory

well within Article 6.2, 6.3 and 6.4 shall be assigned a value (equal to 100% of the

estimated cost thereof) for purposes of reducing the relevant bank guarantee.



7.4



It is understood among the Parties that notwithstanding the fact that Contractor incurs a

cost for a particular item of work listed in the schedule to the bank guarantee furnished

under Article 7.1 greater or less than the amount indicated in bank guarantee pursuant to

Article 7.3, shall be of the amount set out in the schedule.



7.5



If, at the end of the Initial Exploration Period, any extension thereof or upon termination

of this Contract, Contractor has failed to perform in accordance with this Contract all or

any part of any of its accrued Minimum Exploration Program, then Contractor or its

guarantor shall on demand from Petrobangla immediately pay Petrobangla the entire

amount of such outstanding guarantee or guarantees for the work.



7.6



The bank guarantee shall not be affected by any change in the constitution of the

guarantor bank, its successors or assigns or by the absorption of or by its amalgamation

with any other bank or banks and the guarantee shall continue in force and be applicable,

notwithstanding any change in the composition of the Contractor.



7.7



The companies constituting the Contractor shall procure and deliver to Petrobangla within

thirty (30) days from the Effective Date of this Contract financial and performance

guarantee in favor of Petrobangla from a parent company acceptable to Petrobangla, in

the form and substance set out in Annex-E (EXHIBIT I), or, where there is no such

parent company, financial and performance guarantee from the company itself in the

form and substance set out in Annex-E (EXHIBIT II)



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ARTICLE 8

DISCOVERY, APPRAISAL AND DETERMINATION

OF COMMERCIAL DISCOVERY

8.1



If a Discovery is made in an Exploratory Well, Contractor shall immediately notify

Petrobangla of such Discovery. Within thirty (30) days of such Discovery, Contractor shall

notify Petrobangla whether or not Contractor proposes to undertake an Appraisal.



8.2



If Contractor by its notice to Petrobangla under Article 8.1 indicates that Contractor

proposes to undertake an Appraisal of the Discovery, Contractor shall within ninety (90)

days of that notice present to Petrobangla for approval an Appraisal Program, which shall

be deemed approved if no written objections are raised by Petrobangla within thirty (30)

days following receipt thereof . The Appraisal Program shall:



8.3



a)



specify the time frame, not exceeding three (3) years, within which Contractor

shall commence and complete the Appraisal Program;



b)



identify the area to be appraised ("Appraisal Area"), which shall not exceed the

area encompassing the geological structure or feature and a margin of five

kilometers (5 km) surrounding such structure or feature;



c)



include a Work Program and Budget.



If Contractor notifies Petrobangla that it does not propose to undertake an Appraisal,

Contractor shall upon the request of Petrobangla at any time thereafter relinquish an

area, which shall contain as a minimum the geological structure or feature in which the

Discovery was made. Any such relinquishment shall be credited towards the

relinquishment obligations under Article 5.1.



[ Note: This Article 8.3 is not applicable for Shallow and Deep offshore blocks]

8.4



Contractor shall carry out the approved Appraisal Program within the time frame specified

therein.



8.5



Within one hundred and twenty (120) days after the completion of such Appraisal

Program, Contractor shall submit to Petrobangla a comprehensive report ("Evaluation

Report") on the Appraisal Program.



8.6



The Evaluation Report shall include, but not be limited to, the following information:

a)

geological conditions, such as structural configuration, physical properties,

stratigraphy;

b)



the thickness and extent of reservoir rocks;



c)



Petrophysical properties of the reservoirs;



d)



Volumes of oil and gas initially in place, and the reserves in proved, probable and

possible categories in accordance with the guidelines of World Petroleum

Congress and Society of Petroleum Engineers (SPE);



e)



the chemical composition, the physical properties and quality of Petroleum

discovered;



f)



pressure, volume and temperature analysis of the reservoir fluid;



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8.7



g)



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



h)



fluid characteristics, including oil gravity, sulphur percentage, sediment and water

percentage, and product yield pattern;



i)



gas composition, production capacity of the reservoir, production forecasts (per

Well and per Field);



j)



estimates of recoverable reserves;



k)



the estimated Production capacity of the reservoirs;



l)



all relevant economic and commercial information which is necessary for the

determination of a Discovery as a Commercial Discovery and



m)



Contractor's assessment, based on prevailing realistic assumptions

marketability of Petroleum at the time the Petroleum Field is to be produced.



of



With the submission of the Evaluation Report, the Contractor shall submit a declaration in

writing to Petrobangla either:

a)



that it has determined that the Discovery is a Commercial Discovery and upon

such Declaration of Commercial Discovery Contractor shall be obliged diligently to

develop the Discovery and commence Commercial Production in accordance with

Article 8.10; or



b)



that it has determined that the Discovery is not a Commercial Discovery, in which

event the Appraisal Area concerned shall be relinquished, with such

relinquishment being credited against the obligations under Article 5.1; or



c)



that it has determined that the Discovery is a Significant Discovery of Oil, which

may become a Commercial Discovery conditional upon the outcome of further

work under an Exploration or Appraisal Program in areas outside the Appraisal

Area, for which further work Contractor has committed itself; or



d)



that it has determined that the Discovery is a Significant Discovery of Natural Gas,

which:

i)

may become a Commercial Discovery depending on the subsequent

discovery of one or more Gas Fields, the production from which, taken

together with the production from the Significant Discovery of Natural Gas,

would result in a sufficient total volume of Natural Gas to declare a

Commercial Discovery, or

ii)



may become a Commercial Discovery of Natural Gas upon the

development of infrastructure and markets for Natural Gas, or



iii)



may in conjunction with the discovery of one or more additional Gas Fields

reach the volume of ............BCF as required by Article 4.5.



[Note: 125 Bcf for offshore and 250 Bcf for onshore blocks]

8.8



In the event Contractor makes a declaration under Article 8.7 (c), it shall be entitled to

retain the Appraisal Area pending the completion of the work under Article 8.7(c), at

which time Contractor shall advise Petrobangla as to whether or not the Discovery is a

Commercial Discovery of Oil and the provisions of Article 8.7(a) or 8.7(b) shall be applied

accordingly.



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8.9



In the event Contractor makes a declaration under Article 8.7(d), it shall be entitled to

retain the Appraisal Area until the later of:

a)



the date on which any Appraisal Program or the activities pursuant to Article 4.5

have been terminated, or



b)



the termination of the eighth (8th) Contract Year from the Effective Date including

any extension(s) thereof .



8.10



If Contractor declares pursuant to Article 8.7 that the Discovery is a Commercial

Discovery, Contractor shall submit with the Evaluation Report a proposed Development

Plan and Budget for approval by Petrobangla and a designation of the Production Area.

The Development Plan shall be deemed approved if no written objections are delivered to

Contractor by Petrobangla within sixty (60) days following Petrobangla's receipt thereof.

Upon approval of the Development Plan, Contractor shall proceed promptly and diligently

and in accordance with good international Petroleum industry practice, to develop the

Discovery, to install all necessary facilities and to commence Commercial Production.



8.11



The Development Plan referred to in Article 8.10 shall contain detailed proposals by

Contractor for the construction, establishment of all facilities and services for and

incidental to the recovery, storage and transportation of Petroleum from the Contract

Area, including but not limited to:

a)



information regarding projections of the economics and profitability of the

Petroleum Operations as well as indication of the proposed financing

arrangements and terms of funding the Development.



b)



proposals relating to the drainage spacing, intended reservoir operating policy

and the scope for secondary recovery, drilling and completion of wells, the

Production and storage installations, and transport and delivery facilities required

for the Production, storage and transport of Petroleum. Such proposals will

include, but not be limited to:

(i)



the estimated number, size and capacity of Production facilities/platforms, if

any;



(ii)



estimated number of Production wells;



(iii)



particulars of production equipment and storage facilities;



(iv) particulars of feasible alternatives for the transportation of Petroleum

including pipelines;

(v)



particulars of equipment required for the Petroleum Operations;



(c)



estimate of the rates of production to be established and projection of the

possible sustained rate of Production in accordance with good international

Petroleum industry practices under proposed Development Plan and/or alternative

Development proposals;



(d)



cost estimates under such Development Plan and alternative Development

proposals, if any;



(e)



proposals related to the establishment of processing facilities (if any);



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(f)



safety measures to be adopted in the course of the Petroleum Operations,

including a contingency plan and measures to deal with emergencies;



(g)



anticipated adverse impact on environment and measures proposed to be taken

for prevention thereof and for general protection of the environment;



(h)



a description of the organizational set up of Contractor in Bangladesh;



(i)



an estimate of the time required to complete each phase of the proposed

Development;



(j)



a description of the measures to be taken regarding the employment and training

of Bangladeshi personnel;



(k)



a description of the Abandonment plan, to be implemented whenever a piece of

equipment, facility or a platform needs to be abandoned prior to or on termination

of this Contract;



(l)



a map or maps of the outline of the discovered reservoir(s) together with

technical or other back-up justification;



(m)



details of yearly forecast of expenditure of capital, operating and Abandonment

expenditure; and



(n)



contingencies for minimizing gas wastage, pressure maintenance program to

optimize Petroleum recoveries and additional development.



8.12



If any Discovery extends beyond the Contract Area into one or more adjacent areas held

by one or more of Petrobangla's other contractor's or any other entity, Petrobangla and

Contractor and any other relevant contractor or contractors or entities in the adjacent

areas shall meet and endeavor to agree on the most efficient method for jointly

appraising the Discovery and on possible joint Development, production and storage, and

if appropriate, transportation of Petroleum from such accumulation and on the manner in

which the costs and proceeds derived there from shall be equitably apportioned. Such

agreement shall be submitted to Petrobangla for approval. The principles of co-operation

between the parties referred above relating to a possible joint Development shall apply

equally to (i) a Discovery outside the Contract Area which extends into the Contract Area

and (ii) a Discovery which is encountered outside the Contract Area in the course of

drilling a Well into the Contract Area which subsequently proves to be a Discovery.



8.13.



If any Discovery extends beyond the Contract Area into an adjacent area that is not

currently under contract with Petrobangla and is considered "open" the Contractor shall

be entitled to define with seismic and other approved technical means, the limits of such

Discovery. The Contractor and Petrobangla shall endeavor to obtain a supplemental

agreement giving more profit share to Petrobangla to modify the relevant terms of the

Contract Area to include the entire Discovery. Such modification shall be limited to the

specific area defined as the vertical and horizontal productive limits of the Discovery. The

boundary modification shall be submitted to Petrobangla for approval of the Government.



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ARTICLE 9

ANCILLARY RIGHTS OF CONTRACTOR

9.



Contractor shall for the efficient conduct of Petroleum Operations have the right:

9.1



Unimpeded access to and from the Contract Area and to and from facilities

pertaining to Petroleum Operations hereunder wherever located at all times, and

to unimpeded use of the land required at the expense of Contractor.



9.2



To 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

generally prevailing charge for such resources in the locality of use.



9.3



Subject to Articles 10.13 and 10.14, to employ and utilise in Bangladesh qualified

foreign nationals and qualified foreign sub-contractors that it deems necessary for

the conduct of Petroleum Operations under this Contract. On the recommendation

of Petrobangla, Government in accordance with the existing law of the country

shall issue permits and visas required for said foreign nationals and their families

to stay in Bangladesh.



9.4



Subject to Article 10.15, to import goods and services required for conduct of

Petroleum Operations.



9.5



To use Petroleum from the producing Field within the Contract Area in Petroleum

Operations for the particular producing Field free of charge.



9.6



To produce Petroleum from the Contract Area consistent with sound international

petroleum industry and good conservation economic practices.



9.7



To undertake all Petroleum Operations pertaining to the Contract Area consistent

with sound international petroleum industry and good conservation economic

practices.



9.8



To have free access to all geological and geophysical information and data

available in Petrobangla pertaining to the Contract Area during the tenure of this

Contract.



9.9



Subject to Article 15.6(c) of this Contract to use the entitlement to Contractor's

share of production as security for loans or other financing arranged for

Development. Provided that the interests or share of production held by the

Government or Petrobangla shall not be impaired or encumbered by such

arrangements.



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ARTICLE 10

CONTRACTOR'S OBLIGATIONS

10.



Contractor shall in addition to its obligations under other provisions of this Contract be

obliged to:

10.1



Establish within one hundred and eighty (180) days of the Effective Date a

subsidiary or a branch or representative office of the People's Republic of

Bangladesh, and register such subsidiary or branch or representative office in

accordance with the relevant provisions of Applicable Law.



10.2



Designate a representative residing in Bangladesh, who shall have full authority to

represent Contractor in respect of matters related to this Contract in respect of

the Contract Area and to receive notices including process of Court addressed to

Contractor;



10.3



Provide all necessary funds for Petroleum Operations, including but not limited to

funds required for purchase or lease of all assets, materials and supplies to be

purchased or leased pursuant to Work Program and such other funds for the

performance of Work Program including payment to third parties, who may

perform any contractual services and provide technical services, technology and

such expatriate personnel as may be required for the performance of the Work

Program;



10.4



Conduct all Petroleum Operations in a diligent, conscientious and workmanlike

manner, in accordance with the applicable laws and this Contract, and generally

accepted standards of the international Petroleum industry designed to achieve

efficient and safe exploration and production of Petroleum and prevent loss or

waste of Petroleum above or below the surface and to maximize the ultimate

economic recovery of Petroleum from the Contract Area;



10.5



Ensure that all materials, equipment, technologies and facilities used in Petroleum

Operations comply with generally accepted engineering standards in the

international Petroleum industry, and are kept in good working order;



10.6



While conducting Petroleum Operations, take necessary measures in accordance

with good international petroleum industry practice to pay due regard to

conservation, safety of life, property, crops, fishing and fisheries, navigation,

protection of the environment, prevention of pollution and safety and health of

personnel, including but not limited to:

a)



ensuring security areas around all machinery, equipment and tools;



b)



providing secured storage areas for all explosives, detonators, and similar

dangerous materials used in Petroleum Operations;



c)



preventing damage to any Petroleum and water bearing formations, and

other natural resources;



d)



preventing unintentional entrance of fluids into Petroleum formations and the

productions of Oil or Natural Gas from reservoirs at higher rates than

consistent with good international petroleum industry practice.



e)



taking all necessary precautions to prevent pollution of or damage to the

environment;



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f)



maintaining records of workers working in each work area, and sending a

copy thereof to Petrobangla within fifteen (15) days from the date of

commencing of operations in the area;



g) maintaining a register of workers and sending details of workers joining or

leaving every Month to Petrobangla within the first week of the following

Months;

h) reporting to Petrobangla within seventy-two (72) hours in case any worker is

injured while performing his duties in connection with Petroleum Operations;



10.7



i)



arranging an adequate supply of first-aid medicines and equipment in each

area and maintaining healthy environment for the workers; and



j)



providing safety and fire-fighting equipment in each work area;



Evaluate prior to the Abandonment of any Exploratory or Appraisal Well all reservoirs

identified in the well logs as containing zones of .......... meter or more in thickness of

Petroleum, in a manner that would make possible the determination of the contents of

the reservoir fluids as well as the initial production capacity of the reservoirs;



[Note: 1 meter for onshore blocks; 5 meters for offshore blocks]

10.8



Unless otherwise instructed by Petrobangla and contingent upon safety and additional

cost considerations, ensure that any Exploratory or Appraisal Well technically capable of

production, is left in a condition that it may be re-entered for further testing and/or

completion;



10.9



Subject to Article 26.2 and 26.6 and unless otherwise agreed between the Parties, submit

promptly to Petrobangla all such original geological, geophysical, drilling, production, core

sample and any other data as it may collect and compile together with analysis and

interpretations thereof during the term of this Contract. Contractor shall also submit to

Petrobangla all other relevant data, subject to its other contractual obligations that may

be obtained by it from any other source;



10.10 Keep Petrobangla regularly and fully informed of all Petroleum Operations and Contractor

shall notify Petrobangla in advance of all individual Petroleum Operations scheduled and

maintain full records of all such operations;

10.11 Submit to Petrobangla detailed daily drilling reports and monthly physical progress reports

covering in reasonable detail all the activities carried out under Petroleum Operations

hereunder and ensure that such monthly progress reports shall reach Petrobangla by the

fifteenth (15th) day of the Month following the Month under report, and all other reports

as may be required by Petrobangla, including but not limited to those enumerated in

"Annex-D" hereto;

10.12 Furnish Petrobangla with the following:

a)



within ninety (90) days of the Effective Date, submit to Petrobangla for approval,

which shall not be unreasonably withheld, Contractor’s Employees /Labor Salary and

Benefit Policy and Procurement Procedures for purchasing equipment, materials and

services. Contractor’s Employees /Labor Salary and Benefit Policy and Procurement

Procedures shall comply with the provisions setout in “Annex-B” of this Contract.



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b)



manuals, technical specifications, design criteria, design documents (including

design drawings), construction records and information, relating to any work in

connection with Petroleum Operations within 30 days of completion of works.



10.13 a)



Together with its submission of the yearly Work Program and Budget, Contractor

shall submit its manpower requirements including its organization chart.

Contractor shall first obtain written approval from Petrobangla for any positions to

be filled by expatriate personnel including from any third party before such

expatriate personnel are employed and shall minimize the employment of such

personnel in conducting Petroleum Operations by ensuring that expatriate

personnel are employed only to occupy positions for which it has not been

possible to obtain Bangladeshi personnel with the necessary qualifications and

adequate experience that are acceptable to both Parties. Contractor shall review

its expatriate requirements with Petrobangla annually. In addition to the above,

changes in the job functions of expatriate personnel shall require prior

Petrobangla approval.



[Note: This clause[10.13 (a)] will not be applicable for the Exploration Period of

offshore blocks]

b)



Contractor shall undertake the development and training of its Bangladeshi

personnel (including the training of Bangladeshi nationals for specific task of

taking over positions held by expatriate personnel) for all positions including

administrative, technical and executive management positions. Contractor shall

prepare and submit yearly to Petrobangla for its approval plans and programs for

such development and training.



c)



Contractor shall also submit to Petrobangla together with their submission of the

yearly Work Program and Budget, the details of all payments, benefits and

privileges accorded to each classified category of Contractor's personnel (both

expatriate and Bangladeshi)



d)



Contractor shall maximize the employment of Bangladeshi nationals possessing

the requisite qualifications and experience in Petroleum Operations. Contractor

shall ensure that the employment of the Bangladeshi nationals be maintained in

the following proportion:



e)



Exploration Period:



Initial Exploration Period not below 20%.

Extended Exploration Period not below 50%



Production Period:



1st five years

Next five years

Period after ten years



- not below 60%

- not below 75%

- not below 90%



Contractor shall prepare a personnel plan to be reviewed at least annually by the

Joint Review Committee or the Joint Management Committee, as applicable.



10.14 Give priority to the local sub-contractors as long as their prices, equipment, performance

and availability are comparable with prices, performance and availability of international

sub-contractors;

10.15 Give preference to locally manufactured materials, equipment, machinery, supplies and

consumables so long as their quality, price and time of delivery are comparable to

internationally available materials, equipment, machinery, supplies and consumables c.i.f

Bangladesh;

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10.16 Be always mindful, in the conduct of Petroleum Operations, of the rights and interests of

the People's Republic of Bangladesh;

10.17 Assist and allow at any reasonable time the representative(s) of the Government and/or

Petrobangla to inspect any part of Petroleum Operations, and all facilities, installations,

offices, record books, or data related to Petroleum Operations, including but not limited

to continued presence of a representative at any field installation or establishment;

10.18 At the request of Petrobangla, negotiate in good faith, technical assistance agreement

with Petrobangla by which Contractor may render technical assistance and make available

commercially proven technical information of the proprietary nature for use in Bangladesh

by Petrobangla or its subsidiary company. The issues to be addressed in negotiating such

technical assistance agreements shall include, but not be limited to, licensing issues,

royalty conditions, confidentiality restrictions, liabilities, costs and method of payments.

10.19 The Contractor shall obtain insurance coverage during the term of this Contract, for and

in relation to Petroleum Operations for such amounts and against such risks as are

specified below and/or as may be specifically agreed by Petrobangla, and shall furnish to

Petrobangla policies/certificates evidencing that such coverage is in effect. Such

insurance policies shall include Petrobangla as additional name insured and shall waive

subrogation rights against Government and Petrobangla. The said insurance shall,

without prejudice to the foregoing, cover:

a) Loss or damage to all installations, equipment and other assets for so long as they

are used in or in connection with Petroleum Operations, provided however, that if for

any reason the contractor fails to insure any such installation, equipment or assets it

shall replace loss thereof or repair damage caused thereto without benefit of Cost

Recovery.

b) Loss, damage or injury caused by pollution in the course of or as a result of

Petroleum operations.

c) Loss of property or damage or bodily injury suffered by any third party in the course

of or as a result of Petroleum Operations for which the Contractor may be liable.

d) Any claim for which Petrobangla may be liable relating to the loss of property or

damage or bodily injury suffered by any third party in the course of Petroleum

Operations.

e) The cost of cleaning up pollution following an accident in the course of or as a result

of Petroleum Operations.

f) The cost of removing wreck or debris as a result of an accident during Petroleum

Operations.

g) The Contractor’s and/or Operators liability to its employees engaged in Petroleum

Operations.

h) Cost of well control and re-drilling expenses in accordance with the Standard London

Energy Exploration and Development wording (E.E.D.8.86) or such other form in

common use in the International Petroleum Industry and as may be agreed by

Petrobangla.



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Insurances specified in clause 10.19 (a) to (h) above to be concluded with local insurance

companies in accordance with Bangladesh Insurance Law as long as coverage is available

as above and in accordance with International Petroleum Industry Standards.

In case of Petroleum that has been produced to the surface, Contractor shall ensure

against such risks of loss and damage for such amount and with such insurer or insurers

as may be agreed with Petrobangla, and shall nominate Petrobangla and Contractor as

joint beneficiaries under such insurances. Any benefits arising there from shall be divided

between the Parties in proportion to their respective entitlements to Petroleum at the

relevant time.

10.20 Contractor shall require its subcontractors to obtain and maintain insurance against the

risk referred to in Article 10.19 relating mutatis-mutandis to such subcontractors.

10.21 Contractor shall bear responsibility in accordance with laws applicable in Bangladesh for

any loss or damage to third parties caused by the wrongful or negligent acts or omissions

of the Contractor or the Contractor's employees or sub-contractor or sub-contractor's

employees and indemnify Petrobangla and the Government against all claims and

liabilities in respect thereof.

10.22 Where Contractor is comprised of more than one entity, the entities comprising

Contractor shall designate, subject to the prior written approval of Petrobangla, one of

such entities to act as Operator, with power to represent Contractor before Petrobangla

and Government; and in such case, Contractor shall promptly provide a copy of the

operating agreement and any amendments thereto to Petrobangla. Any subsequent

change of Operator shall be subject to prior written approval by Petrobangla.

10.23 (a) The Contractor shall abide by the laws, decrees, rules, regulations and ordinances on

environment protection adopted by the People's Republic of Bangladesh and ensure

prevention of pollution of the air, water, land and ecosystem. Before undertaking

Petroleum Operations, the Contractor shall conduct all environmental examinations,

assessments and studies required under Bangladesh law including Initial

Environmental Examination (IEE), Environmental Impact Assessment (EIA) and

Environmental Management Plan (EMP) as per prevailing Environment Conservation

Act, 1995 and Environmental Conservation Rules 1997 (as amended from time to

time). IEE, EIA and EMP so conducted shall get due clearance from the Ministry of

Environment and Forests of the Government. Thereafter, Contractor shall take

necessary measures in line with the IEE, EIA and EMP recommendations and

incorporate those measures in the Work Program.

(b) Contractor shall submit a disaster management plan to the Ministry of Environment

and Forest for approval prior to undertaking Petroleum Operations.

(c) After completion of approved Petroleum Operations Contractor shall level, restore,

demarcate and reclaim the affected sites. The cost for such work will be borne by

Contractor. In case of no discovery, such work should be done before relinquishment

of the area or before termination of this Contract.

10.24 In implementing any approved Work Program, Contractor shall:(a) be workmanlike and use proper scientific methods consistent with prudent, good and

modern oil and gas field practices;

(b) observe sound technical and engineering practices in producing and conserving the

petroleum deposits;

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(c) execute Petroleum Operations so as not to conflict with obligations of the

Government of Bangladesh under international law or international conventions to

which Bangladesh may be a signatory;

(d) take necessary precautions to control the flow and prevent the escape or waste of

Petroleum into the atmosphere or any waters in or in the vicinity of the Contract

Area in accordance with normal industry practice and in accordance with the

standards as may be established by the Government of Bangladesh (or any relevant

governmental authorities or agencies) from time to time; and

(e) not carry out any operations in or about the Contract Area in such manner as to

interfere unjustifiably with navigation or fishing in the waters of the Contort Area or

with the conservation of the living resources of the sea.

10.25 All procedures or other obligations or requirements for the conduct of Petroleum

Operations under this Contract shall be consistent with good and modern petroleum

industry practice. Petrobangla and Contractor shall regularly consult on such good and

modern petroleum industry practices.

10.26 Contractor shall consult Petrobangla in relation to the measures to be undertaken by

Contractor in compliance with the provisions of Article 10.24 including, without limitation,

the installation of appropriate measuring systems and the adoption of measures for

safety and environmental protection which are consistent with good and modern

petroleum industry practice.

10.27 In case of any damage or expense caused by inefficient, careless or negligent activities of

the Contractor:

(a)



Contractor will not be allowed to recover the cost for such damage under Cost

Recovery; and



(b)



Contractor shall pay due compensation for such damage.



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ARTICLE 11

ASSISTANCE BY PETROBANGLA AND GOVERNMENT

11.1



To enable Contractor to implement this Contract expeditiously and efficiently, Petrobangla

and where appropriate the Government shall have the obligation fully to assist and

cooperate with Contractor at its request to:

a)



obtain the approvals or permits needed to open accounts with banks in

Bangladesh;



b)



comply with the formalities of converting foreign currencies and with exchange

control regulations;



c)



obtain office space, office supplies, transportation and communication facilities

and residential accommodation as required;



d)



comply with customs formalities and import/export control and tax regulation;



e)



obtain entry and exit visas for the expatriate employees, who will come to

Bangladesh for the implementation of this Contract and for their dependants who

will visit them or reside with them in Bangladesh;



f)



obtain necessary permission to send abroad, if necessary, documents, data or

samples for analysis or processing during the Petroleum Operations;



g)



contact relevant Government departments and governmental agencies concerned,

including those dealing with fishing and fisheries, aquatic products, meteorology,

shipping, civil aviation, railway, transportation, communication, health and

services for supply bases as required; and



h)



lease and/or use of land, sub-soil, sea surface, sub-sea and sea-bed areas or

other areas that may be required for the conduct of the Petroleum Operations,

subject to applicable laws.



11.2



Having regard to Article 10.13 Petrobangla shall at the request of Contractor, assist

Contractor with the recruitment of local personnel.



11.3



Petrobangla shall, at the request of Contractor, furnish Contractor with data and samples

in Petrobangla's possession concerning the Contract Area, subject to Contractor's

reimbursing Petrobangla costs in providing such data and/or samples, and Petrobangla

shall also assist Contractor to arrange the purchase of any geological, geophysical, soil

survey, oceanic, environmental, hydrological and other data available from the relevant

Government departments in Bangladesh.



11.4



Petrobangla shall, at the request of Contractor, also render such other assistance as

Contractor may reasonably request from time to time for the purpose of the smooth

implementation of this Contract.



11.5



All expenses incurred in the assistance provided by Petrobangla in accordance with this

Article 11 shall be paid by Contractor and shall be dealt with in accordance with the

provisions of the Accounting Procedure as set out in “Annex-B”.



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ARTICLE 12

JOINT MANAGEMENT COMMITTEE

12.1



Within thirty (30) days after the Date of Declaration of the first Commercial Discovery, a

Joint Management Committee composed of eight (8) members, three (3) of whom shall

be appointed by Petrobangla, one (1) by Government and four (4) by Contractor shall be

established. From time to time by at least ten (10) days' notice to the other Party, a Party

may replace one or more of its members on the Joint Management Committee. The

Chairman of the Joint Management Committee shall be appointed by Petrobangla from

the members appointed by it. Additional representatives of each Party may attend

meetings of the Joint Management Committee as observers or alternate members.



12.2



A quorum for transaction of business by the Joint Management Committee shall consist of

at least six (6) members of the Joint Management Committee. Decisions and

recommendations of the Joint Management Committee shall be made by unanimous

votes of the members attending a meeting.



12.3



a)



In the case that unanimous agreement cannot be reached despite discussion

between the management of Petrobangla and Contractor, the matter shall be

promptly presented to the Secretary of the Energy and Mineral Resources Division

of the Government for consultation.



b)



The opinion of the Secretary of the Energy and Mineral Resources Division of the

Government shall be used to assist the Joint Management Committee to arrive at

a unanimous decision.



Meetings of the Joint Management Committee shall be held in Dhaka at least once every

calendar quarter on dates to be mutually agreed. By at least ten (10) days; prior written

notice, the Chairman shall propose the time and venue for each meeting and notify each

member by dispatching an agenda in accordance with this Article 12.The Joint

Management Committee shall amongst other things deal with the following matters and

shall take appropriate decisions and recommendations relating thereto:

a)



all Work Programs, Budgets and other reports and proposals required to be

submitted to Petrobangla;



b)



progress of Contractor's work;



c)



Contractor's statements under Article 23.4;



d)



Contractor's proposed production levels;



e)



terms of contracts with sub-contractors and performance of sub-contractors work

including variation of such contracts or change orders;



f)



any problem arising in Petroleum Operations;



g)



appointment of auditors;



h)



Development Plans and Budget;



i)



loan agreements for Development Plan ;



j)



the annual personnel plan in accordance with Article 10.13; and



k)



such additional subject as may be requested by either Party.



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12.4



Special meetings of the Joint Management Committee may be called on reasonable notice

by either Party for the purposes of considering any major development or problem(s) in

Petroleum Operations and of proposing appropriate actions to be taken.



12.5



Recommendations, opinions or decisions of the Joint Management Committee shall be

delivered to Petrobangla and Contractor for information and for appropriate and timely

action.



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ARTICLE 13

WORK PROGRAM AND BUDGET FOR DEVELOPMENT PLAN

13.1



Within sixty (60) days after Petrobangla's approval of a Development Plan pursuant to

Article 8.10, Contractor shall prepare and present to the Joint Management Committee a

proposed detailed Work Program and Budget for that Production Area for the remaining

part of the Calendar Year in which Petrobangla's approval was obtained and for the

ensuing Calendar Year. The Joint Management Committee shall act on such proposals.



13.2



Not later than 1st September of each Year following the Declaration of Commercial

Discovery, Contractor shall present to the Joint Management Committee a proposed

annual Production schedule, detailed Work Program and Budget for each Production Area

for the ensuing Calendar Year. The Joint Management Committee shall act on such

proposals within sixty (60) days after receipt thereof.



13.3



Each Work Program and Budget shall set out in detail by quarterly period all aspects of

the proposed Petroleum Operations to be carried out including all relevant data and

information and estimated costs, duration of each operation for each project and in the

case of a Work Program for a producing Petroleum Field, the estimated monthly rate of

production for each Petroleum Field. Such Work Program shall also include measures to

be taken to comply with the obligations of Contractor as specified in Article 10.



13.4



Details of each Work Program and Budget shall be in such form as required by

Petrobangla.



13.5



No Petroleum Operations shall be carried out unless and until the relevant Work Program

and Budget has been approved in writing by Petrobangla. Petrobangla shall notify

Contractor of its approval (whether or not conditional) or otherwise, of a proposed Work

Program and Budget:

a) within sixty (60) days of receipt of the first Work Program and Budget;

b) by 15th December of the previous year, in respect of each subsequent Work Program

and Budget.



13.6



Petrobangla may give notice to Contractor that a proposed Work Program and Budget

submitted by Contractor is approved subject to such conditions as Petrobangla may

specify in such notice and may give Contractor notice that a proposed Work Program is to

be revised either in whole or in part. If Contractor considers that any revision required by

Petrobangla renders the Work Program and Budget unworkable, Contractor shall within

thirty (30) days notify and substantiate to Petrobangla their reasons for coming to such a

decision. Thereupon, Petrobangla and Contractor shall meet and discuss the revision

required by Petrobangla with a view to resolving any differences. If the Parties fail to

resolve their differences within sixty (60) days from the date of the first meeting held to

resolve such differences then, notwithstanding the foregoing, the matter shall be referred

to the Secretary of the Energy and Mineral Resources Division as per Article 12.2.



13.7



It is recognized by Petrobangla and Contractor that the details of a Work Program may

require changes in the light of changing circumstances. Thus Contractor may without the

prior approval of Petrobangla make minor changes, provided that such changes shall not

increase or decrease the approved Budget for any affected expenditure items by more

than ten percent (10%) and do not substantially alter the general objectives of the Work

Program. Petrobangla shall be notified of such changes as soon as possible. Any other

changes shall require the prior written approval of Petrobangla. Any decision by

Petrobangla on such request for approval shall be communicated to Contractor within

sixty (60) days of receipt of the same.



13.8



Contractor shall be solely responsible for the provision of all funds required directly or

indirectly for the implementation of the Work Program.



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ARTICLE 14

ALLOCATION OF PRODUCTION, RECOVERY OF COSTS

AND EXPENSES AND PRODUCTION SHARING

14.1



Contractor shall have the right to use free of charge Petroleum produced from the

Contract Area to the extent reasonably required for Petroleum Operations under this

Contract.



14.2



All Oil and/or Natural Gas and/or Condensate and/or Natural Gas Liquids (NGL) produced

and saved from the Contract Area and not used in Petroleum Operations (hereinafter

referred to as "Available Oil" or "Available Natural Gas" or "Available Condensate" or

"Available Natural Gas Liquids (NGL)") shall be measured at the applicable Measurement

Point and allocated as set forth hereinafter. Test or experimental production prior to an

Appraisal Program shall not be subject to allocation and shall be retained exclusively by

Petrobangla to the extent not required for the Petroleum Operations hereunder.



14.3



Cost Recovery

Subject to the Accounting Procedure and the auditing provisions of this Contract,

Contractor shall recover all costs and expenses not excluded by the provisions of this

Contract and the Accounting Procedure in respect of all the Exploration, Appraisal,

Development and related operations hereunder with respect to the Contract Area to the

extent of and out of a maximum of fifty-five percent (55%)per Calendar Year of all

Available Oil / Natural Gas/ Condensate/ NGL from the Contract Area (hereinafter referred

to as "Cost Recovery Petroleum").



14.4



Such costs and expenses shall be allocated to Available Petroleum and shall be

recoverable from Cost Recovery Petroleum in the following manner and order:

a)



Operating Expenses after first Commercial Production

All Operating Expenses incurred after first Commercial Production from the

Contract Area shall be recoverable in the Calendar Quarter in which such expenses

are incurred and paid.



b)



Capital Expenditures under Development Plan

All capital costs incurred and paid by Contractor under Development Plan

approved by Petrobangla, will be recovered either in the Calendar Quarter in

which the expenditure was incurred and paid (if incurred after first commercial

production) or the Calendar Quarter in which first Commercial Production occurs

(if incurred prior to first commercial production)



c)



Exploration Costs and other costs not included under (a) and (b) above

Costs relating to Exploration and Appraisal Programs before first Commercial

Production as well as all other expenses related to Petroleum Operations, not

directly related to items (a) or (b) above, but incurred and paid prior to first

Commercial Production, will be recovered at the rate of twenty-five percent (25%)

per year on a straight-line basis, commencing in the Calendar Quarter in which

Commercial Production commences in the Contract Area.

Costs relating to Exploration and Appraisal Programs after first Commercial

Production as well as other expenses not directly related to items (a) and (b)

above will be recovered in the Calendar Quarter in which such expenses are

incurred and paid.



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d)



To the extent that in a Calendar Quarter costs or expenses recoverable under

paragraph 14.4 items (a), (b) or (c) related to the Contract Area exceed the value

of all Cost Recovery Petroleum from the Contract Area for such Calendar Quarter,

the excess shall be carried forward for recovery in the next succeeding Calendar

Quarter until fully recovered, but in no case after expiry of this Contract.



14.5



The procedures specified in Articles 17 and 18 shall be used for determining the quantity

and value of Cost Recovery Petroleum to which Contractor is entitled hereunder during

each Quarter.



14.6



Production Sharing

In any Month where Contractor is recovering costs and expenses under Article

14.4 of this Contract, the Petroleum remaining after Cost Recovery, including any

portion of Cost Recovery Petroleum not required to cover costs (hereinafter

referred to as "Profit Petroleum") shall be allocated between Petrobangla and

Contractor in the proportions as shown in Table 14.6; based on total average daily

Production over the Month.



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TABLE 14.6

PROFIT PETROLEUM

A)



PROFIT OIL/CONDENSATE/ NGL

(Oil and /or Condensate and/or NGL

produced and saved from the Contract

Area and not used in Petroleum

operations)

Production tranches

Up to 12,500 bbl per day

Portion in excess of 12,500

and up to 25,000 bbl per day.

Portion in excess of 25,000

and up to 40,000 bbl per day.

Portion in excess of 40,000

and up to 65,000 bbl per day.

Portion in excess of 65,000

and up to 100,000 bbl per day

Portion in excess of

100,000 bbl per day.



PROFIT ALLOCATION

Petrobangla

Share (%)





Contractor

Share (%)













































♦[To be bid]

B)



PROFIT NATURAL GAS

(Natural Gas produced and saved

from the Contract Area and not

used in Petroleum operations)



PROFIT ALLOCATION

Petrobangla

Share (%)



Contractor

Share (%)



Up to 75 mmcf per day











Portion in excess of 75 mmcf

per day and up to 150 mmcf per day.











Portion in excess of 150 mmcf

per day and up to 250 mmcf per day.











Portion in excess of 250 mmcf

per day and up to 400 mmcf per day.











Portion in excess of 400mmcf

per day and up to 600 mmcf per day.



















Production tranches



Portion in excess of 600

mmcf per day.

♦[To be bid]



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14.7



Each entity comprising Contractor shall receive during each Quarter at the Measurement

Point and may separately dispose of its individual share of the Cost Recovery Petroleum

and of Profit Petroleum. Title and risk of loss shall pass to each entity comprising

Contractor at the outlet flange of such Measurement Point. Subject only to Articles 15.5,

15.6 and 24, each entity comprising Contractor shall have the right to export freely

Petroleum received.



14.8



To the extent that the value of Cost Recovery Petroleum, as determined under Article 17,

received by Contractor from the Contract Area during a Quarter is greater or less than

the amount Contractor was entitled to receive as Cost Recovery for that Quarter, an

appropriate adjustment shall be made in accordance with the Accounting Procedure.



14.9



Contractor and Petrobangla shall review annually Operator's production program from

any Production Area having due regard to ensuring compliance with Contractor's

obligations under Articles 10.4 and 10.6 (d) and (e).



14.10 Contractor shall, subject to its other obligations under this Contract, prepare not less than

ninety (90) days prior to the beginning of each Quarter following commencement of

Commercial Production and furnish in writing to Petrobangla and the Joint Management

Committee a forecast setting out the total quantity of Petroleum that it estimates can be

produced, saved and transported hereunder during each of the next four (4) Quarters in

accordance with good international oil industry practices and the production program

established in accordance with Article 14.9. Contractor shall endeavor to produce each

Quarter the forecast quantity.

14.11 The Oil shall be run to storage facilities in accordance with the Development Plan,

maintained and operated at the Measurement Point under this Contract where it shall be

measured for purposes of this Contract. Petrobangla and each entity comprising

Contractor shall have the right to take in kind and separately dispose of its respective

entitlement.

14.12 Prior to commencement of Commercial Production of Oil from Contract Area, Petrobangla

and Contractor shall agree on a procedure for taking volumes of Oil corresponding to

their respective entitlements on a regular basis and in a manner that is appropriate

having regard to the respective destinations and uses of the oil.

14.13 Petrobangla may receive its share of Profit Oil, Profit Natural Gas, Profit Condensate and

Profit NGL as set out in Article 14.6, in kind or in cash, as mutually agreed between the

Parties.



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ARTICLE 15

NATURAL GAS

15.1



Contractor shall use with priority any Natural Gas in the Contract Area for the purpose of

increasing the recovery of Oil, where good international reservoir practices indicate that

the use of Natural Gas for this purpose is required.



15.2



Contractor may use free of charge any Natural Gas in the Contract Area for Petroleum

Operations.



15.3



Any Associated Natural Gas as is not used under Article 15.1 or Article 15.2 and which

Contractor does not consider possible to recover economically shall be offered to

Petrobangla without any payment to Contractor but at Petrobangla's cost at the well-head

or field facilities in the Production Area. To the extent that Petrobangla does not so take

any of such Associated Natural Gas, Contractor may flare such Associated Natural Gas

provided that such flaring is included in the Development Plan submitted under Article

8.10.



15.4



Following good reservoir management practices, Contractor shall have the right to

produce annually a total volume of Gas up to seven and a half per cent (7.5%) of the

Proven Recoverable Gas reserves for each Gas Field, as the expression "Proven " is

defined and approved by the Society of Petroleum Engineers and the World Petroleum

Congress in 1997 or as subsequently amended.



[Note: In case of offshore blocks the words “ or a greater percentage as may be agreed by

Petrobangla and the Contractor” shall be added after the word (7.5%).]

15.5.1 Subject to Articles 15.5.4, 15.5.5 and 15.6 Contractor shall have the right to export any

Marketable Natural Gas, as defined in Article 15.5.2, produced from the Contract Area in

the form of Liquefied Natural Gas ("LNG"). Such volume shall consist of:

(a)



Contractor's Cost Recovery Natural Gas,



(b)



Contractor's Profit Natural Gas, and



(c)



Petrobangla's Profit Natural Gas or, where applicable, the remaining share

of Petrobangla's Natural Gas over the reservation pursuant to Article

15.5.4.



Where Contractor intends to export the Natural Gas as LNG, the related LNG facilities

shall be constructed and operated on the basis of a special LNG export agreement

between Contractor and Petrobangla. Such agreement shall allow, if appropriate, for the

use of facilities by third parties.

15.5.2 The volumes of Marketable Natural Gas shall be the volumes of Natural Gas

produced, less

a)



the Natural Gas used for Petroleum Operations;



b)



the Natural Gas used for increasing recovery of oil, and



c)



any shrinkage as a result of processing such Natural Gas.



15.5.3 For any Natural Gas made available under Article 15.5.1(c) from Petrobangla's

share of Natural Gas, Contractor shall pay to Petrobangla, in Dollars, a price equal

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to the Value established pursuant to Article 17.8 hereof. Where applicable the

Contractor shall pay Petrobangla its share of the pipeline tariffs applicable to the

transport of Natural Gas.

15.5.4 Where Petrobangla has installed necessary facilities to transport and use gas to

meet domestic requirements, Petrobangla shall be entitled at its option to retain in

kind any Natural Gas produced up to Petrobangla's share of Profit Natural Gas, but

in no event more than twenty percent (20%) of the total Marketable Natural Gas.

The actual Monthly amounts to be retained by Petrobangla shall be notified to

Contractor prior to the conclusion of relevant LNG export contract(s) and such

Monthly amounts shall be fixed for the duration of such contracts. At the request

of Petrobangla, the limit of twenty percent (20%) stipulated herein will be

increased to thirty percent (30%), at the beginning of the eleventh year following

the start of deliveries for the purpose of LNG export.

15.5.5 Contractor shall not enter into any agreement for LNG export unless the price or

the pricing formula and the agreement itself are previously approved by

Petrobangla. Such approval shall not be withheld where Contractor can

demonstrate that the price received or pricing formula established represents the

fair market value at the point of export for LNG taking into account the volumes of

LNG export to be sold and the nature and geographical location of the markets to

be served, as well as the transport and distribution costs of LNG from the point of

export to the market are acceptable to Petrobangla.

15.6



15.7



(a)



Contractor shall offer its share of Cost Recovery Gas and Profit Gas to

Petrobangla, and Petrobangla shall undertake that it or its Affiliates will purchase

the gas. This obligation shall not be diminished if additional reserves of Gas are

discovered outside the Contract Area as long as Contractor is fulfilling its

obligation to deliver Natural Gas from the Production Area. The contractual terms

of purchase and sale of such marketable Natural Gas shall be negotiated with

Petrobangla or its Affiliate prior to approval of the Development Plan and shall

include the financial terms set out in Article 15.7.



(b)



If a written notice of a market outlet is not given by Petrobangla within six (6)

months after the date of submission of the Evaluation Report as per Article 8.5,

Contractor will be free to find a market outlet within Bangladesh. Petrobangla shall

cooperate with Contractor to facilitate such sale.



(c)



Contractor has the option to sell Contractor's share of Natural Gas in the domestic

market to a third party, subject to Petrobangla's right of first refusal.



The financial terms to be included in the purchase and sale agreement referred to in

Article 15.6 shall be as follows:

(i)



The price for Natural Gas shall be calculated as follows:

(a)



subject to Article 15.7 (ii), for onshore gas, the price shall be seventy-five

percent (75%) of the Marker Price as defined in Article 15.7(i)(b) converted

into Dollars per mscf on the basis of thermal energy equivalents (BTU);



(b)



the Marker Price shall be calculated for each Calendar Quarter based on

the arithmetic average of Asian Petroleum Price Index (“APPI”) quotations

of High Sulphur Fuel Oil 180 CST ("HSFO"), FOB, Singapore only for such

days as such quotations are published for the six months ending on the

last day of the second (2nd) month preceding the start of the quarter for



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which the calculation of the Marker Price is to be made; Such fuel oil price

will have a floor of seventy Dollars ($70) per metric ton and a ceiling of

one hundred and eighty Dollars ($180) per metric ton;



15.8



(c)



in the event that the trading of HSFO in the area covered by APPI ceases

or HSFO prices cease to be quoted by APPI ceases to be published, the

Parties shall meet and agree as soon as possible upon a suitable

alternative. Until such time as a new basis of pricing is agreed, the last

available Marker Price shall continue to be used;



(d)



for the western zone (Onshore) gas price shall be twenty-five percent

(25%) higher than for the other onshore gas price calculated as per 15.7 (i)

(a);

or

for offshore gas from Type–A blocks situated north of 20 degree north

latitude, the price shall be twenty-five percent (25%) higher than for the

onshore gas price calculated as per (a) above;

or

for offshore gas from Type–B blocks situated south of 20 degree north

latitude, the price shall be one hundred percent (100%) of the Marker

Price as defined in Article 15.7(i)(b);



(e)



Petrobangla shall receive a discount of minimum one percent (1.%) on the

price of gas calculated as per Article 15.7 (i)(a) and 15.7 (i)(d) on the

Natural Gas sold by Contractor to Petrobangla at the Measurement Point.



(ii)



Should the Marker Price for any Calendar Quarter, calculated as in Article

15.7(i)(d) above fall below a floor price of seventy Dollars ($70) per metric ton of

HSFO or rise above a ceiling price of one hundred and eighty Dollar ($180) per

metric ton of HSFO, the Marker Price for that quarter shall be fixed at the floor

price or ceiling price respectively.



(iii)



The gas prices calculated in Articles 15.7 (i)(a), (i)(b), (i)(c), (i)(d) and (i)(e),

above shall be applicable to sales at the Measurement Point.



(iv)



Sales of Gas to Petrobangla or its Affiliate shall be invoiced monthly and payment

shall be made within sixty (60) days of issue of invoice. The invoice should be

supported by necessary documents along with "Cost Recovery Statement" as on

the invoiced month.



The price for Natural Gas sold to a third party(ies) shall be equal to the price obtained as

per Article 15.7 or more.



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ARTICLE 16

PIPELINES

16.1



At any time following the declaration of Commercial Discovery, Contractor shall have the

right to construct and to operate one or more Pipeline(s) within or from the Contract Area

to one or more points in Bangladesh for the purpose of transporting Petroleum from any

Production Area to Measurement Point(s) in Bangladesh, at Contractor's option or jointly

with other parties. For the purpose of this Contract, a Pipeline shall include related

facilities.



16.2



Contractor may submit a Development Plan for construction of such Pipeline(s) to

Petrobangla, which includes the following information and components:

(a)



the right of way and surface acreage for the trunk line or spur lines and any

loops, lateral lines, feeder lines or branch lines, any pumping stations,

measurement stations, valves, compressor stations, storage tanks, loading

facilities (excluding port and terminal facilities) and any other facilities for the

pumping, compression, measurement, or handling of the Petroleum or cleaning or

maintenance of the pipeline and other related facilities;



(b)



the anticipated throughputs and capacity of the various components of the

Pipeline;



(c)



a proposed operating cost and tariff arrangement between the various companies

utilizing the Pipeline.



(d)



an estimate of the anticipated capital investments and operating costs related to

the Pipeline;



(e)



the technical description of the Pipeline and the specifications and standards used

for construction and operations;



(f)



the proposed construction methods and testing procedures;



(g)



the remedial measures that may be required to remedy environmental or other

damages as well as contingency plans in case of any accidents or spills;



(h)



a draft pipeline agreement for construction; and



(i)



such other information as may be required by existing pipeline regulations.



16.3



Petrobangla shall review such information and suggest such changes as may be essential

in the national interest or as may be required by applicable law or conditions in the

Pipeline development plan by Contractor.



16.4



Priority in the use of a Pipeline built by Contractor will be given to transportation of

Petrobangla's and Contractor's Petroleum from the Contract Area or any other area in

Bangladesh held by the Contractor. Development and Operating Costs of the Pipeline

upstream of the Measurement Point shall be subject to Cost Recovery under this

Contract. Contractor shall operate the Pipeline downstream of Measurement Point until

the pipeline investment is recovered. If Petrobangla so desires the Contractor shall

continue to operate the Pipeline downstream of Measurement Point after the Pipeline

investment for that part is recovered.



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16.5



Except Petrobangla, all parties who use the Pipeline downstream of Measurement Point

shall pay 1% tariff against their share of Petroleum transmitted through the pipeline for

transmission service. However, the Contractor will be exempted from paying tariff during

cost recovery of the said pipeline. Any tariff received will be paid to the account of

Petrobangla. Spare capacity in the Pipeline can be assigned to third parties for the

transport of their Petroleum if the quality of such Petroleum is compatible with Petroleum

from the Contract Area, subject to agreement of the parties concerned.



16.6



Title to the Pipeline(s) shall be with Petrobangla.



16.7



Petrobangla shall assist Contractor in obtaining the right of way and surface acreage for

the Pipeline(s) and access roads to the right of way as necessary.



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ARTICLE 17

VALUATION OF PETROLEUM

17.1



The value of Oil from each Production Area for Cost Recovery shall be determined on the

basis of the fair market value ("Value") of such Oil at the Measurement Point.



17.2



Under this Contract, "Value" means the price, which a willing buyer would pay to a willing

seller under a long-term contract for the sale of a given product at a given time on an

arm's length basis, taking into account the quality, volume, cost of transportation from

the Measurement Point, terms of payment and any other relevant conditions, including

the then prevailing market conditions for oil in South and South East Asia, and assuming

that such buyer and seller are acting freely and independently, each in his own interest

without being influenced by reciprocal dealing or any special relationship. Such Value shall

be expressed in Dollars per Barrel.



17.3



Where the different grades of Oil are being produced in a Production Area, the Value shall

be determined for each grade of Oil.



17.4



If there have been sales of Crude Oil produced from the Contract Area to third parties at

arm's length sales during a particular Calendar Month or such other period as the Parties

may agree (hereinafter referred to as "the Delivery Period"), all sales so made shall be

valued at the weighted average of the prices actually received by Contractor, calculated

by dividing the total receipts from all such sales FOB the delivery point by the total

number of Barrels of the Crude Oil sold in such sales.

17.4.1 In the event that a portion of such third party arm's length sales are made on a

basis other than an FOB basis as herein specified, the said portion shall be valued

at prices equivalent to the prices FOB the delivery point for such sales determined

by deducting all costs (such as transportation, demurrage, loss of Crude Oil in

transit and similar costs) incurred downstream of the delivery point, and the prices

so determined shall be deemed to be the actual prices received for the purpose of

calculation of the weighted average of the prices of all third party arm's length

sales for that particular month or the Delivery Period.

17.4.2 Contractor shall submit to Petrobangla within ten (10) days of the end of the

Calendar Month in question or the Delivery Period, as appropriate, a report

containing the actual prices obtained in their respective arm's length sales to third

parties of any Crude Oil. Such reports shall distinguish between term sales and

spot sales and itemize volumes with specifications in respect of quality and gravity,

customs and prices received and the delivery and credit terms. Such reports shall

also indicate for each sale the identity of the purchaser, and the Contractor shall

allow Petrobangla to examine the relevant sales contracts.



17.5



The fair market value of Crude Oil shall be determined in Dollars per Barrel on a monthly

basis in accordance with the following procedure:

(a)



Within ten (10) days following the end of each Month, Contractor shall determine

in accordance with provisions of Articles 17.4, or 17.4.1, as the case may be, the

value applicable for the Month concerned and shall notify Petrobangla in writing of

that market value, indicating the method of calculation and all data used in the

calculation of that market value.



(b)



Within fifteen (15) days following receipt of the notice referred to in the preceding

paragraph (a), Petrobangla shall notify Contractor in writing of its acceptance or

objections to the value determined. Failing notification from Petrobangla within the



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fifteen (15) days period, the fair market value provided for in Contractor's notice

referred to in the preceding paragraph shall be deemed to have been accepted by

Petrobangla.

(c)



17.6



In the event Petrobangla has given Contractor written objections to the Value

within the fifteen (15) day period, the Parties shall meet within fifteen (15) days

following Petrobangla's notification to mutually agree on the fair market value.



If there have been no sales of Crude Oil produced from the Contract Area to third parties

at arm's length during a Month, the Value of Oil required by Article 17.5(c) shall be

determined in accordance with the following procedure:

(a)



The Value shall be determined on the basis of either the FOB selling price per

Barrel of a basket of three Crude Oils which, at the time of calculation, are being

freely and actively traded in the international market and are similar in

characteristics and quality to the Crude Oil in respect of which the price is being

determined, or the spot market for the same Crude Oils ascertained in the same

manner, whichever price, in the opinion of the Parties, more truly reflects the

current value of such Crude Oils. Crude Oils which qualify for inclusion in the

basket shall be those for which the spot price and term price FOB point of export is

published on a regular basis in Platt's Oilgram or in the Asian Petroleum Price

Index (APPI) whichever the parties mutually consider more relevant for this

purpose. Contractor and Petrobangla hereby agree that the following three Crude

Oils shall be used:

(i)

(ii)

(iii)



17.7



: [to be agreed later]

: [to be agreed later]

: [to be agreed later]



(b)



The selection of three Crude Oils or the Value determination procedure pursuant to

this Article 17.6 may be changed from time to time, by mutual consent, where

prevailing market conditions would result in an unfair determination of the Value of

the Oil to either Petrobangla or Contractor or where it is required by an arbitral

decision following from a reference under Article 17.7.



(c)



In the event that at the relevant time, no Crude Oils of similar quality to the Crude

Oil to be sold are being actively traded in the international markets where prices

can be ascertained by international publication, or the official FOB selling prices

and the international spot market price vary widely between producers, the Parties

shall meet in good faith to determine an appropriate pricing basis.



(a)



If the Parties have differences and cannot agree on the Value of Oil under Article

17.5 hereof, or



(b)

(c)



17.8



Crude Oil 1

Crude Oil 2

Crude Oil 3



If the Parties cannot agree on the methods of determining the Value pursuant to

Article 17.6, or

If Contractor or Petrobangla is of the opinion that the determination method

pursuant to Article 17.6 results in an unfair determination of the Value, the Parties

agree to submit, in any of the aforementioned cases, their differences to a sole

expert appointed pursuant to Article 30.3 for final determination.



The value of Natural Gas at the Measurement Point in the case of LNG exports shall be

the arithmetic average value of the Natural Gas calculated at the inlet flange to the LNG

facility based on the delivery price(s) or price formulae in accordance with the LNG export



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agreement pursuant to Article 15.5 less the transport tariff by pipeline from the

Measurement Point to the inlet flange to the LNG facility.

17.9



The Value of Natural Gas shall be determined in Dollars per MCF on a Monthly basis.



17.10 The valuation of Natural Gas for domestic use shall be the sale price of Natural Gas by

Contractor to Petrobangla as determined under Article 15.7.

17.11 Valuation of Condensate and/or Natural Gas Liquids (NGL):

The Value of Condensate and/or Natural Gas Liquids (NGL) shall be determined on the

basis of either the FOB selling price per Barrel of a basket of three Crude Oils which, at

the time of calculation, are being freely and actively traded in the international market or

the spot market for the same Crude Oils ascertained in the same manner, whichever

price, in the opinion of the Parties, more truly reflects the current value of such Crude

Oils. Crude Oils which qualify for inclusion in the basket shall be those for which the spot

price and term price FOB point of export is published on a regular basis in Platt's Oilgram

or in the Asian Petroleum Price Index (APPI) whichever the parties mutually consider

more relevant for this purpose. Contractor and Petrobangla hereby agree that the

following three Crude Oils shall be used:

(i)

(ii)

(iii)



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Crude Oil 2

Crude Oil 3



[to be agreed later]

[to be agreed later]

[to be agreed later]



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ARTICLE 18

MEASUREMENT OF PETROLEUM

18.1



All Petroleum produced, saved and not used in Petroleum Operations shall be measured

at the Measurement Point.



18.2



The Measurement Point shall be the location as decided by Petrobangla, where the

Petroleum is delivered for transportation there from by truck, barge, railway, marine

tanker or pipeline.



18.3



The Production shall be measured in accordance with standards generally acceptable in

the international Petroleum industry. All measurement equipment shall be installed,

maintained and operated by Contractor. Petrobangla shall have the right to inspect the

measuring equipment installed by Contractor and all charts and other measurement or

test data at all reasonable times. The accuracy of Contractor's measuring equipment shall

be verified by tests at regular intervals and upon the request of Petrobangla, using means

and methods generally accepted in the international Petroleum industry.



18.4



Upon discovery of a meter malfunction, Contractor shall immediately have the meter

repaired, adjusted and corrected and following such repair, adjustment or correction shall

have it tested or calibrated to establish its accuracy. Upon the discovery of metering

error, Contractor shall have the meter tested immediately and shall take the necessary

steps to correct any error that may be discovered.



18.5



In the event a measuring error is discovered, Contractor shall use its best efforts to

determine the correct Production figures for the period during which there was a

measuring error and the corrected figures shall be used. Contractor shall submit a report

on the corrections applied to Petrobangla for approval. In determining the correction,

Contractor shall use, where required, the information from other measurements made

inside or outside the Production Area. If it proves impossible to determine when the

measuring error first occurred, the commencement of the error shall be deemed to be

that point in time halfway between the date of the last previous test and the date on

which the existence of the measuring error was first discovered.



18.6



All measurements shall for all purposes in this Contract be adjusted to standard

conditions of pressure and temperature, that is, a pressure of fourteen point seven three

(14.73) pounds per square inch and a temperature of sixty (60) degrees Fahrenheit.



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ARTICLE 19

TAXES AND DUTIES

19.1



In respect of Petroleum Operations undertaken by Contractor as envisaged hereunder

Government will hold and keep Contractor harmless from the following:

a) subject to the fulfillment of the terms and conditions of SRO 202-Law/95/1639/

Cus. dated 28 November, 1995, customs duties, VAT and sales taxes and any

other taxes of a similar nature on:

(i)



equipment, spares and other consumables brought into Bangladesh by

Contractor, its subcontractors or by any agent or representative on their behalf

on a permanent basis.



(ii) all equipment and materials related to drilling, directional drilling workover,

mud logging, mud engineering, wireline logging, cementation, well testing

(production),

DST,

coil

tubing,

snubbing

and

seismic/

gravity/

magnetic/aeromagnetic services brought into Bangladesh by Contractor, its

subcontractors or by any agent or representative on their behalf on a

re-exportable basis.

(iii) equipment or spares that are consumed after use or that become unserviceable

shall not be subject to duties or taxes. Petrobangla, however, before clearance

from customs shall furnish to the NBR and the commissioners of customs a list of

such consumables for which exemption shall be applicable.

(iv) jeeps and pick-ups solely used for oil and gas exploration, production and

development and brought into Bangladesh by Contractor or its subcontractors on

re-exportable basis shall not be subject to duties and taxes. Petrobangla shall

obtain prior permission of NBR regarding the total number of such vehicles

before importation. Likewise, Contractor shall furnish to Petrobangla the requisite

number of such vehicles before importation.

(v) equipment, vehicles, spares and materials brought into Bangladesh under this

SRO cannot be sold or transferred without the permission of NBR.

19.2



Except the items mentioned in Article 19.1, the Government will not hold the Contractor

and its sub-contractors harmless in respect of all other taxes, duties, levies etc. including

but not limited to the following:

a)



corporate income tax of Contractor;



b)



taxes on tobacco and liquor;



c)



income tax of sub-contractors;



d)



income tax of employees of Contractor (including Operator) and sub-contractors,



e)



duties and taxes on locally purchased goods and commercial services provided by

public authorities;



f)



any levies or exaction in respect of property including leased property, capital, net

worth, operations, remittances or transactions pertaining to operations performed

by Contractor, Operator or their sub-contractors;



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g)



duties and VAT on imported office equipment, air conditioners, refrigerators (except

built-in with the equipment), sedan cars and station wagons, microbuses,

household utensils and such other materials which are not directly related to oil

and gas exploration, development and production.



h)



Value Added Tax and Supplementary Duty (if any) for goods and services

purchased to implement Petroleum Operations as per provisions of the Value

Added Tax Act. 1991 and the Value Added Tax Rules, 1991 or as may be amended

from time to time.



19.3



Contractor shall be subject to the tax laws in force from time to time in Bangladesh which

impose taxes on (referred to as "Bangladesh Income Taxes") and shall comply with the

requirements of such laws with respect to the filing of returns, the assessment of tax and

the keeping for review by authorized persons of books and records. For these purposes,

any Bangladesh Income Taxes for which the Contractor may be liable shall be deemed to

be a tax levied against Contractor.



19.4



For purposes of applying this Article, the total taxable income of Contractor with respect

to any Calendar Year shall be an amount calculated in accordance with Bangladesh

accounting principles and Bangladesh Income Tax laws.



19.5



Contractor shall prepare a tax return in Bangladesh and submit such return and shall

promptly pay said taxes to the proper authorities and furnish Petrobangla, without fee,

copies of receipts issued in the name of Contractor by the proper authorities of the

Government.



19.6



For purposes of this Article, where Contractor is composed of more than one entity, the

word "Contractor" shall be considered to mean "each entity constituting Contractor".



19.7



Contractor shall be responsible for paying its own taxes on all incomes derived in

Bangladesh as per Article 19.2 and as prescribed by the Income Tax Ordinance 1984 and

subsequent amendment thereof.



19.8



In the event, whether for the purpose of expediency or otherwise, Contractor or any

other person on behalf of Contractor pays any amount on account of any of the

aforementioned taxes or duties that Government has agreed to hold Contractor harmless

from, Petrobangla shall arrange reimbursement to Contractor, subsequent to submission

of documentary proof as to payment of such tax or duties by Contractor or such other

person on behalf of Contractor provided however that Petrobangla shall have been

consulted prior to the payment of such tax or duties.



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ARTICLE 20

FEES AND BONUSES

20.1



Within thirty (30) days after either the Date of Declaration of each Commercial Discovery

of Oil or Gas in the Contract Area or approval of a Development Plan for Gas Field,

Contractor shall pay Petrobangla Discovery Bonus of three (3) million Dollars.



20.2



Contractor shall pay Petrobangla the following Production Bonuses for Oil after a period of

thirty (30) consecutive producing days, within thirty (30) days after the first date when

the total average daily Production of Oil from each field separately from the Contract Area

has been sustained at the rate of:



20.3



a)



10,000 barrels per day, the sum of amount 500,000 Dollars ($).



b)



20,000 barrels per day, the sum of amount 1,000,000 Dollars ($).



c)



30,000 barrels per day, the sum of amount 2,000,000 Dollars ($).



d)



40,000 barrels per day, the sum of amount 2,500,000 Dollars ($).



e)



50,000 barrels per day, the sum of amount 3,000,000 Dollars ($).



f)



100,000 barrels per day, the sum of amount 4,000,000 Dollars ($).



Contractor shall pay to Petrobangla the following Production Bonuses for Gas after a

period of thirty (30) consecutive producing days, within thirty (30) days after the first

date when the total average daily production of Gas each field separately from the

Contract Area has been sustained at the rate of:

a)



75 MMCF/day, the sum of amount 500,000 Dollars ($).



b)



150 MMCF/day, the sum of amount 1,000,000 Dollars ($).



c)



225 MMCF/day, the sum of amount 2,000,000 Dollars ($).



d)



300 MMCF/day, the sum of amount 2,500,000 Dollars ($).



e)



375 MMCF/day, the sum of amount 3,000,000 Dollars ($).



f)



600 MMCF/day, the sum of amount 4,000,000 Dollars ($).



20.4 Contractor shall at the end of each Calendar Year, pay to Petrobangla at the rate of US

cents three (3) per Barrel of Contractor's Profit Oil and Profit Condensate and/or NGL and

US cents point four (0.4) per MCF of their profit Natural Gas received pursuant to Article

14.6 hereof towards contribution to research and development activities related to

Petroleum or any other activities as may be determined by Petrobangla.

20.5



The aforesaid Discovery and Production Bonuses and contribution towards research and

development activities shall not be recoverable as cost under Article 14.



20.6



During the Exploration and Development Period, Contractor shall pay to Petrobangla on

each anniversary of the Effective Date a Contract Service Fee of two hundred thousand

(200,000) Dollars and during the Production period Contractor shall pay to Petrobangla a

Contract Service Fee of three hundred thousand (300,000) Dollars in each Calendar Year.

This fee shall be recoverable as an Operating Cost under Article 14.4.



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ARTICLE 21

TITLE TO ASSETS AND DATA

21.1



Petrobangla shall become the owner of all assets acquired and owned by Contractor in

connection with Petroleum Operations carried out by Contractor as provided hereunder:

a)



Title to any immovable property purchased or acquired by Contractor shall pass to

Petrobangla as soon as it is purchased;



b)



Title to any fixed or movable asset: (a) purchased by Contractor outside

Bangladesh shall pass to Petrobangla when it is landed in Bangladesh and (b)

purchased in Bangladesh shall pass to Petrobangla as soon as it is purchased.



The provisions of this Article shall not apply to machinery and equipment or other

property, which is rented or leased to Contractor or which belongs to subcontractors,

Contractor's Affiliates, their respective employee or employees of Contractor, and these

may be freely exported from Bangladesh.

21.2



Contractor shall have the exclusive use of all assets mentioned under Article 21.1 for the

conduct of Petroleum Operations under this Contract as long as they are required

therefore. So long such assets are not exclusively needed by Contractor and their use by

others, designated by Petrobangla would not hinder or delay Petroleum Operations

hereunder, Contractor shall make such assets available for use by others so designated

by Petrobangla.



21.3



Title to all original geological, geophysical, geochemical, drilling, engineering, well logs,

production and other data obtained or compiled by Contractor as a result of Petroleum

Operations from time to time as well as interpretations and interpretative and derivative

data shall vest in Petrobangla. Contractor shall, however, be entitled to make use of all

such data, free of cost, for the purpose of Petroleum Operations under this Contract.



21.4



Whenever Contractor relinquishes any part of the Contract Area, all moveable property

located within the part of the Contract Area so relinquished may be removed to any part

of the Contract Area which has been retained. All immovable properties of whatever

nature in such relinquished area shall be handed over to Petrobangla free of charge.



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ARTICLE 22

PAYMENT AND CURRENCY

22.1



All payments, which this Contract obligates Contractor to make to Petrobangla, shall be

made in Dollars to a bank designated by Petrobangla. Contractor may make payment in

other currencies, if acceptable to Petrobangla.



22.2



Payments due to Contractor from Petrobangla shall be made in Dollars or any other

Currency acceptable to Petrobangla and Contractor at a bank inside or outside of

Bangladesh to be designated by Contractor, except that minimum 7.5% of invoiced

amount may be paid in Local Currency (converted from Dollar to Local Currency at the

exchange rate applicable on the date of payment) to meet local expenses of the

Contractor at any scheduled bank of Bangladesh as designated by Contractor.



22.3



Contractor shall have the right to receive, retain abroad and use without restriction the

entirety of proceeds received from its export sales of its share of Petroleum from the

Contract Area, as well as any proceeds paid for Petroleum sold by Contractor to meet

internal demand.



22.4



Contractor shall during the term of this Contract have the right without the imposition of

any control, except as otherwise imposed by the terms of this Contract, to make any

payments and to maintain and operate bank accounts outside Bangladesh in whatsoever

currency; Contractor shall also operate and maintain Dollar or other foreign currency

bank accounts within Bangladesh subject to applicable laws.



22.5



Except as otherwise provided, any payments, which Petrobangla is required to make to

Contractor and which Contractor is required to make to Petrobangla pursuant to this

Contract, shall be made within sixty (60) days following the end of the month in which

the obligation to make such payments arise.



22.6



In respect of other matters of foreign exchange arising in any way out of or in connection

with this Contract and not specifically mentioned herein, Contractor shall be entitled to

receive similar treatment as accorded to any other international Petroleum exploration or

production company carrying on business in Bangladesh.



22.7



Contractor is to pay abroad, in any currency it may desire, from its accounts outside

Bangladesh, without conversion into Taka, for the goods and services it may require or

any other expenses incurred for Petroleum Operations under this Contract.



22.8



Where applicable, the provisions of this Article shall also apply to the foreign subcontractors of Contractor working in Bangladesh.



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ARTICLE 23

BOOKS OF ACCOUNT, FINANCIAL REPORTING AND AUDIT

23.1



Contractor shall maintain in accordance with the Accounting Procedure in “Annex-B” and

accepted accounting practices generally used in the international Petroleum industry, at

its business office in Dhaka, books of account and such other books and records as may

be necessary to show the work performed under this Contract, the costs incurred and the

amount and value of all Petroleum produced and saved from the Contract Area.

Contractor shall keep such books of account and records in English and in Dollars.



23.2



Contractor shall furnish Petrobangla a monthly return showing the amount of Petroleum

produced and saved hereunder. Such return shall be prepared in the form required by

Petrobangla and shall be signed by the General Manager or by the Deputy General

Manager or a duly designated deputy, and delivered to Petrobangla within fifteen (15)

days after the end of the Month covered in the return.



23.3



Contractor shall prepare for each Calendar Year a balance sheet and profit and loss

statement reflecting its operations under this Contract. Accounting methods, rules and

practices applied for determining revenue and expense shall be consistent with sound

and usual international Petroleum industry practice and the laws of Bangladesh. Each

such balance sheet and profit and loss statement shall be certified by an independent

certified firm of chartered accountants acceptable to Petrobangla and shall be submitted,

along with the auditor's report, to Petrobangla within ninety (90) days after the end of

the Calendar Year to which it pertains.



23.4



Contractor shall supply in respect of each Quarter within thirty (30) days after the end of

that Quarter the Statements required by Section 1.4 of the Accounting Procedure.



23.5



Contractor shall also provide Petrobangla such other financial information, reports or

statements required by the Accounting Procedure.



23.6



Petrobangla shall have the right to inspect and audit Contractor's books, accounts and

records relating to Petroleum Operations under this Contract for the purpose of verifying

Contractor's compliance with the terms and conditions hereof. Such books, accounts and

records shall be available in Dhaka at all reasonable times for inspection and audit by

duly authorized representatives of Petrobangla, including independent auditors that may

be employed by it. Financial audits shall be carried out in accordance with the procedure

and within the times specified in the Accounting Procedure. Contractor shall bear the cost

of independent auditors, which shall be subject to Cost Recovery.



23.7



Petrobangla may require Contractor to engage Contractor's parent company auditors to

examine at Contractor's cost and in accordance with generally accepted auditing

standards, the books and records of Contractor's Affiliate to verify the accuracy and

compliance with the terms of this Contract in so far as a charge from the Affiliate of

Contractor (or of any entity comprising Contractor) is included directly or through

Contractor as a reimbursable cost under this Contract. Whenever audit of an Affiliate's

books is requested, Petrobangla shall specify in writing the item or items for which it

requires verification from such independent auditor. A copy of the independent auditor's

findings shall be delivered to Petrobangla within thirty (30) days after completion of such

audit.



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ARTICLE 24

SUPPLY OF INTERNAL DEMAND, STATE'S RIGHT OF REQUISITION AND

MARKETING OF PETROBANGLA'S SHARE OF OIL, CONDENSATE AND NGL

24.1



Out of the total quantity of Oil, Condensate and NGL to which it is entitled from the

Contract Area in a Calendar Year, Contractor shall be required to provide for the period

requested by Petrobangla up to Contractor's pro-rata share of Oil, Condensate and NGL

determined in accordance with Article 24.2 at fifteen percent (15%) discount over the

price calculated in accordance with Article 17 up to eighty percent (80%) of its share Oil,

Condensate and NGL received pursuant to Article 14.6 to meet internal demand, delivery

shall be made at the Measurement Point. Petrobangla shall pay Contractor therefore

abroad in Dollars within sixty (60) days after delivery.



24.2



Contractor's pro-rata share of internal demand requirements equals (a) total internal

demand in Bangladesh during the relevant Calendar Year, reduced by (b) all Oil,

Condensate and NGL produced in Bangladesh during such period to which Petrobangla is

entitled, with such remainder multiplied by the volume of Contractor's total entitlement to

Oil, Condensate and NGL from the Contract Area for such Calendar Year and the product

divided by the total amount of entitlements to Oil, Condensate and NGL of all contractors

producing in Bangladesh for such period.



24.3



If Contractor is required to sell more than the agreed percentage of its share of Oil,

Condensate and NGL as per Article 24.1 to meet internal demand, delivery shall be made

at Measurement Point, the sales price of such additional oil shall be the price calculated in

accordance with Article 17, and Petrobangla shall pay Contractor therefore abroad within

sixty (60) days after delivery in Dollars.



24.4



Recognizing that Contractor may have long term sales commitments, Petrobangla shall

provide Contractor with prior notice at least two (2) Quarters before exercising its right

under Article 24.1. On such notice Petrobangla shall specify the volume of Contractor's

entitlement required, the particular quality desired (where more than one Oil, Condensate

and NGL quality is produced in the Contract Area) and the duration for which such Oil,

Condensate and NGL shall be purchased. The Parties shall enter into an Oil, Condensate

and NGL sales agreement covering such purchase/sale containing normal commercial

terms prevailing in the International Petroleum Industry.



24.5



In the event Oil, Condensate and NGL purchased from Contractor pursuant to this Article

is incompatible with Petrobangla's needs, Petrobangla shall have the right to trade such

Oil, Condensate and NGL for a quality that meets its requirements.



24.6



In case of war or imminent apprehension of war or grave national emergency, the

Government may requisition all or a part of the Oil, Condensate and NGL production from

the Contract Area and require Contractor to maximize such production. The provisions of

Article 24.3 regarding delivery, price and payment shall also apply to any Oil, Condensate

and NGL so requisitioned from Contractor.



24.7



Petrobangla may at its option and upon at least ninety (90) days' prior notice require

Contractor to market all or part of Petrobangla's share of Oil, Condensate and NGL

produced from the Contract Area. In such event Petrobangla will enter into an

appropriate agency contract with Contractor.



24.8



As soon as possible after receipt of any such notice from Petrobangla under Article 24.7,

Contractor shall provide Petrobangla all information available to it concerning possible

purchasers of Petrobangla's Oil, Condensate and NGL price and other terms and

conditions of sale. With transmittal of such information Contractor shall specify the time

within which Petrobangla must determine whether or not Contractor should proceed with

such sale.



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24.9



Contractor shall not enter into any contract for sale of any part of Petrobangla's Oil,

Condensate and NGL from the Contract Area without Petrobangla's prior specific consent.



24.10 Petrobangla shall give instructions or consents as required under this Article in a timely

manner so as not to interfere with agreed storage and lifting arrangements.



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ARTICLE 25

EMPLOYMENT, TRAINING AND TECHNOLOGY TRANSFER

25.1



In the performance of Petroleum Operations under this Contract, Contractor shall have

the obligation to arrange for the systematic transfer of its technology, know-how and

experience to Petrobangla provided, however, where the use of the technology is

restricted by license or agreement with a third-party, Contractor is obligated to use its

best efforts to obtain approval from the third-party for its transfer.



25.2



a) Contractor shall offer a mutually agreed number of Bangladeshi nationals the

opportunity for on-the-job training and practical experience in Petroleum Operations

during the Exploration, Development and Production Period. Not later than six (6)

months after approval of the Development Plan, Contractor shall, in consultation with

Petrobangla, establish and implement training programs for staff positions including

skilled, technical, executive and management positions to improve their knowledge

and skill, and to replace in phased manner the expatriate personnel of Contractor. An

annual program for training and phasing in of Bangladesh nationals shall be

established by Contractor and shall be submitted for approval of Petrobangla along

with the annual Work Programs and Budgets referred to in Article 6 and Article 13.

Within thirty (30) days of the end of each Calendar Year, Contractor shall submit a

written report to Petrobangla describing the number of personnel employed, their

nationality, their positions and the status of training programs for Bangladesh

nationals. Contractor will also require its subcontractors to do the same.

b) During the Exploration and Development Period, Contractor shall expend a minimum

of fifty thousand Dollars ($50,000) each Calendar Year for training pursuant to Article

25.2(a). Following the Date of Commencement of Commercial Production, the

minimum expenditure for training pursuant to Article 25.2(a) in each Calendar Year

during the term hereof shall be one hundred thousand Dollars ($100,000). Such costs

shall be cost recoverable.



25.3



Pursuant to Article 25.2, Contractor shall associate and involve mutually agreed numbers

of the Petrobangla's or any of its company's personnel in the technological aspects of the

then ongoing Petroleum Operations without charge of a fee for such association or

involvement. Such aspects shall include:

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

(k)

(l)

(m)

(n)



25.4



seismic data acquisition, processing and interpretation;

computerized formation evaluation using well logs;

computerized analysis of geological data for basin analysis;

laboratory core analysis;

reservoir simulation and modeling;

geochemistry, including analytical methods, source rock studies, hydrocarbon

generation, modeling;

measurement-while-drilling techniques;

production engineering including optimization methods for surface and subsurface

facilities (e.g. nodal analysis and implementation);

reservoir engineering and management including gas and water injection;

enhanced oil recovery techniques;

gas production technology;

pipeline technology;

well design and drilling technology;

design of offshore facilities;



Within ninety (90) days following the Effective Date, Contractor shall, after consultation

with Petrobangla and taking into consideration the reasonable requirements of the

Petroleum Operations, submit an overall training program in the Exploration Period and



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the corresponding budget to Petrobangla for scrutiny and approval and upon approval by

Petrobangla implement the program. Contractor shall, before the commencement of the

Development Operations and the Production Operations, taking into consideration the

requirement and the economics of the Petroleum Operations in the Contract Area, submit

to Petrobangla for its scrutiny and approval, training programs and corresponding

budgets for the Development period and the Production period, and upon approval by

Petrobangla implement the program.

25.5



All the expenses and costs wherever incurred under this Article 25, except those under

Article 25.6, before the date of approval of the Development Plan for the first Oil Field

and/or Gas Field shall be charged to Exploration Costs, and those respectively incurred

before the date of commencement of Commercial Production of the first Oil Field and/or

Gas Field and after the date of commencement of Commercial Production of the first Oil

Field and/or Gas Field shall be charged respectively to Development Costs and Operating

Costs.



25.6



In addition to the training program pursuant to Article 25.4, during the Exploration and

Development Period, Contractor shall make within first month of each Contract Year, a

grant to Petrobangla of one hundred and fifty thousand Dollars ($150,000) per Contract

Year or part of the Year to be used for Petrobangla's own training program. Following the

Date of Commencement of Commercial Production, the training grant to Petrobangla in

each Contract Year shall be two hundred thousand Dollars ($200,000). This amount shall

not be subject to Cost Recovery.



25.7



Contractor shall also be required to establish a program, satisfactory to Petrobangla to

train personnel of Petrobangla and its affiliates, locally and abroad to develop the

capability of such personnel to effectively perform their duties. Such training program

shall cover both technical and management disciplines including but not limited to

geology, geophysics, engineering, project management, accounting, economics and legal

and shall include on-the-job training and participation in in-house seminars. Costs of such

training shall be cost recoverable.



25.8



Together with its submission of the yearly Work Program and Budget, Contractor shall

submit its manpower requirements including its organization chart. Contractor shall first

obtain written approval from Petrobangla for any positions to be filled by expatriate

personnel including from any third party before such expatriate personnel are employed

and shall minimize the employment of such personnel in conducting Petroleum

Operations by ensuring that expatriate personnel are employed only to occupy positions

for which it has not been possible to obtain Bangladesh personnel with the necessary

qualifications and adequate experience that are acceptable to both Parties. Contractor

shall review its expatriate requirements with Petrobangla annually. In addition to the

above, changes in the job functions of expatriate personnel shall require prior

Petrobangla approval.



[Note: This Article 25.8 will not be applicable for the Exploration Period of offshore

blocks]

25.9



Contractor shall consult with Petrobangla for the purpose of employing qualified

Bangladesh personnel in the conduct of Petroleum Operations.



25.10 Contractor shall undertake to train and employ qualified Bangladesh nationals in its

Petroleum Operations and, following the Date of Commencement of Commercial

Production, Contractor shall undertake the schooling and training of Bangladesh nationals

for staff positions, including administrative and executive management positions.

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ARTICLE 26

RESEARCH, RECORDS INSPECTION AND CONFIDENTIALITY

26.1



Contractor shall prepare and maintain at all times during the term of this Contract

accurate and current records of its operations hereunder. Contractor shall furnish

Petrobangla in conformity with Applicable Law or as Petrobangla may reasonably require

information and data concerning operations under this Contract.



26.2



Contractor shall save and keep for a reasonable period of time a representative portion of

each sample of cores and cuttings taken from drilling wells to be disposed of or

forwarded to Petrobangla in the manner directed by Petrobangla. All samples acquired by

Contractor for its own purpose shall be considered available for inspection at any

reasonable time by Petrobangla or its designee. Any such samples, which Contractor has

kept for a period of sixty (60) months without receipt of instructions to forward them to

Petrobangla, may be disposed of by Contractor at its discretion, after at least ninety (90)

days’ prior notice of intention to do so.



26.3



Unless otherwise specifically agreed by Petrobangla, in case of exporting any rock

samples outside Bangladesh, Contractor shall deliver to Petrobangla samples equivalent

in size and quality before such exportation.



26.4



Originals of technical data and records can only be exported with the prior written

permission of Petrobangla; provided, however, that magnetic tapes and any other data,

which are to be processed or analyzed outside Bangladesh, may only be exported if a

monitor or a comparable records is maintained in Bangladesh and provided that such

exports shall be repatriated to Bangladesh on the basis that they belong to Petrobangla.



26.5



Petrobangla through Petrobangla's duly representatives or employees shall have full and

complete access to all assets, records and data kept by Contractor and Operator. On

exercising such rights Petrobangla shall endeavor not to interfere unduly with

Contractor's operations.



26.6



Contractor at its own cost shall provide Petrobangla for its own use at the same time as

available to Contractor any and all data (including, but not limited to, geological and

geophysical report, logs and well surveys), reports, information, interpretation of such

data and all other information or work product pertaining to the Contract Area including

in particular all data the cost whereof was recorded by Contractor as a cost subject to

Cost Recovery pursuant to Article 14 hereof.



26.7



Either Party may disclose any such information to its employees, Affiliates, Consultants,

Sub-contractors or others to the extent required to efficiently conduct Petroleum

Operations provided it obtains from such individuals or entities prior to disclosure a

written confidentiality undertaking no less restrictive than the obligation of the disclosing

Party under this Article.



26.8



For purposes of obtaining new offers on relinquished portions of the Contract Area,

Petrobangla may show at any time any other entity data related to the relinquished area.

For purposes of obtaining offers on areas adjacent to or in the vicinity of the Contract

Area, Petrobangla may show any other entity data related to the Contract Area during

the term of this Contract, provided the age of these data at the time of showing is not

less than twenty-four (24) months old.



26.9



Except as provided in Article 26.7 and 26.8 all such data and information shall be

maintained by the Parties as strictly confidential and shall not be divulged during the

term of this Contract by either Party without prior written consent of the other Party,



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except to the extent required to comply with Applicable Law, unless such data become

part of the public domain. Such confidentiality undertaking shall continue to apply to

Contractor for a period of five (5) years after the termination of this Contract.

26.10 Contractor shall not trade or sell data pertaining to the Contract Area.

26.11 Contractor shall not publish a compilation of such data without the prior written consent

of Petrobangla.

26.12 At the end of the term of this Contract all original data shall be delivered by Contractor to

Petrobangla.

26.13 No public announcement or statement related to Petroleum Operations shall be issued or

made by Contractor without prior written approval from Petrobangla.



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ARTICLE 27

FORCE MAJEURE

27.1



Neither Party to this Contract shall be considered in default of the performance of any of

its obligations hereunder if the failure to perform or the delay in performing such

obligations results from events occurring in the circumstances set out hereunder:

a)



The performance of any obligations hereunder is prevented, hindered or delayed

because of any event or combination of events including but not limited to war,

earthquake, fire, flood, cyclone or other natural disaster, which could not be

foreseen and was beyond the control of such Party;



b)



Any such event or combination of events is the direct cause of preventing,

hindering or delaying of such Party's performance of its obligations hereunder and

such Party could not by exercise of reasonable care have avoided such effect of

those event(s); and



c)



When any such event or combination of events has occurred, such Party shall

take all reasonable actions to overcome any cause that prevents, hinders or

delays performance of its obligations and to minimize its consequences and shall

in so far as is practicable continue to perform its obligations hereunder.



27.2



Notice of any event of Force Majeure and the conclusion thereof shall forthwith be given

in writing to the other Party by the Party claiming Force Majeure specifying the cause of

Force Majeure.



27.3



If the Petroleum Operations in the Contract Area are partially or entirely suspended as a

result of the Force Majeure referred to in article 27.1 herein, the period of the Petroleum

Operations shall be extended by a period not exceeding the corresponding period of such

suspension. Within fifteen (15) days following the end of each Calendar Year, Contractor

shall report to Petrobangla in writing a total period of such suspension of the Petroleum

Operations caused by Force Majeure, if any, during the preceding Calendar Year.



27.4



Contractor shall resume Petroleum Operations immediately after the cessation of any

Force Majeure event.



27.5



Neither Party to this Contract shall be considered in default of the performance of any of

its obligations under this Contract if the failure to perform or the delay in performing such

obligations results from any events or combination of events arising out of any

overlapping claims in maritime areas, which event or combination of events directly cause

prevention, hindrance or delaying of such Party’s performance of its obligations under

this Contract.



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ARTICLE 28

TERMINATION

28.1



Government shall have the right to terminate this Contract upon giving Contractor sixty

(60) days’ written notice of its intention to do so and subject to Contractor not having

remedied its failure within this period, and to take without payment all property of

whatever nature of Contractor in Bangladesh or offshore of Bangladesh, if Contractor

shall:

a)



fail to make any of the payments prescribed in this Contract on the dates

prescribed for such payments;



b)



fail to fulfill the obligations provided for in Article 6 or a Development Plan hereof,



c)



fail to conform to the provision of an arbitration award under Article 30 hereof

within the period stipulated in such award;



d)



fail to declare a Commercial Discovery in the Contract Area within the time limits

specified in Article 4.3, or



e)



fail to resume Petroleum Operations within one hundred and twenty (120) days

after cessation of any Force Majeure event.



28.2



Contractor shall have the right to terminate by electing to relinquish the entire Contract

Area under Article 5.5 hereof.



28.3



If either Party to this Contract commits a material breach of this Contract, the other Party

to the Contract shall have the right to terminate this Contract:

a)



In the event that either Party declares its intention to terminate this Contract

pursuant to this Article 28.3, it shall give to the other Party notice in writing

specifying the particular material breach complained of and requiring the other

Party, within three (3) Months of such notice or within such extended time as the

Party giving notice may deem fair having regard to the circumstances of the

particular case ("the Specified Period"), to remedy the same or make reasonable

compensation to the complaining Party, as the case may be, in a manner

acceptable to that Party;



b)



If the Party receiving the notice shall fail to comply with said notice, the

complaining Party may, after the expiration of the Specified Period, terminate this

Contract provided, however, that where there is any dispute between the Parties

as to:



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i)



whether there has been any material breach by the Party to which notice

was given of any term, obligation, or condition of the Contractor, or



ii)



whether any breach is remediable or as to the manner in which it should

be remedied, either Party may, within the Specified Period, refer the

dispute to arbitration under Article 30, and neither Party shall exercise its

power of termination until the result of arbitration is known, and then

subject to the terms of the award. Provided, however, that the Party which

elects to refer the dispute to arbitration shall be diligent in prosecuting its

claim in the arbitration proceedings.



61



28.4



Upon the termination of this Contract by the Government or Petrobangla all rights

granted to Contractor hereunder shall terminate, subject and without prejudice to any

rights, which may have accrued to the Government and Contractor under this Contract,

and any obligation or liability imposed or incurred under this Contract prior to the

effective date of termination.



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ARTICLE 29

APPLICABLE LAW

29.



The validity, interpretation and implementation of this Contract shall be governed by the

law of the People's Republic of Bangladesh.



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ARTICLE 30

CONSULTATION, EXPERT DETERMINATION AND ARBITRATION

30.1



The Parties shall make their best efforts to settle amicably through consultation any

dispute arising in connection with the performance or interpretation of any provision of

this Contract and deadlocks in decisions of Joint Management Committee.



30.2



If any dispute mentioned in Article 30.1 has not been settled through such consultation

within ninety (90) days after the dispute arises either Party may by notice to the other

Party propose that the dispute be referred either for determination by a sole expert or to

arbitration in accordance with the provisions of this Article 30.



30.3



Following the notice given under Article 30.2, the Parties may, by mutual agreement,

refer the dispute for determination by a sole expert to be appointed by agreement

between the Parties.



30.4



As an alternative to the procedure described in Article 30.3, and if agreed upon by the

Parties, such dispute shall be referred to arbitration by an agreed Sole Arbitrator.



30.5



If the Parties fail to refer such dispute to a sole expert under Article 30.3 or to a Sole

Arbitrator under Article 30.4, within sixty (60) days of the signing of notice under Article

30.2, such dispute shall be referred to an arbitral tribunal for final decision as hereinafter

provided.



30.6



Arbitration pursuant to Article 30.5 shall be by an arbitration tribunal consisting of three

(3) arbitrators. The Parties shall each appoint an arbitrator and the two (2) arbitrators so

appointed shall designate a third arbitrator. If one of the Parties does not appoint its

arbitrator within sixty (60) days after the first appointment or if the two (2) arbitrators

once appointed, fail to appoint the third within sixty (60) days after the appointment of

the second arbitrator, the relevant appointment shall be made in accordance with the

United Nations Commission on International Trade Law Arbitration Rules (“UNCITRAL

Rules”).



30.7



The arbitrators shall be citizens of countries, which have formal diplomatic relations with

both the People's Republic of Bangladesh and any home country of the companies

comprising Contractor, and shall not have any economic interest in or economic

relationship with the Parties.



30.8



The proceedings before the sole arbitrator or the arbitration tribunal shall be governed by

the Bangladesh Arbitration Act 2001. In pursuance of section 25 of the Arbitration Act

2001, the Parties agree that the sole arbitrator or the arbitration tribunal shall conduct

the arbitration in accordance with the UNCITRAL Rules. However, if the above mentioned

arbitration rules are in conflict with the provisions of this Article 30 the provisions of this

Article 30 shall prevail.



30.9



The English language shall be the language used in the arbitral proceedings. All hearing

materials, statements of claim or defense, award and the reasons supporting them shall

be in English.



30.10 The place of arbitration shall be Dhaka unless another place is agreed by the Parties.

30.11 The absence or default of any Party to the arbitration shall not be permitted to prevent or

hinder the arbitration procedure in any way or at any stages.

30.12 Any arbitration award given pursuant to this Article 30 shall be final and binding upon the

Parties and any reference in this Contract to such an award shall include any

determination by a sole expert.

30.13 The right to arbitrate disputes under this Contract shall survive the termination of this

Contract.

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ARTICLE 31

NOTICES

31.1



Any notice and other communications required or given under this Contract shall be

deemed given when delivered in writing either by hand or through the mail, courier

service or by facsimile (fax), e-mail, appropriately addressed as follows, provided

however, that notices sent by facsimile or e-mail shall be confirmed by hard copies sent

by mail or courier.

TO PETROBANGLA (for itself and for the Government)

Attention:

i)



By Hand or Mail:



3 Kawran Bazar Commercial Area

Dhaka-1215, Bangladesh



ii)



By Facsimile:



(880-2) 9112400



iii)



By Email:



dpscpb@petrobangla.org.bd



TO CONTRACTOR

i)

ii)

iii)



By Hand or Mail: (to official designated under Article 10.2)

By Facsimile:

By Email:



31.2



Each of the Parties may change its address or addresses or representative for purpose of

receiving notices by giving at least ten (10) days prior written notice of the change to the

other Party.



31.3



All notifications and communications between the Parties shall be in English language.



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ARTICLE 32

ASSIGNMENT

32.1



Petrobangla shall have the right to assign any or all of its rights, interests and obligations

under this Contract to any company or enterprise under its control, provided that

assignment of any part of Petrobangla's rights, interests and obligations under this

Contract shall not relieve Petrobangla from its obligations under this Contract.



32.2



Contractor may with prior written approval of Petrobangla assign any or all of its rights,

interests and obligations under this Contract to any of its Affiliates. Such consent shall not

be unreasonably withheld. Any Affiliated assignee shall be as qualified as the assignor

with respect to its technical and financial competence. The assignor shall remain jointly

and severally liable with its Affiliate for all obligations under this Contract. The assignor

shall submit a valuation and all material terms of the assignment. If Petrobangla does not

object to or ask for any clarification as to a proposed assignment within sixty (60) days

after receiving notice thereof, it shall be deemed that Petrobangla has consented to said

assignment.



32.3



Subject to the prior written approval of Government, Contractor may assign any part or

all of its rights, interests and obligations under this Contract to a non-Affiliated third

Party. For consideration to be given to any such request for approval:



32.4



a)



all accrued obligations of the assignor deriving from this Contract must have been

duly fulfilled as of the date such request is made, or assignor and assignee must

jointly and severally guarantee fulfillment of any unfulfilled accrued obligations of

assignor;



b)



the proposed assignee or assignees must produce reasonable evidence to

Government of its or their financial and technical competence; and



c)



the instruments of assignment shall be submitted to Petrobangla and Government

for scrutiny and approval and shall include provisions stating precisely that the

assignee is bound by all covenants contained in this Contract and any

amendments thereto.



d)



the assignor shall submit a valuation and all material terms of the assignment.



In case of any change in the status of any entity comprising the Contractor or its share

holding resulting in a change in:

a)

b)



the control of the entity; or

its relationship with the company(ies) providing the guarantee under

Article 7.7;



the company shall seek the consent of the Government for assigning the Participating

Interest under the changed circumstances and the provision of this Article 32 shall apply,

mutatis-mutandis, for obtaining such consent. For the purpose of this Article 32.4

“control” means ownership by one company of more than fifty percent (50%) of the

voting securities of the other company; or the power to direct, administer and dictate

policies of the other company even where the voting securities held by such company

exercising such effective control in that other company is less than fifty percent (50%)

and the term “controlled” shall have a corresponding meaning.

32.5



(a) The Contractor shall submit the terms and conditions agreed between the

assignee(s) and assignor(s) before requesting the approval as per article 32.3 from

Government/ Petrobangla.



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(b) Any transfer or related taxes, stamp, duty, charges or other fees from any

assignment pursuant to the provisions of this Article shall be borne by Contractor.

32.6



The Government reserves the right to employ the services of an independent consultant,

at the cost of Contractor or any of the entities comprising Contractor, to be mutually

agreed by Government and such entity, to carry out an independent valuation of the

assignment transaction.



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ARTICLE 33

UNITIZATION

33.1



If at any time during the term of this Contract Petrobangla shall be satisfied that the

strata in this Contract Area or any part thereof form part of a single geological structure

or Petroleum Field the other parts of which are situated under separate contract or

contracts and Petrobangla shall consider that it is in the national interest in order to

secure the maximum ultimate recovery of petroleum and in order to avoid unnecessary

competitive drilling that the said Petroleum Field be worked and developed as a unit

cooperation by all persons, including the Contractor, whose contract extend to or include

any part thereof then the following provisions of this Article shall apply.



33.2



Upon notification by Petrobangla, Contractor shall cooperate with such other party as

may be specified in the said notice (hereinafter referred to as “the other Contractor”) in

the preparation of a scheme (hereinafter referred to as “a development scheme”) for the

working and development of the Petroleum Field as a unit by Contractor and the other

Contractor in cooperation and shall, jointly with the other Contractor, submit such

scheme for the approval of Petrobangla.



33.3



The said notice shall also contain or refer to a description of the area in respect of which

Petrobangla requires a development scheme to be submitted and shall state the period

within which such scheme is to be submitted for approval by Petrobangla.



33.4



If a development scheme is not submitted to Petrobangla within the period so stated or if

a development scheme so submitted is not approved by Petrobangla, Petrobangla may

itself prepare a development scheme in consultation with Contractor and Contractor shall

perform and observe all the terms and conditions thereof.



33.5



Where international boundaries are involved Government shall after consulting Contractor

be the party representing the Contract Area in the international unitization agreement

and the terms and conditions agreed thereto by Government (after consulting Contractor)

shall bind Contractor, and Contractor shall reimburse Government for all reasonable

expenses incurred by Government in regard to such agreements within thirty (30) days

after the submission of the unitization agreement to the Contractor. Such reimbursement

shall be deemed to be recoverable cost incurred by Contractor and shall be taken into

account for the purposes of calculating Cost Recovery Oil or Gas or Condensate under the

provisions of Article 14 as the case may be.



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ARTICLE 34

ABANDONMENT

34.1



STANDARDS OF ABANDONMENT

The Parties recognize that they must comply with their Abandonment obligations in

accordance with the relevant Bangladeshi law which is applicable or which may become

applicable and in the absence of specific Bangladeshi law such Abandonment obligations

to be undertaken or proposed to be undertaken shall be in accordance with good and

modern international practice. Accordingly the Parties agree as follows:-



34.2



CONTRACTORS' OBLIGATIONS

34.2.1 Responsibility:

During the term of this Contract, Contractor shall be responsible for Abandonment

of all Petroleum facilities. Contractor shall conduct Abandonment Operations in

accordance with the approved Abandonment Work Program and Budget ("AWP

and B") described in Article 34.3. Contractor's responsibility with respect to the

Petroleum facilities identified for Abandonment after the term of this Contract shall

be as set out in Articles 34.3 and 34.4 and fulfilled during the term of this Contract.

In relation to Abandonment as set out in this Article, Contractor shall continue to

be liable as provided by law, after the term of this Contract, for any damage,

claim, cost, or expense arising from the Petroleum facilities, due to causes which

have arisen or which have accrued during the terms of this Contract and which are

attributable to the willful misconduct or negligence of Contractor.

34.2.2 Abandonment Cost Recovery:

All cost incurred by Contractor for the Abandonment of Petroleum facilities during

the term of this Contract shall be cost recoverable subject always to the provisions

of Article 34.4.1



34.3 ABANDONMENT WORK PROGRAM AND BUDGET AND SUBSEQUENT REVIEW.

34.3.1 Annual Abandonment Work Program and Budget:

(a) Submission of annual Abandonment Work Program and Budget:

During the term of this Contract, Contractor shall submit for the review and

approval of Petrobangla a comprehensive annual AWP and B together with the

annual Work Program and Budget required pursuant to Article 13 for the year

immediately preceding the planned year of the first Commercial Production of

each Petroleum Field in the Contract Area.

(b) Detailed Plans and Cost Estimates:

The AWP and B shall describe in detail the Abandonment plan specified in the

Development Plan or any revision thereof, of such Petroleum Field. The AWP

and B shall contain detailed plans for the Abandonment of Petroleum facilities

and the itemized cost estimates for the implementation of such AWP and B.

(c) Abandonment Cost Estimates:

The itemized cost estimates shall be projected to reflect a realistic estimate of

the costs to be incurred at the time Abandonment Operations are to be

conducted or at the termination of this Contract whichever is earlier. The

projected cost estimates for each Petroleum Field which have been reviewed

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and approved by Petrobangla shall hereinafter be referred to as "Abandonment

Cost Estimates".

(d) Production Forecast and Estimates:

The AWP and B shall also set out the following:

(i)



The yearly production forecast profile for each Petroleum Field in Barrels

for Crude Oil, Condensate/NGL and Standard Cubic Feet for Natural Gas

and Barrels of Oil Equivalent for Crude Oil, Condensate/NGL and Natural

Gas based on estimated reserves to be developed through the Petroleum

facilities for the duration of this Contract.



(ii) The annual production forecast for the current year for each Petroleum

Field in Barrels for Crude Oil, Condensate/NGL and Standard Cubic Feet for

Natural Gas and Barrels of Oil Equivalent for Crude Oil, Condensate/NGL

and Natural Gas (hereinafter referred to as "Annual Production").

(iii) The estimated total remaining petroleum production after the current year

of such Petroleum Field in Barrels for Crude Oil, Condensate/NGL and

Standard Cubic Feet for Natural Gas and Barrels of Oil Equivalent for Crude

Oil, Condensate/NGL and Natural Gas based on estimated reserves to be

developed through the Petroleum facilities for the duration of this Contract

(hereinafter referred to as "Estimated Remaining Total Production").

(e) Implementation of Abandonment Operations:

Subject to Article 34.5, no Abandonment Operations during the term of this

Contract shall be carried out unless and until the relevant AWP and B has been

approved in writing by Petrobangla. Petrobangla shall notify Contractor of its

approval (whether conditional or not) or otherwise, of a proposed AWP and B

by 31st December of the year when such AWP and B is submitted. Petrobangla

may give notice to Contractor that a proposed AWP and B submitted by

Contractor is approved subject to such conditions as Petrobangla may specify

in such notice and may give Contractor notice that a proposed AWP and B is to

be revised either in whole or in part. In the event Contractor disagree with any

revision required by Petrobangla, Contractor shall within thirty (30) days notify

and substantiate to Petrobangla their reasons for disagreement.

Thereupon, Petrobangla and Contractor shall meet and discuss the revision

required by Petrobangla to resolve such differences. If the Parties fail to

resolve their differences within sixty (60) days from the date of the first

meeting held between the Parties to resolve such differences, Contractor shall

then incorporate the revisions required by Petrobangla into AWP and B under

this Article. Discussion held pursuant to this Article shall be treated separately

from discussions held between the Parties pursuant to Article 13.

(f) Revision of AWP and B:

Contractor shall on the first anniversary of the submission of the first AWP and

B and annually thereafter (or at such extended periods as may be agreed by

Petrobangla) during the term of this Contract, submit to Petrobangla revised

AWP and B(s) taking into account changes in the Development Plan, advances

in techniques/ technology and methods available for Abandonment of

Petroleum facilities, and Abandonment Cost Estimates.

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(g) Review and approval right of Petrobangla:

In reviewing and approving the AWP and B, Petrobangla shall have the right to

instruct Contractor not to abandon certain Petroleum facilities or to specify the

time and schedule for Abandonment within the term of this Contract.

34.4



ABANDONMENT FUND

34.4.1 Commencement of Payment into Abandonment Fund:

Contractor shall commence payment to Petrobangla into a fund to be hereinafter

referred to as the "Abandonment Fund" on the first anniversary of the First

Commercial Production (hereinafter referred to as "Commencement of Payment

into the Abandonment Fund").

If any Petroleum Field is brought into commercial production after the

commencement of Payment into the Abandonment Fund, then the payment into

Abandonment Fund for such Petroleum Field shall become payable on the next

anniversary of the commencement of payment into the Abandonment Fund.

It is the intent of the Parties that Contractor shall not have to be liable for both

payment into the Abandonment Fund and the actual cost for Abandonment of

Petroleum facilities carried out by Contractor during the term of this Contract. In

the event Contractor abandon Petroleum facilities during the term of this Contract

for which payments into the Abandonment Fund have already been made then

Contractor shall recover the payments already made into the Abandonment Fund

with respect to the said Petroleum Facilities in accordance with the priority as set

out below:(i)

(ii)



as provided in Article 34.4.2, failing which,

the Parties shall agree on a mutually acceptable arrangement to address

the situation.



Contractor's costs for the Abandonment of Petroleum facilities and / or payment

into the Abandonment Fund should not be recovered more than once under the

Cost Recovery Oil or Cost Recovery Gas or Cost Recovery Condensate/NGL as the

case may be.

34.4.2 Determination of amount of payment into the Abandonment Fund

Payment into the Abandonment Fund for any one Petroleum Field shall be determined by

using the following formula:

Payment into the

Abandonment Fund

Cumulative for any

one Petroleum

Field for any year



Annual Production MOEB

=



Estimated Remaining Total

Production MOEB+ Annual

Production MOEB



( Abandonment

X Estimates - Payment into

the Abandonment Fund)



Where;

(i) "Annual Production", "Estimated Remaining Total Production" and "Abandonment

Cost Estimates" are as defined in Article 34.3.1;

(ii)



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"Cumulative Fund Payment" means the total amount of payments made into the

Abandonment Fund for that Petroleum Field from the Commencement of Payment

into the Abandonment Fund up to the current year; and

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(iii)



"MOEB" means Million Oil Equivalent Barrels and for the purpose of this Article

34.4.2 only, a conversion factor of six (6) Billion Cubic Feet (BCF) equals one (1)

Million Oil Equivalent Barrels (MOEB) shall be used.



In determining the amount of the payment into the Abandonment Fund the cost estimate

of abandoning wells shall be excluded.

The Abandonment Fund of the Contract Area shall be the aggregate of the payments into

the Abandonment Fund made in respect of all the Petroleum Fields in the Contract Area.

In the event of early termination of this Contract pursuant to Article 28 hereof or upon

expiry of this Contract, Contractor shall make any outstanding payment into the

Abandonment Fund in full within a period of there (3) months from the date of notice of

early termination duly given or within three (3) months prior to the expiry of this Contract

as the case may be.

It is the intent of the Parties that the total payment into the Abandonment Fund made by

Contractor for any Petroleum Field shall equal the Abandonment Cost Estimates of such

Field at the time Abandonment Operations are to be conducted or at the termination of

this Contract whichever is earlier.

In the event that Petroleum from the Contract Area is produced through any of the

existing Petroleum facilities, whether or not such Petroleum facilities are located inside or

outside the Contract Area, the Parties shall discuss and agree on Contractor's contribution

to the Abandonment Fund of such Petroleum facilities.

34.4.3 Abandonment Fund: Cost Recovery

Abandonment Fund payments made by Contractor to Petrobangla shall be cost

recoverable.

34.4.4 Failure to make Payment into the Abandonment Fund:

In the event Contractor fail to make payment into the Abandonment Fund to

Petrobangla as stated in Article 34.4, Petrobangla shall have the right to terminate

this Contract in accordance with Article 28.

34.5



ABANDONMENT OF WELL / SALVAGE:

34.5.1 No Well(s) shall be abandoned and no cemented string or other permanent form

of casing shall be withdrawn from any Well which is proposed to be abandoned

without the prior written consent of Petrobangla. Consent shall not be

unreasonably withheld in respect of Wells which have become or are unproductive

and in such cases shall be given promptly with due regard to the cost of any delay.

Petrobangla may in any case require that no Well shall be plugged or any works be

executed for that purpose save in the presence of its officials, provided such

requirement does not unduly delay the agreed operations.

34.5.2 Any salvage operation from any abandoned Well shall be

reported to Petrobangla.



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accounted



for



and



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ARTICLE 35

EFFECTIVENESS AND AMENDMENT

35.1



This Contract shall come into effect on Effective Date.



35.2



Without prejudice to the Government's prerogative of Sovereign powers to act in the

public interest, this Contract shall not be amended or modified except by mutual

agreement in writing of the Government, Petrobangla and Contractor.



35.3



All Annexes to this Contract shall be regarded as integral part of this Contract. If there is

any inconsistency between the provisions of the Annexes and the Articles, the Articles

shall prevail.



35.4



The companies comprising Contractor signing this Contract agree to be jointly and

severally liable to the Government and Petrobangla for Contractor's obligations. As

between companies comprising Contractor their rights and obligations may be varied by

agreement between them with the approval from Petrobangla.



IN WITNESS WHEREOF the Government, the Petrobangla and the Contractor have signed this

Contract in quadruplicated originals in the English language on the date first hereinbefore stated.



SIGNED on behalf of the GOVERNMENT by:



(Name and designation)



SIGNED on behalf of the PETROBANGLA by:



(Name and designation)

SIGNED on behalf of the CONTRACTOR:



(Name and designation)



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ANNEX –A

DESCRIPTION AND MAP OF CONTRACT AREA



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ANNEX-B

ACCOUNTING PROCEDURE

SECTION 1

GENERAL PROVISIONS

1.1



Purpose:

The purpose of this Accounting Procedure is to set out the principles and procedures of

accounting to enable Petrobangla to monitor effectively the Contractor’s costs,

expenditure, production and income so that Petrobangla's entitlement to Profit Oil, Profit

Gas, and Profit Condensate can be accurately determined pursuant to the terms of this

Contract. Such purpose includes:

(a)



classify costs and expenditure and to define which cost and expenditure shall be

allowable for recovery;



(b)



specify the manner in which the Contractor's accounts shall be prepared and

approved; and



(c)



address other accounting related matters.



This Accounting Procedure is intended to apply to the provisions of this Contract and is

without prejudice to the computation of income tax under applicable provisions of

Bangladesh tax law.

This Contract establishes the provisions that govern the costs, which may be recovered

as Cost Recovery Oil, Cost Recovery Gas, and Cost Recovery Condensate. The provisions

of this Accounting Procedure requiring Contractor to maintain and report certain costs

does not mean that such costs are recoverable as Cost Recovery Oil, Cost Recovery Gas,

and Cost Recovery Condensate.

1.2



Definitions:

The definitions contained in Article 1 of this Contract shall apply to this Accounting

Procedure and have the same meaning. References herein to Section refer to Sections

hereof unless otherwise indicated.



1.3



Precedence of Documents:

In the event of any inconsistency or conflict between the provisions of this Accounting

Procedure and the provisions of this Contract, the provisions of this Contract shall prevail.



1.4



Statements:

(a)



Within sixty (60) days from the end of each Calendar Quarter, Contractor shall

submit to

Petrobangla:

i)



a Statement of Expenditure classified in accordance with Sections 3, 4 and 6

hereof containing the information required by Section 12; and



ii) an Inventory Statement containing the information required by section 8.

(b)



Consolidated annual summaries of these statements shall be provided to

Petrobangla, within sixty (60) days after the end of the relevant year.



(c)



Commencing with the Calendar Quarter in which Commercial Production of

Petroleum is initiated in the Contract Area, Contractor shall also submit to

Petrobangla within sixty (60) days from the end of each Calendar Quarter:



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(d)



1.5



i)



a Statement of Receipts in accordance with Section 13,



ii)



a Cost Recovery Statement in accordance with Section 11;



iii)



a Production Statement in accordance with Section 9; and



a Value of Production Statement in accordance with Section 10 consolidated

annual summaries of each of these Statements shall be provided to Petrobangla

within sixty (60) days after the end of the relevant year.



Books of Account:

Contractor's books for Petroleum Operations shall be kept on the cash basis in Dollars.

Such books of account shall be kept in Dhaka, in the English language and in accordance

with internationally accepted accounting principles as published by the International

Accounting Standards Committee, from time to time and consistent with modern

petroleum industry practices and procedures and the provisions of this Contract and this

Accounting Procedure. In addition for information purposes only Contractor will maintain

accounts on the accrual basis in United States Dollars. All Dollar expenditures shall be

charged in the amount expended. All expenditures in Bangladesh currency shall be

translated into Dollars in conformity with Article 22 of this Contract, and all other

non-Dollar expenditures shall be translated into Dollars at the documented cost of

purchase. Contractor shall maintain a record and document of the cost of purchase.

Contractor shall maintain original record and documentation of the exchange rates used

in translating Bangladesh currency or other non-Dollar expenditures to Dollars. Any

realized gains or losses from the exchange of currency in respect of Petroleum

Operations shall be Credited or charged to the accounts. Accounts should show current

month as well as year to date amounts.



1.6



Revision of Accounting Procedure:

This Accounting Procedure may be revised from time to time by written agreement of

Petrobangla and Contractor.



1.7



Detailed outline of Accounting System:

Within ninety (90) days after the Effective Date, Contractor shall present to Petrobangla

for approval, a proposed outline of charts of accounts, detailed classifications of costs,

detailed nature of cost centers (as specified in Section 4 hereof), to be used and

operation records and reports to be established in accordance with this Contract and this

Accounting Procedure. Within one hundred and eighty (180) days from the Effective Date

of this Contract, the Contractor and Petrobangla shall agree on the outline of charts of

accounts, records and reports which shall also describe the basis of the accounting

system and procedures to be developed and used under this Contract. Following such

agreement, Contractor shall promptly prepare and provide Petrobangla with it’s:



(d)



(a)



comprehensive charts of accounts and a soft copy of the accounting system that

the Contractor is using;



(b)



organization chart, showing recording and reporting functions;



(c)



manuals to be used in implementing this Accounting Procedure, and



an agreed detailed budget format which should be prepared in consultation with

Petrobangla.



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1.8



Procurement Procedure:

Within ninety (90) days after the Effective Date, Contractor shall furnish to Petrobangla

for approval, the procurement procedures to be followed thereafter by Contractor for

obtaining materials, equipment and services. Such Procurement Procedure should follow

Section 16.



1.9



Late Payment:

If a Party fails to make any payment due under the provisions of this Contract within the

time specified for such payment, then such overdue payment shall bear interest at a rate

equal to the London Inter-Bank Offered Rate (LIBOR) as per Article 1.48 from the date of

overdue payment until such overdue payment is made.



1.10



Non-Duplication of Charges and Credits:

Notwithstanding any provision to the contrary in this Accounting Procedure, it is the

objective of the Parties that there shall be no duplication of Charges or credits to the

accounts under this Contract.



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SECTION- 2

CLASSIFICATION, DEFINITION AND ALLOCATION OF COSTS AND EXPENDITURES

2.1



Segregation of Costs

Costs shall be segregated in accordance with the purposes for which such expenditures

are made. All costs and expenditures allowable under Section 3 hereof relation to

Petroleum Operations, shall be classified, defined and allocated as set out below in this

Section.



2.2



Exploration Costs

Exploration Costs are all direct and allocated indirect expenditures incurred in the search

for Petroleum in an area which is, or was at the time when such costs were incurred part

of the Contract Area, including expenditures incurred in respect of :



2.3



2.2.1



Aerial, geophysical, geochemical, paleontological, geological, topographical and

seismic surveys, analysis and studies and their interpretation.



2.2.2



Bore hole drilling and water Well drilling.



2.2.3



Labor, materials, supplies and services used in drilling Wells with the object of

finding Petroleum or in drilling appraisal Wells provided that if such Wells are

completed as producing Wells or Injection Well for enhancing Oil recovery, the

costs of completion thereof shall be classified as Development Costs.



2.2.4



Facilities used solely in support of the purposes described in Sections 2.2.1, 2.2.2

and 2.2.3 above, including access roads, all separately identified.



2.2.5



Any Service Costs and General and Administrative Costs directly incurred on

exploration activities.



2.2.6



Geological and geophysical information purchased or acquired in connection with

Exploration Operations.



Development Costs

Development Costs are all direct and allocated indirect expenditures incurred with respect

to the development of discoveries within the Contract Area including expenditures

incurred on account of :

2.3.1



Geological and Geophysical information acquired in connection with Development

Operations.



2.3.2



Drilling of Development Wells, whether these Wells are dry or producing and

drilling of Wells for the injection of water or Gas to enhance recovery of

Petroleum.



2.3.3 Completion of Exploration Wells by way of installation of casing or equipment or

otherwise or for the purpose of bringing a Well into use as a producing Well or as

a Well for the injection of water or Gas to enhance recovery of Petroleum.

2.3.4

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Purchase, installation or construction of production, transport and storage

facilities for production of Petroleum, such as pipelines, flow lines, production and

78



treatment units, wellhead equipment, subsurface equipment, enhanced recovery

systems, offshore and onshore platforms, export terminals and piers, harbors and

related facilities and access roads for production activities.



2.4



2.3.5



Engineering and design studies for facilities referred to in Section 2.3.4.



2.3.6



Any Service Costs and General and Administrative Costs directly incurred in

Development Operations.



Production Costs

Production Costs are expenditures incurred for Production Operations after the start of

production from the Field (which are other than Exploration and Development Costs). The

balance of General and Administrative Costs and Service Costs not allocated to

Exploration Costs or Development Costs shall be allocated to Production Costs.



2.5



Service Costs

Service Costs are direct and indirect expenditures incurred in support of Petroleum

Operations in the Contract Area, including expenditures on warehouses, piers, marine

vessels, vehicles, motorized rolling equipment, aircraft, fire and security stations,

workshops, water and sewerage plants, telecommunication, power plants, housing,

community and recreational facilities and furniture and tools and equipment used in these

activities. Service Costs in any Year shall include the costs incurred in such Year to

purchase and/or construct the said facilities as well as the annual costs of maintaining

and operating the same, each to be identified separately. All Service Costs shall be

regularly allocated as specified in Sections 2.2.5, 2.3.5 and 2.4 to Exploration Costs,

Development Costs and Production Costs and shall be separately shown under each of

these categories. Where Service Costs are made in respect of shared facilities, the basis

of allocation of costs to Petroleum Operations hereunder shall be specified.



2.6



General and Administrative Costs

General and Administrative Costs are expenditures incurred on general administration

and management primarily and principally related to Petroleum Operations in or in

connection with the Contract Area, and shall include:

2.6.1



main office, field office and general administrative expenditures in Bangladesh

including supervisory, accounting and employee relations services;



2.6.2



an annual overhead charge for services rendered by the parent company or an

Affiliate to support and manage Petroleum Operations under this Contract, and for

staff advice and assistance including financial, legal, accounting and employee

relations services, but excluding any remuneration for services charged separately

under this Accounting Procedure, provided that:(h) for the period from the Effective Date until the date on which the first

Development Plan under this Contract is approved by the Government, this

annual charge shall be the Contractor’s verifiable expenditure but shall in no

event be greater than the following percentages of the total Yearly Expenditure

incurred during the Contract Year in or in connection with the Contract Area

and qualifying for recovery pursuant to Section 3 herein:



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Yearly Expenditure in any

Contract year (in million

US$)

0-2

over 2-5

over 5

(ii)



2.6.3



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Annual overhead charge

3%

2% of Yearly Expenditure in excess of

US$ 2 million.

1% of Yearly Expenditure in excess of

US$ 5 million



from the date on which the first Development Plan is approved, the charge

shall be at an amount or rate to be agreed on between the Parties and

stated in the Development Plan.



All General and Administrative Costs shall be regularly allocated as specified in

Sections 2.2.5, 2.3.5 and 2.4 to Exploration Costs, Development Costs and

Production Costs respectively, and shall be separately shown under each of these

cost categories.



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SECTION 3

COSTS AND EXPENDITURES

3.1



Classification of Costs and Expenditures:

Costs and expenditures shall be accounted for in accordance with the following

classifications:

a)



Surface Use Rights:

All direct costs attributable to the acquisition, renewal or relinquishment of surface

use rights for areas required by Contractor for installations and operations forming

part of Petroleum Operations.



b)



Labor:

(i) Actual salaries and wages of Contractor's employees directly engaged within

the Contract Area in Bangladesh in the Petroleum Operations under this

Contract. Salaries and wages paid to employees temporarily assigned to and

employed in such activities shall be allocated on the basis of approved time

sheets or other methods approved by Petrobangla.

(ii) Actual costs for work performed at hourly rates by employees of Contractor's

Affiliates, whose services are not covered by Section 3.1(f)(i) or (ii) hereof,

attributable to time worked within or outside Bangladesh on Petroleum

Operations under this Contract and documented by time sheets format of

which shall be approved by Petrobangla. Prior approval from Petrobangla will

be required for any off-site technical work.

(iii) Cost of overseas service premiums and living and housing allowances of

expatriate employees.

(iv) Paid bonuses, overtime and other customary allowances applicable to salaries

and wages of national employees chargeable under Section 3.1 (b)(i) hereof

(v) Expenditures or contributions made pursuant to law or assessments imposed

by Government, which are applicable to labor costs chargeable under Section

3.1 (b)(i) hereof.



c)



Employee Benefits:

(i)



Cost of Contractor's established plans and policies (copies of which will be made

available to Petrobangla) for employee group life insurance, social security,

hospitalization, pension, retirement, stock purchase, thrift, expatriate tax

equalization and dependent education.



(ii) Severance pay to national employees charged at a fixed rate applied to the

national payroll, which will equal an amount equivalent to the maximum liability

for such severance payments under applicable Bangladesh law.

d)



Materials, Equipment & Supplies:

(i)



Material, equipment and supplies purchased or furnished by Contractor valued

in accordance with the provisions of Section 5 hereof.



(ii) Material and equipment rented or leased charged at actual cost.

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e) Transportation:

(i)



Transportation of equipment, materials, and supplies necessary for the conduct

of Contractor's activities under this Contract.



(ii) Business travel and transportation expenses to the extent covered by

established policies of Contractor, as incurred and paid by or for expatriate and

national employees in the conduct of Contractor's business.

(iii) Employee relocation costs for expatriate and national employees to the extent

covered by established policy of Contractors. Transportation costs chargeable

for employees and their families incurred as a result of a transfer from

Bangladesh to a location other than the point of origin shall not be charged as a

cost under this Contract.

f)



Services:

i)



Outside Services:

The cost of consultants, contract services and utilities procured from third

parties.



ii)



Affiliated Services:

Cost of services, including laboratory analysis, drafting, geophysical treatment

and interpretation, geological interpretation, engineering and data processing,

performed by Contractor's Affiliates in facilities inside or outside Bangladesh that

are not covered by Section 3.1 (b)(ii) or 3.1(k) hereof. Use of an Affiliate's

wholly owned equipment shall be charged at a rental rate commensurate with

the cost of ownership and operation, but not in excess of competitive rates

prevailing in South and Southeast Asia at the time of usage. Other services

performed by an Affiliate shall be charged at a negotiated contract rate not

exceeding the then prevailing rate for similar services performed in an Armlength transaction on a competitive basis.

Cost of professional and administrative services provided by Affiliates for the

direct benefit of Petroleum Operations, including but not limited to services

related to exploration, production, legal, financial, insurance, accounting and

computer which the Contractor may use if prior approval is given by

Petrobangla.



g)



Damages and Losses:

All costs or expenses necessary to replace or repair damages or losses incurred by

fire, flood, storm, theft, accident or any other cause not controllable by Contractor

through the exercise of reasonable diligence and not resulting through Contractor's

failure to file timely claims and to diligently pursue such against the insurers.

Contractor shall furnish Petrobangla written notice of damages or losses incurred in

excess of ten thousand Dollars ($ 10,000) per occurrence, as soon as practicable

after report of the same has been received by Contractor.



h)



Insurance and Claims:

The cost of insurance, including public liability,

including the coverage against liabilities of

outsiders as may be carried by Contractor,

regulations of Bangladesh as Petrobangla



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property damage and other insurance

Contractor to its employees and/or

or required by the laws, rules and

and Contractor may agree upon.

82



Contractor shall not provide such insurance through Affiliates or self-insure for a

premium without prior specific written approval of Petrobangla. The proceeds of any

such insurance or claim collected shall be credited against the appropriate

expenditure account and reduce recoverable costs. If no insurance is carried for a

particular risk, all related actual expenditures incurred and paid by Contractor in

settlement of any and all losses, claims, damages, judgments and any other

expenses, including legal services, shall be charged to the appropriate expenditure

account, provided such loss, claim or damage did not result from Contractor's failure

to operate in accordance with the standards required by this Contract.

i)



Field Offices, Camps, Warehouses, Miscellaneous Facilities:

Field offices camps and other facilities such as shore bases, warehouses, water

systems, and road or other transportation systems.



j)



Legal Expenses:

All costs and expenses of litigation, or legal services otherwise necessary or

expedient for the protection of the Contract Area, Petroleum Operations and facilities

against third party claims, including outside attorney's fees and expenses, together

with all judgments obtained against the Parties or any of them on account of the

operations under this Contract, and actual expenses incurred by a Party in securing

evidence for the purpose of defending against any action or claim prosecuted or

urged in connection with the operations or the subject matter of this Contract. In the

event actions or claims affecting the interests hereunder shall be handled by the

legal staff of Contractor or its Affiliates the cost of such personnel shall be

chargeable under Section 3.1 (b)(i) or (ii) hereof.



k)



General Expenses:

Cost of staffing and maintaining Contractor's head office in Bangladesh and other

offices established in Bangladesh (excepting field offices), excepting salaries of

employees of Contractor or an Affiliate, who are assigned to the various activities

under this Contract, which will be charged as provided in Section 3.1 (b) hereof.



l)



Administration Overhead:

i) Contractor's administrative overhead outside Bangladesh applicable to the

Petroleum Operations under this Contract prior to the date of the first Declaration

of Commercial Discovery in the Contract Area shall be charged in accordance with

the following rates with respect to all expenditures allowable for Cost Recovery

other than administrative overheads:

Three percent(3%) of the first two million Dollars ($ 2,000,000) paid during the

Calendar Year; two percent(2%) of the subsequent three million Dollars ($

3,000,000) of such expenditures paid during the Calendar Year; and one per cent

(1%) of amounts exceeding five million Dollars ($ 5,000,000) of such

expenditures paid during the Calendar Year.

ii) Contractor's administrative overhead outside Bangladesh applicable to Petroleum

Operations under this Contract after the date of the first Declaration of

Commercial Discovery in the Contract Area shall be one quarter of one percent

(0.25%) of all expenditures allowable for Cost Recovery during the Calendar Year

other than administrative overhead.



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iii) Contractor shall make provisional quarterly charges to the accounts based on the

above rates.

iv) Such overhead charges shall be considered full compensation to Contractor's

Affiliate wherever located for the following type of assistance provided:

A) Executive -



Time of executive officers above the rank of regional

exploration manager.



B) Treasury -



Financial and exchange problems and payment of invoices.



C) Purchasing and Forwarding - Procuring materials, equipment and forwarding

supplies.

D) Exploration and Production - Directing, advising and controlling the entire

project.

E) All indirect services of Contractor's Affiliates not chargeable as direct charges

under Sections 3.1 (b) or 3.1 (f) hereof, provided by other departments such

as legal, engineering, employee relations and personnel recruiting,

administrative, accounting and audit, which contribute, time, knowledge and

experience to the operation.

m)



Taxes

All taxes, duties, levies or any other imposts paid in Bangladesh by Contractor

under Article 19 of this Contract other than Corporate income tax.



n)



Bank Charges and Interest

Routine bank charges for transfers of funds and currency exchange.

Interest payable to a bank or lending institution or group thereof for any loan taken

out by Contractor to finance any Development (a "Development Loan"), subject to

the amount of the Development Loan being approved by Petrobangla and subject to

the following conditions:



o)



(i)



the rate of interest payable on the Development Loan shall be competitive in

comparison to rates generally available in Bangladesh or, failing which, in the

surrounding region for development loans for comparable projects;



(ii)



interest shall not be recoverable to the extent that it is payable on any loan, or

part thereof, which relates to Exploration or Appraisal operations; and



(iii)



where a Development Loan does not exceed fifty percent (50%) of the overall

costs of the Development, interest thereon shall be a recoverable cost in full;

where any Development Loan exceeds said fifty percent (50%) then interest

thereon shall be recoverable only insofar as it relates to that fifty percent

(50%).



Other Expenses

Any justified costs, expenses or expenditures, other than those which are covered,

dealt with or excluded by this Section 3, incurred by Contractor for the proper

conduct of the Petroleum Operations under approved Work Programs and Budgets.



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3.2



For the purpose of Cost Recovery all recoverable costs shall be further

classified as follows:

a)



Operating Expenses after first Commercial Production:

All Operating Expenses incurred and paid after first Commercial Production from

the Contract Area shall be recoverable in the Calendar Year in which such

expenses are incurred and paid.



b)



Capital Expenditures under Development Plan:

All costs incurred and paid by Contractor under an approved Development Plan

will be recovered either in the Calendar Year in which the expenditure was

incurred and paid (if incurred after first Commercial Production) or the Calendar

Year in which the first Commercial Production occurs (if incurred prior to first

Commercial Production).



c)



Exploration Costs and other costs not included under a) and b) above:

Costs relating to Exploration and Appraisal Programs before first Commercial

Production as well as all other expenses related to Petroleum Operations, not

directly related to items (a) or (b) above, but incurred and paid prior to first

Commercial Production, will be recovered at the rate of twenty-five per cent

(25%) per year on a straight-line basis, commencing in the Calendar Year in

which Commercial Production commences in the Contract Area.

Costs relating to Exploration and Appraisal Programs after first Commercial

Production as well as other expenses not directly related to items (a) or (b) above

will be recovered in the Calendar Year in which such expenses are incurred and

paid.



d)



3.3



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To the extent that in a Calendar Year costs or expenses recoverable under Section

3.2 a), b) or c) related to the Contract Area exceed the value of all Cost Recovery

Petroleum from the Contract Area for such Calendar Year, the excess shall be

carried forward for recovery in the next succeeding Calendar Year until fully

recovered, but in no case after expiry of this Contract.

(a)



For the purpose of cost recovery, all recoverable costs shall be recoverable

from the date such costs are incurred in accordance with this Contract and

the Accounting Procedure.



(b)



The chart of accounts shall be organized so that goods and services which

have been procured from Bangladeshi suppliers can be identified.



(c)



Use of an Affiliate's services or wholly owned equipment shall be charged

in accordance with the principles set out in Section 3.1 f(ii) herein.



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SECTION 4

COST CENTERS

4.1



In order to provide for an efficient control of the Recoverable Costs under this Contract,

all costs must be presented for Petrobangla's review on the basis of Cost Centers. The

detailed division shall be agreed upon pursuant to Section 1.7 hereof. However, as a

minimum the following divisions shall be established:

a)



The costs shall be allocated per area in the following manner:

i)



Exploration Area



ii)



each individual Production Area



iii) costs that cannot be related to a certain area.

b)



The costs shall be allocated per Petroleum Operations in the following manner:

i)



Exploration Operations, sub-divided further into:

A)



aerial, geological, geochemical, paleontological, topographical and other

surveys



B)



each individual seismic survey



C)



each individual Exploratory or Appraisal Well



D) infrastructure (roads, airstrips, etc.)



ii)



E)



support facilities (warehouses etc.), including an allocation of common

service costs (costs related to various Petroleum Operations)



F)



administrative overhead and general expenses



G)



other costs.



Development Operation, sub-divided further into:

A)



aerial, geological, geochemical, geophysical and other surveys



B)



each individual Development Well



C)



gathering lines



D)



field facilities



E)



pipelines



F)



tank farms and other storage facilities for Petroleum



G)



infrastructure within Contract Area



H) support facilities, including an allocation of common service costs (costs

related to various Petroleum Operations)

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I)



an allocation of the Administrative Overhead and General Expenses



J) other costs.

iii) Production Operations, sub-divided in the same manner as Development

Operations.

c)



Costs shall be allocated to Oil, Natural Gas, Condensate and NGL where all are

being produced and saved. The allocation shall be in accordance with the

following principles:

i) Where costs are exclusively related to either Oil or Natural Gas or Condensate

or NGL such costs shall be allocated completely to the respective fuel;

ii) Where costs can be attributed to all Oil, Natural Gas, Condensate and NGL the

costs shall be allocated on a basis agreed between the Parties in

accordance

with good practices in the international petroleum industry.



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SECTION 5

VALUATION OF MATERIALS

5.1



Materials either charged to the accounts pursuant to Section 4 hereof or credited to the

accounts pursuant to Section 6 hereof shall be valued in accordance with the principles of

this Section.



5.2



Purchases:

Material, equipment and supplies required shall be purchased by Contractor directly from

the

supplier, whenever practicable and in such event, shall be charged at the price paid by

Contractor after deduction of all discounts actually received.



5. 3



Material furnished by Contractor:

Materials provided by Contractor from Contractor's or Contractor's Affiliate's stocks

outside Bangladesh at prices specified in (a) and (b) below:

a)



New material (Condition "A")

New material transferred from Contractor's Affiliate's warehouses or other

properties shall be priced at net cost provided that the cost of material

supplied is no higher than prices in South and South-East Asia for material

of similar quality, supplied on similar terms, prevailing at the time such

material was supplied.



b)



Used material (Conditions "B" and "C")

1)



Material which is in sound and serviceable condition and is suitable for

reuse without reconditioning shall be classified as Condition "B" and

priced at seventy-five percent (75%) of allowable value of new

material as defined in Section 5.3(a) above.



2)



Material which cannot be classified as Condition "B" but which

i)



after reconditioning will be further serviceable for original function

or;



ii)



is serviceable for original function but substantially not suitable for

reconditioning shall be classified as Condition "C" and price at fifty

percent (50%) of the allowable price of new material as defined in

Section 5.3(a) above. The cost of reconditioning shall be charged

to the reconditioned material provided that the value of Condition

"C" material plus the cost of reconditioning do not exceed the

value of Condition "B" material.



c)



Material, which cannot be classified as Condition "B" or "C", shall be priced

at a value commensurate with its use.



d)



Tanks, buildings and other equipment involving erection costs shall be

charged at applicable percentage of knocked down allowable new price.



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SECTION 6

RECEIPTS

6.1



Credits in favor of Contractor as a result of the Petroleum Operations or incidental thereto

shall be credited to the respective accounts and including credits in the Statement of

Expenditures. Such credits shall include the following transactions:

a)



Claims Recovery

The proceeds of any insurance or claim in connection with the Petroleum

Operations or any assets charged to the accounts.



b)



Third Party Revenues

Revenues received from third parties for the use of property or assets, for the

delivery of any services by Contractor or for any information or data.



c)



Adjustments

Any discounts or adjustments received by Contractor from the suppliers/

manufacturers or their agents in connection with goods purchased or defective

equipment or materials, the costs of which were previously charged to the

accounts.



d)



Refunds

Rentals, refunds or other credits received by Contractor, which apply to any

charge, which has been made to the accounts.



e)



Sale or Export of Materials

In case Contractor sells or exports or transfers any material to Affiliates or other

entities or persons, the value of such transfers shall be credited to the accounts,

the costs of which were previously charged to the accounts.



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SECTION 7

NON-RECOVERABLE COSTS

7.1



The following costs shall be non-recoverable for purpose of Cost Recovery under Article

14 of this Contract:

a)



except as permitted under Section 3.1(n) above, interest or financing charges on

investment in the Contract Area; for the avoidance of doubt, such charges in

respect of Exploration and Appraisal Operations shall be non-recoverable.



b)



costs for which original records do not exist or are not correct in any material

respect;



c)



costs incurred before the Effective Date of this Contract that were not incurred

within the relevant Work Program and Budget, or that are of a category not

permitted by the

Contract or the Accounting Procedure;



d)



costs of goods and services in excess of the international market price for goods

or services of similar quality supplied on similar terms prevailing in

South and South East

Asia at the time such goods or services were contracted by Contractor;



e)



charges for goods and services, which are not in accordance with the relevant

agreement with the sub-contractor or supplier;



f)



charges for goods in excess of the amount allowed by Section 5 hereof and/or for

which the condition of the material does not tally with their prices;



g)



any costs not reasonably required for the Petroleum Operations;



h)



costs incurred beyond the measurement point;



i)



income taxes and other taxes incurred outside Bangladesh;



j)



amounts paid under Articles 20.1 through 20.4 and 25.6 of this Contract,



k)



costs of expert determination or arbitration pursuant to Article 30 of this Contract;



l)



fines and penalties imposed by any authority.



m)



donations or contributions, unless previously approved by Petrobangla;



n)



any costs not included in approved work program and budget, unless resulting

from an emergency as mentioned in Article 2.7 of this Contract.



o)



income tax as per Article 19 paid by the Contractor.



p)



the emergency expenditure incurred (as per Article 2.7) but not reported to

Petrobangla within the stipulated time.



q)



expenditure in respect of any financial transaction to negotiate, float or otherwise

obtainor secure funds for Petroleum Operations including but not limited to

interest, commission, brokerage and fees related to such transaction as well as

exchange losses on loan or other financing whether between Affiliates or

otherwise;



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r)



Expenditure incurred in obtaining, furnishing and maintaining the guarantees

required under this Contract and any other amount spent on indemnities with

regard to non- fulfillment of contractual obligations;



s)



costs related to administrative overhead outside of Bangladesh for the following

types of assistance (which are considered to be fully compensated by the

appropriate overhead charges detailed in Section 3.1(l)):

Executive:



time of executive officers above the rank of regional exploration

manager;



Treasury:



financial and exchange problems and payment of invoices;



Purchasing and Forwarding: procuring and forwarding equipment and supplies;

and

Exploration and Production: directing, advising and controlling the entire project;

t)



costs of materials and services in excess of the values established under the

principles in Section 3.1 f) and Section 5. Costs shall include such costs as export

broker’s fees, transportation charges, loading and unloading fees, import duties,

surcharges and license fees associated with the procurement of materials and

equipment, and applicable taxes;



u)



costs involved in creation and management of any partnership or joint venture

arrangement, or costs of acquisition of an interest in this Contract or the Contract

Area;



v)



amounts paid with respect to non-fulfillment of a contractual obligation;



w)



costs incurred which:

(i)



are covered by insurance for Included Risks;



(ii)



are a result of failure to insure where insurance is required pursuant to the

Contract;



(iii)



are receivable for any insured loss that is an Included Risk and which was

not claimed by Contractor under its policies of insurance; or



(iv)



would have been receivable by Contractor where Contractor has selfinsured with Petrobangla's approval within Section 3.1(h) hereof;



x)



costs and expenditure incurred as a result of willful misconduct or negligence of

Contractor;



y)



expenses of the members of the Joint Management Committees (JMC) and Joint

Review Committees (JRC);



z)



any loss or expenses due to non-compliance with this Contract including its

Annexes



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SECTION 8

INVENTORIES AND INVENTORY STATEMENT

8.1



Periodic Inventories, Notice and Representation:

At reasonable intervals as agreed between Petrobangla and Contractor, but in any event

at least once a year and on termination of this Contract, inventories shall be taken by

Contractor of the operations material, which shall include all such material, physical

assets and construction projects.

Written notice of intention to take an inventory shall be given by Contractor to

Petrobangla at least thirty (30) days before any inventory is to begin so that Petrobangla

may be represented when any inventory is taken.

Failure of Petrobangla to be represented at an inventory shall bind Petrobangla to accept

the inventory taken by Contractor, who shall, in that event, furnish Petrobangla with a

copy.



8.2



Reconciliation and Adjustment of Inventories:

Reconciliation of inventory shall be made by Contractor and Petrobangla, with a list of

shortages and overages being jointly determined, and the inventory shall be accordingly

adjusted by Contractor.



8. 3



Inventory Statement:



8.4



(a)



Contractor shall maintain detailed records of property acquired for Petroleum

Operations.



(b)



On a Quarterly basis, Contractor shall provide Petrobangla an inventory statement

containing:

(i)



description and codes of all controllable assets and materials;



(ii)



amount charged to the accounts for each asset;



(iii)



date on which each asset was charged to the account; and



(iv)



whether the costs of such asset has been recovered pursuant to Article 14

of this Contract.



Identification:

To the extent possible and reasonable all assets shall be identified for easy inspection

with the respective codes specified in the manuals prepared by Contractor under Section

1.7 hereof.



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SECTION 9

PRODUCTION STATEMENT

9.1



Contractor's Production Statement shall contain the following information and shall be

prepared in accordance with the following principles:

(a)



The production sharing shall be determined on the basis of all Oil, Natural Gas,

Condensate and NGL produced and saved from the Contract Area and measured

at the Measurement Point or Points during the respective Calendar Quarter in

accordance with Article 18 of this Contract. The production of Oil, Condensate and

NGL in Barrels per day, for the purpose of applying the provisions of Article 18 of

this Contract, shall be determined by dividing the total measurements of Oil,

Condensate and NGL for the Calendar Quarter by the number of days in such

Calendar Quarter. Where different grades of Oil, Condensate and NGL are being

delivered at the Measurement Point(s), the volumes of each grade shall be

determined separately.



(b)



The volumes of each grade of Oil or Condensate or NGL will be determined

separately at the Measurement Point.



(c)



The volumes of Oil or Condensate or NGL shall be corrected for water and

sediments, and shall be determined on the basis of standard temperatures and

pressures. The gravity, Sulphur content, and other quality indicators of the Oil or

Condensate or NGL shall be determined and registered regularly.



(d)



The volume of Natural Gas shall be determined on the basis of standard

temperatures and pressures. The energy content, Sulphur content and other

quality indicators of the Natural Gas shall be determined and registered regularly.



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SECTION 10

VALUE OF PRODUCTION STATEMENT

10.1



Petrobangla and Contractor shall prepare a Statement providing calculations of the Value

of the Oil, Natural Gas, Condensate and NGL produced and sold at the Measurement

Point(s) in accordance with Article 17 of this Contract. This Value of Production Statement

shall include:

(a)



the quantities and prices realized by the Contractor as a result of sales of Oil,

Condensate and NGL to third parties during the Month in question;



(b)



the quantities and prices realized by the Contractor as a result of sales of Oil,

Condensate and NGL during the Month in question to parties other than third

parties;



(c)



the quantity of stocks owned by the Contractor at the beginning and end of the

Month;



(d)



information available to Contractor concerning the prices of Crude Oil produced by

the main petroleum exporting countries of relevance for the determination of the

value of the Oil, including contract prices, discounts and premiums and prices

obtained in the spot market, in accordance with Article 17 of this Contract;



(e)



the quantities and prices realized by Contractor and Petrobangla as a result of the

sales of Natural Gas.



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SECTION 11

COST RECOVERY STATEMENT

11.1



Contractor shall, pursuant to Section 1.4 hereof, render to Petrobangla not later than

sixty (60) days after each Calendar Quarter a statement for that Calendar Quarter

showing:

(a)



recoverable costs carried from the previous Calendar Quarter, if any;



(b)



recoverable costs incurred during the Calendar Quarter;



(c)



total recoverable costs for the Calendar Quarter;



(d)



quantity and value of Cost Oil or Cost Natural Gas or Cost Condensate or Cost NGL

taken and separately disposed of by Contractor during the Calendar Quarter;



(e)



amount of costs recovered for the Calendar Quarter;



(f)



amount of recoverable costs carried into succeeding Calendar Quarter, if any;

and



(g)



quantity of Profit Sharing Oil or Natural Gas or Condensate or NGL taken and

separately disposed of by Contractor and Petrobangla during the Calendar

Quarter.



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SECTION 12

STATEMENT OF EXPENDITURES

12.1



Contractor shall prepare each Quarter a Statement of Expenditures. This Statement shall

show the following:

(a)



the Expenditures contemplated for the Calendar Year in the Budget, on the basis of

the Cost Classification and Cost Centers as provided for in this Accounting

Procedure;



(b) the Expenditures (less credits) accrued during the Months in question;

(c) the cumulative Expenditures (less credits) for the Calendar Year under consideration;

(d) modifications to the Budget agreed to in accordance with this Contract by

Petrobangla, without prejudice to the provisions of Article 2.7 of this Contract, which

provisions shall prevail regarding emergency expenditures;

(e) the latest forecast of cumulative Expenditures for year end; and

(f) variations between Budget forecast (as amended by sub-paragraph (d) hereof, where

applicable) and latest forecast and reasonable explanations thereof)



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SECTION 13

CONTROL STATEMENT AND OTHER ACCOUNTS

13.1 Control Statements

Contractor shall establish a cost recovery account and an off-setting contra account

therein the amount of costs remaining to be recovered and the amount of costs

recovered.

13.2 Other Accounts

Revenue accounts shall be maintained by Contractor to the extent necessary for the

control of recovery of costs and the treatment of Cost Oil or Natural Gas or Condensate or

NGL.



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SECTION 14

AUDITS AND ADJUSTMENTS

14.1



Each Statement of Expenditure supplied by Contractor shall be presumed to be true and

correct with regard to the issue of whether the type of Cost is subject to Cost Recovery

unless within six (6) months after receipt thereof Petrobangla takes written exception to

any item.



14.2



Each annual audited accounts and statement of expenditure supplied by Contractor shall

be presumed to be true and correct, as to the sums charged as expenses or credited as

receipts, twenty-four (24) months after receipt by Petrobangla unless within the said

twenty-four (24) months Petrobangla takes written exception to any charge or credit.

Financial audits shall also be carried out within the said twenty-four (24) months after

receipt of annual audited accounts by Petrobangla.



14.3



Without prejudice to statutory rights, the Petrobangla, upon at least twenty (20) Days

advance written notice to the Contractor, shall have the right to inspect and audit, during

normal business hours, all records and documents supporting costs, expenditures,

expenses, receipts and income, such as the Contractor’s accounts, books, records,

invoices, cash vouchers, debit notes, price lists or similar documentation with respect to

the Petroleum Operations conducted under this Contract in each Year, within two (2)

years (or such longer period as may be required in exceptional circumstances) from the

end of such Year.



14.4



In conducting the audit, Petrobangla or its auditors shall be entitled to examine and

verify, at reasonable times, all charges and credits relating to the Contractor’s activities

under this Contract and all books of account, accounting entries, material records and

inventories, vouchers, payrolls, invoices and any other documents, correspondence and

records considered necessary by Petrobangla to audit and verify the charges and credits.

The auditors shall also have the right, in connection with such audit, to visit and inspect,

at reasonable times, all sites, plants, facilities, warehouses and offices of the Contractor

directly or indirectly serving the Petroleum Operations, and to physically examine other

property, facilities and stocks used in Petroleum Operations, wherever located and to

question personnel associated with those operations. Where Petrobangla requires

verification of charges made by an Affiliate, Petrobangla shall have the right to obtain an

audit certificate from an internationally recognized firm of public Accountants acceptable

to both the Petrobangla and the Contractor. Submission of the audit certificate, shall in no

way relieve or diminish the responsibility of the Contractor for the compliance with the

obligations under this Contract.



14.5



Pending expiry of the periods referred to in Section 14.1 and 14.2 hereof, Petrobangla

shall have the right to inspect, with reasonable notice, Contractor's accounts, records and

supporting documents in Bangladesh.



14.6



Contractor's administrative overheads pursuant to Section 3.1(l) hereof shall not be

subject to audit except as to their application in calculating sums charged as expenses.



14.7



Petrobangla may require Contractor to engage Contractor's parent company's auditors to

examine at Contractor's cost and in accordance with generally accepted auditing

standards, the books and records of Contractor's Affiliate to verify the accuracy and

compliance with the terms of this Contract and this Accounting Procedure in so far as a

charge from the Affiliate of Contractor (or of any entity comprising Contractor) is included

directly or through Contractor as a reimbursable cost under this Contract. Whenever audit

of an Affiliate's books is so requested, Petrobangla shall specify in writing the item or

items for which it requires verification from such independent auditors. A copy of the

independent auditor's findings shall be delivered to Petrobangla within thirty (30) days

after completion of such audit.



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14.8



All documents must be maintained by Contractor and made available for inspection for

five years following their date of issue, or for such longer period as may be legally

required.



14.9



Petrobangla shall make every reasonable effort to conduct audits in a manner, which will

result in a minimum of inconvenience to Contractor and Petroleum Operations. Contractor

shall make every reasonable effort to cooperate with Petrobangla and will provide, as

appropriate, reasonable facilities and assistance.



14.10 An exception referred to in Section 14.1 and 14.2 hereof shall specify the particular cost

or costs being contested and the reason for being contested. Contractor shall answer any

exception within ninety (90) days of the receipt of such exception. In the event that the

Contractor does not respond to the exception within ninety (90) working days of receipt,

the exception in question will be deemed accepted by the Contractor.

14.11 If the Parties are unable to reconcile an exception within one hundred and twenty (120)

days of the receipt of the exception, Contractor and Petrobangla shall promptly present

the matter to the Secretary of the Ministry of Energy and Mineral Resources of the

Government for consultation and if the matter has not been resolved within the next

ninety (90) days, then at any time thereafter either Party may refer the dispute thereon

for resolution in accordance with Article 30 of this Contract.

14.12 Notwithstanding any reference to a Sole Expert or Arbitration in accordance with the

provisions of this Contract, in case any amount is claimed as due to Petrobangla resulting

from the audit exception but not accepted or settled by the Contractor, then the

Contractor shall deposit such claimed amount in a escrow account to be opened with a

financial institution, failing mutually agreed agreement with Central Bank of Bangladesh

within ninety (90) days from the date when the amount is disputed by the Contractor.

The amount in escrow account along with any interest accumulated thereon shall be

appropriated or adjusted in accordance with the decision or award of the Sole Expert or

Arbitral Tribunal as may be or otherwise as mutually agreed to between the Parties.

14.13 Any adjustments required by an agreed exception or by the settlement of a disputed

exception pursuant to Section 14.10 shall be promptly made in the Contractor's accounts

and any consequential adjustments to the allocation of production under Article 14 of this

Contract shall be made as promptly as practicable.



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SECTION 15

TERMINATION

As soon as practical after termination of this Contract, or where applicable, after

Abandonment Costs have been incurred, the accounts shall be finally settled and balanced

by whatever cash payment between the Contractor and Petrobangla are necessary.



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SECTION - 16

PROCEDURE FOR ACQUISITION OF GOODS AND SERVICES

I.



OBJECTIVES

The objectives of these procedures are to:

(a) ensure that the goods and services acquired by the Operator for carrying out

the Petroleum Operations are acquired at the optimum cost taking into

consideration all relevant factors including price, quality, delivery time and the

reliability of potential suppliers.

(b) ensure that goods and services are delivered in a timely manner taking into

consideration the consequences of delay in the acquisition of these goods and

services on the project as a whole.



II.



PRINCIPLES

The principles upon which these procedures are based on:

(a) The Parties must be satisfied that the Operator is working in accordance with an

agreed procedure for acquiring goods and services which is auditable and in

accordance with the provisions of this Contract.

(b) The Operator must have the ability to acquire goods and services expeditiously so

that the project schedules in respect of Approved Work Program are maintained.



III.



A set of vendor qualifications criteria for each major category contract/supply shall be

proposed by the Operator and approved by the Petrobangla within thirty (30) days of its

submission. In the event the Petrobangla fails to approve vendor qualification criteria

within thirty (30) days of the date the same is first submitted by the Operator, the matter

shall be referred to the JRC/ JMC for decision. The Committee may revise the

qualification criteria.



IV.



Contracts will be awarded to qualified vendors/contractors who are identified as approved

vendors for the specified activities. A list of such approved vendors shall first be

established as follows:

Operator shall:

1) provide Petrobangla with a list of the entities from whom Operator proposes to invite

tender for contracts; and such list shall be approved by Petrobangla,

2) add to such list entities who subsequently are deemed qualified subject to approval of

Petrobangla, Such list shall thereafter be maintained by the Operator. Petrobangla may

add to or delete vendors from such list.



V.



PROCEDURES

The procedures to be adopted by the Operator for the acquisition of goods and services

shall be as follows:

Applicable to

Exploration,

Appraisal,

Development and

Production operation



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Procedure A

$50,000 to less than

$200,000



Procedure B

Procedure C

$ 200,000 to less Equal to or more

than $ 500,000

than $500,000



101



For contracts valued at less than $ 5000

The Operator will be at liberty to determine the procurement procedures and methods to procure

goods and services valued at less than five thousand Dollars ($ 5000).

For Contracts valued at $ 5000 and above but less than $ 50,000

The Operator will be at liberty to determine the preferred method of acquiring goods and

services valued at five thousand Dollars ($ 5000) and above but less than fifty thousand Dollars

($ 50,000) provided that at least three (3) quotations from selected suppliers (including at least

one (1) Bangladeshi supplier, if available) will be obtained. For items valued at greater than

twenty thousand Dollars ($ 20,000) Operator is required to report to the Petrobangla if the

quoted price accepted exceed the lowest quoted price by more than twenty (20) percent.

Operator will promptly report to the Petrobangla the Operator’s reasons for not selecting the

lowest quote.

For Contracts valued at $ 50,000 and above but less than $ 200,000 (Procedure A):

Operator Shall:

(1) provide Petrobangla with a list of the entities from whom the Operator proposes to invite

tender;

(2) add to such list the entities proposed by Petrobangla within five (5) Business Days of

receipt of such proposal from Petrobangla;

(3) Provide Petrobangla a comparative bid analysis stating Operator’s choice of the entity for

award of contract. Provide also reasons for such choice in case entity chosen is not the

lowest bidder;

(4) inform Petrobangla of the entities to whom this Contract has been awarded; and

(5) upon the request of Petrobangla, provide Petrobangla with a copy of the signed contract.

For Contracts valued at $ 200,000 and above but less than $ 500,000 (Procedure B):

Operator Shall:

(1) provide Petrobangla with a list of the entities from whom the Operator proposes to invite

tender;

(2) add to such list the entities proposed by Petrobangla within five (5) Business Days of

receipt of such proposal from Petrobangla;

(3) Provide Petrobangla a comparative bid analysis stating Operator’s choice of the entity for

award of contract. Provide also reasons for such choice in case entity chosen is not the

lowest bidder;

(4) inform Petrobangla of the entities to whom this Contract has been awarded; and

(5) upon the request of Petrobangla, provide Petrobangla with a copy of the signed contract.



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For Contracts valued at $ 500,000 and above (Procedure C):

Operator shall:

(1) publish invitations for the proposed contract in at least three (3) daily national

Bangladeshi newspaper. Provide Petrobangla with a list of responding vendors including

those not included in the approved vendor list established under Section 16(IV) above.

Subject to Petrobangla’s approval, bids received from qualified vendors not included in

the approved vendor list shall be accepted for evaluation.

(2) provide Petrobangla with a comparative bid analysis stating Operator’s recommendation

as to the entity to whom this Contract should be awarded, the reasons therefore, and the

technical, commercial and contractual terms to be agreed upon;

(3) obtain the approval of the JRC/JMC to the recommended bid; and

(4) Provide Petrobangla with a copy of the signed contract.



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ANNEX-C

FORM OF BANK GUARANTEE

Bangladesh Oil, Gas and Mineral Corporation (Petrobangla)

Petrocenter

3 Kawran Bazar Commercial Area

Dhaka-1215

The People's Republic of Bangladesh

In consideration of your concluding a Production Sharing Contract on [date] with [Name of the

Contractor] a company incorporated under the companies Acts of [Country of incorporation] and

having its registered office at (address) (hereinafter called the Contractor) concerning oil and gas

exploration and production in Block No. [……] ("the Contract") for which Contractor has certain

obligations for timely performance of the Minimum Exploration Program under Article 6 of this

Contract for the relevant period in accordance with this Contract, we the undersigned bank,

[name of bank, Dhaka address] hereby irrevocably, absolutely, unconditionally and

independently bind ourselves and give this unqualified Bank Guarantee to you on behalf of

[Name of the Contractor].

1)



To make immediate payment to you of maximum………US$ (figure) [United State Dollars

(words) only] on receipt at this office of your first written demand in the form of Exhibit I

attached hereto, with the signatures thereon duly authenticated by your Bankers, without

any question or argument or dispute and without any reference to Contractor in any

manner whatsoever.



2)



This Guarantee shall remain valid and in force for written demand received by us until the

earlier of (i) the date of receipt by us of a certificate from Contractor, countersigned by

you, in the form of Exhibit II attached hereto; and (ii) 1400 hours Dhaka time on [date

execution plus ……..years] (which earlier date is hereinafter called "Expiry"), after which

time our liability to you under this Guarantee will be of no further effect and it is to be

returned to this office.



3)



In the event of your requiring an extension to this Guarantee, we should be notified in

writing at least fifteen (15) days before Expiry.



4)



This Bank Guarantee shall come into force upon its issue.



5)



This Bank Guarantee shall be binding on us and on our successors in interest and shall be

irrevocable.



6)



That our liability under this Bank Guarantee is restricted to US$ (figure as in (1) (United

states Dollar [words] only).



7)



This Bank Guarantee is personal to yourselves and is not assignable.



8)



This Guarantee shall not be affected by any change in the constitution of the guarantor

bank, its successors or assigns or by the absorption of or by its amalgamation with any

other bank and the Guarantee shall continue in force and be applicable notwithstanding

any change in the composition of the contracting company.

Yours faithfully,

[Name of Bank]



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FORM OF EXHIBIT I

EXHIBIT I TO BANK GUARANTEE

[name and address of issuing bank]

Gentlemen,

With reference to Bank Guarantee No.……… issued by your Bank in favor of Bangladesh Oil, Gas

and Mineral Corporation (Petrobangla), we hereby request you to deliver to us US$……(United

states Dollars…….. ) to be drawn under the aforementioned Bank Guarantee, since Contractor

has not completed the Minimum Exploration Program for the current period under the terms and

conditions of Article 6 of the PSC dated ………

The amount thus drawn by Petrobangla does not exceed the current available amount under the

Bank Guarantee.

As a consequence of the foregoing, please pay to Petrobangla the amount stated above. [Add

payment instructions.]

Yours faithfully,



TITLE:

Bangladesh Oil, Gas and Mineral Corporation (Petrobangla)

(minimum of 2 signatories)



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FORM OF EXHIBIT II (two copies to be submitted)

EXHIBIT II TO BANK GUARANTEE

[letterhead]



Bangladesh Oil, Gas and Mineral Corporation (Petrobangla)

[Address]

Dear Sirs,

PRODUCTION SHARING CONTRACT - BLOCK ……….. ("THE CONTRACT")

(Name of the Contractor) under this Contract, hereby certifies that the Minimum Exploration

Program required pursuant to the provisions of Article................of this Contract has been

completed in accordance with this Contract and that both

i)

ii)



all technical data related thereto; and

a technical report thereon as required pursuant to the provision of Article……….of this

Contract have been delivered to Petrobangla.



Contractor hereby requests Petrobangla to countersign this Certificate pursuant to the provisions

of Article……..of this Contract.



Yours faithfully,



_________________

For and on behalf of

(Name of the Contractor)



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Countersigned by:



_____________________

For and on behalf of

Petrobangla



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ANNEX-D

REPORTS TO BE SUBMITTED BY CONTRACTOR

(ARTICLES 10.9, 10.10 and 10.11)

1.



Monthly, quarterly and annual progress reports.



2.



Reports on magnetic, gravity and oil slick surveys, including but not limited to:

(a)



Flight path maps in and 1:250,000 scale.



(b)



Aerial magnetic recording tapes.



(c)



Daily records of the earth's magnetic fields.



(d)



Specifications of equipment used in the magnetic, gravity and oil slick surveys.



(e)



Reports on the interpretation of clause (a), (b) and (c) together with maps

showing the intensity of magnetic and gravity and depth of basement, and

structural maps both sepia and blue-prints in 1:250,000 scales. Report on the

observations and interpretation of the results of the oil slick survey.



Reports on clauses (a), (b), (c) and (d) shall be submitted within thirty (30) days after

completion of the magnetic, gravity and oil slick surveys, and reports on clause (e) shall be

submitted within ninety (90) days thereof.

3.



Reports on seismic data and interpretations thereof including the following in relation to

seismic surveys:

a)



Source and receiver pattern diagrams.



b)



Specifications of equipment used in seismic surveys.



c)



Seismic shot point maps in 1:100,000 scales, and in areas of detailed coverage,

shot point maps at 1:50,000 both in sepia and paper prints together with

corresponding digital files.



d)



Source wave form characteristic analysis.



e)



Magnetic tape recordings of seismic survey and other processing tapes.



f)



Seismic sections of all seismic, data processing methods of every seismic line, in

one second per 10 cm and 5 cm scale, sepia prints and 2 paper prints, one

interpreted and one re-interpreted (the same required to apply to the reprocessed

lines).



g)



Root mean square velocity and interval velocity analysis of shot points carried out

in each line.



h)



Seismic interpretation of relevant horizon as well as the geological age of the

horizons.



i)



Structural contour maps prepared on the basis of the interpretations of clause (g)

and (h) in 1:250,000 scale.



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Reports on clauses (a), (b), (c), (d), (e), (f), shall be submitted sixty (60) days after

completion of the processing of the survey.

Reports on clauses (g), (h) and (i) shall be submitted within one hundred and twenty

(120) days after completion of the processing of the survey.

4.



Reports on drilling operations including the following:

(a)



A daily report within 13:00 hours of the following day, which must contain the

following details:

(i)



Names of well and Contractor.



(ii)



Date and time of operation.



(iii)



Name of drilling rig.



(iv)



Days of previous operation on the particular well.



(v)



Depth of well at time of report.



(vi)



Diameter of well.



(vii)



Type and size of drill bit.



(viii)



Deviation of well.



(ix)



Type, weight, and specification of drilling mud.



(x)



Operation and problem during previous 24 hours.



(xi)



Lithology within previous 24 hours



(xii)



Petroleum found.



(xiii)



Type, size, weight and depth of casing.



(xiv)



Cementing.



(xv)



Pressure test of Petroleum blow-out preventer, casing and other related

equipment.



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(xvi)



Well-logging, including type and depth of logging.



(xvii)



Core sampling.



(xviii)



Flow tests and the depth thereof



(xix)



Well abandonment.



(xx)



Drilling rig, released.



(xxi)



Conditions of weather.



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(b)



Well completion reports on well test analysis and details of geology and lithology

within thirty (30) days after completion of operations in relation to drilling of a

Well.



(c)



One complete set of well logs at 1: 1,000, spliced into continuous logs, both on

sepia and on blue-print within thirty (30) days after the completion of well logging

operations (in addition to well logs at scales received in tile usual course from the

logger). The well completion logs should include at least the following:

(i)



Log curves.



(ii)



Lithologic plot and description.



(iii)



Formation tops.



(iv)



Velocity information.



(v)



Shows and tests.



(vi)



Casing and plugs.



(vii)



Cores.



(viii)



Paleo markers.



(ix)



Environment of deposition.



(x)



Any other information, which Contractor has plotted on its own 1: 1000

logs and which contributes to an interpretation of the results of the well.



(d)



Interpretation of well logging, including formulae and methods of calculation

within thirty (30) days after completion of operations.



(e)



Reports on sample analysis within thirty (30) days after completion of operations

in relation to drilling of a Well.



(f)



Well test reports within thirty (30) days after completion of operations, including

the following details:

(i) Depth of test.



5.



(ii)



Hydrocarbon and water.



(ii)



Analysis of hydrocarbon and water.



(iv)



Pressure analysis.



Reports on production of Petroleum including the following:

a)



A daily report within 13:00 hours of the followings day, with following details:



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(i)



Amount of Petroleum produced.



(ii)



Amount of Petroleum stored, sold or disposed.



(iii)



Amount of Petroleum used as fuel.

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(iv)



Amount of Petroleum flared.



(v)



Gravity and viscosity.



(vi)



Vapor pressure.



(vii)



Pour point.



(viii)



Dew-point and composition of Natural Gas.



(ix)



Impurities.



(x)



Water produced and result of the analysis.



(xi)



Tubing and casing pressure.



(xii)



Choke size.



(xiii)



Well test.



(xiv)



Operation during the previous 24 hours.



b)



Workover report, giving reasons, length and details of workover within thirty (30)

days after the completion of the workover.



c)



Stimulation report, stating methods and details of materials used for the purpose

within thirty (30) days after the completion of operations.



d)



Bottom hole pressure test report within fifteen (15) days after the completion of

the test.



e)



Production test report including details of calculation within thirty (30) days after

completion of the test.



f)



Structural contour maps for all horizons together with well location, reserves

assessment, and detailed calculation and reservoir simulation report, if applicable,

within thirty (30) days prior to production and every six (6) months during

production in the event of change.



6.



Reports on investigation of Petroleum reserves, field limits and economic evaluations.



7.



Safety programs and reports on accidents.



8.



Procurement plans for goods and services, and copies of all contracts with

sub-contractors.



9.



Design criteria, specifications, maps and construction records.



10.



Reports technical investigations relating to Petroleum Operations.



11.



Statements of Petroleum Costs.



12.



Reports on education and training programs.



13.



Such other reports as may be required according to the Accounting Procedure or by

Petrobangla or Government.



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ANNEX-E

(EXHIBIT - I )

FORM OF PARENT COMPANY FINANCIAL AND PERFORMANCE GUARANTEE

(to be furnished pursuant to Article 7.7 of this Contract)

WHEREAS _____________________________________ a company duly organized and existing

under the laws of_______________________________________having its registered office

at___________________________________ (hereinafter referred to as ' the Guarantor' which

expression shall include its successors and assigns) is [ the indirect owner of one hundred

percent (100%) of the capital stock of XYZ Company and direct owner of its parent company; ]

and

WHEREAS XYZ Company is signatory to a Production Sharing Contract in respect of an

(offshore) (onshore) area identified as Block______________________________ (hereinafter

referred to as ' the Contract') made between the Government of Bangladesh (hereinafter

referred to as ' the Government'), and XYZ Company (hereinafter referred to as XYZ which

expression shall include its successors and permitted assigns); and

WHEREAS the Guarantor wishes to guarantee the performance of XYZ Company or its Affiliate

Assignee under the Contract as required by the terms of the Contract;

NOW, THEREFORE this deed hereby provides as follows:

1. The Guarantor hereby unconditionally and irrevocably guarantees to the Government that it

will make available, or cause to be made available, to XYZ Company or any other directly or

indirectly owned Affiliate of XYZ Company to which any part or all of XYZ Company's rights or

interest under the Contract may subsequently be assigned (' Affiliate Assignee'), financial,

technical and other resources required ensure that XYZ Company or any Affiliate Assignee can

carry out its obligations as set forth in the Contract.

2. The Guarantor further unconditionally and irrevocably guarantees to the Government the due

and punctual compliance by XYZ Company or any Affiliate Assignee, of any obligations of XYZ

Company or any Affiliate Assignee under the Contract.

3. The Guarantor hereby undertakes to the Government that if XYZ Company, or any Affiliate

Assignee, shall, in any respect, fail to perform its obligations under the Contract or commit any

breach of such obligations, then the Guarantor shall fulfill or cause to be fulfilled the said

obligations in place of XYZ Company or any Affiliate Assignee, and will indemnify the

Government against all losses, damages, costs, expenses or otherwise which may result directly

from such failure to perform or breach on the part of XYZ Company.

4. This guarantee shall take effect from the Effective Date and shall remain in full force and

effect for the duration of the said Contract and thereafter until no sum remains payable by XYZ

Company, or its Affiliate Assignee, under the Contract or as result of any decision or award made

by any expert or arbitral tribunal there under.

5. This guarantee shall not be affected by any change in the articles of association and byelaws

of XYZ Company or the Guarantor or in any instrument establishing the Company or Guarantor.

6. The liabilities of the Guarantor shall not be discharged or affected by (a) any time indulgence,

waiver or consent given to XYZ Company; (b) any amendment to the Contract or to any security

or other guarantee or indemnity to which XYZ Company has agreed; (c) the enforcement or

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waiver of any terms of the Contract or of any security, other guarantee or indemnity; or (d) the

dissolution, amalgamation, reconstruction or reorganization of XYZ Company.

7. This guarantee shall be governed by and construed in accordance with the laws of

Bangladesh.

IN WITHNESS WHEREOF the Guarantor, through its duly authorized representatives, has caused

its seal to be duly affixed hereto and this guarantee to be duly executed the ____________ day

of _____________ 200__.



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ANNEX E

(EXHIBIT -II)

FORM OF COMPANY FINANCIAL AND PERFORMANCE GUARANTEE

(to be furnished pursuant to Article 7.7 of the Contract)

WHEREAS ______ XYZ company duly organized and existing under the laws

of____________________having its registered office at____________________________

(hereinafter referred to as ' the Guarantor' which expression shall include its successors and

assigns) is signatory to a production Sharing Contract in respect of an (offshore) (onshore) area

identified as Block_________________________ (hereinafter referred to as 'the Contract') made

between the Government of Bangladesh (hereinafter referred to as' the Government'), and XYZ

Company (hereinafter referred to as XYZ which expression shall include its successors and

permitted assigns); and

WHEREAS the Guarantor wishes to guarantee its performance under the Contract as required by

the terms of the Contract;

NOW, THEREFORE this Deed hereby provides as follows:

1.



The Guarantor hereby unconditionally and irrevocably guarantees to the Government that it

will make available, or cause to be made available, financial, technical and other resources

required to ensure that XYZ Company can carry out its obligations as set forth in the

Contract.



2.



The Guarantor further unconditionally and irrevocably guarantees to the Government the

due and punctual compliance by it of any obligations under the Contract.



3.



The Guarantor hereby undertakes to the Government that it shall fulfill or cause to be

fulfilled all its obligations under the Contract, and if it fails to perform its obligations under

the Contract or commits any breach of such obligations, then it shall indemnify the

Government against all losses, damages, costs, expenses or otherwise which may result

directly from such failure to perform or breach on its part.



4.



This guarantee shall take effect from the Effective Date and shall remain in full force and

effect for the duration of the said Contract and thereafter until no sum remains payable by

XYZ Company, under the Contract or as a result of any decision or award made by any

expert or arbitral tribunal there under.



5.



This guarantee shall not be affected by any change in the articles of association and

byelaws of XYZ Company or in any instrument establishing the Company.



6.



The liabilities of the Guarantor shall not be discharged or affected by (a) any time

indulgence, waiver or consent given to XYZ Company; (b) any amendment to the Contract

or to any security or other guarantee or indemnity to which XYZ Company has agreed; (c)

the enforcement or waiver of any terms of the Contract or of any security, other guarantee

or indemnity.



7. This guarantee shall be governed by and construed in accordance with the laws of

Bangladesh.

IN WITHNESS WHEREOF the Guarantor, through its duly authorized representatives, has caused

its seal to be duly affixed hereto and this guarantee to be duly executed the ____________ day

of _____________ 200__.

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