NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here

Afghan-Tajik Basin Phase I Tender



ISLAMIC REPUBLIC OF AFGHANISTAN

MINISTRY OF MINES & PETROLEUM

THE AFGHAN-T AJIK BASIN PHASE I TENDER

EXPLORATION AND
PRODUCTION SHARING CONTRACT

FOR

HYDROCARBONS EXPLORATION,

DEVELOPMENT AND PRODUCTION

IN

MAZAR-I-SHARIF BLOCK



8 October 2013



Afghan-Tajik Basin Phase I Tender



TABLE OF CONTENTS



ARTICLE I DEFIN TIONS & INTERPRETATION ......................... ........................ ..... ...... ...... ... 2

ARTICLE II GRANf OF RIGHTS TO THE CONTRACTOR ..................... .......... .................... 10

ARTICLE III TERM
ARTICLE IV RELINQUISHMENT............................ ..................... ....... .............................. ................. .... .......... 10

12



ARTICLE V GENEtL OBLIGATIONS OF THE CONTRACTOR ........................................ 13

ARTICLE VI EXPLP RA TION PHASE; WINNING BIDDER'S EXPLORATION

PROGRAM .... .... ............... ......... .... ................. ...... .................. ...... ................. ... .... .. ................ 20

ARTICLE VII DISd OVERY; DEVELOPMENT AND PRODUCTION ............ .... ..... ............... 22

ARTICLE VIII FINt NCIAL AND PERFORMANCE GUARANTEES; BONUSES ................ 30

ARTICLE IX OBLIf ATIONS OF THE MINISTRy .......................... .. .... .... ... ....................... .... 32

ARTICLE X ALLOf ATION OF PRODUCTION ..................................... .... .......... ... ................. 34

ARTICLE XI MEASUREMENT OF HYDROCARBONS .............. .................. ... ................ ...... 37



ARTICLE XII DOMESTIC REQUIREMENTS ........ ..... ....................... .. ....................... .......... .. . 38

ARTICLE XIII PAYMENT PROCEDURE ......... ... ......................... .. ........ ................................. .40

ARTICLE XIV SUJ FACE RENTAL FEES ..... .... ..... .... .. ............................................. .... .......... . 40

ARTICLE XV NATp RAL GAS ......................... ................................... .. .. ...................... ............ 42

ARTICLE XVI INCf ME TAX ....................... ..... .. ........................... ..... ....................... .......... .....44

ARTICLE XVII CUfTOMS DUTIES ................. ..................................... ..................... ............... 45

ARTICLE XVIII EXlCHANGE AND CURRENCY CONTROLS ............................... ... ........... .46

ARTICLE XIX TRdf-TMENT UNDER AFGHANISTAN LAW ... ............................. ............... 47

ARTICLE XX TRAINING, EMPLOYMENT AN D LOCAL CONTENT ............. .................... .47

ARTICLE XXI PU, CHASES IN AFGHANISTAN ..... ................................... ............ .............. .48

ARTICLE XXII JOlrT DEVELOPMENT / UNITIZATION ........ ... .. .. ... ................. ................. .48

ARTICLE XXIII



H~ALTH ,



SAFETY AND ENVIRON MENTAL PROTECTION .................. 50



ARTICLE XXIV DISPUTE SETTLEMEN T/ ARBITRATION ...... ....... ........ ........... ... .. ............. 53

ARTICLE XXV TEf MINATION AND REVOCATION ............................................ ............... 55

ARTICLE XXVI BOOKS, ACCOUNTS AND AUDITS; RECORDS, REPORTS

AND INSPECTIONS .. ........................ ......................................... ............................. .. ... ... ...... 58

ARTICLE XXVII INSURANCE AND INDEMNIFICATION ..... .................................. .. .......... 60

ARTICLE XXVIII ASSIGNMENT AND SUBCONTRACTORS ................................. ...... ....... 61



Afghan-Tajik Basin Phase I Tender

ARTICLE XXIX L1 W OF THE CONTRACT .... ................ ........................................................ 64

ARTICLE XXX FOrCE MAJEURE ........ .... ....... ...... ....... ............................................ ............... 64

ARTICLE XXXI



E~TIRE



CONTRACT AND AM ENDMENTS ........... .... ........ .. ...................... 64



ARTICLE XXXII , AIVERS; CUMULATIVE REMEDIES ..................... ........ ........................ 65

ARTICLE XXXIII J RANSPARENCY IN AFGHANISTAN HYDROCARBONS

OPERAT IONS ................................. ................................................................................ .... .. . 65

ARTICLE XXXIV I OTICES ............................. ....... .................................................................. 66

ARTICLE XXXV Ef FECTIVEN ESS AN D REGISTRATION .............. ... .... .............. .. ............. 67

EX HIBIT A



DESCRIPTION OF CONTRACT AREA



EXHIBIT B



MAP IO F CONTRACT AREA



EXHIBIT C



ACC


EX HIBIT D



FINANCIAL GUARANTEE



EXHIBIT E



GEN ffRA L PERFORMANCE GUARANTEE



EXHIBIT F



LON


EXHIBIT G



BIDDIING FORM



EXHIBIT H



MINIMUM EXPLORATION PROGRAM



EXHIBIT I



W IN NING BIDDER'S EXPLORATION PROGRAM



EXHIBIT J



ARTIfL E X CALCULATION EXAMPLE



EXHIBIT K



FORM OF HYDROCARBON S LICEN SE



EXHIBIT L



FOR4 OF PERMIT FOR DEVELOPMENT AN D PRODUCTION

OPERATION S



I

I



- ll -



Afghan-Tajik Basin Phase I Tender



EXPLORATION AND

eRODUCTION SHARING CONTRACT

I



THIS CONTRACT made and entered into this 8th day of October, 2013, by and between THE

MINISTRY OF M$ES & PETROLEUM OF THE GOVERNMENT OF THE ISLAMIC

REPUBLIC OF A GHANI STAN (hereinafter referred to as the "Ministry"), acting on behalf

of the Government of the Islamic Republic of Afghanistan (hereinafter referred to as the

"Government"), D ~agon Oil (Mazar-i-Sharif) Limited, a corporation duly organized and

existing under the lars of Bermuda ("Dragon Oil"), TP Afghanistan Limited, a corporation

duly organized and existing under the laws of Jersey ("TPAL") and Ghazanfar Investment

L td., a corporation Iduly organized and existing under the laws of the Islamic Republic of

Afghanistan ("G hazanfar").



RECITALS

1.



WHEREAS, the entire property in, and control of, all Hydrocarbon resources in or under

the territory 0 Afghanistan is exclusively vested in the State under Afghanistan Law;



2.



WHEREAS, the Ministry wishes to promote the initiation of production and processing

of the known Hydrocarbon resources to meet current and future demands for energy and

related products, services and activities and prioritize the early production of

Hydrocarbon~ and, in parallel with the aforementioned activities, wishes that the

Contractor uSF sufficient resources to thoroughly assess the Hydrocarbon potential in the

Contract Area, and the Contractor desires to join and assist the Ministry in achieving

these objecti1es and goals for the exploration for, and production of, the Hydrocarbon

resources witf in the Contract Area;



,.,



.



WHEREAS, the Contractor represents that it has the financial resources, technical

competence and professional skills necessary to carry out the Hydrocarbons Operations

hereinafter dJscribed;



4.



WHEREAS,Ieach Contractor Entity acknowledges that it is familiar with the laws and

regulations ofI Afghanistan and that it has the means to maintain such familiarity during

the term of tJ '.s Contract; and



5.



WHEREAS, in accordance with the Hydrocarbons Law of Afghanistan, Exploration and

Production I~aring Contracts for Hydrocarbons may be entered into between the

Ministry and I"oreign or domestic contractors.



.)



CONTRACT

NOW, THEREFORE, the Parties hereby agree as follows:



Afghan-Tajik Basin Phase I Tender



ARTICLE I

DEFINITIONS & INTERPRETATION

1.1



Definitions.



~n



this Contract, the following terms shall have the following meanings:



"Accounting IProcedu res" shall mean the accounting procedures set forth in Exhibit C.

"Affiliated El tity" shall mean any entity directly or indirectly controlling, controlled by

or under corrtmon control with, a specified entity. For the purposes of this definition,

"control," wHen used with respect to any specified entity, means the power to direct,

administer an~ dictate the policies of such entity (it being understood and agreed that it is

not necessary to own directly or indirectly fifty percent (50%) or more of such entity's

voting securities to have control over such entity, but ownership, direct or indirect, of

fifty percent I (50%) or more of such entity's voting securities shall be deemed to

constitute control).

"Afghanista l Law" shall mean any and all laws and regulations applicable in the

Islamic Rept lic of Afghanistan, including, for the avoidance of doubt, international

conventions tf which Afghanistan is a party.

"Appraisal Hrogram" shall mean the program for appraising a Discovery established

pursuant to Section 7.1.

"Appraisal Jrogra m Budget" shall mean the estimate of the costs of all items included

in the corresppnding Appraisal Program, including both capital and operating budgets, all

in a form acceptable to the Ministry.

"Arm 's-LenJth Sales" shall mean bona fide commercial sales made at arm's length

between will ~ng and unrelated buyers and sellers in exchange for cash, excluding sales

involving barter, sales from government to government and other transactions motivated

in whole or id part by considerations other than the usual economic incentives involved in

bona fide corbmercial sales of Hydrocarbons in the international market, provided that a

sale of Hydr1carbons shall not be deemed an Arm's-Length Sale unless made at (i) the

applicable Delivery Point or (ii) another point of sale as to which the Parties have

previously akreed upon a standard location differential to account for deemed

transportatiorl costs from the applicable Delivery Point to the point of sale.

"Associated b as" shall mean Natural Gas that is produced in association with Liquid

Hydrocarbons that can be produced commercially.

I



"Bar rel" shallI mean a quantity or unit of Liquid Hydrocarbons equal to 158.9874 liters

(forty-two (42) United States gallons) at a temperature of sixty (60) degrees Fahrenheit

( 15.56 degret Centigrade) under one atmosphere of pressure.

"Baseline E nvironmenta l Assessment" shall mean a report containing a description of

the enviromrtent in the subject area prior to the commencement of Hydrocarbons

Operations, i ! cluding the then existing flora and fauna, soil, air quality, underground and

2



Afghan-Tajik Basin Phase I Tender

surface wate ~, landscape aesthetics, fanning conditions, and socio-economic conditions in

local communities.

I



"Calendar ¥ ear" shall mean a period of twelve (12) consecutive Months, commencing

January 1st ahd ending December 31 st.

"commercill Discovery" shall mean a Discovery which, as detennined in accordance

with the pro~isions of Section 7.1, can be produced commercially, based on consideration

of all pertinent operating and financial data, such as Hydrocarbons volumes, recoverable

reserves, sus~ainable production levels and other relevant technical and economic factors,

according to f OOd Oil Field Practices.

"Commercial Discovery Declaration Date" shall have the meaning set forth in Section

I

7. I (k)(ii).

"Contract" shall mean this Exploration and Production Sharing Contract, including all

Exhibits here~10, as the same may be amended from time to time.

"Contract Aha" shall mean the area described as such in Exhibit A and delineated as

such in Exhibit B, as the same may be reduced by relinquishments made in accordance

with the tennt of this Contract.

"Contract Year" shall mean (i) the period commencing on the date that the License for

Hydrocarbon~ Operations is granted to the Contractor pursuant to Section 9.2(f) and

ending on thb first anniversary of the last Day of the Month in which the License for

Hydrocarbonk Operations is granted to the ContTactor pursuant to Section 9.2(f) and (ii)

thereafter, eath period of twelve (12) consecutive Months, commencing on the first Day

of the MontH following the end of the previous Contract Year and ending on the next

anniversary bf the last Day of the Month in which the License for Hydrocarbons

Operations islgranted to the Contractor pursuant to Section 9.2(f).

"contractorl' shall mean the Contractor Entities, collectively.

"Cont ractor Entity" shall mean each of Dragon Oil, TPAL and Ghazanfar and any of

their respectiv\1 e successors or assigns permitted in accordance with this Contract. For the

avoidance of doubt, at any time when there is only one entity constituting the Contractor,

any referenc9 made in this Contract to "the entities constituting the Contractor" or similar

reference, shall be deemed to mean "the entity constituting the Contractor".

"Cost Recotry Hydrocarbons" shall mean the Hydrocarbons received by the

Contractor in recovery of Hydrocarbons Operations Expenditures in accordance with the

provisions of Section I 0.1(b).

"Customs Duties" shall mean all duties, taxes or imposts (except charges paid to the

Government for actual services rendered, such as normal handling and storage charges)

which are payable as a result of the importation or exportation of the item or items under

consideration.



3



Afghan-Tajik Basin Phase I Tender

"Day" shall yean a Gregorian calendar day.

"Delivery Point" shall mean a point or the points relating to a Field, at or after

extraction, s~ecified in the approved Development Program for such Field, at which the

Hydrocarbons are measured for the purposes of Section 11.3, valued for the purposes of

Section 10.1 1and ready to be taken and disposed of, consistent with Good Oil Field

Practices. I

"Develo ment and Production 0 erations" shall mean all Hydrocarbons Operations in

and relating to a Field, including those conducted to facilitate the extraction of

Hydrocarbons.

"DevelopmeL and Production Phase" shall mean the period referred to in Section 3.2.

l

"Developmen

t Pro"ram"

_

~

shall mean the program for developing a Field established

pursuant to Sbction 7.1.



"DevelopmeL Program Budget" shall mean the estimate of the costs of all items

included in t e corresponding Development Program, including both capital investment

requirements and operating budgets, operating costs and sales revenues, and the

anticipated t pe and source of financing, all in a form acceptable to the Ministry.

"Discovery" shall mean a structure or accumulation or group of structures or

accumulationjs proved by drilling to be bearing Hydrocarbons, whether deemed to be the

subject of commercial development or not, including any extension of a previous

Discovery.

"Effective Date" shall mean October 8, 2013.

I



"EITI" shall mean the Extractive Industries Transparency Initiative and related

implementing requirements, including the Ern Principles, Ern Criteria, and EITI

ReqUirement~

l , the EITI Articles of Association, the EITI Validation Guide and Policy

Notes issued y the EITI International Secretariat conveying decisions taken by the EITI

International · oard.

"EnvironmeL al Impact Assessment" shall mean a report prepared in connection with a

Developmentl Program submitted pursuant to Section 7. 1(i)(ii) or, if required, before

commencement of certain Exploration Operations pursuant to Section 6.2, and containing

a descriPtio~ of the ecosystem in the subject area prior to the commencement of

Development and Production Operations or Exploration Operations, as applicable,

including the flora and fauna, soil, air quality, underground and surface water, landscape

aesthetics, and the aspects of the ecosystem which may be affected qualitatively and

qUantitativel~ by the operations, the effect of the operations on local populations, if any,

and the socio-economic conditions of those individuals.

"Evaluation 1 9reement" shall have the meaning set forth in Section IS .2(d).

"Expertise J Ules" shall have the meaning set forth in Section 24.2.



4



Afghan-Tajik Basin Phase I Tender



"Exploration Operations" shall mean geological studies, geochemical studies,

geophysical Istudies, aerial mapping, seismic surveys, investigations relating to the

subsurface geology

including structure test drilling, stratigraphic test drilling, drilling of

I

Exploration ells, and other related activities such as surveying, drill site preparation

and all wo~t necessarily connected therewith, that is conducted in connection with

HYdrocarbools exploration.



r'



"Exploration Phase" shall mean the period(s) referred to in Section 3.1.



"ExPloratio~



Well" shall mean a Well drilled in the course of Exploration Operations,

where the ta~get or objective of such well is outside or at a different depth of horizon of

the known adcumulations .

"Field" Shall mean an area, as designated by agreement between the Ministry and the

Contractor, relating to the same geological structures or accumulations, where a

Commercial f iscovery of Liquid Hydrocarbons or Natural Gas has been declared.



"Financial Guarantee" shall mean a standby letter of guarantee in the amount

determined i, accordance with Exhibit H, in the form attached hereto as Exhibit 0 or in a

reasonably similar form acceptable to the Ministry, issued by a bank subject to the

jurisdiction and approved by the Government.



t



"First Extension Period" shall have the meaning set forth in Section 3.1.

"Force MaiJ ure" shall have the meaning set forth in Article XXX.

"General p l rformance Guarantee" shall mean a guarantee of the Contractor's

obligations hpreunder, in the form attached hereto as Exhibit E, by the ultimate parent

entity (or ent~ties) of each Contractor Entity in a maximum amount equal to the product

of (i) such aontractor Entity's Participating Interest and (ii) one hundred million US

Dollars (US$I I 00,000,000), to be executed and delivered to the Ministry simultaneously

with the exeT tion of this Contract.

"Good Oil Flield Practices" shall mean such practices and procedures employed in the

Hydrocarbonk industry worldwide by prudent and diligent operators under conditions and

circumstancekI similar to those experienced in connection with the relevant aspect or

aspects of the Hydrocarbons Operations, intended principally at guaranteeing: (i)

environmendlI protection, which calls for the adoption of methods and processes which

avoid or minrmize the adverse impact of Hydrocarbons Operations on the environment,

including avoiding or minimizing damage to flora and fauna; (ii) operational safety,

which entailsl the use of methods and processes that promote occupational safety and the

prevention o~ accidents; and (iii) conservation of Hydrocarbons resources, which implies

the utilizati9n of adequate methods and processes to maximize the recovery of

Hydrocarbons in a technically and economically sustainable manner, with a

correspondin~ control of reserves decline, using principles of maximum efficient

production ra~es and other conservation principles, and to minimize losses at the surface

and avoid waste.



5



Afghan-Tajik Basin Phase I Tender

"Gross Contractor Revenues" shall mean the value of Cost Recovery Hydrocarbons

and Net Hytocarbons allocated to the Contractor in accordance with Section 10.1 and

any other proceeds derived from Hydrocarbons Operations as set forth in the Accounting

Procedures.

"Hydrocarbons" shall mean Liquid Hydrocarbons and Natural Gas.

"HYdrOCarbi ns Law" shall mean the Hydrocarbons Law 2009 of Afghanistan.

"HYdrOCarbi ns Operations" shall mean any operations related to prospecting,

exploration, bxtraction, production, field separation, storage, transportation, or sale of

Hydrocarbon~, but not transportation beyond the border exit-point for exports or after

delivery into refinery or processing plant.



I



"Hydrocarbons Operations Expenditures" shall mean expenditures made in

conducting Hydrocarbons Operations hereunder, as well as decommissioning and

abandonmen~ operations, as determined in accordance with the Accounting Procedures.

"HYdrocarbl ns Register" shall mean the registration of documents, reports and records

of HYdrocartns Operations established in accordance with the Hydrocarbons Law.

"Hydrocarbons Regu lations" shall mean the Hydrocarbons Regulations 2009 of

Afghanistan . I

"Income Tax" shall mean the tax imposed on Net Taxable Income pursuant to the

Income Tax ILaw.

"Income TaJ Law" shall mean the Income Tax Law (2009) of Afghanistan .

"Initial coJ mercial Production" shall mean, with respect to any Field, the date on

which the fir~t regular shipment of Liquid Hydrocarbons or Natural Gas, or both, is made

from such Field under a program of regular production hereunder.

"Initial EXPlbration Period" shall have the meaning set forth in Section 3.1.

"License" shl ll mean the license granted to the Contractor pursuant to Section 9.2(f), in

the form at-tached hereto as Exhibit K, certifying that the Contractor holds this

Exploration ~nd Production Sharing Contract and is therefore entitled to conduct

Hydrocarbonk Operations within the Contract Area.

"Li uid H J rocarbons" shall mean crude mineral oil, asphalt and all other kinds of

hydrocarbon and bitumen, regardless of gravity, which are produced at the wellhead in a

liquid or solid state at ambient conditions of temperature and atmospheric pressure, or

which are eXj acted from Natural Gas by condensation.

"Market P rice" shall mean, with respect to each type and grade of Hydrocarbons

produced frO fl the Contract Area in a given Quarter, the weighted average net price per

unit obtained by the Contractor or any of its Affiliated Entities at the applicable Delivery



6



Afghan-Tajik Basin Phase I Tender

Point from rm's-Length Sales of such Hydrocarbons during the Quarter (after deduction

of a standar , location differential agreed between the Parties to account for deemed

transportatio~ costs from the applicable Delivery Point to the point of sale); provided that

if less than ~fty percent (50%) of the total volume of sales of such Hydrocarbons during

the Quarter 1re Arm's-Length Sales, then the Market Price shall be the price agreed by

the Ministry and the Contractor as reflecting the market price for such Hydrocarbons at

the applicable Delivery Point for the Quarter.

"Maximum I Efficient Rate" shall mean the maximum rate of production of

Hydrocarbon~ in a Field, without excessive rate of decline of production or excessive loss

of reservoir Bressure, and in accordance with Good Oil Field Practices and the provisions

of Section 7 .l(b).

I



"Minimum Exploration Program" shall mean the mlOimum work commitment for

Exploration Operations to be undertaken by the Contractor during the Exploration Phase

as set forth irl Exhibit H and which is subject to the terms ofthe Financial Guarantee.

"Month" ShJll mean a Gregorian calendar month.

"Natural Gal " shall mean any Hydrocarbons which at ambient conditions of temperature

and pressure [are found in a gaseous state, and includes dry mineral gas, including coalbased methalle, wet gas and residue gas remaining after the extraction, processing or

separation o~ Liquid Hydrocarbons from wet gas, as well as non-Hydrocarbon gas or

gases produced in association with liquid or gaseous Hydrocarbons, including the residue

gas remainink after the condensation of Liquid Hydrocarbons, but excluding condensed

or extracted ILiquid Hydrocarbons.

"Net HvdroJarbons" shall mean the quantity of Hydrocarbons produced and saved and

not used in ~ydrocarbons Operations or flared or re-injected into the Contract Area, after

deduction of the Royalty and the Cost Recovery Hydrocarbons.

"Net Taxabll Income" shall mean net taxable income as determined in accordance with

the provisiont of the Income Tax Law.

"Non-Associated Gas" shall mean Natural Gas that is produced without association with

Liquid Hyd~ocarbons or in association with Liquid Hydrocarbons that cannot be

produced commercially.

"Operator" l hall mean the Contractor Entity designated by the Contractor pursuant to

Section 5.2 Iwhich, in the name and on behalf of the Contractor, shall carry out

Hydrocarbons Operations in the Contract Area.

"particiPatiJ g Interest" shall mean each Contractor Entity's undivided share (expressed

as a percentage of the total shares of all Contractor Entities) in the rights and interests of

the contractt under this Contract.

"Parties" shall mean the Ministry, each Contractor Entity and their permitted successors

and assigns.



7



Afghan-Tajik Basin Phase I Tender

"Person-in-
charge of all r YdrOCarbons Operations hereunder.

"Progressive Tax Rate" means, in relation to Income Tax, a tax rate that increases as

Net Taxable income increases.

"Quadrant" lshall mean the area demarcated by five (5) minutes of longitude and five (5)

minutes of la itude. Quadrants are identified in Exhibits A and B.



s~all



"Quarter"

mean a period of three (3) consecutive Months commencing with the

first day of Jruary, April, July or October.

"RGIIP" or j'Recoverable Gas Initially in Place" means Natural Gas initially in place

and having ~ reasonable certainty of being recoverable under existing economic and

political conlitions, using existing technology.

"ROIIP" or f'Recoverable Oil Initially in Place" means Liquid Hydrocarbons initially

in place and having a reasonable certainty of being recoverable under existing economic

and political tonditions, using existing technology.



s~all



"Royalty"

mean twelve and six-tenths percent (12.6%) of the Hydrocarbons

produced and saved from the Contract Area and not used in Hydrocarbons Operations

prior to the Oelivery Point, or lost, flared or re-injected into the Contract Area, which is

allocated to ithe Ministry before allocation to the Contractor of the Cost Recovery

Hydrocarbons, all as set forth in Article X.

"Screening IReport" shall mean a report prepared for review by the National

Environmental

Protection Agency under its current regulations or procedures to

I

determine whether an Environmental Impact Assessment shall be required for any

Hydrocarbonk Operations.

"Second Extlnsion Period" shall have the meaning set forth in Section 3.1 .

I



"Shareholder" means any person holding shares or other voting securities of a

Contractor Et tity from time to time .

"Signature Bonus" shall have the meaning set forth in Section 8.6(a).

"Social 1m let Assessment" shall mean a social impact report prepared in connection

with Sectio 6.3 or Section 7.1 (i)(ii), assessing the probable impacts on affected

communities of proposed Exploration Operations or Development and Production

Operations, as applicable, including mitigation strategies and plans for community

engagement Iand development, benefit sharing, labor welfare, resettlement and

rehabilitation p and resolution of grievances. Each Social Impact Assessment shall be in

such form mid otherwise comply with any guidelines published by the Ministry or the

National Envrronmental Protection Agency.

"State" shall mean the Islamic Republic of Afghanistan.



8



Afghan-Tajik Basin Phase I Tender



"u.s. Dollars" or "US$" shall mean the lawful currency of the United States of America.

"Well" shall imean any opening in the ground made or being made by drilling or boring,

or in any other manner, for the purpose of exploring for and/or producing Hydrocarbons,

or for the inj ~ction of any gas or fluid into an underground deposit, other than a seismic

hole or a stratigraphic test hole.

"Winning BJdder" shall mean the consortium that submitted the bid in the Afghan-Tajik

Basin Phase i Tender that was awarded this Contract, as such consortium may have been

changed priot to the date hereof with the approval of the Ministry.

"Winning J idder's Exploration Program" shall mean the work commitment

Exploration Operations

undertaken by the Contractor as set forth in Exhibit I. For

I

avoidance O~ dOUbt, the Financial Guarantee shall not apply to such portion of

Winning Bid er's Exploration Program which is in excess of the requirements of

Minimum E loration Program.



for

the

the

the



"Work Program" shall mean, as applicable, (i) the initial work program prepared by the

Contractor plirsuant to Section 5.3(a) itemizing the Hydrocarbons Operations to be

carried out in the Contract Area during the period from the Effective Date until December

31, 2013 and (ii) for each subsequent Calendar Year, the annual work program prepared

by the Contractor pursuant to Section 5.3(b) itemizing the Hydrocarbons Operations to be

carried out in the Contract Area during such Calendar Year.

"Work Program Budget" shall mean the estimate of the cost of all items included in the

corresponding Work Program, including both capital and operating budgets, all in a form

acceptable to Ithe Ministry .

1.2



Interpretation. Unless the context otherwise requires :

(a)



the wbrd

"including" means including, without limitation; words in the singular

I

include the plural and words in the plural include the singular; and the words

"here~f," "herein" and "hereunder" refer to this Contract as a whole ;



(b)



referehces herein to Articles, Sections and Exhibits are to the Articles, Sections

and Ekhibits of this Contract;



(c)



the hJadingS of this Contract are included for purposes of convenience only and

are nt to be used in the interpretation of this Contract;



(d)



references herein to each of the Parties shall include their respective successors

and p~rrnitted assigns; and



(e)



any Jgreement, instrument or statute defined or referred to herein or in any

instruh,ent or certificate delivered in connection herewith means such agreement,

instrutnent or statute as from time to time amended, modified, supplemented or

repladed.



9



Afghan-Tajik Basin Phase I Tender



ARTICLE II

GRANT OF RIGH TS TO THE CONTRACTOR

I



2.1



Exclusive Rights. Subject to the terms and conditions set forth in this Contract, the

Ministry grartts to the Contractor the exclusive right to conduct Hydrocarbons Operations

within the Cdntract Area for the duration of this Contract. The Contractor shall acquire a

share of exttacted Hydrocarbons as set out herein and shall, except as provided in

Sections 12. , 12.3 and 12.4, have the right, during the term of this Contract, to freely

take, sell an export such share. For the avoidance of doubt, title and risk of loss of the

Contractor's hare of extracted Hydrocarbons shall pass from the State to the Contractor

at the applic Ie Delivery Point.



2.2



Sole Risk, Cost a nd Expense. Except as otherwise expressly provided in this Contract,

the Contractdr shall conduct all Hydrocarbons Operations hereunder at its sole risk, cost

and expense land shall look on ly to the Hydrocarbons to which it is entitled under this

Contract to recover such costs and expenses, and such Hydrocarbons shall be the

Contractor' s sole source of compensation hereunder.



2.3



I ndependeuJ Contractor. The Contractor shall be responsible to the Ministry for the

execution ofl all Hydrocarbons Operations in accordance with the provisions of this

Contract. \\j ithout prejudice to the Contractor's position as an independent contractor

hereunder, t~e extent and character of such work to be done by the Contractor shall be

subject to the general supervision, review and approval of the Ministry, to which the

Contractor shall report and be responsible as set forth herein and in the applicable

legislation at regulations.



2.4



Participatin, Interests. As of the Effective Date, the Participating Interests of the

Contractor Eltities are:

Dragon Oil: 0%

I



Ghazanfar: 20%

TPAL: 40%

If a Contractor

Entity transfers or assigns all or part of its Participating Interest under the

I

provisions o~ this Contract, the Participating Interests of the Contractor Entities shall be

revised accortlingly.



ARTICLE III

TERM

3.1



Exploration Phase. The Contractor is authorized to conduct Exploration Operations

within the CJ ntract Area during the Exploration Phase, which shall be comprised of (i)



10



Afghan-Tajik Basin Phase I Tender

an initial eXtloration period of four (4) Contract Years ("Initial Exploration Period")

commencing on the date that the License for Hydrocarbons Operations is granted to the

Contractor PI rsuant to Section 9.2(t), and (ii) subject to the conditions hereinafter

provided, two (2) successive extension periods ("First Extension Period" and "Second

Extension Pdriod") of two (2) Contract Years each. Such extension periods shall be

granted to thJ Contractor upon the Contractor's request delivered to the Ministry not later

than ninety (PO) Days prior to the expiration of the then current period, subject to the

Contractor having fulfilled its obligations under this Contract for the then current period,

including th9 relinquishment provisions of Article IV, and having submitted with such

request a Work Program and Work Program Budget, as well as a Financial Guarantee for

an amount e~ual to the estimated expenditures associated with the Minimum Exploration

Program for ~he period of extension, all of which is to be consistent with the undertakings

set forth in Article VI.



3.2



Develo meJ and Production Phase. If a Commercial Discovery is declared, the

Contractor s all commence Development and Production Operations (the "Development

and Production Phase") in respect of the Field where such Commercial Discovery has

been declar~~, subject to the Ministry's approval of a Development Program and

Developmen I Program Budget submitted pursuant to Section 7. I (i)(ii).



3.3



Absence of
Exploration ~hase, no Commercial Discovery has been made in any part of the Contract

Area, this c~ntract shall terminate in its entirety, except that the Ministry shall grant an

extension for such period, and for such area as may be necessary (i) for the Contractor to

complete the drilling, testing, appraisal or plugging of any Well actually being drilled,

tested, appraiFed or plugged at the end of the Exploration Phase and (ii) for the Ministry

and the contlactor to determine that a Discovery is a Commercial Discovery pursuant to

Section 7. 1.



3.4



Term of D ·velopment and Production Phase. In the event of a Commercial

Discovery, t*e extent of the area capable of production of Hydrocarbons from the

formation orl formations so identified shall be determined in accordance with the

provisions o~ Section 7.1 or Article XV. The area so determined shall thereupon be

converted a~ltomatically into a Field, with effect from the Commercial Discovery

Declaration q>ate. The term of the Development and Production Phase for each Field

shall extend ~or a maximum of twenty-five (25) years from the date on which a permit to

conduct Development and Production Operations in respect of such Field has been

granted purs~ant to Section 7. I (k)(iv).



3.5



Extension oflDevelopment and Production Phase. In the event that the Contractor has

fulfilled all its obligations for the specified term of the Contract, the Contractor may

request an e~~ension of the Development and Production Phase for a further period not

exceeding ter (10) years. The Ministry shall approve any such request, unless the

Contractor h s failed to establish an economic basis for such extension, subject to the

provisions of he Hydrocarbons Law.



11



Afghan-Tajik Basin Phase I Tender



ARTICLE IV

RELI NQUISHMENT

4.1



4.2



Exploration Phase. Without prejudice to Section 7.1 , during the Exploration Phase, the

Contractor s~all relinquish to the Ministry parts of the original Contract Area as follows:



o~



(aJ



on

before the end of the Initial Exploration Period, the Contractor shall

relin'lfish at least twenty-five percent (25%) of the original Contract Area that has

not been converted into a Field;



(b)



on or Ibefore the end of the First Extension Period, the Contractor shall relinquish

at leabt an additional area equal to twenty-five percent (25%) of the remaining

Contrkct Area that has not been converted into a Field; and



(c)



at the end of the Exploration Phase, the Contractor shall relinquish the remainder

of th9 Contract Area that has not been converted into a Field or has not had a

Discolvery which is under evaluation for development or is otherwise subject to an

Evaluation Agreement.



Size and shl e of Relin uished Areas. The size and shape of the part or parts of the

Contract Ara to be relinquished shall be determined by the Contractor; provided,

however, that:

(a)



the c bntractor shall advise the Ministry at least ninety (90) Days prior to the date

of rel~nquishment which parts of the Contract Area the Contractor wishes to

relinquish;



(b)



the Cf ntractor shall consult with the Ministry regarding the shape and size of each

indivT ual portion of the areas being relinquished; and



(c)



unless the Ministry expressly allows otherwise, the area being relinquished shall

not b~ div ided into more than two (2) portions, each of which shall comprise, and

be der ned by reference to, graticular sections as described in Exhibit B, provided,

howeyer, that the Ministry shall permit the area being rel inquished to be divided

into !fore than two (2) portions if necessary to avoid including within the area

part 9r all of a Field or area in which a Discovery has been made which the

Contrflctor is not otherwise required to relinquish hereunder. To the extent that the

boundaries of the original Contract Area permit, each individual portion being

relinqLished shall:

(i)



be not less than twenty percent (20%) of the area being relinquished at

such time;



(ii)



be not less than fifty percent (50%) of the largest individual portion being

relinquished at such time;



12



Afghan-Tajik Basin Phase I Tender

(iii)



have a longest side not more than three times as long as the shortest side;

and



(iv)



have sides parallel to the boundaries of the original Contract Area.



4.3



Voluntary Relinquishment. The Contractor shall have the right to relinquish all or any

part of the Cbntract Area upon at least ninety (90) Days' written notice to the Ministry.

In the event f f partial relinquishment pursuant to this Section 4.3, the area relinquished

shall be credl;ted against that portion of the Contract Area which the Contractor is next

required to relinquish pursuant to Section 4.1 .



4.4



Compliance IWith Obligations. No relinquishment made in accordance with this Article

IV shall reli~ve the Contractor of: (a) its obligation to make payments due as a result of

surface rental fees incurred prior to the date of any such relinquishment; (b) its obligation

to comply WIth the Winning Bidder's Exploration Program; or (c) any other obligation

that may have accrued prior to the date of relinquishment.



4.5



Clean-up a J d Restoration. Upon relinquishment of any area, the Contractor shall

perform all nbcessary clean-up activities and undertake all necessary restoration measures

in accordancf with Good Oil Field Practices and Afghanistan Law, and shall take all

action neces~ ary in accordance with Good Oil Field Practices to prevent hazards to the

environment, flora and fauna, the local community, human health and life or third-party

property, pr vided that the Contractor shall have no obligation to restore any area to a

condition better than that established in the Baseline Environmental Assessment.



ARTICLE V

GENERAL OBLIGATIONS OF THE CONTRACTOR

5.1



Conduct of Hydrocarbons Operations. The Contractor shall be responsible for

conducting lall Hydrocarbons Operations within the Contract Area diligently,

expeditiousl~ and efficiently in accordance with Good Oil Field Practices and the

prevailing legislation and pursuant to Work Programs and Work Program Budgets

approved in I accordance with Section 5.3 . Without limiting the generality of the

foregoing, the Contractor shall:



(aJ



expe~d all necessary funds and purchase or lease all technology, equipment,



machJnery, materials and supplies required to be purchased or leased in

conn9ction with Hydrocarbons Operations and furnish all other funds for the

perfo ~mance of Hydrocarbons Operations as may be required, including payment

to th ~rd parties that perform services as contractors or subcontractors to the

Contractor;



(b)



provit all technical expertise and assistance, including foreign personnel,

requirled for the conduct of Hydrocarbons Operations;



13



Afghan-Tajik Basin Phase I Tender



5.2



(c)



ensure that all equipment, materials, supplies, plant and installations used by the

Cont~actor, its contractors and subcontractors comply with Good Oil Field

pract cs and are of proper construction and kept in good working order;



(d)



ensure that Exploration Wells with shows of Hydrocarbons sufficient to warrant

testink under Good Oil Field Practices are properly tested;



(e)



use

resources in the Contract Area as productively as practicable, prevent

damage to producing formations, and ensure that Hydrocarbons discovered,

drillirtg fluids, mud or any other waste (solid or fluid) do not escape and are not

wasterI •



(f)



act i ' accordance with Good Oil Field Practices to prevent damage to

HydrJ carbon and water bearing strata that are adjacent to a producing formation,

and prlevent water from entering any strata bearing Hydrocarbons, except where

water injection methods are used for enhanced recovery operations or are

intended otherwise in accordance with Good Oil Field Practices;



(g)



act in accordance with Good Oil Field Practices to (i) protect the environment

such as to avoid any damage to flora and fauna and any other pollution of the

envirJ nment and (ii) subject to Section 9.3, secure the safety, health and welfare

of pe~sons engaged in Hydrocarbons Operations and the public;



(h)



to the extent possible, prevent and mitigate any risks arising from Hydrocarbons

Operations,

and compensate third parties to the extent required by Afghanistan

I

Law in respect of any actual injury, damage or loss resulting from an act or

omiss~on of the Contractor, its subcontractors or its agents, employees or

repreJentatives in the course of the conduct of Hydrocarbons Operations, and

ensur~ prompt, fair and full compensation to such parties to the extent required by

apPli1abie law and the decisions of authorized dispute settlement bodies;



(i)



comply with applicable laws relating to employment when employing domestic or

forei gf staff, provide acceptable working conditions and living accommodations,

and aecess to medical attention and nursing care, for all personnel employed by it,

its cor tractors and its subcontractors in Hydrocarbons Operations, and otherwise

ensure that international norms related to labor, social protection and human

rights l,are respected and that no child labor or forced labor is used in connection

with If YdrOCarbons Operations; and



(j)



comply with the applicable environmental laws and regulations of Afghanistan.



t~e



O per a tor.

(a)



The ~ontractor hereby appoints TPAL to act as the Operator responsible for

carrying out Hydrocarbons Operations in the Contract Area for and on behalf of

the Cbntractor. Each Contractor Entity hereby authorizes the Operator to take

such ~ctions as agent on behalf of the Contractor and to exercise such rights,



14



Afghan-Tajik Basin Phase I Tender

privi lFges and powers and to comply with such obligations under this Contract as

are ar ibuted to or imposed on Contractor herein or under Afghanistan Law.

(b)



The ([)perator shall, subject to the terms and conditions of this Contract, have all

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

and ~nder Afghanistan Law. The Ministry shall be entitled to deal exclusively

with Ithe Operator in respect of all matters relating to this Contract and the

contr ctor's performance of Hydrocarbons Operations.



(c)



The ~ontractor shall notify the Ministry in writing of any proposed change in the

Operf tor or the Operator's responsibilities and any change in the Operator or the

Operf tor's responsibi lities shall require the prior written consent of the Ministry

(not to be unreasonably withheld).



(d)



All J ts and omissions of the Operator under this Contract shall be binding upon

and ~eemed to constitute acts and omissions of the Contractor. Each Contractor

Entit1' shall be jointly and severally liable for all duties and obligations of the

Cont~actor and each Contractor Entity hereunder except (i) those relating to

paymFnt of Income Tax pursuant to Article XVI and (i i) for the accuracy of

inforrr.ation provided to the Ministry under this Contract in connection with its

own affairs (including but not limited to information provided in connection with

a prof osed transfer or assignment pursuant to Article XXVIII), which shall be the

separate obligation of each Contractor Entity.



(e)



thirty (30) Days after the Effective Date, (i) the Operator and each

contr:ctor Entity shall register to do business in Afghanistan and (ii) the Operator

shall appoint and notify the Ministry of the name of a competent Person (the

"Per"on-in-Charge") to be in charge of all Hydrocarbons Operations in the

Conttr,ct Area. The Person-in-Charge shall ensure to the best of his ability that he

and ~Il workers in his charge know and comply with all relevant laws and

regu lations, and with any safety manual that is applicable to the operations under

his c~ntroi. The Person-in-Charge shall ensure that the Contractor's operating

proce~ ures and working conditions provide for the safety of the personnel

engaged in Hydrocarbons Operations, the protection of the equipment used in

Hydr~carbons Operations, the protection of the environment and the conservation

of rekources. The Person-in-Charge shall be respons ible for preparing and

subm itting to the Ministry on a timely basis all programs, budgets, manuals,

repork documents and other communications required from the Contractor

pursur nt to this Contract or Afghanistan Law.



(t)



The ~erson- in-Charge shall serve as the legal representative in Afghanistan for

the Contractor and each Contractor Entity. The Person-in-Charge shall have an

offic9 in an adequate location in Afghanistan for exercising the tasks of such

representative, be a resident in Afghanistan with legal address and have authority

to reBresent the Contractor and each Contractor Entity in all matters relating to

this Contract. In the event of replacement of the Person-in-Charge, such



With~'



15



Afghan-Tajik Basin Phase I Tender

replatement shall be similarly notified to the Ministry upon the effective date of

the rj laCement.



5.3



Work progrla ms and Budgets.

(a)



The Contractor shall prepare and submit to the Ministry for approval a Work

Prog¥ m and Work Program Budget for Hydrocarbons Operations and

Hydr?carbons Operations Expenditures (i) for the period from the Effective Date

until p ecember 31, 2013 within sixty (60) Days after the Effective Date and (ii)

for t~e period from January 1, 2014 until December 31, 2014 on or before

November 1, 2013 . Notwithstanding any other provision of this Contract, the

Wor~ Programs and Work Program Budgets shall include the annual training

programs described in Sections 20.1 and 20.2. The Ministry and the Contractor

shall I promptly agree on the Work Programs and Work Program Budgets

SUbmitted pursuant to this Section 5.3(a).



(b)



At 19ast ninety (90) Days prior to the beginning of each Calendar Year

comrrrencing on or after January 1, 2015, the Contractor shall prepare and submit

to the Ministry for approval a Work Program and Work Program Budget for

Hydrt carbons Operations and Hydrocarbons Operations Expenditures by Quarter,

setting forth the Hydrocarbons Operations the Contractor proposes to carry out

during the ensuing Calendar Year.



(c)



maximum extent practicable, the Contractor shall involve representatives

To

of the Ministry in the preparation of the Work Programs and Work Program

Budgbts.



(d)



Each Work Program and Work Program Budget shall comply with the Winning

Bidd9r's Exploration Program (including any changes thereto adopted pursuant to

Secti~n 6.5), as well as with Good Oil Field Practices and the prevailing

legislation and regulations.



(e)



APprL al by the Ministry of the proposed Work Programs and Work Program

BUdgbts will not be unreasonably withheld or delayed.



(f)



the Ministry wish to propose revisions to the Work Program or Work

Program Budget, it shall within thirty (30) Days after receipt thereof so notify the

Cont+ ctor, specifying in reasonable detail its reasons for doing so. Promptly

there,fter, the Parties shall meet and endeavor to agree on the revisions proposed

by thl Ministry.



(g)



If the Contractor and the Ministry fail to agree upon any revisions proposed by the

Minis ry within sixty (60) Days of the receipt of the Contractor's proposals, the

l

point of disagreement shall be resolved as follows :



th~



ShOU~



(i)



with respect to Work Programs and Work Program Budgets that relate to

Exploration Operations, the Contractor's proposals, revised in accordance



16



Afghan-Tajik Basin Phase I Tender

with any agreed amendments or additions thereto, shall be deemed

adopted, provided that they are in compliance with Section 5.3(d); and

(ii)



(h)



5.4



with respect to Work Programs and Work Program Budgets that relate to

Development and Production Operations, the Contractor's proposals,

revised in accordance with any agreed amendments or additions thereto,

shall be deemed adopted provided that they are consistent with the

Development Program and Development Program Budget adopted

pursuant to Section 7.1 (i)(ii) and are in compliance with Section 5.3(d).



The ~arties recognize that the details of a Work Program may require changes in

lightdof the then prevailing circumstances. In such event, the Contractor may

intro uce such changes as may be necessary, following consultation with the

Minisltry, but subject to the following:

(i)



in the case of changes to a Work Program and Work Program Budget

relating to Exploration Operations, such changes may be implemented

provided that compliance with Section 5.3(d) is maintained; and



(ii)



in the case of changes to a Work Program and Work Program Budget

relating to Development and Production Operations, such changes may be

implemented to the extent that they are not inconsistent with the

applicable Development Program and Development Program Budget

adopted pursuant to Section 7.1 (i)(ii) and compliance with Section 5 .3(d)

is maintained .



Drilling



Op~rations.



I



(a)



The ~=ontractor is required to design Wells and conduct drilling operations,

inclUr'ng the casing, cementing and plugging of Wells, in accordance with Good

Oil Fi Id Practices.



(b)



Ever I Well in the Contract Area shall be identified by name, number and

geographic coordinates, which shall be shown on maps, plans and similar records

that the Contractor shall keep and submit to the Ministry.



(c)



priorf

lo commencing the drilling of any Well or re-entering any Well on which

work as been discontinued for more than ninety (90) Days, the Contractor shall

give e Ministry written notice no later than seven (7) Days before such work

shall lommence and submit a proposed Well program. The proposal shall include

the fo lowing information:

(i)



the official name and number of the Well and a description of its precise

location by reference to geographical coordinates;



(ii)



a detailed work program describing the drilling technique to be employed

and all ancillary operations (including casing, cementing, mud, coring,

logging, Well control and testing), an estimate of the time to be taken and



17



Afghan-Tajik Basin Phase I Tender

depth objective, the estimated costs of the Well program, and the safety

measures to be employed in the drilling of the We ll ;

(iii)



a summary of the geological and geophysical data, and any interpretations

thereof, upon which the Contractor made the decision to drill or

commence work on the respective Well (accompanied by appropriate

maps and cross-sections);



(iv)



the name of the drilling contractor and designation of the drilling rig; and



(v)



the name of other service companies to be employed, together with a brief

description of the equipment and services to be provided.



(d)



If an)! work related to any Well is suspended for a period exceeding thirty (30)

Days,1the Contractor shall notify the Ministry in writing to that effect and shall

provime the Ministry with reasons for suspending work related to that Well.



(e)



The



~ontractor



shall give forty-eight (48) hours notice in writing before



recommencing

work on any Well on which work has been suspended for more

I

than tr irty (30) Days but for less than ninety (90) Days.

(f)



The Gontractor shall not, without the prior written approval of the Ministry, drill

any t ell from any surface area within the Contract Area which is less than five

hundrf d (500) meters from a boundary of the Contract Area, or from within the

contT ct Area through any vertical boundary of the Contract Area.



(g)



The Gontractor shall securely plug and clearly mark any Well that it abandons, in

accor~ance with Good Oil Field Practices, to prevent pollution and damage to the

depo¥ and underground strata through the entry of water or otherwise. The

Contrr ctor shall, except when the Ministry otherwise directs or this Contract

otherf ise provides, remove all equipment, materials and facilities relating thereto

and provide that cemented strings or other forms of casing shall not be withdrawn

witho~t the written approval of the Ministry.



(h)



In ret ion to every Well being drilled, completed, tested or abandoned, the

Contrkctor shall submit to the Ministry daily Well reports during the conduct of

drillirlg operations describing the progress and results of the operations. In

additibn, the Contractor shall submit a Well completion report accompanied by

copie$ of all logs obtained from the Well within two (2) Months from the date of

rig re1case of a Well.



(i)



The 9 ontractor shall, within one hundred and eighty (180) Days of the completion

of an~ survey, test or drilling operations, or, in the case of data that cannot

reaso?ably be obtained or compiled in that period, as soon as possible thereafter,

submIt to the Ministry copies of all geological and geophysical data obtained by

the Cbntractor in the course of conducting Hydrocarbons Operations, including

any irlterpretations thereof and logs and records of Wells.



18



Afghan-Tajik Basin Phase I Tender

G)



(k)



The 90ntractor shall drill each Exploration Well to the depth set forth in the Well

program, unless:

(i)



formation is encountered at a lesser depth than originally anticipated;



(ii)



basement is encountered at a lesser depth than originally anticipated;



(iii)



in the Contractor's reasonable opinion, continued drilling of the

Exploration Well is too hazardous because of abnormal or unforeseen

conditions;



(iv)



Good Oil Field Practices require the suspension or termination of drilling

operations due to insurmountable, abnormal or unforeseen technical or

operational conditions; or



(v)



the Parties agree in writing to terminate the drilling operations in respect

of the Exploration Well.



If the Contractor determines it is reasonable to stop drill ing pursuant to Section

5.4G) it will notify the Ministry immediately and a determination will be made

jointly whether to amend the Work Program, the Winning Bidder's Exploration

Progr i m, the Minimum Exploration Program and the Well program accordingly

to :

(i)



enable successful completion of the Exploration Well;



(ii)



substitute another Exploration Well; or



(iii)



determine an alternative solution acceptable to the Parties.



In th event the Parties elect to substitute another Exploration Well pursuant to

Secti9n 5.4(k)(ii), the amount guaranteed under the Financial Guarantee shall be

reduced by the cost of the abandoned Exploration Well.



5.5



Reports on I Hydrocarbons Operations. The Contractor shall keep the Ministry

regularly andl fully informed of the progress and results of all Hydrocarbons Operations

and shall ~rovide the Ministry with all geologic information, data, samples,

interpretationr and reports, including progress and completion reports, and keep such

original data, records and full particulars at its registered office in Afghanistan, as are

required under this Contract, the Hydrocarbons Law or applicable regulations.



5.6



Other MinJ als.

(a)



If, in fhe course of Hydrocarbons Operations, the Contractor discovers minerals

other ~han Hydrocarbons in the Contract Area that are of economic value and are

capable

of being developed, it shall within thirty (30) Days inform the Ministry of

I

the m'nerals discovered, their location and such other information as the Ministry



19



Afghan-Tajik Basin Phase I Tender

may reasonably request and

minerls to the Ministry.



5.7



In



addition submit a sample of the discovered



(b)



If, ar·er the Effective Date, the Ministry seeks to grant licenses within the

Cont act Area authorizing prospecting for, exploration for or mining of any

mine als or other substances other than Hydrocarbons, the Ministry shall obtain

the
with1eld.



(c)



If ot~ers are granted licenses within the Contract Area authorizing prospecting

for, ~xploration for or mining of any minerals or other substances other than

Hydnhcarbons, or the Ministry proceeds with such prospecting, exploration or

mini~g directly on its own behalf, the Contractor shall afford proper passage for

the li
reasohable efforts to avoid obstruction or interference with such licensees' or

MiniJtry operations within the Contract Area. The Ministry shall use its

reasor able efforts to ensure that operations of third parties do not obstruct or

interfere with the Hydrocarbons Operations within the Contract Area.



Historic andi Cultural Items.

(a)



If, in the course of Hydrocarbons Operations, the Contractor finds signs or marks

or disf overs items of any historical or cultural significance, including fossils only

of sPFcial significance and other items included on the Archaeological and

Cultural Heritage list, it shall immediately inform the Ministry of the find or

·

I

d Iscor

ry.



(b)



The
The ¢ ontractor undertakes to keep any such items safe on its own account on

behalf of the State until they are transported by the relevant State authorities.

Howd1ver, in case such transportation is not provided by the State within sixty (60)

Days of reporting, the Contractor may arrange transportation for the items,

provi~ed that all reasonable transportation and related expenses shall be borne by

the re evant State authority, whom failing then the Ministry.



(c)



Costs incurred by the Contractor in complying with its obligations pursuant to

Section 5.7(b) shall be considered Hydrocarbons Operations Expenditures

recov~rable by the Contractor in accordance with the Accounting Procedures.



ARTICLE VI

E PLORATION PHASE; WINNING BIDDER'S

EXPLORATION PROGRAM

6.1



Commencement of Hydrocarbons Operations. The Contractor shall commence

HydrocarbonS Operations within the Contract Area not later than thirty (30) Days after



20



Afghan-Tajik Basin Phase I Tender

the later of the date that the Ministry approves the first Work Program and Work Program

Budget and the activities and approvals required under Sections 6.2 and 6.3 are

I

completed or secured.



6.2



Baseline EnJ ronmental Assessment and Screening Report. As soon as practicable

following the jEffective Date and prior to commencing any Exploration Operations that

would be subject to review under the applicable environmental laws of Afghanistan, the

Contractor shkll carry out a Baseline Environmental Assessment to determine the then

prevailing sitJ ation relating to the environment in the portion of the Contract Area where

the Contracto~~ntends to commence Exploration Operations. The Contractor shall submit

that Baseline Jcnvironmental Assessment, along with a Screening Report describing the

Exploration 0IPerations proposed to be conducted in that portion of the Contract Area, to

the Nat ional Environmental Protection Agency. If, after review of such Baseline

Environmental Assessment and Screening Report, the National Environmental Protection

Agency dete1mines that an Environmental Impact Assessment and environmental

management plan are required prior to commencement of the proposed Exploration

Operations, t~e Contractor shall prepare such Environmental Impact Assessment and

environmental management plan in compliance with the regulations or procedures of the

N atiooal Env tnmental Protection Agcncy and with Section 7.1 (i)(ii)g-7 .1(i)(i i)h .



6.3



Social I mpact Assessment. As soon as practicable following the Effective Date and

prior to comrrtencing any Exploration Operations, the Contractor shall prepare and submit

to the Minist?: for approval a Social Impact Assessment relating to communities in or

immediately adjacent to the portion of the Contract Area where the Contractor intends to

commence E~ploration Operations.



6.4



Winning

Exploration Program. Subject to Section S.4(k) and Section 6.5, the

Contractor u~dertakes to carry out and comply with the work commitments established

by the Winning Bidder' s Exploration Program. The amount estimated to be expended by

the Contractot in conducting the Minimum Exploration Program is set forth in Exhibit H

and the amoJ nt estimated to be expended by the Contractor in conducting the entire

Winning Bidder's Exploration Program is set forth in Exhibit I.



6.5



Changes to Winning Bidder's Exploration Program. The Parties recognize that the

portion of thcl Winning Bidder's Exploration Program that exceeds the requirements of

the MinimurJ Exploration Program may require changes in the event the Contractor

determines that:



Bid~er's



I



(a)



EXPIJ ation Operations cannot be conducted as proposed due to abnormal or

unfor9seen technical or operational conditions, including the conditions described

in seclion S.4(j); or



(b)



development of a Commercial Discovery should be prioritized in order to

promdte the early production of Hydrocarbons from the Contract Area.



The contractL shall notify the Ministry immediately of any such determination and the

Parties shall meet as soon as reasonably practicable to determine jointly whether to adopt



21



Afghan-Tajik Basin Phase I Tender

any proposed changes to such portion of the Winning Bidder's Exploration Program;

provided, ho lever, that any such changes shall not reduce the amount estimated to be

expended by the Contractor in conducting the entire Winning Bidder's Exploration

Program as set forth in Exhibit I.



ARTICLE VII

DISC([)VERY; DEVELOPMENT AND PRODUCTION

7. 1



Discovery; Dl velopment .



(a)



The c l ntractor shall immediately notify the Ministry in writing of any Discovery,

specif~ing all pertinent information concerning the Discovery and submitting a

samplJ of the Hydrocarbons discovered to the Ministry.



(b)



If the

detenn ines to conduct a drill-stem or production test, in open

hole OF through perforated casing, with regard to the Discovery, it shall notify the

Ministbr of the time of such test at least forty-eight (48) hours prior to the

propo~ed test, and the Ministry shall have the right to have a representative

present during such test. The duration of such test shall be in accordance with

Good Oilfield Practices and Hydrocarbons produced during such test may be

flared . Not later than one hundred and twenty (120) Days after completion of

such tFst, the Contractor shall complete its analysis and interpretation of the

resultt g data and submit a report to the Ministry, which shall contain copies of

such data and its analysis and interpretation thereof, and which shall also contain

a wri~en notification of whether or not, in the Contractor's opinion, such

DiscoJ ery is of commercial interest. If the Contractor' s report informs the

Minis~ that a Discovery of Non-Associated Gas is of commercial interest, the

provisions of Section 15.2 shall apply.



(c)



If the Contractor plugs and abandons a Well which encountered a Discovery

w ithout conducting a dri ll-stem or production test, or fails to conduct a drill-stem

or proa uction test within one hundred and eighty (180) Days from the date on

which Isuch Discovery was made (or within such additional period of time as the

Ministry may grant pursuant to Section 15.2 or upon application by the Contractor

demodstrating the Contractor' s firm intention to conduct such test and a

comp, lIing commercial rationale for the extension), the Contractor shall be

deem9d to have notified the Ministry that, in the Contractor's opinion, such

Discovery is not of commercial interest.



(d)



If, pu+ uant to Sections 7.I(b) or 7.1 (c), the Contractor notifies, or is deemed to

have notified, the Ministry that such Discovery is not of commercial interest, the

Ministry shall have the option, exercisable by notice in writing to the Contractor,

to reqLire the Contractor to relinquish the area corresponding to such Discovery

and fdrfeit any rights relating to such Discovery and any production from that

area. lfhe area subject to relinquishment shall not exceed the vertical projection to



~ontractor



22



Afghan-Tajik Basin Phase I Tender

the sUfface of the prospective producing area determined by taking into account

the ar
technibl factors . Notwithstanding any other provision of this Contract, if the

Contd ctor notifies the Ministry that it cannot declare a Commercial Discovery in

respect of a Discovery within the time period specified in Section 7 .1 (b) for

econoljl1ic reasons, the Ministry agrees that prior to it requiring the Contractor to

relinquish such Discovery, the Ministry shall meet with the Contractor and give

the C9ntractor the opportunity to discuss the basis on which development of such

relinquished area would be commercially viable for the Contractor.

(e)



1f, pul suant to Section 7.1 (b), the Contractor notifies the Ministry that the

Discovery is of commercial interest, the Contractor shall within ninety (90) Days

prepar~ and submit to the Ministry for approval an Appraisal Program and an

Appraisal Program Budget for the appraisal of such Discovery. Such Appraisal

Progd m and Appraisal Program Budget shall include a complete program of

appraisal operations necessary to determine whether such Discovery is a

comtrcial Discovery.



(t)



Withiq thirty (30) Days after the submission of the Appraisal Program and

Appraisal Program Budget pursuant to Section 7.l(e), the Contractor and the

Minis~ry shall meet with a view to adopting such Appraisal Program and

Appraisal Program Budget or mutually agreeing upon amendments or additions

theret~ . Failing agreement between the Contractor and the Ministry as to such

Appraisal Program and Appraisal Program Budget at such meeting, or within

twent~ (20) Days thereafter, the original Appraisal Program and Appraisal

Progr~m Budget submitted by the Contractor, revised in accordance with any

agreed amendments or additions thereto, shall be deemed adopted, provided that it

confo~ms to Good Oil Field Practices and the applicable legislation and

regu lations, and the Contractor shall immediately commence implementation

ther:?f . On adoption of the Appraisal Program and Appraisal Program Budget,

the ~Iork Program and Work Program Budget adopted pursuant to Section 5.3

shall , e revised accordingly.



(g)



If, pu~suant to Section 7.1(b), the Contractor has notified the Ministry that the

Discovery is of commercial interest, the Contractor shall, unless otherwise agreed:

(i)



in respect of a Discovery of Liquid Hydrocarbons, advise the Ministry by

notice in writing whether or not in its opinion the Discovery is a

Commercial Discovery prior to the expiration of the Exploration Phase;

provided, however, that if the Discovery occurs in the final year of the

Exploration Phase, the Contractor shall have a period of twelve (12)

Months following the expiration of the Exploration Phase in which to

advise the Ministry by notice in writing whether or not in its opinion the

Discovery is a Commercial Discovery; and



(ii)



in respect of a Discovery of Non-Associated Gas, advise the Ministry by

notice in writing whether or not in its opinion the Discovery is a



23



Afghan-Tajik Basin Phase I Tender

Commercial Discovery within twenty-four (24) Months following

adoption of the Appraisal Program or such other period as may be

stipulated in an agreement made pursuant to Section 15 .2(c) or in an

Evaluation Agreement.

The Cpntractor shall include in any request for an extension of the Exploration

Phase f ubmitted pursuant to Section 3.1 information pertaining to each Discovery

that is of commercial interest and which remains under evaluation for

devel~pment, including a description of the feasibility studies and evaluation

activities conducted by the Contractor in respect of such Discovery.



(h)



[f sections 7.1 (g)(i) or 7.1 (g)(i i) apply to such Discovery and the Contractor

notifie1s the Ministry that the Discovery is not a Commercial Discovery, or fails to

notify the Ministry that the Discovery is a Commercial Discovery, within the

periods prescribed in Sections 7.1 (g)(i) and 7.1 (g)(i i), the Ministry shall have the

oPtion~ exercisable by notice in writing to the Contractor, to require the

contr1ctor to relinquish the area corresponding to such Discovery and forfeit any

rights relating to such Discovery and any production from that area. The area

subjecf to relinquishment shall not exceed the vertical projection to the surface of

the prospective producing area determined by taking into account the area of

structJral closure of the prospective horizon and other relevant technical factors .

Re linquishment shall be without prejudice to the Contractor's right to be

reimb~rsed for Hydrocarbons Operations Expenditures in respect of the

relinq~ished areas to the extent otherwise provided in this Contract.



(i)

(i)



The notice submitted to the Ministry by the Contractor pursuant to

Sections 7.1 (g)(i) or 7.1 (g)(ii) shall be accompanied by a report on the

Discovery setting forth all relevant technical and economic data, including

geological and geophysical information, areas, thicknesses and extent of

the productive strata, petrophysical properties of the reservoir formations,

the reservoir's productivity indices for the Wells tested at various rates of

flow, permeability and porosity of the reservoir formations, the relevant

characteristics and qualities of the Hydrocarbons discovered, additional

geological data and evaluations of the reservoir, Liquid Hydrocarbons and

Natural Gas reserves estimates and any other relevant characteristics and

properties of the reservoirs and fluids contained therein, as well as all

evaluations, interpretations and analyses of such data and feasibility

studies relating to the Discovery prepared by the Contractor, its

contractors, subcontractors and Affiliated Entities.



(ii)



In addition, if the Contractor believes that the Discovery is commercial, a

proposed Development Program and a Development Program Budget for

the development of such Discovery shall be submitted to the Ministry for

approval together with the report described in Section 7.1 (i)(i). The



24



Afghan-Tajik Basin Phase I Tender

Development Program and the Development Program Budget shall

include the following information:

a.



a description and map of the area that contains such Discovery and

that the Contractor proposes to delineate as a Field. The map

should be defined by reference to graticular sections and

geological formations;



b.



a detailed report, accompanied by supporting data and all analyses

and interpretations thereof, which demonstrates that the area

described in subparagraph a. above contains, alone or in

conjunction with other areas, as the case may be, a Commercial

Discovery;



c.



detailed proposals for commencement and a working plan for the

operation of the Hydrocarbons Operations, including drilling

schedules, number of Wells, Well spacing and depth objective,

Delivery Point location, production forecasts and a timing schedule

in accordance with generally accepted engineering practices and

economics of the international petroleum industry, all of which

shall ensure that the area does not suffer an excessive rate of

decline of production or an excessive loss of reservoir pressure, but

rather keeps such production rates compatible with the nature and

extent of the Hydrocarbon reservoir discovered;



d.



detailed proposals for the construction, establishment and

operation of all facilities and services for and incidental to the

development, extraction, production, storage, transportation, sale

and other disposal of Hydrocarbons and a proposed timetable for

the commencement of Hydrocarbons production, all of which shall

ensure that the area does not suffer an excessive rate of decline of

production or an excessive loss of reservoir pressure;



e.



a detailed forecast of cost estimates, capital investment

requirements, operating costs and sales revenues, and the

anticipated type and source of financing;



f.



a risk management plan prepared in accordance with the

requirements of the Hydrocarbons Law and applicable regulations,

including the measures and directions established by the Ministry

to prevent any damage and remove any hazards that the

Hydrocarbons Operations may cause to affected communities, the

Contractor's personnel and the environment;



g.



an Environmental Impact Assessment;



h.



an environmental management plan, including a socio-economic

management plan, prepared in accordance with the requirements of

25



Afghan-Tajik Basin Phase I Tender

the Hydrocarbons Law and any other applicable laws and

regulations, including the measures planned for the protection of

the environment, the elimination or the reduction of pollution and

the protection and compensation of affected populations if

applicable, and the verification of the effectiveness of such

measures;



(j)



1.



a Social Impact Assessment;



J.



an emergency response plan prepared in accordance with the

requirements of the Hydrocarbons Law and applicable regulations,

including measures to respond to any accident that may occur at

the site of the Hydrocarbons Operations, medical treatment and

evacuation of employees and surrounding populations and the

protection of the environment; and



k.



particulars of feasible alternatives, if any, considered by the

Contractor for the development and exploitation of the Discovery

and economic feasibility studies carried out by or for the

Contractor with respect to the Discovery, taking into account the

location, meteorological conditions, cost estimates, the price of

Hydrocarbons and any other relevant data and evaluations.



The Ministry shall examine the report and any documents submitted pursuant to

Section 7.I(i)(ii), and may require the Contractor to provide, within a specified

periodl of time, such additional information and data as it may reasonably require

in ordf,r to evaluate such documents . As soon as possible after the submission of

such ~ocuments pursuant to Section 7.1 (i)(ii) or receipt of such additional

information and data, the Ministry and the Contractor shall meet to determine the

boundr ries of the area to be delineated as a Field and adopt a Development

Program and Development Program Budget for the development of the Discovery

and ad environmental management plan in connection therewith .

I



(k)



(i)



At the meeting described in Section 7.1(j), the Contractor shall carefully

consider and take into account any proposals of the Ministry and the

reasons for the proposals and shall attempt in good faith to reach

agreement with the Ministry on the points at issue, paying particular

consideration to the objective of achieving Initial Commercial Production

expeditiously from the Field in question, taking into account generally

accepted engineering practices and economics of the international

petroleum industry.



(ii)



If the Ministry and the Contractor agree upon the boundaries of the area to

be delineated as a Field and upon the adoption of a Development Program

and Development Program Budget for the development of the Discovery,



26



Afghan-Tajik Basin Phase I Tender

the date upon which such agreement is reached, as reflected in writing

signed by the Ministry and the Contractor, shall be the date of the

declaration of the Commercial Discovery for all purposes of this Contract

(the "Commercial Discovery Declaration Date").

The area so

determined shall, on such date, be automatically converted into a Field.



(I)



(iii)



In the event that no agreement is reached between the Ministry and the

Contractor within one hundred and eighty (180) Days from the date of

submission of the report and proposed Development Program and

Development Program Budget pursuant to Section 7.1 (i), the Ministry or

the Contractor may refer the matter for determination pursuant to Article

XX IV. The determination in accordance with Article XXIV shall be fina l

and the Development Program and Development Program Budget for the

development of the Discovery and the boundaries of the area to be

delineated as a Field, as the case may be, shall be deemed to have been

adopted and agreed as determined, except that the Contractor may, within

sixty (60) Days of receipt of such determination, notify the Ministry that

the Discovery to which such Development Program and Development

Program Budget and area so determined relate is no longer considered to

be commercial. If the Contractor so notifies the Ministry, the provisions of

Section 7. 1(g)(ii) shall apply. Failing such notification, the date sixty (60)

Days after the receipt of such determination shall be deemed to be the

Commercial Discovery Declaration Date. The area so determined shall,

on such date, be automatically converted into a Field.



(iv)



The Ministry shall provide the Contractor with a permit to conduct

Development and Production Operations in the Field substantially in the

form attached hereto as Exhibit L within thirty (30) Days after the later of

(A) the Commercial Discovery Declaration Date and (B) approval by the

National Environmental Protection Agency of the Contractor's

Environmental Impact Assessment and environmental management plan .

The Contractor shall, as soon as is practicable after receipt of such permit,

commence and continuously carry out Development and Production

Operations in the Field according to the adopted Development Program

and the Development Program Budget. Upon adoption of the

Development Program and Development Program Budget as aforesaid, the

Work Program and Work Program Budget adopted pursuant to Section 5.3

shall be revised accordingly.



In the event that Initial Commercial Production from a Field has not occurred

withi six (6) Months after the period agreed in the Development Program (as

amended from time to time), the Ministry may require the Contractor to relinquish

the arJa comprising such Field and to forfeit any rights relating to such Field and

any p~oduction from such Field. Notwithstanding the foregoing, if the Contractor

demonstrates to the reasonable satisfaction of the Ministry that, despite the

Contractor having acted in accordance with Good Oil Field Practices, Initial

Comrrlercial Production will not occur within six (6) Months after the period



27



Afghan-Tajik Basin Phase I Tender

agreed in the Development Program (as amended from time to time), the Ministry

shall 10t require the Contractor to relinquish the area comprising such Field and

the D9velopment Program shall be automatically amended to reflect the revised

date f9r Initial Commercial Production and such revised Development Plan shall

be deemed approved by the Ministry. The Contractor shall notify the Ministry as

soon a~ reasonably practicable if it cannot meet the Initial Commercial Production

date ahd

the Contractor shall provide the Ministry with written notice of any

I

extension requested under this section at least thirty (30) Days prior to the Initial

com1 ercial Production date.



7.2



(m)



If the
Sectiof 7.1, ownership of all fixtures, including but not limited to pipes, pipelines,

installations, facilities, downhole well equipment, wellhead equipment and other

equiprhent or materials within the geographic limits of the area shall be

transf9rred to the Ministry. Unused inventory and fixtures which can be used by

the C(i)ntractor for Hydrocarbons Operations elsewhere in the Contract Area,

leased I equipment and other Contractor equipment may be removed if such

removal may be accomplished without damage to the area.



(n)



The

or procedures of the National Environmental Protection Agency

require submission and review of a Screening Report prior to submission of the

Envir9nmental Impact Assessment and environmental management plan

descrilbed in Section 7.1 (i)(ii)g-7.1(i)(ii)h. The Contractor will ensure that such

Screeding Report is submitted in a timely manner so as not to introduce delay in

sUbmibsion of the Development Program and Development Program Budget.



r~gUlations



Production.

(a)



Not le1ss than three (3) Months prior to Initial Commercial Production in any

Field, the Contractor shall submit to the Ministry for approval proposed

procedures and related operating regulations and financial terms covering, as

applicr ble, the scheduling, storage and lifting of Liquid Hydrocarbons and the

scheduling, storage and extraction of Natural Gas from such Field. The

procedures, regulations and terms shall comprehend the subjects necessary to

efticier t and equitable operations, including Delivery Point location, rights of

parties, notification time, maximum and minimum quantities, duration of storage,

nomi1ation and scheduling of transportation, volumetric balancing, conservation,

spillage, liabilities of the parties, through-put fees , and safety and emergency

procedures.



(b)



shall produce Liquid Hydrocarbons from the Contract Area at the

The

Maximum Efficient Rate. The Contractor and the Ministry shall establish the

Maxirhum Efficient Rate of production for Liquid Hydrocarbons and the

produbtion rate for Non-Associated Gas in conjunction with the adoption of each

Work IProgram that relates to the development of a Field. In the case of NonAssociated Gas, the production rate shall not be required by the Ministry to be



c~ntractor



28



Afghan-Tajik Basin Phase I Tender



less In that required to satisfy any contracts then in existence for the sale of

such 'f tural Gas.

(c)



7.3



No later than September 30 of each Calendar Year during the Development and

Produdtion

Phase of any Field, the Contractor shall, in accordance with Good Oil

I

Field r ractices, prepare and furnish to the Ministry for approval a forecast

statement setting forth by Quarter the total quantity of Liquid Hydrocarbons (by

qualit~, grade and gravity) and Natural Gas that the Contractor estimates can be

produ1ed, saved and transported hereunder during the ensuing Calendar Year,

together with estimates, if available, of recoverable reserves of Hydrocarbons,

broke~ down into proven and proven plus probable. The Contractor shall

endeavor to produce in each Calendar Year the forecast quantity. The Liquid

Hydrobarbons shall be run to storage tanks, constructed, maintained and operated

by the lContractor in accordance with applicable regulations, in which such Liquid

Hydrocarbons shall be metered or otherwise measured for all purposes of this

Contdct. Natural Gas shall be stored, transported and metered or otherwise

measu~ed in accordance with the provisions of the Natural Gas Development

progr1m adopted pursuant to the provisions of Article XV.



Cessation of Production.

I



(a)



The S ontractor shall submit to the Ministry for approval a proposed Field

decolllmissioning and abandonment plan (the "Decommissioning and

Abandonment Plan") after exhaustion of fifty percent (50%) of Recoverable Gas

Initial ly in Place (RGIIP) / Recoverable Oil Initially in Place (ROIIP), or seven

(7) Cdlendar Years before the expiration of the Development and Production

Phase Ifor the relevant Field, whichever is earlier, which shall include a detailed

technical and engineering description of the decommissioning, removal and

dispos~l of the facilities and installations, and of the site clean-up and restoration

measures, consistent with the Hydrocarbons Law, Good Oil Field Practices and

with the obligations of Contractor under Sections 4.5, 23.2 and 25.7, including

measUirl es to rehabilitate, as far as reasonably practicable, the environment affected

by the Hydrocarbons Operations to its natural or prior state as established by the

Baseline Environmental Assessment.

The Contractor shall submit the

Decommissioning and Abandonment Plan together with a detailed and itemized

budget of the Hydrocarbons Operations Expenditures to be incurred in connection

therei ith (the "Decommissioning a nd Abandonment Budget").



(b)



No lafr than twelve (12) Months prior to the expiration of the Development and

Production Phase of any Field, the Contractor shall notify the Ministry of its

intent~on to terminate Hydrocarbons Operations. Within thirty (30) Days from the

date of the Contractor's notice under this Section 7 .3(b), the Ministry shall notify

the Cdntractor in writing whether it will require the Contractor to carry out all or

part ~f the decommissioning measures set out in the Decommissioning and

Abandonment Plan. Following receipt of the Ministry'S notice, the Ministry and

the q ontractor shall meet to agree upon a final Decommissioning and

Abandonment Plan and a final Decommissioning and Abandonment Budget.



29



Afghan-Tajik Basin Phase I Tender

(c)



The c t ntractor and the Ministry shall set up an escrow account in the joint name

of the Contractor and the Ministry (the "Escrow Account") with a bank of good

intern+onal reputation (the "Bank") to finance the Hydrocarbons Operations

Expenoitures specified in the Decommissioning and Abandonment Budget in



accort nce with Section 7.3(e).

E~crow



(d)



Account shall be funded by monthly contributions made by the

Contr~ctor on a unit-of-production basis until the target value of the

Decommissioning and Abandonment Budget is reached. The monthly

contriHution will be calculated by following the procedure established in

AppenUix I to the Accounting Procedures.



(e)



The

of the Decommissioning and Abandonment Budget, pro-rated on a

unit o~ production basis over the period from the date of opening of the Escrow

Account to the estimated date of cessation of production, shall be included in the

Hydrotarbons Operations Expenditures and shall be recovered by the Contractor

in accbrdance with Section 10.1 (b). At the end of each Quarter in which the

Contr~ctor shall have recovered any part of the Decommissioning and

Abandpnment Budget, the Contractor shall deposit the amount so recovered in the

Escror Account. Upon cessation of production, the Contractor shall diligently

carry f.ut the Decommissioning and Abandonment Plan and the Hydrocarbons

Operations Expenditures due in connection therewith shall be paid by the Bank

upon + ceipt of a written joint instruction from the Ministry and the Bank. Any

un-sper t monies remaining in the Escrow Account upon settlement of all

Decommissioning

and Abandonment Expenditures shall be remitted by the Bank

I

to the Ministry.



(f)



In the L ent the Ministry elects to continue Hydrocarbons Operations in any Field

(or thll Ministry permits a third party to commence or continue Hydrocarbons

Opera ions in any Field) following the Contractor's termination of Hydrocarbons

Opera ions in relation thereto, the Contractor's liability for decommissioning

measutes shall be limited to the balance of the Escrow Account.



The



a~ount



I



l



ARTICLE VIII



FINANCIA AND PERFORMANCE GUARANTEES; BONUSES

8. 1



Financial G J arantee. N ot later than thirty (30) Days after the Effective Date, the

Contractor s~all submit a Financial Guarantee in an amount equal to the estimated

expenditures ~ecessary to perform the Minimum Exploration Program for the Initial

Exploration Pf riod. If the Contractor wishes to proceed to the First Extension Period or

the Second Bxtension Period, as the case may be, it shall submit the corresponding

Financial Gu antee as provided in Section 3.1.



30



Afghan-Tajik Basin Phase I Tender



8.2



Reduction oil Financial Guarantee. During the Exploration Phase, the amount of the

Financial Gu~rantee shall be reduced at the end of each Contract Year by the amount

actually expended on the Minimum Exploration Program.



8.3



Drawdown. [f, at the end of the Initial Exploration Period or any extension thereof, the

Contractor h~s not performed the Minimum Exploration Program required for such

period, a portion of the Financial Guarantee corresponding to the then current balance of

the Financial ~uarantee for such period shall be paid to the Ministry in accordance with

Article XIII. 11he Ministry shall have the right to draw down on the Financial Guarantee

to collect sucn amount.



8.4



Drawdown Upon Termination or Relinquishment. If, upon the date of termination of

this Contract,1 or upon relinquishment of the entire Contract Area by the Contractor

pursuant to 1rticle IV, whichever first occurs, the Contractor has not completed the

Minimum Exploration Program, an amount corresponding to the then current balance of

the Financial IGuarantee shall be paid to the Ministry in accordance with Article XIII.

The Ministry shall have the right to draw down on the Financial Guarantee to collect such

amount. The ~inistry will not grant partial credit for Wells that do not reach target depth

unless the Parties elect to substitute another Exploration Well pursuant to Section

5.4(k)(ii).

I



8.S



General Performance Guarantee. On the date that this Contract is executed, the

ultimate parertt entity of each Contractor Entity shall execute and deliver the General

Performance Guarantee to the Ministry.



8.6



Bonuses. Thl Contractor shall pay to the Ministry the following one-time bonuses:



I



I



(aJ



Withi1 seven (7) Days following the Effective Date, the Ministry shall invoice the

Contractor for one million U.S. Dollars (US$ 1,000,000) (the "Signature

BonuJ,,). The Signature Bonus shall be payable by the Contractor within seven

(7) D~ys following the date on which the exclusive License for Hydrocarbons

Operations is issued to the Contractor pursuant to Section 9.2(f).



(b)



As sot as reasonably practicable following the date on which the first permit to

condutt Development and Production Operations is granted to the Contractor

pursuJnt to Section 7. 1(k)(iv), the Ministry shall invoice the Contractor for three

millioh U.S. Dollars (US$ 3,000,000), to be paid within seven (7) Days following

receipt of such invoice.



Each invoice lissued pursuant to this Section 8.6 shall include the bank account details of

the Treasury Single Account in Da Afghanistan Bank and other details necessary for the

Contractor to make an electronic transfer of the relevant sums within the time period

prescribed.

These bonuseF shall not be recoverable by the Contractor and shall be excluded from

Hydrocarbons Operations Expenditures .



31



Afghan-Tajik Basin Phase I Tender



ARTICLE IX

OBLIGATIONS OF THE MINISTRY

9.1



9.2



Data. The Ministry shall supply or otherwise make available to the Contractor:

(a)



all geL OgiCal, geophysical, geographical, drilling, Well, production and other

inforilation, including Well location maps, relating to the Contract Area in the

posses 'ion of the Ministry or coming into its possession and which it has the right

to dis lose to the Contractor;



(b)



a list pf the sites of national parks and/or ecological reserves, as well as sites

identij ed as having Archaeological and Cultural Heritage significance, such list

to be provided prior to commencement of Hydrocarbons Operations and to

contair available details of the sites, including maps and other pertinent

information; and



(c)



inforJ ation reasonably available to the Ministry related to private land ownership

in the F ontract Area.



Assistance. In accordance with the provisions of the Hydrocarbons Law, the Ministry

shall for the d~ration of this Contract:



(a)



ProVit for the right of way and passage over State-owned land and facilitate the

Contractor in obtaining the right of way and passage over privately owned land in

order conduct Hydrocarbons Operations (including nationalization to the extent

permiJsible under Afghanistan Law), provided that the Contractor shall bear any

compdnsation to the owner or occupier. Such costs and any compensation shall be

consi1ered Hydrocarbons Operations Expenditures recoverab le by the Contractor

in accr dance with the Accounting Procedures;



to



(b)



in respect of occupation and use of privately owned land for Hydrocarbons

Operations, and upon notice submitted by the Contractor no later than ninety (90)

Days ~rior

to a proposed operation, obtain consent for such use from the owner or

I

occupier of the land in question to enable the Contractor to conduct the proposed

I

operatIons thereon, and provide the Contractor with evidence of such consent,

provided

that the Contractor shall pay fair market value for the use or occupation

I

of such land, and in the event the owner or occupier has suffered a disturbance to

activit~es or damage to land or assets caused by surface or sub-surface oil and gas

explo~ation operations, and the Contractor and the owner or occupier fail to agree

on th9 amount of compensation, review the matter and determine the amount of

damages in the first instance;



(c)



provide reasonable access to State facilities in the Contract Area at reasonable

cost tb the Contractor, provided that the Contractor's terms and conditions of

accesJ shall not be less favorable than the terms and conditions granted to

simila1ly situated parties;



I



32



Afghan-Tajik Basin Phase I Tender

(d)



(e)



provi~e reasonable access to surface areas relinquished by the Contractor pursuant

to thi ~ Contract and reasonable access to and use of existing infrastructure and

facilit ~es on such relinquished areas at no cost to the Contractor in the case that

such ir frastructure and facilities are owned by the State, provided that access and

use oflsurface areas relinquished by the Contractor shall be limited (i) to a period

of tw@ (2) years following relinquishment and (ii) to the extent necessary to

enabl~ the Contractor to conduct Hydrocarbons Operations or to retrieve unused

inventory and fixtures, leased equipment and other Contractor equipment from the

relinqiliished area in accordance with Section 701 (m);



o

assumeI responSI°bo

Il Ity C"lor t he re ha bOlO

I ItatlOn 0 f envlronmenta I contammatlOn on

State f wned and private land identified in Baseline Environmental Assessments

completed by the Contractor and approved by the National Environmental

0



0



0



0



protct on Agency;



9.3



(0



on th9 Effective Date, or no later than thirty (30) Days thereafter, issue to the

Contractor the appurtenant exclusive License for Hydrocarbons Operations within

the Ci ntract Area, subject to the satisfaction of any terms and conditions of such

License;



(g)



upon l pPlication in the prescribed manner and pursuant to applicable legislation,

proVide or facilitate all necessary visas, work permits, import licenses, export

permiis (including but not limited to licenses for Hydrocarbons), rights of way

and eJsements which (i) may be required by the Contractor and its subcontractors

and cdntractors

in connection with the Hydrocarbons Operations and (ii) may be

I

available from resources within the Government's control; and



(h)



provJ e the same assistance as set out above in (a) to (g) in relation to any

carried out by the Contractor pursuant to a Decommissioning and

Abanl onment Plano



opera~ons



Securityo The Govemment shall, at no cost to the Contractor, endeavor to provide

adequate sedurity within the Contract Area and any other areas in Afghanistan in which

Hydrocarbo~s Operations or operations related thereto (including any operations carried

out by the F ontractor pursuant to a Decommissioning and Abandonment Plan) are

conducted, ir cluding during travel to and from such areaso However, in the event that

the contracror, in its reasonable opinion, considers the security provided for its

personnel is inconsistent with its health, safety and environmental policies, Good Oil

Field Practices or inadequate to allow Hydrocarbons Operations to be conducted safely

and without threat to life, both the Ministry and the Contractor hereby agree

supplementdry security measures shall be implemented by the Contractor, as the case

may be, in1 uding, but not limited to, the engagement of competent private security

providers ligensed to operate in Afghanistan, such costs to be considered Hydrocarbons

Operations IExpenditures if included in an approved Work Program and Work Program

Budget but ~ithout prejudice to the Contractor's right to recover costs incurred under

Section 2301 not included in an approved Work Program and Work Program Budget.

Such arrangements shall be revised from time to time in response to changes in security



33



Afghan-Tajik Basin Phase I Tender

conditions, subj ect to an international independent third party conducting a security

rev iew.



9.4



Aoorovals. If the Government's consent or approval is required by the Contractor in

accordance r ith this Contract, the Contractor shall submit its request for consent or

approval to ~he appropriate authority and shall provide the Ministry with a copy of such

request contFmporaneously therewith. The Government shall endeavor to respond to

such request as soon as reasonably practicable. If the Contractor does not receive a

response fr9m the Government within thirty (30) Days following the Contractor's

submission 1o f its request, the Contractor may submit a fo llow-up request to the

appropriate authority, with a copy to the Ministry. Without prejudice to any time period

otherwise s~ecified herein or under applicable law, the Government' s consent or

approval shall be deemed to have been given if the Government has not notified the

Contractor 9f its disapproval or required clarification of such request within seven (7)

Days fOliOWling the Government's and Ministry' S receipt (whichever is later) of the

Contractor' s follow-up request. The Ministry acknowledges and agrees that to the

extent the Contractor is unable to carry out certain Hydrocarbons Operations as a result

of a failure by the Government to respond to or issue any consent, approval, permit or

license rela~ng to Hydrocarbons Operations that any time periods applicable to the

performanc9 of the Contractor' s obligations hereunder shall be suspended for the period

during which the Contractor is prevented from performing and that the Parties shall

meet and sek to agree to further extensions of time with regard to such delay. Each

Contractor 1 ntity shall benefit from the same rights as Contractor under this Section 9.4.



ARTICLE X

ALLOCATION OF PRODUCTION

10.1



Royalty; Production Share. The Hydrocarbons produced and saved from the Contract

Area in any ~' uarter and not used in Hydrocarbons Operations prior to the Delivery Point,

or lost, flared or re-injected into the Contract Area shall be allocated as follows:

(a)



A po lion of such Hydrocarbons equal to the Royalty shall first be allocated to the

Ministry as the royalty payable under the Hydrocarbons Law, but shall be lifted

by thd Contractor in accordance with any deemed sales made to the Contractor

pursuAnt to Section 10.4.



(b)



The Contractor shall be entitled to recover Hydrocarbons Operations

Expenditures

incurred by retaining and disposing of the amount of Hydrocarbons

I

availaple after payment of the Royalty for the Quarter that is equal in value to the

unrec(j)vered Hydrocarbons Operations Expenditures for the Quarter plus all

unrec~vered Hydrocarbons Operations Expenditures from prior Quarters.

Hydrdcarbons not used for the recovery of Hydrocarbons Operations

Expe~ditures shall be Net Hydrocarbons. All such Hydrocarbons Operations

Expe~ditures shall be recovered in the manner provided for in, and subject to, the

Acco Inting Procedures.



34



Afghan-Tajik Basin Phase I Tender

(c)



For the purpose of determining the quantity of such Hydrocarbons to which the

ContrJctor is entitled in any Quarter pursuant to Section 10.1(b), each type and

grade bf Hydrocarbons shall be valued at a price (i) in the case of Arm's-Length

Sales r,ade by the Contractor or its Affiliated Entities, equal to the net price at the

applicable Delivery Point obtained by the Contractor or its Affiliated Entities in

respect of sales of such Hydrocarbons produced in such Quarter (after deduction

of a ~tandard location differential agreed between the Parties to account for

deemed transportation costs from the applicable Delivery Point to the point of

sale) 1nd (ii) in the case of other sales made by the Contractor or its Affiliated

Entiti~.s, equal to the Market Price for such Hydrocarbons. If the Contractor and

the M ~ nistry fail to agree upon the Market Price within sixty (60) Days after

Contractor has provided the Ministry with written notification of its proposal, the

deterrrlination of Market Price may be referred by either the Ministry or the

ContrJctor to expertise proceedings pursuant to Section 24.2. The Ministry may,

in its ~ole discretion, determine that any sale of Hydrocarbons by the Contractor

or its 1'Jfiliated Entities to a related buyer shall be deemed an Arm ' s-Length Sale

if (A) I~he sale results from a fair, transparent and competitive tender process

conduf ted in accordance with good international petroleum industry practices and

(B) the price and payment terms accurately reflect the then prevailing fair market

value [for the Hydrocarbons, taking into consideration the grade, gravity and

quality of the Hydrocarbons, transportation costs and any other appropriate

· I

a d~ ustrents.



(d)



After deduction of the Royalty as provided in Section 10. 1(a) and recovery of the

Hydro~arbons Operations Expenditures as provided in Section I 0.1 (b), the

Minisl Y shall be allocated a portion of the Net Hydrocarbons produced and saved

in th4 Quarter determined in accordance with the formula set forth below

(provioed that such allocation shall be lifted by the Contractor in accordance with

any d~emed sales made to the Contractor pursuant to Section 10.4) and the

remai+ ng Net Hydrocarbons after such allocation shall be allocated to the

c ontrJ ctor:

If R<1.25

If 1.2 ( R:::;2.50

If R>:3.50



then

then

then



P = 50%

P = 60%-[(2.50-R) x 8%]

P = 60%



In the l bove formula :



"E" sf ll mean the Ministry's percentage share of Net Hydrocarbons, and

"R" sf all mean the cumulative Gross Contractor Revenues up to the end of the

Quarter immediately preceding the Quarter in question, divided by the cumulative

Hydroicarbons Operations Expenditures incurred up to the end of the Quarter

immef iately preceding the Quarter in question.

10.2



Calcula tions I a nd Ad justments. The calculations required by this Article X shall be

made for eac ~ Quarter on a cumulative basis. An example of the required calculations is



35



Afghan-Tajik Basin Phase I Tender

attached heret10 as Exhibit 1. To the extent that actual quantities, prices and expenses are

not known, calculations shall be made on the basis of the estimate, and quarterly updates

thereto, proviaed to the Ministry pursuant to Section 10.3. Within thirty (30) Days after

the end of ekch Quarter, adjustments shall be made based on actual Hydrocarbons

quantities, pri~es and expenses in relation to such Quarter to the extent then available.

Within ninetyl (90) Days after the end of each Calendar Year, final calculations shall be

prepared and submitted to the Ministry for approval, and any necessary adjustments shall

be made baSerI upon the detailed accounts submitted for such Calendar Year pursuant to

Section 26.2.



10.3



Estimates antl Approvals. Not le ss than ninety (90) Days prior to the beginning of each

Calendar Yea~, the Contractor shall prepare and furnish to the Ministry for approval an

estimate by Qiu arter for the forthcoming Calendar Year of all Gross Contractor Revenues

and Hydrocatons Operations Expenditures, and of the value of the Royalty and of the

Ministry'S an~ the Contractor's respective shares of Net Hydrocarbons, Net Taxable

Income and If come Tax for such Calendar Year. Such estimate shall be consistent with

the forecast statement furnished pursuant to Section 7.2(c) and the Work Program Budget

approved pu~suant to Section 5.3, and shall set forth the other assumptions and

projections u~on which it is based. Upon approval by the Ministry, such estimate shall

serve as the b~sis for the quarterly calculations required pursuant to Section 10.2 and for

the Income 'Ijax pursuant to Article XVI. Quarterly updates of such estimate shall be

submitted by the Contractor to the Ministry within thirty (30) Days after the end of each

Quarter.



10.4



Deemed Sales. The Hydrocarbons allocated to the Ministry under this Article X in any

Quarter shall,1unless the Ministry otherwise elects in accordance with Section 10.5, be

deemed sold ~y the Ministry to the Contractor upon production at the wellhead . The

purchase price for each type of Hydrocarbons produced shall be the applicable Market

Price for suc~ Hydrocarbons, and shall be payable to the Ministry no later than thirty (30)

Days following the Quarter in which such Hydrocarbons are produced . Payment shall be

accompanied Iby a certificate from the Contractor setting forth in detail the basis for

computation (j)f the purchase price, in a form acceptable to the Ministry. The provisions

of this Sectioh 10.4 shall not apply to Hydrocarbons produced during production testing

and sold by t, e Contractor, the proceeds of which shall be applied to reduce the amount

of the Contrai tor's capital expenditures in accordance with the Accounting Procedures .



10.5



Notice and ~Iection . The Ministry may, in respect of any Calendar Year, elect to retain

title to all or ~ny

part of the Hydrocarbons allocated to it under this Article X, rather than

I

sell such Hydrocarbons to the Contractor. In such event, the Ministry shall provide the

Contractor w lth notice of its election at least six (6) Months prior to the commencement

of the Calendar Year in question. If the Ministry elects to retain Hydrocarbons that

include Natutal Gas, it shall follow the Contractor's procedures for nomination and

scheduling 0 transportation, volumetric balancing, and similar operational requirements

approved by e Ministry pursuant to Section 7.2(a).



36



Afghan-Tajik Basin Phase I Tender



ARTICLE XI

MEASUREMENT OF HYDROCARBONS

11.1



Verification. Within thirty (30) Days following the end of each Quarter, the Contractor

shall submit

the Ministry for its verification the volumes, gravity in API and sulfur

content of th~ Liquid Hydrocarbons produced and saved from the Contract Area during

the Quarter inlquestion. In the event that the Ministry raises objections to the Contractor's

determinations, the Parties shall meet within fifteen (I5) Days from the Ministry's notice

of objection tJ mutually agree upon the appropriate determinations.



11.2



Measuring Eb uiPment. The Contractor shall supply, operate and maintain equipment

for measuring the volume and quality of the Hydrocarbons produced and saved, or

transported, ~tored or exported under this Contract, including gravity, density,

temperature ahd pressure measuring devices and any other devices that may be required.

All measurerrlent equipment and devices shall, prior to their installation or usage, be

approved in 1Titing by the Ministry. Such equipment and devices shall at all reasonable

times be available for inspection and testing by the Ministry or its authorized

representativef. Any such inspection or testing shall not interfere with the normal

operation oft, e facilities involved. The equipment and devices used or installed pursuant

to this secti01 11.2 shall not be replaced or altered without the prior written approval of

the Ministry.



11.3



Measurement Standards. The Contractor shall undertake to measure the volume and

quality of the ~ydrocarbons produced, saved, transported, stored and exported hereunder,

consistent with Good Oil Field Practices for fiscal metering, with such frequency and

according to t Ch procedures as are approved in writing by the Ministry .



11.4



Notice. The F ontractor shall give the Ministry timely notice of its intention to conduct

measuring operations and the Ministry shall have the right to be present at and observe,

either directly or through authorized representatives, such operations.



11.5



Measurement Inaccuracies and Adjustment. If it is determined, following an

inspection or Itest carried out by the Ministry or its representatives, that the equipment,

devices or prTcedures used for measurement are inaccurate and exceed the permissible

tolerances W~fuiCh shall be established by agreement between the Ministry and the

Contractor to be entered into prior to the installation and usage of such equipment, and

such determi ation is verified by an independent surveyor acceptable to the Ministry and

the Contractot, such inaccuracy shall be deemed to have existed for one-half of the period

since the last previous such inspection or test, unless it is proved that such inaccuracy has

been in exist9nce for a longer or shorter period. Appropriate adjustments covering such

period shall b made within thirty (30) Days from the date of such determination.



37



Afghan-Tajik Basin Phase I Tender



ARTICLE XII

DOMESTIC REQUIREMENTS

12.1



Local Preference. In marketing any part of its share of the Liquid Hydrocarbons

produced and Isaved from the Contract Area, the Contractor shall seek competitive bids in

U.S. Dollars from national and international purchasers for the purchase of the Liquid

Hydrocarbonsl in accordance with generally accepted procedures and standards for

competitive t~nders in the international petroleum industry, including reasonable, nondiscriminator requirements concerning financial capability and assurance of payment.

The Contract Ir shall notify the Ministry in writing from time to time of its procedures for

marketing Liquid Hydrocarbons. In the event that comparable bids are received from a

bidder that is Ian Afghan national or company and another bidder that is not, the bidder

that is an Afghan national or company will be preferred. Within thirty (30) Days

following the pontractor's completion of the bid evaluations, the Contractor shall prepare

and deliver tT, the Ministry a competitive bid analysis setting forth the Contractor's

recommendat~on as to the winning bidder, the reasons therefor, and the commercial and

contractual te1ms to be agreed upon .



12.2



Storage. Liquid Hydrocarbons that the Ministry has elected to take in kind and not to

sell to the Cartractor shall, to the extent practicable, be delivered by the Contractor at

regularly spaged intervals at the Delivery Point or to the Ministry's storage facilities in

the Field, or ~oth, at the option of the Ministry . The Ministry shall provide at such

Delivery Points, at its sole expense and risk, all storage, transportation and other facilities

necessary to r~ceive such Liquid Hydrocarbons.



12.3



Internal conlumption of Liquid Hydrocarbons. Out of the total quantity of Liquid

Hydrocarbons production to which the Contractor is entitled in each Calendar Year, the

Ministry may elect to take a quantity of Liquid Hydrocarbons, of the gravity, grade and

quality of its choice (but which shall be of no better than average quality if this

substantially qecreases the marketability of the remaining Liquid Hydrocarbons), that the

Ministry requ ires to satisfy the requirements of internal consumption in Afghanistan for

such calenda~ Year. The Ministry shall reimburse the Contractor for such quantity at the

applicable Market Price. The maximum quantity of Liquid Hydrocarbons that the

Ministry may ltake to satisfy the internal consumption requirements of the country shall

be calculated as follows :

DMOe = APe x (DMOt- GO V) / APt



Where:

DMOe



is the maximum quantity of Liquid Hydrocarbons from

the Contract Area that the Ministry may take to satisfy the

internal consumption requirements of the country in the

period of reference;



38



Afghan-Tajik Basin Phase I Tender

APe



is the total quantity of Liquid Hydrocarbons produced

from the Contract Area during the reference period, less

(a) the amount of the Royalty, (b) the Ministry's share of

Liquid Hydrocarbons production under Section 10.1 (d),

(c) consumption of Liquid Hydrocarbons incidental to

Hydrocarbons Operations, and (d) the quantity of Liquid

Hydrocarbons that Contractor is already selling to the

Afghanistan domestic market.



DMOt



is the internal consumption requirements of Afghanistan

during the reference period;



GOV



is (a) the quantity of Liquid Hydrocarbons rendered, in

the reference period, to the Ministry by all contractors in

the form of production payments, royalties and

production shares plus (b) any quantity of Liquid

Hydrocarbons produced directly by the Ministry or any

State oil company within Afghanistan in the reference

period; and



APt



is the volume of all Liquid Hydrocarbons produced in

Afghanistan in the reference period.



12.4



Internal Consumption of Natural Gas. Out of the total quantity of Natural Gas to

which the Cor tractor is entitled in each Calendar Year, the Ministry may elect to take a

quantity of Natural Gas to meet its internal consumption requirements on the following

basis. The Co~tractor shall be obliged to provide and supply to the State such quantities

of Natural Ga~ that are equal to the proportion that the Contractor's production of Natural

Gas bears to t~e aggregate quantities of Natural Gas produced in Afghanistan (according

to the princinles set forth in Section 12.3 for Liquid Hydrocarbons) at the applicable

Market priCe~S), provided that if the Contractor has notified the Ministry within thirty

(30) Days of Fxecuting a Natural Gas sales contract of greater than twelve (12) Months

duration excluding option periods, volumes of Natural Gas committed to purchasers

under such c~ntracts shall be excluded from the amounts that might be available to the

State for intelnal consumption. The Contractor shall have no obligation to pay for any

infrastructure necessary to transport, process or deliver Natural Gas to the Ministry. If

the Ministry elects to take a quantity of Natural Gas to meet its internal consumption

requirements, 1it shall follow the Contractor's procedures for nomination and scheduling

of transportatIon, volumetric balancing, and similar operational requirements approved

by the Ministr pursuant to Section 7.2(a).



12.5



Notification and Election. If the Ministry elects to exercise its rights under Sections

12.3 or 12.4, ~t shall so notify the Contractor in accordance with the provisions of Section

10.5. The amounts to be taken shall be based upon estimates, including those contained

l

in the forecas statement furnished pursuant to Section 7.2(c), and final adjustments shall



39



Afghan-Tajik Basin Phase I Tender

be made witll in ninety (90) Days after the end of each Calendar Year on the basis of

actual quantities.



ARTICLE XIII

PAYMENT PROCEDURE

13.1



Payments to t he Ministry. All payments due to the Ministry hereunder shall be made in

U.S. Dollars to

the Treasury Single Account in Da Afghanistan Bank, details of which

I

may be provii ed from time to time by the Ministry, and shall be made in accordance with

the provision of the Public Finance and Expenditure Management Law.



13.2



Payments to the Contractor. All payments due to the Contractor hereunder shall be

made in U.S. Dollars at a bank to be designated by the Contractor or, at the Ministry's

election, such other currency as is acceptable to the Contractor.



13.3



Timing of Payments. Except as otherwise expressly provided herein, all payments

required to b~ made pursuant to this Contract shall be made within thirty (30) Days

following the r nd of the Month in which the obligation to make such payment occurs.



13.4



Late Payments. If any payment is not made when due, such unpaid amount shall be

increased as from and after the due date until the date of payment at a rate, compounded

monthly, of five percent (5%) per annum above the London Interbank Offer Rate

("LIBOR") fEr one (I) month deposits of U.S. Dollars, as reported in the London

Financial T i es or any other agreed publ ication.



ARTICLE XIV

SURFACE RENTAL FEES

14.1



State-owned Land . In accordance with the Hydrocarbons Regulations, the Contractor

shall be liable for payment of the following annual surface rental fees to the Ministry in

respect of all bnsurrendered State-owned land forming part of the Contract Area:

(a)



for so long as a Commercial Discovery has not been declared with respect to any

Field:

(i)



during the Initial Exploration Period, one U.S. Dollar (US$ 1.00) per

hectare;



(ii)



during the First Extension Period, four U.S. Dollars (US$ 4.00) per

hectare; and



(iii)



during the Second Extension Period and any extension granted pursuant to

Section 3. 1, eight U.S. Dollars (US$ 8.00) per hectare;



40



Afghan-Tajik Basin Phase I Tender

(b)



from the first declaration of Commercial Discovery with respect to any Field:

(i)



fifteen U.S. Dollars (US$ 15.00) per hectare, excluding Fields; and



(ii)



forty U.S. Dollars (US$ 40.00) per hectare of each Field.



14.2



Timing of Payments. The Contractor shall make surface rental fee payments to the

Ministry ann1ally in respect of the then current Calendar Year. The first annual surface

rental fee pal,ment under Section 14.1 shall be made within thirty (30) Days after the

date on whi9h the Ministry has provided the Operator with an approved surveyor

geographic PJojection in accordance with Section 14.4. Following the provision of such

surveyor ge0r,raphic projection to the Operator, all subsequent annual surface rental fee

payments sha~1 be made within thirty (30) Days after each anniversary of the Effective

Date. In the
Calendar Year so as to increase or decrease the number of hectares of State-owned land

forming part of such Field, no corresponding adjustment shall be made to the amount of

any surface ' 1ntal fcc payment already paid in respect of such Calendar Y car.



14.3



Privately Owned Land. For its use of privately owned or occupied land, the Contractor

shall pay suc~ rental fees as are agreed with the owner or occupier. Upon the request of

the Contractor, the Ministry shall facilitate negotiations between the Contractor and the

owner or ocaupier on the amount of such rental fees . The Ministry may seek the

assistance of pther agencies in the Government for this task. If the Contractor and the

owner or occupier fail to agree on the amount of such rental fees, the amount shall be

determined bt the Ministry. If the Contractor or the owner or occupier do not agree with

the amount determined by the Ministry, the dispute shall be settled by a dispute

resolution bo~rd which shall consist of representatives from the Ministries of Justice,

Mines, Agrid.tlture and Finance and the National Environmental Protection Agency. All

such rental fee payments shall be considered Hydrocarbons Operations Expenditures

i

recoverable br the Contractor in accordance with the Accounting Procedures.



14.4



Area Subjec to Surface Rental Fees. The area of State-owned land subject to surface

rental fees un~er Section 14.1 shall be determined by a survey approved by the Ministry;

provided, howl ever, that in the absence of such a survey, such area shall be determined on

the basis of a geographic projection approved by the Ministry.



14.5



Obligation tJ Pay Compensation. The Contractor's payment of rental fees pursuant to

this Article ~IV shall not relieve the Contractor of its obligation to pay compensation to

the extent r
settlement botlies for any actual injury, damage or loss resulting from an act or omission

of the Contrdctor, its subcontractors or its agents, employees or representatives in the

course of the bonduct of Hydrocarbons Operations.



41



Afghan-Tajik Basin Phase I Tender



ARTICLE XV

NATURAL GAS

15.1



Associated (];as. The Contractor shall have the right to use, free of charge, Associated

Gas for Hydtocarbons Operations, including reinjection for pressure. Associated Gas

that is not us~d in Hydrocarbons Operations, and the processing and utilization of which,

in the opiniJn of both the Contractor and the Ministry, is not economical, shall be

returned to tt e subsurface structure, or may be otherwise disposed of, so long as such

alternate dis~osition is (i) in accordance with Good Oil Field Practices or (ii) the Ministry

consents to such alternate disposition in writing. In the event that the Contractor chooses

to process a9d sell Associated Gas, the Contractor shall notify the Ministry of the same

and upon su~h notification, the Ministry and the Contractor shall, as soon as practicable

thereafter, ~eet together with a view to reaching an agreement on the production,

processing a:l.d sale of such Associated Gas. In the event the Contractor chooses not to

process and ~ell Associated Gas, the Ministry may elect to off-take at the outlet flange of

the gas-oil separator and use such Associated Gas which is not required for Hydrocarbons

Operations. ~here shall be no charge to the Ministry for such Associated Gas, provided

that the cost to gather such Associated Gas in the Field and to process and utilize it shall

be for the ac, ount of the Ministry.



15.2



Non-Associalt ed Gas.

(a)



wherl Non-Associated Gas is discovered in the Contract Area and the Contractor

has, ~ursuant to Section 7 .1 (b), informed the Ministry that the Discovery is of

comrrlercial interest, a Natural Gas development committee composed of an equal

numbel r of representatives of the Ministry and the Contractor shall be established

upon adoption of the Appraisal Program relating to such Discovery pursuant to

l

Section

7.1 (t). The purpose of the development committee is to jointly evaluate

the us1e of such Natural Gas in:

(i)



the domestic market and the chain of downstream activities required to

bring the Natural Gas to the end consumers in such market; and



(ii)



current or potential export markets.



(b)



The Natural Gas development committee shall conduct (or cause to be conducted)

gas rrlarketing studies and programs to ascertain the benefits, commercialization

issueJ and economics of sales of Natural Gas to the various potential markets.

The bosts of such studies and related expenses shall be recoverable as

HYdrt carbons Operations Expenditures.



(c)



Within twelve (12) Months following adoption of the Appraisal Program, the

Mini, ry and the Contractor will meet with a view to reaching an agreement on

the most economic market for commercialization of the Natural Gas, with the

objective of securing the highest value for the Natural Gas resources, and the

relaterI development, production, processing, utilization, disposition or sale of



42



Afghan-Tajik Basin Phase I Tender

such Natural Gas, as well as the period within which the Contractor shall be

requi+ d to advise the Ministry in writing whether or not in its opinion the

Discoj ery of Non-Associated Gas is a Commercial Discovery.

(d)



15.3



If, pu~suant to Section 15 .2(c), the Ministry and the Contractor determine that a

Discarery of Non-Associated Gas, although substantial, is not then, either alone

or in fombination with other Discoveries, commercially viable, but is likely to

bec011jle so within eight (8) years thereafter with appropriate gas marketing

operations, feasibility studies and further evaluation, the Ministry and the

Contrkctor shall enter into an agreement for an initial term of five (5) years,

extenJIible for up to three subsequent periods of one (1) year each (the

"Evatluation Agreement") postponing the agreement contemplated under Section

15.2(d). Under these circumstances, to allow for gas marketing operations,

feasib;ility studies and further evaluation, the Ministry shall refrain from

exerc· sing its option under Section 7. I (h) to require the Contractor to relinquish

the area corresponding to such Discovery for the term of the Evaluation

Agre9ment. On or prior to January I st of each year commencing after the

expiration of the initial five (5) year term of the Evaluation Agreement, the

Contrkctor shall submit to the Ministry for review a report specifying the gas

markclting operations, feasibility studies and evaluation activities conducted, and a

writt+ notification of whether or not, in the Contractor's opinion, such Discovery

continues to be of commercial interest. The Evaluation Agreement shall be

extenJIed until the earlier to occur of the following :

(i)



the expiration of eight (8) years from the date of the Parties' Evaluation

Agreement;



(ii)



the date on which the Ministry receives a report from the Contractor

indicating that the Discovery is no longer of commercial interest; and



(iii)



the date on which the Ministry informs the Contractor that it disagrees

with the Contractor's conclusion in a report that the Discovery continues

to be of commercial interest and exercises the Ministry'S option under

Section 7. I (h) to require relinquishment.



Allocation of Revenues and Expenditures.



In the event that the development,

production, ~rocessing, utilization, disposition or sale of Natural Gas from the Contract

Area is dete~mined by the Parties to be economically feasible in accordance with this

Article XV, the costs of development and production of the same from the reservoir to

the Delivery Point, and the revenues derived therefrom, shall, unless otherwise agreed

pursuant to Sections IS. I and 15.2, be included in Hydrocarbons Operations

Expenditures and Gross Contractor Revenues, respectively, for all purposes of this

Contract, sub·ect to the Accounting Procedures.



43



Afghan-Tajik Basin Phase I Tender



ARTICLE XVI

INCOME TAX

16.1



I ncome Taxes. Income tax issues related to Hydrocarbons Operations are governed by

the Income Thx Law.



16.2



Income Tax lRate. Subject to Section 16.4, each Contractor Entity agrees that its Net

Taxable Incotne shall be subject to the then prevailing Income Tax rate for the period of

the Contract.



16.3



Business Re,c eipts Tax. Each Contractor Entity shall be exempted from Business

Receipt Taxn~uring the term of this Contract for all business conducted in connection

with this Co T ract.



16.4



Tax Stabilization. If, at any time after the Effective Date, (a) any new tax, levy or other

fee is introd~ced in Afghanistan that (i) is targeted at Hydrocarbons Operations or (ii) is

in the nature lo r the equivalent of a value added tax or provincial, local, municipal tax or

windfall tax (the taxes referred to in this clause (ii) being ("Designated Taxes")) or (b)

there is any ~hange in Afghanistan Law (or the interpretation thereof) that (i) is targeted

at Hydrocar\:}ons Operations or (ii) discriminates or has the effect of discriminating

against the dmtractor or any Contractor Entity (including but not limited to a Progressive

Tax Rate) antl (c) as a result of the circumstances described in (a) or (b), the Contractor

or any Contrkctor Entity suffers an adverse effect of a material nature on the economic

benefits it d~rives from Hydrocarbons Operations or the Contract, the Contractor will

notify the Mipistry in writing and the Parties will, as soon as possible thereafter, meet to

verify such effect and, within ninety (90) Days of such meeting, agree on such changes to

this Contract as may be required in order to restore, as closely as possible, the economic

benefits that the Contractor and each Contractor Entity would have derived from the

Hydrocarbons Operations or the Contract in the absence of such new tax, levy or other

fee or such +ange of Afghanistan Law (or the interpretation thereof). In the event that

the Contractor and the Ministry fail to reach an agreement within the time period

specified in Iti his Section 16.4, the matter may be referred to arbitration pursuant to

Section 24.1. Except in the case of Designated Taxes, the provisions of the preceding

sentences shall not apply with respect to Income Tax that is applied generally or any tax,

levy or fee r f general application that is not specifically targeted at Hydrocarbons

Operations af d which does not discriminate or have the effect of discriminating against

the Contractor or any Contractor Entity. Nothing in this Section 16.4 shall be construed

as imposing l ny limitation or constraint on the scope, or due and proper enforcement, of

Afghanistan ILaw which does not discriminate, or have the effect of discriminating,

against the Contractor or any Contractor Entity, and provides for the protection of health,

safety, labor lor the environment, or for the regulation of any category of property or

activity Carrij d on in Afghanistan.



16.5



No Double Taxation. The revenues generated from Hydrocarbons Operations for the

Contractor's laccount shall only be subject to Income Tax once in Afghanistan . Each

Contractor Entity shall be liable to pay Income Tax on its share of such revenue or the

44



Afghan-Tajik Basin Phase I Tender

Shareholders shall be liable to pay Income Tax on such revenue in accordance with

applicable la s. If at any time after the Effective Date, there is any change in the legal,

fiscal and/or economic framework applicable to the Contract (or the interpretation

thereof) whic~ results in the Contractor Entities and the Shareholders both being liable to

pay Income ~ax on such revenue, the terms and conditions of this Contract shall be

altered so as to restore the Contractor Entities and the Shareholders to the same overall

position as that which such persons would have been in, had no such change in the legal,

fiscal and/orl economic framework occurred. If a Contractor Entity believes that its

economic po .ition, or the economic position of its Shareholders, has been detrimentally

affected here n by a change or interpretation of law that results in double taxation of

income, upon the Contractor Entity's written request, the Parties shall meet to agree on

any necessart measure to resolve the issue.

16.6



Benefit of Changes to Law. Without prejudice to Section 16.4, the Contractor shall be

entitled to tHe benefit of any future changes to Afghanistan Law; provided that this

Section 16.6 Irhall not apply to any benefit arising from any changes in Afghanistan Law

that relate to financial or fiscal matters agreed in this Contract, including in respect of

royalty, cost recovery, production sharing and surface rental fees (other than any change

in the Incomd Tax rate).



16.7



Capital GaiL Tax. Nothing contained in the Contract shall excuse or exempt the

Contractor orl any Contractor Entity (or any Affiliated Entity of a Contractor Entity) from

any obligatioh that may otherwise exist under Afghanistan Law to pay any tax on the sale

or transfer or any tangible or intangible property, including such Person's direct or

indirect interest in this Contract or any asset owed by it directly or indirectly in whole or

in part; provi~ed, however, that a transfer or sale by a Contractor Entity to an Affiliated

Entity pursuant to Section 28.4 shall not be deemed to constitute a taxable event for

purposes of f ny tax on gains imposed under Afghanistan Law if both the transferring

Contractor E~tity and its transferee Affiliated Entity confirm, prior to effecting the sale or

transfer, in wr iting to the Ministry that the tax basis of the transferred asset immediately

after the consummation of the transfer or sale shall be the same as the tax basis for the

transferred as!s et immediately prior to the consummation of the transfer or sale.



ARTICLE XVII

CUSTOMS DUTIES

17.1



Customs Dlfties related to Hydrocarbons Operations are governed by the Customs Law

of Afghanistan, provided, however, that:

(a)



for thl duration of this Contract, each Contractor Entity shall be entitled to import

I

into tfghanistan (including by its subcontractors as joint consignees) free of

cust0f;s Duties the equipment and supplies designated by the Parties as required

to be imported for Hydrocarbons Operations and shall be entitled to export the

same (provided that no transfer of ownership of such equipment or supplies has

occurred after the date of their import into Afghanistan) free of Customs Duties



45



Afghan-Tajik Basin Phase I Tender

pursuant to that separate Memorandum of Understanding between the Parties

dated r etober 8, 2013, as the same may be amended from time to time; and

(b)



for th€ duration of this Contract, each Contractor Entity shall be entitled to export

Hydrdcarbons free of Customs Duties.



ARTICLE XVIII

EXCHANGE AND CURRENCY CONTROLS

The Contractor shall Ibe subject to the applicable exchange control legislation and regulations in

effect from time to time in Afghanistan, provided, however, that:

(a)



the c t ntractor shan be entitled to retain outside Afghanistan, and freely transfer,

foreign currency received by it outside of Afghanistan, including the proceeds of

sales ~f Hydrocarbons to which it is entitled hereunder;



(b)



the c t.ntractor shan be entitled to export from Afghanistan, free of limitation or

restri~ion, in the same currency as that in which the investment was made, the

funds held by it, provided, however, that this subsection (b) shall not impose any

ob lig~ ion upon the Ministry or the Government to provide foreign currency to the

Contractor;



(c)



the Ministry shall endeavor to ensure (by liaising with other Government agencies

or instrumentalities from time to time as appropriate and when requested to do so

by th~ Contractor in writing and by offering such other reasonable support as may

be re~uested by the Contractor) that there is sufficient availability of U.S. Dollars

or ot~er freely convertible foreign currency in Afghanistan to facilitate the

Contractor's right to convert any proceeds from the sale of Hydrocarbons or other

cash rfceived in local currency into U.S. Dollars and/or other convertible foreign

currency without delay, provided, however, that this subsection (c) shall not

imposF any obligation upon the Ministry or the Government to provide foreign

currency to the Contractor;



(d)



I



in thel matter of purchase and sale of currency within Afghanistan, whether of



Afgh~nistan or other countries, the rates of exchange shall not be less favorable to



the Cfntractor than those granted to any Person that introduces or transfers

fOreigr currency into Afghanistan;

(e)



no reftriction shall be placed on the importation by the Contractor of funds

necessary for carrying out Hydrocarbons Operations under this Contract; and



(f)



the c l ntractor shall have the right to pay directly outside of Afghanistan from its

officekI abroad for purchases or services for Hydrocarbons Operations hereunder,

provided that no such payments shall be made to Afghan citizens or to firms using

AfghJnistan as their main base of operations, whether natural or juridical,

contr ry to the laws of Afghanistan.



46



Afghan-Tajik Basin Phase I Tender

Each Contractor Er tity, its Affiliated Entities and Shareholders, and the Contractor's

subcontractors shall lbenefit from the same rights as the Contractor under this Article XVIII.



ARTICLE XIX

TREATMENT UNDER AFGHANISTAN LAW



accor~ed



The treatment

to the Contractor, each Contractor Entity, its Affiliated Entities and

Shareholders by Af , hanistan in relation to the Contract shall not be less favorable than the

treatment required to be accorded to foreign investors under Afghanistan Law.



ARTICLE XX

TRAINING, EMPLOYMENT AND LOCAL CONTENT



~fghan



20.1



T raining of

Nationals. The Contractor agrees to as far as possible train and

employ qualtfied Afghan nationa ls in the Hydrocarbons Operations and after Initial

I

Commercial f roduction will undertake the schooling and training of Afghan nationals for

staff positions,

including administrative and executive management positions. The

I

Contractor will require its major contractors and subcontractors to do the same, provided

that if the Cpntractor is unable to secure the agreement of its major contractors and

subcontracto~s to train and employ qualified Afghan nationals, the Contractor shall

inform the Ministry but shall nonetheless be allowed to contract with such major

contractors ahd

subcontractors. The Contractor undertakes to give priority to Afghan

I

nationals with equivalent qualifications and experience and actively search for Afghan

nationals in f rder to meet the training and employment obligations established in the

prevai ling legislation and to gradually replace its expatriate staff with qualified Afghan

nationals as they become available. An annual program for training and phasing in of

Afghan natidnals shall be established by the Contractor and shall be submitted for

approval to ~he Ministry. Such program shall be included in the Work Programs

submitted byi the Contractor pursuant to Section 5.3. Within thirty (30) Days after the

end of each Calendar Year, the Contractor shall submit a written report to the Ministry

describing thtbnumber of personnel employed, their nationality, their positions and the

status of trail ing programs for Afghan nationals.



20.2



Tra ining of inistry Personnel. The Contractor shall also be required to establish a

program, reasonably satisfactory to the Ministry, to train personnel of the Ministry to

I

undertake skpled and technical jobs in Hydrocarbons Operations for the State. Such

program shall include provisions for involving representatives of the Ministry in the

preparation d[f the Work Programs and Work Program Budgets as required by Section

5.3(c).



20.3



Minimum E penditures. The Contractor shall expend a minimum of fifty thousand

U.S. Do llar~ (US$ 50,000.00) during the period from the Effective Date until

December 31, 2013 for training pursuant to Sections 20.1 and 20.2. Thereafter the



· 47



Afghan-Tajik Basin Phase I Tender

minimum expenditure for training pursuant to Sections 20.1 and 20.2 shall be increased

by five thous~nd U.S. Dollars (US$ 5,000.00) annually, provided that the Contractor shall

expend a minimum total amount of one hundred thousand U.S. Dollars (US$ 100,000.00)

for training a~nuallY from the date of commencement of the Development and Production

Phase in resp~ct of any Field.

20.4



Long Range jP lan and Budget. A long range plan and budget for the training programs

described in : ections 20.1 and 20.2 is attached hereto as Exhibit F. All annual training

programs and budgets shall be consistent with such long range plan and budget.



ARTICLE XXI

PURCHASES IN AFGHANISTAN

21.1



Local Preference. In procurement, the Contractor shall give preference to goods that are

produced or Jvailable in Afghanistan and services that are rendered by Afghan nationals

and companids, provided that such goods and services are similar in quality, quantity and

price to impob,ed foreign goods and services and available at the time. The Contractor

shall, upon relquest of the Ministry, develop local preference targets and specific plans to

meet such talrgets. Such plans shall be provided as part of the Contractor's Work

Programs to ibe approved by the Ministry and shall include, but not be limited to,

timelines, key milestones and formal review dates, a description of potential areas of the

Contractor's business in which to integrate local preferences, and a summary of

Contractor's ocal preference initiatives and results, including the then current percentage

and sources Afghan goods aod services used in Contractor's Hydrocarbons Operations.



l



21.2



EquivalencYl Locally produced or available equipment, materials and supplies shall be

deemed equal in price to imported items if the local cost of such locally produced or

available iteIl1s at the Contractor's operating base in Afghanistan is not more than fifteen

percent (15~) higher than the cost of such imported items after transportation and

insurance cos s have been added.



ARTICLE XXII

J OINT DEVELOPMENT / UNITIZATION

22.1



Joint Development in Other Awarded Areas. If the Contractor identifies a proposed

Field within the Contract Area that appears to extend beyond the Contract Area to other

areas of Afghanistan over which other parties have the right to conduct exploration,

development land production operations, the Contractor shall notify the Ministry and the

other party or the proposed Field in conjunction with its Appraisal Program submitted

under Sectio? 7.1 (e) or its geological report submitted under Section 7.1 (i)(i). The

Ministry ma~ require that the development of the proposed Field and the production of

Hydrocarbons from such proposed Field be carried out in collaboration with the other

parties. Th I same rule shall be applicable if deposits of Hydrocarbons within the



48



Afghan-Tajik Basin Phase I Tender

Contract Area, although not equivalent to a Commercial Discovery if developed alone,

would be deJmed to be a Commercial Discovery if developed with those parts of the

deposits that ~xtend to areas controlled by other contractors.

22.2



Joint DevelJ pment in Non-Awarded Areas. If a Hydrocarbons deposit or potential

deposit appdrs

to extend into a non-awarded block adjacent to the Contract Area or if

I

deposits of Hydrocarbons within the Contract Area, although not equivalent to a

Commercial Discovery if developed alone, would be deemed to be a Commercial

Discovery if developed with those parts of the deposits that extend to such areas, the

Contractor sHall promptly notify the Ministry in the same manner set forth in Section

22.1. The M·nistry may decide if and how the non-awarded area shall be explored and

awarded, and any terms and conditions for such joint development.



22.3



Collaborative Proposals. The Contractor shall collaborate with other parties in

preparing a cbllective proposal for common development and production of the deposits

of HYdrocartns for approval by the Ministry.



22.4



Ministry Proposals. If the proposal for common development and production pursuant

to Section 2213 has not been presented within ninety (90) Days of the notice described in

Section 22 .1, lor if the Ministry does not approve such proposal, the Ministry may prepare

or cause to b prepared, for the account of the Contractor and the other parties involved, a

reasonable p,an for common development and production. The Ministry shall submit

such commof development and production plan to the Contractor and other parties for

approval. S~ould the Contractor wish to propose revisions to the plan for common

development I and production, it shall within ninety (90) Days after receipt thereof so

notify the Ministry, specifying in reasonable detail its reasons for the proposed revisions.

Promptly th~reafter, the Parties shall meet and endeavor to agree on the revisions

proposed by ~he Contractor.



1



Internationa~



22.5



Coordination. This Article XXII shall also be applicable to Discoveries

of Hydrocar~ons within the Contract Area which extend to areas that are not within the

dominion o ~ Afghanistan, provided that in these cases the Government shall be

empowered tf impose the special rules and conditions which may be necessary to satisfy

obligations ur der any agreements with international organizations or adjacent states with

respect to the development and production of such Hydrocarbons. If a Hydrocarbons

deposit extenl~s onto the territory of another state, the Ministry will assist the Contractor

in, as far as ppssible, negotiating an agreement with the government of that other state on

the most efficient co-ordination of Hydrocarbons Operations in connection with the

deposit as wJll as on the apportionment of the deposit. This shall apply similarly when,

in the case or several Hydrocarbons deposits, joint Hydrocarbons Operations would be

more efficient



22.6



Unitization. Within ninety (90) Days following the approval or adoption of a unitization

plan for co mon development and production by the Ministry, the Contractor shall

proceed to 'perate under any such plan. If a clause of a cooperative or unitary

development and production plan which has been approved or adopted by the Ministry,



49



Afghan-Tajik Basin Phase I Tender

and which by its terms affects the Contract Area or a part of the same, contradicts a

clause of this Contract, the clause of the cooperative or unitary plan shall prevail.



ARTICLE XXIII

HEALTH, SAFETY AND ENVIRONMENTAL PROTECTION

23.1



Compliance l ith Laws. In the conduct of the Hydrocarbons Operations, the Contractor

shall comply,j and shall require its subcontractors to comply, with any applicable laws and

regulations, Including the Hydrocarbons Law and any regulations issued thereunder,

relating to the protection of the environment and the health, safety and welfare of workers

and the PUbt



23.2



Oversight and Rehabilitation. Prior to the commencement of Hydrocarbons Operations

in any portioh of the Contract Area, Contractor shall undertake and complete a Baseline

Environmendl

Assessment of the subject area consistent with Good Oil Field Practices

I

and applicable laws and noting any existing deficiencies, including any environmental

contaminatior existing in the area on or prior to the commencement of Hydrocarbons

Operations. In the course of the Hydrocarbons Operations, the Contractor shall consider,

investigate, 1ssess and manage the impact of the Hydrocarbons Operations on the

environment land the socio-economic conditions of any person who might directly be

affected thereby. Furthermore the Contractor shall, upon completion of any

Hydrocarbons Operations, rehabilitate as far as reasonably practicable the environment

affected therclby to its natural or prior state as established by the Baseline Environmental

Assessment. I



23.3



Health and Safety Plan . The Contractor shall take all necessary measures to secure the

health, safet~ and welfare of individuals consistent with Good Oil Field Practices and as

required unmer applicable Afghanistan Law.

Prior to the commencement of

Hydrocarbonk Operations in the Contract Area, the Contractor shall establish, submit to

the Ministry knd publish, implement and enforce a health and safety plan throughout all

Hydrocarbonk Operations, which shall include the following measures :



e~Uipment



(a)



and facilities shall afford reasonable safety from accidents, and

all

shall ?e inspected by a qualified person as often as may be necessary to ensure the

safet~ . of the equipment or facility and compliance with the relevant laws and

reguT ions;



(b)



the person performing the inspection shall make a written report of the inspection

and s~all forward a copy of the report to the Ministry, and any equipment found to

be deIective or unsafe shall be repaired or replaced;



(c)



adeq~ately



designed, tested and maintained blowout prevention equipment shall

be employed in connection with the drilling, testing, completing or working over

ofan~ Well;



50



Afghan-Tajik Basin Phase I Tender

(d)



adequate, easily accessible and properly maintained fire fighting equipment shall

be prhvided at all operational locations where the potential of fire exists, the

pers01nel shall be trained in the effective use of such equipment and fire fighting

contingency procedures shall be published and displayed around the site;



(e)



all colPleted Wells shall be reasonably protected and a notice warning persons of

the d I ger that exists shall be prominently displayed;



(f)



all personnel shall wear clothing and footwear suitable for the operational

conditions and the work being performed, including, where appropriate, industrial

prote9t~ve eq~ipment, such as helmets, eye protectors, gloves and hearing

proteotlOn eqUIpment;



(g)



wher~ appropriate, notices in English and in the prevalent language of the area of

operations shall be displayed at the operational sites warning all personnel of any

potential danger and of the associated safety requirements;



23.4



(h)



adequlte first aid equipment and personnel shall be available on all operational

sites rhile work is in progress and procedures shall be established for the

transPr0rtation of persons needing prompt medical attention;



(i)



reliable communication facilities shall be provided at all operational locations;

and



(j)



all ai~craft operations shall be conducted

Afghanistan.



In



accordance with existing laws of



T~e



Manuals.

Contractor shall prepare and submit to the Ministry for approval prior to

the commencement of Hydrocarbons Operations:



ma~ual



(a)



a

of instructions for the safety operations which shall detail procedures to

be fo~owed to safeguard the health and safety of all personnel associated with all

fores.:..1en operations and to safeguard the environment;



(b)



a manual of response to emergencies which may occur, including the escape or

igniti~n of Hydrocarbons, serious injuries, and other conditions requiring the

evacuation of the site; and



(c)



a mJual of procedures for the maintenance of Well control which shall detail

prociures and equipment which will be used in the evenl of a blowout.



All appropriate personnel at the site shall be made aware of and be trained

procedures d1tailed in the manuals.

23.5



In



the



Additional Rrotective Measures. In addition to the requirements for the protection of

the environ~fnt as is provided in the environmental management plan approved by the

Ministry, th'1 Contractor shall, when carrying out Hydrocarbons Operations, take all

practical mea ures to:



51



Afghan-Tajik Basin Phase I Tender



23.6



(a)



preve t the pollution of any water well, spring, river, lake or reservoir by the

escap~ of Hydrocarbons, drilling fluids, chemical additives or any other waste

Produ1c t or effluent;



(b)



~~~~lr~ollution occurs, treat or disperse it in an environmentally acceptable



(c)



dispJe of all waste liquids used during the drilling of a Well

appror ed by the Ministry;



(d)



properly secure permanent installations;



(e)



remole all worn, damaged or surplus equipment and supplies, and other rubbish

l

from ite to an approved waste disposal site to be reused or recycled if possible;

and



(f)



on the completion or abandonment of a Well, promptly restore the Well site and

any ~urrounding area as near to the state existing prior to the conduct of

Hydrocarbons Operations as may practically be done and render that area safe.



In



a manner



r



Minimizatioh of Flaring. When carrying out Hydrocarbons Operations, the Contractor

shall furthermore take all practical measures to minimize flaring of any Natural Gas by

re-injecting ~uch Natural Gas into suitable strata or underground storage in accordance

with Good

Field Practices or in any other approved scheme . T~e Contractor shall

seek the MIn[.stry's approval (such approval not to be unreasonably WIthheld or delayed)

to flare any such Natural Gas which cannot be re-injected due to specific reservoir

considerati09s or for other reasons that are accepted internationally or in an approved

scheme in lij,e with Good Oil Field Practices. Before flaring, the Contractor shall take

reasonable 1easures to ensure the extraction of Natural Gas and other liquids contained

in the Associated Gas if the Ministry and the Contractor have agreed that such extraction

is economidlly justifiable. Notwithstanding anything in this Article XXIII to the

contrary, As~ociated Gas may be flared if necessary for the conducting of Well and

production tt ts and during any emergency.



.qil



23.7



Remedial Measures. If the Ministry reasonably determines that any works or

installations Frected by the Contractor or any operations conducted by the Contractor

endanger or Fay endanger persons or third party property or cause pollution or harm

wildlife or the environment to an unacceptable degree, or are otherwise not in compliance

with the prdvisions of the applicable laws and regulations or of this Contract, the

Ministry ma~ require the Contractor to take remedial measures and to repair any damage

to the environment within a reasonable period established by the Ministry. In the event

that the Conttactor fails to take the remedial measures required by the Ministry within the

time period lestablished by the Ministry, the Ministry may carry out such remedial

measures and the Contractor shall be liable for any costs related to such measures. If the

Ministry de~ms it necessary, it may also require the Contractor to discontinue

Hydrocarbonl Operations in whole or in part until the Contractor has taken such remedial



52



Afghan-Tajik Basin Phase I Tender

measures or nas repaired any damage. The period of discontinuance shall not exceed six

(6) Months. I

23.8



Reporting of Accidents or Hazards. The Contractor shall as soon as possible report

any serious lo r fatal accident that occurs, or any imminent hazard that arises, in

connection fith the Hydrocarbons Operations by the most rapid means of

communicati~m to the Ministry and the local State administrative authorities under whose

jurisdiction tHe accident or hazard occurs or arises.



23.9



Emergency

In case of imminent threat to life, property, or the environment,

the Contractor shall take every measure possible in accordance with the risk management

plan to mitig~te or avoid such imminent threat and such immediate action as is necessary

to preserve ~ ife, prevent destruction of property, or protect the environment. The

Contractor snail as soon as possible thereafter notify the Ministry of the action taken .

The costs indurred by the Contactor in relation to such action shall be recoverable as

Hydrocarbonr Operations Expenditures so long as the imminent threat to life, property, or

the environ~ent is not a direct result of the Contractor's gross negligence or willful

misconduct. I The Ministry shall take such measures to assist in efforts to mitigate or

avoid such ,mminent threat as it deems appropriate and issue such orders and/or

instructions ar it deems necessary.



~easures.



ARTICLE XXIV

DISPUTE SETTLEMENT/ ARBITRATION

24.1



ICSID ArbiJration. Subject to Section 24.2, any dispute, controversy or claim arising

out of or rel~ting to this Contract that is not resolved by mutual agreement within fortyfive (45) Da~s from the date on which the existence of a dispute is notified in writing by

a Party to another Party or Parties shall be settled by arbitration initiated by a Party by

submission

the International Centre for Settlement of Investment Disputes (ICSID)

pursuant to t1e Convention on the Settlement of Investment Disputes between States and

Nationals of lother States as of March 18, 1965 (lCSID Convention) and the arbitration

rules promulgated thereunder. For the avoidance of doubt, the Ministry hereby expressly

consents to t, e submission of any dispute which may arise under this Contract to ICSID

for settlement by arbitration in accordance with Article 25 (1) of the ICSID Convention.

For the purpbse of Article 25 (2) (b) of the ICSID Convention, the Contractor shall be

treated as a nktional of a state other than Afghanistan. The number of arbitrators shall be

three. The a~lbitration shall be conducted in the English language. The arbitration award

may take the orm of an order to pay a sum of money, or an order to perform an act, or an

order to refr in from an act, or any combination of such orders. The place of arbitration

shall be London, England. The award rendered shall be final and conclusive. Judgment

on the award lrendered may be entered in any court having jurisdiction or application may

be made in sJ ch court for a judicial acceptance of the award and an order of enforcement,

as the case rhay be. As far as practicable, both the Contractor and the Ministry shall

continue to irhplement this Contract during pendency of any dispute.



tb



53



Afghan-Tajik Basin Phase I Tender

24.2



Expertise Proceedings. In the event (i) that the Ministry disagrees with the Contractor's

determinatiort of the Market Price or (ii) in the event of there being any dispute as to

whether or ~he extent to which an expenditure is disqualified as a Hydrocarbons

Operations !fpenditure, the Parties shall submit the matter to administered expertise

accordance with the Rules for Expertise of the International Chamber of

proceedings

Commerce (tr,e "Expertise Rules") provided that the Ministry or the Contractor may (but

shall not be 9bliged to) refer any dispute which falls under paragraphs (i) and (ii) above

to arbitration I where it reasonably estimates that the disputed amount is likely to exceed

twenty-five million u.s. Dollars (US$ 25,000,000), in which case there shall be no

expertise probeedings in respect of such dispute. The Request for Administration (as

such term is Setined in the Expertise Rules) shall be copied to all Parties concerned and

shall specify that:



ir



(a)



if the le xpert is not appointed pursuant to the agreement of the Parties, the expert

Shoul1 have appropriate experience in the administration of exploration and

production sharing agreements for Hydrocarbons;



(b)



if the fxpert is not appointed pursuant to the agreement of the Parties, the expert

shall not be a citizen of Afghanistan or of any jurisdiction in which any

Contr cting Entity or its ultimate parent entity is organized or has its principal

place bf business;



(c)



unleJ otherwise agreed by the Parties and the expert, the expert shall endeavor to

deliv+ his report within sixty (60) Days after acceptance by the expert of his

apPOlrment;



(d)



the report shall include a determination by the expert as to the allocation of the

costs of administration (including the fees and expenses of the expert) among the

. I

Partles;



(e)



the Jpert may require (including as a result of a suggestion by a Party) that any

Party ~roduce to the expert (and if the expert so determines, to such Persons as the

expert may direct) any documentation or explanation relating to the matters in



dispuje;

(f)



the lar gUage of the expertise proceedings shall be English; and



(g)



as fa~ as practicable both the Ministry and the Contractor shall continue to

implement this Contract during the pendency of the expertise proceedings and

pendi~g any expert determination regarding the calculation of the Market Price

the ~arket Price applicable shall be the Market Price determined by the

Contractor.



Each Party fhall bear its own costs or counsel in connection with the expertise

proceedings, la nd pending determination by the expert as to the allocation of the costs of

administration, such costs shall be borne equally by the Parties . The report of the expert

shall be final and binding on the Parties. If a Party fails to comply with a determination

contained in such report within thirty (30) Days after the date the report is delivered to

54



Afghan-Tajik Basin Phase I Tender

the Parties, s ch failure to comply shall constitute a breach of this Contract. Any dispute

regarding a Prrty's failure to comply with a determination contained in the report may be

referred to arr tration in accordance with Section 24.1.

I



24.3



24.4



Contractor Parties. For purposes of (i) the selection and appointment of arbitrators

pursuant to Section 24.1 and (ii) the allocation of costs of administration in expertise

proceedings ~ursuant to Section 24.2, the Contractor and the Contractor Entities shall be

considered tO be one (1) Party.

I

Jurisdictional

Defenses. The Parties hereby stipulate that the investment contemplated

by this Contr~ct constitutes an investment for the purposes of the ICSID Convention and

the Governrrlent and the Ministry each acknowledge that its rights and obligations

hereunder ar~ of a commercial and not a governmental nature. For purposes of this

provision, th, term "Covered Persons" shall mean the Ministry, the Government, or any

of its or the.! Government's agencies or instrumentalities and the term "Commercial

Property" sf all mean the property of a Covered Person that: (a) is invested for a

commercial f urpose or (b) is used for a commercial activity, and specifically shall

exclude any property that: (i) constitutes the assets of a diplomatic or consular mission

outside Afgh~nistan;

(ii) is used in connection with a military activity, is of a military

I

character and is under the control of a military authority or defense agency of the

Government; I (iii) consists of assets of the central bank of Afghanistan, including

accounts held by it in other financial institutions; or (iv) consists of aircraft or re lated

equipment thr t is used predominantly for the transport of Government officials. It is

agreed that aIjlY Covered Person shall not use its status as a state or instrumentality of the

state to avoiU any legal proceeding (including expertise proceedings) commenced in

accordance J*ith this Contract, including any application for interim relief and any action

to enforce or execute any award or judgment or determination of an expert pursuant to

Section 24.2 and it is further agreed that any property subject to any such action,

including a

property used to enforce or execute any award or judgment or

determination of an expert, shall be limited to the Commercial Property of the Covered

Persons.



ARTICLE XXV

TERMINATION AND REVOCATION

25.1



Termination for Default. The Ministry shall have the right to terminate this Contract

upon giving t~irty (30) Days' written notice of its intention to do so if the Contractor: (a)

fails to prov'de or maintain in effect the Financial Guarantee as required under this

Contract; (b) subject to Section 24.2, fails to make any monetary payment required by

law or under this Contract, including any payment in respect of the purchase price of the

Hydrocarbons deemed sold by the Ministry to the Contractor pursuant to Article X, for a

period of thif Y (30) Days after the due date for such payment; (c) fails to comply with

any other material obligation that it has assumed under this Contract, including the

obligation to l perform the Winning Bidder's Exploration Program; (d) fails to comply

with a material obligation imposed by the Hydrocarbons Law or regulations thereunder or



55



Afghan-Tajik Basin Phase I Tender

any lawful aFts, regulations, orders or instructions issued by the Government or any

department ot agency of the Government.

25.2



TerminatioJ for Default of a Contractor Entity. The Ministry shall also have the right

to terminate th is Contract only in respect of the relevant Contractor Entity upon giving

thirty (30) Days' written notice to such Contractor Entity, if such Contractor Entity: (a)

fails to provide or maintain in effect its General Performance Guarantee as required under

this Contractj or (b) becomes bankrupt, or goes into liquidation because of insolvency or

makes a comr osition with its creditors.



25.3



Cure P eriod.



If the circumstance or circumstances that result in termination under

Section 25.1 rre remedied (i) by the Contractor (x) in the case of Section 25 . 1(a) or (b),

within the thiry (30) Day period following the notice of termination as aforesaid or (y) in

the case of Section 25 . 1(c) or (d), w ithin the sixty (60) Day period following the notice of

termination Jls aforesaid or (ii) by the relevant Contractor Entity in the case of Section

25 .2, within he thirty (30) Day period following the notice of termination as aforesaid,

such termina ion shall not become effective.



25.4



False or Fraidulent Information.

(a)



If thJ Ministry finds that the Operator has presented false or fraudulent

infor~ation in its capacity as Operator or information has been withheld by the

Oper1~or in such capacity, the Ministry may require the Operator to provide any

necessary information and explanation. If the Operator fails to provide such

inforryation or the information and/or explanations provided are unsatisfactory,

and t~e incorrect information provided or the omission to provide information

consti utes a material breach of Contract, the Contract may be revoked and the

State is entitled to compensation from the Contractor for losses incurred as a

result of the breach of contract or other remedies for breach of contract.



(b)



If the Ministry finds that a Contractor Entity acting in its individual capacity has

false or fraudu lent information or information has been withheld by

such ~ ontractor Entity, the Ministry may require such Contractor Entity to

provide any necessary information and explanation. If the Contractor Entity fails

to pr~vide such information or the information and/or explanations provided are

unsatilsfactory, and the incorrect information provided or the omission to provide

inforIfation constitutes a material breach of Contract, the Contract may be

termi~ated only in respect of the relevant Contractor Entity and the State is

entitl5d to compensation from the Contractor for losses incurred as a result of the

breacT of contract or other remedies for breach of contract.

prese~ted



(c)



If an ,I ~rbitral tribunal convened pursuant to Section 24.1 determines in a final

that the Contractor or any Contractor Entity has breached the prohibition

on br bing state officials pursuant to Afghanistan Law in respect of the award or

opera ion of this Contract, the Contract may be revoked and the State is entitled to

comp~nsation from the Contractor for losses incurred as a result of the breach of

contdct or other remedies for breach of contract. In case of revocation, the

decisi~ n



56



Afghan-Tajik Basin Phase I Tender

Minis ry shall publish reasons justifying revocation of the Contract and shall send

a cop~ thereof to the Contractor. In such case, the rights and privileges granted to

the Crtractor shall be revoked, and the Contract Area shall be forfeited as well

as the ( inanCial Guarantee in accordance with its terms.

25.5



Continuing Obligations. The termination or revocation of this Contract for whatever

reason shall The without prejudice to the obligations incurred and not discharged by the

Contractor o~ the relevant Contractor Entity (as the case may be) prior to the date of

termination or revocation. In the case of any termination or revocation of the Contract in

respect of thei Contractor, the Ministry and the Contractor shall promptly agree on a plan

Subject to Section 7.3(f) and Section 27.3,

for take-ove~ and/or abandonment.

termination or revocation of this Contract is without prejudice to accrued liabilities of

each Party and in particular the Contractor is liable to rehabilitate as far as reasonably

practicable t~e environment affected by Hydrocarbons Operations to its natural or prior

state as established by the Baseline Environmental Assessment.



25.6



Continuing rerformance. In the event of termination or revocation pursuant to Section

25.1, Section !25.4 or Section 25.9, the Ministry may require the Contractor, for a period

not to excee~ one hundred eighty (180) Days from the effective date of termination, to

continue, for the

account of the Ministry, Liquid Hydrocarbons or Natural Gas production

I

activities until the right to continue such production has been transferred to another

entity. Durin~ such period, the Contractor shall be entitled to its share of Hydrocarbons

production ak determined in accordance with Section 10.1. Upon termination, the

provisions of lSections 4.4 and 4.5 shall apply.



25.7



Mitigating Jnvironmental Damages or Hazards. Within ninety (90) Days after the

termination dr revocation of this Contract pursuant to Section 25.1, Section 25.4 or

Section 25 .9~unless the Ministry has granted an extension of this period, the Contractor

shall comple e any reasonably necessary action as directed by the Ministry to avoid

environment I damage or a hazard to human life or third party property.



25.8



Transfer of Ownership. Upon the termination or revocation of this Contract for any

reason, ownhship of all pipes, pipelines, installations, facilities, downhole well

equipment, ~ellhead equipment and other equipment or materials within the geographic

limits of the
Operations Efpenditures pertaining thereto shall be transferred to the Ministry, other than

unused inventory, leased equipment and other Contractor equipment which can be

removed witHout damage to the Contract Area.



25.9



Area Closedl to Hydrocarbons Operations. If, after the Contractor has signed this

Contract, the! State declares or designates a portion of the Contract Area as disputed,

prohibited ot unauthorized in accordance with the Hydrocarbons Law, then the

Contractor sUall be entitled to terminate or re-negotiate this Contract. The Contractor

shall also b I entitled to damages for losses incurred due to such declaration or

designation.



57



Afghan-Tajik Basin Phase I Tender

25.10 Transfer of Participating Interest on Termination in respect of a Contractor Entity.

If the Contr1ct is terminated under Section 28.2, Section 25 .2 or Section 25.4, the

Participating J nterest of the terminated Contractor Entity shall be transferred to the other

Contractor Entities in the proportions which their Participating Interests bear to the

aggregate of the Participating Interests of all such Contractor Entities (unless otherwise

agreed by the Contractor Entities).



ARTICLE XXVI

BOOKS, ACCOUNTS AND AUDITS;

ltECORDS, REPORTS AND INSPECTIONS

26.1



MaintenancJ of Accounts, Books and Records. The Contractor shall, in accordance

with prevaili+g legislation and regulations, be obliged to keep and maintain complete

accounts, books and records at its registered office in Afghanistan reflecting all

HYdrOCarbon~ Operations, Hydrocarbons Operations Expenditures and Gross Contractor

Revenues consistent with International Financial Reporting Standards, generally accepted

procedures arid standards in the international petroleum industry and the requirements of

this Contract, including the Accounting Procedures.



26.2



Submission of Accounts. No later than June 30 of each Calendar Year, the Contractor

shall submit to the Ministry detailed accounts showing all Hydrocarbons Operations

Expenditures and all Gross Contractor Revenues during the past Calendar Year. Before

submission t9 the Ministry, the accounts shall be audited and certified by an independent

chartered accountant or certified public accountant acceptable to both the Ministry and

the Contract~r, at the expense of the Contractor (such expense to be considered as

Hydrocarbons Operations Expenditures recoverable by the Contractor in accordance with

the Accountirl g Procedures). It is understood that the Ministry retains the authority to

review and audit the Contractor's accounts, books and records with respect to

Hydrocarbon~ Operations conducted hereunder either directly or through an independent

accountant dlsignated by the Ministry.



26.3



Inspection Rights. The Ministry shall have full and complete access to the Contract

Area at all re~sonable times with a right to observe Hydrocarbons Operations and shall

have the rig~t to inspect all accounts, books, records, assets and data kept by the

Contractor relating to Hydrocarbons Operations and this Contract, such observations and

inspection to l be conducted at the expense of the Ministry. The Ministry may, upon

reasonable amvance notice to the Person-in-Charge, perform examinations, surveys,

drawings, tests and analyses, inspect and make copies for the purpose of implementing

this contract.l ln doing so, the Ministry shall not unduly interfere with the Contractor's

Hydrocarbons Operations. The Ministry shall be entitled to make reasonable use of the

equipment ar¥ instruments of the Contractor for purposes of this Section 26.3, provided

that no da~1ge to the equipment or instruments or impediment to the Hydrocarbons

Operations hereunder shall result from such use. The Ministry shall indemnify and

reimburse the Contractor for any loss or damage that may in fact result from any such use

of equipment and instruments. The Ministry shall be given reasonable assistance by the



58



Afghan-Tajik Basin Phase I Tender

Contractor for such functions, and the Contractor, the Person-in-Charge and the

Contractor's tepresentatives shall be required to provide the Ministry with all reasonable

facilities and iassistance for the effective exercise of its functions, inter alia by affording

to the Ministry all facilities and privileges afforded to its own personnel in the field

including the use of available office space and housing free of charge .

26.4



Current Recordkeeping and Reporting. The Contractor shall prepare and maintain

accurate and ~urrent records of its activities in the Contract Area. The Contractor shall

furnish all inr.ormation, reports and data concerning its activities and operations under

this Contract litn such formats, at such times, and to such parties as may be required under

the Hydrocafbons Law and any regulations issued thereunder or pursuant to any

transparency principles or policies adopted by the Government, including the EITI.



26.5



Samples.

Contractor shall save and keep for the duration of this Contract all unused

cores and saflilfPles taken from the Wells drilled, which shall be forwarded to the Ministry

or its represe tatives at such time and in the manner directed by the Ministry. All cores

and samples . cquired by the Contractor shall be available for inspection by the Ministry

or its represe1tatives at all reasonable times. Unless previously forwarded to the Ministry

pursuant to instructions given under this Section 26.5, the Contractor shall forward to the

Ministry all r~maining cores and samples upon expiration or termination of this Contract.

Unless otherrise agreed to by the Ministry, in the case of exporting any rock or

Hydrocarbons samples from Afghanistan for the purpose of testing and analysis, samples

equivalent inI size and quantity shall, before such exportation, be delivered to the

Ministry.



26.6



Exportation of Original Data. Originals of records and other data can be exported only

with the priot- permission in writing of the Ministry; provided, however, that any data

which must ibe processed or analyzed outside Afghanistan may be exported if a

comparable record is maintained in Afghanistan to the extent feasible and such exported

records and d~ta, including processed and interpreted data, are repatriated to Afghanistan.

Response to request for such permission shall be given without undue deJay.



Th~



j



26.7



Ownership and Confidentiality of Data. The Contractor shall provide to the Ministry

in appropriatt form all original data resulting from Hydrocarbons Operations, including

geological, ~eophysical, petrophysical, engineering, Well logs, production data and

completion s~atus reports and any other data (including derivative data) which the

Contractor 1ay compile during the term hereof, including all reports, analyses,

interpretationr' maps and evaluations thereof prepared by the Contractor and any

contractors, sf bcontractors or consultants to the Contractor or by its Affiliated Entities,

and cuttings of all samples that have been obtained or compiled during the term hereof

("Data"). THe State shall have title to all Data. The Data shall not be disclosed to third

parties by theiMinistry prior to relinquishment of the area to which they relate, or prior to

the end of tre Exploration Phase if such area is not sooner relinquished, provided,

however, that the Ministry may make copies available to professional consultants, legal

counsel, accor ntants, underwriters, lenders and such Government entities as may need to

be made aware thereof or have the right to require disclosure. In any event, the

Contractor m~y retain copies of all Data. The Contractor shall not disclose the Data to



59



Afghan-Tajik Basin Phase I Tender

any third pa 'es without the Ministry's prior written consent, provided, however, that the

Contractor ryay make copies available to professional consultants, legal counsel,

accountants, ~nderwriters, lenders, its Affiliated Entities, the Contractor Entities, their

respective S1areholders and Affiliated Entities, contractors and subcontractors of the

Contractor and such government entities as may need to be made aware thereof or have

the right to tequire disclosure. Any Data that are disclosed by the Ministry or the

Contractor tol third parties pursuant to this Section 26.7 shall be disclosed on terms that

ensure that t~e Data are treated as confidential by the recipient. To the extent that there is

any inconsis ~ency between the provisions of this Section 26.7 and the provisions of

Article XXX ~ II, the provisions of this Section 26.7 shall govern except to the extent that

application 0 i this Section 26.7 would violate applicable law.



ARTICLE XXVII

INSURANCE AND INDEMNIFICATION

27.1



Insurance. To ensure that the Contractor shall meet its obligations to third parties, or to

Government jagencies, that might arise in the event of damage or injury (including

environmental damage or injury and cleanup of accidents in accordance with Good Oil

Field Practic~s) caused by Hydrocarbons Operations, notwithstanding that the damage is

accidental, thf Contractor shall maintain in force a third party liability insurance policy

through an i~ternationally recognized insurance company reasonably acceptable to the

Ministry covfring the activities of itself, its contractors and subcontractors and the

employees o~ all such parties, to the extent that such insurance is reasonably available to

the Contractor. Such insurance policy shall include the Ministry as an additional insured,

shall waive subrogation against the Ministry, and shall provide that it may not be

cancelled excf Pt upon thirty (30) Days prior written notice to the Ministry. A certificate

evidencing s ~ch insurance policy shall be provided to the Ministry within ninety (90)

Days of the Effective Date. The limits, coverage, deductibles and other terms thereof

shall be subj ect to approval in writing by the Ministry (such approval not to be

unreasonably lwithheld or delayed). To the extent that such third party liability insurance

is unavailable or is not obtained, or does not cover part or all of any claims or damage

caused by of resulting from Hydrocarbons Operations, each Contractor Entity shall

remain fully ~esponsible for the obligations of the Contractor and shall defend, indemnify

and hold the [ inistry harmless against all such claims, losses and damages of any nature

whatsoever.



27.2



Indemnification. Subject to Section 27.3, each Contractor Entity shall indemnify,

defend and hhld the Government harmless against all claims, losses and damages of any

nature whatsJ ever, including, without limitation, claims for loss or damage to property or

injury or de~h to persons, caused by or resulting from any Hydrocarbons Operations

conducted b~ or on behalf of the Contractor, provided that a Contractor Entity shall not

be held responsible to the Government under this Section 27.2 for any loss, claim,

damage or i~ury caused by or resulting from any negligent action of personnel of the

Government br from any environmental contamination existing in the Contract Area on

or prior to thcl Effective Date.



60



Afghan-Tajik Basin Phase I Tender

27.3



Limita tion @n Liability. Notwithstanding any other provision of this Contact, no Party

shall be Iia~le to any other Party (and for the benefit of the Contractor, the Ministry

agrees that

Contractor Entity, its Shareholders or their respective Affiliated Entities, or

any subcontractor of the Contractor shall be liable to the Ministry) for loss of profits,

punitive da0 ages, exemplary or indirect damages, business interruption damages or loss

of goodwill arising out of a fai lure to comply with an obligation (includi ng in respect of

Hydrocarborls Operations) under this Contract (whether such failure is characterized as

breach of cohtract or a tort or otherwise), including under any indemnity provision under

this Contra9t, unless such Party has caused the damages or losses by its willful

misconduct or gross negligence. Nothing contained in this Section 27.3 shall preclude

the Ministryl or any other agency or instrumentality of the Government that exercises

regulatory functions from assessing fines to the extent specifically provided in

Afghanistan Law and not assessed based on lost profits or loss of goodwill and not

intended to indemnify for business interruption or indirect damages . Reference to

"willful mis~onduct or gross negligence" means (a) a marked and flagrant departure from

the standard pf conduct that a reasonable and prudent person acting in such circumstances

would have peen expected to display at the time of the purported misconduct, or such

wanton and Ireckless conduct as constitutes in effect an utter disregard for harmful,

foreseeable, and avoidable consequences; or (b) an act or failure to act with knowledge or

reckless disr~gard of the harmful, foreseeable , and avoidable consequences



+



I



ART ICLE XXVIII

ASSIGNMENT AND SUBCONTRACTORS

28.1



Assignment. Subject to Section 28.4, a Contractor Entity may not sell, assign, transfer,

convey, pledge or otherwise dispose of any part or all of its rights or obligations under

this Contrad to any person or entity, unless approved by the Council of Ministers and

subsequentl~ authorized by the Ministry. In the case of any assignment authorized undcr

this Section 28.1, the assignor shall provide to the Ministry an unconditional undertaking

by the assiknee to assume all obligations of the assignor under this Contract.

Notwithstan1ing the foregoing, (i) the assignor shall remain liable for all obligations

under this 9 0ntract that the assignor has incurred prior to the date upon which such

assignment, encumbrance or transfer takes effect and (ii) the assignor shall remain jointly

and severall~ liable with the assignee for performance of the obligations of the assignor

arising after Ithe effective date of the assignment unless the assignor assigns its entire

interest under this Contract.



28.2



Indirect TJnsfers; Change of Control. The Ministry shall have the right to terminate

this Contractlonly in respect of the relevant Contractor Entity upon notice to the relevant

Contractor i ~: without the prior approval of the Council of Ministers and subsequent

approval of the Ministry, such Contractor Entity shall, during the life of this Contract,

undergo, dirf ctly or indirectly, a change of control (it being understood that for this

purpose "co~trol" of the Contractor Entity means the power, directly or indirectly, to

direct or change its management or policies, whether through ownership of shares or

other voting ~ecurities or by any other means). Notwithstanding the foregoing, nothing in



61



Afghan-Tajik Basin Phase I Tender

this Article fXVIII shall prohibit the ultimate parent entity of any Contractor Entity or

any Shareh(i)lder from entering into any merger, acquisition or other business

combination J



28.3



Application I to the Ministry. Prior to any proposed assignment or change of control

under this trticle XXVIII, the Contractor Entity assignor or the Contractor Entity

undergoing a change of control, as applicable, shall notify the Ministry in advance

together wit~ an application which shall include :

(a)



the J me, address and nationality of the third party;



(b)



in thJ case of the third party organized as a corporation:

(i)



its place of registration or incorporation, its principal place of business, the

names, addresses and nationality of the directors, principal officers and

authorized signatories of the company and its capital structure;



(ii)



the corporate structure of the third party, its parent company, if any, and

other Affiliated Entities;



(iii)



financial information on the third party and its parent company, if any,

including annual reports, audited balance sheets and profit and loss

statements for the past three years, and any reports of relevance for the

Hydrocarbons Operations which the third party or its parent company may

have filed with government agencies responsible for securities regulation

during that period;



(c)



how



(d)



the t~ ird party's previous experience and technical expertise in Hydrocarbons

Operations, specifically including the third party's experience in developing



countnes;



(e)



.mlonpI atlOn

.

.

.

f ·

·fi

concernmg

expenence

an d tec h·

mcaI

competence

0 slgm lcance to



I



e Hydrocarbons Operations would be financed;



~



the ala or areas to which an application applies;



(f)



a description of the organization and expertise which the third party will have

available in Afghanistan and elsewhere for activities in connection with the



cont e! Area;

(g)



a description of the relevant equipment, machinery, tools and personnel that will

be available for the Hydrocarbons Operations of that third party;



(h)



an indication of who will be the representative in relation to the authorities;



(i)



a desL iPtion of the third party's experience and procedures that will apply for

securing the health, safety and welfare of persons involved in or affected by the

Hydrocarbons Operations;



62



Afghan-Tajik Basin Phase I Tender



U)



a des!criPtion of the third party's experience and procedures that will apply for

protecting the environment, preventing, minimizing and remedying pollution and

otherlharm from the Hydrocarbons Operations;



(k)



proposals with respect to the training of Afghan nationals and expenditures to be

incurred therefor;



(I)



such guarantees required pursuant to Article 40, Section 14 of the Hydrocarbons

Law and as required herein, including a General Performance Guarantee executed

by th~ ultimate parent entity of the third party in a maximum amount equal to the

prodJ ct of (i) the Participating Interest to be acquired by the third party and (ii)

one t ndred million US Dollars (US$ 100,000,000).



(m)



such other particulars as the Ministry may reasonably require to be submitted

within a reasonable specified timeframe.



If such further information is not submitt ed within the specified timeframe, the

application shall be deemed to be withdrawn. The Ministry will not unreasonably

withhold its ~onsent to any such assignment or change of control, except that the Ministry

may in its sole discretion withhold any such consent in the event of any transaction which

wou ld resul~ in a change in the Operator or the ultimate parent entities of the prequal ified patties in the consortium constituting the Winning Bidder owning in the

aggregate, directly or indirectly, less than fifty-one percent (51 %) of the Participating

Interests at ar time during the Exploration Phase.



28.4



Assignments to Affiliated Entities. A Contractor Entity may sell, assign, transfer,

convey, pledge or otherwise dispose of any part or all of its rights or obligations under

this contractlto an Affiliated Entity. In the case of any assignment authorized under this

Section 28.4, the Contractor Entity shall notify the Ministry of such assignment and shall

provide to tr e Ministry an unconditional undertaking by the assignee to assume all

obligations or the assignor under this Contract. The assignment, encumbrance or transfer

of this Cont~act or interests hereunder shall not affect any liability that the Contractor

Entity has if curred prior to the date upon which such assignment, encumbrance or

transfer takes effect. Notwithstanding such undertaking, the Contractor Entity shall

remain jointly and severally liable with the assignee for performance of the obligations of

the Contractor.



28.5



SUbcon tractbrs. The provIsIons of this Article XXVIII shall not apply to the

engagement bf subcontractors that are engaged to perform special operations or provide

services. THe Contractor undertakes to provide copies of all such subcontracts to the

Ministry and the Ministry of Finance.



63



Afghan-Tajik Basin Phase I Tender



ARTICLE XXIX

LAW OF THE CONTRACT

This Contract shall lJe governed by, construed under and interpreted in accordance with the laws

of Afghanistan.



ARTICLE XXX

FORCE MAJEURE

Except as otherwise provided in this Article, each Party shall be excused from complying with,

or permitted to delay its performance of, this Contract, except for the payment of money due and

only with respect to those terms that are directly affected by the event in question, for so long as

such compliance is Iprevented or delay in performance is caused by Force Majeure. "Force

Majeure" shall mean any act or cause that is reasonably beyond the control of such Party and

does not result froml the fault or negligence of such Party, including natural catastrophes, fires,

earthquakes, strikeJ (except strikes by the Contractor's employees), wars (declared or

undeclared), acts of!terrorism and acts of God. It is expressly understood that Force Majeure

shall not mean econ(])mic hardship or change in market conditions. In the event that either Party

hereto is rendered uhable, wholly or in part, by any of these causes to carry out its obligations

under this Contract, !such Party shall give notice and details of Force Majeure in writing to the

other Party within seven (7) Days after its occurrence. In such cases, the obligations of the Party

giving the notice shall be suspended during the continuance of any inability so caused, and the

duration of any period specified in this Contract for carrying out the obligations affected by any

of the aforesaid causbs, including, but not limited to, the Exploration Phase and the Development

and Production Phasf' shall be extended for a period equal to the impact of delay caused by the

Force Majeure occurrence; provided, however, that the term of this Contract shall not be

extended unless th~ delay caused by the Force Majeure event in question persists for a

continuous period or at least three (3) Months . The Party claiming Force Majeure shall use all

reasonable efforts t9 remove or correct the event that gave rise to the Force Majeure. If this

Contract is subject to Force Majeure for more than ninety-six (96) consecutive Months, either the

Ministry or the COljltractor shall have the right, upon notice to the other, to terminate this

Contract with respect to the part or parts of the Contract Area affected.



ARTICLE XXXI

ENTIRE CONTRACT AND AMENDMENTS

31.1



Entire Agrel ment. This Contract embodies the entire agreement and understanding

between the I Contractor and the Ministry relative to the subject matter hereof, and

supersedes and replaces any provisions on the same subject in any other agreement

between the Farties, whether written or oral, prior to the date of this Contract.



64



Afghan-Tajik Basin Phase I Tender

31.2



Amendment This Contract may not be amended, modified, varied or supplemented

except by m~ual consent in writing, executed, endorsed and approved in accordance with

the Hydrocarbons Law, and signed by the Contractor and the Ministry.



31.3



Severability. The provisions of this Contract shall be separate and severable each from

the other to t~e extent that if any portion or anyone provision or portion thereof is held to

be inoperativie or unenforceable in any jurisdiction then the remainder of this Contract

shall remain ~inding upon and enforceable by the Parties hereto in that jurisdiction and

shall be construed as if the Contract had been executed without such inoperative or

unenforceabl~ provision or portion thereof, provided that the provision or portion so

severed shall !not materially affect the remainder of this Contract.



31.4



Governing i anguage and Duplicate Originals. This Contract shall be executed in

English and ib Dari in eight (8) originals, with the Ministry holding two (2) originals, one

(1) in EnglisH and one (1) in Dari and the Contractor holding six (6) originals, three (3) in

English and !three (3) in Dari. In the event that a dispute arises under this Contract

between the English and Dari versions, the English version shall be definitive as to the

terms and co I ditions of this Contract and the rights and obligations of the Parties.



ARTICLE XXXII

WAIVERS; CUMULATIVE REMEDIES

32.1



Express Waiver Required . Performance of any condition or obligation to be performed

hereunder sh~1I not be deemed to have been waived or postponed except by an instrument

in writing s~gned by the Party that is claimed to have granted such waiver or

postponemenf'



32.2



No General Waivers. No waiver by a Party of anyone or more obligations or defaults

by the other ~arties in the performance of this Contract shall operate or be construed as a

waiver of an Xother obligations or defaults, whether of a like or of a different character.



32.3



Cumulative I Remedies. All rights, powers, and remedies provided hereunder are

cumulative a I d not exclusive of any other rights, powers or remedies provided hereunder

or under appJ" cable laws.



AlR.TICLE XXXIII

TRANSPARENCY IN AFGHANISTAN HYDROCARBONS OPERATIONS

33.1



Transparen j y. The Ministry shall have the right to keep a copy of this Contract in the

Hydrocarbons Register, publish and keep publicly available and distribute to provincial

offices such I information and reports on the Contract, related documents and the

Contractor ad is required pursuant to the Hydrocarbons Law and any regulations issued

thereunder dr pursuant to any transparency principles or policies adopted by the

Government, including the EITI. Such information and reports may include production



65



Afghan-Tajik Basin Phase I Tender

and financi ~ 1 data concerning all revenues from income taxes, production shares,

royalties, fees and other taxes and other direct or indirect economic benefits received by

the Ministry land all amounts paid by the Contractor under or in relation to this Contract.

The foregoing shall not preclude the Ministry from disclosing the Contract or any

information !relating to Hydrocarbons Operations if the Ministry concludes that such

disclosure is in the national interest or complies with the EIT! or other internationally

accepted norms relating to transparency in the extractive industries.



33.2



Trade secrJts. If any information referred to in Section 33 .1 concerns technical devices,

production 1 ethods, business analyses and calculations and any other industrial and trade

secrets and are of such a nature that others may exploit them in their own business

activities, th~ Ministry may approve that such information may rightfully be subject to

confidentiality for a period of time determined by the Ministry.



33.3



No corrupJ Action. Each of the Ministry and the Contractor Entities represents and

covenants that it is, and during the term of this Contract will remain, in full compliance

with all laws applicable to it prohibiting corrupt business practices, including the

Hydrocarbons Law.



ARTICLE XXXIV

NOTICES

All notices, reports and other communications required or permitted hereunder or any notices

that one Party may desire to give to the other Party shall be in writing in the English language

and deemed to have Ibeen properly delivered if personally handed to an authorized representative

of the Party for whl~ intended or sent by electronic mail, registered airmail or cable, except as

otherwise provided r,erein, at or to the address of such Party for whom intended as indicated

below, or such other address as either the Ministry or the Contractor may from time to time

designate by notice 1n writing to the other Party:

CONTRAC1 0R:



TP Afghanistan Limited

Attn : Afghanistan Country Manager

PRT, Sheberghan

Mazar-i-Sharif, Afghanistan

and

TPAO Exploration Department

Attn : Co~kun NAMOGLU

S6giltOzil Mahallesi 2180. Cadde

No:86 06100 <;ankaya ANKARA

Turkey



MINISTRY:



Ministry of Mines & Petroleum

Pashtoonistan Watt



66



Afghan-Tajik Basin Phase I Tender

Across from Ministry of Finance

Kabul, Afghanistan

Telephone: +93 (0) 202 100 309

Attn : Director of Afghanistan Petroleum Authority

Any notice, report olil other communication hereunder (other than reports under Article XXIII)

that is required to be submitted within seven (7) Days or less shall be due on the next business

Day if Government ffices in Afghanistan are closed on the Day it would otherwise be due.



ARTICLE XXXV

EFFECTIVENESS AND REGISTRATION

35.1



Effective Date and Validity. This Contract, which has been endorsed by the Interministerial Cbmmittee and approved by the Council of Ministers, shall become effective

and binding Ion the Parties on the Effective Date. The Ministry shall inform the

Contractor of the Effective Date within forty-eight (48) hours thereof. The Ministry

represents thkt it has all requisite power and authority to enter into this Contract and

perform its obligations hereunder and that the execution, delivery and performance of this

Contract by ~he Ministry has been duly authorized in accordance with the constitutional

and administjlative procedures for the Ministry and that only the approval of the Council

of Ministers ·s required to give this Contract legal effect.



35.2



Registration of Contract; Publication. Within ten (10) Days following the Effective

Date, the Ministry shall (i) register this Contract in the Hydrocarbons Register and (ii)

publish in at ~east three (3) newspapers of national circulation in Afghanistan and on the

Ministry's website an announcement summarizing the material terms of the Contract.



[signature page follows]



67



Afghan-Tajik Basin Phase I Tender



IN WITNESS WHEREOF, the Parties hereto have caused this Contract to be executed by their

respective duly auth i rized representatives as of the date first above written.

DRAGON OIL (MAZAR-I-SHARIF) LIMITED



By



J1L~P1



Mark W. Sawyer

0

Manager, New Ventures and

Business Development



TP AFGHANISTAN LIMITED



By __~~-=-*_______________________



GHAZANF AR INVESTMENT LTD.



~



.~

\

By



, "



.



, -



----,._-



'l1aZa11f;



Chief Executive Officer



THE MINISTRY OF MINES & PETROLEUM OF

THE GOVERNMENT OF THE ISLAMIC

REPUBLIC OF AFGHANISTAN



Abdul Jalil Jumriany

Director General

Afghanistan Petroleum Authority



68



Afghan-Tajik Basin Phase I Tender



EXHIBIT A

DESCRIPTION OF CONTRACT AREA



A -2



Afghan-Tajik Basin Phase I Tender



COORDINATES OF CONTRACT AREA

The Contract Area cpnsists of the following coordinates, comprising the interiors of the

geographic region described by its comers, stated with reference to the meridian of Greenwich

and the Equator:



MAZAR-J-SHARIF

660 55' 0" E



37 0 22' 36.48" N



660 55' 0" E



36 0 30' 0" N



67 0 15' 0" E



36 0 30' 0" N



67 0 15' 0" E



370 11' 23.9748"



A-2



Afghan-Tajik Basin Phase I Tender



EXHIBITB

MAP OF CONTRACT AREA



B-1



Afghan-Tajik Basin Phase I Tender



66.916667E

37.3768N



66.916667E

36.75N



67.25E



36.5N



B-2



Afghan-Tajik Basin Phase I Tender



EXHIBITC

ACCOUNTING PROCEDURES



C- l



Afghan-Tajik Basin Phase I Tender



TABLE OF CONTENTS



I



ARTICLE I General Provisions ..................................................................................... ............. C-3

I. I

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

1.11



Definition1s and Scope ............................................................................................... ... C-3

Inconsistehcy .. ...................... ................................... ................................................. ... C-3

Accounting Records and Reports ...................................................... .......................... C-3

Languag~ land Units of Account ...................... ........ ...... ..... .................. ..... ....... ........... C-4

Cash BasIs ... ..... .................................................................................. ......................... C-4

"R" Factor Expenditure Account ............................................... ................... ............... C-4

"R" Factor Income Account ........................ .... .. .......................................................... C-6

Arm' s Le~gth Transactions ................................................................ .. ................. .. .... C-6

General Efclusions ...................................................................................................... C-6

Currency Exchange Rates ..................................... ..... ........................... ......... .............. C-8

Acceptanoe of Costs ....................................... ............................................................. C-8



ARTICLE II ACCOU1ting Methods and Principles ...................................................... ................ C-8

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

2.9



Labor Cos s ................ .................................................................................... .............. C-8

Material osts ................. ........ ......................................................... ....... ............... ... ...C-9

Technical Services Costs ...................................................... ....................................... C-9

Insurance and Claims ................................................................................... .............. C- I 0

Legal and ~itigation Costs ......................................................................... ................ C-I 0

General Atlministration and Services Overhead Costs .............................................. C-I 0

Office CoJts, et cetera, in Afghanistan ..................................................................... C- II

Land Use and Surface Rental Fees ............................ ...................................... .... ...... C-II

Training Costs .. ............. ........... .............. ..... ......... ...... ............................................... C-] I



ARTICLE III Audit and Inspection Rights of the Ministry ..... ................................. .... .. ....... ... C-ll

APPENDIX I: ESCr w Account.. ............... ................................ .............................................. C-13

APPENDIX 2: Proourement Manua!.. ................ ....................................... ..... ..... C-14



C-2



Afghan-Tajik Basin Phase I Tender



EXHIBITC

ACCOUNTING PROCEDURES

ARTICLE I

General Provisions

1.1



Definitions and Scope



The AccouJing Procedures described herein are to be followed and observed in the

performance iof the Ministry's and the Contractor's obligations for purposes of Article X

of the Contract. Except as otherwise provided in the Contract, these Accounting

Procedures ~hall not apply to Contractor's Income Tax obligations, which shall be

governed by fhe provisions of the Income Tax Law.

The definiti t s appearing in Article I of the Contract shall also apply to this Exhibit C.

In order to determine the "R" Factor, the Contractor shall keep a particular system of

accounts to ¥cord, in U.S. Dollars, income and expenditure related to the Hydrocarbons

Operations. ]This system shall consist of two main accounts: the "R" Factor Income

Account, and the "R" Factor Expenditure Account as defined in this Exhibit C.

In all matters of procurement under the Contract, the Contractor shall comply with the

policies and procedures set forth in the Procurement Manual, a form of which is attached

as Appendix! 2 to these Accounting Procedures. The Procurement Manual shall be

subject to rer iew by the Parties at the end of each Calendar Year, and may be amended,

supplementeo or replaced as mutually agreed between the Parties.

1.2



InconSistent

In the event of any inconsistency or conflict between the provisions of this Exhibit C and

the other pror isions of the Contract, the other provisions of the Contract shall prevail.



1.3



Accounting Records and Reports



(a)



I



The
compllete accounts, books and records of all revenues, costs and expenses relating

to all Hydrocarbons Operations hereunder in accordance with International

Financial Reporting Standards and generally accepted procedures and standards in

the irlternational petroleum industry. Such accounts, books, records and reports

will ibe available for the inspection and use of the Government and its

representatives in carrying out its supervisory, financial and fiscal functions under

the Contract.



C-3



Afghan-Tajik Basin Phase I Tender

(b)



~ccounts,



All



books, records, reports and statements will be prepared in



acco~dance with the Contract, applicable Afghanistan Law, and where there are



no relevant provisions of either of these, in accordance with International

Finarlcial Reporting Standards and Good Oil Field Practices.

(c)



1.4



The Ministry may, in accordance with the prevailing laws and regulations, from

time to time by no less than thirty (30) Days' notice to the Contractor, specify the

style, format and level of details of the reports, documents and materials that the

Ministry may reasonably require from the Contractor.



Language a id Units of Account

Unless othe;r

l ise agreed or prescribed in prevailing legislation, all accounts, records,

books and r orts shall be maintained and prepared in the English language and shall be

recorded in 1IJ .S. Dollars.



1.5



Cash Basis

Notwithstanding any other provision of this Contract, International Financial Reporting

Standards or generally accepted procedures and standards in the international petroleum

industry, the Contractor shall prepare on a cash basis the 'R' Factor Expenditure Account

described in Section 1.6 of this Exhibit C and the 'R' Factor Income Account described

in Section 1 of this Exhibit C. In such books, accounts, and records relating to the' R'

Factor Expe?diture Account and the 'R' Factor Income Account, all cash receipts and

cash expenditures shall be attributed to the time period in which the cash receipt or

expenditure ·s realized.



f



1.6



"R" Factor Expenditure Account

Hydrocarbons Operations Expenditures may consist of capital and operating expenditures

as follows:

(a)



Capital Expenditures

Capital expenditures are those Hydrocarbons Operations Expenditures for assets

that normally have a useful life that extends beyond the year in which the asset

was acquired.



In



a~ition to expenditures relating to assets that nonnally have a useful life



beyo ~d



the year in which the asset was acquired, the costs of exploration and

develppment operations, as described in Sections 1.6(a)(v), (vi), (vii), (viii) and

(ix) of this Exhibit C, will be classified as capital expenditures. Capital

expenditures shall be reduced by the amount of any proceeds received by the

Cont~actor from sales of Liquid Hydrocarbons or Natural Gas produced during

production testing, such sales to be valued at the net realized price obtained by the

Contractor therefor.

Capital expenditures include, but are not limited to, the following:



C-4



Afghan-Tajik Basin Phase I Tender

(i)



Construction utilities and auxiliaries - work shops, power and water

facilities, warehouses, and field roads . Cost of Liquid Hydrocarbons

treating plants and equipment, secondary recovery systems, Natural Gas

plants and steam systems;



(ii)



Construction housing and welfare housing - recreational facilities and

other tangible property incidental to construction;



(iii)



Production facilities - production rigs (including the costs of labor, fuel,

hauling and supplies for both the offsite fabrication and onsite installation

of rigs, and other construction costs in erecting rigs and installing

pipelines), wellhead equipment, subsurface lifting equipment, production

tubing, sucker rods, surface pumps, flow lines, gathering equipment,

delivery lines and storage facilities;



(iv)



Movables - surface and subsurface drilling and production tools,

equipment and instruments, barges, floating craft, automotive equipment,

aircraft, construction equipment, furniture and office equipment and

miscellaneous equipment;



(v)



Development and production drilling - labor, materials and services used

in drilling Wells with the object of penetrating a proven reservoir,

including the drilling of delineation Wells as well as redrilling, deepening

or recompleting Wells, and access roads, if any, leading directly to Wells;



(vi)



Exploration drilling - labor, materials and services used in the drilling of

Wells with the object of finding unproven reservoirs of Liquid

Hydrocarbons and Natural Gas, and access roads, if any, leading directly

to Wells;



(vii)



Surveys - labor, materials and services used in aerial, geological,

topographical, geophysical and seismic surveys, and core hole drilling;



(viii)



Security and de-mining - the engagement of private security providers

licensed in Afghanistan and de-mining or mine clearance costs associated

with Hydrocarbons Operations;



(ix)



Third-party assessments - the engagement of internationally recognized

third parties to conduct assessments, including Baseline Environmental

Assessments, wireline, well-logging and testing, logistics, security and demining assessments; and



(x)



Other exploration expenditures - auxiliary or temporary facilities having

lives of one year or less used in exploration and purchased geological and

geophysical information.



C-5



Afghan-Tajik Basin Phase I Tender

(b)



Operating Expenditures



oper~ting expenditures are all Hydrocarbons Operations Expenditures other than

capitj l expenditures.



1.7



"R" Factor Income Account

The followi g shall be recognized as income and recorded in the "R" Factor Income

Account:

(a)



(b)



The alue of Hydrocarbons allocated to the Contractor in accordance with Article

X of t e Contract.



lnco~e from



sales of assets acquired by the Contractor for Hydrocarbons

Operations, the cost of which was recorded in the "R" Factor Expenditure



Acco~nt.



1.8



Inco~e



(c)



from services rendered to third parties involving personnel whose

remu, eration and benefits are recorded in the "R" Factor Expenditure Account

and/or involving goods whose acquisition cost has been recorded in the "R"

Facto~ Expenditure Account.



(d)



Inco, 1e from letting assets belonging to the Contractor, whose acquisition cost has

been recorded in the "R" Factor Expenditure Account or subletting of goods

whos€ hire is charged to the "R" Factor Expenditure Account.



(e)



I

.

. d J

:"..

. re IatlOn

·

C omnensatlOn

receive

lrom

Insurance po I··

ICles ta ken out In

to C ontract

activities for damaged goods, including compensation for loss of profits.



(t)



Other income representing credits applicable to charges to the "R" Factor

Expel diture Account.



Arm's Leng h Transactions

Except as pJ vided in Section 2.3 or as may be otherwise agreed in writing between the

Ministry andl the Contractor (including pursuant to Section 2.6), all transactions giving

rise to reve9ues, costs or expenses which will be credited or charged to the books,

accounts, records and reports prepared, maintained or submitted hereunder shall be

conducted at ~rm's length or on such a basis as will assure that all such revenues, costs or

expenses willI not be higher or lower, as the case may be, than would result from a

transaction c


1.9



General



I



Exc~ usions



The fOllowihg expenditures shall not be included In Hydrocarbons Operations

Expendi turesl

(a)



costs and expenses incurred at any time prior to the Effective Date;



C-6



Afghan-Tajik Basin Phase I Tender

(b)



costs relating to Hydrocarbons refining, marketing or transportation beyond the

Deli ~ery Point (unless otherwise specifically agreed in an approved Development

Prog~am and Development Program Budget as constituting recoverable

HYdT carbons Operations Expenditures);



(c)



contributions and donations, except those approved by the Government;



(d)



gifts or rebates to suppliers, and gifts or commissions to intermediaries arranging

service or supply contracts;



(e)



any cb sts relating to the provision of the Financial Guarantee including payments

madel to the Ministry pursuant thereto or otherwise for failure to perform the work

coml itments in accordance with Section 6.4 of the Contract;



(f)



any i ~terest, fees and other financial charges relating to loans and credits obtained

by the Contractor to acquire funds for the execution of Hydrocarbons Operations,

as w911 as amortization of such loans and credits and any exchange gains or losses

thereof;



(g)



any fines,

interest, monetary corrections or increases in expenses resulting from

I

the (fontractor's failure to comply with its obligations under the Contract,

applidable law or regulations or agreements with third parties;



(h)



over+ ad or payments to any Affiliated Entity of the Contractor, any Contractor

Entity or any of Affiliated Entity of a Contractor Entity that are not allocable to

Hydrbcarbon Operations Expenditures pursuant to Article II ;



(i)



incoi e taxes paid in Afghanistan and all taxes paid outside of Afghanistan;



(j)



costs relating to equipment, inventory or fixtures removed by the Contractor from

the (fontract Area following relinquishment pursuant to Article IV of the

Cont~act, Section 7.1 of the Contract or upon termination or revocation of the

Contract for any reason;



(k)



any

that are required to be made in accordance with the policies and

procdlures set forth in the Procurement Manual attached hereto as Appendix 2 (as

it ma~ be amended from time to time) to the extent such expenditures are not

made in accordance with such policies and procedures and to the extent that such

breach results in the Contractor incurring higher costs and/or results in material

delayk in Hydrocarbons Operations;



(I)



any ofher expenditures not directly related to Hydrocarbons Operations or not in

compliance with the provisions of this Exhibit C; and



(m)



costs that would otherwise be recoverable as Hydrocarbons Operations

Expe~ditures but exceed by ten percent (10%) or more the approved Work

Program Budget as may be amended by the Parties from time to time; provided,

however, that costs in excess of one hundred and ten percent (110%) of any



I



e~penditures



C-7



Afghan-Tajik Basin Phase I Tender

appro~ed



Work Program Budget shall be included in Hydrocarbons Operations

Expe~ditures where such costs are associated with emergency measures taken in

accor
The fOllowink shall not be recognized as income for the purposes of calculating the "R"

Factor:



1.10



(a)



Final ial income in general.



(b)



Inco~e received for services rendered by the Contractor or sales of Contractor's

asset1 occurring before the Effective Date.



(c)



Incole received for activities not related to the Hydrocarbons Operations.



Currency Exchange Rates

For conversilI n purposes between Afghanis, or any other currency, and u .S. Dollars, the

average of the

buying and selling rate of exchange shall be used as issued by Da

I

Afghanistan Bank on the first Day of the Month in which the revenues, costs or expenses

are recorded.



1.11



Acceptance of Costs



aeeep~ee



The

by the Ministry of the values and treatment proposed by the Contractor

relating to ~r l costs and expenses may be conditional upon the presentation by the

Contractor, following a request by the Ministry or its representatives, of all records and

original doc~ents supporting such costs and expenses, such as invoices, cash vouchers,

debit notes" lprice lists or similar documentation verifying the value and treatment

proposed. Any dispute, claim or controversy regarding whether, or the extent to which,

an expenditute should be disqualified as a Hydrocarbons Operations Expenditure shall be

settled in accbrdance with Section 24.2 of the Contract.



ARTICLE II

Accounting Methods and Principles

HydrocarbonF Operations Expenditures incurred hereunder shall be calculated and

accounted fo in a manner consistent with the following principles and definitions and

shall include:



2.1



Labor Costs

Costs of salaries and wages of the Contractor's and Contractor Entities' employees

directly engJged in Hydrocarbons Operations, including costs of holidays, vacations,

sickness, livihg and housing allowances, travel time, bonuses and other established plans

for employecl benefits customarily granted to the Contractor's and Contractor Entities'

employees aJd their families in similar ventures.



C-8



Afghan-Tajik Basin Phase I Tender



2.2



Materia l Costs



Costs of mat rials, equipment, machines, tools and any other goods of a similar nature

used or consumed in Hydrocarbons Operations, subject to the following :

Acquisition - the Contractor shall only supply or purchase materials for use in

Hydrocarbonr Operations that may be used in the foreseeable future . The accumulation

of surplus stf cks and inventory shall be avoided. Inventory levels shall, however, take

into account the time lag for replacement, emergency needs and similar considerations;

Components of Costs - costs of materials purchased by the Contractor for use in

Hydrocarbonf Operations may include, in addition to the invoice price for such materials

(subtracting the discounts given, if any) and provided that they are properly documented

with invoiceJ:



(a)



freig~t costs and costs of transp
~oint 1(~rOVided



that such costs are not included in the invoice price);



(b)



mspeetlOn costs;



(c)



insurl nce; and



(d)



cus~ms



Duties, taxes and othcr itcms that may be charged to imported materials

or to r aterials purchased in Afghanistan; and



-I



Inventories the Contractor shall maintain both a physical and accounting inventory of

all materials ~n stock in accordance with Good Oil Field Practices. The Contractor shall

make a physical inventory of all such materials at least once in any Contract Year. The

Ministry ma1 carry out total or partial inventorics whencver it deems it necessary.



2.3



Technical a nd Professional Services Costs

The value l f technical and professional services costs relating to Hydrocarbons

Opcrations, t hich shall be:

(a)



In the case of technical and professional services performed by third parties

direct~y subcontracted, including outside consultants, contractors and utilities, the

price Ipaid by the Contractor, provided that such prices are no higher than the

prices charged by other suppliers for comparable work and services; and



(b)



In

case of technical and professional services perfonned by the Contractor or

its Affiliated Entities, prices which are no higher than the prevailing prices

chargr d to other Affiliated Entities of the Contractor and to third parties for

comp rable services.



th~



C-9



Afghan-Tajik Basin Phase I Tender

2.4



Insu rance and C laims

Costs relatink to insurance, provided such insurance is customary, affords prudent

protection agf inst risks and is at a premium no higher than that charged on a competitive

basis by insurance companies which are not Affiliated Entities of the Contractor. The

proceeds of any insurance or claim shall be credited against Hydrocarbons Operations

Expenditures I Except in cases where insurance coverage is required pursuant to Article

XXVII ofth~l Contract, ifno insurance is carried for a particular risk, all costs incurred by

the Contractdr in settlement of any related loss, claim, damage (including payment under

indemnities to third parties other than indemnities arising under this Contract or

Afghanistan I Law) or judgment, including legal services, shall be includable in

Hydrocarbons Operations Expenditures, provided that such costs did not result from the

Contractor's Jgross negligence or breach of its obligations under this Contract or

Afghanistan r aw.



2.5



Legal a nd L t gation Costs

Costs and expenses of litigation and legal or related services necessary or expedient for

the protectiof of the Contract Area. Any damages or compensation received shall be

credited against Hydrocarbons Operations Expenditures. Under no circumstances may

the Contract~r' s costs incurred in the course of arbitration or expertise proceedings

entered into ~nder Article XXIV of this Contract be included in Hydrocarbons Operations

Expenditures l



2.6



General Administration a nd Services Over head Costs

General admr istration and services costs, other than direct costs, including:

(a)



Persor nel of Contractor's Affiliated Entities, personnel of any Contractor Entity

or any of its Affiliated Entities and services costs, incurred outside of

AfghJnistan, relating to administration, legal, accounting, treasury, auditing,

taxati~)J1, planning, employee relations, purchasing and other functions required

for H~drocarbons Operations under the Contract; and



(b)



travel expenses of the Contractor' s Affiliated Entities' personnel,

persof,nel of any Contractor Entity or any of its Affiliated Entities in the general

and administrative categories listed in (a) above for the purpose of inspection and

supert ision of Hydrocarbons Operations in Afghanistan;



Reas~nable



shall be allocl ble to Hydrocarbons Operations Expenditures according to methods agreed

to by the Coptractor and the Ministry. The methods agreed shall result from a detailed

study and t~e methods selected following such study shall be applied each year

consistently unless otherwise agreed by the Parties. These general and administration

and services bverhead costs shall not exceed two percent (2%) of the direct costs incurred

in Hydrocarbbns Operations in each Quarter.



C- IO



Afghan-Tajik Basin Phase I Tender



2.7



Office Costs et cetera, in Afghanistan

Staffing and maintenance of the Operator's head office in Afghanistan and other offices

in Afghanisd n, including rent, telephone and radio expenses, as well as the expenses of

general facilities such as bases, warehouses, water, power and communications systems,

roads and bridges.



2.8



Land Use a+ Surface Rental Fees

Any compensation paid to private landowners or occupiers pursuant to Section 9.2 of this

Contract and r,ny annual surface rental fees paid to the Ministry in respect of State-owned

land in accortlance with Article XIV of this Contract shall be included in Hydrocarbons

Operations Ekpenditures.



2.9



I



Training Costs

Any expend L res pursuant to Sections 20.1 or 20.2 of this Contract for the purposes of

training Afg Ian nationals and Ministry personnel.



ARTICLE III

Audit and Inspection Rights of the Ministry

The Ministry, upon thirty (30) Days advance written notice to the Contractor, shall have

the right to inspect and audit, during normal business hours, the Contractor's accounts,

books and records with respect to the Hydrocarbons Operations conducted hereunder,

provided tha~ such right shall apply only for a period of thirty-six (36) Months following

the end of the year to which the relevant accounts, books and records relate and that such

accounts, bodks and records shall in the absence of fraud conclusively be presumed to be

true and corr~ct after such period. During the Exploration Phase of the Contract, it may

be necessary ~o conduct such an examination at the office of the Contractor, a Contractor

Entity or their respective Affiliated Entities in a foreign jurisdiction. Where this is the

case, the Co~~ractor agrees to reimburse the Ministry direct economy airfare costs to such

office and return and a reasonable foreign per diem living allowance for a reasonable

period for two auditors to conduct such an examination. The cost of any audits or

examinationJ by the Ministry within Afghanistan shall be for its sole expense. Any audit

exceptions identified by the Ministry or its designated auditors following an audit of the

Contractor's accounts, books and records (i) submitted to the Ministry pursuant to

Section 26.2 of the Contract or (ii) obtained by the Ministry in connection with an

inspection colnducted pursuant to Section 26.3 of the Contract or this Article III must be

submitted to the Contractor in writing within one hundred and eighty (180) Days

following completion of such audit and failure to give such written exception within such

time shall eJtablish the correctness of the Contractor's books and accounts. The one

hundred andle ighty (180) Days referred to above shall be tolled for the number of Days

during wh ic ~ the Contractor has failed to provide reasonable assistance to the Ministry or

its auditors or otherwise satisfy their reasonable requests for access or documentation in

connection with such audit.



C-ll



Afghan-Tajik Basin Phase I Tender



~f



For purposes auditing, the Ministry may examine and verify, at reasonable times upon

prior notice fOthe Contractor, all charges and credits relating to the Hydrocarbons

Operations, such as books of account, accounting entries, material records and

inventories, vouchers, payrolls, invoices and any other documents, correspondence and

records necessary to audit and verify the charges and credits.

The auditors shall 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 Hydrocarbons Operations.

The contractL shall include in its contracts with subcontractors provisions granting to

the Ministry the same audit and inspection rights in respect of the subcontractors that it

has in respectlof the Contractor pursuant to this Contract.

The provisions of the present Article shall not infringe with the power of inspection for

authorized representatives of the Ministry pursuant to the laws and regulations of

Afghanistan.

All agreed JdjUstments resulting from an audit shall be made

I

accounts.



C- 12



111



the Contractor's



Afghan-Tajik Basin Phase I Tender



APPENDI X 1: Escrow Account

The amount in the Escrow Account shall be subtracted from the Decommissioning and

Abandonment Budget to establish a net shortfall. The net shortfall shall be divided by the

remaining RGII P/ROIlP as of the beginning of the Quarter, then multiplied by that Quarter's

production, in accordance with the following methodology:



Example CalculatiJ n of Escrow Under Section 7.3(d) of the Contract:



At beginning of Quarter,

I



ROIlP = 2,000,000 Barrels

Decommissioning and Abandonment Budget = US$ 2,400,000

Amount in Escrow Account = US$ 800,000

Net shortfall = US$ 2,400,000 - US$ 800,000 = US$ 1,600,000

Quarterly production = 100,000 Barrels



Quarter!y contributil



~ ! 00,000/2,000,000 x lJ S$ 1,600,000 ~ lJS$ 80,000



At end of Quarter,

ROIlP = 1,900,000 Barrels

Amount in Escrow Account = US$ 880,000



C- 13



Afghan-Tajik Basin Phase I Tender



APPENDIX 2: Procurement Manual



C-14



PROCUREMENT MANUAL

FOR THE MAZAR-I-SHARIF CONTRACT AREA

1.



INTROOJ CTION

1.1



This Procurement Manual (the "Manual") and any additional and more detailed

Procurement procedures adopted in accordance with Paragraph 8 of this Manual

(collectively, the "Tender Procedures") establish the tendering, bidding and

contdct awarding policies and procedures for purchasing services, goods and

other assets needed for the Contractor to perform its obligations in accordance

with the Exploration and Production Sharing Contract for Hydrocarbons

Exploration, Development and Production in the Mazar-i-Sharif Block dated

Octo~er 8, 2013 (the "Contract"), by and among the Ministry of Mines &

Petroleum of the Government of the Islamic Republic of Afghanistan (the

"Ministry") and TP Afghanistan Limited ("TPAL"), Dragon Oil (Mazar-iShari~ Limited ("DOML"), and Ghazanfar Investment Ltd . ("GIL") (the

"Contractor"). TPAL, DOML and GIL, and their respective successors and

assignees (if any), may sometimes individually be referred to as "Contractor

Entidr" and collectively as the "Contractor".



1.2



The 'Ifender Procedures shall be applicable to all transactions of the Operator (as

defined in the Contract) for the purchase of services, goods and other assets in

relation to Hydrocarbons Operations, including, but not limited to, purchasing by

means of commercial financing and long-term leasing ("Procurement"). The

Contractor Entities, the Operator, the CPO (the Contracts and Procurement

Depafment defined in Paragraph 5.1 of this Manual) and their respective

employees shall adhere to the terms of the Tender Procedures.



1.3



This

has been adopted by agreement of the Ministry and the Contractor as

an exhibit to the Contract. Notwithstanding Section 31.2 of the Contract, this

Manu~1 may be amended, supplemented or restated solely by written agreement

of the Ministry and the Operator.



1.4



All terms that are capitalized in this Manual but are not defined herein shall, to the

extent defined in the Contract, have the same meaning as set out in the Contract.



1.5



In th9 event of any inconsistency between the provisions of this Manual and the

provisions of the Contract, the terms of the Contract shall prevail.



1.6



As J ntemPlated in Section 1.9(k) of the Accounting Procedures, costs that are

incur~ed by the Contractor pursuant to sub-contracts, purchase orders or any other

contractual arrangements for the conducting of Hydrocarbons Operations ("SubContracts") awarded, issued or otherwise entered into by the Contractor in

breach of the Tender Procedures shall be non-recoverable to the extent such

breach results in the Contractor incurring higher costs and/or results in material

delays in Hydrocarbons Operations.



I



~anual



2.



PRINCIPLES AND OBJECTIVES OF THE MANUAL

2.1



3.



The



p~inciPles and objectives of this Manual are as follows:



2.1.1



procuring services, goods and other assets required by the Operator in

relation to Hydrocarbons Operations of good quality at the relevant times

in a well-planned, economic and efficient manner through competitive

bidding (except as noted in Paragraph 4.4 of this Manual) that results in

best value to the citizens of Afghanistan;



2.1.2



procuring services, goods and other assets consistent with approved annual

Work Programs and Work Program Budgets;



2.1 .3



conducting ethical and transparent Procurement activities and ensuring

equitable and unbiased treatment of suppliers of services, goods and other

assets (the "Sub-Contractors");



2.1.4



awarding Sub-Contracts to Sub-Contractors and otherwise implementing

Procurement procedures in accordance with the requirements of this

Manual, the Contract and the applicable requirements of Afghanistan Law;



2.1.5



acting with the participation and approval of the Operator and, to the

extent required by this Manual, of the Government authority overseeing

Procurement activities conducted pursuant to this Manual (the

"Authority"), as such Authority may be appointed or substituted from

time to time by the Ministry and notified to the Operator;



2.1.6



providing the Authority with the access, information, reports, training and

tools necessary or useful for the Authority to carry out its functions under

this Manual;



2. 1. 7



mitigating risk and reducing costs through effective and competitive

contract terms; and



2. 1.8



supporting the development of Afghanistan's economy and petroleum

industry.



OVERVIj W OF THE MANUAL

3. 1



Gener l

This Manual describes the contracting and procurement policies and procedures

of thb Operator with respect to Hydrocarbons Operations, which include the

funct~ons of the CPD and the Authority in the process leading up to the awarding

of contracts to Sub-Contractors (each an "Award") and the concluding of Sub-



-2-



Contracts between the Operator and Sub-Contractors, depending on the applicable

methf of Procurement.

A reasonable estimation of the total costs related to each Award in accordance

with Good Oil Field Practices shall be made by the user department of the

Opera~or and validated by the CPD prior to any tender or direct Award in order to

deteiine which method of Procurement applies and whether and which

appro als by the Authority will be required.



J



This ttanual sets forth the policies and procedures applicable to all stages of

Procurement, including the planning, tendering, awarding and concluding of SubContrActs and to any amendments of Sub-Contracts. The CPD shall develop

additibnal and more detailed Procurement procedures to implement this Manual,

sU~ie1' to approval in accordance with Paragraph 8 of this Manual.

3.2



Methods of Procurement

3.2.1



The methods of Procurement shall be determined in accordance with this

Manual and shall consist of:

(A)



Tenders conducted in accordance with Good Oil Field Practices for

competitive bidding and open to any potential Sub-Contractors,

where the invitation to participate in the tender or the invitation to

pre-qualify is communicated by means of publication in

appropriate Afghan and international mass media (each an "Open

Tender");



(8)



Tenders open only to potential Sub-Contractors invited to

participate by the Operator pursuant to the requirements set forth

herein (the "Selective Tender"); and



(C)



Direct Awards made to Sub-Contractors pursuant to Paragraph 4.4

of this Manual (each a "Sole-Sourced Procurement").



3.2.2



Open Tenders conducted in accordance with Good Oil Field Practices for

competitive bidding shall be the standard method for all Procurement

exceeding one million five hundred thousand Dollars (US$ 1,500,000).



3.2.3



Selective Tenders shall be the standard for all procurement of more than

two hundred fifty thousand Dollars (US$ 250,000) and less than or equal

to one million five hundred thousand Dollars (US$ 1,500,000) in value

and shall require submission of written price quotations from potential

Sub-Contractors.

(A)



For each Selective tender, unless otherwise agreed upon in writing

by the Authority, the Operator shall issue at least two-thirds (2/3)



-3 -



of the invitations to partIcIpate to Sub-Contractors that are not

Related Parties as the term is defined in Paragraph 3.3 .1(A).

(8)



3.3



For each Selective Tender, if the Operator does not issue at least

two-thirds (2/3) of the invitations to participate to Sub-Contractors

that are not Related Parties and the Operator does not obtain the

Authority's written consent to conduct the Selective Tender with

less than the requ ired amount of non-Related Parties, the Tender

shall be deemed to not comply with this Manual.



3.2.4



All potential Sub-Contractors shall confirm their compliance with

Afghanistan Law and international standards with respect to transparency,

accountability and the strict observance of business ethics and anticorruption laws and regulations.



3.2.5



All potential Sub-Contractors shall confirm their compliance with health,

safety and environmental requirements under Afghanistan Law and Good

Oil Field Practices pursuant to the Contract.



3.2.6



Proposals received after the closing date of a tender shall not be accepted.



RelatJd Party Transactions

3.3.1



3.3.2



All Awards to Related Parties shall be made on an arm's-length basis on

terms that are no less favorable to the Operator than those that could have

been obtained by the Operator in a comparable transaction with an

unrelated third party.

(A)



For the purposes of this Manual, "Related Par ties" means, in

relation to any Contractor Entity, its Affiliated Entities and its

Associates, all of them and each of them as the context admits.



(8)



For the purposes of this Manual, "Associates" means, in relation to

any Party, an entity in which the Party has a holding of 20% or

more of the voting power (directly or through Affiliated Entities).



The Operator shall not, without the prior written approval of the

Authority, award any Sub-Contracts to any Related Parties or amend,

supplement or otherwise modify any Sub-Contract awarded to any Related

Parties, or waive or compromise rights or obligations for the benefit of any

Related Parties. Notwithstanding the foregoing, any approval shall not be

unreasonably withheld or delayed by the Authority.



-4-



3.4



Contract-Splitting; Material Amendments to Sub-Contracts; Extensions

3.4.1 The Operator shall not split potential Sub-Contracts or potential

amendments to Sub-Contracts such that any thresholds established by this

Manual are not met.



3.4.2



3.5



(A)



With respect to Sole-Sourced Procurement, the prior written

approval of the Authority shall be required before an A ward is

made that (i) would result in the award of more than one SubContract with the same vendor or Affiliated Entities of such vendor

for (a) the same, substantially similar or interchangeable goods or

other assets, within the same Contract Award Period, or (b) the

same, substantially similar or equivalent services, within the same

Contract Award Period; and (ii) would result in the aggregate value

of such Sub-Contracts within the same Contract Award Period

exceeding the thresholds set forth in Paragraph 4.4 of this Manual.



(8)



If the earlier of the Sub-Contracts contemplated in Paragraph

3.4.1(A) above is awarded between January 1 and June 30 of any

Gregorian calendar year, then the term "Contract Award Period"

shall mean January 1 of such calendar year through June 30 of the

following calendar year. If the earlier of the Sub-Contracts

contemplated in Article 3.4.1(A) above is awarded between July 1

and December 31 of any Gregorian calendar year, then the term

"Contract Award Period" shall mean July 1 of such calendar year

through December 31 of the following calendar year.



The Operator shall not make any Material Amendment to a Sub-Contract

without the prior written approval of the Authority. For the purposes of

this Manual, "Material Amendment to a Sub-Contract" means (a) any

Amendment to a Sub-Contract (other than a Major Sub-Contract) that

increases the consideration under the Sub-Contract such that the SubContract becomes a Major Sub-Contract, or (b) any Amendment to a

Major Sub-Contract that increases the consideration under such Major

Sub-Contract by the lesser of (i) 15% of the consideration under such

Major Sub-Contract, or (ii) one million Dollars (US$ 1,000,000). The term

"Amendment" includes any amendment, supplement or other

modification of, or any waiver or compromising of rights or obligations

under, any Sub-Contract (including any change order or similar

discretionary modification of any Sub-Contract in connection with the

implementation or administration thereof), or any series of such

amendments, supplements, modifications, waivers or compromises.



As a general rule, Sub-Contracts shall be awarded for a fixed period of time . One

exten~ion option may be set forth in such Sub-Contracts but the duration of such

Sub-dontracts should be planned to avoid the need for additional extensions. Any



-5-



additional extensions beyond the one extension option and any extension that

consiJts of a Material Amendment to a Sub-Contract shall require the prior written

approt al of the Authority. In determining whether a potential Sub-Contract or a

poten~ial amendment to any Sub-Contract meets any thresholds established by this

Manukl, the consideration payable under the extension option and any additional

extenJions shall be aggregated with the consideration payable under the Sub-



4.



OPE;:j~~:::;:::;::~:;:~=:;:REMENT; PURCHASE



ORDERS

4.1



Open Tenders conducted in accordance with Good Oil Field Practices for

competitive bidding shall be used for all Awards of Sub-Contracts under which

the aggregate consideration payable by any party thereto exceeds one million five

hundfed thousand Dollars (US$ 1,500,000).



4.2



In all Open Tenders, the Operator shall require the submission of two sets of two

separate proposals: (a) a "Technical Proposal"; and (b) a "Commercial

ProP1sal". A bidder's Commercial Proposal will be opened and considered only

after such bidder's Technical Proposal is found to have met the tender's technical

erilet and has been scored.



4.3



In each Open Tender, the Operator shall (a) publish an Open Tender

annoJ ncement in a local Afghan newspaper (in an official language of

AfghAnistan), in appropriate international mass media (in English), and on

Oped Itor's or Operator's parent company's international website accompanied by

brief information on the tender subject and (b) deliver an invitation to potential

10cal, 1 regional and international suppliers identified by the Operator. The

invita~ions shall summarize the relevant terms, conditions and requirements for

participation or pre-qualification. The tender announcement shall be issued at

least thirty (30) days prior to the Operator's issue of the formal invitation to bid .

Invita~ions to bid shall be issued to pre-qualified bidders at least thirty (30) days

in ad{ance of the bid submission date. Exceptions to the preceding thirty (30) day

periods may be approved by the Authority in special circumstances.



4.4



I

.

Sole-Sourced

Procurement may be used to procure serVices,

goo ds an d other

assetJ in the following cases:



4.4.1



Awards of Sub-Contracts under which the aggregate consideration payable

by any party thereto is up to or equal to two hundred and fifty thousand

Dollars (US$ 250,000);



4.4.2



When the extension of an eXlstmg Sub-Contract, entered into in

accordance with this Manual, offers obvious advantages and where

conducting a tender would be uneconomic and inefficient;



-6-



4.5



4.6



4.4.3



When a tender conducted in accordance with this Manual has not resulted

in bid conditions acceptable to the Operator and more favorable conditions

can be obtained by the Operator through Sole-Sourced Procurement;



4.4.4



When certain services, goods or other assets can be provided by only one

supplier as a result of the inability of any other suppliers to provide the

required services, goods or other assets and there exists no reasonable

alternative;



4.4.5



When only one supplier offers services, goods or other assets compatible

with those utilized by the Operator;



4.4.6



When the provision of particular services, goods or other assets is urgently

required, where such urgency was unforeseeable and did not arise as a

result of the Operator's failure to act in a timely manner; or



4.4.7



In cases of emergency, where the failure to act may cause material damage

or harm to Hydrocarbons Operations.



Exce~t for any Procurement conducted pursuant to Paragraphs 4.4.1 or 4.4.7 of

this Manual, Sole-Sourced Procurement shall not be conducted without the prior

writteh approval of the Authority.



SUb-~ontracts



for routine services and supplies under which the aggregate



~~~~~~~~at;~II~r:y~~I~$ t~~~,~~~~r~:/~e t~w~~d:du~~ ~e::~ oh:~~~~~a:;:r~:!s

issue -11 in accordance with the following procedures:

4.6.1



The CPO will pre-qualify and maintain a CPO approved vendor list for

items normally procured through purchase orders. In accordance with the

Contract, Afghan suppliers shall be the preferred source for services,

goods and other assets procured pursuant to purchase orders.



4.6.2



Procurement through purchase orders not exceeding two hundred and fifty

thousand Dollars ($250,000) requires price quotes from a minimum of

three approved suppliers, must adhere to standard terms and conditions,

and must be approved by the Operator. If the Operator is unable to identify

at least three suppliers for the services, goods or other assets required by

the Operator, or is unable to obtain price quotes from at least three

suppliers in respect of such services, goods or other assets, then the

Operator shall be deemed to have satisfied the obligations under this

provision irrespective of the number of price quotes obtained.



4.6.3



Procurement through purchase orders not exceeding ten thousand Dollars

($10,000) may be accomplished through requests for quotes from entities

listed on a vendor list pre-approved by the CPO.



-7-



5.



6.



FUNCTI9 NS OF THE CONTRACTS AND PROCUREMENT

DEPARTi ENT

5.1



The Operator shall establish a Contracts and Procurement Department (the

"CP~") which shall be responsible for planning, initiating and managing all

Procurement activities and supervising and administering all contracts for

Hydrclcarbons Operations and the performance of all Sub-Contractors in

compliance with this Manual, the Contract and Afghanistan Law.



5.2



The Operator shall implement a Procurement management system that meets the

needs lofthe Contract and Good Oil Field Practices for Procurement that provides

for a9curate preparation, transmission, review, approval, retrieval, maintenance

and ar dit of all Procurement Documentation and Tender Documentation. All

Procurement

Documentation and Tender Documentation shall be maintained by

I

the CPO in the Operator's registered office in Afghanistan, provided that (unless

othei ise agreed) the CPD shall open all proposals in Afghanistan.



5.3



Relevant

departments of the Operator shall provide support to the CPO and

I

participate in relevant Procurement activities.



FUNCTI9 NS OF THE AUTHORITY

6.1



The tuthority shall have an oversight function with respect to all aspects of

Procurement. The Authority shall have the right to appoint one or more

repres:entatives to participate as observers (without approval powers except as

conter plated in Paragraph 6.2 below) in all stages of Procurement, including

Procurement planning, the preparation of tender strategies and vendor lists, the

openir g and scoring of bids, compliance with local preference rules and Award

reco~mendatiOns .

The CPO shall provide quarterly reports during the

Explo. ation Phase and monthly reports during the Development and Production

Phase to the Authority describing the Operator's ongoing Procurement activities

and shall furnish such information as the Authority may from time to time

reas01ably request with respect to the Operator's Procurement activities. The

Authority shall also have the right to audit the Operator's Procurement activities

in aCCr rdanCe with Article III of the Accounting Procedures.



6.2



The f(j)llowing shall require the prior written approval of the Authority:

(a)



The revision of Annual Procurement Plans and adoption of Development

Procurement Plans, as provided in Paragraphs 9.1 and 9.2 of this Manual;



(b)



The adopting of additional and more detailed Procurement procedures, as

provided in Paragraph 8.1 of this Manual;



-8-



6.3



(c)



The conduct of certain Sole-Sourced Procurement, as provided

Paragraph 4.5 of this Manual;



(d)



The award of any Major Sub-Contract. "Major Sub-Contract" shall

mean a Sub-Contract under which the aggregate consideration payable by

any party thereto exceeds four million Dollars (US$ 4,000,000);



(e)



Material Amendments to Sub-Contracts, as provided in Paragraph 3.4.2 of

this Manual;



(f)



Additional extensions of Sub-Contracts, as provided in Paragraph 3.5 of

this Manual;



(g)



Awards to Related Parties and any Amendments to Sub-Contracts with

Related Parties, as provided in Paragraph 3.3.2 of this Manual; and



(h)



Any requests by the Operator to waive any provision of this Manual with

respect to any Sub-Contract or to otherwise conduct Procurement

activities in a manner different from the procedures set forth in this

Manual.



10



When requesting any of the foregoing approvals, the CPD shall provide to the

Auth9rity the commercial, technical or operational reasons for which the Operator

believFs that approval is justified. It is understood that any approval by the

Autho1rity under this Manual shall be based upon the information and

justifications provided in writing by the Operator and that the participation of the

Auth9rity in Procurement activities and any approval by the Authority under this

Manual shall not in any way lessen the Operator's obligations under the Contract.

In pa~icular, it is understood that any approval by the Authority shall solely

satisfXthe procedural requirement for approval under this Manual and shall not

imply approval by the Authority of the substance of any Sub-Contract, including

the nged for the Sub-Contract, the scope of work set forth in a Sub-Contract, the

abilit~ of the Sub-Contractor to perform the activities contemplated by the SubContract, the performance by the Sub-Contractor of its duties under the SubContr~ct, and the reasonableness of the consideration payable under the SubContr~ct, all of which shall be and shall remain, under the Contract, the joint and

severJl responsibility of the Contractor Entities.

1



6.4



If thel Authority fails to respond within ten (10) Afghanistan business days

regarding any requested approval, then the Authority shall be deemed to have

grantdd the requested approval. In the event that the Authority requests any

info~ation in connection with a requested approval, the foregoing ten (10) day

periodI shall be extended by one (1) day for every day required by the Operator to

provide the information requested by the Authority. Any approval shall not be

unrea~onably withheld or delayed by the Authority.



-9-



6.5



7.



8.



In aceordance with Article XX of the Contract, the Operator shall provide the

Authdrity with the training and software tools necessary or useful for the

Authdrity to carry out its functions under this Manual. Any expenses incurred by

the O~erator in this regard shall be counted towards the Contractor's minimum

expe1diture requirement pursuant to Section 20.3 of the Contract.



STORAGE AND OPENING OF PROPOSALS

7. 1



All pL posals received in relation to any tender shall be stamped with date and

time ~f receipt, logged in the Procurement management system, and stored under

the c~ntrol and custody of the CPO. Any proposals relating to Awards of an

estim~ted value equal to or exceeding two million Dollars (US$ 2,000,0(0) shall

be stt ed by the CPO in a single, secure location (the "Tender Box").



7.2



The aI PD shall open all proposals during its regular meetings in order to ensure

that all Procurement is conducted in accordance with this Manual.



7.3



Each 10 f the Contractor Entities and the Authority shall have the right to access

and

the documents related to the tenders carried out under this Manual

including those stored in the Tender Box.



~dit



ADDITI9 NAL PROCEDURES

8.1



Addit~ onal



and more detailed Procurement procedures than those set forth in this

Manu1al shall be developed by the CPO. If the additional and more detailed

procf ement procedures are consistent with this Manual, they may be approved

by tHe Operator and the Authority. If the additional and more detailed

procf ement procedures are not consistent with this Manual, they may not be

approf ed unless and until this Manual is amended to render the additional and

more detailed Procurement procedures consistent with the amended Manual. In

the e ent of any inconsistency between the provisions of the Manual and the

additipnal and more detailed Procurement procedures, the terms of the Manual

shall prevail.

I



9.



PLANNING OF PROCUREMENT

9.1



The L perator shall prepare a plan of its proposed Procurement activities in

relati~n to Hydrocarbons Operations for each calendar year (an "Annual

Proc~rement Plan"). The Annual Procurement Plan shall form part of the annual

Wor~ Program and Work Program Budget. The Operator and the CPO shall

cond4ct all Procurement activities in accordance with the Annual Procurement

Plan ~nd no Procurement exceeding two hundred and fifty thousand Dollars

(US: 250,000) shall be conducted without an associated Annual Procurement

Plan. All Procurements must be consistent with the applicable approved annual

Wor Program and Work Program Budget. Annual Procurement Plans may be



-10-



revised by the Operator with the prior written consent of the Authority, such

const t not to be unreasonably withheld or delayed.



10.



11.



9.2



In adoition to the Annual Procurement Plan, the Operator shall prepare a plan of

its pr~posed Procurement activities in relation to Hydrocarbons Operations during

I

the q evelopment Phase (a "Development Phase Procurement Plan"). The

Development Phase Procurement Plan shall form part of the Development

Program and Development Program Budget and shall be approved or deemed

appror cd in the same manner.



9.3



Annu~1



Procurement Plans and Development Phase Procurement Plans shall

include plans to: (a) provide the Authority with the training and software tools

neceskary or useful for the Authority to carry out its functions under this Manual,

and (11,) maximize the use of Afghan suppliers, including plans for developing the

capa~i lity and competiveness of in-country suppliers and workforce, in

accoTance with Section 21.1 of the Contract.



MARKEl RESEARCH

10.1



At thG: outset of each Procurement, the user department of the Operator requesting

the P~ocurement shall submit to the CPO a written request containing the specifics

and s(!;ope of the Procurement requested.



10.2



The crPD shall, with reference to each request for Procurement and to the extent

neceskary, perform appropriate market research to determine which potential Subcontrf~ctors, both in Afghanistan and elsewhere, possess the relevant technical

and fi ancial capacities to satisfy the particular requirements of each request.



10.3



The CPO shall use information collected during market research exercises to

develbp and maintain a supplier database, which shall document the capabilities

of potential Sub-Contractors and be used in the preparation of vendor lists.



I



PROCURkMENT DOCUMENTATION

11.1



For eL

h Procurement, the proponent user department shall, in collaboration with

I

the GPO and other relevant departments of the Operator, prepare a set of

docurhents containing full and complete information on the subject of the

ProcJ rement and the terms and conditions of the Procurement (the "Procu rement

DOCUr en tation").



11.2



For 9pen Tenders and Selective Tenders, the following documents shall comprise

the pr curement Documentation:

11 .2. 1 tender documentation (the "Tender Documentation"), which shall itself

I compnse:



- 11 -



(A)



announcement of the tender (if applicable);



(8)



an invitation to the tender and confidentiality agreement;



(C)



instructions to tender participants;



(D)



technical and financial requirements/conditions;



(E)



a draft of the contract; and



(F)



a bid guarantee (if used);



criteria for evaluation of the bids, including technical and commercial

11.2., the

evaluations;

the bids from participants; and



11.2.



1



11.2.4 determination of the winning bidder.

11.3



For a Sole-Sourced Procurement, in addition to the above Tender Documentation,

the fo lowing documents shall comprise the Procurement Documentation:

11.3. 1 the justification for selection of the particular Sub-Contractor;

11 .3.2 the request for quotation sent to the particular Sub-Contractor and any

other potential Sub-Contractor with respect to the Procurement; and

11.3.3 the proposal from the Sub-Contractor.



11.4



a~y



method of Procurement, the following documenL, shall also be a part of

For

the prcurement Documentation:

11.4.1 amendments to the Procurement Documentation, if any;

I



11.4.2 resolutions of the Operator directly related to the specific Procurement, if

I applicable;

11 4 3 any approvals of the Authority directly related to the specific

. · 1 Procurement, if applicable;

II 4 4 the tender strategies and all other documents directly related to the specific

. · 1 Procurement.

11.5



If bidders submit incomplete information or if their proposals do not meet the

requi Jements set out in Tender Documentation, such failures may be grounds for

diSqt li fication.



-1 2-



12.



bid~ers



11 .6



If

submit false information which the CPO determines to be material to

the bid, they shall be disqualified and such bidders (and its owners and their

affilidtes) may be excluded from all other tenders.



11.7



extent that it is prepared by the Operator, the Procurement Documentation

To

shall I e prepared for each specific Procurement in accordance with this Manual.



th~



PROCUREMENT VIA TENDERS

12.1



pre-qlalification of bidders

12.1.



~



I



When appropriate, a process under which participants in an Open Tender

must pre-qualify to submit proposals shall be carried out.



12.1.2 The invitation to pre-qualify shall be published in a local Afghan

newspaper (in an official language of Afghanistan), in appropriate

international mass media (in English), on Operator's or Operator's parent

company's international website, and circulated to potential SubContractors identified by the CPO. The invitation shall be accompanied

by brief information on the tender subject. When drawing up the list of

potential Sub-Contractors, it shall be mandatory for the CPO to review the

leading companies in the relevant area of expertise as well as the relevant

companies included in the database prepared pursuant to Paragraph 10.3

of this Manual and any potential Sub-Contractors in Afghanistan . In

preparing the pre-qualification criteria, the CPO shall take into account the

technical and financial qualifications of potential Sub-Contractors in

Afghanistan and, to the extent possible, shall determine appropriate prequalification criteria that both meet the Contractor's requirements and

maximize the participation of potential Sub-Contractors in Afghanistan .

12 1 3 Potential Sub-Contractors shall be provided with the pre-qualification

. · 1 requirements, forms for filling and list of documents required for

submission.

The completed forms and documents submitted by participants seeking

pre-qualification shall undergo an evaluation by at least three (3) Experts

(as such term is defined in Paragraph 12.6.2 of this Manual) and a

representative of the CPO.

I



12.1.5 A list of pre-qualified bidders shall be drawn up by the CPO on the basis

of the Experts' conclusion on compliance of the participants with the prequalification requirements.

12.1.6 All participants seeking pre-qualification shall be notified by the CPO

about the results of pre-qualification, and the participants that have preI

qualified may be invited by the CPO to participate in the Open Tender via



-13-



an invitation to bid without the need to further publicize the Open Tender

in mass media.

12.2



Break Down into Items

12.2.1 Orders for the supply of services, goods and other assets may be separated

into items in the Tender Documentation, with different applicable terms

and conditions.

12.2.2 Tum-key contracts (e.g., for the supply of equipment for technical

upgrading, construction, repair of power facilities, etc.) including such

activities as engineering design, selection of main and auxi liary

equipment, automated control systems' installation and commissioning

need not be broken down into individual items, but grouped according to

functional activity.



12.3



Tender Announcement

12.3. 1 In each Open Tender, the Operator shall (a) publish an invitation to

participate in the tender or an invitation to pre-qualify in appropriate

media in accordance with Paragraph 4.3, and (b) deliver an invitation to

appropriate potential suppliers identified by the Operator. The invitations

shall summarize the relevant terms, conditions and requirements for

participation or pre-qualification. The tender announcement shall precede

the formal invitation to bid by at least thirty (30) days unless a shorter

period is approved by the Authority.

12.3.2 Potential Sub-Contractors who confirmed their intention to participate in

the tender and who paid the cost of Tender Documentation (if applicable)

shall be provided with the Tender Documentation package described 10

Paragraph 11.2.1 of this Manual.



12.4



Invitation to Bid

12.4.1 Bidders who meet pre-qualification criteria will be informed of their

qualification and will be issued a formal invitation to bid. Bidders who do

not meet the pre-qualification criteria will be informed of the reasons

therefor. The invitation to bid shall precede the bid closing date by at least

thirty (30) days unless a shorter period is approved by the Authority.

12.4.2 Tender participants may receive additional information explaining

tendering procedures and tender terms and conditions.

12.4.3 Changes and amendments may be introduced 10 the Tender

Documentation prior to the deadline for submission of bids with a



-14-



mandatory notification to all bidders and, if necessary, with an extension

of term for submission of bids.

12.4.1 A preliminary meeting with bidders for clarification of possible questions

may be held prior to the dead line for submitting of bids.

12 4 5 Any clarification requested by any bidder shall be sent to all tender

. · 1 participants.

12.5



Bids Receiving and Opening

12.5.



~



Each bidder shall submit its bid compnsmg a Technical Proposal

(envelope A) and a Commercial Proposal (envelope B) in separate sealed

envelopes.



12.5.2 The bid shall be in compliance with the rules of bid submission indicated

in the Tender Documentation .

12.5.3 Each bidder shall be entitled to submit only one bid in the same tender. If

the bidder submits more than one bid or participates directly or through its

Affiliated Entities in several bids in the same tender, the bidder itself and

any bids in which it is involved shall not be admitted to participate in the

tender.

12.5.4 If the Procurement subject is broken down into items in the Tender

Documentation, each bidder shall be entitled to bid for a particular item or

for several items.

12.5.5 Each tender must involve not less than two bidders, otherwise such tender

shall be considered unsuccessful and a second tender shall be conducted.

However, a Sub-Contract may be awarded to a bidder in the second tender

irrespective of the number of bidders that participate in the second tender

in which the Sub-Contract is rebid.

Proposals shall be opened first, by the CPO in the presence of

12.5., Technical

one or more representatives of the Authority, with the results being

recorded by the CPO in the minutes of the tender meeting. The CPO shall

prepare a Technical Evaluation Report for submission to the Authority and

the Operator prior to opening the Commercial Proposals. Thereafter, the

Commercial Proposals of the bidders whose Technical Proposals are

deemed technically acceptable according to the evaluation criteria shall be

opened by the CPO in the presence of one or more representatives of the

Authority. The CPO shall prepare a Commercial Evaluation Report to

submit to the Authority and the Operator. Notwithstanding the foregoing,

fai lure of the representative(s) of the Authority to attend, or participate in,

the opening of the Technical Proposal or Commercial Proposal shall not



-15-



prevent CPO to commence with the opening of such Technical Proposal

and/or Commercial Proposal.

12.6



Bids Evaluation

12.6. 1 The evaluation of bids shall be carried out by the CPO on the basis of a

balanced scorecard method in accordance with approved criteria of

evaluation in two stages.

(A)



In the first stage, the Technical Proposals shall be evaluated and

scored. The scoring shall result in a determination that a bidder is

either technically qualified or technically not qualified;



(B)



In the second stage, the Commercial Proposals of the technically

qualified bidders shall be evaluated and scored.



(C)



The relative weighting of scores for Technical Proposals and

Commercial Proposals shall be specified in the Procurement

Documentation package and shall be used in the bid evaluation

process in accordance with the balanced scorecard method .



12.6.2 At least three (3) of the Operator's employees with relevant expertise (the

"Experts") plus a representative from the CPO shall be appointed in

writing to evaluate the Technical Proposals.

12.6.3 At least three (3) Experts plus a representative from the CPO shall be

appointed in writing to evaluate Commercial Proposals.



12.J



If a Technical Proposal is determined by the Experts to be non-compliant

with the requirements of the Tender Documentation or the bidder who has

submitted a Technical Proposal is determined to be technically not

qualified, such proposal shall not be admitted to the second stage of

evaluation.



12.6.5 When a bid was not admitted to the second stage of evaluation, the

envelopes containing the Commercial Proposal of such bids shall remain

unopened and be kept for two years.



12.6.



If necessary, bidders may be requested to provide additional data for

clarification of information contained in the bids.



If necessary an additional stage of bid

12.6.,1auction/reduction

may be carried out.



evaluation



In



the form of



12.6.8 In evaluating bids, the CPO shall comply with the requirements of Section

21.2 of the Contract. The Contractor and the Authority shall, from time to

time, agree on the definition of "locally produced or available" as used in



-1 6-



Section 21 .2 of the Contract and of "Afghan suppliers and "SubContractors in Afghanistan" as used in this Manual. To be "locally

produced or available", (a) "services" shall be provided by companies

formed in Afghanistan that are majority owned by Afghan nationals and

that pay at least 75% of their total payroll costs to Afghan nationals, and

(b) "goods and other assets" shall be provided by companies formed in

Afghanistan that are majority owned by Afghan nationals that produce at

least 50% of the value of the goods or other assets in Afghanistan. The

Contractor and the Authority shall increase the preceding percentages over

time, as compatible with the rising technical and financial capabilities of

Afghan suppliers over time.

12.6.<9 The technically qualified bidder whose bid received the highest total



balanced scorecard shall be considered a winner of the tender (the

"Winner"). The decision on the Winner shall be properly documented by

the CPO.



12.6f



The Contractor may elect to cancel the tender or not to award the

contract to the Winner.



12.6.11 Notification of the recommended Award shall be promptly provided by



the CPO to the Authority. Should the Authority fail to respond within

ten (10) Afghanistan business days, then the Authority (when its

approval is required under this Manual) shall be deemed to have

approved the Award. In the event that the Authority requests any

information in connection with a recommended A ward, the foregoing

ten (10) day period shall be extended by one (I) day for every day

required by the CPO to provide the information requested by the

Authority.



13.



CONCLUSION OF THE SUB -CONTRACT

13. 1



sUbJ lct to Paragraph 12.6.10, the technically qualified bidder whose bid receives

the h ~ghest score rating as a result of evaluation of the bids, shall be notified that

it haslwon the tender. Forwarding of a notification by the Operator to such bidder

shall be considered as a commitment for conclusion of the Sub-Contract.



13 .2



In th, 1event that additional negotiation of the fina l Sub-Contract with the Winner

is re uired and the relevant Sub-Contract is a Major Sub-Contract, the Authority

may, through one or more of its representatives, attend the negotiation as an

obseT er.



13.3



In the event that, during the negotiations of the final Sub-Contract with the

win~br, there has been a material deviation from the terms of the successful bid,

the Operator shall obtain the prior written approval of the revised A ward from the

Auth~rity (when its approval is required under this Manual), prior to entering into



-17-



the final Sub-Contract. Should the Authority fail to respond within five (5)

Afghanistan business days, then the Authority (when its approval is required

under this Manual) shall be deemed to have approved the A ward. In the event

that the Authority requests any information in connection with a recommended

Award, the foregoing five (S) day period shall be extended by one (1) day for

every day required by the CPD to provide the information requested by the

Authority.

13.4



If applicable, the Winner of the tender shall provide a performance guarantee

which amounts to no less than five percent (S%) of the Award value in the

required form.



l3.S



If the Winner refuses or avoids signing of the Sub-Contract within a reasonable

period of time determined by the CPD, which may not exceed two (2) months

from the announcement of the Winner, then the technically qualified bidder

whose bid is next in the score rating shall be named as a Winner of the tender.



13.6



Preparation and signing of the Sub-Contract with the Winner shall be carried out

in accordance with the CPD's policies on contract preparation, coordination and

registration, provided that such policies do not have an adverse effect on carrying

out prcurement activities under this Manual.



13.7



The CPD shall ensure that all Sub-Contracts contain all provisions necessary to

satisf~ the requirements with respect to the obligations of Sub-Contractors that are

stipul~ted in the Contract.

I



14.



STORAGE

OF

CONTRACTS,

PROCUREMENT

DOCUMENTATION AND TENDER DOCUMENTATION

14.1



15.



PAYMEN~ POLICY

IS.1



16.



I



All Sub-Contracts entered into under this Manual, and all Procurement

Docufentation and Tender Documentation in connection therewith shall be

storeq under the control and custody of the CPD which will maintain a good

recor1 of all such contracts and related documents so that they are easily

accessible by the Operator or the Authority.



paymlnt to suppliers will ordinarily be made within thirty (30) days after receipt

of the Sub-Contractor's undisputed invoice or as agreed in the Sub-Contract.



CONFIDENTIALITY

16.1



The bPD shall take reasonab le measures to ensure confidentiality of any

confidential information provided by the CPD to potential Sub-Contractors. Any



-18-



breach by potential Sub-Contractors of their confidentiality obligations may be

deemrd grounds for disqualification.

16.2



17.



Negotiations on behalf of the Operator with representatives of potential SubContlilactors shall be held only by one or more authorized representatives of the

CPo.



TERM

17.1



I

I



This ~ anual shall take effect on the Effective Date of the Contract and shall

expire, unless renewed by the Contractor and the Ministry, on December 31 of the

fifth

calendar year from the Effective Date ofthe Contract.



15'")



-\9-



Afghan-Tajik Basin Phase I Tender



EXHIBITD

FINANCIAL GUARANTEE FOR

MINIMUM EXPLORATION PROGRAM



D- 1



Afghan-Tajik Basin Phase I Tender



EXHIBIT D

FINANCIAL GUARANTEE



Ministry of Mines Petroleum

Government of the Islamic Republic of Afghanistan

Pashtonstan Watt, Abross from Ministry of Finance

Kabul, Afghanistan



Gentlemen:

Re:



Our Irrevocable Letter of Guarantee No.



In compliance with the request of Dragon Oil (Mazar-i-Sharit) Limited, TP Afghanistan Limited



and Ghazanfar Inve~tment Ltd. (collectively, the "Contractor"), we, (Name of bank), issue this

unconditional irrevbcable

letter of guarantee in your favor for a sum not exceeding

I

~ .S. Dollars (US$

), which represents the total estimated

expenditures for the !.Minimum Exploration Program during [the Initial Exploration Period] [the

First Extension Pe~iod] [the Second Extension Period], as set forth in Exhibit H of the

Exploration and Production Sharing Contract for the Mazar-i-Sharif Block (the "Contract"),

dated

!

, between the Contractor and the Ministry of Mines & Petroleum of the

Government of the Islamic Republic of Afghanistan (the "Ministry"), relating to Hydrocarbons

Operations in Afghahistan, to guarantee the Contractor's faithfu l performance of such Minimum

Exploration Progr~m. The said sum of

u.S. Dollars (US$

_ _ _ __ _ _ ) shall be reduced at the end of each Contract Year in [the Initial Exploration

Period] [the First E~tension Period] [the Second Extension Period] by the amount determined in

accordance with Sedtion 8.2 of the Contract, as such amount is evidenced by a signed certificate

from the Ministry.

The terms and conditions of this Letter of Guarantee are as follows:

1.



Capitalized tL ms used herein and not otherwise defined shall have the meanings as set

forth in the 1 ontraet.



2.



The said am?unt, or any part thereof, shall be paid to the Ministry upon our receipt of

your demand by way of a written statement that the amount claimed is duly payable

under the Cohtract.



~aive



We hereby

diligence, presentment, demand for payment, protest, any requirement

that the Minif.try exhaust any right or power or take any action against the Contractor, all

notices (whether of non-payment by the Contractor, dishonor, protest or otherwise) and

all demands whatsoever. Our obligations hereunder are continuing, absolute and



D-2



Afghan-Tajik Basin Phase I Tender

uncondition ,and will not be in any way affected by giving of time or any forbearance

by the Ministry, the waiver or consent by the Ministry with respect to any provision of

the Contract! and irrespective of the validity, regularity, enforceability or value of the

Contract, or I by any other circumstances which might otherwise constitute a legal or

equitable discharge or defense of a surety or guarantor, all of which are hereby expressly

waived.

4.



Our Obligati~ ns hereunder shall be paid in U.S. Dollars to the bank account designated by

the Ministry, free and clear of and without reduction by reason of any and all present and

future taxes, levies, imposts, deductions, assessments, charges or withholdings

whatsoever IFied, assessed, imposed or collected with respect thereto by the government

of [name of j urisdiction of issuing bank] or any political sub-division or taxing authority

thereof or thbrein. We shall bear and pay any and all fees and expenses in relation to or

in connectiorl with this Letter of Guarantee.



5.



In order to dive effect to this Letter of Guarantee, we hereby declare that the Ministry

to act as though we were the principal debtor, and we hereby waive all

shall be at liTherty

I

and any of tre rights as surety which may at any time be inconsistent with any of the

above provisions.



6.



Any claim

demand under this Letter of Guarantee shall be presented to us on or before

the eXPirati0r of the date of the validity of this Letter of Guarantee.



7.



This Letter 9f Guarantee shall be effective immediately and shall remain effective until

[enter date tHat is ninety (90) days after the last day of the Initial Exploration Period, the

First Extensihn Period or the Second Extension Period, as applicable], and shall thereafter

automaticall~ without any formality become null and void for all its effects and this

Letter of Gu rantee shall be returned to us immediately.



o~



Yours very truly,



(Name of Bank)



0-3



Afghan-Tajik Basin Phase I Tender



Dragon Oil pIc

c /o Dragon Oil (Holdings) td . (Dubai Branch)

P. O. Box 34666 Dubai, United Arab Emirates

Tel. (971-4) 305 3600, Fax (971-4) 335 6954

www.dragonoil.com



EXHIBITE



GENERAL PERFORMANCE GUARANTEE



I5300040v2



E-I



Reg. Office : Dragon Oil pic, 6th Floo r, South Bank Hou se, Barrow Street, Dublin 4, Ireland

Reg. No.

: 35228, Registered in Dublin, Ireland

Directors

: M. AI Ghurair (UAE), Or.A. J. AI Khalifa (KSA), A. Sharaf (UAE), A. AI Muhairbi (UAE) , S. AI Mazrooei (UAE), 1K. Haugnaess (Norway)



Afghan-Tajik Basin Phase I Tender



EXHIBIT E



GENERAL PERFORMANCE GUARANTEE

Dragon Oil pIc, a company organized and existing under the laws of Ireland with registered

office at 6th Floor, South Bank House, Barrow Street, Dublin 4, Ireland (the "Guarantor"); and

The Ministry of Mines & Petroleum of the Government of the Islamic Republic of Afghanistan

(the "Ministry").

RECITALS



(A)



Reference is made to the Exploration and Production Sharing Contract for the Mazar-iSharif Block (the "Contract"), dated

October 2013, entered into between (i) the

Ministry and (ii) each of Dragon Oil (Mazar-i-Sharif) Limited, TP Afghanistan Limited

and Ghazanfar Investment Ltd. (together with their respective successors and permitted

assigns, collectively the "Contractor").



(B)



Pursuant to Section 8.5 of the Contract, the ultimate parent entity of each Contractor

Entity is required to deliver this Guarantee to the Ministry.



(C)



Under this Guarantee, the Guarantor guarantees the prompt payment and performance

when due of the Guaranteed Obligations.



The Guarantor and the Ministry agree as follows:

1.



Capitalized terms used and not otherwise defined herein shall have the meanings as set

forth in the Contract. In this Guarantee, the following terms shall have the following

meamngs:

"Contract" shall have the meaning set forth in the preamble of this Guarantee.

"Contractor" shall have the meaning set forth in the preamble of this Guarantee.

"Demand" shall have the meaning set forth in Clause 5 of this Guarantee.

"Guarantee" shall mean this general performance guarantee.

"Guaranteed Obligations" means all obligations of the Contractor under the Contract

(except those obligations that are covered by the Financial Guarantee) which arise or are

incurred prior to the date on which the Guarantor Subsidiary ceases to hold a

Participating Interest in compliance with the provisions of the Contract.



E-2

I5300040v2



Afghan-Tajik Basin Phase I Tender



"Guarantor" shall have the meaning set forth in the preamble of this Guarantee.

"Guarantor Subsidiary" means Dragon Oil (Mazar-i-Sharif) Limited, a company

organized and existing under the laws of Bermuda with registered office at Victoria

Palace, 31 Victoria Street, Hamilton HMIO, Bermuda and any successor entity and

permitted assignee which is an Affiliated Entity of the Guarantor.

"Insurance" shall mean any insurance obtained pursuant to Section 27.1 of the Contract.

"Longstop Date" shall have the meaning set forth in Clause 8(b) of this Guarantee.

"Ministry" shall have the meaning set forth in the preamble of this Guarantee.

2.



The Guarantor shall make available to the Contractor the necessary resources that the

Contractor may require to meet, on a timely basis, the Contractor's obligations under the

Contract.



3.



The Guarantor hereby expressly represents and warrants to the Ministry that (i) it is duly

organized, validly existing and in good standing order under the laws of its jurisdiction of

organization, (ii) it has all requisite corporate power and authority to execute, deliver and

perform this Guarantee, (iii) the execution, delivery and performance of this Guarantee

have been duly authorized by all necessary corporate action, (iv) this Guarantee

constitutes the legal, valid and binding obligation of the Guarantor, enforceable against

the Guarantor in accordance with its terms, (v) no governmental approvals are required in

connection with the execution, delivery and performance of this Guarantee, except as has

been obtained and is in force on this day of signature as set forth below or as may be

required in Afghanistan for the Guarantor or its permitted subcontractors to perform

Hydrocarbons Operations, (vi) execution, delivery and performance of this Guarantee by

the Guarantor will not violate any provision of any existing law or regulation to which

the Guarantor is subject or any provision of the Guarantor's constitutive documents or of

any material agreements to which it may be a party and (vii) it is the one hundred percent

(100%) beneficial owner of the Guarantor Subsidiary.



4.



Subject to Clause 5, in consideration of the Ministry entering into the Contract, the

Guarantor hereby unconditionally and irrevocably guarantees to the Ministry the payment

and performance of the Guaranteed Obligations when due (subject to any applicable cure

periods).



5.



The obligation of the Guarantor pursuant to Clause 4 in respect of any Guaranteed

Obligation is conditioned on the receipt by the Guarantor of a written demand from the

Ministry (the "Demand") that:

(a)



makes specific reference to this Guarantee;



(b)



states the relevant Guaranteed Obligation(s);



E-3

15300040v2



Afghan-Tajik Basin Phase I Tender



6.



7.



(c)



states that the Contractor has not performed the specified Guaranteed

Obligation( s);



(d)



where applicable, specifies the amount(s) of such Guaranteed Obligation(s) or the

date(s) on which such Guaranteed Obligation(s) were due to be performed; and



(e)



is received by the Guarantor on or before the Longstop Date.



The liability of the Guarantor hereunder is irrevocable, continuing, absolute and

unconditional and the obligations of the Guarantor hereunder shall not be discharged or

impaired or otherwise affected by, and the Guarantor hereby irrevocably waives any

defenses to enforcement it may have (now or in the future) by reason of:

(a)



any illegality or lack of validity or enforceability of any Guaranteed Obligation or

the Contract related agreement or instrument;



(b)



any change in the time, place or manner of payment or performance of, or in any

other term of, the Guaranteed Obligations or any other obligation of any party

under the Contract, or any rescission, waiver, amendment or other modification of

the Contract or any other agreement, including any increase in the Guaranteed

Obligations;



(c)



any taking, failure to take, exchange, substitution, release, impairment or nonperfection of any collateral, or any taking, failure to take, release, reduction,

impairment, amendment, waiver or other modification of any guaranty, for the

Guaranteed Obligations;



(d)



any default, failure or delay, willful or otherwise, in the performance of the

Guaranteed Obligations;



(e)



any change, restructuring or termination of the corporate structure, ownership or

existence of any Contractor Entity or any of its Affiliated Entities or any

insolvency, bankruptcy, reorganization or other similar proceeding affecting any

Contractor Entity or any of its Affiliated Entities of its assets or any resulting

release or discharge of any obligation; or



(f)



the failure of the Ministry to assert any claim or demand or to exercise or enforce

any right or remedy against any Person under the Guaranteed Obligations or

otherwise.



After the Ministry has received indefeasible payment in full in cash of all Guaranteed

Obligations for which it has issued a Demand, it shall, at the Guarantor's request and

expense, execute and deliver to the Guarantor, without recourse or representation or

warranty, appropriate documents necessary to evidence the transfer by subrogation to the

Guarantor of the Ministry'S interest in any Insurance proceeds in respect of such

Guaranteed Obligations.



E-4

15300040v2



Afghan-Tajik Basin Phase I Tender



8.



If a Demand is delivered to Guarantor that requires the performance of non-monetary

Guaranteed Obligations, the Ministry shall provide to the Guarantor (or its approved

subcontractor) permits that are required to conduct Hydrocarbons Operations associated

with such Guaranteed Obligations, subject to fulfillment of reasonable and customary

requirements for the grant of such permits (e.g. qualifications and safety programs to

conduct blasting operations).



9.



The aggregate liability of the Guarantor under this Guarantee to the Ministry shall not

exceed forty million U.S. Dollars (US$ 40,000,000); provided that if the Participating

Interest of the Guarantor Subsidiary increases, the aggregate liability shall henceforth be

equal to the product of (i) the new Participating Interest of the Guarantor Subsidiary and

(ii) one hundred million U.S. Dollars (US$ 100,000,000).



10.



This Guarantee is irrevocable and unconditional and shall remain in full force and effect

until the earlier of the date that:

(a)



all of the Guaranteed Obligations are fully and irrevocably satisfied and

discharged; or



(b)



five (5) years following termination of the Contract (the "Longstop Date").



11.



The Guarantor's obligations under this Guarantee shall be independent and absolute, and

the Guarantor shall have no right to set-off or counterclaim with respect to any other

claims it may have against the Ministry or any other Person.



12.



All of the obligations of the Guarantor set forth herein shall bind the Guarantor and its

successors and permitted assigns. The Guarantor may not assign or delegate its duties

hereunder without the prior written consent of the Ministry, and any purported

assignment or delegation without such consent shall be null and void. The Guarantor

confirms that this Guarantee shall remain in effect notwithstanding the assignment of the

Guarantor Subsidiary's Participating Interest to an Affiliated Entity of the Guarantor

Subsidiary. Upon any such assignment the assignee shall be considered the Guarantor

Subsidiary for all purposes hereunder to the extent of the assigned obligations. The

Guarantor also confirms that any assignee of the Ministry under the Contract may

exercise all rights and remedies of the Ministry under this Guarantee. No other person or

entity shall be a beneficiary of this Guarantee or have or acquire any rights by reason of

this Guarantee.



13.



This Guarantee shall be governed and construed in accordance with Afghanistan Law.

Any dispute, controversy or claim arising out of or relating to this Guarantee that is not

resolved by mutual agreement within forty-five (45) Days from the date on which the

existence of a dispute is notified in writing by one party to the other shall be settled by

arbitration initiated by either party by submission to the International Centre for

Settlement of Investment Disputes ("ICSID") pursuant to the Convention on the

Settlement of Investment Disputes between States and Nationals of other States as of

March 18, 1965 ("ICSID Convention") and the arbitration rules promulgated thereunder.



E-5

I5300040v2



Afghan-Tajik Basin Phase r Tender



For the avoidance of doubt, the Ministry hereby expressly consents to the submission of

any dispute which may arise under this Guarantee to rCSrD for settlement by arbitration

in accordance with Article 25 (1) of the ICSID Convention. For the purpose of Article 25

(2) (b) of the rCSrD Convention, the Guarantor shall be treated as a national of a state

other than Afghanistan. The number of arbitrators shall be three. The arbitration shall be

conducted in the English language. The arbitration award may take the form of an order

to pay a sum of money, or an order to perform an act, or an order to refrain from an act,

or any combination of such orders. The place of arbitration shall be London, England.

The award rendered shall be final and conclusive. Judgment on the award rendered may

be entered in any court having jurisdiction or application may be made in such court for a

judicial acceptance of the award and an order of enforcement, as the case may be. Each

party agrees that at the request of the other party it will consent (and will cause its

Guarantor Subsidiary to consent) to the consolidation of any arbitration brought under the

provisions of this Clause 13 with any arbitration under Section 24.1 of the Contract in

which the Ministry, on the one hand, and the Contractor or any Contractor Entity, on the

other hand, is a party that relates to matters at issue in the arbitration brought under this

Clause 13.

14.



Any failure of the Ministry to exercise any right, in whole or in part, hereunder shall not

be construed as a waiver of the right to exercise the same or any other right.



15 .



No amendment or modification of this Guarantee shall be effective unless in writing and

signed by both the Guarantor and the Ministry.



16.



The Guarantor shall pay upon demand and presentation of invoices all reasonable and

actual costs and expenses incurred by the Ministry in connection with the successful

enforcement of this Guarantee (excluding all costs and expenses incurred by the Ministry

in connection with claims under the Insurance), including, without limitation, reasonable

fees and expenses of counsel.



17.



All notices, demands, instructions, waivers, consents or other communications hereunder

shall be in writing in the English language and deemed to have been properly effective

upon receipt, and shall be sent by personal delivery, courier, first class mail or fax to the

following addresses:



GUARANTOR:



Dragon Oil PIc

C/O Dragon Oil (Holdings) Limited

PO Box: 34666, Dubai, United Arab Emirates



MINISTRY:



TO BE CONFIRMED



E-6

I5300040v2



Afghan-Tajik Basin Phase I Tender



The Addresses and fax numbers by either party to this Guarantee for notices given

pursuant to this Guarantee may be changed by means of written notice to the other party

at least fourteen (14) working days prior to effective date of such change.

18.



r



This Guarantee shall be effective immediately.



IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be executed and the

Ministry duly authorized the same, both parties represented by their respective duly authorized

representatives on this day ofe flO ctober 2013.



DRAGON OIL f; C



!A~-fu.Jlr

By: Mark William Sawyer

Authorised Signatory



THE MINISTRY OF MINES & PETROLEUM OF

THE GOVERNMENT OF THE ISLAMIC

REPUBLIC OF AFGHANISTAN



By



~~f

~ /f2



.

The Minister of Mines & Petroleum



E-7

15300040v2



EXHIBIT E



GENERAL PERFORMANCE GUARANTEE



Tu,kly'



P,t'O~I'd



Anonim O'tak1igi, a c?:npany ocgaoized and existing undec ,thc laws of

the Republic or Turkey with registered office at [Sogutozu Mahallesl 2 I 80. Cad, No :86,

06100, Cankaya/ Ankara Turkiye] (the "Guarantor"); and



The Min istry of Mines & Petroleum of the Government of the Islamic Republic of

Afghanistan (th[1 "Ministry").



RECITALS



.



(A)



Referen'Te is made to the Exploration and Prod uction Sharing Contract for the Mazari-Sharif rlOCk (the "Contract"), dated 08 October 2013, entered into between (i) the

Ministry and (ii) each of Dragon Oil (Mazar-i-Sharif) Limited, TP Afghanistan

Limited nd Ghazanfar Investm ent Ltd. (together with thei r respective successors and

permitte8 assigns, collectively the "Contractor'').



(B)



pursuanj to Section 8.5 of the Contract, the ultimate parent entity of each Contractor

Entity is required to deliver this Guarantee to the Ministry.



(C)



Under t is Guarantee, the Guarantor guarantees the prompt payment and performance

when due of the Guaranteed Obligations.



The Guarantor j nel the Ministry agree as follows:

L



c aPitalided term s used and not otherwise defined herein shall have the meanings as set

forth in ihe Contract. In this Guarantee, the follow ing terms shall have the following

meamngs:





1



"c ontraJ , shall have the meaning set forth in the preamble of this Guarantee.

"ContraJor" shall have the meani ng set forth in the pream ble of this Guarantee.



I



"Demand" shall have the meaning set forth in Clause 5 of this Guarantee.



"GllllranJ~t;:_" shall mean this general performance guara ntee.

"GUaran~ed Obligations" means all obligations of the Contractor under the Contract

(except those obligations that are covered by the Fi nancial Guarantee) which arise or

are incu lred prior to the date on which the Guarantor Subsidiary ceases to hoid a

Participa ing Interest in comp liance with the provisions of the Contract.

"Guarantor" shall have the meaning set forth in the preamble of this Guarantee.

" Guara ntbr Subsidiary" means TP Afghanistan Limited, a company organized and

existing lmder the laws of Jersey and any Sllccessor entity and pennitted assignee

which is r n Affiliated Entity of the Guarantor.



"Insuralilcc" shall mean any Insurance obtained pursuant to Section 24.1 of the

contraT

"Longs!,op Date" shall have the meaning set forth in Clause 8(b) of this Guarantee.

·' MinistJv.· shall have the meantng set forth in the preamb le of this Guarantee.



Gu~rantor



2.



The

shall make available to the Contractor the necessary resources that the

Contractor may require to meet, on a timely basis, the Contractor' s obligations under

the Contract.



3.



The

hereby expressly represents and warrants to the Ministry that (i) it is

duly organized, validly cxisting and in good standing order under the laws of its

jurisd ic~ion of organization, (ii) it has all requisite corporate power and authority to

execute,1 del iver and perform this Guarantee. (iii) the execution, delivery and

performance of this Guarantee have been duly authorized by all necessary corporate

action, ~ iV) this Guarantee constitutes the legal. valid and binding obi igation of the

Guarantor. enforceable against the Guarantor in accordance with its te rms. (v) no

governn{ental approvals are required in connection with the execution, delivery and

perfom1~nce of this Guarantee, except as has been obtained and is in force on th is day

of signature as set forth below or as may be rcquired in Afghanistan for the Guarantor

or its pdrmitted subcontractors to perform Hydrocarbons Operations, (vi) execution.

delivery l and performance of this Guarantee by the Guarantor will not violate any

provision of any existing law or rcgulation to which the Guarantor is subject or any

provisiob of the Guarantor' s constitutive documents or of any material agreements to

which i ~ may be a party and (vii) it is the one hundred percent (100%) beneficial

owner 0r the Guarantor Subsidiary.



4.



Subject to Clause 5, in consideration of the Min istry entering into the Contract, the

Guarant0r hereby unconditionally and irrevocably guarantees to the Ministry the

paymentl and performance of the Guaranteed Obl igations when due (subject to any

applicable cure periods).



5.



The obli~ation of the Guarantor pursuant to Clause 4 in respect of any Guaranteed

Obligati
the Ministry (the " Demand") that:



Gu~rantor



(a)



makes specific reference to this Guarantee;



(b)



s1 tes the relevant Guaranteed Obligation(s);



(c)



that the Contractor has not performed the specified Guaranteed

4 bligatiOn(S):



(d)



wrerc applicable, specifies the amount(s) of such Guaranteed Obligation(s) or

t~e dalc(s) on which such Guaranteed Obligation(s) were duc to be performed:



(e)

6.



~t~tes



.



~sF eeiV~d



by the Q"acantoc on oc berNe the Longstop Date . .



The lJabilIty ot the Guarantor hereunder is irrevocable, eontlt1l1lt1g. absolute and

unconditional and the obligations of the Guarantor hereunder shall not be di scharged



or impaired or otherwise affected by. and thc Guarantor hereby irrevocably waives any

dcfcnsd to enforcement it may have (now or in the future) by reason of:



r



(a)



i ny illegality or lack of validity or enforceability of any Guaranteed O bligation

the Contract related agreement or instrument;



(b)



any change in the time, place or manner o f payment or performance ot: or in

t ny other term of. the Guaranteed Obligations or any other obligation of any

~ arty under the Contract, or any rescission, waiver, amendment or other

Ipodifieation of the Contract or any other agreement, including any increase in

the Guaranteed Obligations;



(c)



taking, failure to take, exchange, substitution, release, impairment or nonnerfection of any collateral , or any taking, failure to take, release, reduction.

iplpairm ent, amendment, waiver or other modification of any guaranty, for the

(iJuaranteed Obligations;



(d)



default, failure or delay, willful or otherwise, in the performance of the

! uaranteed Ob ligations;



(e)



~ny change, restructuring or termination of the corporate structure, ownership

9r existence of any Contractor Entity or any of its Affiliated Entit ies or any

ir solvency, bankruptcy, reorganization or other similar proceeding affecting

ary Contractor Entity or any of its Affiliated Entities of its assets or any

resulting release or discharge of any obligation; or



(t)



tt failure of the Min istry to assert any cl aim or demand or to exercise or

er force any right or remedy against any Person under the Guaranteed



~ny



~ny



Obligations or otherwise.



th~



7.



After

Ministry has received indefeasible payment in full in cash of all Guaranteed

Obli gatiCDns for which it has issued a Demand, it shall, at the Guarantor' s request and

expense,1execute and deliver to the Guarantor, without recourse or representation or

warrant* appropri ate documents necessary to evidcnce the transfer by subrogati on to

the G U1 antor of the Ministry's interest in any Insurance proceeds in respect of such

Guarant ed Obligations.



8.



If a De and is delivered to Guarantor that requires the performance of non-monetary

Guarantged Obligations, the Mini stry shall provide to the Guarantor (or its approved

subcontractor) permits that are required to conduct Hydrocarbons Operations

assoc iatdd with such Gua ranteed Obligations, subject to fulfillment of reasonable and

customa ~y requ irements for the grant of such permits (e.g. qualifications and sate!y

programs to conduct blasting operations).



9.



liability of the Guarantor under this Guarantee to the Ministry shall not

Th e

exceed fr rty mill ion U.S. Dollars (U SS 40,000,0(0); provided that if the Participating

Interest (If the Guarantor Subsid iary increases, the aggregate liability shall henceforth

be equa l to the product of (i) the new Pal1icipating Interest of the Guarantor

SUbSidiaiy and (ii) one hundred million U.S. Dollars (USS 100,000,(00).



10.



Thi s Guarantee is irrevocable and unconditiona l and shall remain in full force and

effect unt il the earlier of the date that:



aggr~gate



II.



(a)



plioI' the Guaranteed Obligations are fully and irrevocabl y satisficd and

t scharged; or



(b)



five (5) years following terminat ion of the Contract (the "L_Q!J&'>top Dat~~n -



The



G~arnntoc's obligations und" this Guamntee shall be independent and ahsotute.



and thel Guarantor shall have no right to set-off or counterclaim with respect to any

other claims irmay have against the Min istry or any other Person.



t~e



12.



All of

obligations of the Guarantor set forth herein shall bind the Guarantor and its

successprs and perm itted assigns. The Guarantor may nOl ass ign or delegate its duties

hereunier without the prior w ritten consent of the Ministry, and any purported

aSSignlent or delegation without such consent shall be null and void. T hc Guarantor

contir s that this Guarantee shall remain in cffect notwithstanding the assignment of

the Gu rant or Subsidiary's Participating Interest to an Affiliated Entity of the

Guarantor Subs idiary. Upon any such ass ignment the assignee shall be considered the

Guarantor Subsid iary for all purposes hereunder to the extent of the assigned

obl igatJns. The Guarantor also confirms that any assignee of the Ministry under the

Contrait may exercise all rights and remedies of the Ministry under this Guarantee.

No other person or entity shall be a beneficiary of this Guarantee or have or acquire

any ri g1ts by reason of this Guarantee.



13 .



This G ~ arantee shall be governed and construed in accordance with Afghanistan Law.

Any d iJPute, controversy or claim arising out of or relating to this Guarantee that is

not res91ved by m utual agreement w ithin forty-five (45) Days from the date on which

the eXisfence of a dispute is notified in writing by one party to the other shall be settled

by arbilation initiated by either party by submission to the International Centre for

Settlement of Investment Disputes ("ICSID") pursuant to the Convention on the

Settl em~nt of Investment Disputes between States and Nationals of other States as of

March [IS, 1965 ("IC SlD Convention") and the arbitration rules promulgated

thereun~er. For the avoidance of doubt, the Ministry hereby expressly consents to the

submid1ion of any dispute which may arise under this Guarantee to ICSlD for

settlem1nt by arbitr.ation in accordance with Article 25 (1) of the ICSTD Convention.

For the purpose of Article 25 (2) (b) of the ICSTD Convention, the Guarantor shall be

treated

a national of a state other than Afghanistan. The number of arbitrators shall

be thre9" The arbitration shall be conducted in the English language . The arb itrati on

award ~ay take the form of an order to pay a sum of money, or an order to perform an

act, or' order to refrain from an act, or any combination of such orders. The place of

arbitrati n shall be London, England. Th e award rendered shall be final and

conclus ve. Judgment on the award rendered may be entered in any court hav ing

ju riSd ic~ion or appl icati on may be made in stich court tor a judicial acceptance of the

award ar d an order of enforcement, as the case may be. Each party agrees that at the

request p f the other party it will consent (and will cause its Guarantor Su bsidiary to

consent) to thc consolidation of any arbitration brought under the provisions of this

Clause

with any arbitration under Section 24 .10f the Contract in wh ich the

Mini str., on the one hand, and the Contractor or any Contractor Entity, on the other

hand, is a party that relates to matters at issue in the arbitration brought under this

Clause 3.



fS



113



14 .



Any failure of the Ministry to exercise any right, in whole or in part. hereunder shall

not be construed as a waiver of the right to exercise the same or any other right.



15.



No arn L drnent or modification of this Guarantec shall be effective unless in writing

and Sigl ' ed by both the Guarantor and the Ministry.



16.



The Gu rantor shall pay upon demand and presentation of invoices all reasonable and

actual osts and expenses incurred by the Ministry in connection with the successful

enforceplent of this Guarantee (excluding all costs and expenses incurred by the

Minist1' in connection "vith claims under the Insurance), including, without limitation,

rcasonat le fces and expenses of counsel.



17.



J\ II no]ices, demands, instructions, waivers, consents or othcr com muni cations



hereun ~cr shall be in writing in the Engl ish language and deem ed to have been

properly effective upon receipt, and shall be sent by personal delivery, courier, first

class. .rnj l il or fax.' to the following addresses:

GUAR NTOR:



[TUR 'YE PETROLLERi A.O.

SOgutor Mahalbi 2180 Cad, No,86, 06100, CankayaiAnkam TuckiyeJ

MIN ISTRY:

Ministry lo f Mines & Petroleum

Pashtoo1istan Watt

Across from Ministry of Finance

Kabul, Afghanistan

Telephorte: +93 (0) 202 100 309

Attn: Dirt ctor of Afghanistan Petroleum Authority



The Ad1resses and fax numbers by either party to this Guarantee for notices given

pursuant to this Guarantee may be changed by means of written notice to the other

party at l east fourteen (14) working days prior to effective date of such change.

18.



Th is Gu rantee shall be effective immediately.



IN WITNESS IWHEREOF, the Guarantor has caused this Guarantee to be executed and the

Ministry duly authorized the same, both parties represented by their respective duly

authorized representatives on this day of 08 October 20 J 3.



TiJR KiYE PETROLLERi A.O.j

By

~.e

".-----~



------=::::::::



ITitlel



~



.... ; ~



Besim ~I$MAN



P~esjdent and CEO Act



THE MINISTRY OF MINES &

PETROLEUM OF THE GOVERN MENT OF

THE ISLAMIC REPUBLIC OF



AFG~

H ANJSTAN

{j



By __~__~_____________________

The Minister of Mines & Petroleum



Afghan-Tajik Basin Phase I Tender



EXHIBIT F

LONG RANGE PLAN FOR

THE TRAINING OF AFGHAN NATIONALS



F- I



EXHIBITF

LONG RANGE PLAN FOR THE TRAINING OF

AFGHAN NATIONALS

1. Overview & General Approach



Contractor is coL mitted to the training and development of a competent Afghan workforce

that meets the n~eds of our business and increases the capability and percentage of Afghan

personnel in ou1 operations over time. Consistent with this, as well as the requirements of

the EPSC, Contractor will foster an environment where training and development is a key

activity within dur operations. All Afghan employees will be encouraged to participate in

developing their lown skills to enhance their knowledge for use in their current job, as well as

jobs that they can reasonably expect to progress to during their careers. Our training plans

will be based o~ individual job evaluations and competency assessments, which will help

Contractor identify the optimal training requirements for each Afghan employee. A

sophisticated cob puter-based assessment system will be used to design and track each

Afghan employee's skills levels to track progress and future training needs.

In this regard, c l ntractor will:

I

















Implement on-the-job, course-based in-house as well as external training. In-house

training J ill be conducted by experienced personnel from the Operator as well as

internatio~al-standard trainers from well reputed training companies from all over the

world. External training will be in the .form of training activities or professional

conjerencks located inside or (subject to the reasonable availability of visas) outside

ofAfghanistan.

Use per.f0fmance reviews to identify individual development plans that will encompass

enhanced 'performance in an employee's current position as well as on their long term

I

development.

Manage r d develop training activities via an annual training program that reflects

individual team and organizational needs.

j

Work withI sub-contractors to establish training program requirements for their

personnel.

Provide tmining programs to the Ministry and other Afghan Government entities

consistent with their needs and as agreed in the annual training program.



F-2



2. Annual Training Program

I



Each year, the Operator will submit an Annual Training Program (' ATP') at the same time as

the Work Program and Work Program Budget. The ATP shall identify the specific classes or

other training activities that will be conducted for Afghan employees, Afghan subcontractors

and Ministry personnel in the coming year. 'rhe ATP shall be subject to approval by the

Ministry.

I



The minimum AlfP cost will meet the amounts specified in the Contract.

3. Post commercir Discovery, In-Country Training - 'Center of Excellence'

Once Contractor proves a Commercial Discovery and has an approved Development

Program and Development Program Budget, Contractor, in association with the Ghazanfar

Group, will establish a 'Center of Excellence' dedicated training facility to be located in

Northern AfghaJistan, which will provide classroom space and resources for course work

offered by eXPl teachers from inside and outside the company together with computerbased, self-pace I courses driven by specialized software.

The Center will enhance training activities by providing our Afghan employees with the

necessary onsite physical classroom facilities for more and better quality, cost-effective

training in-country.

4. Contractors

As a significant portion of the operations that will be provided by third party contractors

working in Afg~anistan on behalf of Contractor, we will routinely seek to include Afghan

training commitments in our contracts with such third party contractors.

5. Training Program for 2013

I



During the In itia Exploration Period (i.e., the first four years of Hydrocarbons Operations),

training will be primarily focused on introductory skills appropriate to setting up office

operations, the exploration activities being conducted and preparation for development

activities .

I

It is hard to predict the exact training program during the first year of Hydrocarbons

Operations, as the specific needs of staff yet to be hired cannot be ascertained now.

However, subject to further evaluation of need and availability, the following lays out the

training areas (subject to revision) for the first year of Hydrocarbons Operations:

F-3



I



Preliminary ~ raining Areas

Staff Categork



Course



Support







Safe Driving







Basic Secretarial & Office Administration







Microsoft Office Applications



Financial







Introduction to Accounting Software



Technical









Basic Geology and Geophysics













Mini Oil & Gas MBA



Ad . .

.1

mmlstratIl e



Ministry



All



Basic Seismic Acquisition



Oversight of Procurement Activities

English Language

Introduction to HSE Practices



Ministry personnel may attend any of the courses offered, and/or attend a 'Mini Oil & Gas

MBA' program, lwhich would most likely be outside of Afghanistan. Ministry feedback on

proposed training for their personnel is appreciated.



~ear



During the first

of Hydrocarbons Operations, Contractor will provide more details on

the specific cou1ses to be offered, how the courses will be conducted and the location in

Afghanistan (or Flsewhere) for such training. Contractor will appoint a Human Resources

M~n~ger who SJ all be the person accountable for assessing training needs and planning

trammg events.

Training plans for future years will be submitted along with the Work Program and Work

Program Budge~ for that year. Such training plans shall take into account the training

activities carriedl out during the first year of Hydrocarbons Operations for the purposes of

assessing whether the Contractor has fulfilled the training requirements under the Contract

I

for such future years.



F-4



Afghan-Tajik Basin Phase I Tender



EXHIBITG

BIDDING FORM



G- I



Afghan-Tajik Basin Phase I Tender



Bid Form



AFG HAN-TAJIK BASIN PHASE I TENDER

Ministry of Mines of the Islamic Republic of Afgh anistan

I



Kabul, Islamic Repufn c of Afghanistan

BIDDER:



l llrkiye Petrolleri Anonim OrtakJigi

Dr10n Oil (Int ernational ) Limited

Kuwait Energy Afghanistan Umited



Gh~zanfar Investment Limited



Blcrl k 4 -



BLOCK:



Mazar-I~Sharif



Bleck



ROYALTY BID: lwei e ointsix ercent 12.6 %

BIDDER'S REPRESEr ATIVE: Mark W. Sawyer (Dragon Oil), Michael Andersen (Kuwait Energy), Murat

Fehmi Karci {TPAOr nd Ismail Ghazanfar {Ghazanfar)

The undersigned, Turkiye Pet rolleri Anonim Ortakligi, Dragon Oil (Internat ional) Limited, Kuwait Energy

Afghanistan



limite~ and Ghazanfar Investment Limited, hereby unconditiona Uy commit t hat, if selected



as t he winning Bid~ers in the above-referenced tender process, they will cause a company organized

under the laws of the Islamic Republic of Afghanistan and wholly owned bV them to enter i nto t he

Exploration and PrJduction Sharing Contract for the Mazar-I-Sharif Block (t he "EPSC") 1n the final form

I

distributed t o the ~idde rs in the above-referenced tender process, with the royalty referred to in the



+



EPSC being t he percentage indicated above. Unless such period is extended by the Ministry, the EPSC

shall be executed



lat er t han t hirty (30) days after notification by the Ministry of award of the EPSC.



The undersigned a€knowledge that noncompliance wIth the obligation set forth above sha ll result in a

drawing on t he BidjGUarantee.

The undersigned f rther certifies that the electronic version of the bid submitted with the original paper

version is the samJ as the original paper version, except for electronic format.



I

Dragon Oil (International) Limited



A{ ltu~)h~



Title:



[



,



.('1 t1-c



J



-">



, IC



Kuwait Energy Afghanistan limited



..£4~~~~~.~~::..=::==-----_



(J



/lit



(...v



VFr./1'v{2f>-J



TUrkiye Petrolleri 4nonim Ortakligi



-~

..:.-,/



-- I



Title:



U,-c. (.. IPrea \'.l.o- J-



Title:

,



.."1 /

~,



Ghazanfar Invest ment LilT\ited



\~..L

.

tS ~-----~

Title:



C 'E 0



Afghan-Tajik Basin Phase I Tender



EXHIBITH

INIMUM EXPLORATION PROGRAM



H-I



Afghan-Tajik Basin Phase I Tender



EXHIBITH

MINIMUM EXPLORATION PROGRAM

The Contract I r shall perform the fo llowing minimum Exploration Operations during the

Exploration l ase:



Exploration Wells

Initial Expl ~ration Period



2



First Exten1ion Period



2



Second Extl"'ion Period



2



Each EXPlorat on Well shall be drilled to a target depth that penetrates the Guri/Bukhara

horizon. For ~urposes of determining the original amount of the Financial Guarantee,

Well shall be deemed to have a value of fifteen million

each such Ekploration

I

U.S. Dollars ~US$ 15,000,000.00). For the Initial Exploration Period, drilling in respect

of one of the Itwo (2) Exploration Wells must commence prior to the end of the second

nd

(2 ) Contraat Year, and drilling on both must commence prior to the end of the third

rd

(3 ) Contrac~ Year; provided, however, that such deadlines shall be extended by the

Ministry to later dates within the Initial Exploration Period if the Contractor demonstrates

to the Ministrl1y'S reasonable satisfaction that such extension would allow the Contractor

to effi cientlY j adequately and in a technically sound fashion comply with its Work

Program obl igations to better prioritize its operations in order to optimize production of

Hydrocarbons from the Contract Area. The amount of any Exploration Wells dri lled in

excess of the l required minimum Exploration Operations for any given period shall be

carried forwa~d to the next period and shall be taken into account to satisfy the required

minimum Ex~loration Operations and/or calculate the amount of the Financial Guarantee

required for sbch subsequent period.



H-2



Afghan-Taj ik Basin Phase I Tender



EXHIBIT I

WINN NG BIDDER'S EXPLORATION PROGRAM



1- 1



EXHIBIT I

WINNING BIDDER'S EXPLORATION PROGRAM

FOR THE MAZAR-I-SHARIF BLOCK



Part 1

Work commitments



1.



Geological nd geophysical ("G&G") studies and services, including:

o



o



2.



appf(llximately fifteen hundred square kilometers (1500 km 2) high resolution

aerot agnetic and gravity survey and interpretation

G&G studies and services outsourced from specialized service companies



· · program,

I

. Iud·mg:

mc

SelsmlC

o



at lekst one thousand two hundred line kilometers (1200 line km) of new

reco Inaissance and detailed 20 seismic



3.



Two (2) E ploration Wells to the shallower of three thousand five hundred meters

(3500 m) 0 the top ofthe Lower Cretaceous formation



4.



Lo.ggi:I: ::yall Wells, including, at a rn inirnurn, the following logs:



o



sonil



: :::1:

..



Calmer



In sections L here target reservoirs are expected, the following additional logs will be

run:



5.



..



Resistivity



..



FMI



VSP at the end of each Well



1-2



t



6.



Coring progL m, including cuts at a minimum of thirty-five meters (35 m) of two (2) or

more cores each Well



7.



Wellsite operations including:



8.



o



cOllebtion of ditch samples



o



tagg10ln g and description of samples for lithology and shows



o



strip log plotting showing drill time, lithology, porosity and verbal description of

samRle







bott1 ms-up sample of drilling breaks and evaluation for shows and porosity



o



core cut if shows and porosity are detected







drill stem test if core results show encouragement, drilling is determined to be

safe and required equipment is available within a reasonable time



Post-drilling evaluation of each Well



Part 2

Total estimated cost



Sixty four million U.S. Dollars (US$ 64,000,000) (excluding G&A, training and land

rentals)



1-3



Afghan-Tajik Basin Phase I Tender



EXHIBIT J

ARTICLE X CALCULATION EXAMPLE



J-l



Afghan Tajik Exploration & Development

Example of R-Factor Calculation

Row



(US$ '000 Except Oil & Gas Volumes)



Period 1



Period 2



Period 3



Period 4



Period 5



Period 6



Period 7



Period 8



Period 9



Period 10



Total



Revenue



6

7

8

9

10

11

12

13

14



Qi!

Actual Sale Price (Bbl)



80.00



°°



Total Oil Sold (Bbl)

Cumu l ative Oil Sold (Bbl)



°



Total Actual Revenue for Oil



18

19

20

21

22

23

24

25



Actual Sale Price for AG (MCF)

Total AG Sold (MCF)



°

°



80.00

4,000,000

6,000,000

320,000



80.00

5,000,000

11,000,000

400,000



80.00

6,000,000

17,000,000

480,000



80.00

7,000,000

24,000,000

560,000



80.00

7,000,000

31,000,000

560,000



80.00

7,000,000

38,000,000

560,000



5.00

1,515,160

1,515,160

O·---~

i ,576



5.00

3,030,320

4,545,480



5.00

3,787,900

8,333,380



5.00

4,545,480

12,878,860



5.00

5,303,060

18,181,920



5.00

5,303 ,060

23,484,980



5.00

28,788,040

5,303,060

28,788,040

26;5r5------r43;940

e r-- - - - - --



80.00

57,600

57,600

4,608



80.00

115,200

172,800

9,216



80.00

144,000

316,800

11,520



172,800

489,600

13,824



172,184

172,184



344,368

516,55 1



430,460

947,011



°

°



°



38,000,000

3,040,000



5.00

5.00

5.00

0 0 0

0 0 0



°



r5;152--------,;8;940~ 2;727~ 6;5r5~ 6;515



Condensates from Associated Gas

Actual Sale Price for Condensates (Bbl)



80.00



80.00



80.00



Total Condensates Sold (Bbl)



o



Cumu lative Condensate Sold (Bbl)



o



°o



Total Actua l Revenue for Condensates



°



o



°



o



o



°

°



°

°



80.00



80.00

201,600



80.00

20 1,600

1,094,400

16,128



1,094,400



691,200

16,128



80.00

201,600

892,800

16,128



516,551

1,463,562



602,643

2,066,206



602,643

2,668,849



602,643

3,271,492



3,271,492



87,552



Oil. AG and Condensates Combined

Total Actual Revenue



o



Cumulative Actual Revenue



Effective Actual Price on Physical Sales I Bbl of Oil Sold

26

27

28 All Recoverable Capex & Expenses

29

Total Capex, SG&A & Opex

30

Cumulative Capex, SG&A & Opex

Effective Cumulative Cost/Bbl of Oil Sold

31

32

33 Production Sharing

34

Royalty Oil to GolRA at 12.6% (Bbl)

35

Oil Remaining for Exp & Profit Share

36

Cost Recovery Hydrocarbons

37

Unrecovered Exp From Previous Period

38

Recoverable Exp This Period

39



40

41



Total Recoverable Exp Due to Operator - $



42

43

44

45

46

47

48



Value of Hydrocarbons Allocated to Exp



49

50

51

52

53

54

55

56

57



°



80.00

2,000,000

2,000,000

160,000



80.00



Associated Gas (AG)



Cumulative AG Sold (MCF)

r "------'marACfiThTRevenue fDr.tlG- - - - - - - - - - - - - - -'O



16

17



80.00



Remaining Hyd roca rbons Allocated to Exp (Bbl)

Unrecovered Exp Carried Forward

Cumulative Recoverable Exp Paid to Operator

Net Hyd rocarbons (Bbl)

R Formula Ca lculation

Net Hydrocarbons to Contractor (%)

Net Hydrocarbons to Contractor (Bbl)

NH to Con t ractor - Value

Gross Contractor Revenue (GCR)



Net Hydrocarbons to GolRA (Bbl)

Total Hydroca rbons to Go lRA

Total



0.00



0.00



86.09



86.09



86.09



86.09



86.09



86.09



86.09



5,000

5,000



25 ,000

30,000



35,000

65,000



48.53



42.71



150,000

1,175,000

37.90



75,000

1,250,000

32.89



1,250,000



nfa



200,000

625,000

56.82



200,000

1,025,000



nfa



200,000

425,000

70.83



200,000

825,000



n/a



160,000

225,000

112.50



o

o



°°



°

°



252,000

1,748,000



504,000

3,496,000



630,000

4,370,000



756,000

5,244,000



882,000

6,118,000



882,000

6,118,000



882,000

6,118,000



4,788,000

33,212,000



o

5,000

5,000



o

o

5,000



o



wi Royalty (Bbl)



S Pa id to GolRA for Royalty & Profit Oil



Cumulative Paid to Go lRA for Royalty & Profit Oil



5,000

25,000

30,000



o



°

30,000

°



30,000

35,000



65,000

160,000



65,000



225,000

1,748,000

150,489

74,511

150,489



°



°



65,000



o



o



0.000



0.000



°

°

0.000



100.0%



100.0%



100.0%



°



°

°



o

o

o



o



Cumulative GCR



°



0.00



°o

o



°



°

°

°

°

°



°°



°

°

°

°

°

°



°



0.000

100.0%



°



°



150,489

150,489



°



252,000

21,695

21,695



74,511

200,000

274,511

3,188,585

274,511



°



°



°



°



200,000



150,000



75,000



1,250,000



200,000

2,323,099

200,000



200,000

2,323,099

200,000



150,000

1,742,324

150,000



75,000

871,162

75,000



14,519,368

1,250,000



°



625,000



307,415

0.669

100.0%

307,415

26,466

300,977

451,466



°



°



200,000



200,000

2,323,099

200,000



425,000



504,000

43,390

65,085



°



200,000



°



o



°



°



825,000



1,025,000



1,175,000



1,250,000



2,046,901

1.062

50.0%

1,023,451

88,111

288,111

739,577



2,920,901

1.183



3,794,901

1.291



5,246,838

1.499



50.0%

1,460,451

125,733

325,733

1,065,310



49.7%

1,884,917

162,276

362,276

1,427,586



4,375,676

1.393

48.9%

2,137,862

184,053

334,053



1,023,451

1,653,451

142,349

207,434



1,460,451

2,216,451

190,818

398,253



1,909,984

2,791,984

240,367

638,620



1,761,638

2,237,814

3,119,814

268,59 1

907,211



48.0%

2,518,790

216,847

291,847

2,053,486

2,728,048

3,610,048

310,796

1,218,006



18,692,632



9,332,885

803,486

2,053,486



9,359,747

14,147,747

1,218,006



Afghan Tajik Exploration & Development

Example of R-Factor Calculation

Row



(US$ '000 Except Oil & Gas Volumes)



Notes



Revenue



Qi!

6

7



Actual Sale Price (Bbl)



Assumption. For demonstration purposes only.



Total Oil Sold (Bbl)



Assumption. For demon stration purposes only.



8



Cumulative Oil Sold (Bbl)



9



Total Actual Revenue for Oil



Formu la: RowI6*Row7/1000



10



11



Associated Gas lAG)



12



Actual Sale Price for AG (MCF)



Assumption. For demonstration purposes only.



13



Total AG Sold (MCF)



Assumption of 0.75758 mcf of Associated Gas for each barrel of oi l



14



Cumulative AG Sold (MCF)



15

16



TotalActuarRevenue fo,71G



17



Formula:RowTZ*Row13/1000- -- - -



Condensates from Associated Gas



18



Actual Sale Price for Condensates (Bbl)



Assumption. For demonstration purposes only.



19



Total Condensates Sold (Bbl)



Assumption of 0.0288 mcf of condensate for each barrel of oil



20



Cumulative Condensate Sold (Bbl)



21

22



Total Actua l Revenue for Condensates



23



Oil. AG and Condensates Combined



24



Total Actual Revenue



25

26

27



Formula: Row18*Row19/1000



Formula: Row9+Row15+Row21



Cumulative Actual Revenue

Effective Actual Price on Physical Sales / Bbl of Oil Sold



Expressed in terms of bbls of oi l sold.



28 All Recoverable Capex & Expenses

29



Total Capex, SG&A & Opex



30



Cumulative Capex, SG&A & Opex



31

32



Effective Cumulative Cost/Bbl of Oil Sold



Assumption. For demonstration purposes on ly.

Expressed in terms of bbls of oil sold. Formula: Row30*1000/Row8



33 Production Sharing

34



Royalty Oil to GolRA at 12.6% (Bbl)



Expressed in terms of bbls of oil, but GIRoA also receives proportional AG & condensates. Formula: Row7*12.6%



35

36



Oil Remaining for Exp & Profit Share



Formula: Row7-Row34



37



Cost Recovery Hydrocarbons



38



Unrecovered Exp From Previous Period



Formula: [Previous Period]Row43



39



Recoverable Exp This Period



Formula : Row29



40



Total Recoverable Exp Due to Operator - S



Formula: Row38+Row39



41



Remaining Hydrocarbons Allocated to Exp (Bbl)



Measured in oi l. Formula : =IF(Row35=0,0,IF(Row26=0,0,IF(Row35>(Row40*1000/Row26),(Row40*1000/Row26),Row35)))



42



Value of Hydrocarbons Allocated to Exp



Includes value of oil & proportional AG & condensates. Formula: Row41*Row26/1000



43



Unrecovered Exp Carried Forward



Formula: Row40-Row42



44

45



Cumu lative Recoverable Exp Paid to Operator



Formula: Row42+ [Previous Period]Row44



46



Net Hydrocarbons IBb!)



47



R Formula Calculation



Formula : [Previous Period] Row52/ [Previous Period]M30. Note: Contract stipu lates Previous "Period" is Previous "Month".



48



Net Hydrocarbons to Contractor (%)



Form u Ia: IF( Row4 7<1, 1, IF(Row4 7<1. 25 ,0. 5, IF(Row4 7> 2.5 ,0.4, (0.4+( (2 .5-Row4 7)/( 2.5-1.25)) * (0.5-0.4)))))



49



Net Hydrocarbons to Contractor (Bbl)



50

51

52

53



NH to Contractor - Va lue

Gross Contractor Revenue (GCR)

Cumulative GCR



Formu la: Row35-Row41



Measured in oil - Contracto r also receives proportional AG & condensates. Formu la : Row48*Row46

Includes value of oil & proportional AG & condensates. Formu la: Row49*Row26/1000

Includes value of oil & proportional AG & condensates. Formula: Row42+Row49*Row26/1000

Formula: Row51+[Previous Period]Row52



54



Net Hydrocarbons to GolRA (Bbl)



55



Total Hydrocarbons to GolRA w/ Royalty (Bbl)



Measured in oil - GIRoA also receives proportiona l AG & condensate s. Formula: Row54+Row34



56



Tota l $ Paid to GolRA for Roya lty & Profit Oil



Includes value of oil & proportiona l AG & condensates. Formula : Row55*Row26/1000



57



Cumulative Paid to Go lRA for Royalty & Profit Oil



Measured in oi l- GIRoA also receives proportional AG & condensates. Form ula: Row46-Row49



Formula: Row56+[Previous Period]Row57



Afghan-Tajik Basin Phase I Tender



EXHIBITK

FORM OF HYDROCARBONS LICENSE



K- I



Afghan-Tajik Basin Phase I Tender



3Jslamic RepubItc of ~fgbanistan

:ministrp of :mines

QExploration lLicense

Issued to



Persuant to contract _ __

For _ __

Basin of northern Afghanistan

Valid From _ _ __ _ _ To _ _ _ __ _



Ministry of Mines



Date:_ __ _



K-2



Afghan-Tajik Basin Phase I Tender



~.).J~'

--+_



_



~1 _ _ _ -...JjIJ~1 es""b



-+---:~J lJ



K-3



Afghan-Tajik Basin Phase I Tender



EXHIBITL

FO



I



OF PERMIT FOR DEVELOPMENT AND

PRODUCTION OPERATIONS



L-I



Afghan-Taj ik Basin Phase I Tender



Jfslamic Republic of £lfgbanistan

;ffiinistrp of ;ffiines

~e mit for ~ebelopment anb ~robu(tion ~eration

Issued to



Persuant to contract _ _

For _ _ _

Basin of northern Afghanistan



Valid From _ __ _ _ To _ _ _ __



Ministry of Mines



Oate: _ _ __



L-2



Afghan-Tajik Basin Phase I Tender



,,~~l ~~l ~)-'cA6 ,..

~h1u 4j~



~~~ ~~ -' ~~l

~



"4 A;4.l



~~J U-'

-----+----



t,



eot



j1 ~1·

J •



II



L-3



MEMORANDUM OF UNDERSTANDING

between

THE MINISTRY OF MINES & PETROLEUM

OF THE

GOVERNI ENT OF THE ISLAMIC REPUBLIC OF AFGHANISTAN,

DRAGON OIL (MAZAR-I-SHARIF) LIMITED,

TP AFGHANISTAN LIMITED,

and

GHAZANFAR INVESTMENT LTD.

for

CUSTOMS DUTY EXEMPTION FOR ITEMS USED EXCLUSIVELY FOR

HYDROCARBONS OPERATIONS



1. Parties. This Memorandum of Understanding ("MOU") is entered into on this 8th day of

October 2013 betwecln the Ministry of Mines & Petroleum of the Government of the Islamic

Republic of Afghani~tan (the "MoMP"), acting on behalf of the Government of the Islamic

Republic of Afghani~tan (the "Government"), Dragon Oil (Mazar-i-Sharif) Limited ("Dragon

Oil"), TP Afghanistah Limited ("TPAL"), and Ghazanfar Investment Ltd . ("Ghazanfar"). Each

of the MoMP, DragOr Oil, TPAL and Ghazanfar may be referred to as a "Party," and

collectively they may be referred to as the "Parties." Each of Dragon Oil, TPAL and Ghazanfar

may be referred to a~ a "Contractor Entity" and collectively as the "Contractor".



2. Background andiScope. On behalf of the Government, the MoMP has entered into an

Exploration and Production Sharing Contract, dated October 8, 2013, with the Contractor for

hydrocarbons explor1tion, development and production in the Mazar-i-SharifBlock of the

Afghan-Tajik Basin bf

Afghanistan (the "EPSC"). Pursuant to Section 17.1(a) of the EPSC, the

I

Parties have agreed that for the duration of the EPSC, each of the Contractor Entities shall be

entitled to import intb Afghanistan (including by its subcontractors as joint consignees) free of

Customs Duties the clquipment and supplies designated by the Parties as required to be imported

for Hydrocarbons OJerations and shall be entitled to export the same (provided that no transfer

of ownership of suc~ equipment or supplies has occurred after the date of their import into

Afghanistan) free of Fustoms Duties pursuant to the terms and conditions of this MOU, as it may

be amended from time

to time. Capitalized terms used but not defined herein have the meanings

I

provided in the EPS


3. Import of EquiPLent and Supplies. To import equipment and supplies into Afghanistan

free of Customs Dut~es, a Contractor Entity, either on behalf of itself or its subcontractor as joint

consignee, shaH submit to the MoMP an application for exemption from Customs Duties that:



. . . . -.-.. .-.. . ---.----. · ····-··-···- 1---·--·



a. Categorizes tfe items under one or more of the imported items within the categories

stipulated in 'rAppendix I to the MOU for Customs Duty Exemption for Items Used

Exclusively for Hydrocarbon Operations" attached hereto;

b. Identifies the number and value of each item to be imported (on the basis of delivery

FOB and CIF as such terms are defined in lncoterms 2010);

c. Identifies the applicable Harmonized Commodity Description and Coding System ("H .S.

Code") headi g of each item to be imported and the tariff rate applicable to such heading

under the CuJtoms Tariff (20 12) of Afghanistan, as the same may be amended from time

to time;

I

d. Certifies that It he items to be imported are required for Hydrocarbons Operations within

the contract area and will be exclusively devoted to that purpose;

e. Certifies that I'tems similar in quality and quantity to the items to be imported are not

produced or Jvailable in Afghanistan at prices that are no more than 15% higher than the

prices of the r· ems to be imported, after transportation and insurance costs have been

added; and

1



f.



Complies with such other forma lities as may be required by the Customs Law of

Afghanistan ds instructed by the MoMP.



A Contractor Entity Jhall submit such application for review and approval at least forty-five (45)

days prior to the datelthe items are to arrive in Afghanistan or at a time requested by the

Contractor and acce1ted by the MoMP.

4. Export of Equipipent and Supplies. To export from Afghanistan free from Customs Duties

equipment and supplies previously imported into Afghanistan for use in Hydrocarbons

Operations, a Contrat tor Entity, either on behalf of itself or its subcontractor as joint consignee,

shall submit to the j OMP an application for exemption from Customs Duties that:

a.



Identifies the number and value of each item to be exported (on the basis of delivery FOB

and CIF, as srh terms are defined in Incoterms 2010);



b. Identifies the la pplicable H .S. Code heading of each item to be exported and the tariff rate

applicable to such heading under the Customs Tariff (20 12) of Afghanistan, as the same

may be amen~ed from time to time;

c. Certifies that fhe items to be exported were previously imported free from Customs

Duties, were used in Hydrocarbons Operations, and that no transfer of ownership of such

items has occhrred after the date of their import into Afghanistan; and

d. Complies with such other formalities as may be required by the Customs Law of

Afghanistan Js instructed by the MoMP.

A Contractor Entity Jhall submit such application for review and approval at least forty-five (45)

days prior to the datelthe items are to be exported from Afghanistan or at a time requested by the

Contractor and acce~ted by the MoMP.



2

-·--·-----·----····---·· -·-·--·----1 --



5. MoMP Review a l d Approval; Objections. Following consuitation with the Afghanistan

Customs Departmen~ ("ACD"), the MoMP shall endeavor to respond to any application

submitted by a Contractor Entity pursuant to Paragraphs 3 or 4 of this MOU as soon as

reasonably practicab~e, but in any event within thirty (30) days or at a time requested by the

Contractor and acce~ted by the MoMP following the MoMP's receipt of such application. If the

MoMP, the ACD or any other Government ministry or instrumentality determines that any

equipment or supplie~ identified in an application submitted pursuant to Paragraphs 3 or 4 of this

MOU are not entitled to an exemption from Customs Duties, the MoMP shall inform the

Contractor Entity th~~ submitted the application of the relevant objection(s) and the reason(s)

therefore. Within fitteen (10) days following the Contractor Entity's receipt of the MoMP's

response, the Contradtor Entity and the MoMP shall meet to agree upon any required revisions to

the relevant apPlicatif n.



6. Joint and Several Liability. The Contractor is jointly and severally liable with its

subcontractors for an~ infraction in the use of the Customs Duties exemptions and preferences

set out in this MOU. IWithout prejudice to Section 1.9(g) of the Accounting Procedures to the

EPSC, any fines, penfllties and payments of any nature incurred by the Contractor or its

subcontractors in violation of the Customs Law of Afghanistan or any formalities required by the

ACD shall not constitute a Hydrocarbons Operations Expenditure under the EPSC.

7. Term. This MOJ is effective upon signature by the Parties and terminates upon termination

of the EPSC.

I

8. General Terms ard Conditions.

a. Binding Effect. The provisions of this MOU shall create a binding legal obligation on the

I

Parties.

b. Dispute Resolution. Any dispute, controversy or claim arising out of or relating to this

MOU that is 10t resolved by mutual agreement within forty-five (45) days from the date

on which the existence of a dispute is notified in writing by a Party to another Party or

Parties shall Be settled in accordance with Article XXIV of the EPSC. Under no

circumstance~ may the costs incurred in the course of any dispute resolution proceeding

commenced ~nder this MOU be included in Hydrocarbons Operations Expenditures

under the EP$C.



An~



c. Notices.

notice or other communication required or permitted to be given under this

MOU shall be communicated in writing on the official letterhead of the communicating

Party, shall bJ signed by an authorized representative of such Party, and shall be deemed

to have been ~ufficiently given or made upon delivery.

I



d. No Waiver. The failure of any Party to seek redress for violation, or to insist on strict

performance, lof any provision of this MOU will not prevent a subsequent act that would

have constituted a violation from having the effect of an original violation.

e. Separability. If a provision of this MOU should be held illegal, void, or unenforceable by

any court or administrative body having proper jurisdiction, such determination shall not

affect the rerJaining provisions of this MOU, which shall remain in full force and effect

as if such illehl, void, or unenforceable provision had not been included.



3

-------------------------------1-----



---------_._-------------



f.



Assignment and Succession. This MOU shall be binding and shall inure to the benefit of

the Parties an~ their respective assigns, executors, administrators, and successors in

interest.

I



g. Choice of La'r. This MOU shall be governed by, construed under and interpreted in

accordance with the internal laws of Afghanistan, as such laws may be amended from

time to time ahd without regard to conflicts of law principles.

I



h. Costs. Each ~arty shall bear and pay its own legal costs and expenses incurred in the

preparation and review of this MOU .

I.



Sole Benefit. IThiS MOU is for the sole benefit of the Parties and their successors and

assigns. No o~her person shall be entitled to enforce this MOU, rely on any

representati01, warranty, covenant, or other agreement contained herein, receive any

rights hereunder, or be a third-party beneficiary of this MOU. No Party shall have any

direct liabilit~ or obligation to any third party for any election or non-election or any act

or failure to act or in regard to any term of this MOU. Nothing in this MOU shall be

construed to 0 eate any duty, standard of care, or liability to any person not a Party to this

MOU.

(Signature page follows)



4

. . . . . . -.. . . . . .-..-.-.. -.-----.-------------T -----------



I



AGREED AND AC(cEPTED:

I



MINISTRY OF MI~ES & PETROLEUM

OF THE ISLAMIC REPUBLIC OF AFGHANISTAN

{[)



I



~--41



By: Abdul Jalil Jumrlany .

Title: Director General, Afghanistan Petroleum Authority

Date:

AZ AR-I -SHARIF) LIMITED



/Il/!



~~,!1

1



0



-B-y-:M--ar-k-W--.S-a-w-ye i



Title: Manager, New Ventures and Business Development

Date:



TP AFGHANISTA



LIMITED



~~~

Date:



Title: Chief Executi e Officer

Date:



5



ADDENDUM 1

to the

MOU FOR CUSTOMS DUTY EXEMPTION

FOR ITEMS USED EXCLUSIVELY FOR

HYDROCARBONS OPERATIONS

1.)



Heavy Equi~ment:

a. Graders

b. Dozers

c.

d.

e.

f.

g.

h.

I.



J.

k.

I.

m.

n.

o.



Dump trul kS

Backhoes

Trenchers

Loaders

Rock crus~ers

Screen shakers for gravel sorting

HYdraUliCljaCkhammers (hand held and mounted on backhoes)

Portable rpck drills and associated explosive material for blasting rock

Cuiverts ~br roads

Road rail1

Asphalt plants

Asphalt trucks

Paving equipment



p. Spare paT for all of the above

2.)



Cranes (all sizes)



3.)



TransportatL n Vehicles:

a. Trucks

b. Cars

c. Vans



4.)



Support Eq ipment

a. Diesel ta1 s

b. Fuel stations

c. Service e4uipment (hydraulic jacks, oil incinerators, maintenance tools)



5.)



Storage Depots

a. EXPIOSiV~ bunkers (for dynamite used in seismic and for perforating charges)

b. Radioact±

ive source pits (lead lined bunker which would be cemented into the ground

with whia to gain access and secure lead cover)

c. Fuel stor r e tanks



I



I



A-I



----_.._._-------------:-- - - -- - - - - -- - - - -- - -_ .



d. Oil storat tanks

e. Ventilatior



6.)



Pipeline Requirements

a. Pipe, all sizes from 4" to 36"

b. Wrappin~ for pipe

c. Cathodic protection for pipe

d. Sand bags for pipe

e. Flanges af d bolts

f. Welding equipment (gas and electric)

g. Welding + dS

h. Generatorr

I.

Welding safety equipment (eye protection, breathing apparatus, gloves, aprons, etc .)

J. surveye1uipment

k. Pressure gauges

I.



Painting ellqUiPment and paint



7.)



Life Suppor

a. Portable office containers

b. Portable living containers and associated furnishings

c. Refrigeration units for cold storage

d. Generatorls

e. Portable ~itchen units containers wi associated kitchen accessories

f. Portable light plants

g. Air conditioners

h. Heaters

I.

Cables/w·ring

J. Electrical infrastructure equipment for networking a closed grid



8.)



Office Equi ment

a. Compute, s

b. Printers (all sizes)

c. Office sut plies (paper, pens, staplers, etc.)

d. Scanners I

c. Furnishings (desks, chairs, etc .)

f. VTC (vidbo teleconferencing)

I

·

g. ProJectors

h. Whiteboards and markers

I.

Telcconf
J. Plotters

k. Cables/w·ring



A-2



___._..



- -- _._ - - - - - ; - - _...... ....



9.)



Drilling Equ·pment

a. Drill rigs (all sizes and depth requirements)

b. Drill pipe

c. Casing

d. Tubing (l ll sizes and weights)

e. Bits

f. Drill components (travelling block, drill line, weight indicators, slips, blocks, blowout

I

preventers,

tongs, etc.)



g. Mud purfs

h. Mud storage tanks/pits



(2'i'



Piping

to 6")

J. Tools (sl9dge hammers, wrenches, etc.)

k. Spare parts

I.



1



10.) Security E Q p ment

a. Video m~nitoring



:~ ~~t~e:e~~~;:;~~~alkWayS' wands, etc.)

d.

e.

f.

g.

h.



Hescos I

Fencing 1 aterial

Entry conltrol (barricades, road blocks, etc.)

Binocula, s

Alarm system/warning sirens

I.

Spotl ightJ

I

j . Cables/wiring

11.)



!~f~:f~~:~b:t

b.

c.

d.

e.

f.



g.

h.

I.



J.

k.

l.



Coveralls (preferably Nomex)

Gloves

Boots (steel toed)

Hearing ~rotection

Communication equipment (radios, walkie-talkies, headsets)

First aid (r ontainers, kits, equipment, medicines, bandages, etc.)

Ambulanf es

Firefighting equipment

Signage I

H2S dete~tors

I

SCBAs ($elf Contained Breathing Apparatus)



A-3



. . . . -.. ----.. ---.-.-----.. .-.-.-.-------r--



- - - - - - _.._-----_.._-_..._._-_....__..._.._....__..-_.-._-_._._--_...._.._-_.._._._ - - -_...._---_.._-



m. Dusk masf s/filters

n. Eyewash stations

o. Cold weaiher gear

12.) Chemicals

a. Cement

b. Hydrochl(j)ric acid

c. HYdroflot c acid

d. Barite

e. Bentonite

f. Surfactants

g. POlymers !

h. Anti-foam agents

D·Ispersanr

I

I.

J. Emulsifie s

j

k. De-emulsIfiers



I.

m.

n.

o.

p.



Lost circu ation material

Hematite

Ilmenite

Extenders

Fluid loss additives



13.) Laboratory Equipment

·

I

a. VIscometers

b. Beakers !

c. MicroscolJles

.

I

d . ConsistOjeters



e. Compress·ve strength testers

f. Test tUbe !

g. Blenders

h. Sample c1ntainers

I.

Associateo lab equipment

14.) Well servicet!

a. Wireline ogging equipment

b. Wireline ogging tools



~~ :;e~~:::tJ:~:~:::~s

e.



Pneumati~ silos (truck and mobile units)



f.



Hoses



!



g. High pre l ure pipes



A-4

------------------------------------------------------------1----------- -----------------------------------------------------------



h. Blenders

I.

Cementing equipment

J. Slickline equipment

k. Well-testihg equipment (separators, flares, manifolds, valves, etc. and their

componerlts)

I. Chart recdrders

m. Pressure ~ecorders

n. Spares fOF all of the above



j



· . E qUlpment

15.) Selsmlc

a. Vibrators

b. Dynamite

c. Recording equipment

d. Cables I

e. computer

f. Batteries

g. Geophon1s

h. Junction IBoxes

I



16.) Gravity/Magnetic Surveys

a. Aerial bok e vehicles

.

I

b . GraVlmeter

c. Magnetorheter

d. Different~al GPS

e. Geophysical measuring equipment

f. Spares



A-5



IJ~W\ ~~\ ~)~



~ j):; j 1J~1.A.o ~)~j



Islamic Republic of Afghanistan

Ministry of Mines & Petroleum

~-'~ o)\~\ I$"~ ..;;......4)



October 6, 2013

Mr. Mark Sawyer

Manager - New y entures

Ltd .

Dragon Oil (International)

I

c/o Dragon Oi l (1 0IdingS) Ltd.

P.O. Box 34666

Dubai

United Arab Emi liates

Mr. Murat Karci

Director

Ttirkiye Petrolleri Anonim Ortakhgl (T PAO)

Sogtit6zti Mahallesi 2180

Cadde No. 86 06100

<;ankaya/ Ankara

Ttirkiye

Mr. Ismai l Ghazar far

Ghazanfar Investment Ltd.

Kart -e-Parwan

Kabul

Afghanistan



Subject: Memorandum of Understanding for Customs Duty Exemption ("Customs Duty

MOU'') for Sllnd~qli and MllZllr-i-Sharij EPSCs

Dear Consortium:

Reference is made to the subject Memorandum of Understanding, which defines the process for

the Contractor and its subcontractors to document and legally import into Afghanistan equipment

and supplies, exelnpt from Customs Duty, for exclusive use in Hydrocarbons Operations, said

right established in Article 17 of the EPSCs for both the Sanduqli and Mazar-i-Sharifblocks.

As the Contractor land the Ministry of Mines & Petroleum (the "Parties") wish to proceed with the

signing of the EP$Cs for both the Sanduq Ii and Mazar-i-Sharif blocks, the Parties agree that they

shall also sign the Customs Duty MOU.



The Ministry of Mines & Petroleum acknowledges that the Contractor believes additional

discussion between the Parties, and with representatives of the Ministry of Finance, will lead to

greater clarity an d efficiencies in the customs duties exemption process and hence to smoother

Hydrocarbons Operations.



~ines



The Ministry of

& Petroleum agrees to facilitate further discussions between the Parties

and the Ministry pf Finance to identify and mutually agree in good faith on amendments to the

Customs Duty MOU to result in an amended version of that document in a timely fashion,

consistent with thb applicable customs laws and regulations of Afghanistan and the requirements

of the EPSCs.

We appreciate thl Consortium's commitment to Afghanistan and look forward to a successful

signing ceremony for the EPSCs.



-J:t



~n

~



Jalil Jumriany

Director General

Ministry of Mines & Petroleum



"':".u~ ~~\ ~l-:.-JWI~



~)Gj ~j.;k;



jl



~l-:.-JWI ~~I ~)~



~j.;k; j ~ ~ IJI.o ..:;.,) IjJ



ii\5"~



Islamic Republic of Afghanistan

Ministry of Mines & Petroleum

~J~



0)\':'\



I.$"y.>- ..:.......4)



October 8, 2013

Mr. Mark Sawyer I

Manager - New V1ntures

Dragon Oil (Internjtional) Ltd.

c/o Dragon Oil (HOjl dings) Ltd.

P.O. Box 34666

Dubai

United Arab Emira es

Mr. Tayfun Yener L nucu

Director

'rUrkiye Petrolleri Anonim Ortakllgl (TPAO)

SogUtozii Mahallesi 2180

Cadde No . 86061 0lb

C;ankaya/ Ankara

TUrkiye

Mr. Ismael Ghazanfar

Ghazanfar Investm6nt Ltd.

Kart-e-Parwan

Kabul

Afghanistan



Subject: Final EXI1'0mtion ami Production Sharing Contmcts ("EPSCs'J for the MaZllr-iSharif (lnti santiu(f Blocks

Dear Consortium :



j



Reference is made 0 the EPSCs for the Mazar-i-Sharif and Sanduqli Blocks initialed on July 15,

20 130n behalf oftlie Ministry of Mines & Petro leum and the Consortium (the "Initialed EPSCs").

The Ministry notes lthat the final execution copies of the EPSCs it provided to the Consortium on

October 5. 2013 incduded various ministerial changes to the Initialed EPSCs required to prepare



the documents for t gnature atthe sign in g ceremony to be held today, October 8, 20 13.

In recognition of the limited time available to the Consortium to review and approve these

ministerial changes the Ministry agrees to provide the Consortium until October 22,2013 to

review the final EPr Cs and notify the Ministry regarding any material changes from the Initialed

EPSCs that may belcontained therein. Upon receiving such notification, the Ministry and the



Consortium will endeavor to agree on such material changes to the final EPSCs as may be

required to bring the final EPSCs into conformity with the Initialed EPSCs.

Sincerely,



Abdul Jalil Jumriany

Director General I

Afghanistan Petroleum Authority

Ministry of Mines & Petroleum

Government ofthe Islamic Republic of Afghanistan



AGREED AND ACCEPTED:



Ma'k~~r vr



Manager, New Velftures and

Business Developlf ent

Dragon Oil (MazarCi-Sharif) Limited and

Dragon Oil (SandU1Rli) Limited

~



~"'=ttJ

TP AFghanistan Lif ited



-&~~

~r



Chief Executive Officer

Ghazanfar Investment Ltd.



~



.. ..



.".•".~ .J~. 'y gJ.--=l ~



Gl1AZANFAR GROUP LlC



Dear Ministl'Y:

Subject: Procurement Manual for Sanduqli and Maz.ar-i-Sharif EP$Cs



Refcrence is made to the subject Agreements which will be signed together willi the EPSCs. The

Consortium m~mber3 expect to learn a. great deal about the procurement process during the first year of

operations as they implement the Procurement Manual and may identifY improycment$ 10 tbe process.

Accordingly, ~,vhere improvements are identified by the COllsortium, it will make suitable

recommcndntiolns to the M inisfry. The Consorti um and the Ministry \,~II use Iheir reasonable efforts and



"' .. """ "'1I"",..,....,..., _

10



•...-ilY

T'



!!!!d~~", Llmi~

AgJ'~nthis -



I day of Oclober, 2013:



-;1' /1 ~Q

Minister of Mi n



and Petroleum



,m .... th, """""",'" ....." In. Hm"y ....",