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Article 14 NATURAL GAS










Article 24 ROYALTY









Article 32 BONUSES

Article 33 PIPELINES












Article 44 NOTICES










“GOVERN Mi:NT’), duly represented by the Minister of Natural Resources;


KOMET GROUP S.A., a company established and existing under the laws of the British

Virgin Islands whose registered office at Drake Chambers, /ninny, Bldg.. Market Square,

Road Town, Tortola, British Virgin islands, and being un affiliate of die Ascont Group, duly

represented by its attorney, Anatol Stati;

(hereafter referred to as the “CONTRACTOR")


(A) The GOVERNMENT wishes to develop the petroleinn wealth of the Kurdist:in

Region (ns defined in this Contract) in it way dim achieves the highest benefit to dte

people Of the KurdiRtnn Region and all of Iraq, using the most advanced techniques of

market principles and encouraging investment, consistent with the Constitution of

Iraq including Article 112 thereof;

(B) In accordance with the Constitution of Iraq, the prevailing law of tl>c Kurdistan

Region is die Kurdistan Region Law (as defined in this Contract), except with regard

to n matter wholly w ithin die exclusive jurisdiction of (Ik- Government of lr.*q;

(C) The National Assembly of the Kurdistan Region approved the Oil ami Law of the

Kurdistan Region - Iraq (Law No. 22 of 200?) which law regulates Petroleum

Operations, including production sharing contracts;

(I)) The GOVERNMENT intends to present to the National Assembly of the Kurdistan

Region a law to authorise the GOVERNMENT, by contract or other authorisation, to

exempt investors in long term projects relating to the conduct of petroleum operations

in die Kurdistan Region from Kurdistan Region taxation, to indemnify such holders

against liability to pay such taxation, and/or to guarantee the stability of the applicable

legal, fiscal and economic conditions of such projects;

(E) The Contractor Entity is a company,

(i) with the financial capability, and the technical knowledge and technical

ability, to carry out Petroleum Operations in Iho Contract Area (as defined in

this Contract) under the terms of this Contract;


 (ii) having a record of compliance with the principles of good Corporate

citizenship, and

(tii) willing to cooperate with the GOVERNMENT by entering into this Contract,

(hereby assisting iho GOVKRNMEM to develop the Kurdistan Region

petroleum industry, thcrcb>' promoting the economic development of the

Kurdistan Region ami Iraq and the social welfare of its people; and

the GOVERN MEN I has entered into a refinery contract on the same date a* the

Effective Date ("Refinery Con tract”) with Card ha) I Services Ltd. Cardhall Services

I .ul., being an Affiliate of Komet Group S.A., lor the refining of seventeen thousand

barrel# per day (17,000 bpd) of crude oil, and for the sqiply of petroleum product# to

the Kurdistan Region and other parts of Iraq;



I | Capitalised terms and expressions in this Contract shall have the following meaning,

unless otherwise specified:

Abroad means outside of the Kurdistan Region and other parts oflmq.

Access Authorisation is defined in Article 17.9.

Accounts is defined in Article 15 I

Accounting Procedure means the Accounting Procedure attached to this Cootract u

Annex B and constituting an integral part of this Contract.

Adjacent Contract Are. is defined in Article 34.1.

Adjnstment Date b defined in Article 27.6.

Affiliated Company or Affiliate means, as repanfc any of the compares or entities

oosKtihJtmg the (OMR \(TOR. a c*«npm>y or other legal entity which

(n) controls a COM KACTOR Entity, or

(fa) is controlled by a CONTRACTOR Entity; or

(c) controls or IS controlled by


Imu shall not include the GOVERNMKNI in respect of the Public Compuny. For the

purpose of tins definition, "control” means direct or indirect ownership or control of

fifty per cent (50%) or more of the voting rights of (lie applicable entity at its

stwrchoMers’ meetings or their equivalent


 Agreed I mm if defined in Article 14.10(*).

Appraisal Arm means the area defined in Article 12.2.

Appraisal Work Program and Budget it defined in Article 12 2.

Appraisal Report is defined in Article 12.4.

Appraisal Well monru u well drilled for the purpose of evaluating the commercial

potential of a geological feature or u geological structure in which Petroleum has been


Arm’s-l ength Sales means sales of Petroleum in freely convertible currencies

between sellers and buyer* having no direct or indirect relationship or common

interest whatsoever with each other that could reasonably influence the sales price.

Such Arm's- length Sales shall exclude:

(a) sales between or among any of the CONTRACTOR I ntiticf and then

respective Affiliates;

(l>) sale* involving the GOVERNMENT or the Government of Iraq; ami

(c) sales involving exchanges and any transaction* not relating to normal

commercial practices.

Assets means all land, platforms, pipelines, plant, equipment, machinery', wells,

facilities and all other installations and structures and all Materials and Equipment.

Asoctattd Natiral (.ov rocaav (0 my Njtsral On titwolvtd m Qndc Oil tufa

reservoir coodiu,«» and (n) my residue gas remain.** after die eatracticn of Crude

Oil from a rcacrvoir

Audit Request Period i* defined in Article 15.3(a).

Available Associated Natural Gas is defined in Article 25.1.

Available C nidr Oil is defined in Article 25.1.

Available Non-Associated Natural Gas is defined in Article 2' I

Available Prtndrsim if defined » Article 25.1.

fcsapertforc of l«n Fibreabaf^d preaMre of fourteen point seven

(14.7, p«

Budgets means any budgets prepared by. or on behalf of. the CONTRACTOR

pursuant to this Contract aud forming pari of an laploraftoo Work Program and

Budget andor an Appraisal Wort Program and Budget and or a Gas Marketing Work

Program and Budget andor a Development Work Program and Budget andor a

Production Work Program and Budget


6/1 12


Calendar Year means a period of twelve (12) consecutive Months, commencing I

January and ending on 31 December of the same year.

( hair man is defined in Article 8.1.

Commercial Disco very means a Discovery which is potentially commercial when

taking into account all technical, operational, commercial and financial data collected

when currying out! works or similar operations, including recoverable

reserves of Petroleum, sustainable regular production levels and other material

technical, operational, commercial and (inancinl parameters, all in accordance with

prudent international petroleum industry practice.

Commercial Production means the production of Petroleum from the Production

Area in accordance with annual Production Work Program and Budget.

Constitution of Iraq means the ixrmnncnt constitution of Iraq approved by the

people of Iraq in the general referendum of 15 October 2005.

Contract means this production sharing contract, including its Annexes A and F», and

the guarantee contained in Article 2.0 that in an integral part hereof, as well an any

extension, renewal, substitution or amendment of this production sharing contract that

may be agreed in writing by the Parties in accordance with Article 43.7.

Contract Area means the area described and defined in Annex A attached to this

Contract and constituting an integral part of this Contract, and any modifications

mude to iliai Annex in accordance with the provisions of this Contract, through

amendments, surrender, withdrawal, extension or otherwise.

Contract Year means a period of twelve (12) consecutive Months starting from the

Effective Date or any anniversary of the said Effective Date.

CONTRACTOR includes and comprises each and all CONTRACTOR Entities,

including any Public Company nominated by the GOVERNMENT pursuant to

Article 4. and/or any assignee of all or part of the rights ami obligations under this

Contract in accordance with Article 39.

CON TRACTOR Entity means any Person which is for the time being n component

of the CONTRACTOR, and'or any assignee of all or part of the rights and

obligations of such Person under this Contract in accordance with Article 39. but not

including any holder of the Government Interest. For the avoidance of doubt, at any

time when there is only one entity constituting the CONTRACTOR, any reference

made in this Contract to ‘The entities constituting the CONTRACTOR" or the

“CONIKACTOR entities" or similar reference, shall be deemed to mean “the entity

constituting the CONTRACTOR*. Koine* Group S.A. » the CONTRACTOR

Entities as at the Effective Date, owns an undivided interest in the Petroleum

Operations in respect of the entire Contract Area in llte following percentage at the

Effective Date:


 Komet Group S.A. S0.0%

The haliince of the interest in Petroleum Operations in respect of the entire Contract

Area, being twenty per cent (20%), is the Government Interest as defined in Article


Crude Oil means all liquid hydrocarbons in their unprocessed state or obtained from

Natural Gas by condensation or any oilier means of extraction.

Decommissioning Costs means all the costs and expenditures incurred by the

CONTRACTOR when carrying out Decommissioning Operations, including those

defined in the Accounting Procedure.

Decommissioning Operations means any works, together with all reluted and

auxiliary activities, for decommissioning and/or removal und/or abandonment and

making safe all of the Assets and site restoration and remediation related thereto in

relation to any Production Area.

Decommissioning Plan is defined in Article 38.7.

Decommissioning Reserve Fund is defined in Article 38.1 md includes all

contributions paid into such fund and all interest accumulated such fund.

De«l uctlble Amount is defined in Article 35.12.

Delivery Point means the point after extraction, specified in the approved

Development Plan for a Production Area, at which the Crude Oil. Associated Natural

Gas and/or Non-Avvodated Natural Gas is metered for the purposes of Article 27.7,

valued for the purposes of Article 27.1 and ready to be taken and disposed of.

consistent with prudent international petroleum industry practice, and at which a Party

may acquire title to its share of Petroleum under this Contract or such other point

which may be agreed by the Parties.

Development Costs means all the costs and expenditures incurred by ll*c

CONTRACTOR when carrying out Development Operations, including those

defined in the Accounting Procedure.

Development Operations menus nil development operations or works conducted in

accordance with a Development Plan up to the Delivery Point with a view to

developing a Production Area, including: drilling of wells; primary and subsequent

recovery projects and pressure maintenance; survey, engineering, building ami

erecting or laying of production plants and facilities (including: .separators;

compressors; generators; pumps and tankage; gathering lines; pipelines and all

facilities required to lie installed for production, pressure maintenance, am! treatment,

storage and transportation of Petroleum); obtaining of such materials, equipment,

machinery, items and supplies ns may lx- required or expedient for the foregoing

activities; and all auxiliary operations and activities required or expedient for the

production of Petroleum from the Production Aren.

Development Period is defined in Article 6.


'• .

 Development Plan mean* a phm for development defmod in Article 12.8.

Development Well means any well drilled alter the date of approval of the'

Development Plan for the purpota of producing Petroleum, increasing or accclernling

production of Petroleum, including injection well* ami dry holes. Any well drilled

within a Production Area shall be deemed n Development Well.

Development Work Program and Budget means die development work program

and budget prepared pursuant to Article 13.2.

Discovery means a discovery of Petroleum within the limits of the Contract Aten

resulting front Petroleum Operntloir* carilcd out under this Contract, provided such

Petroleum is recoverable at the surface with a measurable flow utilising techniques

used in prudent intcmutionnl petroleum Industry practice.

Dispute is defined m Attkle 42.1.

Dollar (CSS) means (he legal currency (dollar) of the United States of America


Effective Date means the date on which the conditions referred to in Article 47 have

been fulfillcd

Envlronment Fund to defined in Article 23 9.

Equipment and Material* u defined in Aitick 19.1.

Exploration Costs means nil the costs and expenditure incurred by tlvo

( I )NTR\< TOR «tan QinyllR out hxplorttien Openiiow. iutadifig those defined

in the Accounting Procedure.

Exploration Operations means any and all operations conducted with a view to

dneovenng Petroleum, including: any actmbc* necessary to commence operation*,

any topographical. hvdrognphicaJ. gcofogkal, geophysical. aenal acd ocher surveys

and activities (including interpretations, analyse* and related studies) to investigate

UnutnpJTtca hok* spud, drilling, toting, coring, logging axi cxjmppoK of

Explorative Well* or Appraisal WeHa; pnoaemon of such services, material,

exjtcfsocw, marhmery, items and supplies as nay he required <* expedient for the

foregoing activities; and all auxiliary oprrttirckt and activities required or expedient

fen the conduct of the foregoing activities

Exploration Pcriotl is defined in Article 6.

Exploration Rental is defined in Article 6.3.

Exploration Well menus any well drilled for iIk* purpose of confirming a geological

structure or stratigraphic unit in which no Discovery him previously been made by the


Exploration Work Program and Budget the exploration work program and

budget prepared pursuant to Article 111.



 K sport ( rude Oil is defined in Article 24.2.

» sport Non-Associated Natural Gas is defused m Article 24.2.

►'sport Petroleum is defined m Article 24.2.

I'irst Commercial Declaration Dale is defined in Article 4.1.

I li st Exploration Well is defined in Article 10.2 (e).

I Iml Production means the ntomcnl when Commercial Production of Crude OH or

Nutt Associated Natural tins fas the case may be) first commences, by flowing at tho

rate forecast in the Development Plan without intemiption for a minimum of forty

eight (48) hours.

Force Majrurc is tk'fincd in Article 40 2.

Gaa DmiopMl is defined in Article 14.10.

fin Marketing Cost* meant all costs and expenditure incurred by the

CONTRACTOR when carrying out (las Marketing Operations, including those

defined in the Accounting Procedure

Gas Marketing Operations monns any and all of the activities and operations

oontnnplnicd by Article 14.6.

(hit Marketing Work Program and lludgct means the marketing work program

and budget prepared pursuant to Article 14.8.

Government Interest is defined in Arix-lc 4 I

Government of Iraq means the Federal Government of the Republic of Iraq. which

holds office under the Constitutkm of Iraq and any minister, ministry, deportment.

tliereof aal shaU, avihoai iimrtaUon. include any esaporaoua owned aodor controlled

by any of the foregoing.

litrnutional Market Price ■ defined m Article 27A

Iraq; the entirety of the

Jotat Operating .Agreement means any agreement executed by the

CONTRACT OR Entities at any time for the |xwpmc of regulating between such

entities the terms under which the Petroleum Operations will be conducted, whuh

agreement shall be: (a) consistent with prudent international petroleum industiy

practice, (b) as between such entities, supplementary to this Contract, and (c)

consistent with the provisions of die C ontract

Kurdistan Region means the Federal Region of Kurdistan recognised by the

Constitution of Iraq and basing the mi in the Kurdistan

Region OO and Gas Law u

i (Vi 12


 Kurdistan Krgton Law means all Manxes, decrees, edicts, coden, order*. tuba,

ordinance* «nd regulation. of the GOVERNMENT or of any other local. municipal.

tcrmoruL provincial. or any other Ally constituted governmental authority or agency

m the Kardisun Kcpna

Kurdistan Regk>. OH and Gas Law mean the Od and Gas Law of the Kurdistan

Region - Iraq (Law- No. 22 of 2007) as the sane may be amended.

I aw means ill applicable laws including *te following: constitabonal law, ci>il bw.

common law. mxcmationai bw. equity, treaties, statu lei, decrees, edicts, coden,

orders, judgements, rules, ordinances and rcgulabotM of any local. municipal,

territorial, provincial, federated, national or any other duly conciliated governmental

authority or agency.

LTIA is defined in Article 42.1(h).

I IIIOU means the London Inter-Bank Offered Rate at which lX*Ilar deposits for oik

(I) month are offered in the mter-bank market in London, as quoted in the I bancial

1'ime* of London for the day in question. In the event that such rale is not published in

the financial limes, rt shall mean the London Inter-bank Offered Kate M which

Dollar deposits fix one month are offered for the nearest day as quoted by National

Wostminater Bank pic.

Management Committee is defined in Article 8.

Maximum Efficient Rate(MKR) bdoffnod in Article 16.12.

Minimum Kkplorutlon Ohllgiitluns ih defined in Article 10.1.

Vllalnium Financial Commitment means:

(a) in respect of the Find Sub-Period, dtc local of the amounts set out in Article*

10.2(d) and 10.2(e); and

Natural Gas moans all gaseous Petroleum and merts

Noa-Associated Naiaral Gas means any Natural Gas which is not any Associated

Natural Gas.

Notice or Dispute is defined in Article 42.1.

Operator means the entity designated hy the < ONTRACTOR pursuant to Article s

which, in iltc name and on behalf of the CONTRACTOR, shall cany out nil

Petroleum Operations. If at any time there exists more than one (1) Operator under

this Contract, any reference herein to the verm 'Operator' shall ba to each tfperafc*

with respect to *e parts of the Contract Arm in which such Operate*



Parly or Parties means the GOVERN MF.N'I aiul/or each CONIKACTOK Entity

and/or llic CONTRACTOR.

Pci mils means all licences, permits, consents, authorisations or other permissions, as

the context requires.

Ponton shall include natural and juristic persons (including corporations and

governmental agencies).

Petroleum means:

(a) any naturally occurring hydrocarbon in a gaseous or liquid state;

(b) any mixture of naturally occurring liydroeuriKms in a gaseous or liquid state;


(c) any Petroleum (as defined in paragraphs (a) and (b) above) that has been

returned to a Reservoir.

Petroleum Coat* means all costs and expenditure incurred by the CONTRACTOR

for the Petroleum Operations, and which the CONTRACTOR is entitled to recover

under (his Contract and its Accounting Procedure, including Decommissioning Costs,

Development Costs Exploration Costs, Gas Marketing Costs and Production Costs.

Petroleum Field means a Reservoir or group of Reservoirs within a common

geological structure or stratigraphic unit, which may become part of a Production

Area pursuant to a Development Plan.

Petroleum Operations means all Exploration Operations Gas Marketing Operations,

Development Operations Production Operations and Decommissioning Operations,

as well as any other activities or operations directly or indirectly related or connected

with the said operations ( including health, safety and environmental operations and

activities) and authorised or contemplated by. or performed in accordance with, this


Pipeline Costs is defined in Article 33.5.

Production \mi in. ins such arras within the Contract Area designated as a

production area in an approved Development Plan prepared pursuant to Article 12.

For the avoidance of doubt, all superjacent or subjacent strata ot the Reservoir in

which a Commercial Discovery is located are automatically included in the rrlesant

Production Area.

Production Romis means any bonus due pursuant to Article 32.3 or 32.4.

Production Costs means all the costs and expenditure incurred by the

CONTRACTOR in carrying out the Production Operations, including those defined

in the Accounting Procedure.


 any together with all related jod auxiliary

activities, for the production of Petroleum (rota (he start of Commercial Production,

including: extraction, injection. simulation, pimping, treatment, storage, engineering,

operating, servicing. repairing and mamlainwg any well*. pbnit. a|inpnK«l.

pipelines, terminals aid any other imul latum* and facilities. and my related

operation* and auxiliary operation., and storage and transportation of Petroleum from

the Production Area to the Delivery Point

Production Rental is defined in Article 13.10

Production Work Program Htulft*'* *hnll menu the production work program

nml budget prqmrcd pursuant to Article 13.6,

Profit Crude OH is defined in Article .'<> I

Profit Natural Gas n defined in Ann Ic 2ft I

Profit Prtrolcmn i* defined in Article 261

Proposed Contract i. defined m Article 14 10(a)

Public Compan* mean* a public company duly registered and incorporated in the

Kurdistan Region and regulated by the GOVKRNMF XT umkr the Kurdistan Re*.*.

Oil and Gas Law.

Public Officer means n civil servant, including n member or employee of a public

entity, a member of tho Kutdialnn National Assembly or n member of llie


Quarter means a period of three (3) consecutive Months starting on the first day of

January, April. July or October respectively.

R- » actor « defined m Article 26 4

Royalty is defined in Article 24.

Second I iploration Well. is defined In Article 10.3 (b\



 uaderaiing worts rctaong to tbe Parolcwa OpcnboM directly cr mdaectiy oo

behalf of. ie( ON IRACTOR ocany CONTRACTOR l-aitit)

Sub-Period and Sub-Periods ik defined in Article 62.

Tltn meant nil currenl or future lev**. dutica, payments. charges, imposition.,

imposts. withholdings. fee*, taxes (including value added tax or other sales or

transact**! boxed tax. corporation tax. income tax. capital gain* tax. Ham? duty, land

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

tax on income from movable capital and fixed tax on transfers) or curtribubom

payable to oe anposed by llw GOYFR>MFNI

V>ot\ Program means any week program prepared by. « on behalf of. the

CONTRACTOR pursuant to this Contract and Faming pvt of an hxploranoa Work

Program and Budget and «* an Appraisal Work Program and Budget and or a CJa»

Marketing Weak Program nod Budget andor a Development Work Program and

Budget and or a Production Work Program and Budget.

Vice-Chairman ia defined in Article 8 1.

1_2 In this Contract, unless the context otherwise requires or u specifically otherwise


(a) headings arc to be ignored;

(b) “including" and similar words do not imply any ImriMmw;

(e) singular includes plural and vice versa, and

(d) reference to un “Article" is to an article of this Contract and to a “Paragnqih"

is to a paragraph in the Accounting Procedure.


2.1 This Contract is a production sharing arrangement with respect to the Contract Aren,

whereby the GO> KKNMEN I lias the right, pursuant to the Constitution of Iraq. to

regulate and oversee Petroleum Operations within the Contract Area.

The purpose of ttita Contract is to define the respective rights and obligations of the

Parties and the terms and conditions under which the CONTRACTOR shall carry out

all the Petroleum Operations

By entering into tin. Contract, the GOVERNMENT grants the CON I K AC TOR the

exclusive right und authority to conduct all Petroleum Operations in the Contract Area

as detailed in Article 3.

2.2 Upon the CONTRACTOR'S request, the GOVERNMENT dmll provido nil required

Permits relating to the Petroleum Operations required by the CON IKACTOR to

fulfil its obligations under this Contract, including those relating to any extension ami


 renewal period* and including those required by the Government of Iraq The

GOVERNMKVT (i) repre^nt- and warrants to the CONTRACTOR that it hit not

Jooc and ha* not omitted to do anything that would cause the cancellation or

suspension of this Contract or any Permit granted under this Article 2.2 or piaxwuii to

this Contract; and (ii) covenants that it will not do. or omit to do. anything that would

cause the cancellation or suspension of thi* Contract or any Permit granted under this

Article 2.2 or pursuant to this Contract. I or the avoidance of doubt, nothing in this

Article shill I affect the rights nod obligation* of the Panics pursuant to Article 43.

2.3 11k CONTRACTOR dull conduct all Petroleum Operations within the Contract

Area at it* sole cost, rial and peril on behalf of tlie GOVERNMENT, pursuant to the*

Contract, including the following operations:

(a) Technical Services

(b) Financial Sera Ice*

The responsibility for funding the Exploration Operations and. in the event of

n Commercial I Sisco very. Development, Production and Decommissioning

Operation*, pursuant to this Contract.

For the funding of Petroleum Operations, each CONTRACTOR Entity shall

bo entitled to have recourse lo external Financing from either its Affiliated

Companies or from any third parties.

(c) Administrative Services

Implementation of ail

of the Operations under this Contract.

2A During the term of tht* Contract, the CONTRACTOR shall he responsible to the

GOVERNME.V r foe the comfort of Petroleum Operation* within the Contract Attn

2.5 KauraI resources other than Petroleum shall be excluded from the scope of this

t ontract, ev en if the CON I K AC I OR discovers any such resources when executing

its obligations pursuant to this Contract.

2.6 I'hc CONTRACTOR sltnll only lie entitled to recover Petroleum Cost* incurred

under this Contract in the event of a Commercial Discovery. Recovery of Petroleum

2.7 Costs shall occur within tltc limit/, provided under Article 25.

During the tenn of (his Gintruel, Profit (.'rode Oil aiul/ot Profit Natural (la* produced

from Petroleum Operation* shall be shared between the Parties in accordance with the

provisions of Article 26.




1 * For the execution of Petroleum Operation* under this Contract, the CONTRACTOR

■hall have the right to:

(a) freely access and open* within the Cotaract Area, as well at mtf^bcMe*

(h) twiv n

(c) freely use sand, water, ctoctrtcity and any other natural reitotircoH knitted

inside or outside the t 'onlrnot Aren for the Petroleum Operations;

(d) use any qualified foreign and ktcnl personnel and/or Subcontractors ret|unc«l

for the conduct of Petroleum OiH-rnlions in accordance with Aftiden 22 and

23. Any foreign personnel working in the Kurdistan Region shall require prior

authorisation of the GOVERNMENT (such authorisation not to he

unreasonably delayed or withheld) and the GOVERNMENT shall obtain any

authorisation required by the Government of Iraq;

(r) import any good*, mni.rnds, equipment andor services required for the

Petroleum Operation* tn accordance w ith Articles 19,22 and 30; and

(0 freely use land or property tvlonging to the Kurdistan Region, and the

GOVERN MEM will assist the CONTRACTOR with facilitating the use by

the CON TRAC TOR of nny private property in the Kurdistan Region.

2.9 In addition to production-sharing arrangements with respect to Petroleum Operations

the Contract Area, this Contract incorporate* aa an integral pvt of this Contract a

g\kiranlee to the GOVERNMENT from Komet Group S.A that Cardhall Service*

l-hl (Cardhall Services Ltd. being aa Affiliate of Komet Group S A and a party to the

Ret incry Contract), shall complete the delivery of the Refinery to the Kurduran

Region withm a deadline of fifteen (15) month* from the effective due of the Refinery

Contract a* required n Article 3.3 of the Refinery Contract A failure by Komet

Group S.A to perform this guaranteed obligation dull constitute a material branch of

dm Contract by Komet Group SA and the pros oiom of Article 4?. 1(g) shall apply

110 Foe ihr avoidance of doubt, the •cowries described »

Refinery Contract sha3 Dot be recoverable under this Cotaract



The initial Cootruct Area covers the Barda Rich Block and extends over an area of two

hundred and sixty five square kilometres (265 km3), as detailed and indicated on the map

attached in Annex A and is delimited by the following coordinates:

Latitude (dog min Longitude (deg

sac) min sec) X (mE) | Y (mN)

A 36'32'Of.’N 43 29’ 51 "E 365 500 4044 300

B 36= 31' 13"N 43" 43’ 35'E 385 977 4042 422

c 36’ 28' OO'N 43° 47' 49nE 392 200 4036 400

D 36° 24' 29"N 43' 41' 30"E p»)7 700 4030 000

E 36- 26' 24' N 43 30' 32"E 1 300 358 4033 785

Hie GOVERNMENT, by execution of this Contract, hereby validates and approves the

foregoing co-oidinntes of the Contract Area.

The total area of the Contract Area may he reduced only in accordance with the provisions of

this Contract.


Government Interest

4.1 [he GOVERNMENT dull participate in this Contract through a Public Company’,

effective from the Effective Onto in respect of the entire Contract Area, with an

undivided interest in the Petroleum Operations and all the other rights, duties,

obligations and liabilities of the CONTRACTOR (save as provided in and subject to

this Article 4) under this Contract in respect of the Contract Area, of twenty per cent

(20%) (the -Government Interest").

4.2 The Public Company shall not have any liability to the CONTRACTOR to

contribute its Government Interest share of all Petroleum Costs, whenever those

Petroleum Costs may he inclined, and its Government Interest share of such

Petroleum Costs shall be the responsibility of Komet Group S.A. for the duration of

this Contract (such responsibility to he held jointly and severally), komet Group

S.A. shall be entitled (through the < ONTRACTOR) to recover all such Petroleum

Costs in accordance w ith Article 25. For Hie avoidance of doubt, the Public Company

shall contribute its share of Production Bonuses attributable to the Government

Interest and payable pursuant to Articles 32.3 and 32.4.

43 The Public Company may, at its discretion, assign part or all of its Government

Interest to a third party or parties which is another Public Company duly authorised

by the GOVERNMENT, provided that in no event shall a transfer be made which

would result in the transferor or transferee holding less than a five per cent (5%)

participating interest.



la tbe era* offukia to »4m Public Cernpov. for the purposes of

Attack 37 of dt Kirlnw RffMa Oil and law tbe Gootmi Inlrmi so

«M>KKd shall be deemed to be held by *r CON » HNMEM and m accordance wwh

1< principk in Article 16.13. the Public Compciy to which such Government In-crcs*

in transferred will be individually and separately liable (and Dot jointly and so crally

liable with the CONTRAC I OR Inlitics) u. the GO* ERNMENT for its obligation*,

tftrtios and liabilities mulii ibis t ’oiilmol nn I (hi provUiooi of Article 45 shill 8pply<

A A Any failure by the Public I ompany to perform nny of its obligations or to uittoiy any

of its duties or liabilities under this Contract dwll no) be considered as a default of the

CONTRACTOR Entities and dull m mi care be invoked by the GOVERN Mb Nl

to terminate this Contract or exercise any oilier rights or remedies in respect of such

default that may be available to it

The capacity of a Public Company as ;t may an re pursuant to tbe provision. of this

Contract, shall in no event cancel or effect tbe nglib of toe c*a CONTRACTOR

4 6 A Public Company may assign pan or ell of its Government Intercut to a third pirty or

panics (not being a Public Company) end lor ihe avoidance of doubt the provision* ol

Articles 39.1, 39.2 and 39.3 dull not apply Any such assignee shall have the wmc

rights and responsibilities held by the Public I ompsny prior to the assignment

For tlic avoidance of doubt, following tiny nwignmeni by a Public Company ol part m

all of a Government Interest to « Uilfd putty nv1mv.Ii is uo; a Public Owi-itiy, in

• .« '"I i: cc with the ........... ot tin. \itUe •». the provivoi.s of Aitkin I. 39

and 39.3 shall apply to any subsequent assignment of such interest.

(i) no transfer nay be made which would result in the transferor or

transferee holding lees Ihon a five per cent (5%) participating interest,

(ii) the proposed third parly assignee must demonstrate to the reasonable

ratisfs.1 ion of cecb of the extant CONTRACTOR Entities the! it has

tlx financial capability to perform its payment obligations under the

 (iii) the proposed third party uilpM shall enter into an instrument

satisfactory to each of the extant CONTRACTOR Entities so as to

assume and to pet form the obligations of the transferor.


5.1 Komei Group S.A. is hereby designated to net as the Operator for the execution of

the Petroleum Operations. The CONTRACTOR shall at any time have the right to

appoint another entity as the Operator, upon giving the GOVERNMENT not lew

than thirty (30) days prior written notice of .such appointment.

5.2 The CONTRACTOR ahull submit to the GOVERNMENT for comment any

agreement regarding or regulating the Operator's appointment and Its conduct of

Petroleum Operations on behalf of the CONTRACTOR pursuant to this Contract

prior to execution of such agreement.

5.3 In the event of the occurrence of cither of the following, the GOVERNMENT may

rc\|uirc the CON TRACTOR to appoint another entity as Operator a* soon as is

reasonably practicable:

(a) if an order has been passed in court declaring the bankruptcy. lufuitLitiun, or

dissolution of the < >pcrator. or

(b) if tlsc Operator terminates the activities under this Contract delegated to it by

tlic CON TRACTOR or a material proportion thereof, and. as a result the

CON TRACTOR foils to fulfil it* obligations under the Contract


Cl Thu Contract comprises an Exploration Period and a Development Period, an defined


62 The Exploration Period shall be for a ianul terra of five (5) Contract Yrary

extendable on a yearly basis (as provided * Articles 6.5 and 6.6) up to * max imam

penod of seven (7) Contract Y ears starting from the Effective Date. Ihc initial lorn

of five (5) years shall be subdivided in two (2> sub-periods as follows:

(a) an initial sub-period of three (3) Contract Years (“First Sab-Period"); and

(b) a second sub-period of two (2) Contract Yean;«••Second Sab-Period"),

each a -Sab-Period" and collectively -Sub-Periods".

It is undemood that die right of the CONTRACTOR to accede to the next Sub

Period or any extension thereof dull be subject to fulfilment of the Minim.m

Exploration Obligations or minimum wort obligations applicable to die previous Sub-


6 3 Duriug ilic Exploration Period, l Ik- CONTRACTOR shall pay to the

GOVERNMENT, in arrears, an annual surface rcutil for ihc Contract Area, a« may

be reduced by relinquishment from lime to time pursuant to Ankle 7, of ten Dollar*

(USSIO) per’ square kilometre per C ontract Year t* EvpIoraUon Rental"). Such

Exploration Rental shall be considered as a Petroleum Cost Mid shall he recovered by

tin.- CONTRACTOR in accordance with the pros irions of Articles 1 and 25.

6.4 It the CONTRACTOR decides not to emer into the Second Sub-Period, it shall

notify the (GOVERNMENT at least thirty (30) day* prior to the expiry of the Pint

Sub-Period and, provided that live clut.i tVnm the First Exploration Well demonstrates

tlial there is no reasonable technical Como for drlUlnjl the Second Exploration Well in

ihe Contract Area, the Exploration Period llull expire at the end of the First Sub

Period, unless the First Sub-Period baa been extended pursuant to Article 6.5 und/or

Article 6,6.

6.5 If die CON TRACTOR lias fulfilled its Minimum Exploration Obligations for a Sub-

Period of the Exploration Period but couridem that additional work Ls required pnor

(a) to .leciding to submit an Appraisal Work Program and Budget a» provided

urah-r Ankle 12.2 in respect of a Discovery, or

(h) In deciding to declare a Discovery as a Commercial Discovery in accordance

with Article 12.6(a) or 14.5(a), which additional wort may include the

preparation and/or execution of an Appraisal Work Program and Budget as

provided under Article 12.2 and/or (las Marketing Operations,

tlw CONTRACTOR will automatically be entitled to extensions, each of one (I)

Contract Year, of Ihe then current Sub-Period, up to the end of th, m-wimum

Exploration Period of seven (7) Contract Years, (as provided in Article 6.2). The

CONTRACTOR'S notiflciitlou of its mtonttoa to exercise such extension and its

duration shall he submitted in writing to the GOVERNMENT at least thirty (‘*0)

days prior to Ihe end of the tlK-n current Sub-Period or the era! of the then current

extension (us the ease may be).

6.6 Without prejudice to Artklr 6 4, upon expiry of the initial term of the ExphntKA

Period, if it considers it has not completed its exploration evaluation of the Contract

Area, the CONTRACTOR 'hall be entitled to an extension of the Second Sub-

Period, provided it notifies the GOVERNMENT in writing at least thirty (30) days

prior to the end of such Sub Period, together w ith a proposal for a minimum wort

obligation for such extension Any such extension shall not exceed one (I) Contract Upon the expiry of such extension, if it considers it has still not completed its

evaluation of the Contract Aron, the CONTRACTOR dial! be entitled to a farther

extension of one (1) Contract Year provided that it notifies (lie GOVERNMENT in

writing at leant thirty (30) days prior to the end of the original extension. The right of

III. COM RACTOR to accede lo the farther extension shall be subject to falfilmciit

oftlio minimum work obligations applicable to the original extension.

6.7 Subject lo Article 6.4, at any lime during the Exploration Period, upon thirty (30) days

prior notice to the GOVERNMENT, the CONTRACTOR shall have the right to

withdraw from this Contract provided that die outstanding Minimum Exploration

Obligations relating to the then current SutvPeriod have been completed in


 accojdanc* with llic ( ontract, or it has paid to the GOVERNMENT the amounts

specified in Article 10.2 or Article 10.3, whichever is applicable to the then current


6.8 If no Commercial Diivovcry hu* been mitdo nt the end of the Exploration Period

(including any extoimlum ihcrool) this Contract shall terminate.

6.9 If a Discovery is made within the maximum Exploration Period of seven (7) Contract

Years (as provided in Article 6.2). and if the CONTRACTOR considers it has not

had time to complete auflicicnt (ias Marketing Operations to declare the Discovery a

Commercial Discovery pursuant to Article 12.6(a) or 14.5(a). the CONTRACTOR

shall be entitled to request an extension of the Exploration Period (notwithsraeding

the maximum period provided in Article 6.2). provided « so requests the

GOVERNMENT in writing at lc.»t thirty (30) day* prior to the end of the maximum

Exploration Pernod, together with a proposal for tiiw Marketing Operations to be

undertaken during such extension If granted by the GOVERNMENT, any such

extension shall not exceed tw o (2) Contract Yeora. Upon tlic expiry of such extension,

if it considers it has still not completed it* (in* Marketing Operations relating to such

Discovery, the CON I RAC I OR shall be entitled to icqiiesl a further extension nl

two (2) Contract Years provided that it so request* lira GOVERNMENT in writing at

least thirty (30) days prior to the end of the original extension, togedwr with a

proposal for (ias Marketing Operations to bo undertaken during such extension.


6.10 If the CONTRACTOR considers that a Discovery of ( rude Oil and any Associated

Manual Gas is a Commercial Discovery, the CONIRACTOR shall have the

eAdirsivc nght to devetof and produiie web Commercial Dreovay, ffcrwasi id the

terms of this Contract The lVvdcpment Period for a tVmmmwl Discovery of

Crude Oil and any Associated Natural Gas shall be twenty (20) years commencing on

tlac declaration of inch Commerctal Discovery by CONIRACTOR. in accordance

w-ith Article 12 f

6.11 If the CONTRACTOR considers that a Discovery of Non-Associated Natural (ias is

a Commercial Discovery. the CONTRACTOR shall have the exclusive tight to

develop and produce such Commercial Discovery, pursuant to the terms of this

Contract Ihc Devekipment Period for a Commercial Discovery of Non Associated

MatnraJ (ias shall be twenty (20) yean, commencing oa the dedomtion of such

Commercial Discovery by CONIRACTOR. in accordance with Article 12.6(a) or

Article 14 5(a). with an automatic right to a five (5) year extension

Dcvckfmcal Period as defined ■ Articles 6.10 or 6.11 rh^Tupoo its request the

writing by the N TRACTOR at least six (6) Months hefcee the end of the end

Development Period

The term of any such extension of the Development Period shall be:

(a) five (3) Yean for Crude Oil and any Associated Natural Gas. and or


(b) five (3) Ycan for Not-Associated Natural Gb

6.13 Tbe rONTRACTOR -till have ibe right to lermtnale Production OpcraDaos for any

Prodjcbon Are* at aay time dunce the tore of this Contract, subject to giving

notec to the GOVERNMENT of at least ninety (90) day*. This Contract shall

terminate on the expiry date of die last Production Area or when Production

Operations for all Production Areas have terminated.


7.1 Subject to the provisions of Articles 72 and 73, the CONTRACTOR shall surrender

porootss of the Contract Area as

(a) at the end of the initial term of tbe Espioraben Penod referred to m Article

63. twenty five per cent (25%) of the net area determined by subtracting tbe

(b) at the end of the first extension period entered into under this Contract after

the end of the initial term of the Exploration Penod referred to in Article 63,

an additional twenty five per cent (25%) of the net area determined by

subtracting tlie Production Areas from the remaining pact of the Contract

Area; and

(c) at the end of the Exploration Period (including all extensions thereof), ad of

the remaining nrca dint is not in a Production Aren.

73 For the application of Article 7.1:

(a) any arras already relinquished pursuant to Article 7.4 shell be deducted from

(b) the CONTRACTOR dull have the right to determine the to shape and

location of the Contract Area to be kept, provided that such surrendered

portions of the Contract .Area shall he in contiguous Nocks

73 If the relinquishment referred to in Article 7.1 can only be achieved by including part

of an Appraisal Area, then these percentages shall he reduced to exclude such

.Appraisal .Are*

7.4 During the Expkracon Penod, lb: CONTRACTOR nuy at the cud of each Cootracf

Year surrender all or any port of *e Contract Area by written notice scad id die

GOVERNMENT at kart thirty (30) days to advance of the proposed dor of

arTender, subject to the provrsuns of th» Article 7.4. Such votantary surrender*

during the Exploration Period shall be deemed equal to tbe obligatory relinq jxsfcmects

referred to under Article 7.1. This Contract shall imnmrtc in tbe event of tbe

surrender of the entire Contract Area.

7.5 No surrender provided under Article 7.4 shall exempt the CONTRACTOR from its

outstanding obligations under dm COatract. In tire* event the CONTRACTOR elects

to surrender die entire Contract .Area without having fulfilled the Minimum

Exploration Obligations relating to the then current Sub-Period as provided in Article



10 2 or Article 10.3, the COM «A( TOR 'lull pav to the GOVERNMENT the

relevant outstanding amount as detailed in Article 10.2 or Article 10.3, as the ease


7.6 Die boundaries of the portion of die C ontract Area to be relinquished by the

(-ONTRACTOR shall be communicated to the GOVERNMENT by written notice

at least thirty (301 days in advance of tin* relevant date for relinquishment. puismml lo

Article 7.1.


8.1 A Management Committee shall lie established witliin thirty (30) days following the

Inflective Date lor the purpose of providing orderly direction of all matters pcrtainiiiR

to the Petroleum Operations and tho Work Programs. Within such period, each of the

GOVERNMENT and the CONTRACTOR shall by written notice nominate its

respective members of the Management Committee nnd their deputies.

The Management Committee ah all comprise two (2) members designated by the

GOVERNMENT and two (2) members designated by the CON I KAt TOR.

Upon ten (10) days notice, each of the GOVERN'D Nl and tire CONI R ACTOR

may suhstimte any of lU members of the Management Committee. I he chairman of

the Management Committee shall lie one of the member* designated by the

GOVERNMENT (the -Chairman-) Ihc vice-chairman of the Management

Committee shall be one of the members

"Vlce-CIiairman"). In the absence ol the Chairman, tlio Vico-Chairmiin shall chair

the meeting.

Each Party shall have the right to invite a reasonable number of observers as denned

necessary to attend the mactings of tlie Management Committee in a non voting


12 The Management Committee shall review, deliberate, decide and give arhntc.

(•) Work Programs and Budget*.

(b) the CONTRACTOR’S activity reports.

(c) production levels submitted by the CONTRACTOR, i

international petroleum industry prance. 8


«0 Accounts of Petroleum Costs.

(c) procurement procedures lor potential Subcontractors, submitted by the

CONTRACTOR m Accordance with Article 19 3;

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


IJ Each of «he GOVERNMENT adlhflOMH V(TOK 4k.1I havx one (1) vole m

the Management Committee. Hr Maiwgcmcnl Committee cannot validly 4cl.her.ic

a slew* each of the GOVFRNMPNf and the CONTRACTOR is represented by at

subjevt matter being submitted. In the event the Management Committee cannot

reach enmutnoas agreement, a second nrnUmU shall he held aithxn forelccn (14) day.

to diwuss the vene subject matter and attempt to tench a unanimous decision.

B«c«pt as provided for in Article 8.4 and Article 8.5, m the event that no

14 approval K not obtained, as required pursuant to Article 8.5; then the proposal made

b> the CONTRACTOR ihall be denned adopted by *c Manageeeal Conaude*

8.3 >4otaithvundmg the prwiuoas of Arhclc 8.3, and aubpet to Article 8.4. nuninw

approval of the Management Committee shall be required for

(«) approval of, and any mWoriiil revision lo, any Exploration Work Program and

Hudget prepared niter the lint Commercial Discovery in the Production Aren

relating to such Commercial Discovery;

(b> approval of. and any material revision to. the Development Plan, the

production schedule. lilting schedule and Development and Production Work

e) approval ot ** my maaeml f«v,.M to . procrou procctteres foe »«fc

andor wvxet, subsmtted by the CONTRACTOR in accords* \rtK k

Committee m accordance »ith Article 19.3);

(ft approval of, and any material revision to, any proposed pipeline project,

submitted by CONI R AC TOR in accordance with Article 33.3;

(g) appmvnl of a first rate bank in which lo place the Decommissioning Reserve

Pund. in accordance with Article 38.1;

(h) approval of, and anv material revision to. any proposed DcconimuMotung

Plan submitted punuaat to Article 38.7 on anv Dccotnmivaooitif Work

Program and Dodges i« (iea Marketing Wort Program sal Budget,


(i) any Terms of ReUvnKc which arc required fc* he prepared and ugreed for die

purpose* of expert Jclcmiination, pursuant to Article 42.2;

(j) approval of any costa in excels of ten per cent (10%) above any Budget: and

fk) any mutter having n material advene effect on Petroleum Operations.

8.6 Ordinary meetings of the Management Committee shall take place in the Kurdistan

Region, alternately at the offices of the GOVERNMENT and those of the

CONTRACTOR, or at any other location agreed between Parties, at least twice a

Contract Yew prior lo the date of (Ik And Commercial Discovery and three times a

Contract Yew thereafter

8.7 Either the GOVERNMENT or the CONTRACTOR may call an extraordinary

meeting of the MwuRcnuiit Committee to discus* important i«u« or development*

related to Petroleum Operation*, subject lo giving reasonable prior notice, specifying

the matter* to be discussed at the meeting, to the other Party. The Management

Committee may from time to time make decision* by correspondence provided all the

members have indiuaird their approval of such decision* in such correspondence.

8.8 Unless at least one (I) monilvt or its deputy of eoch of the GOVERNMENT and the

CONTRACTOR i* present, the Management Committee shall be adjourned for a

penod not to exceed eight (8) day*. I he Party being preoit shall then notify the oilier

Party of the new data, time and location for the meeting.

8.9 The agenda for meetings or the Management CranmiiMe dial: be prepared by the

CONTRACTOR in accordance with instruction* of the < human «ad cunumtewed

to the Parties at ku*t fifteen (15) days prior lo the date of the meeting The agenda

shall include wiy subject matter proposed by either tlic GOVERNMENT or the

CONTRACTOR Decisions of the Management Committee will be made at the

meeting* The < ONTRACTOR shall he respitnsible for preparing and keeping

minute* of the decision* made at the meetings. Copica of such minutes shall be

forwarded to each Party for review and approval. liach Party shall review and

approve such minute* within ten (10) days of receipt of the draft minutes. A Party

who fail* to notify in wi lting il> approval or disapproval of such minutes within such

ten (10) day* ahull bo deemed (o hove approved tin- minutes.

8.10 If required, die Management Committee may request the creation of a technical sub¬

committee or any Other mb committee to assist it. Any such subcommittee shall be

composed of a rcn*onable number of experts from the GOVERNMENT and die

CONTRACTOR After each meeting, the technical sub-committee or any other sub¬

committee shall deliver a written report to the Management Committee.

8.11 Any costs and expenditure incurred by the CONTRACTOR for meetings of the

Management Committee or any technical sub-committcc or any other sub-committoc

shall be considered na Petroleum Costs and shall be recovered by the

CONTRACTOR in accordance with the provisions of Articles I nnd 25.


 \Kiin r * ciiAiAYrm

9.1 »-*h CONTRACTOR l-my shall pmidc the GO\ ERNMEXT. if *» required by

the Inter pursuant to wnntn notice received by the CONTRACTOR Fotilv with*

thirty (30) days of the Effective Date. with a corporate puruKc to a form as .dull be

agreed m good faith between die GO\ ERNMENT and «fc CONTRACTOR

Knrity nor later than ninety (90) days after the Fffcctive Dale, provided that such

corporate guarantee shall be given only in rrapa.1 of the Minim ora financial

Commitment for the First Sub-Pcnod and shall expire automatically upon completed

of the performance of the Minimum Exploration Obligations set out in Article 10.2(d)

and (c) or expenditure of such Minimum I mancial Commitment, whichever is die


9 2 Sot later dun sixty (60) days after lltr commencement of the Sccood Sub-Pcnod.

each CONTRACTOR Hatity shall provide the COV ERNMENT, if so required by

the Utter pursuant to wntten notice received by the CONTRACTOR Entity within

(a) the form suhttaabally agreed between the GOVERNMENT and each

CO.VTRACTOR Fatity far the l int Sub-Period, if any. subject to maktov* «he

Second Sub-Penod. nr ^ *

(b) if there i« no a peed form, in a f.*m as dull be agreed tn good faith between

the GOVERN MEN I and each C ONTRACTOR Entity not later than ninety

(90) days after the CJOV I KNMENT's notice,

and provided in each case that mch corporate guarantee shall be given only in respect

Of tin.' Minimum Financial Commitment tor the Second Sub-Pcnod .m.l Hut >tK'h

oorpontte guarantee shall expire autmnntically upon completion of the pcrfamunce of

the Minimum Exploration Obligation* set out in Article 10.3 (b) or expenditure of

inch Minimum Financial Commitment, whichever is the curlier.

9.3 In the event of an assignment by a CONTRACTOR Entity in accordance with

Article 39. the relevant third party assignee shall provide the GOVERNMENT, if so

required by’ the latter pumuni to wntten notice given to such assignee within thirty

(30) days ol the Effective l>atc. with n curptealc guarantee in the form agreed

pursuant to Article 9.1 or 9.2. as applicable to the then current Sub-Period or. in the

absence of any such agreed form of cotpotnlc guarantee, in a form n» skill be agreed

in good faith between the GO> KKNMIft l ami Mich assignee not luicr than ninety

(90) days after the effective data of tlsc aasigmncnt, provulcil that such corporate

guarantee shall be given only m respect of the Minimum Financial Commitment for

the then current Sub-Period, and slut 11 expire automatically upon completion of the

performance of the Minimum Exploration OhligndotiH set out in Article* 10.2(d) mid

(e) or Article 10.3(b), as the cow may he. or expenditure ol such Minimum Financial

Commitment, whichever is the curlier.





Aitick i rv <'ovnucnw *

geophysical aador dnlbng works m provided under Article* 102 to |0J (the


ObbMtwm shall be performed Sub-Period in

10 2 During the Fint Sub-Period. the ( ONTRACTOR aha*

(a) carry out geological an

(i) the compilation of a Icdnucal database.

(ii) the performance of a remote Mating rtudy:

(m) * field visit to verify initial Rcotopoil and gcophyucal work and

remote sending mulls and plan for two dirocn'ional arixnoc

acquisition; ami

(b) carry out a data search for e.xi.ting data specific to thin Contract Aren,

comprising die following:

(i) well data, if available, for example, electric logs;

(ii) seismic data ami gravity data, if available, and

10 3 During the Second Sub Period, the CONTRACTOR >hall:

(a) acquire, process ami interpret further seismic dntn (being either two

dimensional or thuv dimensional), if the CON IK ACTOR consider* Oust the

results from the l inn Exploration Well justify the acquisition ol further

seism* ‘lata; and

(b) dnll one 111 Exploration Well (the "Second I ipl.u utiaa WOT)

(USSlO.OoJoOoT unko* the data from


 demonstrates that there is not a reasonable technical case for drilling the

Second Exploration Well in the Contract Area.

Ill4 Notwithstanding the provirions in Articles 10.2 to 10.3, for the execution of the

Minimum Exploration Obligation! under Articles 10.2 to 10.3, it is agreed as follows:

(a) Minimum Exploration Obligations in the Second Sub-Period shall only apply

in tlie event the CONTRACTOR lias not elected to notify the

GOVERNMENT tluit it will not enter into the Second Sub-Period, tn

Accordance with and subject to Article 6.4.

(It) Subject to Article 10.4(a), the CONTRACTOR slulll be required to meet its

Minimum Exploration Obligations for the ii|iplicflhlo Sub-Period, even if this

entails exceeding the Minimum l imincml Commitment for such Sub-Period.

II die CONTRACTOR has satisfied its Minimum Exploration Obligations

without having spent the total Minimum f inancial Commitment lor such Sub-

Period, it shall be deemed to have satisfied its Minimum Exploration

Obligations for such Sub-Period

(c) Each Exploration Well shall be drilled to the depth agreed by the Management

Committee unless:

(i) the formation is cocountcrod at a lesser depth than originally


(ii) harem cut is encountered at n lesser depth tlmn originally anticipated;

(iii) in the CONTRACTOR'a solo opinion continued drilling of the

relevant Exploration Well presents a haaard due to the present* of

abnormal or unforeseen conditions.

If drilling is slopped for an> of the foregoing reasons, (he Exploration W ell

shall be deemed to have been drilled to the depth agreed by the Management

Committee and the CONTRACTOR -hall be deemed to have satisfied .U

Minimum Exploration Obligation* in reject of the Exploration Well

Any geological or geophysical wort earned out or any seismic data acquired,

processed or interpreted or tiny Exploration Well drilled or any oilier work

performed in excess of tho Minimum Exploration Obligations untKor any

amounts spent in excess of the total Minimum Financial Commitment in any

given Sub-Period, shall he carried forward to the next Sub-Period or any

extension period and shall be taken into account to satisfy the Minimum

Exploration Obligations ondfor the total Minimum Finaanal Commitment for

such subsequent Sub-Period or extension period


 (c) For the avoidance of doubt. IP (I) tn the Fin* Sub-Period, the

CONTRACTOR perform? any of the Minimum F.xplorahon Obligation*

preacribed for the Second Sub -Period in Article 10.3; und (ii) the

CONTRACTOR ha* not elected to notify the GOVERNMENT that it will

not enter into the Second Sub-Period (in accordance with and subject to

Article 6.4). the performance of Hitch Minimum Exploration Obligations shall

be deemed to satisfy the same Minimum Exploration Obligations for the

Second Sub-Period.


111 Within forty-five (45) days following tbc Effective Date, the CONTRACTOR shall

prepare and submit to the Management Committee a proposed work program ami

budget relating to Exploration Operations (the "Exploration Work Program and

Budget") for the remainder of the Calendar Yew Thereafter, no later than I October

in each Calendar Year, the CONTRACTOR shall submit a proposed Exploration

Work Program and Budget to the Management Gommittee for the following Calendar


11.2 Hach Exploration Work Program and Budget hIiiiII Include details of. but not be

limited to, the following:

(a) work in be undertaken;

(b) materials. rch*1« and equipment to be acquired;

(c) cost o4mate of services to be provided, including sctyicw by tod partes

and'or Affiliated Compame* of any CONTRACTOR LntHy. and

(d) estimated expenditure*. hrolm down by cost centre o accordance with the

Accounting Prwohflc

||.3 The Management Committee dull meet withm sixty (60) day* following its receipt of

CONTRACTOR .* proposal to examine ami approve the Exploration Work Program

and Budget.

11.4 If tbc GOVERNMENT requests any modification to the Exploration Wort Program

and Budget, the Management Committee shall meet to discuss the Exploration Wort

Program iraJ Budge, rod proposed modifications thereto within the sixty (60) day

period referred to in Arndt 11.3. The CONTRACTOR doll communicate its

comments on any ax* requested modificaboos to the GOVERNMENT at the

11.5 The CON TRACTOR shall be authorised to make expenditures not budgeted in an

approved Eipkeatior Wort Program and Budget provided (hat the aggregate amount

of such expenditures shall not exceed ten per cent (10%) of the approved Exploration

Wort Program ami Budget m any Calendar Year and provided Ember that such

exec** expenditure? shall be reported as soon as » reasonably practicable to the

For the avoidance of doubt all cxoc&s expenditure* shall be it




recovered bv the CONTRACTIOR » accordance with d* provsaon* of Arhck* 1

sod 25. provided Om any ow cxpq»d»curei aboyc the ten per can (10%) Imw! shall

only be recovered with the uumtmom *>f*uv«l of (he Management Coamsncc

11.6 In cavs of emergency. Ihe C ON IR At ft»R may incur such additional enpenditure*

u il deem* ncccmoy to pretext life, environment or property. Such additional

expenditure* *hnll be reported promptly to the Management Committee, l ot the

avoidance of doubt, such addltloiuil expenditure shall be considered Petroleum Costs

and shall be recovered by the CONTRACTOR in accordance with the provision* of

Articles I and 25.


I2.I If the drilling of an Exploration Well result* in a Discovery, the CONTRACTOR

ahull notify die COVERNMEN I within forty-eight (48) hours of completing tests

confirming the presumed exigence of such Discovery or within such longer period as

11* CONTRACTOR reasonably requires to determine whether or not there is a

Discovery. Within thirty (30) day* following notification of the said Discovery, tltc

CONTRACTOR shall present to Use Management Committee all technical dab. then

available together with its optimal on the commercial potential of the said Discovery

(the “Discovery Report”) Ihe CONTRACTOR shall provide in a timely manner

such other information reluting lo die Discovery as the GOVERNMENT may

reasonably request.

12.2 If, pursuant to Article 111, Ihe CONTRACTOR considers that the Discovery hs^

commercial potential it shall, within ninety (90) days following notification to the

GOVERNMENT of the Discovery. submit an appraisal program m rrvpovt of ihe

Discovery (the ‘-Appraisal W ork Program and Bndgcf i to the Management

Committee. Tit Management Committee >*iall examine the Appraisal W ort Program

and Budget within thirty (30) days of ft* receipt. If the GOVERN MEN I requests any

tnodiffcabon to the Appraisal Work Program and Budget, the Management

requested modifications thereto within sixty (60) days from its receipt of the propwed

Appraisal Work Program and Budget The CONTRACTOR shall cwwnuracato its

c*un mem* on any such requested modifications to the GOVERN MINI at die

meeting of the Management Committee or in wrang prior to such meeting

The Appraisal Work Program mid Budget dial I include the following:

(n) nn appraisal works program mid budget, in accordance with prudent

international petroleum iinlustiy practice;

(b) nn estimated tinw-lYume for completion of appraisal works; and

(c) die delimitation of the urea to be evaluated, the surface of which "Jin 11 not

exceed twice (2 x) the surface of the geological structure or prospect In lie

appraised (the “Appraisal Area”). //


113 ir. following u Discovery, ■ rig acceptable U* Ihc i OM RACFOR is available lo drill

a well, the CONTRACTOR may drill any nldrtional exploration Well or any

Appraisal Well deemed nccc-ary by the CONTRACTOR before or daring the

Msugcrocnt Committee's review of the Discovery Report provided in accordance

with Article 111 or ite review of the Appraisal Work Program ad Budget

1 he CON IRACTOR dull he authorised to mem expenditures not budgeted m an

approved Appraisal Work Program and Budget provided that the aggregate amoxn* of

such expenditures shall out exceed len per cent (10%) of the approved Appraisal

Work Program and Budget in any Cakatltr Yew and provided further that such

excess expenditures shall be reported os aoon as is reasonably practicable lo Ihc

Management Committee. For the avoidance of doubt, all excess expenditures shall be

recoxeted by the CON 1'RAC TOR in occonhuicc with the provisions of Articles I

and 25, provided dull any excess expenditure* above the ten per cent (10%) limit shall

only be recovered with (he unanimous approval of the Management Committee.

.Vpprahal KVBglt

114 The CON TRACTOR shall submit a detailed report relating to the Discovery (Use

“Appraisal Report") to the Management Committee within ninety (90) days

following completion of the Appraisal Work Program and Budget.

12.5 The Appraisal Report shall include the following:

(«) goological conditions;

(li) physical properties of any liquids;

(c) sulphur, sediment and water content;

(d) type of substances obtained;

(c) Natural Gas composition.

126 with IU Appraisal Report, die CONTRACTOR shall submit a wntlcn

to the:

<*) the CONTRACTOR has determined that the Discovery is a Commercial


(b) the CON TRACTOR has determined that the Discovery is not a Commercial



the CONTRACTOR has that the Discovery is a

Discovery, which nay Discovery subject lo

Area; or


 («f) the CONTRACTOR tea determined cut Ihc Discovery it a significant

Disown of Non-A«ociatal Natural Gas, »twh may become a Cwurrial

Discovery sub,eel lo On Marketing Operatuos, m accradioce wi*.

Article 14.5.

12 7 In cose the statement <*r tba CON I K ACTOR corresponds to Article 12.6(c). the

CONTRACTOR shall submit a Work Program and Budget lo the Management

Committee within thirty (30) days following such statement. Any well drilled to

evaluate the said significant Discovery shall he considered nn Exploration Well.


12.8 If the Discovery has been declared a Commercial Discovery hy the CON TRACTOR

pursuant to Article 12.6(a) or Article 11.5(a), the CONTRACTOR shall submit a

proposed Development Plan to Ihc Management Committee within one hundred

eighty (180) days following such declaration. The Development Plan shall he in

accordance with prudent international petroleum industry practice. Except with the

Ooraciit of the GOVERNMENT, such Development Plan shall include details of the

following M applicable:

(•) the delimitation of the Production Area, Uking into account the results of the

Appraisal Report regarding the importance of the Petroleum Field within the

Appraisal Area;

(l>) drilling and completion of Development Wells;

(c) drilling and completion of water or Natural (las ii\j«ctkm "elk;

(d) laying of gathering pipeline*;

(c) installation of separatum, tanks, pumps and any other umuc ratal product**!

and injection facilities for the production;

(I) treatment and transportation of Petroleum to the processing and storage

facilities onshore or offshore;

(g) laying of export pipelines inside or outside the Contract Area to the storage

facility or Delivery Point;

(h) construction of storage facilities for Petroleum;

(•) plan lor the utilisation of Associated Natural Gas;

(j) training commitment in aaordnnce with Article 23;

(k) n preliminary decommissioning and site restoration plan;

(l) all contracts and arrangements made or to lie made by llic CONTRACTOR

l’or the sale of Natural Gas;

(ro) to the extent available, all contracts and arrangement* nude or to be made by


he told by the CONTRACTOR and which are relevant to the price at which

(and other terms on which) it in to be sold by the CONTRACTOR or arc

otherwise relevant to the determination of the value of it for the purpose* of

this Contract, but not beyond the point at which it is GrM disposed of in on

Arm's Length Sale;

(r) each CON IRACTOR lEntity's plans for financing its interest, if any; and

(o) any other operations not expreaaly prov ided for in this Contract but reasonably

necessary for Development Opcmtlons, Production Operations and delivery o!

Petroleum produced, in aooordonco with prudent iutcmatititMl petroleum

industry practice.

12.9 IV Management Committee shall use its best efforts to approve the Development

Plan within sixty ((*0) days nllur its receipt of such plan. Ihe Development Period for

oih Ii Commercial Discovery within n Development Plan shall bo extended for the

number of days in excess of such sixty (60) day period that it taho f.< the

Management Committee to approve the Development Pl.ui The Doetopox-m Plan

shall be considered approved by tlsc GOVERNMENT if (he GOVERNMENT,

through its representatives on the MaMgement Committee, indicates its approval m


12.10 If the GOVERNMENT request, aay modifications to the Development Plan, then the

Management Committee shall meet within sixty (60) days of receipt by the

CONTRACTOR of the C.o\ I RNMEM's wnneo notification of requesicd

modifications accompanied by all the documents Justifying *uch reqiefl. and shall

d lmiss such request The CONTR AC TOR shall communicate its eoatnteatl on any

elicit requested modification* u? tl. GO' I.KNMLM dt uch meeting oi in writisi;:

prior to such meeting. Any modification approved by the Managenvnt Committee at

such meeting or within a further period of thirty (JO) days from the date of »od>

meeting shall be incorporated into the Development Plan which shall then he deemed

approved and adopted

12 11 If d»e CON I RACTOR mokes several Camera] Discoveries with* the Contract

Arvo each such Commercial Discovery will have a separate Production Aren. The

CONTRACTOR shall be entitled to develop and to produce each CMnscroal

Discovery and the GOVERNMENT dial I provide the appropriate Permits covering

roc-h Production Aren In case the arm covered by the Commercial Discovery extends

beyond the boundaries of the Contrast Aren, and to the extent such urea outside tl»c

Contract Area is not the subioct of h Petroleum Contract (as defined in the Kurdistan

Region Oil and


lit IDG IT

U. I Upon the approval of the Development Plan by the Management Committee, the

CONTRACTOR shall start the Development Operations for the Commercial

Discovery in accordance with the Development Plan and prudent international

petroleum industry practice. A


15 2 Within cact\- (90)

Management CommiUre, the ( OMR.W IOR shall prepare and submit to Ac

Opcrabrtte (the Development Wart Program aad Budget": to be earned tut in «M

Production Area for the Jurat*® of the Development Operations Tbcreafler. do laicr

than I October n each Calendar Year, the CONTRACTOR shall submit to the

Management Committee updates hi respect of its Development Work Program and

Budget. To enable die Management Committee to forecast expenditures, each

Development Work Program and Budget shall include details of the following:

(n) works to be carried out;

(b) material and equipment to be acquired by main categories;

(c) type of services to be provided, distinguishing between third p*ric* and

Affiliated Companies of any CON IKAtTOK Fruity; ami

(d) categories of general and administrative expenditure

13.3 If any modification to the Development Work Program and Budget is requested by

the GOVERNMENT, the Management Committee shall meet » dram

Development Work Program und Budget and propos'd modifications thereto within

sixty (60) days from its receipt of the proposed Development Wert Program and

lludget. The CONTRACTOR shall communicate :t» comments on any such

requested modifications to the GOVERN MEN I at the meeting of the MmgencM

Committee or In writing prior to such meeting.

13.4 The CONTRACTOR shall be authored to incur expenditures not budgeted in an

approved Development Wort Program ami Budget provided that the aggregate

amount of such expending shall nor exceed ten per cent

Development Wort Program and Budget in any Cafcmkr Year and provided fisher

tltn sue* excess expenditure* dull be reported as soon as b reasonably practicable to

die Management Coomitie* For the avo*t»cc of doubt, all exc«w expewirturcs

shall be recovered by the COM RACTOR in accordance with the prorisioev of

Artxks I aad 25. provided dal any excow expenditures above the tea per cent (10%)

Kma shall only be iccovcttd with the unanimous approval of the Management

13.5 In cases of • CONTRACTOR may incur me

as « deems necessary lo protect life, environment « property Sucb additional

expenditures shall be reported promptly to the Management Committee For the

avoidance of doubt, such additional expenditure shall be considered Petroleum Costs

and shall be recov ered by the COM K At TOR in accordance with the provisions of

Articles I and 25. P


of production pursuant lo xn approved Development Plan and thereafter no later than

1 October in cadi Calendar Year, the CONTRACTOR dull prepare and submit to

the Management Committee a proposed work program and budget for Production

Operations (the Trodacttoa Work Program and Budget > for the following

Calendar Year. To enable the Management Committee to forecast expenditure*. tlic

Production Work Program and Budget shall include detail* of the following:

(a) week* to be earned ou*.

(b) to he acquired by mam.

(c) trpe of to be provided.

of »> covm \C I «R l nii«>.

(d) categoric* of general and expenditure

13.7 If any modification to the Production Work Program and Budget i* requested by the

GOVERNMENT, the Management Committee shall meet to dweuxs the Production

Work Program and Budget and proposed modifications thereto w ithin sixty (60) daw

from its receipt of the proposed Production Work Program and Budget. Ibc

CONTRACTOR shall communicate its comments on any

modifications to the GOVERNMENT at the meeting ot the

13 8 The CONTRACTOR xhall be anhonsed to incur expenditures nm budgeted in an

approved Production W'orl Program and Budget provided that the aggresare anoM

of such expenditures shall not exceed ten per cent (10%) of the approved Production

Work Program and Budget in any Calendar Year and provided further that such

excess expenditures Mull he reported ns soon a* reasonably practicable to the

Management Committee For the avoidnnoo of doubt, .ill excess expenditure! shall be

recovered by the C'ONTRAt TOR in ocoor dunce with the provisions of Articles I

and 25, provided that any excess expenditure above tlto ton pet vent (10%) Until shall

only be recovered with the unanimous upproval of lliv Management Committee,

13.9 In casus of emergency, the CONTRACTOR may incur such udditionnl expenditure

as it deems necessity to protect life, environment or property. Such additional

expenditure* shall be reported promptly to the Management Committee, l or the

avoidance of doubt, such expenditure shall b« considered PeVoUum Conti

and shall b* recovered by the CONTRACTOR in accordance w ith the provisions of

Articles I and 25.

13.10 After the commencement of Commercial Production the CONTRACTOR shall pay

to the GOV I UNMI N I , in arrears, mi annual surface rental for the Production Area,

of one hundred Dollars (US$100) per square kilometre per Contract Yeur

("Production Rental"), Such Production Rental shall he cotuiiderad as a Petroleum

Cost and shall he recovered by tl>e CONTRACTOR in Accordance with the

provisions of Articles I and 25. I



14.1 To like account of specific cootfetuns relating lo Nanrai Gas and lo promote «*

Jcwle|*nc*l ■ the Kradhan Region. the GOVERNMENT will grant specific

benefits to the CONTR ACTOR on principle* materially similar to those contained m

this Contract, including, consistent with the Kurdistan Region Oil and Gas I aw. more

generous provisions in respect of the recovery of Petroleum Costs and the sharing "I

Profit Petroleum than in respect of Crude Oil.

14.2 I In CONTRACTOR may freely use any Natural Gas required for the Petroleum

0|*cmliim If tcchnlcully and economically justified, the CONTRACTOR shall In

priority use any Natural Gas for the purpose of enhancing recovery of Crude Oil m

m«orduncc with prudent international petroleum industry' practice as follows.

14.3 Any ax COM Associated Natunil Gas produced that is neither used in the Petroleum

Operations nor developed and sold by the COMRACTOR shall, upon the

CR>\ HHNMIATt written request, be transferred at the fin4 practicable delivery

point as agreed between tin- rallies, free of charge to the GOVERNMENT. In such

CAM, the GOVERNMENT shall be solely responsible for collecting, treating, und transporting such Natural Gas from such agreed delivery point and

stall be solely liable for any additional direct and indirect costs associated (herewith.

The construction and operation of required facilities as well as the offtake of such

excess Associated Natural Gnu by the GOVERNMENT shall occur in accordance

with prudent International petroleum industry practice and shall not interior with il*c

production, lifting and transportation of the Crude Oil by the CON TRACTOR For

tire avoidance of doubc all expenditure incurred by the CONTRACTOR up to such

agreed delivery point shall be considered Pctrolcwm CoMi and shall be recovered by

die CON IR ACTOR in accordance with the provisions of Articles I and 25

In the event the GOVERNMENT finds a market for Associated Natural Gas. it dull

promptly give wrraa. notice lo the CONTRACTOR and die CONTRACTOR may

elect U- partKipme in sapptying lucfa Asauctaled Natural Gas within nmety («

follow mg nuufkaDOB thereof by the GOVERNMENT If the COMR\C TOR

elects to participate in supplying Associated Natural Gas lo mJ, market, all

expenditures associated with any aecostary facilities shall be paid for by the

COM K ACT OR For the avoidance of doubt. Mich expenditure incurred draft he

considered Petroleum Costs and shall be recovered by the CONTRACTOR m

accordance with the provisions of Articles I and 25.

144 Until an approved Natural Gas sales contract is executed in respect of all volumes of

Natural Gas expected to be produced, the CONTRACTOR shall be entitled during

the Exploration Period aad the Dcvekipmcnt Period to cany out Gas Marketing

Operations. H



 If, pursuant to Article 12.6(d), the CONTRACTOR ha* determined that the

Diacovciy i» n significant Discover of Non-Associated Natural Gaa, which may

become n Commercial Discovery subject to (ins Marketing Operations, it shall cany

out <1.* Marketing«iteration*. at the eral of which it shall submit a written statement

to the Management Committee specifying tlut:

(a) the CONTRACTOR ha* determined dal the Discovery u a Commercial

Discovery; or


14.6 For the purpose of this Contract. "Gw Marketing Operations'* means any activity

under Uus Contract relating to the marketing of Non- Assoc tain! Natural Gas.

including any evaluation to find a commercial market for such Non Associated

Natural (ins aud/or to find a commercially viable technical means of extraction of

such Non-Associated Natural Gas and may include activities related to evaluating the

14.7 quantities of Non Associated Natural Gas to he sold, its quality, tire geographic

location of potential markets to he supplied oh well na ovaluntlng the costs of

production, transportation tuul distribution of the Non-Assoctuted Natural Gas from

the Dclivorv Point lo the relevant market.

All costs iiihI expenditure Incurred by the CONTRAC TOR in Iho performance of the

activities in relation to the Gas Marketing Operations shall be considered Petroleum

14.8 Costs.

No later than I October of the Calendar Year preceding the Calendar Year in which

any Gas Marketing Operations arc duo to occur, the CON TRACTOR slwill prepare

and submit to the Management Committee its Gas Marketing Work Program mJ

Budget for the following Calrrato Year. To enable die Management Commute* So

forecast etpcnditarcs, the Ga» Marketing Work Program and R.klget shall indude the


(a) works to be earned out;

(b) type of services lo be provided, distinguishing between third parties and

Affiliated companies of any CON TRAC TOR Lmity, and

(c) categories of general and administrative expenditure

If any modification to the Gas Marketing Work Program oral Budget is requested by

the GOVERNMENT, the Management Committee dull meet lo discuss the Gas

Vlarketing Work Program and Budget nod proposed modifications thereto wuiun sixty

(00) days from its receipt of the proposed Gas Marketing Work Program and Budget.

The CONTR ACTOR shall communicate its comments on any such requested

modification»to (Ik- GOVERNMENT at the meeting of Use Management Committee

or in writing prior lo such meeting

14.9 The CONTRACTOR shall Ik- authorised to incur expenditures not budgeted in an

approved G«' Mat* cl mg Work Program and Budget provided tiuu the aggregate

amount of such expenditure nliull not exceed ten per cent (10%) of the approved

vL 37/112

BuJgxs in any Calendar Year ,«vd provided Hlfthcr that such excess expenditures shall

be reported as soon as reasonably practicable in the Management Committee. hoc the

avoidance of doubt all excess expenditures dull be recoscrcd by the

CONTRACTOR in accordance with the provisions of Articles 1 and 25, provided

tbu any excess expenditure above the ten per cent (1(1%) limit shall only he rtrmncd

w ith the unanimous approval of the MAiMgctnrnt Committee.

14.10 If any Non-Associated Natural Gas is discovered within the Contract Area, and the

CONTRACTOR reasonably consider* that the Non Associated Natural Ons

Discovery will only be a Commercial Discovery if certain terms of this Contract nrc

amended, it shall be entitled to request amendments to this Contract, with its renionx.

The GOVERNMENT shall in good faith give reasonable consideration to the

CONTRACTOR’S proposed amendment and reasons and the Parties shall in good

faith attempt to agree on the necessary amendments to the Contract If the Parties are

unable to agree on such amendments, ami the Exploration Period expires without the

CONTRACTOR having declared such Discovery to be a Commercial Discovery m

accordance with Article 12.6(a) or Article 14 5(a). and subsequently within a period

of eight (8) years from the end of inch Exploration Period, the GOVERNMENT

reaches agreement with any third party to develop such Discovery (the "(in

DmtopmeaT). then the following previsions dull apply:

(■) either before or upon agreement in relation to die Gas Development having

been reached (and whether or not such agreement is recorded in a fully termed

production sharing and/or operating or other like agreement), but before wtch

agreement ts signed ((he T*iopoM-d Contract”) (subject only to die rights of

each CONTRAC I OK Kntlly (o pre-empt such Proposed Contract pursuant to

Article 14.10(b) nnd such conditions as may be npplicublo), the

GOVERNMENT dal). » wan ax rawrtWy practicable after tbr ocnmencc

of such ctrcrastances, serve on each of the CONTRACTOR Entities s

notice to that effect and shall with Rich notice provide such information and

main terms of such agreement a* the CONTRACTOR l-Jilitica may

reasonably request to determine if they will exercise therr rights (the “.Agreed



(iv) all and any material conditions to which the Proposed Contract is


(h) Upon (. request from nny CONTRACTOR Entity, the GOVERNMENT will

provide all lire CON TRACTOR Entities with such fmthcr information nnd

terms us may l*c reasonably requested by any CONTRACTOR Entity.

Within onc hundred and eighty days (18(1) days after receipt of a notice and

any further infbnnatiaa under Article 14.10(a) m relation to a PTupored

Contract each of the CONTRACTOR Entities dull ded either


(i) io enter into the hopowd Conliuct on the same or substantially similar

terms to the Agreed Terms, with live right to cost recover all Petroleum

Costs incurred under this Contract against all Petroleum revenues

received under lltc Propos'd Contract, up U> any cost recovery limits

set out therein, or

(ii) to waive live aforesaid right of pro-auptioa in relation to the Proposes!


and shall serve notice accordingly upon the GOVERNMENT and all the

CONTRACTOR Untttir* aivd in default ot receipt by the GOVERNMENT

of any such notice within such penod of one hundred and eighty (1X0) days

such TON IKACTOR Entity shall be deemed conclusively to have served a

notice electing to waive ita aforesaid right of pre-emption in relation to the

Proponed Contract.

(c) In the event that more tlimi one of the CONTRACTOR Entities OtcfOiscs ilh

rights under Ailiclo l4.l

GOVERNMENT shall Irimafcr or grant each such CONTRACTOR Entity

an interest in the Proposed Conliuct upon the Agreed Terms (in accordance

with Article 14.10(b)(0) in «h« pfoportlona in which their reapcciive

percentage Interests hear to the aggregate of their respective percentage

interests umlcr the relevant Joint Operating Agreement (as it applied ot the end

of the Exploration Period) or in such other proportions as such

CONTRACTOR Entities shall agree between them.

(d) In the event that one of the CONTRACTOR Entities exercise* M* nghts

under Article U.IO(b)(i) •» relation to (he Propped CoolIKl dm D*

GOVERNMENT shaQ transfer or grant the whole of the interest m the

Proposed Contract upon the Agreed Terms (m accordance wi* 14.I0(bXi)) »o

such CONTRACTOR Entity

(e) In the event that none of the COM RACTOR Entities exercises its rights

•-raJer Article M.IOfbXi) then the GOVERNMENT may enter into the

Proposed Contract on terms no more favourable to its counterparty than live

Agreed Terms and. in such case, the aforesaid rights of pre-emption shall

thereupon cease to apply in relation to the Proposed Contract.

14.11 It the pre-emption rights in Article 14.10 arc not exercised and the GOVERNMENT

enters mto the Proposed Contract with die third party concerned, the

GOVERNMENT will use Us best endeavour* to avoid any effect which may hamper

tfw Petroleum Operations of the CONTR ACTOR while producing Petroleum.


 The CONTRACTOR dul kNnit suA request to tV CO\ » RNMENT. *h*ii dull

include mi evaluation »l rcas>manlc alternative* to flaring that have been coosidertd

along with information on the amount and quality of Natural Gas involved nnd the

duration of the requested flaring.


The CONTRACTOR dull I keep in its office* in ihc Kurdistan Region copies of nil

books and accounts of all revenue* relating to the Petroleum Operations and all

Petroleum Costs (the -Account*”), except durmg the Exploration Period, when die

CONTRACTOR shall he entitled to keep die Accounts at its headquarters Abroad

IV Accounts shall reflect >•> detail npreidrtnre incurred a* a function of Ihc

quantitic* nnd value of Petroleum produced, and shall V kept for a penod of five (5)

year*. All Accounts wtuch are made available So Ac GOVERNMENT in accordance

with Ihc provisions of this Contract shall V prepared m the PngliA language TV

Accounts dull be kept in accordance with prudent internal woal petroleum industry

practice and in accordance with the provisions of the Accounting Procedure TV

Accounts shall be kept in Dollars, which shall be the reference currency for the

purposes of this Contmet.

152 Within ninety (90) days following the end of each Calendar Year, the

CONTRACTOR shall submit to the GOVERNMENT a summary statement of all

Petroleum Coals incurred during the *aid Calendar Year. Ihc .summary statement

13.3 sluill also include a profit calculation pureuaol lo the provisions of Article 26.

TV GOYF.RNMI NT dull have the right:

a pmod of two (2) C alendar Years loik^n^hc end of such Calendar Yeas

(V “AndIt Rre,.rU Preiud”). and

CiOVFRNMI NT to undertake the audit

Socwithoaadng paragraph. (at and lb) of Article 15 3. Ac

d»B have the n$* to audit the Arax*»« »•* reaped to ends (akodv Year at my

The reasonable cost of retaining an auditor pureuani to Aiticle 15.3 shall he borne by


the CONTRACTOR and treated os a Petroleum Cunt for tho ]nirposo of com recovery

155 under Articles 1 and 25.

During the Audit Request Period for my Calontlnr Your hut not tVrcnlto, tV

GOVERNMENT, acting inisomibly ami in ncuortlunoe with pmdcni international

petroleum industry practice, tuny request in writing nil reasonably available

information and justification* for its audit of Petroleum Cost*.


15.6 Should the GOVERNMENT consider, on the basis of data and information available,

that the CONTRACTOR made a material nil Make or there is any irregularity in

reaped of the Accounts and consider* thill any collections, adjustments or

amendments should be mndo. the GOVERNMENT shall make any audit exceptions

m writing and notifuxl to the CONTRAC TOR within six (<*) Months of the date of

request referred to in Article 15.3, and failure to give such written exception within

such time shall be deemed to be an acknowledgement of the correctness of the

CONTRACTOR'* Accounts.

15.7 In respect of any audit exception nude by the GOVERNMENT in accordance with

Article 15.6, the C ONTRACTOR shall then luve sixty <*M») days to make necessary

corrections, adjustments or amendments or to present its comments in writing or

ropiest a meeting with the GOVERNMLYI the <;<>\ I RNMT N I shall within

thirty (30) days of the CONTRACTOR’S response. niH.IV Ihc CONI R ACTOR in

writing of iu position on the corrections, adjustment*, amendments or comments, if

thereafter there still exists a disagreement between tho GOVERNMENT «uid the

< TIN TRACI OK. die dispute will be settled in accordance with Article 15.9.

15.8 In addition to the annual statements of Petroleum ( o»U n- provided in Article 15.2,

the CONTRACTOR dull provide the GOVERNMENT with such production

Statements nntl repents, as required pursuant to Article 16.3.

15 •' Any dispute between the Parties under this Article 15 that ciuinot be settled amicably

within nixiy (00) day* of the GOVERNMEN I T final notice wider Article 15.7, may

be submitted to an expert on the request of either the GOVERNMENT or (lie

CONTRACTOR in accordance wadi the provisions of Article 42.2. Notwithstanding

die provisions of Article 42. in this specific instance the decision of the expert shall

not Mxcvsmly be final end ciihrx Par. toy decide to nbiuii the miner iu ututratxc

in axordancc with the pro i».oa» of Article 42.1.


16.1 If not done already, within ninety (90) days following the Effective Date, each

CONTRACTOR Entity shall open an office and appoint a permanent representative

m the Kurdistan Region, who may be contacted by the GOVKRNM1N I with regard

to any matter relating to ihi* Contract and will be entitled to receive any


16 2 TV CONTRACTOR dial! carry out all Petroleum Operation* in accordance with the

provisions of this Contract, prudent international petroleum industry practice and

applicable Kurdistan Region Law.

The CONTRACTOR shall be responsible for the conduct, management, control and

administration of Petroleum Operations and shall he entitled to conduct Petroleum

Operations in accordance with the provisions of this Contract. In conducting its

Petroleum Operations, the < ONTKACTOR shall have the light to use any Affiliate


of cadi CONTRACTOR Emily, ita end their Subcontractors, and the employee*,

cerwulcaats, and ipfe of mtk of the foregoing. I he CONTRACTOR and all sac*

Perms shall at all tune* have free access to the < ootract Area and am ProdwO.c*

Areas for the purpose of carrying out f rtroVeum Operations.

Informs I*■!! and Reports

16.3 Ht CONTRACTOR fhall provide the GOVERNMENT with periodic data and

activity reports relating to Petroleum Operation* Sind reports shall include details of

the following:

(u) information and data regarding all Exploration Operations, Development

Operations and Production Operation* (as applicable) performed doling the

Calendar Year, inchidinR any quimtittoi of Petroleum produced and sold;

<*>) data iuid information regarding any transportation facilities built and operated


(c) n statement specifying the number of personnel, their title, their natiooalily us

well ns a report on any medical sendee* and equipment made available to such

personnel; and

(d) a descriptive statement or all capital assets acquired for the Petroleum

Operations, indicating the date and price or coat of their acquisition

16 4 The CONTRACTOR may freely use any Petroleum produced within the Contract

16 5 The CONTRACTOR shall at all times provide reasonable assistance as may

reasonably be requested by the GOVERNMENT dunne itt review and verification

of records and of any otlier information misting to Petroleum Operations at the

offices, wwfcsites or any other facilities of the CONTRACT OR

Upon giving reasonable prior notice to the CONTRACTOR, the GOVERNMENT

may send a reasonable number of representatives to the work-sites or any other

facilities of the CONTR ACTOR m the Kurdistan Region to perform such reviews

and verifications. The representative, of the GOVERNMENT shall at all tiroes

comply with any safety regnlaOom imposed by the CONTRACTOR and such

reviews and verification* shall nor hinder die smooth progress of the Petroleum


166 For the performance of the Petroleum Operations. the CONI K ACTOR, ray Affiliafc

of each CONTRACTOR Entity, its and (heir Subcontractors and the csnpk*y<«.

consultant* and agents of «nch of «k foregoing shall M all tones be granted free

access to (lie Contract Area and lo any facilities for the Petroleum Operations located


 within or oul«de of the Contract Area or within or outside tlic Production Arc*, for

the purpose of canying out the Petroleum Operation*

16.7 U|K>n notice from the GOVERNMENT, the CONTRACTOR shall nuke available

to .1 reasonable number of representatives of the GOVERNMENT those ot' the

CONTRACTOR** facilities which arc necessary to enable such representatives to

perform their tasks related to this Contract and the Kurdistan Region Oil and Gas Law

including, in case of works to be performed on work sites, transportation,

accommodation and board, under the same conditions as those provided by the

C OYIKACTOK for its own personnel

Notwithstanding Article 16.8, die GOVERNMENT dial I mdemnify and hold

hannlcM each CONTRACTOR Entity against all lo«cs. damages and liability

arising under nny claim, demand, action or proceeding brought or initialed against any

( t>MHA( IOK Entity by any representative of the GOVERN MIN I in connection

with the access to or use of the facilities by such representative!.

16.8 The CONTRACTOR shall he responsible for any loss 0' damage caused to thiid

parties l»y iti or it* Subcontractors personnel solely nnd Jirccily refilling from their

negligence, errors or omissions in accordance with applicable Kurdistan Region Law.

16.9 In its Petroleum Operation*, the CONTRACTOR dull respect any patents belonging


1610 Tbc CONTR\CTOR shall aa soon a* reasonably practicable inform the

GOV ERNMENT of aa> iiutrrtal litigation relating to this Contract


1611 The CONTRAClt»R shall implement a health, safety and cm ironmcM program and

take necessary measure* to ensure hygiene, health and safety of to penoonel


(•) sopphing first aid and safety .

: for |

(b) reporting to the GOVERNMENT within seventy-two (72) hour-, of such

accident, any accident where personnel ha* been injured while engaged in

Petroleum Operations nnd resulting in such personnel being uniiblo to rcium to



 fd) providing wfc opksvcs.

(c) supplying firc-ntingunhing equipment in each work ares;

(I) for il 10 purpose of taking control of any Mow out or fire which could d-n o .•

the environment or I'cuolonin Field, in accordance with prudent international

petroleum industry practice; and

(it) tor the purposo of preventing any involuntary injection of fluids in petroleum

formations and production of (rude Oil and Natural Gas at rates that do not

conform to prodent international petroleum industry practice

16.12 Subfoct to Article 43.2. in the event the production rate of the individual well* and

Reservoir of a Petroleum Field is to be act below the Maximum Efficient Kale

C MIR”) for the Reservoir. M provided for hi the Development Plan. M a

consequence of a docision by the GOVERNMENT or any federal or international

regulatory body. tl«c GOVERNMENT undertakes to allocate any such reduction

fiurly and equitably among the various operators (including die GOVERNMENT)

then producing in the Kurdistan Region, pro rala their respective production rates. In

'iich event, the GOVIRNMEN I dm)) grant an extension of the Development Period

of any Production Area so nlTcctcd fin u reasonable period of time in order to produce

iIm Petroleum which would otherwise have already been produced, hnd the MER for

die individual wells and Reservoir of the Petroleum field been maintained

Loral Status

1613 The respective rights, duties, obligations and liabilities of the CON 1 RAC~l OR and

the GOVERN MENT under (his Contract are to be understood as being separate and

individual and not joint and several The Parties agree that this Contract dull *4

create joJ skill not be deemed to have created a partnership or odwt form of

16.14 The GOVERN'ME VT and each CONTRACTOR Entity dull have the right and the

obligation to take in kind and separately sell or otherwise dispose of their respective

dares of Petroleum. Upon approval of the Dev elopment Plan, the Parties shall moct

as soon as practicable to reach a detailed agreement governing the lifting of Petroleum

b> each such CONTRACTOR Entity. Such lifting agrecracni shall iikUW the


(a) the obligation of the GOVERNMENT and each CONTRACTOR Entity to

lift, regularly throughout each Calendar Year, their share ol Petroleum

produced from the Production Area; .


(b> notification procedure* by Utc Operator to the GOVERNMENT and each

CONTR ACTOR Utility regarding entitlement* and availability of Petroleum

fin lilting by each Party during each lilting period nnd nominations by each

Party; and

(c) the right of (ho Purlieu to lilt any Available Petroleum not nchcdulcd for lilting

and/or not lilted by the other Party during each such lilting period.


16.15 The CONTRACIOR Politics shall sell ami transfer to the GOA F.RNMENT, upon

written request of tbe GOVERNMENT, toy amount* ol < rode Oil that the

GOVERNMENT dull deem necessary to meet Kirnlntan Region internal

consumption requirement* The sales price ol *uch Ctudc Oil shall be the

International Market Price. Tbe GOVERNMENT shall provide the

CONTRAC I OR I nliuet with not less than si* (6) Months' advance written notice of

its intention to buy such ttndc Oil.

Payment shall be made in Dollais and othenvNe on terms consistent with prudent

intcrnntlotuil petroleum industry practice. Tlic CONTRAC IOR Entities' obligation

to sell ( mdc Oil to the GOVERNMENT shall be. with the olhei o|ienitoni (including

tin* GOVERNMENT) then producing in the Kurdiatan Region, pro rota to their

respective production rates.

The provisions of this Article 16.15 shall pot apply to NoivAssociated Nannal Gas.


17.1 The GOVERNMENT shall make available to the CONTRACTOR any tad or

property in the Kurdistan Region required fer tbe Petroleum Operation*. provided,

however. the CON f R AC IOR shall not request to use any such land unless there is a

real need for rt The CONTRACTOR shall base the right to build and maintain,

above and below ground, any facilities required for the Petroleum Operations.

17.2 If it becomes noccs-ary for conduct of the Petroleum Operations to occupy and use

ary land or property in the Kurdistan Region belonging to third parties. Ilac

CO VI RAC TOR shall endeavour to reach amicable agreement with the owners of

such land If such amicable agreement cannot be reached, tbe CONTR ACTOR dull

notify the GOVERNMENT. On receipt of m* notification

(a) the GOV ERNMENT shall determine the amoort of compensation to be paid

by tbe COVrRACTOR to the owns, if occupation will be for a short

tbe GOVERNMENT shall expropratc the lmd or property m accordance

with applicable Kurdistan Redoa Law. if such occupation wifi he long lasting

or makes it henceforth impossible lo resume original usage of such land or

property. Any property rights shall be acquired by and recorded in the name

of tlic GOVERNMENT, but tbe CONTRACTOR dull be entitled free use

of the Lind or property for the Petroleum Operations for the entire duration of

this Contract <


Tbc amount of (he comp emotion in Article 17.2(a) dull be fair and reasonable. in

accordance with Article 29 of the Kurdi*an Regain Oil and Gas Law. and dial! lake

into account the right* of the owner and any effective use of (he land or property by

it* owner »l the time of occupation by the CONTRACTOR. All reasonable cost*,

expenditure* and fair and reasonable compensation (as required pursuant to Article 29

of tlio Kurdistan Region Oil mid Gas Law) which result* fioni such expropriation

shall be borne by the CONTRACTOR For die avoidance of doubt, inch costs,

expense', and coinpcnnUion incurred by the CONTRACTOR shall bo considered

Petroleum Cost* and shall be recovered by the COM KACTOR in accordance with

tltc provisions of Article* I and 25.

17.3 For its Petroleum Operations, the COXTRACIOR .hall have the right in the

Kurdistan Region to u*c, *ubject to applicable Law, any railway, tramway, road,

airport, landing field, canal, river, bridge or waterway, any telecommunications

network and any exiting pipelines or transportation infruMreciure, on terms no less

favourable tluui those offered to oilier entities and, union generally in force, to be

mutually agreed

17.4 Under national emergencies due to environmental catastrophe ot disaster, or inlcriml

or extemu! war, the GOVERNMENT shall have the right to request to use any

transportation mu I communication facilities installed by tlio CONTRACTOR In

such case*, tho requoiit shall originate from the Minister of Natural Resources For tU

avoidance of doubt, such costs, expenses or liabilities incurred by tie

CONTRACTOR hereunder shall be considered Petroleum Coot* and shall be

recovered by the CONTRACTOR in accordance with the pfuveoon* of Altidot I

and 25.

17.5 For ft Petroleum OpoaDom, tte CONTRACTOR dull hi>t the ngbl ■ the

Kurdistan Region to clear land, excavate, drill borv\ conrtruct, erect, place, procure,

operate, emit ami discharge, mange and maintain ditches, tanks, wdk, trenches,

access roads, excavations, dams, canals, water main*, plants, reservoirs. bums,

storage and disposal facilities, primary distillation units. ci traction and processing

units, separation units, sulphur plants and any other lacilifir* or iiw.i'latioas for the

Petroleum Operations, in addition to pipelines, pumping stations, generator*. power

plants, high voltage linos, telephone, radio mid uny otlu i telecommunications system;,

as well as warehouse*. offices, shed*, houses foi personnel, hospitals, schools,

premises, dikes, vehicles, railways, roads, bridge*, airline*, airports and any oilier

transportation facilities, garages, liangais, workshops, foundries, repair shops and any

other auxiliary facilities for the Petroleum Operations and, generally, everything

which is required for its performance of the Petroleum Operations. The

CONTRACTOR shall luve the right to select the location for these facilities.

17 6 For its Petroleum Operations, the CONTRACTOR shall hive the nght in ihc

Kurdistan Region, subject to compliance with applicable Kurdistan Region Low, to

remove and use the topsoil, fully-grown timber, clay, sand, lime, gypsum, stones

(other than precious stones) and other similar substances as required for its Petroleum


The CONTRACTOR shall have the right in the Kuidisinn Region to take or use any

water necessary for the Petroleum Operation.' provided it door not damage any

existing irrigation or navigation systems and thut kind, house* or watering point*

46/112 V

 belonging lo third partro are not deprived ol their use.

17.7 The GOVERNMENT shall have the light in the Kurdistan Region to build, operate

and maintain roads, railways, airport*, landing ship*, canals, bridge*, protection dam*,

police stations, military installation*, pipeline* and telecommunications network* in

the Contract Area, provided this doc* not Iqcimhc the costs, or compromise or have n

material adverse effect on the perfwmunco of the Petroleum Operations. If the

construction, operation and nmintcnaiKe of *ucll facilities by the CJOVEHbMEN'I

results in increased cost or expense for the t ON I UAdOK then, for the avoidance

of doubt, such cost and expense slut 11 lie considered Petroleum Costs nnd shall be

recovered by the CONTRACTOR in nccorduticc witli the provision* of Article*. I

and 25.

17 H Upon request of the CONTRACTOR, the GOVERNMENT shall prohibit the

construction of residential or commercial buildings in the vicinity of facilities used for

die Petroleum Operations that may be declared itingorous due to the Petroleum

Operations and to prohibit any interference with the use of any facilities required for

die Petroleum Operations.

17.9 Access to the Contract Area may be granted pursuant lo an Access Authorisation, as

shall be defined in, and consistent with, the Kurdistan Region Oil and Gas Law. to

authorised third parties on reasonable term* nnd oond'tioa* (including coordination),

including Persons authorised to uwntmet, m«tnll and operate structures, facilrtic* and

installations, and to cams- out other work*. |*rovidcd that nothing in tlx* Ac*vs*

Authorisation or in this Article 17.9 outhouses the holder to drill a Well or to pci form

:mv Petroleum Operation!! m Contract Ami

The GOVERNMENT “hull live CONTRACTOR adequate ath-mc ontfce of

any Access Authorisation m reaper* of the Contract Area and shall not grant any

Access Authorisation in respect of the Contract Area until it has taken into account

any submissions made by the CONTRACTOR nor m such a way that these is undue

interference with or hindrance of the rights and activities of the CONTRACTOR


18.1 To the exksu allowed by KtwdnUn Regie* Law and Iraq, law and at the specific

request of 4c COMHACIOR, the GOVERNMENT shall take all necessary steps

to asrirt theCONTRAC'IOR I ntmes in, but not limited to. the following area*

(■) securing any necevnry Permit* for the uao and installation of moans of

transportation and communication*;

(b) securing regulatory Permit* in matters of customs or import'export;

(c) securing entry owl exit visas, wort and residence permits as well as any other

administrative Permit* for each CONTRACTOR Entity's, its Affiliate's an.1

its Subcontractors' foreign personnel (including then- family member)

working ui the Kurdistan Region and any other part of Iraq during the

implementation of 4.* Contract;



(cl) securing any Dccessary Permits k> send Abroad documents, data or samples fur

analysis or processing for the Petroleum Operation*;

(e) relations with federal and local authorities and administration*, including for

the purposes of the remainder of this -Article 18.1,

(f) securing any necessary environmcntHl Permit*;

Petroleum Operations;

(h) access to any existing ilutu and information, including data nod information

relating to the Contract Area held by previous opomtors or contractors; ami

(i) providing all necessary security for Petroleum Operations.

18.2 Within the scope of services to be provided under this Article 18, reasonable and duly

justified expenses incurred by the GOVERNMENT or paid to third parties shall be

charged to the CON TRACTOR and shall he considered Petroleum Costs and shall be

recovered by the CONTRACTOR as Petroleum Costs in accordance with the

provisions of Ankle* I and 25.


19 1 The CON TRAC T< >R dm]] supply, or procure the supply of, nil materials, equipment,

machinery, tool*, spore parts and any other items or goods required for the Petroleum

Operation* ("Equipment and Materials").

192 Said Equipment and Materials «hall be provided by the CONTRAC TOR in

accordance with the relevant Wink Program* and Budget*.

19 3 At turn as possible after the ITfccttvc Da*, the < ON 1K VCTOK shall provide the

Management Committee with a copy of it* procedures for procurement of Equipment

and Materials andor service* for the Petroleum Operations as requited by (be

Provens of Artde 82 Cel. ladodia* the criteria for tender^ evataraion. which

Mkiuniy practice. If the Management Coramittoe does not retjarst any modification*

lo the procurement procedures within thirty (30) day* after receiving nich procedures.

tl»c procedures sfcaU be deemed approved by the Management Conan-'tee

194 The CONTRACT OR shall give priority to Equipment and Material* that are readily

available in the Kurdistan Region and other parts of Iraq to the extent their price,

grade, quality, quantity, specification*, purchase, delivery and other commercial and

technical terms arc comparable in all material respect* with those generally available

in the international petroleum industry.



20 I Dunng ihc Exploration Period, any AimU acquired l»y the CONTRACTOR for Uie

Petroleum Operations shall remain the property of the CONTRACTOR, the

CONTRACTOR Entities, their Affiliates or their Subcontractors, as the case may be.

20.2 Inuring the Development Period, subject to Article 21, all Assets acquired by the

CONTRACTOR for the Petroleum Operations shall become the property of the

GOVERNMENT upon the completion of the recovery of the costs of all such assets

by the CONTRACTOR, or the end of the Conduct, whichever is the earlier

20.3 The provisions of Article 20.2 shall not apply to any Assets leased by the

CONTRACTOR or belonging to an Affiliated Company of a C ONTRACTOR

Entity or belonging to its or their Subcontractors or Its or their employee*.


21.1 Each CONTRACTOR Entity shall have the exclusive right In use. free of any

charge, all Assets described in Article 20. both before and alter tin m cry of the Oust of

the santc, for the Petroleum Operations, as well as lor any petroleum opcruiionK under

other agreements in the Kurdistan Region to which it or any of lit AlTdiiMcti is n party,

provided that the Petroleum Operations take priority Ihc GOVERNMENT agrees

not to transfer or otherwise dispose of any of such Assets without the

COMRACTOR'S prior written approval.

21 2 The COM K ACTOR may freely mosc to the Contract Area any Assets from any

relinquished portion of the Contract Area, or from any other ra m the Kurdistan



22.1 The CONTRACTOR shall ensure that any Subcontractors it engages have all the

requisite experience and qualifications

22.2 The CONTRACTOR shall give priority to Subcontractors from the Kurdistan

Region and other parts of Iraq to the extent their competence, rates, experience,

reputation, qualifications, apecialtim, credit rating and term* of availability, delivery

and other commercial tesin* are, in the CON TRACTOR’S sole opinion, comparable

in all mjteral respects wdfc those provided by foreign companies operating in the

international petroleum industry. Such Subcontractor, must be bona tide Kunfetan

Repon companies not related to any Public Officer, direct!) or indirectly, and most

have all nccctury resources and capacity.

223 Selection of Subcontractors shall take place in accordance with the procurement

procedures submitted by the CONTRACTOR to the Management Committee ia

accordance with Article 19 3 and approved by the Management Committee.

22.4 The CONTRACTOR shall provide the GOVRRNME NT with copies of agreements

entered into with Subcontractors, where their amount exceeds the limit set by the

Management Committee from time to time.





23.1 For the Petroleum Operations tin* < ONI KAC’l < )K shall give, and shall require its

Subcontractors to give, preferone* to personnel from the Kurdistan Region and other

parts of Iraq to tlic extent such personnel luve the technical capability, qualifications,

competence and experience required to perform the wort.

23 2 The CONTRACTOR I tunics "hull give due consideration to the secondment of

GOVERNMENT personnel to the CONTRACTOR Entities and of tlte

CONTRACTOR Entirio*' personnel to the

phases of the Petroleum Operations. (emu and condition for such secondment shall

be mutually agreed by the Parties und any costs associated therewith shall be

considered Petroleum Costs and slull be recovered by the CONTRACTOR in

accordance with the provision of Article* 1 and 23.

23.3 Each CONTRACTOR Entity ami its A(TUklat and Subcontractors shall have the

right to hire foreign personnel whenever the personnel from the Kurdistan Region and

other parts of Iraq do not have the requisite technical capability, qualifications or

experience for positions to be tilled a» required pursuant to Article 23.1. In the event

any such foreign personnel and or a member of their family engage in activities or

commit acts which breach KuidiaUn Region Law, the CONTRACTOR "ball, at the

request of the Management Committee, take the necessary steps to repatriate such


23.4 For the first five (5) Contract Years. the COM RAC TOR shall provide up to two

hundred and fitly thousand Milan ($250,000) tn advance each Contract Year to the

GOVERNMENT for the recruilmctit or accoodmatt of personnel, whether from Hie

Kurdistan Region other parts of Iraq or Abroad, to the Ministry of Natural

The selection of such personnel shall he al the discretion of the Minister of Natural

accunbikic with (he prtninctB of Article* I and 25.

235 In a of this Article 233 owd Articles

23.6 23.7, CONTRACTOR rom the

other pans of Iraq directly indirectly involved in tU

Operations for the purpose of

in order thal such personnel gradualh reach the level of knowledge and

professional qualification held by the CON TRACI OR Eats**' foreign worim

with an equivalent nJsumf. Such traimng shall also include the transfer of knowledge

of petroleum technology and the necessary management experience to av to

the personnel front the Kurdistan Region and other parts of Iraq to apply

and appropriate technology in the Petroleum Operations, to the extent per nutted by

applicable Law and agreements with third parties, and subject to appropriate

confidentiality agreements.

In addition to (he requirements of Article 23.1, the recruitment, integration find


training of five CONTRACTOR Entities* personnel trom the Kurdistan Region and

 other parts of Iraq shall be planned, whtch plans shall be submitted to the

Management Committee for ita approval. IV training plan shall take into

cradcnt™ the reqwreomts of Artxle 23.5 and may include trainm* for

GOVERNMENTS pcnoonrl. drpnalmg oo the ester* to

to the training plan. as prescribed by Article 23.7, is available


Within ninety (90) days of the Effective DnK. the CONTRACTOR shall submit to

the Management Committee a proposed training plan for the remainder of 0*

Calendar Year. Thereafter, no Inter than I October in each Calendar Year, the

CONTRACTOR shall submit a proposed training plan to the Management

Committee for the following Calendar Yum.

23.7 The training plan referred to in Article 23.6 shall provide for the payment to the

GOVERNMENT of the amount of one hundred thousand and fifty Dolton

(USS150,000) in advance tor each Cmbki Year ikroig the Exploration Period ami llirec

I mi u bed thousand Dollars (US$300,000) in advance for each Contract Year during the

Development Period.

21.8 Bach CONTRACTOR Entity ahull be rmponriWe for the training costs which it may

incur in respect of the personnel it employs from die Kurdistan Region and other part*

of Iraq. All such rea.som-.ble costs shall he considered as Petroleum Costs and shall lie

rtvovered in accordance with the provisions of Articles 1 and 25. Costs incurred by

iIk- CONTRACTOR for training programs lor the GOVERNMENT'S personnel

*»uill Ik home by the CONI RAC TOR only to the extent that they are inc luded in the

CONTRACTOR'S training plan, pursuant to Article 23.6 and shall also Ik

considered at Petroleum Celt* tod dull be recovered in accordance with the

provisions of Article* I and 25 TV cost of all other training programs for the

GOVERNMENTS personnel shall V the GOVERNMENT* feasibility.

239 TV CXkVTRAC TOR dull cootnbutefce amoera

Devek^meffl Period mro the envin«mauftad established by tV GOVERnSnT

for the benefit of tV natural environment of the Kurdistan Region, pursuant to the

Kurdaun Region Oil and Oa* Law (the ratal lund”) Such amounts dull

be deemed to be Petroleum Cart* tod dull be recovered in accnrihnoe with Articles 1 and


23.10 Any expenditure incurred by the < ONTR ACTOR under this Ankle 23 shall V

considered Petroleum Coatt and dull V recovered in accordance with Article* I and


23.11 He fore rbc end of the firs* Contract Year, the CONTRACTOR dull provide to the

GOVERNMENT technological and logaticzl auiomce to tV Kurdutm Region


 petroleum sector, including geological computing hard* arc and Kiftwttc and such

other equipment as the Minister of Natural Resource* may require, up to the value of

one million Dollars (SI.000,000). I he form of such assistance shall be mutually

agreed by the Parties and any costs associated tlicrewitli shall be considered

Petroleum Costs and shall be recovered by the CON IK ACTOR in accordance witli

die juovvvom of Articles I and 25.


24 I The CONTRACTOR shall pay to the GOVERNMENT a portion of Petroleum

produced and saved from the Contract Aten. a* provided in this Article 24 (the


24.2 The Royalty sluill be applied on all Petroleum produced and saved from the Contract

Area which is Crude Oil or Non-A»»ocuitc«l Natural tins, except for Petroleum used in

Petroleum Operations, re-injected in a Petroleum Field, lo«t. flared or for Petroleum

dial cannot be used or sold and such Crude Oil and Non-Associatrd Natural Ci«s

(excluding the excepted Petroleum) shall be tefeirvd to collectively as "Export

Petroleum- and separately and respectively a* “Export Crude Oil" and "Export

Noa-Associated Natural Gas”.

24 3 II payable in cadi, the amount of the Royalty calculated by applying the Royalty rates

provided under Aiticic 24.4 shall be paid by the CONTRACTOR as directed by the

GOVERNMENT, in accordance with Article 24.7.

I* payable in kind, the quantity of Export Petroleum corrcaponding to the Royalty and

Ciilculiitcd by applying the Royalty rates provided under Article '24.4 shall be

delivered in kind by the t OM K \CTOH to the GOVERNMENT at the l>clivery

Point Title and lid: of lorn of the Royalty paid in kind shall be transfenvd at the

Delivery Point

links?, the GO\ ERNMKNT require* the Royalty to be paid in lend, by giving the

CONTRACTOR not low than ninety (90) days pnor written nobcc poor to the

ccnuiK-ncemeni of the rrlevaoi Quarter. the GOVERNMENT shall be deemed t>

have elected to receive the Royalty in full and in cadi for the rekvao (garter

24.4 The Royalty due on any Export Petroleum produced and saved in the Contract Arm

dull be determined daily by applying tie following relevant Royalty rale, to the

F apart Crude Oil or to the F xport Non- Amoeuted Natural Gas (as the case may be)

produced and raved on that day

(n) For Export Crude OH:

the Royalty rate for Export Crude Oil dull be ten per cent (10%). which, for

the av oidance of doubt. shall apply regardless of the gravity of the oil; and

the Royalty rate for Export NW Aw*utcd Natural Gas shall be ten per cent



24.5 Associated Natural Gas and any other Petroleum shall be exempt from any Royalty.

24.6 If. pursuant to Article 24.3. the GOVERNMENT receives the Royalty in Wind, and to Article 28. the GOVERNMENT requests assistance for the sale of all or

part of the Royalty received in kind, each CONTRACTOR Entity shall assist the

GOVERNMENT in selling all or port of such Royalty received in kind (belonging to

die GOVERNMENT) in consideration of a commission per Bnrrcl payable to such

CONTRACTOR Entity, in accordance with Article 28.

24.7 If pursuant to Article 24.3, the GOVERNMENT receives the Royalty In cash:


obtained at the Delivery Point, as denned in Article 27.2;

(b) any Export Non-Associutcd Natural Gas shall be valued nt the actual price

obtained at the Delivery Point under un approved contract, as provided in

Article 27.3;

(c) the CONTRACTOR shall pay such Royalty each Quarter, in mn, within

thirty (30) days of the «xl of each Quarter, and shall calculate the payment

due tor the relevant Quarter by reference to the price for the Export Petroleum

at tlic Delivery Point, determined in accordance with paragraph (a) ami (h)

above, and the Royalty due on the Export Petroleum, determined in

accordance with Article 24.4, for the said Quarter; and

(cl) the CONTRACTOR Entities shall be entitled to export ftecly the volume of

Export Petroleum corresponding to the Royalty determined in accordance with

Article 24.4 for the purpose of paying the Royalty in cash


25 I All Export Crude Oil produced and saved from tbc Contract Area shall after

deduction of any quantities of Export Crude Od due for Royalty pursuant to Article

All Associated Natural Gat produced and saved from the Contract Area, except far

Associated Sanaa! Gas which is owl ia Petroleum Operraons, re-injected ia a

Petroleum Field, lost, flared or cwnot be used cr sold, shall be considered as

-Available Associated Nataral Gas-

All Export Kon-Associsiod Natural G.i» produced and saved from the Contract Area

•hall, after deduction of any quantiiics of Export Noe-Associated Natural Gas due f«

Royalty pursuant to Article 24. be con n (fared as “Available Non-Associated Natural


"Available Petroleum" menus Avmlnblc Crude Oil. Available Associated


Gas ami Available Non-Associated Natural Gas.

25.2 For the purpose of this Article 25:


 (a) uny Available Quito Oil shall be valued at the International Mart* Price

obtained al the IVlivvry Point, * defined in Article 27.2; and

(b) any Available Associated Natural Claa and any Available Non-Associated

Natural (las shall be valued at the Actual price obtained at the Delivery Point

under un approved contract, ns provided in Article 27.3.

Subject to lire provisions of (his Contract, from the Find Production in the Contract

Aron, the CONTRACTOR shall nt nil times ho ontitlod to recover all Petroleum

< .'outs incurred under this Contract, of up to forty percent (40%) of Available Quito < >il

(which, fiw the avoidance of doubt, shall apply rogiirdl.vt of the gravity of die oil) and

Available Associated Natural Gas, prmhuod and saved within any Calnulur Year.

Available (rude Oil above this percentage or otherwise not used for die recovery of

Petroleum Costs shall be ProGt Crude Oil

Subject to die provisions of th« Contract, from fim Pluducoop in the Central Aren.


«k (ONTRACTOR shir at aD time* be entitled to recover all Petroleum Cota

incurred iKfekr this Centraci of to fifty percent (50%) of Available Nre-AwcuM

Natural Gss produced and saved »nhi» «ry (atontor Year Avertable Non-

of Petroleum Cosu shall he Profit Natural Gan

For tbe application of Article 25.3 and 25.4. the CONTRACTOR shall keep a

25 5

detailed account of Petroleum Cost* in accordance with the provision* detailed la the

Accounting Pnxxdure Recovery of Pctrolevim Costs shall occur in the following


(a) production Costs;

(b) Exploration Costs (including appraisal costs and further exploration within the

Contract Area);

(c) Gas Marketing Coats;

(d) Development Costs; and

(e) Decommissioning Costs.

25.6 Total recovery of Petroleum Costs during any Calendar Year, expressed in quantities

of Petroleum, dull not exceed the relevant percentage* indicated in Articles 25.3 and

25.4. If in any Calendar Year, the Available Crude OU andor Available Non-

Associalcd Natural (ias do not allow the CONTRACTOR to recover all its

Petroleum Costs pursuant to this Article 25, the amount of un-rccovcrcd Petroleum

Costs in such Calendar Year shall he carried forward indefinitely to the subsequent

Calendar Years until all Petroleum ( !o*ih nro frilly recovered, but, save as provided in

Articles 14.10 and 38.4, in no other ease al ter the termination of (he Contract.

The provisions of Articles 27.7 and 27.8 shall he applied to determine (he quantities

Of Available Crude Oil and/or Available Non Awniciutod Natural Gas duo to the

CONTRACTOR for Hie recovery of its Petroleum Costa. j


23 * Tbc quanoocv of PcUolcwn avrapoading K> die tbare of Available Petroleum &* to

the CONTRAC TOR !.- it*- recovery of n Potrolrom Com **11 be delivered to Ac

CON IRACrOR *l the Deh'xry Point Title and n«h of loo of such Available

Petroleum dull In- trowforrod »lthe Delivery Point.

25.9 Each CONTRACTOR Entity dull be entitled to receive. take in kind and to export

tieely all Available Petroleum to which it is entitled f«r recovery of Ms Petrofesun

Co*. m accordance with the provision, of thn Contract and to retain Abroad any

proceeds thin the talc of an such Available Petroleum Petroleum Costs m oach

Production Area dull he recovered from Available Petroleum from that Product* «»


25 10 Subject to Article 38.4. for the avoidance of doubt. Petroleum Costs under this

Contract are not recoverable against other contract urea* held by the



2f» I Under this Contract,

(a) “prom Petroleum" meant Profit < rode fhl and Profit Natural Gas;

(t*) “Profit Crodc OIT means Uk- quantities of Available Crodc Oil and

Available Associated Natural Ga. produced from the Production Area, after

the recovery of Petroleum Costs, in accordance widi Articles I and 25: and

(c) "Profit Natural fiat" mean, the quiaiitin of Available NofrAttKiaMd

Natural Oo< produced from the Production Area, after the recovery of

262 Prom Fint Prodxtm and as rod when Petrokm it be» prufaced. the

t tIN TRACTOR dull be waded to lake a pr infer *nre of Profit Crodc fhl

^watkms. wttek pm*am§t *mt *al be dwrarined i*

26 3 To determine the percentage share of Profit Crude Oil and'or Profit Natural Gas to

which the CONTRACTOR is entitled, the K" Factor dull be calculated ib

accordance with Article 26.4 and shall be applied to each Production Area

26 4 The “R” Factor dull hr calculated aa follower



 Far the purpose of this Article 26.4:

Cumulative Revenues" means total Revenues, as defined below, receded by the

CONTRACTOR until the end of the relevant Semester, determined m accordance

with Article 26.7.

•'Revenues” means the total amount actually received by the CONTRACTOR for

recovery of its Petroleum Costs and its share of Profit Petroleum in the Production


‘Cumulative Costs” means all Petroleum Costs in the Production Area, actually

incurred by the CONTRACTOR until the end of the relevant Semester, determined

in accordance with Article 26.7.

Noe withstanding the foregoing provisions of this Article 26.4. for the period from

First Production until the end of the Calendar Year in which Fust Production occurs,

the “R” Factor shall be deemed to be less than one (I t

26.5 The share of Profit Petroleum to which the CONTR ACTOR dull be entitled from

First Production is:

(a) for Profit Crude OiL equal to the quantities of Petroleum resulting from the

application of the relevant percentage as indicated below to the daily volume

of production of Profit Crude Oil within the Production Area at the

corresponding Delivery Point:

“R Factor CONTRACTOR** % Share of Profit Crude Oil

K < or ■ 1 30%


R>2 15%


(b) for Profit Natural (ias. equal to the quantities of Non-Associated Natural Gas

resulting from live appluaiion of the relev ant percentage as indicated below to

the daily volume o' production of Profit Natural Gas within the Production

Area at the corresponding Delivery Point:

“R" Factor CONTRACTOR'* % Share of Profit Natural Gas

R < or= 1 35%

I < R*( R - I )/(3- I ))

R > 3 18%


26.6 The CONTRACTOR*! accounting shall account separately for all components for

cIk* calculation of "X" unJ “Y~ values in the formula provided in Article 26.4.

26.7 For each Seme Her. starting from the 1“ of January of the ( ilcmlur Year following the

(fllendnr Yenr In which First Pioduclion occurs, the COM K ACTOR shall calculate

tire "1C Pnetor applicable to the relevant Semcnlcr within thirty (30) days of the

beginning of such Semester. The “R" Factor to be applied duiing n Semester shall be

Uut determined by applying the Cumulative Revenues actually received and the

Cumulative Costs actually incurred up to and including the lust thy of the preceding


If the CONTRACTOR is unable to calculate the “R" Factor fc* the relevant

Semester before an allocation of Profit Pctrt»leum for such Semoter must be made,

then the allocation of l*rofit Petroleum for the previous Semester dull be used for the

relevant Semester. Upon the calculation of the “K“ I actor lor the relevant Semester

(a) If lit: allocation of Profit Petroleum in the previous Semester and foe rttasM

Semester is Utc same, then no adjustment shall be made; and

(b) it tl*e allocatton of the Profit Petroleum in the twv» Semesters i> different, then

the CONTRACTOR shall make any adjustment- to lire Partin' respective

shares of Profit Petroleum to resore them to the position that they would have

been n had the “R” Factor for the relevant Semester been available from the

26.8 If at any in* an emir OCCUR in the cakuhdoo of the “R“ Factor, realty in a

change » the CONI RACIOR s percentage share of Profit Crude OU and or Profu

Natural (iaa. the oceeamry correct*® shall be made and any adjustment* shall apply

from the Semester in which the error occurred Ihe Party having benefited from a

surplus of Profit Petroleum shall surrender nich surph» to the other Party’, beginning

from the first day of the Semester following the Semester in which ihe error was

recognised. However, each lifting of Petroleum relating to such error by live Parry

receiving the surplus shall not exceed twenty-five per cent (25%) of tlie share of Profit

P-etroleum to which such surrendering Party is entitled. For the avoidance of doubt, if

at any time an error occurs in the calculation of the "R" I tie tor, which does not result

in a change in the CONTRACTOR'S percentage share of Profit ( rude Oil and/or

Profit Natural (Ins, no correction shall be mndc,

26.9 The quantities of Profit Petroleum doe to the < 'ON I R AC I OR dull he delivered to

the CONTRACTOR Polities at the Delivery Point Title and risk of lum of such

Profit Petroleum shall be transferred to the CON TR\< TOR Entitle* at the Delivery


Each CONTRACTOR Entity shall be entitled to receive, lake m kind and to export

freely its share of Profit Petroleum in accordance with the provisions of this Contract

and to retain Abroad any proceeds from the sale of all such Profit Petroleum.

26.10 The share of the Profit Petroleum to which the GOVERNMENT is entitled in any

Calendar Year in accordance with Article 26.5 shall be deemed to include a portion

representing the corporate income tax imposed upon and due by each

CON TRAC TOR Entity, mid which will be paid directly by the GOVERNMENT m


behalf of each such entity representing the CONTKAC TOK hi the "Tpropriatc tax

authorities in accordance with Article 31.2. Ihc GOVERNMENT dull provide Ac

CONTRACTOR I ntitio with all written documcotation and evidence reasonably

required by the C ONTRACTOR Entities to confirm that well corporate income tax

has liccn pnid by the GOVERNMENT

2(i. 11 The quantities of Profit Petroleum due to the GOVKKNMKNI shall I'c delivered to

tlic GOVERNMENT nt Che Delivery Poim Pill* nntl risk of Iom of such Profit

Petroleum si mil bo treniferted at the Delivery Point.

26.12 At Icut twenty-one (21) day* prior to CONTRACTOR', estimated date of First

Production and. subsequently, thirty (30) day* prior to lhe beginning of each

Scracuer, the CONTRACTOR dull prepare and deliver to the GOV ERNMENT a

production program comprising the production forecast foe the next Semester and the

forecast of the quantities of Crude Oil and Natural Gas to which each Patty shall be

entitled during the said Semester.

26.13 Within ninety (90) day* following the end of eiuh Calendar Year, the

CONTRACTOR shall prepare and deliver mi annual production report to the

GOVERNMENT, slating the quantities of Cnide Oil and Natural Ons to which each

Party is entitled, the quantities of Cnide Oil and Natural (inn filled by each Party ami

the resulting over-lilt or undcr-llll position of ouch Party, pursiuint to the liflum

agreement enieixd into pumuiuit to Article 16.14

26.14 Any costs or expenditure incurred by the CONTRACTOR. it> Subcontractors or

supplier* relating hi the lilting of the GOVERNMENT * share of Petroleum by the

CON I R -M l OK .kill mil he considered Petroleum Costs and .shall ho charged to the

GOVERNMENI acvonlinw to ROV W W mutually Agreed bOVCSR &C




27.1 For the purpose of this Contract, any Crude Oil produced in the Contract Area shall be

valued at the end of each Quarter at the Delivery Point Uued no the International

Market Price, as defined in Article 27.2-

27 2 The ~latvra at tonal Market Price" referred to at Aniclo 27 I dull be die weighted

average pnee per Hand, expressed ia Dollars, obtained by the ( ON TRACTOR at

the Delivery Pout, by actbwk if necessary. daring the Quarter radmg on the date of

rahutwn for Ana's Length Sales of Crude Ofl

The CON IK \C TOR hall provide evidence to the \ ERNVIE.M that the sales

of Crude Oil referred to m Artkk 27.2 arc Aim's Length Saks. If the

GOVERNMENT consider* that any such sale of Crude Oil ii not on the basis of an

Arm’* 1 ength Sale then the GOVERNMENT has die right to refer the matter to an

expert pursuant to Article 42.2.


 In the event that there is no lilting of Ctude Oil in the relevant Quarter or no Amt’S

Length Saks, the applicable "lUimllllll Market Price' far such Quarter shall be

the *cighted avenge poce per Barrel obtained during that Quarter tram Aral’s

Length Saks of Crude Oil of the same or vunriar gravity and quality tram other

prodvox* areas void ia markets competing with Crude Oil produced from the

and other post Delivery Point cotfa

To determine such price, the Parties dull, prim to the -

agree cm a bosket of Crude Oil comparable to (hose produced in the Contract Ana and

sold in die international market. Prices olitained slutll be adjusted to account for any

variations such as quality, spocific gravity, sulphur content, trampotlalion costs,

product yield, seasonal variations in pnee and dationd, general market trends and

other terms of sale

27.3 The price of Natural Gas shall be the actual price obtained nt the Delivery Point,

(which may take into account quantities to lie sold, quality, geographic location of

rniikcts to be supplied ns well ns costa of production, transportation mid distribution

of Natural Gas from the Delivery Point to tho relevant market, in accordance with

standard international petroleum industry practice). The GOVKRNMtN I' shall have

tlie right to review and approve Natural tins sales contracts.

Account Inn Statement

27.4 In accordance with this Article 27.4, the GOVERNMENT and the CONTRACTOR

shall establish a statement showing calculations of the value of Petroleum produced

and sold from die Contract Area. Such statement shall include following iafc---lion



ft») ■ak pnee*.

of Crad: Oil sold by the CONTRACTOR I otitic* the

Month that do not fall m -be category referred to in (a)

(c) with sak priests applied daring such Month.

inventory in storage belonging to the CONTRACTOR I nitric* at

beginning and at the end of the Month: and


quantities of Natural Gas sold by the CONTRACTOR I rstatiov and

GOVERNMENT together with sale prices realised


27.5 All Export Petroleum shall be metered at the Delivery Point in accordance with

prudent intcrnatinrul petroleum industry practice and such meters shall be to lineal

meter standards. All metering equipment shall be installed and operated by the

CONTRACTOR lire GOVERNMENT shall, on receipt by the CONTRACTOR

of reasonable prior written notice, have the right to inspect any such metering

equipment installed by the CONIRACTOR. as well as all relevant d«vumc.«> ,md

nipporting information reasonably necessary to validate tlsc accuracy of such



metering. All metering equipment sluill be subject to periodic technical inspections in

accordance with prudent international petroleum industry practice.

27.f» If any metering equipment ts defective, the < ON IR ACTOR shall use all reasonable

endeavour* to repair it within fifteen (15) day* or, if deemed necessary by the

CONTRACTOR, replace it as soon as reasonably practicable from the dare the

defect became known. The “Adjustment Date" shall be the last date that d»c

metering equipment was known or agreed to Imvc been measuring correctly, or if not

known or agreed, the date that is midway between the date the defect was discovered

and the last date the equipment was known to have measured correctly. The results

from tlic defective equipment shall be disregarded for the period from die Adjusimcnt

Date until the (kite the defective equipment is repaired or replaced ami the

measurement for such period shall be estimated

(a) if cheek measuring equipment is installed and registering accurately, then by

uning the measurements recorded by such chock measuring equipment;

(b) if check measuring equipment is not installed or not registering accurately,

(hen by correcting the errot if the percentage of error is ascertainable by

verification, calibration or mathematical calculation; or

(c) if neither method is feasible, then by estimating the volume and/or quantity

delivered bused on deliveries during the preceding comparable period of time

when the metering equipment was registered accurately.

27.7 Any disputes arising under this Article 27 shall Ik settled by expen determination in

accordance w ith the provisions of Article 42.2.


Upon the GOVERNMENT** prior written notice of at least ninety (90) day*, each

CONTRACTOR Entity shall provide all reasonably necessary assistance to the

GOVERNMENT for the sale of all or pan of the quantities of Crude Oil to which the

GOVERNMENT is entitled, in consideration of a sales commission per Barrel to be

established with reference to prudent international petroleum practice ami to be mutually

agreed upon between the Parties.


29.1 Any payment to be made by a CONTRACTOR Entity to the GOVERNMENT

pursuant 10 this Contract shall be in Dollars and shall he offset against any

outstanding payments due by the GOVERNMENT to Ihe C ON I RA< I OR Entity,

or paid into the hunk account duly designated by the GOVERN MEN I' in writing and

sluill be paid within thirty (30) days of the due date, after which interest compounded

monthly lit the rale of LIBOR plus two (2) percentage points sluill be applied.

29.2 The GOVERNMENT may, at its sole discretion, direct the CONTRACTOR

Entities to pay:


(,) any Royalty in cash due to the GOVERNMENT pursuant to the provisions of

Article 24; and'or

(b) any proceeds from the sale undertaken by the CONTRACTOR Entity on

behalf of the GOVERNMENT pumiant to Article 28 of any Cnule Oil to

which the GOVERNMENT is entitled pursuant to Article 25; and'or

(c) any Production Bonus,

to a fund for revenue sharing, which mny in due course be established by legislation

consistent with the Constitution of Iraq. between the Government of Iraq and other

regions (including the Kurdistan Region) and govemoratw of Iraq. Nothing in this

Article 29.2 shall be understood as implying any contractual relationship or other

relationship between the COMRACIOR and'or any CONTRACTOR Godly and

die Government of Iraq and'or the regions of Iraq (other than the Kunlistui Region)

and'or and govcrnoroic* of Iraq

29.3 Any payment due by die GOVERNMENT to a CONTRACTOR Entity shall be

offset against future payments due by such CONTRACTOR Entity to die

GOVERNMENT, or paid in Dollars to the hank account designated by the

COM RACTOR Entity in writing and shall he paid within thirty (30) day* of the

date of invoice, after which intorest compounded monthly at the rate of LIBOR plus

two (2) percentage points shall be upplied

29.4 Any currency conversion to be nuidc under this Contract dull be ai the exchange rate

of the Central Bank of Iraq, provided such exchange rale applied lo the

t OMKU IOK f dull not he Icaa favourable taw the rase offered by o*NT

private, commercial or Industrial Ivinks in tile nuriet In the absence of

the Central Hank of Iraq or m the event that the Central Hank of Iraq b unable lo

provide the relevant exchange rate, any currency convcrv.m lo be made under (his

Contract dull be at the exchange rate of a reputable commercial hank carrying oo

business in live international market and approved by the Parties.

29.5 The CONTRACTOR shall not realise any gain or loss duo to exchange rate

fluctuations and, consequently, any gain or low resulting ftom the exchange of

currency sluill Ik- either considered as revenue and credited to the Accounts or shall lie

considered as u Petroleum Cost and shall be recovered by the CONTRACTOR in

accordance with Articles I and 25, as the ease may he

296 Each CONTRACTOR Entity shall at all times be entitled to freely convert into

Ikoliars or any other foreign currency any Iraqi dinars received in the framework of

the Petroleum Operations and lo freely transfer the same Abroad Fhe conversion rate

si rail be as provided under Article 29.4.

29.7 Each CONTRACTOR Entity shall have the right to be paid, receive, keep, transfer

aud use Abroad, without any restrictions, all proceeds of its share of Petroleum.

29.8 Bach CONTRACTOR Entity and its Subcuntractors shall luive the right to freely

open and maintain hank accounts for Petroleum Operations within or outside the

Kurdistan Region oittl other parts of Iraq.


29* Hacb CONTRACTOR Entity shall have the njchl to pay m any freely convertible

imncmty ail itt financial requirement* for the Petroleum Operations and Io convex

ttrese currencies to Iraqi dinars in any bank ai the KurdtsUn Region or other parts ol

Iraq, at the saroe exchange rite as provided under Article 29.4

29 10 Each CONTR \CTOR Entity shall hare the right, without any restnctvcv id freely

repatriate Abroad and to freely d**a« of:

(a) *i> proceeds received n the Kurdistan Region or other parts of Iraq from (he

sak of Petroleum;

(b) any proceeds received from other operations and activities carried out undo

this Contract in the Kurdistan Renton or other parts of Iraq

29 11 Each CONTRACTOR Polity shall have the right to pay in any foreign currency rta

Subcontractors and its expatriate personnel, either in the Kurdistan Region, other parts

of Iraq, or Abroad Sard Subcontractors and expatriate personnel shall be obliged to

local needs and ihey shall have the nghi to repatriate the proceeds of the sale of then

29 12 Each CONTR ACTOR Entity * Affiliate*. Subcontractors and their perwrmd shall

such CON TRACTOR Entity and

29.13 For the fuumdng of Petroleum Operations, each CON IR ACTOR Entity shall have

Itw right to have recourse to external firuu*. n t> from third panics or from in Affil.tlud

Companies on an aim’s length bn«i.


30.1 All services, material, equipment, goods, consumables aod products imported into (he

Kurdwtnn Region and other ports of Iraq by the CONTRACTOR. un>

CON I It At TOR Entity, its Affiliate*, any Subcontractor or any agent of any of the

foregoing, for use or consumption m the Petroleum Operations shall be admitted free

and exempt from any and all Taxes on import. The CONTRACTOR, any

COM R AC TOR Entity, its Affihates. any Subcontractor or any agent of any of the

foregoing Hindi have the right to re-export from the Kurdistan Region and other parts

of Iraq free from all Taxes on export any material, equipment, goods, consumable*

nixl product* ihut ate no longer required for the Petroleum Operations, except inhere

title has poiutod to the GOVERNMENT in accordance with Article 20. In wIikIi case

reexport si mil be approved by the Management Committee.

30.2 The CONTRACTOR, any CONTRACTOR Entity , iis Affiliates, any Subcontractor

o« .my agent of uny of the foregoing, and their personnel (includin’ ilwu family

members) shall have live right to freely import mto the Kurdistan Region md other

purts of Iraq and reexport from the Kurdistan Region and other parts ol Iraq any

pentad belongings and furniture free and exempt from any Taxes on import re

export The sak in the Kurdutan Region and orher parts of Iraq of



30.3 Em* CONTRACTOR Entity and hs Affiliates shall he «Wtled lo freely export fn*n

(be Kurdistan Region and other parti of Iraq, free of any Taxe*. any Petroleum 10

which it is entitled pursuant to the provisions of this Contract.

304 The GOVERNMENT shall indemnify the CONTRACTOR, any CON TRACTOR

Entity, its Affiliates, any Subcontractor or any agent of any of the foregoing, and theu

personnel (including their family member?) for any n port or export Taxes referred to

m Articles 30.1. 30.2 or 30.3.


31.1 Except as expressly provided m this Article 31. and without pn^odice to the

exemptions expressly presided for is Article 30 and in this AfOck 31. each

CONTRACTOR Entity, its Affiliates and any Subcontractor OuR. for the entire

duration of this Contract, be exempt from all Taxes as a result ol' it? inowne. assets

and activities under (hi.? Contract. The GOVKK.NMl Nl lull indemnify each

(’ON'I'RACTOR Entity Upon demand against any liability t««p V > I »xes assessed

or imposed upon sucli entity which relate to any of the exemption* cr.mted by the

GOVERNMFJVI under this Article 31.1, and under Articles 31.4 through 31-11.

31.2 teach CONTRACTOR Fntity shall be subject to corporate iMOmc lax oo its income

bom Petroleum Operations as provided in Article 31J, which dull be denied to be

inclusive and in full and total discharge of any Tax on income, receipt*, revenues,

gains or profit? of each rod> oaky Payment of the wid corporate income tax shall be

made for the entire duratmo of this Contract dmvly to the offtc ul Kurdistan Regkn

tax anfcnrihr i by the OWFRNMF.NT. for the aceowl of am* CONTRACTOR

Entity, from the GOVERNMENT** share of the Profit Petroleum received pursuant

to Article 26.

Each CONTRACTOR Emily shall, within sixty (60) day? after llic aid of each tax

year, provide a statement to the appropriate Kurdistan Region lax authorities of its

profits which are subject to corporate income tax. together with a calculation of the

amount of corporate income tax due on thoae prol t»

The GOVERNMENT shall, with* ninety (90) days after the cod of cnch tax year,

pros-ide to each CON IRAC TOR booty (i) the appropriate official lax receipts from

dc appropriate Kurdistan Region tax authentic* or coker rrtes ant audwnty certifying

such entry has met aO it* Tax obligation? m the preceding lax year, and (ii) a copy of

any retain cr other filing made by the GOVERNMENT in respect of it* payment of

corporate income tax on behalf of such CONTRACTOR Fntity

31.3 For the purposes of Article 312:

(n) The rale of corporate income tax to he applied to each CONTRACTOR

Entity shall be the generally applicable rale prescribed m the Law of Taxation

(Law No. 5 of 1999). passed by the National Assembly of the Kurd:?tan

63/1 ■ 2 H

frtrv.Wm Operations (as defined under the Kcfdutan Rc^kw Oil and Goa

low.) by a petroleum, operation' taxation law for the ki.rd.Oan Regain. but in

no event in excess of lorty per cent (40%).

(b) The GOVERNMENT and the f ONTHACTOR agree tlmt corporate Income

tux shall be calculated for each CONTRACTOR Hiitlty on its net taxable

profits tinder the Contract, us calculated in accordance with the provisions

relating thereto in die Accounting Procedure.

31.4 Fach CONTRACTOR Entity, its Affiliates as well as any Subcontractor* shall he

exempt from any withholding tax applicable oo any payments made to Ilian or by

thorn to or from Affiliates or third parties, whether inside or outside the Kurdistan

Region and'or Iraq, for the entire duration of this Contract.

31.5 Isuch CONTRACTOR Entity mid Its Affiliates shall he exempt from Additional

I'rofiU Tax, ns referred to in Article 40 of the Kurdistan Region Oil and Gas Law or

any successor Tux.

31.6 Uach CONTRACTOR I nitty and its Affiliates shall he exempt from Surface Tax, as

referred to in Aiticle 40 of the Kurdistan Region Oil and Cits Law or any successor

31.7 liach CONTR ACTOR Entity and its Affiliates shall be exempt from Windfall Profits

Taxes, ns referred to in Article 40 of the Kurdistan Region Oil ami (ins Uw or any

successor I «x.

31.K Bach CON I R At TOR Entity and any Subcontractor shall be subject to the payment

0>r withholding of the personal income u v and soda) seevity cental* n. uv for which

such entity or Subcontract.* is liable to pay or withhold in respect of it* employees

who are Iraqi national*, pursuant to the Law of Taxation (Law No 5 of l*»99) paved

by die National Assembly of the Kurdistan Repca. as may be amended from fine to

except that a CONTRACTOR Entity or Subcontractor

31.9 II i* acknowledged that doable tax treaties will have effect to give relief from taxes So,

but not limited M. the CON IWAfTOR. CONTRACTOR Entities, Subcontractor*

and employee* and other Person* in accordance with the pnivioons of such double

Cm treaties, but shall not impose an additional burden of taxation

31.10 Any value added tax (“VAT) shall be considered as a Petroleum Cost ml shall he

coat recovered in accordance with the provHtooa of Article* I and 25.

31.11 Anv value added tax (“VAT), not otherwise recoverable by the CONI RACTOR

under VAT Uw. shall be considered a* a Petroleum Cost and shall be COR recovered

u* accordance with the provisions of .Articles I and 25.

31.12 Notwithstanding any other provision to the contrary m this Contnict. the Parties

acknowledge and agree that the provisions of this Article 31 dial! apply individually

and separately k> all CONTRACTOR I otitic* under this Contract and dial there shall


 I* no joint and several liaMUly in respect of any liability, duty or obligation referred

to in this Article 31.


Slunntarc Bonus

32 I A signature bonus of one million Dollars (USS1,000.000) (“Stature Bonus"! shall

be payable to the GOVERNMENT by the CONTR ACTOR within thirty (30) days

of the Effective Date.

I'UMCHS PuMtilflll

32.2 A capacity building bonus of twenty four million Dcllnis (US$24,000,000) (“Capacity

Building Bonus") shall be payable to the GOVERNMENT by the

( ONTRACTOR Within thirty (30) days of the Effective Dute, to be applied by the

GOVERNMENT to housing projects to assist victims of Anfal and other conflicts.

32.3 In the event of a Crude Oil Commercial Discovery, the CONTRACTOR shall pay

the following relevant Cnidc Oil Production Bonus to the GOVERNMENT withm

thirty (30) days of the following relevant occurrence;

(a) two million five hundred thousand Dollar* (US 32,500.000) when Fin*

Production of Crude Oil front the Contract Aren commences;

(b) five minion Dollars (US $5,000,000) when podartion of Crude Oilfrnm the

Contract Aren reaches a cumulative aaaxml of ten tralhon Barrels of Crude Oil


(c) ten aattoo DoUara (US $10,000X00) when production of^Cr^Oil^om the

Cradc Od (25 amho); and

(d) twenty mil bon Dollar* (US $20,000,000) when production of Qude 0.1 firm the

Contract Area rrwchra a cumulaUvc amount of fifty millwo Barrel* of Crod: Oil


324 In the event of a Non Annealed Natural Cm Commercial Discovery, the

CONTRACTOR dull pay the following relevant No® Associated Natural Gas

Production Bonin to the CRIVERNMENT wtthm thirty (30) days of the following

relevant occurewc

(a) twu million five hutaked thraonnd Dollars 0'S $2500,000) when Rrst Production

of Non A*r**ciated Natural Gas from the Contract Area commences;

(h) five raillion Dollar* (US $5,000,000) when production of Nun-Associated Natural

Gas from the Contract Ami rcnchcs a cumulative amount of ten million baud*

of oil equivalent (10 nmilwc);


(c) ten miDioa DotUr* (US 110.000,000) when production of Non-Asncntcd

Natural Gu from the Contract Ami reaches a cumulative amount of twenty five

miliioo barrels of oil equivalent (2$ mmboc); and

(d) twenty million DoIIms (US $20,000,000) when production of Non-Associated

Natural Gas from the Contract Aron tenches a cumulative amount of fifty million

barrels of oil equivalent (50 mitilioc).

1? 5 For the purposes of this Article .12, It ( on micro ml Discovery shall be declared by the

CONTRACTOR u> be either n Crude Oil Commercial Discovoy or n Non

Associated Gas Commercial Discovery mul under no circumstances shall a Production

Bonus be due in respect of both Crude Oil itud Non Associated Natural Gas for the

same Commercial Discovery.

12.6 No bonus due pursuant to this Article 32 dial I be deemed to be a Petroleum Cost


33.1 11k GOVERNMENT shall obtain any required Permits for the transportation of

Petroleum in the Kurdistan Region and in Iraq, an well its any necessary Permits and

casement rights for the construction of any pipelines and related facilities required for

the Petroleum Operations, as provided tn Article 33 2.

33.2 IV GOV KRNMBNT undertake* to transfer to the CON I RAC TOR its rights lor

transportation of Petroleum by pipeline. The < ’ONTRAC' I OR shall have the right to

design, construct, operate and maintain pipelines and any related facilities for the

transportation of Petroleum produced under this Contract.

33.3 Prior to the construction of any pipeline and related facilities as provided m Article

33.2, the CONTRACTOR fbaU submit following information to the Management

proposed pipeline route and related facliOos


(d) proposed financing schakdc;

(e) construction schedule;

(f) general technical description of the pipeline and related facilities,

(g) construction plans and tests;

(h) preventive measures for damage to the «m iroament and thkd parties; and


 The Management Committee shall examine all the above information mul 'hull within

ninety (90) days, approve the proposed pipeline project in accordance with die

provisions of Article 8.5.

33.4 Subject to spare capacity being available and to their Petroleum being compatible,

third parties shall be entitled in transport their Petroleum through any pipeline

constructed by the CONTRACTOR in accordance with this Articlo 33 on terms to be

agreed between the CONTRACTOR and such third party, those terms shall be

reasonable commercial terms and shall not discriminate among third party users. The

CONI RAC TOR shall always have priority of access to such pipelines

33.5 To the extent that they ure incurred upstream of the Delivery Point, any costs

associated with the design, construction, operation and maintenance of the pipelines

and related facilities by CONTRACTOR under this Article 33 ("Pipeline Costs”)

shall bo considered Petroleum Costs and shall be recovered by the COM KACTOR

in accordance with the provision* of Articles I and 25.

33.6 rhe CONTRACTOR shull have the absolute right, without any exceptions and for

the entire duration of thin Contract, to use, free of charge, any pipeline and related

facilities constructed by CONTRACTOR under this Article 33 and to transport

Petroleum produced from any Production Area and to operate anti maintain any

pipeline and its related facilities, freoly and witlioiit any additional costs.

33.7 To the extent related to transportation upstream of the Delivery Point, any tariffs

received front third parties for use of any pipeline and related facilities by

CONTRACTOR under this Article 33 shall Is) applied to (lie recovery of Petroleum

Costs until all Pipeline Costs have been fully recovered by the CONTRACTOR

pursuant to the provisions of Article? I end 2^ til'd dial! not be UKluttal iu iKome for

corporate income tax purposes. The GOVERN MEN f shall he entitled to receiso

any mch tan ft's from third parties for their use of *uch pipeline and related facilities

when the raid Pipeline Costs have been fully recovered by the C ON IRACTOR The

costs associated with providing such tran>portali

Delivery Point shall be considered Pipeline Costs and therefore Petroleum Co* and

shall be recovered by the CON TRACTOR in accordance with the provision* of

Articles I and 25.

33.8 Upon recovery by Hie C ONTRACTOR of all the Pipeline Costs, the operating and

maintenance costs of any pipeline and its related facilities shall be borne by the

CONTRAC MIR and dull be considered Petroleum Co* and shall be recovered by

the CONTRACT OR in accordance with the pros uions of Article* I and 25.

31.9 The GOVERNMENT shall have the same nght* ns the CON I RAC TOR for use.

free of charge, of any pipeline and related facilities constructed by CONTRACTOR

under lliis Article 33 for the transportation of the share of Petroleum to which the

GOVERN MEN I )' entitled under this Contract up U> (lie Delivery Point, provided

that where the GOVERNMENT is participating in its capacity as a ( ONTRACTOK

Entity pursuant to Article 4, it shall be liable for its share of Petroleum Costs.

33.10 Hie CONTRACTOR shall bear the cost of operation and maintenance of any

pipeline and related facilities constructed by CONTRACTOR under this Article 3'

 and all risks of accidental loss or damage u» such pipeline and related facilitic* while

they are required for Petroleum Operations.


.14 I It i the event a Reservoir extends beyond the Contract Area into an adjacent urea which

IK the subject of another Petroleum Contract (as defined by the KuixJJmhii Region < >il

and Gun i-aw) (an “Adjacent Contract Area”), or in the event n Reservoir of nn

Adjutant Contract Area extends into the Contract Area, the provisions of Article 47,

Paragraph Second of the Kurdistan Region Oil and Gas Law shall apply and live

GOVERNMENT shall require die CONTRACTOR and the contractor of llto

Adjacent Contract Area to agree upon a schedule for reaching agreement of the terms

of die unitisntion of the Reservoir, which terms shall be based on reliable technical,

operational and economical parameters, all in accordance with prudent international

petroleum industry practice. In the event that the Minister of Natural Resources

decides the uniti-ation pumiant to Article 47, Paragraph Third or the Kurdistan

Region Oil and Gas Law. and if die CONTRACTOR does not agree with the

Minister of Natural Resource s decision. the CONTRACTOR shall he entitled to

arbitration pursuant to the provisions of Article 411.

.14.2 For clarification and die avoidance of doubt and notwithstanding Article 47 of the

Kurdistan Region Oil unJ Gas Law, in the event that a Reservoir extends beyond the

boundarica of the Contract Area into an adjacent area which is not die subject of

another Petroleum Contract (as defined by the Kurdistan Region Oil ami tins I .iw),

die GOVERNMENT slutU. upon die CONTRACTOR'S request, lukc the ncccsmry

steps to extend the boundaries of Contract Area so as to include the entire Reservoir

within the Contract Area. provided that Uve CONTRACTOR ecu offer iIk*

GOVERNMENT a competitive oiinirmun w.irk |voy.ram for such adjacent area.


312 N.twithMaafcng the other provukw of this Contract, the CONTRACTOR and the

CONTRACTOR Entities shall not be liable to the GOVERNMENT or the Public

Company or other government agencies, authorities or bodies, courts or political

subdivisions for any damage or loss or claims ol any kind resulting from ils conduct

the Petroleum Operations unless such dflinngo or loss is the result of wilftil

misconduct or a material failure to conduct Petroleum Operations in accordance with

die terms of this Contract; provided, however, such liability cannot result in tlw

•vent of any omissions, errors or mistakes committed in good faith by die

CONTRACTOR in the exercise of die power* and authorisations conferred upon Hie

 CONTRACTOR by vthoc ot -


out of, relating to. or ..... w---... . «*.v*--------------

out under ibis Contract: (i) reservoir or formation damage, (ii) inability to produx,

use or dispose of Petroleum; (iii) lou or deferment of income; (iv) special or punitive

damages; or (v) other indirect d*m»|*» «* h>w whether or not similar to did


35.3 The CONTRACTOR dull indemnify aid bold harmless the (iOMK'MIM

iha Contract regardless of ihe fault v« nrvli, .nee m whole or m party of any entity or


35.4 Notwithstanding Article 33.1, the GOVERNMENT shall indemnify and hold

harmless the CONIKACTOK and the < ONTRACTOR Rabbet against all low.

damages and liability anting under any claim, demand, action or proceeding brought

nc instituted agaum the CONTRACTOR or any CONTRACTOR Entity by any

employee of die GOVERNMENT or of any Public Company or of any subcontractor

of the foregoing or by any dependent of any -

industrial illness, death or damage to personal property sustained in connection with,

related to or arising out of llie performance or non-performance of dm Contract

tegcrdlre* of the fault or negligence Hi whole in m part of any entity « individual

considered Petroleum (oato and shall be recovered by the CONTRACTOR at

atcunkncc with the provtsiom of Articles I ml 25.

15.7 The *iOVERNMINT shall indemnify and bold hanrkwa the CON TRACTOR mtJ

each CONTRACTOR Entity from and agams. all onto (metudiag legal unto I

expense*. !<*K*. damages and IwbUity which such Pcnon may mlTer or incur, or

nuy rcoih from such Person being denied, hindered or prevented from A»By

eueasmg its righto or taking the full benefit of AUkIcs 29 4. and »o 29.11.

35* In accordance with prudent international petroleum industry practice, cadi

CONTRACTOR Entity dull maintain any insurance required by applicable

(a) lot* oT and damage to materia! and equipment mod in the Petroleum

Op toll IIW. and

(h) personal injury , damage to third parties and risk* of pollution associated with

Petroleum Operation* for reasonable amount*, within the limits approved by

the Management Committee.

35.9 Any imumce policy relating to this Contract dull name the GOVERNMENT as an

additional insured party and dull include a waiver of subrogation protecting the

GOVERNMENT against any claim, !os* and dtnuge resulting from any Petroleum

r oo behalf ot*s CONTRACTOR under this C ontract. *

that the CONTRACTOR is liable for 1

The CONTRACTOR dull out be

COVTRNMtM «» of any Pi*hTcL«r«i> or of its or i

o* of am

35.10 Upon m written request, the

CONTRACTOR which rclrtca' u» due ( ,«nw

35.11 Each CONTRACTOR Entity .lull be responsible for the filing of all claims nude

under any insurance policy maintained by such CONTRACTOR Entity which relate

to till* Contract. Any premiums and payments relating to Midi insurance policies shall

bo considered Petroleum Coals and shall be recovered by the CONTRACTOR in

accordance with the provision* of Article* t mid 25.

35 12 In any insurance policy maintained by a CONTRACTOR Entity which relate, to this

Contract, the amount for winch the CONTRACTOR itself is liable (the "Deductible



36 I Ike CONTRACTOR thill lap til records, dm and rdaringto

Report OBadGMUii


362 Upon «hc OOVF»MDfTi rcqae«. the CONTRACTOR shall provide (he


36 3 The GOVERN MEVT shall have tide » all data and mfomunoa wtorther raw.

derived, poccrnd. interpreted or analysed, obtained pursuant to this Contract.

36.4 Each CONTRACTOR Entity shall have the right, without any limitation, to send

Abroad copies of all reports and technical data, magnetic tapes and other data relating

to ilk- Petroleum Operations. Magnetic tapes or other dats. the original of which must

b« analysed and proem**! Abroad, may be transported out of the KurdLstan Region

365 Any reprcaentttivvs audtorised by the GOVERNMENT and notified to the

CONTRACTOR shall, upon reasonable prior written notice, have reasonable access

to any information and data rclstaig to the Contract Area m the poeesswo of the

CONTRACTOR which the CONTRACTOR is obliged to provide to the

GOVERNMENT pursuant to this Contract It is understood that, when exercising

«*h right, the GOVERNMENT dull ensure it does nor unduly mtcricre with or

hinder tlse CONTRACTOR'S rights and activates

36.6 The CONTRACTOR dull pros-hlc the GOVERNMENT upco the

GOVERN ME VT'a wntten request any analysis information. reports, tape* or other

data (geological, ges>physical. logs, interpretations, drilling reports, etc.) related to the

Petroleum Operation* In the possession of the CONTRACTOR All available

original* of such data dull Ik- transferred to the GOVEKNMI NT at the end of this


36.7 Apart from the exceptions doted in this Article 36. the I’nrtic* undertake to keep all

««nsfulcntinl during the cnliic term of this Contract tuid not to divulge or disclose such

ditto or information to third parties without the specific consent of the oilier Parties,

such consent not to be unreasonably withheld or delayed. The foregoing

confidentiality obligation dull not apply to information or data which:

** or. through no fault of any Party, become* pent of the public domain;


(b) i* known to Use recipient iu the date of disclosure;

government agency having jur.Mlk.ikm over a CONTRACTOR Entity, by a

court order or any other legal proceedings, or


*• .

 h-viag jorisdktior ■


36S Notwithstanding the foregoing in Altkie 36.7, m *xardaocc with pnM

mternabocaJ petroleum industry practice. **ch dm and informal*® may he fiackw*


(a) Affiliates of cadi CONTRACT OR Entity;

(b) employees, officer* aikI director* of oath CONTRACTOR Entity and thcr

respective Affiliated Companies for the purpose of the Petroleum Operation*,

subject to each such entity taking customary precautions to ensure >i.fc

information is kept confidential;

(c) consultants or agent* retained by any CONTRACTOR Entity or its Affiliate

for the purpose of analysing or evaluating information or data,

(cl) banks or financial wtnuiion. retained by any CONTRACTOR Entity or it*

Affiliates with a view to financing Petroleum Operations, including any

professional consultant* retained by such bank or financial institution;

(c) bona fide prospective assignee* of a participating interest under this Contract

(including any entity with whom a CONTRACTOR Entity and/or it*

Affiliates are conducting horni fid. negotiations direclod towards a mergot,

consolidation or the sole of a material portion of its or an Affiliates shines);

(ft prospective or actual Subcontractor* mid suppliers engaged by a Party where

diacloMiro of such information U essentia) to such Subcontractor's ..r

supplier** work for such Party; and

(g) any other Person or entity, upon the prior wnttcr approval of the n-o

36 9 Any dm

Comet shall become the ewfoanc property of fee GOVERNMENT, who dull

have the right to ose aame fee any purpose, in parncula for the purpose of promoting

said areas Each CON TRACTOR Entity shall be entitled to keep copie* of such daU

36 10 Subject to the provisions of this Article 16, the CONTRACTOR may not sell nor

exchange any data related to the Petroleum Operations without the approval of die

GOVERNMENT, which npprmnl dull not be unreasonably withheld or delayed

where, in the CONTRACTOR * reasonable opinion, such sale or exchange would

benefit the Petroleum Operation*.



37 | Ihuutg Che performance of the Petroleum Operations, the CO.V1 K \( I OK .shall take

rvmotuNc measures to ensure that it. the Operator. it* Subcontractor* and agent*

attend to tl« protection of llic environment and prevention of pollution. in accordance

with prudent international petroleum industry practice in similar physical and

ecological environments nnd any then applicable Kurdistan Region law.

37.2 Prior to surrendering a portion of the Contract Area, the CONTRACTOR shall take

reasonable measures lo abandon the area to he surrendered in accordance witlt prudent

International petroleum uiduMty pmcllce m similar physical and ecological

environments Such manure* shall Include removal or closure in place of ftcllitioi,

nsatcriul und equipment together with rcusoiuhlc measures necessary for the

preservation ol fuuna, Horn mul ccocyvtcms, all iu accordance with printout

international petroleum industry practice in similar physical and ecological

environments The CON I’RAC TDK shall only he responsible for site restoration or

environmental .lamage to the extent the same pertains solely and directly lo Petroleum

Operations conducted purxuant to thi» Contract

37.3 The C<>.N 1RAC TOR shall talc reasonable precautions and measures in accordance

with pnitk-nl intcniationiil petroleum industry practice in similar physical and

ecological environments lo prevent any pollution which may arise diroctly as a result

of the Petroleum Operations and lo protect the environment (fauna and Dora), water

soutves iukI any other natural resource* when carrying out Petroleum Operation*.

37.4 The CONTRAC TOR shall, in aooonlancc with prudent international petroleum

industry practice in similar physical and ecological environments, respect die

preservation of property, agmultural njeas, KhJ ftllrcrivx when carrying out

Petroleum Operations

37.5 The CONTRACTOR shall conduct and submit an environmental impact assessment

to the GOVERNMENT within six (6) m,Tih> alter the Effective Date

37.7 The GOVERNMENT (i) represent. and warrants that, on the bflccuve Dale, there

are no national parks, nature icaervo or other protected areas located in whole or m

pnrt within the Contract Area where the COVI RAC.TOK shall not be entitled to

entry out Petroleum Operations and (ll) covenants that during the term of this

Contract will not designate or create or permit the creation of any nation*: parks,

nature reserves or oilier protected ureas, located tn whole or in part within the

Contract Area.


378 Any by the CONTRACTOR m

Article 37 stall be »d shall be

CONTRACTOR in i of Articles I ml 25.

37.9 The CONTRACTOR is not responsible for any pre-ex itting cnvironTncTUl

condition or any acts of unrelated third partH*.


38.1 To enable the CONTRACTOR to recover the coat* associated with future Contract

Area Decommissioning Operation* under (his Contract, the CO MR \CTOR d'-ill

huve the right to establish a reserve hind for future decommissioning and site

restoration (a -Decommissioning Reserve fund*). The Decommissioning Receive

Fund may be established at any time during the final ten (10) Calendar Years of the

term of the Production Operations of a Pnxluctioo Area hut, upon the reasonable

request by the CONTRACTOR, t»*c GOVERNMENT 'lull allow the

CON TRACTOR to establish Mich fund over a longer period. Once established, the

CON IRACTOR shall make regular contributions to the Decommissioning Reserve

Fund based upon estimated Petroleum Field decommissioning and site restoration

corns in accordance with prudent international petroleum industry practice, and inking

into account interest received nnd Allure interest expected to he emiii-d on tlie

Decommissioning Reserve I und Any contributions by the CON I RAC I OR to die

Decommissioning Reserve l und >',.11 be nude in IX»llir» .ik! d ll -c tkemod

Petroleum Cost* when piid mlo the reserve fund, and shall be recovered hy ttw

CON IRACTOR in accordance with the provisions of Articles 1 and 23.

Contribution* to the Decommrssiomng Reserve Fund dull be placed with a first rale

bank approved by the Management Committee in accordance with Article 8.5.

38.2 If. at the end of the Win of the Production Operations of the Production Art*, the

GOVERNMENT decides to take over product**) operatic®* m the ProdoctMa Area

(at the GOVERNMENT dull become liable for its fJure Dccomn-issi.*mg

(b) tha coofribuboec and any mlero* accumulated in the Dccommwuoran*

Reserve Fund, to the extent **cb contributions have been recovered at

Petroleum Coals, shall be paid to the GOVERNMENT; and

(c) the GOVERNMENT 'hall release the CONTRACTOR and the

« ONT RAC! OK Entities Horn any obligations relating to Decommissioning

Operations nnd shall indemnity the CONTRACTOR and the

CONTRACTOR Entities for any costs, liabilities, expenses, claims or

obligation* associated therewith.

38.3 If the CONTRACTOR undertakes the Production Area Decommissioning

Operations, the contributions and any in teres* accumulated in the Decommiwoning

Reserve Fund shall be paid to the CON IRACTOR and shall be used for die

Decommissioning Operations. The CONTRACTOR stall undertake any such

Decommissioning Operations in accordance with prudent iMematfottt) petroleum

industry’ practice in similar physical and ecological environments.

JM If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the

Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs

for the Contract Area, the balance shall be paid by the CON I R \< *H>H dimI may be

recovered, if applicable, by the CONTRACTOR Entities or any of their Affiliates

from any other area which m the subject of another Petroleum Contract («* defined by

the Kurdistan Region Oil and Gas Lmv) anywhere in the Kurdistan Region and. to the

extent tl>e balance is not recoverable ns aforesaid, such remaining balance shall be

paid by the GOVERNMENT to the CONTRACTOR.

38.5 If the Decommissioning Reserve Fund is paid to the CONTRACTOR Md the

Decommissioning Reserve Fund exceeds all Decommissioning Coats for the Contract

Area, the balance dull be transferred to the GOVERNMENT

38 6 Any expenditure incurred by the CONTRACTOR in rclmion with this Article 38,

including any contributions to the Decommissioning Reserve Fond, shall be deemed

Petroleum Costs and shall be recovered by the CON IKACTOK in accordance with

the provisions of Articles I and 25.

38 7 The CONTRACTOR shall subnut to the Management Committee for approval in

accordance with Article 8.5 a detailed plan for decommissioning the Contract Area

facilities and .site restoration (the “DecoamlutonlnK Plan-), such Decommissioning

Plan to bo submitted no later than twenty four (24) Months prior to the date estimated

by die CONTRACTOR for the end of Commercial Production from the Contract

Aron, The Management Committee dull provide comments, if any, on the

l>coommissionmg Plan within ninety (90) days after receipt. The CONTRACTOR’S

completion of the Decommissioning Operations in axordaoce. in all material

respects, with the Decnnmiwioning Plan for a Production Area approved by the

Mutagcmeal Committee shall satisfy all of the CONTRACTOR'? oblige

In the esoil the GOVERNMENT doe not agree dor Decormnisioomg OpeeaDoM

Dectrwnissjoomg Plan, it must advise the COM RAfTOR within six (6) months of

CONTRACTOR'S completion of such operations.


Assigament to Affiliate

39.1 Each CONTRACTOR Entity dull be free to sell, assign, transfer o« otherwise

dispose of all or part of its rights, obligations and interests under this Contract to an

Affiliated Company or to another COST KACTOR Entity with the prior toasml of

the GOVERNMENT, which envoi! shall not be unreasonably delayed or withheld

7 VII2

>92 Fach C OMRACInH I «Wy dull have the i

cc put of .t* ngtu* nl -CO

(no* bang jd AtliUatcd < ouRuny or am** COVTR « TOR FjU> |

°f GO\ I.R.NlltN r •♦octl cm.

w,thhckl An, COVTKAC TOR I .mt, propon* to $t0.

driposc of all or put of (U right* ml interests under this C ontract to any web thud

P«rty shall request mob content in writing, which n^ucrl shall he acconpaniad hy

reasonable evidence of the loci in tool .uiJ financial capability «if the proposal third

putty assignee.

39.3 In order for any deed of mile, assignment. transfer or other disposal ns providotl under

Article* 39.1 or 39.2 to he ellcclivc, die Parties awl the relevant third patty, if any,

.JuJI enter into a binding and enforceable instrument of assignment and novation,

>94 fly -ray of darifkwnoa. and w 4 3 bm*«x«i of tfw fcwtfomg prmtdom of this

Article >9. die GOV KRNMKNT Anil ** be o*mdmd to be wrtag »

ami ewe is deemed owrary to *e GOYfJlNMrvrs awrtsts. as cvkkaccd n


>9 3 In the root a CONTRACTOR FaUy noga* or la any other w*> tramfen its rights

and imcmt* raider dm ONSKt - briber a wfcpfc or a part, such ampumi *

transfer shall not give rise to any Tax. including on the consideration paid or received

or on the income or gain therefrom.

39.6 The GOVERNMENT may not at any time transfer any ra all iu rights and

afcUftfOU under this Contract to any Person, including to a Public Company «* any

other company or entity, except in accordance with Article 4

39.7 f hangc of Control" for the purpooe of this Article 39.7 mean* any direct or indirect

change of the identity to the Person who Controls a CONTRACTOR Entity (whether

through merger, sale of shares or of other equity interests, or otherwise) through a

liHttl< transaction or senes of transactions, from one or more transferors to one or

more transferees, in which die market value of such entity’s participating intcicrt

(which shall ho as specified in the Joint Operating Agreement tabuing to this

Contract, or where there W only ooe CONTRACTOR l-nttfy, one lundred (IW.)

per cent) in this Contract represent* more than seventy five per cent (7$S) of the

«~~™*£*~*** ^2dlr^gw JdTaiyS

desremwd “w*ed span Ac mtxmta m cash a wiling buyer would pay a wiRng «*•


 Back CONTRACTOR Entity -fexti * or anticipates w,th a mnabU degree >4

ccrnfaty that it will be subpct to . (W m toocrot. other than to an AlTilumJ

Company or a COVTRACIOk fatty. ■kail aotify the GOVERN MFNT aa aooa a>

practicable after it becenet aware of the (hanpe M Control or anticipated Otm*t m

Control and request the convent of GOVERNMENT, which consent shall not be

unreasonably delayed or withheld.

A Change in Control shall not give rise to nity Tax including on the consideration punl

or received or on the income or gain tliereftxnn.


•U). I Mo delay, default, broach or omission of the (ONI RA< TOR in the execution of any

of its obligations under this Contract shall he considered a failure to perform this

Contract or be the subject of a dispute if such delay, default, breach or omission u due

to a cam: of Force Mature. In such event the ( (IM KACTOR shall promptly n tify

«K GOVERNMENT xn anting and uke all reasonably appropruae mcasmo. to

or cumilmeiir^l,h«1tldft|d»o,aiiy nme'plrtod provided under thu t ootra.1

tincluding the Exploration Period and any externum thereto, any Sub-Period .ukI any

e xtension thermo and any Development Period and any extension thereto). I he Parties

shall nnvt ns soon .is possible after the notification of Force Majeure with n view to

using reasonable oodeovourt to miiigntc the dTocis thereof.

4ft,?. For 11sv* purpose of this Contract. "Form Majeure” means uny event that is

unforeseeable, insurmountable and iirrststihlc, not due to any error or omission by die

CONTRACTOR but doe to . reui ,.traces beyond tu control, which prevent* or

impedes execution of all or part of us obligations wider this Contract. Such events

(e) any act, event, ban** mg or ocewntKc due u» natural causes, in particular,

but without limitation, llooils, ilotnis, cyclones, fires. liglitnitiB, or


(0 environmental reWitclloim, which the GOVERNMENT has not notified to the


(g) except in respect of the (if IV F H N MKNI and/or any Public Company winch

may be a CONTRACTOR Intity, any acts or orders of the



 GOVERNMENT, my rammer. ministry. department aMKim, agency,

authority. council, committee, of other constituent eletnent thereof, any

corporation owned nml/or controlled by tlic any of die foregoing; uiul

(It) any acts or orders of any other government claiming or asserting jurisdiction

over the subject mutter of this Contract, any minister, ministry, department,

.sub-division, agency, authority, council, committee, m oilier constituent

element thereof, or any corporation owned and/or controlled by rniy »*t‘ the


40.3 The ifaall receive th


Co^ay of a < ONTRACTOR

ike (OMI ACTOR if the

ofay of ftc


The GOV KRNMKNT md any Public Company which may be a CON IRACTOR Ratify at

any time licroby ftilly and lirovoeably waives any claim to Immunity for itsclt or any of its


This waiver includes any claim to immunity from:

•oAmSTlS; rr"r"»tati


! *t» Aitxk 42;.

dial results from an export deteinilnuiion, mediation, arbitration or any.judicial,

administrative or other proceedings oommenced pursuant to this Contract.


validity , interpretation, enforceability, breach or lertmnaUon

of this Contract, which arises between the Parties (or between any one or more

entities constituting the CONTRACT OR and the GOVERNMENT).



 lu lire event of a Dispute, the ponies lo the Depute shall use their reasonable

endeavours to negotiate promptly in good faith a mutually acceptable resolution of

Mich Dispute.

Subject lo the pm visions of Article 42.2, a Party who desires to submit a Dispute for

resolution which has not been promptly resolved us aforesaid shall commence the

dispute resolution process by providing the other parties to the Dispute written notice

of the Dispute ("Nolle* or Dispute"). The Notice of Dispute shall identify the parties

to the Dispute, aluill contain a brief statement of the nature of the Dispute and the

relief requested and shall request negotiations among Senior Representatives.

(a) In the cvcut tku any Notice of Dispute is given in accordance with this Article

42 I. the parties to the Dispute shall first seek settlement of the dispute by

negotiation between Senior Representative* Senior Representative means

any individual who has authority lo negotiate the settlement of the Dispute for

a party to Use Dispute, which for (lie GOVERNMENT shall mean rise

Minister of Natural Resource*. Within thirty (30) days after the dale of

delivery of the Notice of Dispute, the Senior Representatives representing the

parties to the Dispute shall meet at n mutually acceptable date, time and place

to exchange relevant infomuuion in an attempt to resolve the Dispute. II u

Senior Representative Intends to be accompanied at the meeting by a legal

adviser, each oilier parlv shall ho given written notice of such intention and iD

Senior Representative may also he accompanied at the meeting by a legal


(b) If the Dispute cannot be resolved by negotiation in accordance with Article

42 I (a) within sixty (60) days after the date of the receipt by each party to the

Dispute of the Notice of Dispute of such tuitha period ttt Ibe pntia to the

Dispute may agree ia writing, any party lo the Dispute may reek scltknteac of

n ATATMediatioo Procedure, which Procedure dull be decreed

to be incorporated by reference mio th» Article, and the parties to such

Dispute shall submit to *ucb mediation procedure.

(c) If the Dispute is not settled within the earlier of (A) sixty (60) days of the

appointment of the median*, or such further penod as the potties to the

Dispute may otherwise agree in writing under the mediation procedure under

Article 42.1 (bh and (B) one hundred and twenty (120) day* after the delivery

of the Dispute Nonce, any party* the Dispose may refer the Dispute to. and

seek final retoiaooo by. orbitntko under the LC1A Rales, which Rules shall

be decreed to be incorporated by reference alo tins Afhcfc.

(i) Aay arbitration shall be ccodoctcd by dm (3) arbitrators.

00 If the parties lo die Dupree are the GOVERNMENT and all the

CONTRACTOR fcowies, the GOVERNMENT and the

CONTRACTOR dial! each appoint one (I) arbitrator. If Use fumes to

the Dispute are the GOVERNMENT and more than one. but not all

the CONTRACTOR Entities, the GOVERNMENT shaft appoint

oik' (I) arbitrator and such CONTRACTOR Entities shall appoint one

(I) arbitrator. If the parties to the Dispute are the GOVERNMENT



 and one CONTRACTOR Entity. the GOVERN MINI md **h

CONTRACTOR Entity dull each appoint cue (1) arbilnsi.r

(iii) In any on*. the two arbitrator* to appointed shall, m good faith, ire

all reasonable endeavour* to agree on the appointment of the third

arbitrator, who will chan the arbitral tribunal. In one of failure to

appoint mi atbitniiN or lo agree on the appointment of the third

arbitrator, Rules of thtf I-CIA sJiull apply.

(vi) Arbitration shall take place in l-ondon, England. The language lo lie

used in any prior negotiation, mediation and in die arbitration hIiiiII be

English During the arbitration procedure aral until tlie arbitral

decision, the Purlieu shall continue to perform their obligations hiuI

take no actions that would impair the Contract The arbitral award may

be enforced by any court of competent jurisdiction, including in the

Kurdistan Region Any award shall be expressed in Dollars.

(v) The Parties agree that the arbitral award shall be final and not subject

to any appeal, including to the Courts of England on issues of Law

(vi) With respect to any nutter referred to arbitration under Article 4.1.4.

the arbitral tribunal shall have the uuthority to amend this Contract lo

restore the economic position referred to in Article 43.3.

P inert PeKTlllLnation.

42.2 Any disagreement between live Pirtie* relating to Articles 15.9, 27.2 and 27.9, os well

as any disagreement the Parties agree to refer to an expert, shall be submitted to an

expert. The Management Committee shall prepare and agree appropriate terms of

reference relating to the disagreement lo be submitted to the expert, in accordance

with Article S-5 CTerm* of Reference').« «xn as possible after the Effective Dote.

<•> The disagreement shall he submit led to an expert appointed by mutual

agreement of the Parties within thirty (30)

preparation and agreement of the Tem» of Reference by Ok Management

thirty (30) day period, at the relpsot of either Pam. dsTexpen shall he

appointed by the President of ibe Energy Irwrcxe n Loudon. Fnglaad Any

expert appointed must have the rwvcasary qualification for reviewing and

agreed by the Management Committee. The Management Committee shall

promptly provide the expert w ith the agreed Verms of Reference relating to the

disagreement. Each Party shall have the right to give to the expert in writing

any information which it considers useful, provided it docs so within ferty-flw

(45) days after the expert's appointment. Such information shall be provided

to the other Party at the same time and such other Party shall be entitled t»

provide commons on such information to the first Party and the expert withm

thirty (30) days after receiving such mfcrmaboo. The expert shall have




 nght to review and verify any information he deem* uaeful to assist him in his

review of the disagreement

lc) Ihc cxpeii shall rcnikr liis decision within forty five (45) days of his receipt

of the Term* of Ketcronce and the infbmmlion referred to in Article 42.2.

Subject to the provisions of Article 15.9, any decision o( the expert shall be

final and dvtdl not lie svibject to any appeal. except in the ease of manifest

error, fraud or malpractice. Any costs and expense* u*M«eulcd with ite expert

detcrmin.itk*i dull he shared equally between the PartK*


(.'overning .Law

43.1 This Contract, Including any dispute arising therefrom, thcroundar or In relation

thereto and the agreement lo arbitrate in Article 42, shall be governed by English law

(except any rule of I’ngliidi Imv which would refer the imtttci lo unother jurisdiction),

together with any relevant rules, customs and practices of international law, ax well os

by principles and practice generally accepted in petroleum producing countries nnd in

the international petroleum industry.

I heal Stability

432 Tbc obligation* of the CONTRACTOR ra raped of this Contract shall not be

changed by the GOVERNMENT and the general sod overall equilibrium between

tlx- Parties under this Contract dull not be affected in a substantial and lasting

43.3 The GOVERNMENT guarantees to the COM KAtTOK. for the entire duration of

this Contract, that it wil maintain the stability of the legal, fiscal and economic

condition* of this Contract, as they result from this Contract and as they result from

the laws and regulations in force on the dale of signature of this Contract. Ihe

CONTRACTOR has entered into this Contract on the Ml of the legal fiscal and

ecooonk framework prevailing at the Effective Da*. If. at any time aficx the

E tTcctivc Oale. there is any change ia the legal fiscal and or cconomK frame* ork

under the Kerdntan Rrgwo Law or other law applicable id ce So the Kurdistan

Repen which detrimentally affect* the CONTRACTOR, tbc C ONTRACTOR

Entities or any ocher Person entitled to benefits under this Contract, the terms and

conditions of the Contract shall be altered so as lo restore the CON TRACTOR, the

CONTRACTOR Entities and any other Person entitled to benefits under this

Contract to the same overall economic position (taking into account home country

laves) as that which such Person would have been in. had no such change in the legal,

ft seal aodtar economic frame*ori occurred. •


 434 If the COMKAC nm believe* rf* ns comma* poaitx*. or the economic p-iuu.

of a CONTRACTOR l-«N> or my ocher Per** entitled lo benefit. under dm

Contract, has been detrimentally affected as provided in AiticJc 43.3, upon the

C'ONTRACTORN v*nHen mpicu. the Paine* shall raeel lo agree on any noomaary

measure* or making uny appropriate amendments lo die terra* of ihu Contract lo n-

cstahl idling I bo ttjulUbrium between the Panic* and restoring the COM RACTOR,

the CONTRACTOR EMMn or any other Peraon eutided lo benefit. under dm

Contract u> the position (taking into account home country taxer) il war in prior to the

SLdfto (90) Che CONTRACTOR • ttqac* (or

o*ex penod a» may be agreed by the Part**), the COVTRACTOR may refer

the matter m ilnputr to arbitration a* provided m Artwlc 42.1, w*hout die ncceurty of

435 % prtfudM to the generality of the foregoing. the CONTRACTOR shall be

entitled to the benefit of any future change* to the petroleum legislation or any other

legislation complementing, amending or replacing il

43.6 The Parties agree to cooperate in all possible ways with a view to fully achieving die

objective* of this Contract The (SOVKKNMBN T shall facilitate the performance of

the Petroleum Operation! by promptly granting lo the COMRACTOR any

nccersaiy nudiorisitiun. permit, licence or access right and making available any

existing facilities and services with a view to dm Panics obtaining maximum mutual

benefit from die Contract.

43.10 Aa ua behalf of the GOVERNMENT, the

Vfumary of CM fc*

the Oil and Ora Affair, of

Agree and approvo this Contract for of the K RcgnmOilaodGaa

L*». if




44.1 All notices, demands, instructions, waivers, consents or other communications to be

provided pursuant to this Contract shall be in writing m English, shall be effective

upon receipt, and shall be sent by receipted hand delivery or by email (followed by

delivery bv reputable international air courier company with an establishment in I'.rbil

in tlic Kurdistan Region) to the following addresses:



His Excellency the Minister of Natural Resources


Ministry of Natural Resources

Kurdistan Regional Government

Ivrbil, Kurdistan



Komot Group S.A.:

Attention: Anatol Stati

Address: MD 2005 Republics Moldova, Chisinau, bd. Renasterii 22/2


A notice delivered by email (followed by air courier) shall, save for manifest error, Ik

deemed to have been delivered upon its transmission by email. .


44.2 The .above address and/or designated representative of any of the Parties may be

changed on giving ten (10) days prior notice to the other Party delivered pursuant to

Article 44.1.


45.1 Subject to the provisions of Article 45.5, the GOVERNMENT shall have the right to

terminate this Contract in tire event the CONTRACTOR:

(a) fails to meet a material financial obligation expressly Mato s Contract or

(b) during the Firet Sub-Period docs not carry out drilling and seismic acquisition,

as detailed in Article 10.2 or. during the Second Sub-Period (or earlier), does

not cany out drilling and seismic acquisition, as detailed in Article 10.3; or

(c) internips Production for a period of more than ninety (90) consecutive days with

no cause or justification acceptable in accordance with this Contract or under

prudent international petroleum industry practice, it being recognised dial

Force Majeure is an acceptable justification for such interruptions; or

(d) intentionally extracts or produces any' mineral which is not covered by the object

of this Contract, unless such extraction or production is expressly authorised or

unavoidable as a result of operations earned out in accordance with prudent

international petroleum industry practice; or

(e) if tltc CONTRACTOR comprises solely one entity, is declared bankrupt in

accordance with applicable I jiw, or

(t) wilfully refuses to abide by negoriatint, mediation, arbitration or expert decision

under Article 42;

or if:

(g) Komet Group S.A. both

(i) fails to perform the guaranteed obligation referred to in Article 2.9

before the expiry of the cure period as defined in the Refinery

Contract; and also

(ii) fails to pay to the GOVERNMENT a penalty of two hundred million

dollars ($200,000,000) I*fore the expiry1 of the cure period as defined

in the Refinery Contract.

45.1.1 If Komet Group S.A., before the expiry of the cure period as defined in the Refinery

Contract, either performs its guaranteed obligations referred to in Article 2.9 and

referred to in Article 45. i(g)(i), or pays to the GOVERNMENT the penalty referred

to in Article 45.l(g)(ii), the GOVERNMENT shall issue to Komet Group S.A. a

certificate of compliance with Article 2.9.


45.2 'Hie GOVERNMENT may also terminate the Contract only in respect of one

CON TRACTOR Entity if such entity is subject to a Change of Control for which the

GOVERNMENT has not given its authorisation in accordance with Article 39.7.

45.3 At any time prior to the Development Period, tlie CONTRACTOR shall have the

right to terminate this Contract by surrendering the entire Contract Area in accordance

with tltc provisions of Article 7.

45.4 During the Development Period, the CONTRACTOR dial! have the right to

terminate this Contract at any time by surrendering all Production Areas, provided its

then current obligations have been satisfied in accordance with this Contract.

45.5 If the GOVERNMENT intends to exercise its right to terminate this Contract

pursuant to Article 45.1, it shall first comply with the following provisions:

terminate this Contract stating the reasons for such termination and requesting

the latter:

(i) to remedy the default; or

(ii) to propose acceptable compensation.

(b) If. within three (3) Months after the notice referred to in Article 45.5(a), the

CONTRACTOR has not remedied the situation complained of hv the

GOVERNMENT to its satisfaction or offered compensation acceptable to the

GOVERNMENT in cadi case acting reasonably, the GOVERNMENT shall

notify the CONTACTOR in writing that the Contract shall be terminated

from the termination date detailed in such notice. This Contract shall terminate

on such termination date unless the CONTRACTOR issues a notice of

dispute as provided under Article 42, in which case this Contract shall remain

in force until n final settlement of the dispute has been reached in accordance

with the dispute resolution provisions of Article 42.

The foregoing provisions of this Article 45.5 arc subject to the proviso that, in case of

a dispute where there has been breach of this Contract which has been submitted to

dispute resolution pursuant to Article 42, the GOVERNMENT shall not be entitled

to exercise its right to terminate this Contract prior to a final determination under

Article 42 in favour of the GOVERNMENT.

45.6 If Uio GOVERNMENT terminates this Contract pursuant to the provisions of

Articles 45.1 and 45.5, the CONTRACTOR shall lose all its rights and interests

under this Contract. Notwithstanding the foregoing, the provisions of Articles 14.10,

16.7, 30, 31, 35.1, 35.3, 35.4, 35.7, 36, 38.2(c), 41, 42, 43.1 to 43.6 and the guarantee

contained in Article 2.0 shall survive the termination or expiry of this Contract

45.7 If a (CONTRACTOR Entity breaches Article 46.1 or 46.2 the GOVERNMENT or

another CONTRACTOR Entity may terminate this Contract in respect of the first


45.8 If the Contract is terminated under Article 45.2 or 45.7, the interest of the relevant

CON TRAC T< >R Entity shall he transferred to the other CONTRAC TOR Entities in

 the proportions in which their respective percentage interests bear to the aggregate of

their respective percentage interests under the relevant Joint Operating Agreement or

in such other proportions os such CONTRACTOR Entities shall agree between them

for the market value thereof (as such term is defined in Article 39.7). Such transfer

shall not give rise to any Tax including on tin: consideration paid or received or on the

income or gain therefrom


46.1 If this Contract is reasonably proven to have been obtained in violation of Kurdistan

Region Law concerning corruption, this Contract is void ub initio.

46.2 Each CONTRACTOR Entity agrees that if it is, nt any time, reasonably proven to lie

in breach of Kurdistan Region Law concerning corruption the provisions of Article

45.7 apply.


This Contract shall become effective nod be binding on the Panic* upon the signature of the

Contract by the duly authorised representatives of the GOYI KNMLM and the

CON TRAC TOR. as provided over lea!


Entered into in three (3) originals in Erbil, the Kurdistan Region on 2®^ 2008


Bv : ---

Nechirvan Barzani Ashti Hawrami

Prime Minister Minister of Natural Resources

Kurdistan Regional Government Kurdistan Regional Government

On behalf of the Regional Council On behalf of the Ministry of Natural

for the Oil and Gas Affairs of Resources in the Kurdistan Region

the Kurdistan Region - Iraq


Komet Group S.A.



Map showing coordinates of Barda Bash Block corner points

Point Latitude (deg min Longitude (deg X(mE) Y(mN)

•®£l_......... min sec)

A 36' 32' 05'N 43" 29' 51* E 365 500 4044 300

B 36* 31’ 13'N 43* 43’ 35'E 385 977 4042 422

c 36 28' OO'N 43' 47' 49'E 392 200 4036 400

D 36' 24' 29TJ 43‘41‘30‘E 382 700 4030 000

tnj 36: 28’ 24"N 43* 30' 32"E 366 358 4033 785

).l 88/112




1.1 INirpose

Io classify expenditure^ define further Petroleum Cart* (in ndditioo to throe defined

as such in the Article* of the Contract), and prescribe (he manner in which (he

CON 1 RACTORs Account* shall be prepared and approved.

1.2 Definition*

Weeds and phrase* to which a meaning ban been assigned in Article 1 or ocher

Articles of the Contract dull have the mme meriting when u* Annex.

1J fnransbtencs

In tlic event of any inconsistency or conflict between the provision* of this Annex and

the other provisions of the Contract, Ihcn the oilier provision* of the Contract dull


1.4 Accounting Record* mid Reports

1.4.1 The CONTRACTOR shall maintain the Account* in acu*dancc wit| Artfck 15.1

and in accordance with this Accounting Procedure, including in accordance with the

charts of Account* agreed under Paragraph 1.4.2.

1.4.2 Within sixty (60) days of the Effective Date, the CONTRACTOR dull submit to and

tllaetw' with the GOVERNMENT a proposed outline of duals of Aoeotmi'

outline aboil be io accordance wiA generally accepted standard* and rccognimi

accounting tystcros and coosakmi with normal petroleum industry practice and

procedure* Widmi ninety (90) days of receiving the above subn the

GOVERNMENT dull either provide wnaen notifcatum of ** approval of the

or request in wntmg revisions to the proposal Within ooe hundred and

(1X0) day* after the Effective Date, the CONTRACTOR and the

(GOVERNMENT dull agree .*> the outline of charts of Accounts which

deacnhtf the basis of the isccr-inlmg system and procedure* to be developed nnd

under this Contract Following *udi agreement, the CONTRACTOR »hall

expeditiously prepare and provide the GOVERNMENT with formal copie* of the

of Accounts and manual* related to the accounting, rcvnrduig

which arc. and shall be. observed under the


(a) Production Statement (an iinhcatod in Paragraph 6).

(b) Value of Production and Pricing Statement (as indicated in Pnntgmph 7).

(c) Con Recovery and Share Account Statement (as indicated in Paragraph 8).

(d) Statement of Kxpeadifurca and Receipts (as indicated in Paragraph 9).

(e) Final I ind-of-Year Statement (to indicated in Paragraph 10).

( 0 Budget Statement (a* indicated in Paragraph 12).

1.4.4 All reports nnd statement* shall l*o prepared in accordance with tho Contract,

Kurdistan Region l aw, and where there arc no relevant provisions of cither of these,

in ik'conlanoo with pmdent inlernutloiuil petroleum industry practice.

1.5 fjiiiguage and Unit* of Account

AD Account* dull be maintained nnd prepared in the English language and dull be

recorded in DoUar*. Where necessary for clarification, flic CONTRACTOR may

also mnintnin Account* in other currencies.

1.6 Audit nnd Inspection Right* of the

In addition to tire provisions of Articles 15.3 to 15.7 and 15.9. the following

provisions shall apply to any audit carried out in accordance with Articles 15.3 to


1.6.1 For purposes of audit,n?J tbe GOVERNMENT. reraoably and in arewfcncr

with prudent intcrrumenal petroleum indurtry practice, may examine and verify, at

r civ ruble tunes upcm reasonable pr.or wrtten notice to the CONI R ACTOR, all

charge* and credits relatnc to the Petroleum Operation «, such a* book* of account,

accounting entries, material record* and invent ones, vouchers, payrolls, invoices and

any other documents, correspondence and records including electronic records

reasonably considered necessary by the GOVERNMENT to audit ami verify the

charges and credits, values and treatments.

1.6.3 Where the GO\ f RNMENI requires venficotion of charges made by an Affiliated

Company of the CONTRACTOR, the GOVERNMENT shall have the right to

obtain an audit certificate for such changes from an internationally recognized tinn of

public accountants acceptable to both the GOVERNMENT and the

CONTRACTOR, which may be the CON TRACTOR’* statutory auditor.

9ft'l 12

1.6.4 Will'll issues are outstanding with respect to an audit, the CONTRACTOR shall

maintain the relevant documents and permit inspection thereof until the issue is


1.7 raiments

Unices a* otherwise provided in Article 24, Article 29 or other Annies of the


1.7.1 All payments between the Parlies shall, unless otherwise agreed, be in DoIIiim and be

i mute through a bank designated in writing by each receiving party; anil all Mima due

under the Contract shall he paid within thirty (30) days following the end of the

Month in which the obligation to make such payment occurred.

1.7.2 All suini. due by one party to the other under the Contract shall, for each day such

auim aie overdue, bear interest compounded monthly at LIBOR plus two pet cent


1.8 Cuirniey Exchange Rales

In addition to the provisions of Article 29, the following provisions shall apply «" any

exchange* of currency carried out in accordance with Article 29:

1.8.1 Amounts received and Petroleum Coats incurred, shall be converted from other

e treitoo into Dollar* in accordance with the CON I KACTOR's usual accounting

procedures which .dull reflect generally accepted accounting practices in the

international petroleum industry, mid with reference to exchange rates obtained ®

lucorduiHo with Article 29.

1.9 Accrual Basis. Cash I taw Bash and Report*

All books aid

1.16 V aloes and Treatments

Values and treatments proposed by the CON TR ACTOR relating to all Petroleum

Costs shall be subject to challenge by the GOVERNMENT in the count* of audit to

ensure that they are in accordance with the provinons of this Accounting Proccfcire.



2-1 Segregation of Costs and Expense*

Petroleum Costs shall be segregated in accordance with the purposes for which such

Petroleum Costs arc nude. The purposes which shall quality are:

(«) those which have been included in the approved Work Program and Bulge!

foe the year n> which the Costs and Expenditure* are nude;


(b) expenditures incurred in twi o! emergency as m* out m Artic les 11.7, 13.5,

13.9 35.5,33.6 and any other Article* of the Contract:

(d) bee. .greed by fef«e.ha tanc lo ftnr

All Petroleum Coats recoverable under Paragraph 3 relating to Petroleum Operation*

•hall he classified, .kilned and allocated a* set oul Mow

2.2. Uxplonttlon Costs

I iplnrarion Costs are all direct and allocated indirect costs and expenditure* incurred

2.2.1 Aernl. geophysical, geochemical, paleontological. geological, topographical ami

seismic surveys and studies imd their iulcipret.ition and purchased geological and

geophysical information.

2.22 Stratigraphic test hole drilling and water well drilling

2.2.3 labour, materials supplies, and awvicea used in dnlling wells with the object of

finding Petroleum or Appraiiwl Well* excluding any costs of (he subsequent

completion of such wells as producing wells

2.2.4 Facilities lo (lie extent uted In support of the puipuu» dewrihed tr i‘inspire} '} I.

2.2.2 and 2.2.3. including access tomb.

Development Costs are all direct and aDoented indirect cost* and expenditures

incurred in carrying out Operation* including all

indirect costs ac M


2.4.1 Drilling well* which are completed as producing wclU and drilling well* for purposes

of producing from a Petroleum reservoir, whether these well* arc dry or producing

und dnlling wells for the Injocikm of water or gn* lo enhance recovery ot Petroleum.

2.4 2 Completing wells by way of installation of casing or esjuipment or otherwise ufta n

well lias been drilled for die purpose of bringing the well into use ns n producing well

or oa a well for the injection of wuter or gas to enhance recovery of Petroleum.

2.4 3 The costs of Petroleum production, transport and storage facilities Mich ns pipeline*.

flow lines, production and treatment units, wellhead equipment, subsurface

equipment, enhanced recovery systems, Petroleum storage facilities, mid access road*

for production activities

2.4.4 I'.nginotriug and design studies for die wells anil facilities referral to In Paragraphs

2.4.1,2.4.2 ami 2.4.3.

And including that portion of all service expenditures and that portion of all genenil

.md administrative expenditures directly attributable to Development Coat* or

allocated thereto on a consistent and equitable bo«i»; and any other expenditure

mooted in the l»cvclo|imcnl Opcraiions and not otherwise covered under

Paragraph 2.3.

2.5 I'roiluctlon Costs

Production Costs are nil direct and allocated indirect costs and expenditures incurred

In carrying out Production t ipcrations, including all direct and allocated indirect costs

and expenses incurred in Petroleum t>pcrutioo.s a Her first Production which arc other

than P \p!oration Cert*, 0a» Marketing Coats, Development Costs and

Decommissioning Cotta. Production Costs include that portion of all oavwc

expenditures and that portion of all general mid mJrunirtrativc expenditures directly

attributable to Production Costs or allocated thereto on a consistent and equitable


and equitable bass, and the I>ecocnmi5siooiag Reserve Fund shall be determined on

such buris. in advance of incurring such costs. as provided in Article 38 raid. for the

purposes of cost recovery, the contributions to the Decommissioning Reserve Hunt

shall he recovered in accordance with Article 38.

2.7 Service Fipenditurn

Service expenditures are expenditures in sapped of Petrofeme Operation*, including

wjircbuuaca, vehicles, rootorved rolling equipment, taersfl. fire and security monom.

workshops, water and sewerage plants, power plant*, bousing. community an.I

recreational facilities and furniture, tools and equipment used in these ocUviticv

Service expenditures in any Calendar Year shall include the costs incurred


year to purchase andor construct the said facilities as well as the annual cost' of

maintaining and operating the same. All nervicc expenditures shall be rugulariy

allocated a> specified in Paragraphs 2.2.5, 2.5, 2 4. 2.5 and 2.6 to Bxploration Cost*,

(.Ini Marketing Costs. Development Costs, Production Costs and Decommissioning

Costs respectively tuid shall he separately sliown uuder each of these categories.

Wltcrc service expenditures are made in respect of shared fitcilitic-H. the basis of

allocation of costs to Petroleum Operation- dull be consistent and equitable and shall

be specified.

2.8 t .eneml and Admialstrativc lApcnditurrs

General and administrative expenditure* are:

2.8.1 All main office, field office and general administrative expenditures in the Kurdistan

Region including supervisory, accounting, procurement and employee relations


2.8.2 Where die CONTRACTOR is rut Affiliate of o group of companies whose

headquarters is Abroad (n "Kordga CONTRACTOR"), an annual overhead charge

shall be made for service* rendered (excluding the direct expenditures us referred in

Paragraph 3.1 -2.(b)) by any Affiliate of the Foreign CONTRACTOR outside the

Kurdistan Region to support and manage Petroleum Operations under the Contract, or

where the CON 1RACTOR. not being a Foreign CONTRACTOR draws upon the

services of an Affiliate within the Kurdistan Region, an annual overhead charge shall

be made for service* rendered (excluding the direct expenditures os referred in

Paragraphs 3.1.2.(«) and (b)) by socli Atlilinte to support and manage Petroleum

Operations under (ho Contract ("Parent < orapany Overhead").

Parent Company Overbead will be deemed to cover (be actual com (being saline*,

wage* and labour burden, employee benefits, travel, head and other normally

ret rhurcable expenses pad by the Affiliate of a CONTRACTOR in accordance with

it* •undarxl personnel policy in fcrce m the relevant period, provision of office

CONTRACTOR S Affiliate. su.h a*, but rsvt limited »o. irucrastxrul production

hendquarten. mtcraaboaal exploration bcaApmters, treasury . P*>toII. taxation,

nwuranca, legal, connnanKatKins. computer services, controllers, personnel.

executive administrative management, research and development, central engineering

and proccwi engineering which:

(n) cannot, without unreasonable effort under expenditure or without tlie release

of confidential data proprietary to any of the CONTRACTOR'S Affiliates, be

charged under any other wxtjon of this Annex; and

(b) are property allocable to Petrofeun Opoanocs under die Contract It is

understood, however. that services performed by- the departments luted above

and other corpora* departments which directly benefit Petroleum Operations

uodrv the CcsKract shall be charged as *fcrcct costs in accordance with



 Ill inspect of the costs of the CONTRACTOR’! Parent Company Overbad, is

described above, the CONTRACTOR shall charge monthly to Petroleum(Ipcrnlioiv.

an amount equal to the total of the following:

The CONTRACTOR .full be entitled to an annual charge based on a shdmg teak

percentage and charged mrei'-hly to Petroleum Operations Ute basis for applying th»%

percentage shall be the total of Fxpk*atx>o Costs and Gas Marketing C diving

each Calendar Year (exclusive of this Exploration Overhead) or fraction thereof lew

expenditures which have been subjected to the two (2) per cent fee. referred to in

Paragraph .1.1 8(b). The sliding scale percentage shall be the following:

for the fin* four mills* OoLIare (USW.000.000) four pet cent (4%)

For the next four million Dollars (UST4.000.000) three per cent (3*»)

Over eight million Dollars (USS8.000.000) two per cent (2%)

I ho foregoing pcrccnfngc.i may be reviewed but not more often than annually, nnd

any approved appropriate iul|nstment shall be made, if necessary, productively.

2.8.2 2 Development, Production and Decommissioning Operations Overhead

live overhead rate applicable to Development. Production and Douomrai.stoning

Operation* shall be agreed between the Parties in due course and uhnll incot poratc the

following guidelines:

(a) live CONTRACTOR*! cfarm rmi* he chirped u direef charge whaoevar

possible. Overhead charger, exist only to compensate the CONTRACTOR’*

Affiliates for costs which are properly allocable to Petroleum Operations

under the Contract but which cannot, without unreasonable effort sod or

release of confidential data proletary to the CONTRACTOR » Affi»-*cv

be charged under any other section Overhead costa arc billed monthly

Overhead must be commemorate with koko rendered and based on actual

cost studies but may not exceed an amount calculated as a percentage of

certain annual expend]Urea excluding I: \plotnti««i Costs and

(b) That percentage as wdl as the type* of expenditures, which affect overhead

sod those, which do not. shall be agreed air. »«g the Parties

rxpendirres to which they apply shall he agreed as socm *> the Partie* poewna

reasonably reliable cost estimates for the relev ant Production Area

(d) Overhead charges arc not subject to audit by GOVERNMEVT

(c) The CONTRACTOR shall upon requwt furnish ut the end of each relevant

Calendar Year to the GOVKRNMEN I’ a continuation by its statutory auditor

that the overhead costs actually charged do not duplicate any other charges

and that the method used m allocating o verb cod to Petroleum Operations


 hereunder »s opposed to other activities is and in accordance with

generally accqxed accounliag practices.

(0 The CONTRACTOR must budget for overhead clvagon,

2.8.3 All general and administrative expenditures shall lie regularly allocated m specified in

f’limgraphs 2.2.5, 2.3. 2.4, 2.5 and 2.6 to Exploration Cost*. Gan Marketing Costa,

Development Costs, Production Costa and Decommissioning Costs respectively and

fchall be separately shown under each of these categories.



3.1 Costs Recoverable Without Further Approval of the GOVERNMENT

Petroleum Costs incurred by the CONTRACTOR pursuant «o the Contract as

classified under the headings referred lo in Paragraph 2 shall he recoverable for the

purpose of Article 25 of the Contract (except to tint extent provided in Paragraph 4 at

elsewhere in this Annex), subject to audit as provided for in Ankle 15 and tr

Paragraph 1.6.

3.1.1 Suifo&Ei&hlfi

All direct costs necessary for the acquisition. renewal or relinquishment of Mirfree

rights acquired mv»l maintained in force for the purposes of the Contract

3.1.2 l^h^uuL\a«A'iuit»lll4bQui£aR4

(a) The CONTRACTOR'* locally recruited emplayms bated m ike kwdrtm

Region: Costs of all CONTRACTOR’S locally recruited employees »ho

directly engaged in the conduct of Petroleum Operations under the Contract in

the Kurdistan Region Such costs shall include the costs of salaries, wages,

bonuses, overtime, employee benefits ond GOVERNMENT benefits for

employees and levies imposed on die CONTRACTOR ns nn employer,

transportation and relocation costs within the Kurdistan Region of the

employee and such members of tlte employee's family (limited to spouse and

dependent children) as required b> law or customary practice in the Kurdistan

Region If such employees arc engaged in other activities in the Kurdistan

Region, in uddition lo Petroleum Operations, the cost of such employee* ahull

be apportioned on a time sheet basis according lo sound ami acceptable

accounting principles.

(b) Assigned Personnel: Co»li of salaries and wages me billing bonuses of the

CONTRACTOR'S employees directly engaged in the conduct or the

Petroleum Operations under the Contract, whether temporarily or permanently

assigned, irrespective of the location of such employee*, it being understood

that in the case of those personnel only a portion of whose time is wholly

dedicated to Petroleum Operations under the C ontract, only that pro-rata

portion of applicable salaries, wages, and other cost* as delineated in

Paragraphs 3.1.2(c), (d», (c), (f) and (g). hIuiII ho charged and the basis of such

pro-rata allocation shall l*e specified.

(C) ll»c CONTRACTOR’* cod* regarding holiday, vacation. ucfcacss and

disability benefits aod living and housing and other customary allowances

applicable to the salaries nnd wage* chargeable under Paragraph 3.1.2(b).

Cd) Kxponws or contributions made pursuant to avetsuicnu «>i -hi: git ions

Imposed under Law which .ire applicable to the < ONIKACTOR - cost of

.salaries and wages chargeable ui»d

(•) The CONTRACTOR’S coal of cuabhshcd pirns for employee* group life

bosrnaazabos. pernum. slock purchases, savings. bonus. and c*t»

plans of a hie allure cxwtnmanly granted to the C ONI R \< TOR’s

employees, provided however that such coats are in i


Paragraph 3.1.2(bX

(0 Actual transportation and iravd expenses of employee* of CON IR ACTOR,

including those made for travel nnd relocation of the ex pain ale employees,

including their families and personal effects, assigned to the Kurdistan Region

whore salaries and wages are chargeable to Petroleum Operations under

Paragraph 3.1.2(b).

Transportation expenses of personnel transferred from Petroleum Operation* to a

country other than the country of tbeir origin dial! not be charged to rt* IVttolcum

Operations. I ransportatioo cost as used in this section shall mom the cost of freight

and passenger service, meals, hotel*, insurance and other expenditures related to

vocation and transfer travel and authorized unde? the CONTRACTOR’S standard

personnel poll, icv I Ik CON I KA< TOR shall ensure that all expenditures reLned to

transportation coat* are equitably allocated to the activities, which hive benefited

from the pmonnd concerned

(g) Reasonable personal expenses ot pcreornK! whose sabric* and w^ges are

chargeable to Petroleum Operattom under Paragraph 3.1_2(b) and for which

expense* reefc paraormel are reimbursed under the CONTRACTOR'*

standard personnel policies In tlie event sxh expenses are not wholly

attributable to Petroleum Operations, the Petroleum Operatioa* shall be

charged with only the applicable porti.m thereof, which shall be determined on

an equitable basis.


 3.1.4 Charge* for Ssrvicg

(a) Third Parlies

The actual cost* of conirucl service*, services of professional consultants,

utilities, and other services necessary for the conduct of the Petroleum

Operations under the Conlmct performed hy third purtica other than an

Affiliate of die CONTRACTOR

(h) Affiliates of the CONTRACTOR

(i) Professional and Administrative Services KipoMi: cost of

professional and adminivtralive services provided by any Affiliates of

the CONTRACTOR for die direct benefit of Petroleum Operations,

including services provided hy the |>roduction, exploration, legal,

procurement, financial, Insurance, accounting itnd computer services

divisions other than those covered hy paragraphs 3.1.4 (b) (ii), 3.1.6

and 3.1.8 (b) which CONTRACTOR may use in lieu of having its

own employees Such charges shall reflect the cost of providing their

services. Such charges shall not include any element of profit and shall

be no more or levs favourable than similar charges for other operations

carried on hy the (OMR \CTOR and its Affiliate* The chargcout

rate shall include all coals incurred by Affiliates incidental to die

employment of such personnel including all Labour and Associated

Labour Costs and die cost of maintaining nnd operating offices and

providing all support services for such personnel. Costs of travel of

such personnel in respect of Petroleum Operations will bo directly

charged. The charges fbr such »crv|vej shall uol eweed flKrtfi

prevailing if performed by non-Affiliatcd third partie*. taking into

account the qualify and availability of such service* Where the work is

performed outside the home office base of such personnel, the daily

rale shall be charged from the date such personnel leave the home

inelutng days which ore not worfcng days n the Inciter where the

(ii) Scientific or Technical Personnel cost of ackntlfW or technical

personnel services provided by any Affiliate of the < ON I RAC TOR

for tbe direct benefit of Pclroleum Operations which coat ahall be

charged on a cost of service basis and shall not include any element of

profit. The chargeout rale shall include all costs incurred hy Affiliates

and Associated Labour Coats and the cost of maintaining and operating

offices and providing all support services for $u:h perwond coats of

dveedy charged The charges fee each service* shall not eveved those

prevailing if performed by nan-affiliated third portico, taking Ido

account tbe quality and availability of such services I ’nlcav tbe work

to be done by such personnel is covered by on approved Work


 and Budget, the CONTRACTOR dull not authorize work by such

personnel without approval of the GOV URNMENT.

(lii) Equipment and facilities: use of equipment and facibtic. owned and

funuAed by the CONTRACTOR'S Affiliates, at rates amiMi-inic

with the cob of ownership and operation, provided, however, u "»*

rates shall not exceed tho>e currently prevailing for the *upply of like

equipment and facilities on comparable terms in the are* where toe

Petroleum Operations arc being conducted and shall he on an .irm*s

length basis. On die request of the GOVERNMENT, the

CONTRACTOR shall provide the GOVERNMENT wilh evidence

of such rates being on an arm's length basis. (If the GOVEKNMEH T

considers that any such rate is not on an era's length tba> the

GOVERNMENT has the right to refer the matter to an expert

pursuarB to Article 42.2 of the Contract). TV* equipment and facilities

referred to herein shall exclude major investment rtemt such as (bs*

not limited to) dnlhng rigs, produemg plarfanns. oil treating facilities

ml and gas loading and transportation tjtttmt. storage and tmninal

facilities and other major facilities. rates for which shall be aibject to

separate agreement with the GOVERNMENT.

Not COM to the CONTRACTOR of establishing, maintaining and operating any

office, nib-office, warehouse, housing or other facility directly serving the Petroleum

Operations. If any such facility service* more than one contract area the nrt oorts

thereof shall be allocated on an equitable bams in wxordance with prudent

international petroleum industry practice.

(a) Costa incurred in the ( oturact Area as a result of legislation for arehneologkai

and geophysical surveys relating to Kkntifkaiioo and protoCtkxi of cultural

pursuant to Article 37_5 of the Contract and any other costs incurred ui

(c) Costs to provide or have available containment and removal




 (d) COM of actual control and cleanup of oil spill*, and of such further

responsibilities resulting therefrom as may be required by applicable law* and


(c) Com* of restoration of the operating environment incurred pur*uiuit to an

approved icheme prepared in accordant with Article 38 of the Common

(0 Any costs inclined lor the decommissioning of facilities anti life restoration,

including any related activity required by the GOVERNMENT or other

competent authority or by the Contract, and

(g) Any contributions made by the COM R A* TOR lo the Decommissioning

Reserve Fund in accordance with Article 38, when such contribution* arc


3.1.8 Material nud Equipmcntii8tlB

Costs of materials and supplies, equipment, iiihcIiIiw.s, tools and any oilier goods of a

similar nature used or consumed in Petroleum Operations subject to the following:

(a) Acquisition - the CONTRACTOR shall only supply or purchase materials

for use in Petroleum Operations th.u may he used in the foreseeable future.

The accumulation of surplus stocks ami inventory shall be avoided to far as is

reasonably practical and consistent with efficient and econo mica) operations.

Inventory levels shall, however, take into account the time lag for

replacement, emergency needs, wentlur conditions affecting operations and

similar considerations.

(hi CompuRcuU of rostv arm's length transactions - except as titlwrwisc

provided in paragraph 3 l.8

in arm s length transactions in the open market for use in the Petroleum

Operations aider the Contract shall be valued to include invoke pnee lew

hade and cash discounts (if any), licence fees purchase and proesuvsnent fora

importation lo warehouse or operating she. Where an Affiliate of the

CONI K At TOR has arranged the purchase, coordinated the forwarding and

expediting effort, its owls should not exceed those currently prevailing in

normal arm's length transactions on the open market nod in any case shall nor

exceed a lee equal to two percent (2%) of the value of the material, added to

the coat of the materials purchased

(c) Accounting - SKfa material costs shall be charged to the accounting records

and hooka ic accordance with the "First in. First Our” (HI O) method.

(d) Material purchased from or sold to Affiliates of the < ON I RAC FOR or

Irnnvlrired from other activiUc* of llie CON TRACI OR lo or from Petroleum

Operations under this Contract dial) be valued mid charged or credited ut the

prices specified in Paragraphs 3.1 M) ‘>"<1 3.l.8(d)(lli):



(i) No* material. including used new material moved from inventory

(Condition “A”), shall he valued at the current intcnutHxud net price

which shall not exceed the price prevailing in normal arm's length

transactions in the open i

(ii) Used material (< , “C and ~TT;

(A) b » sound 2nd serviceable

suitable for n?-u>c without rcconditkxiing shall be classified as

Condition "B“ and priced at seventy fiv e per cent (75%) of the

current price of new material defined in Paragraph 3.1.8(d)(i).

(B) Material which cannot be classified as Condition "B" bu which

after reconditioning will be further serviceable f.a its original

function shall be classified as Condition **C“ and priced at not

® fifty per ceta (50%) of the current price of new

aa defined in Paragraph 3.1 *d)<0 The coat of

shall be charged to the

provided that the value of Condition "C" i

of reconditioning do not exceed the value of >

(C) Material which cannot be classified as Condition “B" or

Condition “C* shall be classified as Condition “D" and priced

at a value commensurate with its use by die < OM K ACTOR

If material b not fit for use by the CON IK \< TOR it dull he

(Ui) Material hall be

condition of die current knocked^k>wn price

.1. Paragraph * l.8(d)(i>.

(»V> When tbe use of material is temporary and its service to the Petroleum

Operations uinlet die Contract doc* not justify the reduction in price as

provided for in paragraph .VI.lMdKiiXb). such material shall he priced

on a basn that will result in a net charge to the

with the value of the servk

(v) nrehly

of rational emergcnciev stakes or

over which the COVTUAC FOR has no control,

the CONTRACTOR may charge Petroleum Operations lor the

revpnrcd material at the CONTRACTOR'* actual cost incurred m

providing such matenal, in making it suitable for use. and in moving it

to the Contract Aten, provided notice in writing b furnished to the

GOV URN MKYT of the proposed charge prior to charging Petroleum

Operation* for such maunal and the GOVMXMTXT shall have the

(*0 Warranty of by the CONTRACTOR - the

CONTRACTOR doe not In case of



 defective materia), credit dull not be passed to Petroleum Operations

until adjustment has been received by the CONTRACTOR from the

manufacturer* of the material or their agents.


(c) hquipracw of the CONTRACTOR charged at rates oot to exceed the average

commercial rate* of noo-affUiated third parties for equipment, facilities,

installations and utilities for use in die area "here the same are used. On

request, the C ONTRACTOR shall furabb a list of rates and the bads of

application. Such rate* shall be revised when found to be either excewtv* or

insufficient, but not more than oo» every six (6) Months.

Drilling tool* and other equqxneot lost ia the bote or damaged bev.aal repur

may be charged at replacement cost kw dcprecubaa phs transpertatH* cotta

to deliver hkc equipment to the locate* wfvnr used.

(0 U*e of leased or hired machinery and or equipment in the Petroleum

Opcrancos shall be charged at full cost to the CONTRACTOR This may

include mobilisation and dc-mobOisatiun charge*, lease and hire fee*, at well

3 19 Renal* and

All rentals of every kind and nature lev ied by any QOVERNMEN r and all Tate*

imposed in connection with (he CON I RAC TOR*s assets, income or activities under

the Contract and paid directly by the CONTRACTOR or any CONTRACTOR

Entity (savo whore the contrary is expressly' peuvidod in (he Contract! with the

exception of l uxes described in Article 31.2) ami bmim payments made uislcr Article


If the CONTRACTOR, any CONTRACTOR Entity or any of it* Affiliated

Companies i* subject to income or withholding tax at a result of service* performed at

cost for the Petroleum Operations under the Contract, it* charges for such service*

may bo increased by the amount required to covet such tuxes (grossed up) including

tJixos on hticlt gross up.

3.1.10 1 UMirmtce und Logsoa

Li'uraucc premiums and costs incurred for insurance carried for the benefit of the

Petroleum Operations provided that such insurance is customary, afford* prudent

protection against rid; and is at a premium no higher tluin that charged on a

competitive basis by insurance companies which arc not Affiliated Companies of the

C (IN I KACTOR Except in cases of failure to insure where insurance coverage in

required pursuant to the Contract, actual costs and lov>e* incurred shall bo recoverable

to the extent not made good by insurance unless such louse* result solely from .in net

of wilful misconduct by the CONTRACTOR. Such costs may include repuir and

replacement of property in the Contract Aren resulting from damages or losses

incurred by fire, florid, storm, theft, accident or such other




JhT^mnt. perfecting. ttmooa and proton of thTfrmi AraT’and m

defending of prosecuting Lm«im tavolvm* thr Contract Ana or any third party

claim arising out of the Petroleum Operation! under the Contract. or aunt paid in

respect of legal service*. necotary for ihe protection of the joint interest of the

OOVT.KNMK.NT and the CONTRACTOR shall he recoverable Such axpandrtarM

- Imll Include attorney's Iocs, court costs, aibiiriiihni coals, costs of iiivottignlloti, mid

pmaiioniciit of evidence ami umounis pan! in u'lllomcnt or satisfaction of any such

llllliatlon and claims provided such costs arc not covered elsewhere in the Annex.

Where legal services arc rendered in such matters by salaried or regularly retained

lawyers of the COM RAC I OK or an Affiliated Company of the CON I K At TOR.

inch compensation shall be included instead under Paragraph 3.12 or 31.4(b) a»


J.I.I2 CUum

» xpciHlitures made in the scatancal or satisfaction of any loss, claim, thumgc,

judgement or other expense arising out of or relating to Petroleum Operations, except

m may otherwise be covered elsewhere in the Annex.

All COM and expenses incunrd by the COM R At TOR in the tninM* of Ms

employee* engaged in Petroleum Operations under Ihe (lontracL

1 1.14 Crenerri and Atfanuarativc Cosu

) Wtech an Mownh^md by the CONT^CrSTfeTaT

t of I

3.2 Credit I ader the Contract

11k- proceeds, other than die proceeds from the sale of Petroleum received from

Operaboos under the t oauact. mcludag the items luacd hekm shall be

to the Account* under the Contact for the pumwee of Article 25



3.2.1 The proceeds of any insurance claim or Judicial awards in connection with

Petroleum Operations under the C ontract or any wact, charged to the Account, under

the Contract where ruch operation. or wr« have been insured and tt» premia

charged to the Account, imdcr the Contract

*22 Legal co*U charged to the account, undo Paragraph 3.1.11 and subsequently

recovered by the CONTRACTOR

3.2.3 Revenue received from third portion for the use of property or assets the cost of which

lias been charged to the Accounts under the Contract.

3.2.4 Any adjustment received by the CON IK ACTOR from the wppliervmanufacturcT,

or thru agent, in connection with a defective material the aw of which wwt

previously charged by the CONTRACTOR to the Accounts under the Contract

3-2.5 Rentals, refunds, including refunds of (axes paid, or other cnxlits received hy tin-

C ONTRACTOR which apply to any charge which lias boon made to the Accounts

under the Contract, but excluding any award granted to the CONTRACTOR

32.6 Costs originally charged to the Account, and* the Contract for materials

kutaeqocntiv exported from the Kurdistan Region or transferred to another Contract

Area within die Kurdistan Region.

3.2.7 Proceeds from the sole or exchange by the CCTINT It \< "l ( Ht of plant or facilities used

in Petroleum Operation* the acquisition costs of which have been charged to the

Accounts under the Contract.

' 2.ft Proceeds derived from the sale or license of any intellectual property tf* development

touts of whidi were incurred pursuant to and are recoverable under the Contract.

J.2.9 l*rocecds detived from the ule, hire, transfer or disposal in any

of any oilier of which have been charged to



iwvmNe crafcr Article 2J;"","irTlMI C*m

4.1. Taxc, on income or profit pud to GOVERNMENT aulhorrty except taxes

duties tint may he included in the of material and equipment purchased fi-r V

Petroleum Operation*;


4.2. Any payment made lo the GOVERNMENT by reason of the failure of the

CONTRACTOR to ftilftl its Minimum Exploration Obligations in rwpcvl of Urn

relevant Sub-Period under the Contract

4.3. n*o eon of any letter of guarantee, if any, required under the Contract;

4.4 The bonuses set out in Ankle 32 of tbe Contract;

4.5. Cost. of marketing or transportation of Petroleum beyond tbe Delivery Point

(excluding Gas Marketing Costa);

4.6. Attorney’s fees and other costs of proceedings in connection with arbitration under

Article 42 of the Contract or internationally recognised independent expert

determination as provided in llic Contract or this Accounting Procedure;

4.7 Any interests, fees, costs and expenses paid by the CONTRACTOR for loans and

any othei form of financing or advances for the financing of die Petroleum Costs

entered into by the CONTRACTOR with third panics or Affiliated Companies;

4.8 Any accounting provision for depreciation and/or amortisation, excluding any

mljualmonts in value pursuant to Paragraph 3.1.8;

4.9 I hvulcnds, repayment of equity or repayment of intercompany loam.

4.10 Fine* and penalties imposed under Law.


5.1 Records

TT» CONTRACTOR shall maintain detailed record* of pre**»ty in use for

SJ. In sen tones

Inventories of property in use in Petroleum Operations shall be taken it reasonable

intervals but at least once a year with respect lo mo' able assets and Ofce every three

inventory and the GOVERNMENT shall have the ngbt to be represented when such


Par hire of the GOVERNMENT to be represented * an inventory shall bind the

GOV KRNMENT to accept the inventory taken by die COKTRAC TOR

The CONTRACTOR dull clearly inform GOV ERNMENT about the principle*

upon which valuation of Ac inventory has bora hared The CON IRACTOK dull

make every effort to provide to the GOV FRNMI NI a fan report on such mvewtocy

withaa thirtv (30) day* of the taking of the inventory. When an maignmo* of ngtas

under the Contract take* place the CONTRACTOR may. at the request of tbe


 take a provided that ibe cort* ol u*h inventory arc borne


*.1 Prodacthm Infer m.Ooo

Without prejudice to the nghta and obligation* of the Panic* under Article 16 of (be

Contract, from (he dale of Pint Product im from the Contract Arvn il«e

CONTRACTOR .hall tubtnrt a tnoothly production statement to the

GOVERNMENT darning the following information rcparately for each producing

Development Area and m aggregate fee the Contract Area:

6.1.1 The quantity of Crude Oil produced and saved.

6.1.2 The quality characteristic* of wich Crude Oil produced and saved.

6.1.3 The quantity of Natinl Gas produced and saved-

6.1.4 The quality charactmtoca of wch Natural Gaa produced and saved.

61.5 The quantities of Crude Oil and Natural Gas used for *c purpose* of carrying on

dr.King and production operation, and pumping to fidd storage

6.1.6 'Ibe quantities of Crude Oil and Natural Gas unavoidably lost.

6.1.7 The quantities of Natural Gas flared and vented

6 1 K The si/* of Petroleum stocks held at the beginning of the calendar Month in question

6.1.9 Hie size of Petroleum stocks held ni the end of the calendar Month in question.

6.1.10 The quantities of Natural Gas reinjected into the Reservoir.

6.1.11 In respect of lltc Contract Area as a whole, the quantities of Petroleum transferred at

the Measurement Point All quantities shown in this Statement shall be capmsed in

both volumetric terms (Barrels of oil and cubic meter* of gas) and in weight (metric


6.2 Submission of Production Statement

The Production Statement for each calendar Month dial I be submitted to the

GOVERNMENT no Inter than ten (10) day* alter the end or such calendar Month.


7.1 \ alar of Production and Pricing 8taU nu at Information

The CONTR ACTOR dull, for the purpose* of Article 25 of the Contract, prepare a


 Iliii “Value of Pn>d action and Pricing Suiemenl" shall contain the following


7.1.1 I he quantifier and prices realized therelbr by the CONTRACTOR in respect ot

sales of Natural Gu and Crude Oil delivered to third parties made during the Quarter

in question.

7.1.2 The quantities and prices realized therefor by the CONTRACTOR in respect of sales

of Natural (ins end Crude Oil delivered during tlw Quarter in question, other than to

Third Parties.

7.2 Sabin (salon of Value of Production and Pricing Statement

Ttic Value of Production and Pricing Statement foe CM* Quarter shall he submitted to

the GOVERNMENT not later than twenty-one (21) day* after the end of such



8.1 Cost Recovery Statement

I he CONTRACTOR shall prepare with respect to each Quarter a Cost Recovery

Statement containing the following inforraation:-

8 11 Recoverable Petroleum Costs carried forward from the previous Quarter, it any

8 1.2 Recoverable Petroleum Costs for the Quarter in question

8.1.3 Credits under the Contract fee the Quarter m queahoo.

8 14 Total Recoverable Petroleum Cook for the Quarter id question (Paragraph 8 11 pint

Paragraph 8.1 2. net of Paragraph 8 13).

8.1.5 Quantity and value of Pctroleran applied to cost recovery pursuant to Article 25 taken

by the CONTRACTOR for the Quarter in question.

8.1.6 Amor®? of recoverable Petroleum Cote to be earned forward duo the next Quarter

8.2. Cumulative Production Statement

The CONTRACTOR aha« pnpen with respect to each Quarter a Cumulative

Produako Statement cootaumg the following informalHm:



8.2.5 The amount of Petroleum applied lo Royalty pursuant to Article 24, cort recovery-

pursuant to Article 25 and Profit Petroleum pursuant to Article 26 taker by the

GOV F.RXMKVT and by the CONTRACTOR, respectively, during the Quarter m

8 2.6 The forecast of production and Ac dure of Petroleum applied to Royalty pursuant to

Article 24. cost recovery pursuant to Article 25 and Profit Oil pursuant to Article 26

due to the GOVERNMENT and to the CON TRACTOR, respectively, for the next

succeeding Quarter.

8_t Preparation and submission of Cost Recovery and Cumulative Production

8.3 1 Provisional Coat Recovery and Cumulative Product*® Statements, ccotunmg

climated information where necessary, shall be submitted by the CONTRA( TOR

on the last day of each Quarter for the purposes of Article 25 of the Contract.

8.3.2 Final quarterly Com Recovery and Cumulative Production Statements shall be

submitted within thirty (30) days of the end of the (gutter in question

8-4 Aaanai Statement

For the purposes of Article 25 of (he Contract, an Annual CoM recovery and

Cumulative Production Statement shall be submitted within ninety (90) days of the

end of cacti Year. I he Annual Statement shall contain the categories of information

listed in Paragraphs 8.1 and 8J! fix the Year in question, separated into the Quarters

of the Year 0 quotum tnd showing the cumulative positions at the end of the Year n



9 I The CONTRACTOR dull prow with respect to

Expenditure and Receipts under the Contract. The Statement will

Exploration Costs, Gas Marketing Costs. Development Costs, Product*® Costs

Com and will identify major items of

The Stxemeni will

9.1.1 Actual expenditures and receipts for the Quarter m question.

9.1.2 Cumulative expenditure and receipts for the budget Calendar Year in

9.U latest forecast cumulative expenditure. X the Calendar Yew end

9.1.4 Variatk« between budget forecast and latest forecast and op.auiio.

9.2 I he Secernent of Expenditure and Receipts of each Quarter dull be Mibauticd to the

GOVERNMENT no later than thirty (30) days after the end ol such Quarter




I lie CONTRACTOR will prepare a Final End-of-Yeni Statement The Statement will

Contain Information as provided in the Production Statement, Value of 1‘rodudion and

Pricing Statement, Cost Recovery mmI Cumulative Production Statements and Statement of

expenditures and Receipts hut will he based on actual quantities of Petroleum produced and

expense* incurred. This Statement will he used to nuke any adjustments that arc necessary to

the payments made bv the C OVER AC I OR under the Contract. The final End of Year

Statement of each Calendar Year dull he submitted to the GOVERNMENT w-nhin nmety

(90) days of the end of such Calendar Year.


Each such report and stalemcnl provided for in ParuKtaph ft through 10 shall he considered

true and correct, unless the GOVERNMENT raises an exception thereto within the

tmKfraxiK and uulcr the process set out in Article 15 of the Contraci.


11.1 I nch annual Work Program and Budget to be prepared iu accordance with Articles

11,12 .uvd 14 of the Contract, in respect otTxplornlioo Costs, Gas Marketing Costs,

Development Costs and Production Coats respectively will show the following:

11.1.1 forecast expenditures for the budget Calendar You In question including a quarterly

ilii»»ilicat)on of such expenditures.

11.1.2 Cuinulnllve expenditure* to the (Ad of said budget C ulwulur Y ear

11.1.3 A schedule showing fee mow important individual items of Developmml Costa (if

applicable I for tmd budget Year


13.1 For the purpoac of Article 3l.3

CONTRACTOR Entity Trent all the Petroleum Operations earned out under this

Contract, shall be calculated m *xordance with dm Paragraph

13J lack COMR.VCTOR Endry shall raainuin for each Calcndir Ye* separate

the Petroleum Operations earned out in socb Calendar Year as well as the assets and

liabilities assigned or directly related thereto. The profit and k*»» account will be

nuiirtaiaed under the accrual mctliod of accounting.

13.3 For purposes of tkterrammg the net taxable profits of each CONTRACTOR Entity

13.3.1 the profit and loss account of such CONTRACTOR E«n*v doll be credited wnb the




 (a) if the Royalty is paid in cadi pufMDl to Article 24. revenuw ari'ing flora the

dispoial of Royalty volumes a* recorded in lucb entity'* Accounts and

determined in accordance willi the provisions of Article 24,

(b) revenues arising; from the disposal of nny Avnilnble Petroleum to winch such

entity i« entitkxl for recovery of Its I'ctrolcum Costs u« recorded in ifs

Accounts and determined In acflordunce with (lie provision* of Article 25;

(c) revenues from the disposal of any Profit Petroleum to which such entity is

entitled under Article 26 as it recorded in its Accounts and determined in

accordance with the provision* of Article 26;

(d) any other revenues or proceeds directly connected to the Petroleum Operations

including those arising from the disposal of related Petroleum *ul»M.tneo», or

from the treatment, storage and transportation of products for thud parties.

connection with the Petroleum Operations;

13.32 the profit and loss account for such CONTRACTOR Fntity shall he debited with all

charges incurred for the purposes of the Petroleum Operation* whether incurred mssdc

or outside the Kurdistan Regno. which charges shall ux ludc the following

<*) m addition to the charger rpecificnlly Ml forth below in ihi« Paragraph, all

manpower expenses, and the co- of service* provided to the

CON TRAC I OR in connection with the Petroleum Co-*.

(b) if fh« Royally is pn:d in cash pursuant to Article 24. Roy ally payments made

nnd us recorded in auch entity's Accounts and determined in accordance with

the provision* of Article 24;

(c) General and administrative expenditures related to the Petroleum Operation*

performed under this Contract.

(d) depreciation of capital expenditure in accordance with the following


(i) cupitnl expenditure* inclined by the CONTR ACT! >K for the purposes

of the I'ctrolcum Operation* shnll be depreciated on a reducing balance


(ii) the depreciation rate*, which shall be applicable from the Calendar

Year during which such capital expenditures are incurred, or from the

Calendar Year during which the assets corresponding to said capital

expenditures are put into normal service, whichever is later, for die

first Calendar Year in question and for each subsequent Calendar Year,

arc ns follows:



 Nature of ihc capital asvet to be depredated Annual deprrelation Kate

Permit buddings 10.0%

Temporary buddrugs 20.0%



1 200%




Productive wells 20.0%

Production and delivery evpupmcnr 20.0%

Drilling equipment 20.0%

Pipelines 20.0%

Automotive equipment 20.0%

Marine and aviation equipment 20.0%

All other capital assets 20.0%

(e) Exploration Cost* (which for the avoidance of doubt include appraisal

expenditure*) shall bo deductible on n reducing balance bonis nt tin* role of

20% per annum.

CO interest and P«d to creditor* of the CONTRACTOR, for their actiml

(*) Iona of As**«» resulting from dc*ruct«i or damage. a»e*s which arc

Article 202, bad debts, iadactutics paid to third parties as compemutiou for


(h) any other cost*, expenses, lone* or charges directly related to the Petroleum

Operations, including exchange Iomcs realised in connection wth ihc

PctroicuH) Operatioos aa well as the bonuses provided in Artick 32. die

ExpioraCon Rental provided in Artkla 6.3. the Production Rental provided in

Article 13.10. the aliocatioa to bung, provided m Article 23.7 and the

allocation to the I ovaonment Fuad provided in Article 23.9, the costs

specified m Article* 23.11, 3K 1 and 38.6 and transportation and marketing

costs bevoad the Deliver) Pont.

(i) the amount of non offset losses relating to the previous Calendar, which

shall be carried forward for iui indefinite period until full settlement ol said

losses or termination of this Contract:


13.3J. die net profit of Mich COMKA< TOR Inlity shall be to the dilfcrence

between all die nmounu credited mid all the amounts debited in die profit Rod loss

account, iiikI

(a) if this amount is negative, it shall constitute a loss.

(l») If the amount is positive, it shall be glossed up to take account of the fact that

such entity's corporate Income tax is being settled out of die

GOVERNMENT'* share of the Profit Petroleum in accordance with Article

31.2, by applying the following formula in order to provide such entity’* net

taxable profits for corporal* income tnx purposes:

Nrt Taxable Net Profit*' (I W • Applicable Rate olXopoialC income Tax )

I’t •‘fits 100

13.4 For purpose* of determining each CONTRACTOR hntity's liability to cotporatc

income tnx for a tax year in respect of the Petroleum Operations carried out under this

Contract, the net taxable profit* (if any) for socli tax year shall be multiplied by Iho

applicable rate of corporate income lux, as provided in Aiticlo 31.3(a).