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 PRODUCTION SHARING CONTRACT





BARD A RASH BLOCK


KURDISTAN REGION














BETWEEN


THE KURDISTAN REGIONAL GOVERNMENT OF IRAQ


AND








KOMET GROUP S.A.


I \BI KOK OM FNTS





PREAMBLE





Article l DEFINITIONS


Article 2 SCOFF OF THE CONTRACT


Article 3 CONTRACT AREA


Article 4 GOVERNMENT PAR nCIPAl ION


ArtkleS OPERATOR


Article 6 TERM OF THE CONTRACT


Article 7 RELINQUISHMENTS


Article 8 MANAGEMENT COMMITITI!


Article 9 GUARANTEES


Article 10 MINIMUM EXPLORATION WORK OBLIGATIONS


Articlo 11 EXPLORATION WORK PROGRAMS AND BUDGETS


Article 13 DISCOVERY AND DEVELOPMENT


Article 13 DBYBLOPMI3NI AND PRODUCTION WORK PROGRAMS AND


BUDGETS


Article 14 NATURAL GAS


Article IS ACCOUNTING AND AUDITS


Article 16 CONTRACTOR’S RKHfl S AND OBLIGATIONS


Article 17 USE OF LAND AND fcXISTINO INFRASTRUCTURE


Article II ASSISTANCE FROM THE GOVERNMENT


Aniele 19 EQUIPMENT AND M ATIRIALS


Article 20 TITLE TO THE ASSt IN


Article 21 USE OF THE ASSETS


Article 22 SL'BCONTRACTLNG


Article 23 PERSONNEL TRAINING AND TECHNOLOGICAL ASSISTANCE


Article 24 ROYALTY








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Article 23 RECOVERY OF PFTRC* FI 'M COSTS


Article 26 SHARING OF PROFIT PtTROI FI M


Article 27 VALUATION AM) METERING OF CRUDE Oil AND NATURAL GAS


Article 28 DOMFST1C MARKET SALI OF GOVERNMENT SHARE


Article 29 FINANCIAL PROVISIONS


Article 30 CUSTOMS PROVISIONS


Article 31 TAX PROVISIONS


Article 32 BONUSES


Article 33 PIPELINES


Article 34 UNTTISAHON


Article 35 LLABIUTY AND INSURANCE


Article 36 INFORMATION AND COM IDENT1ALITY


Article 37 ENVIRONMENTAL PROVISIONS


Article 38 DECOMMISSIONING


Article 39 ASSIGNMENT AND CHANGE OF C(>NTROL


Article 40 FORCE MAJBURH


Article 41 WAIVER OF SOVhRI IGN IMMUNI1 Y


Article 42 ARBITRATION AND BXPI-RT 1)1 1I KMINATION


Article 43 GOVERNING LAW. FISCAL STABILITY, AMENDMENTS AND


VALIDITY


Article 44 NOTICES


Article 45 TERMINATION


Article 46 APPLICATION OF CORRUPTION LAWS


Article 47 EFFECTIVE DATE


Annux A CONTRACT AREA MAP AND LIST OF COORDINATES


Annex 1* ACCOUNTING PROCEDURE











3/112


 PRODUCTION SHARING CONTRACT








BETWEEN








The KURDISTAN REGIONAL GOVERNMENT OF IRAQ

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





AND





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")








WHEREAS


(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 Ci.is 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;





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 (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;








NOW. THEREFORE,THE PARI II S HAVE AGREED AS FOLLOWS


ARTICLE I - DEFINITIONS


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

CONTRAC TOR Entity,


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





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 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


discovered.


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


v





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it





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 uppnii.su! 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:





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 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


4.1.








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.





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'• .


 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





(USA).


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


CONTRACTOR





Exploration Work Program and Budget the exploration work program and


budget prepared pursuant to Article 111.





WII2











1.





 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








\L








 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*








11/112











Li





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;


or


(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


Contract.


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.











12/112


 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


(.(IVKRNMENT.


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\

















13/112











It





 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


staled:


(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.


AIM 1C IH 2 SC < >PE OF THE CONTRACT’


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


14/112


 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.


V








15/112











)L








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






































IM12


 ARTICLE 3 - CON IK ACT AREA





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.





ARTICLE 4 -GOVERNMENT PARTICIPATION


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.











17/112


Ifl





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.








ARTICLE 5 - OPERATOR





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





ARTICLE 6 TERM OF IMF. CONTRACT





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


below:








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-











1*112


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


Yc.ir 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





20/112


 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


Sub-Period





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.


i>.

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





21/112


(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.





ARTICLE 7 - RELINQl ISI1MEN TS


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


V


22112








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


maybe.


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.








ARTICLE 8 - MANAGEMENT COMM11 I EE


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


cagwcity


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


1


«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;








2VII2


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,











24/112


(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.

















25/112


 \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


earlier.


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.

















26/112


 4RINU If - MIMMI M EXfl/HUTION WORK OBI It. \ IIO"





10 1 TV CONTRA CTO*


Wort


Aitick i rv <'ovnucnw *


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


If


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







27/112


 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


anticipated,


(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





28/112


 (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.








ARTICLE II - EXPLORATION WORK PROGRAMS ANI> BUDGETS


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


Year.


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


k


29/112














\L.





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.








ARTICLE I2 DISCOV ERY AND DEVELOPMENT


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”). //





3WM2


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


Discovery;


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





Discovery;


(c)


the CONTRACTOR has that the Discovery is a


Discovery, which nay Discovery subject lo


Area; or





31/112





 («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.


L>C.veli>l?ment_Pim


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




















1L





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


writing.


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




AR I lf I I 13 DRVF.IiOPMEN I AND PRODUCTION WORK PROGRAMS AM)


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








33/112


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




















34/112


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 adililion.il 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








35/112


 ARTICLE 14 - NAT! KAU.AS











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,


oompn.-R.ing 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











36/112











Itv





 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







Discovery.


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


following:





(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


TermO.'mch»d»g:

















Oii)





(iv) all and any material conditions to which the Proposed Contract is





subject.





(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








35/112


(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!


Contract;


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.


HariM


 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.








ARTICLE 15 ACCOUN I INC AND AUDITS





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


15.4


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*.





40fll2


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.








ARTICLE 16 CON I RAC TOR’S RIGHTS AN|> OBLIGATIONS








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


cx







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





41/112


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


by the CONTRACTOR;


(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


Operations.











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





42/112


 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


»thWp








1610 Tbc CONTR\CTOR shall aa soon a* reasonably practicable inform the


GOV ERNMENT of aa> iiutrrtal litigation relating to this Contract





Safct>


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





practice








(•) 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


work;








43/112


 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


following:


(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; .








44/112


(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.


CviuRuMuu.Rviiitir-nwflti


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.








ARTICLE 17-USE OF LAND AND EXISTING INFRASTRUCTURE





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 <





45/112


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


Operations.





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





ARTICLE It- ASSISTANCE FROM THE GOVERNMENT





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;








47/112











11





(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.





ARTICLE 19-EQUIPMENT AM) MATERIALS





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.

















48/112


 ARTICLE 20 I I HE TO ASSETS





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*.





ARTICLE 21 - USE OF Tilt. ASM I S





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


Regm*


ARTICLE 22 - SUBCONTRACTING





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.


49/112











t-





\KI1CLE23-PERSONNEL, 1 RAINING, AND IK I1NOLOG1CALASSISTANCE


Personnel





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


individual(s).





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 Rcsosm.es.


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


23.f»


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


of the CONTRACTOR








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 Eav.ro. ratal lund”) Such amounts dull


be deemed to be Petroleum Cart* tod dull be recovered in accnrihnoe with Articles 1 and


25.


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


25











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





SI/112


 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.








ARTICLE 24 - ROYALTY


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


-Royalty-)


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


O0HX





52/112


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


pumu.it 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:


(n)

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


ARTICLE 25 RECOVERY Of PETROLEUM COSTS


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


Gas".


"Available Petroleum" menus Avmlnblc Crude Oil. Available Associated


Natural


Gas ami Available Non-Associated Natural Gas.


25.2 For the purpose of this Article 25:











53/112


 (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.


25.4


«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


order:


(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





5-4/112


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* «»


Area


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


CONTRACTOR.





ARTICLE 2f» SIIAKINC Of PROFII PI I KOI IUM


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 tvjs.it.it.-ly to each Production Area


26 4 The “R” Factor dull hr calculated aa follower


R-X/Y

















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 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


Area.


‘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%





1

R>2 15%


and





(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%








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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


Semester.


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


Point


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





57/112


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


CONTRACTOR md the GOVERNMENT.








ARTICLE 27-VALUATION AND METERING OP < Kl III Oil AND NATURAL


GAS











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.








58/112


 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





(■) CONTRACTOR


(Sales


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


id)


quantities of Natural Gas sold by the CONTRACTOR I rstatiov and


GOVERNMENT together with sale prices realised


Mcterlim








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


V


59/112





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.





ARTICLE 2* - SALE OF GOVERNMENT SH VRT.





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.








ARTICLE 29- FINANCIAL PROVISIONS





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:











60/112


(,) 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 mil.es dull not he Icaa favourable taw the rase offered by o*NT


private, commercial or Industrial Ivinks in tile mtcnuti.au) 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.








61/112


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.








ARTICLE 30 - CUSTOMS PROVISIONS





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








62/112


 Ln-





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.








ARI IC'LK 31 - TAX PROV1SH IN s


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





6*112


 I* no joint and several liaMUly in respect of any liability, duty or obligation referred


to in this Article 31.








AHTIM i: 32- BONUSES





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


OOmmlw):


(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


(50mmbo).


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);


65/112


(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








ARTICLE 33 PIPELINES





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











facilities.


(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











66112


 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.








ARTICLE 34 - UNIT ISA LION


.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.


ARTICLE 38- LIABILITY AND INSURANCE





























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, tli.it 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 -


he CONTRACT OR mx < OMNM IOK











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


foregoing.





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


individual.





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 29.fr »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

















7*112


 ARIKXE J* IMORMMION AND COINE IDE VITALITY





36 I Ike CONTRACTOR thill lap til records, dm and rdaringto


Report OBadGMUii





GOVERNMENT m**








362 Upon «hc OOVF»MDfTi rcqae«. the CONTRACTOR shall provide (he


(WVTJWMEVT with








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


Contract.


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











71/112











*• .


 h-viag jorisdktior ■


COPTIRACTOK I nt*>





36S Notwithstanding the foregoing in Altkie 36.7, m *xardaocc with pnM


mternabocaJ petroleum industry practice. **ch dm and informal*® may he fiackw*


to:


(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*.














72/112


 article 37 ENVIRONMENTAL PROVISIONS





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.

















73/112


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*.








ARTICLE 38-DECOMMISSIONING


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 th.it **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.








ART1CI E 39 ASSIGNMENT AND CHANGE OF CONTROI


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


(»VIWNENTWe»


>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 «*•








76/112


 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.





ARTICLE 40 I (>H( M MAJKURF!


•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


earthquakes;


(0 environmental reWitclloim, which the GOVERNMENT has not notified to the


CONTRACTOR.


(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


u


77/II2





 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


foregoing





40.3 The ifaall receive th


force'


Co^ay of a < ONTRACTOR


ike (OMI ACTOR if the


ofay of ftc











ARTICLE41 WAIVER OF SOVEREIGN IMMt Mn


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


asset*


This waiver includes any claim to immunity from:








•oAmSTlS; rr"r"»tati








fb)


! *t» Aitxk 42;.





dial results from an export deteinilnuiion, mediation, arbitration or any.judicial,





administrative or other proceedings oommenced pursuant to this Contract.








ARTICLE 42 ARBITRATION AND EXPERT DETERMINATION




















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).


V








71/112


 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


adviser.





(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





79/112














»


 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


If





80112








|.(U








 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*























ARTICLE 43 t.ON I KNING I AW. FISCAL STABILITY AM) AMI MOMENTS





(.'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. •











81/112


 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











82/112








11








 ARTICLE 44 - NOTICES





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:














Tot he GOVERNMENT:


Attention:


His Excellency the Minister of Natural Resources





Address:


Ministry of Natural Resources





Kurdistan Regional Government


Ivrbil, Kurdistan





Email: mnr@Lrgoil.com














lot he CONTRACTOR:


Komot Group S.A.:





Attention: Anatol Stati


Address: MD 2005 Republics Moldova, Chisinau, bd. Renasterii 22/2





Email: info@ascom.md








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. .














83/112


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.








ARTICLE 45 - TERMINATION


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.








84/112


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


CONTRACTOR Entity.





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





ARTICLE 46 -APPLICATION OF CORRUPTION LAWS





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.








ARTICLE 47 - EFFECTIVE RATE


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!










































































86/112


Entered into in three (3) originals in Erbil, the Kurdistan Region on 2®^ 2008


For the KURDISTAN REGIONAL GOVERNMENT




















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











For the CONTRACTOR





Komet Group S.A.

























































































87/112


 AHM2LA





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








 A>Nfc\M


\< T<»1 MING PROtTIHHE














PARAGRAPH I - GENER \I PROVISIONS





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


prevail.





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



































1








(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


15.7:





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


revolved.


1.7 raiments


Unices a* otherwise provided in Article 24, Article 29 or other Annies of the


Contract:


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


(2%).


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.





PAR VGRAPH 2 ---C1ASSIHCAIIOYDEFIM1IOS AND AiJ/X A I ION OF


COSTS .AND EXPFNSF-S


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;








91/112


(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








92/112


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


bans.














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





93/112


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


services.


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


3.











•M/112


 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:





2.8.2.1





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





95/112


 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.





PARAGR APH 3 - COOT'S. EXPENSES. EXPENDITURES AND CRRD1 IN OF THE


CONTRACTOR


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


accepted





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.



































*7/112


 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


98/112





 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 ha.it 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 pollut.ua containment and removal


if


i(u.





99/112




















 (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


regulation*;


(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


made


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):





100/112








\K.








(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


1/





101/112





 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.





('ii)








(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


32.


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 cau.se.








102/112











Mk








 3-1.11





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»


W*kMc





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


u








I03TI2


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























PARAGRAPH 4 - COSTS AND EXPENSES NOT TO BF TREATED AS


RL« OY F.RABLI


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*;








164/112


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.





PARAGRAPH 5 RECORDS AND VALUA I ION OF \SS» IN





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


iaii---Btyahha


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





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 take a provided that ibe cort* ol u*h inventory arc borne








PAR At.R API* 6- PRODUCTION STATEMENT





*.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


founts).


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.


PARAGRAPH 7 - VALUE OF PRODUCT ION AND PRICING STATEMENT


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








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 Iliii “Value of Pn>d action and Pricing Suiemenl" shall contain the following


information:


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


Quarter.








PARAGRAPH H COST RECOVERY AND SHARE ACCOUNT STATEMENT


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:


question























)i





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





Production.





PARAGRAPH 9-STATEMENTOF l.NPI NDITI RF AND RFC KIFTS





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


0








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 PARAGRAPH 10- I'INAI. KMM)F-VI \R STATEMENT





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.





PARAGRAPH 11 AUDITS





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.





PARAGRAPH 12 ANNUAI, WORK PROGRAM AND B1IDG1CI


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


PAR AGRAFII 13 - CONTRACTOR ENTITY INCOME TAX COMF1 TA THIN





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


following;





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IL





 (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


provision*:


(i) cupitnl expenditure* inclined by the CONTR ACT! >K for the purposes


of the I'ctrolcum Operation* shnll be depreciated on a reducing balance


basis;





(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:














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IT





 Nature of ihc capital asvet to be depredated Annual deprrelation Kate








Permit buddings 10.0%


Temporary buddrugs 20.0%





1


1


1 200%


I


1


i


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


damage.


(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 Ye.us, which


shall be carried forward for iui indefinite period until full settlement ol said


losses or termination of this Contract:











Ml/112


13.3J. die net profit of Mich COMKA< TOR Inlity shall be opi.il 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).




























































































112/112