energy contracting & negotiation-4

8/14/2019 Energy Contracting & Negotiation-4

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CHAPTER 4

JOINT OPERATING AGREEMENT (JOA)

Article 7 of the PSC embodies and acknowledges the existence of a JointOperating Agreement and also prescribes that it must include certain essentialfeatures. But this agreement is required only when two or more than two partiesconstitute the Contractor. Out of which one party is designated as Operator whocarries on operations on behalf of the all other parties constituting theContractor. No change in the operator ship shall be effected without the consentof the Government and such consent shall not be unreasonably withheld. It isoften provided in the PSC that the functions required of the Contractor underthis Contract shall be performed by the Operator subject to, and in accordancewith, the terms and provisions of this Contract and generally accepted GoodInternational Petroleum Industry Practice provided, however, that this provisionshall not be construed as relieving the Constituent(s) of Contractor from any ofits obligations or liability under the Contract.

Within fifteen (15) days of the Effective Date (or such longer period asmay be agreed to by Government), the Companies constituting Contractor arerequired to execute an Operating Agreement. This agreement should beconsistent with the provisions of this Contract. Operator is to provide to theGovernment a copy of the duly executed Operating Agreement within thirty (30)days of the Effective Date or such longer period as may be agreed to byGovernment.

The Operator is selected at the time of bid submission. The operatorcarries on petroleum operations on behalf of all the parties who have entered into Joint Operating Agreement.

A committee known, as Operating Committee is constituted where all theconsortium partners are represented and they take all important decisions in themeetings of the committee.

The procedure to collect money (cash call) from consortium partners getsspecial treatment and dealt in detail and provision for a penalty which extends toforfeiture of participating interest in the project, is made if a party defaults in thepayment of cash call.

Other provisions relating to sole risk operations, assignment with orwithout a right of pre-emption or first refusal, relinquishment, force-majuere,dispute settlement etc are also provided in the Joint Operating Agreement.

Amongst various regimes in vogue, India has chosen production sharingregime. In this type of regime a contract is entered into between Government ofIndia acting through Ministry of Petroleum and Natural Gas and contracting partyor parties as the case may be. In the event of contractor consisting of more thenone party, a joint operating agreement is also executed by consortium partnersso as to regulate their relationship. These contracts are of long durationextending up to 25 years with provision for extension.


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DRAFT

JOINT OPERATING AGREEMENT

BETWEEN

ABCD

AND

XYZ

FOR

---------------------


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TABLE OF CONTENTS

ARTICLE CONTENTS PAGE NO.

1 Definit ions an d Int erpreta tion 5

2 Effective Date, Du ra tion , an d Scope 10

3 Par t icipat ing Interes t an d J oint Operat ions 11

4 Operator 11

5 Operat ing Comm it tee 20

6 Program mes an d Budget s 23

7 Cos t s an d Expenses 26

8 Owners h ip of Ass ets 31

9 In form ation , Reports an d Confiden tiali ty 32

10 Work Programm e 36

11 Relinqu ish men t 38

12 Withdr awal 39

13 Sale , Tran sfer an d Assignm ent 42

14 Force Majeu re 44

15 Relationsh ip of Parties,Mutu al In dem nities an dNo Partition

4 6

16 Ins u ran ce an d Ind emn ifica t ion 48

17 Notices 50

18 Terminat ion 51

19 Arbitration 53

20 App lica ble Law 54

21 General 54


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EXHIBIT A ACCOUNTING PROCED URE

I Gen era l Provisions 57

II Bas is of Cha rges to th e J oint Accoun t 65

III Procurem ent of Material an d u se of Facilit ies an dEquipment

68

IV Disposa l of Mater ials 78

V Inventor ies 79

VI Forms in which Accoun ts sh all be Main tained 81

EXHIBIT B :PROCEDURE FOR ACQUISITION OF GOODS AND SERVICES

EXHIBIT C: AUTHORISATION EXPENDITURE REQUES TEXHIBIT D: CASH CALL


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JOINT OPERATING AGREEMENT

This J oint Oper a tin g Agreem en t is m a de th is __________________ da y of ______________________ 200 0-- - b y a n d b et wee n

1. ABCD, a body corporate esta blish ed u nd er th e Compa n ies Act 195 6, ha ving itsregistered office at ----------------------------------------(Hereinafter referred to asA and unless the context otherwise require shall include i ts administrators,su ccessors a nd p erm itted as sign ees ), of th e FIRST PART.

AND

2. X established and exist ing under the laws of the---------- and having i tsregistered / h ead office at ------------------------ (h ereina fter referred to as ------which expression unless the context otherwise require shall include i tsadministrators ,successors and assignees,) of the SECOND PART

AND

3. Y established and exist ing under the laws of the ----------------and having i tsregistered / h ea d office at ((h ereina fter referred to as ----- which expr ess ionu nless th e context o therwise requ ire sh al l include i t s adm inis t ra tors , su ccessorsan d a ss ign ees,) of th e THIRD PART.

All of which are collectively referred herein as Parties, which expression shallinclude thei r adminis t ra tors , successors and such ass igns as are permit ted

u n der Article 13 her eof.


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WITNESSETH

WHEREAS, Part ies ha ve en tered int o a Bidding Agreem en t ( BA) da ted -------which intera lia, conta in s provision for execu tion of Opera ting Agreemen t am ongst th eParties.

WHEREAS the Parties have entered in to a Production Sharing Contract(Con tr a ct) on __________ with Govern m en t of In dia .

WHEREAS th e Parties wish to defin e th eir resp ective righ ts, in terest an dobligat ions with respect to th e Petroleum Operat ions to be condu cted u nd er th is J ointOperating Agreement (hereinafter referred to as Agreement).

WHEREAS the Par t ies have read and unders tood the r ights and obl igat ionsconta in ed in th e PEL an d pr ovisions of th e Act an d Ru les ,

NOW THEREFORE, in consideration of the premises and mutual agreements

h ereina fter cont ained, th e Parties a gree as follows:-

ARTICLE 1

DEFINITIONS AND INTERPRETATION

Unless the context otherwise requires, for the purposes of this Agreement, thedefinit ions conta ined in the Contra ct sh all also be applicab le h erein. Fu rth er more,each term lis ted below sha ll have the m ean ing s ta ted th erefor, when ever u sed in th isAgreement.

1.1 Accoun ting Procedur e m ean s th e proceedings accou n ting to be ad opted by th eOperator in accordan ce with th e Accou nt ing Procedur e a t tached here to asExhibit A.

1 .2 Work Programm e mea ns the work program m e as given in the Contra ct .

1 .3 Advan ce mea ns each paymen t of cash required to be ma de pu rsu an t to a cashcall.

1.4 Affiliate means a company that directly or indirectly controls or is controlledby such Party to this Agreement or a company which directly or indirectlycontrols or is cont rolled by a com pa n y which con trols a Par ty to this Agreemen tit being understood that control means ownership by one company of morethan fif ty percent (50%) of the voting securit ies of the other company, or thepower to direct , ad m in ister an d dictate policies of th e oth er com pa n y evenwhere the voting securit ies held by such company exercising such effective


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control in that other company is less than fif ty percent (50%) and the termcontrolled sh all h ave a correspon ding m ean ing.

1.5 Agreemen t m ean s th is J oin t Operat ing Agreemen t in clu ding Exhibits .

1.6 Appr aisa l Program m e m ean s a program m e, carr ied out following a Discoveryin the Contra ct Area for the pu rpose of ap pra isin g Discovery an d delin eatingthe Petroleum Reservoirs to which the Discovery relates in terms of thicknessand la tera l extent and determining the character is t ics thereof and the quant i tyof recoverab le Petroleu m th erein .

App ra isal Well m ean s a n y well dr illed as a p ar t of fu lfillmen t of App ra isalProgramme.

1.7 Approved Budget m eans a bud get tha t ha s been approved with respect to theAppr oved Work Program m e.

1.8 Approved Work Program me m eans a Work Programm e tha t ha s been approved

by the Operating Committee.

1.9 Bu dget m ean s a bu dget formu lated in relation to a Work Progra m m e. Theterm Budget shall mean, as the context requires, preliminary, proposed orfina lly adopted versions t h ereof, an d an y revisions or su pplemen ts th ereto.

1 .10 Bus iness Da y mea ns a d ay on which the Banks in - - -- - , Ind ia an d - -- - -- - - arecus tomari ly open for bu siness .

1 .11 Cash Call m eans an y request for payment of cash ma de by the Operator, inaccordance with an Approved Work Programme and Budget to the Parties inconnect ion wi th the Joint Operat ions (as per the format to be decided by theOpera ting Comm ittee).

1.1 2 Confiden tial Inform at ion means all legal, f inancial , commercial , technicaland other data, knowledge and information (including any and all information)obta ined an d/ or acquired by an y Par ty(ies) re la t ing to th is t ran sact ion includingbu t not limited to geological , geoph ysical , seism ic an d oth er data , m ap s,models, diagrams and modelling exercises any and all reports or otherdocuments created f rom such data and informat ion and exercises and analysescarr ied out u s ing su ch data a nd informat ion.

1.13 Contra ct Area m ean s at any t im e th e area covered by th e PEL,.


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1.14 Cons ent ing Par ty mea ns a Par ty who agrees to par t ic ipate in an d pay it s sh areof th e cost of an Exclu sive Opera tion.

1.15 Delivery Poin t m ean s, except as oth erwise h erein p rovided or as m ay beotherwise agreed between the Parties having regard to international practice,the point at which Petroleum reaches the outlet f lange of the delivery facil i ty,either offshore or onshore and different Delivery Points may be established bypu rp oses of sa les. Delivery point(s) for th e pu rp ose of sa le(s) of Petroleum fromthe Contra ct Area s ha ll be approved by the Mana gemen t Comm it tee .

1.16 Development & Production Operations means any activity connected toexploitation of oil & natural gas from a Commercial Discovery.

1 .17 Discovery m eans an accum u lat ion of hydrocarbon (oil an d/ or gas) in th esu bs u rface, th e econom ic viab ili ty of developm ent a n d produ ction of which ha sbeen es tab lish ed throu gh explorat ion a nd d elinea t ion (ass essm ent).

1.18 Effective Date sh all m ean th e date on which th e Contra ct is sign ed.

1.19 Explora tion Pha se m ean s th e PEL period of four years as prescribed in thePEL an d an y extens ion gran ted there to u nless otherwise re linqu ish ed by thelicen see givin g two m ont h s n otice to the GOI before th e expiry dat e. Th e periodmay be extended through regrant of PEL by the GOI as per provision of the Actand Rules on application by the l icensee atleast two months before the expiryda te at th e sole discretion of th e GOI.

1.20 Explora tion Operations m ean s operat ions con du cted in the Contra ct Areapu rsu an t to th is Agreemen t in sear ching for Pet roleum an d sh al l include bu tnot be limited to aerial, geological, geophysical, geochemical, palaeontologicalinvestigations relating to the subsurface geology including structural testdr illin g, str at igra ph ic tes t drillin g, dr illin g of Explorat ion Wells an d App ra isalWells and other related activit ies such as surveying, dri l l si te preparation andall work necessari ly connected therewith that is conducted in connectio


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1.21 J oint Accou nt mea ns th e se t of accoun ts ma inta ined by the Operator inaccordance with the provisions of this Agreement to record all revenues,expendi ture or o ther t ransact ions conducted on behalf of the Par t ies asprovided h erein.

1 .21 Joint Operat ions means those operat ions and act iv i t ies carr ied out by theOpera tor pur su an t to th is Agreemen t t il l th e form ation of J oint Stock Com pa ny,the costs a nd expens es for which a re cha rgeable to the J oint Accou nt .

1.22 Joint Property means, at any point in t ime, the Contract Area, al l wells,facil i t ies, installat ions, equipment, materials, information, funds and theproperty h eld for the J oint Accoun t.

1.23 Min im u m Work Obligations m ean s th e Appr oved Work Progra m m e relatedto those i tems which h ave been obligated as per th e Contract .

1.24 Opera tor m ean s a Party carr ying out the operat ion relating to h ydrocarbonexploration in the particu lar PEL block an d wh o is a part ner in the joint ventu reh olding at leas t 25 % Participa ting In terest .

1.25 Non-Opera tor m ean s at an y t ime th e Party or Parties to th is Agreemen t oth erthan the Opera tor.

1 .26 Operat ing Com mit tee m eans a commit tee to evalua te and ap prove budgets ,work programme progress or pet roleum operat ions and many other exigencies

as outl ined in various Articles and clauses and defined at Article 5 of thisAgreement. The headings of the Articles and Clauses in this Agreement areinserted for convenience of reference only and shall not affect the meaning orcons tru ction of th is Agreemen t.

1.27 Party or Parties m ean s Parties to th e Agreemen t an d th e resp ectivesu ccessors a nd p ermit ted ass igns of each.

1.28 Participa ting Int erest m ean s an u n divided interest (express ed as apercen tage) h eld by a party in an d to all r ight s, privileges, obligation s andliab ilit ies u nd er th e sa id PEL an d th is Agreemen t which will be convertedinto share holding on incorporation of the Joint Stock Company.

1.29 Petroleu m Operations m ean s, as the context m ay requ ire, Explorat ions


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Operations, Development Operations or Production Operations or anycombination of two or more such operations, including construction, operationan d m ainten an ce of all neces sa ry facilit ies, plu gging and ab an donm ent of Wells,sa fety, environm enta l protection , tra ns porta tion, stora ge, sa le or dispos it ion of Petroleum to the Delivery Point, Site Restoration and any or all other incidental

operations or activit ies as may be necessary.

1 .30 Su b-contra ctor mea ns an y comp an y or person contracted by the Operator

to provide goods or services with res pect to Petroleu m Opera tions .

1.31 Wilfu l Miscond u ct m ean s an in tent iona l an d cons cious or reckless disregar dby the supervisory or management staff or any director of any Party, of theterm s of th is Agreemen t or of good oilfield p ra ctice bu t s ha ll n ot inclu de a ny a ctor omission reasonably required to meet emergency conditions, includingwith out lim itation th e sa fegua rding of l ife, property an d J oint Opera tions or, for

the avoidance of doubt , any error of judgement or mis take made by any suchperson in the exercise, in good faith of any function, authority or discretionconferred u pon th e Par ty.

INTERPRETATION

1.32 Unless the context otherwise requ ires , reference to singu lar sh al l sh al linclude a reference to the plural and vice-versa , and reference to anygender s h al l in clu de a reference to a ll genders .

1.33 Reference to a ny Article or Clau se s h all be a n Article or Clau se of th isAgreement.

1.34 In th e event of an y in consisten cy between the ma in body of th is Agreemen t an dany schedules a t tached here to , the provis ions of the main body of theAgreement shall prevail.

1.35 Reference to an y law or regu lation h aving the force of law inclu des a r eferenceto tha t law or regula t ion f rom t ime to t ime am ended, extended or re-ena cted.

1.36 In cas e of an y conflict of an y term of th is Agreemen t with tha t of th e Contra ctor Bidding Agreemen t th e provisions of th e Contra ct an d this Agreemen t willprevail.


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ARTICLE 2

EFFECTIVE DATE, DURATION AND SCOPE

2.1 Th is Agreem en t sh all be effective from the Effective Dat e an d sh all cont inu e ineffect for the term of the l icense and any lease granted including theirextens ions an d thereafter un t il a fina l se t t lemen t of a l l accoun ts am ong thePar t ies has been made or terminated ear l ier in accordance wi th the terms of this Agreement or Contract .

2.2 The developin g, operat ing, produ cin g an d ab an doning th e oil an d gas fields inthe Contract Area , t rea t ing and f ie ld process ing and the t ranspor t ing of Petroleum produced to the delivery point and appropriate supporting activit iesfor an y of th e foregoin g sha ll be carried on by a J oin t Stock Comp an y form edan d incorporated in India for th is pu rpose .

2.3 Except otherwise provided herein, each Party sh all sh are in all costs,obligations an d ben efits in proportion to i ts Participa ting Int erest .

ARTICLE 3

PARTICIPATING INTEREST AND JOINT OPERATIONS

3.1 Th e Part icipa t in g In terest of th e Par t ies on th e Effect ive Date sh all be asfollows:-

A : .. %

X : %

Y %

3.2 Th e Par t ies u n der take to comple te the Work Programm e as descr ibedin the Con trac t .


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ARTICLE 4

OPERATOR

4.1 All J oint Operations sh all be condu cted by th e Opera tor in accordan ce withpolic ies , programm es a nd bu dgets app roved in accordance with the provis ionsof th is Agreemen t , th e directions of th e Opera ting Comm ittee an d inaccordance with generally accepted international petroleum industry practices.

4.2 X is designat ed Opera tor an d agrees to so act un ti l it resign s or ceases to hold aPar t ic ipat ing Interes t hereunder or unt i l such t ime as Joint Stock Companyas su m es the Operators h ip as provided in Article 2 of th is Agreemen t. Th eParties shall provide the Operator with such powers of at torney or any otherdocuments that i t may need in order to carry out operat ions pursuant to th isAgreement.

4 .3 Any cha nge in Operator o ther tha n PSC formed pu rsu an t Art ic le 4 .2 sh al l bemade by resignation of Operator on one hundred eighty (180) days prior writ tennot ice to the Par t ies or by mu tu al cons ent of the Pa r t ies .

4.4 Su bject to Article 4.2, Operator sh all be removed upon receipt of notice of occu rr en ce of an y of th e followin g even ts .

i) An order is m ad e by a cour t or an y effective resolution is pa ss ed for

dissolution, l iquidation, winding up, amalgamation or reorganisation of Operator.

ii) Operat or dissolves, liqu ida tes or term in ates its corporate existen ce.

iii) Operator becomes ins olvent , ban kru pt or ma kes an ass ignm ent for theben efit of cred itors; or

iv) A receiver is ap poin ted for a su bst an tial pa rt of Opera tor s as sets .

v) If Oper at or together with an Affiliate of Oper at or is or becom es th e h olderof a Participating Interest of less than twenty five percent (25%).


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vi) Opera tor is in su bst an tial brea ch of its du ties or obligations h ereu nd er inany mater ia l respects and does not commence to rect i fy the breachwithin ten (10) days after writ ten notice from any Non-Operatorspecifying the breach and request ing Operator to rect i fy the same anddoes n ot rectify the brea ch within a furth er th irty (30) da ys after su ch ten

(10 ) da y period.

4.5 Wh en a cha nge of Opera tor occurs pu rsu an t to Article 4.3 or Article 4.4:

i) The Opera ting Comm ittee sh all m eet as soon as poss ible to ap poin t asu ccessor Operator p rovided th at on ly the Non-Operators s ha ll have ther ight to vote to appoint the successor Operator. Such appointment shal lbe by th e u na n im ous vote of th ose Parties ent it led to vote.

ii) The Operat ing Comm ittee sh all ar ra nge for th e tak ing of an indepen den tinvent ory of all J oin t Property and an au dit of th e books an d records of

the rem oved Operator. Su ch inventory an d au dit sh al l be com pleted, if possible, no later than the effective date of the change of the Operator.The liabilit ies an d expen ses of su ch au dit sh all be cha rged to th e J ointAccoun t u n less Opera tor is rem oved pu rsu an t to Article 4.4 (exceptfor subparagraph (v) thereof) in which such expenses shall be for theaccoun t of the removed Operator.

ii i) The resign ation or rem oval of Opera tor or replacem ent by th e su ccessorOper at or sh all n ot becom e effective pr ior to receipt of an y ap pr oval of th e GOI, if sa m e is required.

iv) Upon the effective da te of th e res ign at ion , or rem oval or ch an ge of th eOperator, the successor Operator shal l succeed to a l l dut ies , r ights andau th ority of Opera tor. Th e former Operator sh all tra n sfer to th esu ccessor Opera tor a l l J oint Proper ty, books of accoun ts , records a ndother documents mainta ined by the outgoing Operator per ta ining to theContra ct Area a n d to J oint Opera tions . Upon delivery of th e abovedescr ibed proper ty and data , the former Operator shal l be re leased anddischarged from all obligations and l iabil i t ies as Operator accruing afters u c h d a t e.

v) The ou tgoin g Opera tor sh all be liable for all obligations a n d liabilities asOperator incurred t i l l the effective date of appointment of the successorOperator.

4.6 Su bject to Article 4.1 Operator sha ll ha ve th e following powers an d au th orit iesan d sh all perform an d car ry ou t th e following du ties:


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4.6.01 Exert i ts bona fide efforts to explore th e Contra ct Area in a ccordan ce withgenerally accepted international petroleum industry practice to discovercommercia l accum u lat ions of Pet roleum .

4.6.02 Su bject to th e provisions of this Agreemen t, exercise control a n dexclu s ively ma na ge an d carry out the Joint Operat ions .

4.6.03 Comply with th e respective obligations im posed u pon th e Parties by th elaws of India includ ing th e tim ely filing of rep orts a n d pa ymen t of allfees, levies, taxes (except in come taxes pa yable by th e Parties), an dcha rges of every natu re payable by the Par t ies u nder the s a id laws .

4.6.04 Tak e all ap propriate s teps t o obtain, m ainta in in force, renew or extend,consents , approvals , author isa t ions in accordance wi th the terms of th isAgreement.

4 .6 .05 Represent the Par t ies before th e GOI and an y a nd a l l cou r ts ,adminis t ra t ive depar tments , bureaux and agencies whatsoever in Indiain mat ters re la ted to the Joint Operat ions , and in so doing prepare andsign, f i le and receive any affidavits, undertakings, contracts, peti t ions,

requests , cer t i f ica tes , author isa t ions , repor ts or o ther documents inconnection therewith; advise the Parties in a t imely fashion of any suchacts which in th e Opera tor s opinion m ay s ignifican tly affect th e Part ies;and perform al l o ther ac ts of a s imi lar nature necessary and proper inconnection therewith, except to the extent any Party has indicated i tsdesire to represent itself in connection with any of the foregoing. Non-Operators shall be enti t led to attend for the purposes of observation,m eet ings between th e Operator and GOI an d an y cour t ap peara nce of theOperator where su ch m eet ings or appeara nces per ta in to ma t ters re la t ingto th is Agreemen t.

4 .6 .06 Estab lish an d m ainta in s u ch re la t ions hip with GOI, local au thor i ties a ndwith the publ ic as shal l be necessary or appropr ia te to assure that theJoint Operat ions are conducted and carr ied out to the bes t advantage of the Par t ies .


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4.6 .07 Prepare an d su bm it to the Operat ing Comm it tee , programs an d bu dgetsas pr ovided in Article 6.

4 .6 .08 In accordance with the procedure out l ined by Operat ing Comm it teeestablish and maintain such offices, installat ions and facil i t ies in Indiaas are n ecessa ry, adequa te an d a ppropr ia te for the effic ient performan ceof J oint Operat ions a nd service hereu nd er.

4 .6 .09 Es tab lish and ma in ta in su ch books , r ecords and accoun t s a s a rerequired by this Agreement together with such addit ional books, recordsand accounts as f rom t ime to t ime may be reasonably speci f ied by theParties. Main tain su ch produ ction records, well an d reservoir data , fieldreserves and ra te of product ion s tudies and es t imates , and the l ike aswill reflect a thorough and accurate history of Petroleum Operations,together wi th such addi t ional s imi lar records and data as f rom t ime tot ime m ay be specified by the Operat ing Commit tee or required u nd er theAgreement.

4.6.10 Em ploy, adm in ister, u se a n d h ave sole respons ibili ty for al l the s election,employment , adminis t ra t ion and compensat ion for a l l personnelreas ona bly requ ired for th e J oint Operation s. Also obtain whenappropriate, such occasional or part-t ime services of experts, loanemployees an d others as operat ional requirements ma y, in Operator sopinion, dictate, while always keeping in mind the Parties desire tocondu ct J oint Op erat ions in a n efficient a n d cost effective m an n er.

4.6.11 Su bject to Articles 5 an d 7 h erein , acqu ire on beh alf of th e Parties an dut i l i se in the Joint Operat ions a l l equipment , mater ia ls and suppl iesn ecessa ry or desirab le for carrying on th e J oin t Operations .

4 .6 .12 Acquire su ch lan ds , leases , s u rfaces r ights , easem ents an d r ights-of-wayas m ay be necess ar y or desirable for the J oint Oper ations; provided,however, that Operator shal l not acquire for the Joint Operat ions anylands, surface rights, easements or r ights-of-way involving a totalcommitment in excess of the equivalent of f if ty thousand United StatesDollar s (U.S. $50 ,000) for each su ch acqu isit ion with out prior app roval of Operat ing Commit tee; and provided, fur ther, that Operator shal l not


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acquire for the Joint Operations any lease for a longer period of t imethan ten (10) years a t an annual renta l in excess of the equivalent of twenty five thou sa n d United States Dollars (U.S. $25 ,000 ) with out pr iorap proval of th e Operat ing Comm ittee.

4 .6 .13 Enter in to contra cts with others in i t s own n am e as pr incipal or as agentfor the Parties, as appropriate and in the interest of the Parties followingth e procedu re , for the per forma n ce of services or su pply of facili t ies,equipment , mater ia ls , or suppl ies by such others , provided that there isa reasonable bas is to bel ieve that such others shal l be competent andcapable technically and financially, to perform properly their obligationsunder such contracts , and that the se lect ion of such contractors i s to bemade on the basis of the Procedures for Acquisit ion of Goods andServices contained in Appendix VI to the Agreement.

4.6 .14 In cases of emergency, Operator m ay a ward su b-contra cts withou tfollowing the procedure set out in the Procedure for Acquisition of Goodsand Services contained in Appendix B subject , however, to suchtransactions being reported with writ ten detailed reason for awardingsuch subcontracts along with the financial implications thereof to theOpera ting Com m ittee at i ts first m eeting following su ch awar d.

4 .6 .15 Promptly pay a nd du ly discharge a l l cos ts an d expens es incu rred inconnect ion wi th the Joint Operat ions and keep and mainta in theContra ct Area a n d an y property acqu ired for the J oint Oper ations free of a l l l iens , charges and encumbrances ar is ing out of the Joint Operat ionsor in connection therewith.

4 .6 .15.1 The Operator shal l obta in and mainta in in respect of the JointOperat ions and the Joint Proper ty, insurance as required under th isAgreement or any appl icable laws and such other insurance as theOpera ting Comm ittee m ay from tim e to t ime determ ine. All su chrequired insurance shal l name a l l the Par t ies having a Par t ic ipat ingInterest as addit ional insured with appropriate waivers of subrogation.No other ins u ran ce sha ll be carr ied by the Operator for th e J ointOperat ions . Each Par ty ind ividu al ly ma y ma inta in su ch addi t ionalinsurance or se l f - insurance as i t deems proper to protect i t s owninteres ts in the J oint Operat ions , th e costs of which s ha ll not be cha rgedto the J oint Accou nt .


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4.6.15.2 The policies of any such insurance shall be endorsed with waivers of al lexplicit or im plicit r igh ts of su brogation to eventu al r ights a gain st th eNon Operators and, al ternatively, to the extent possible, the Operatorsh al l ha ve an d the Non-Operators na m ed as add it ional ins u red. TheOperator shal l take care that Sub-contractors whi le taking insurancesh al l ha ve the Par t ies na med as add it ional ins u red.

4.6.15 .3 Ea ch Pa rty sh all be solely liab le for an y loss or d am age or liabili ty of whatsoever na tu re when s u ch loss , da ma ge or l iabi lity is cau sed by su chPartys Gross Negligence or Wilfu l Miscon du ct a n d in su ch event su chParty shall indemnify the other Parties against al l claims in respect of an y loss or da ma ge so ar is ing.

4.6.15 .4 Su bject to Article 4.6.15.3 a n d to Article 4.9.01, al l da m age, loss an dliab ility in cu rred in th e J oin t Opera tions which a re n ot completelycovered by insurance policies procured or furnished under Article4.6.15.1 shall be borne by the Parties in proportion to their respectiveParticipating Interests.

4 .6 .16 Open and ma in ta in a ban k accoun t o r accoun t s a s m ay be appropr ia t efor the J oint Operat ions .

4 .6 .17 Keep th e Par t ies informed regarding th e J oint Operat ions an d prepareand submit repor ts , technical s tudies and product ion forecas ts ,including s ignifican t cha nges in produ ct ion forecas ts , an d other d ata an dinforma t ion as required un der th is Agreemen t .

4.6.18 Su bject to Article 10 .3, a llow au th orised repres ent atives of th e Par tiesfu ll access to J oint Operat ions , da ta an d informat ion per ta ining to J ointOperations including derivative maps, reports, books, records, accountsat a l l reasonable t imes and conduct audi ts as provided for in the JOAAccoun ting Procedu re.


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4.6.19 Give t im ely n otice to th e Pa rties p rior to p hysically dem arca ting th elocation of an Exploration Well (including co-ordinates, and all otherrelevant information), as well as reasonable advance notice of thecommencement of any exploratory dri l l ing operations and give notice of proposed testing.

4 .6 .20 Take p rompt an d necessa ry ac t ion and measu res to p ro tec t a ndsa fegu ard life , heal th , the en vironm ent a nd the p roper ty an d in teres ts of the Par t ies an d the J oint Operat ions .

4 .6 .21 Make such recomm enda t ions from t ime to t im e to the Operat ingComm ittee for th e efficient carr ying ou t of th e J oint Opera tions asOperator may consider advisable.

4.6.22 Perform du ties for th e Opera ting Com m ittee set out in Article 5, s u bm itWork Programmes, Budgets and AERs as provided in Article 6 andperform s u ch a ddi t ional operat ions an d s ervices as Operat ing Comm it teem ay from time to t ime direct .

4 .7 Operator u nd er takes to carry out each J oint Operat ions program me within the

l imi ts of the re la ted Work Programme and budgets in accordance wi th thegeneral ly accepted in ternat ional pet roleum indust ry pract ice and shal l notunder take any operat ions hereunder not included in the Joint Operat ionsprogramme or make any expendi ture as to a f inancia l year in excess of theam oun ts b u dgeted in th e re la ted Budgets except a s follows:

4.7.01 If n ecessa ry to car ry ou t an Appr oved Work Program m e, Operator is au th orisedto make expendi ture in excess of the budget adopted therefor up to but notexceeding ten percent (10%) of each budget i tem , provided that such excess

expenditures shall not exceed five percent (5%) of the total Budget and bereported promptly to the Operating Committee by Operator.

4 .7 .02 Operator in a fina ncia l year is a lso au thor ised to ma ke expendi tures foroperations in the Contract Area not included in an Approved Work Programmeor not p rovided in a n ad opted Bu dget, limited, however, to a total not exceeding


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fif ty thousand United States Dollars (U.S. $50,000) provided that theexpenditures are not for purposes therefore rejected by the OperatingCommit tee and provided such expendi tures shal l be repor ted promptly to theOpera ting Comm ittee by th e Opera tor. Once the item ised report of su chexpend itu res ha s been a pproved by the Operat ing Commit tee, the am oun t sh al l

be increas ed ba ck to fifty thou sa n d United Sta tes Dollar s (U.S. $50,00 0).

4 .7 .03 In case of emergency, Operator m ay m ake s u ch imm ediate expendi tures as itdeems necessary for the protection of l ife, property or environment, and suchemergency expendi tures shal l be repor ted promptly to the Operat ingCommittee.

4.7.04 Opera tor sh all an nu ally su bm it a forecast of operating expens es (also calledoperating expend itu re bu dget) to Opera ting Comm ittee. Sh ould actu al orant ic ipated operat ing expenses for any annual per iod be in excess of suchforecas t b y ten p ercent (10%) or one h u nd red thou san d Uni ted Sta tes Dollars(U.S. $100,000), whichever is less, appropriate explanation of the overexpendi ture shal l be presented to the Operat ing Commit tee as soon as suchoverrun is evident and Operating Committee shall determine corrective actionsto be taken, if an y. Operator sha ll fu rnish to th e Par t ies qua r ter ly s ta tem entsof ac tual versus budgeted expendi tures wi th appropr ia te explanat ions forvar iances .

4.8 Opera tor sh all prom ptly provide the Par ties all du plicate sam ples, properlypacked, of rocks and fluids collected during operations. Operator shall alwaysbe mindful in the conduct of Petroleum Operations of the rights and interest of India.

4.9 If a claim is made against any Non-Operator or if any Party is sued on accountof an y mat ter a r is ing from operat ions hereu nd er over which su ch Par ty ha s n ocontrol because of the rights given to the Operator by this Agreement, suchParty shall immediately notify all other Parties and the claim or suit shall bet reated as an y other c la im or su it involving operat ions h ereun der. Operatorshall (except in the case of class actions) without admission of liability,compr omise, sett le or defend claims an d l it igation (to the exten t n ot covered byinsurance) arising out of Joint Operations provided, however, that Operatorshall not pay or waive rights to more than the equivalent of twenty fivethousand United States Dollars (US$25,000) in full sett lement of any claim orsu it with out pr ior writ ten ap proval of th e Operating Com m ittee. However, theaggregate value payable by Operator without prior approval of OperatingCommittee towards sett lement of al l claims or suits in a year shall not be moretha n equivalent of one h u nd red th ousa nd United Sta tes Dollars (US$100,000).Any claim or litigation involving an amount in excess of the equivalent of twenty five thousand United States Dollars (US$25,000) shall be reported


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promptly to the par t ies and the Par t ies shal l have the r ight to be representedby it s own coun sel a t it s own cost an d expense in th e comp romise , se t t lemen tor defence of such claims or litigation.

4.9.01 The Opera tor sh all not be l iab le to the Parties or any of th em for an y loss ordamage ar is ing in connect ion wi th the conduct by the Operator of JointOperat ions hereunder, and, fur ther each Par ty shal l , to the extent of i t sParticipating Interest , indemnify the Operator against any action, claim ordemand arising in connection therewith except in the case of any loss orda m age or an y action, claim or dem an d, aforesaid arising directly out of GrossNegligence or Wilful Misconduct on the part of the Operator.

4 .10 Cla ims and dema nds made on Non-Opera tor s

In the event a c la im, demand, ac t ion is made by the Government or any th i rdparty or arising out of or l iabil i ty is made against or incurred by or demandedfrom an y par ty who is not the Operator un der the terms of th is Agreement ,then su ch Par ty sh al l u pon receipt of an y such c la im or dema nd or upon receiptof notif ication of such suit or action, promptly report the same to the Operatorand all of the other Parties and provide therewith details of such claim,dem an d, su it or action. Any comprom ise, sett lemen t or waiver of an y righ ts inrespect of any such c la im, demand, sui t or ac t ion made by such par ty wi thoutthe prior approval of the Operating Committee, shall be solely to the account of such par ty and the other Par t ies here to shal l not be responsible or l iableth erefore or an y part th ereof. The a foresaid is without p rejudice to legal r igh tsas may be avai lable to the Par t ies to be represented by thei r own counsel a t

thei r expens e in the p ar t ic ipat ion or defence of an y such c la im, dem an d, su it oraction.

4 .11 Each of the Par t ies sha ll, obta in a nd m ainta in , in r espect of it s PercentageInterest share of any l iabil i ty to third parties which may arise in connectionwith the Joint Operations, such insurance or other evidence of abil i ty to meetany such l iabil i ty as shall from time to t ime be determined by the OperatingCommit tee. Each of the Par t ies sh al l, as an d when required by the Operat ingCommittee, produce to i t such evidence as i t shall reasonably require toes tabl ish tha t su ch insu ran ce or su ch a bi lity exis ts a nd is being m ainta ined.

ARTICLE 5

OPERATING COMMITTEE

5.1 Su bject to Article 2, to provide for th e orderly su pervision and direction of J ointOperat ions , there shal l be es tabl ished an Operat ing Commit tee consis t ing of one (1) representative of each of the Parties to this Agreement. The nominee of the Operator will be the convenor a nd chairma n of the Opera t ing Comm it tee .


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Ea ch Pa rty sh all with in two weeks of th e Effective Date notify th e other Pa rty inwri t ing of the name and address of i t s representa t ive and may a t any t ime andfrom time to t ime replace i ts representative by notice to the other Party and may

designate one or more alternate representatives to act in the absence of i tsrepresenta t ive . A representa t ive shal l be deemed author ised to b ind the Par tynom ina t ing su ch representa t ive for the pu rposes of th is Agreemen t .

The Operating Committee is the co-ordinating body for the direction, controlan d ad m inistra tion of th e J oin t Operat ions . Th e principal fu n ctions of th eOperating Committee shall be:

5.1.01 To es tab lish policies from time to t ime govern ing variou s as pects oractivit ies of the J oint Opera tion s.

5.1.02 To review, appr ove an d revise a n nu al exploration Work Program m es a n dcorrespond ing Bu dgets , as proposed by the Operator.

5.1.03 To ap point su ch techn ical , fin an cial , accou n ting, legal or oth er su b-commit tees as the representa t ives may deem appropr ia te for s tudies ,an alyses , repor ts , e tc . , on ma t ters per ta ining to the J oint Operat ions .

5.1.04 To review reports on J oin t Operat ions con du cted in th e Con tra ct Area.

5 .1 .05 To review an d appr ove a ny proposal for the appr aisa l of an area an d todelineate any Discovery.

5.1.06 To review, revise an d ap prove Work Progra m m es an d Bu dgets forExplorat ion Operat ion as defined here in and as proposed by theOperator.


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5.1.07 To review an d a ppr ove Explorat ion Wells a nd locations (in clu dinglocations for Wells requ ired for a n y pu rposes wha tsoever).

5.1.07ATo review and approve delineation plan including release of assessmentwells for establishing a Discovery as a Commercial Discovery or

otherwise.

5.1.08 To review an d a ppr ove well st im u lation p rogram m es.

5.1.09 To review an d determ ine th e area to be relin qu ish ed

5.1.10 To approve appointment of subcontractors for carrying out any PetroleumOperat ions by Operator beyond the author i ty ves ted in the Operatoru nder th is Agreemen t .

5.1.11 To review and approve the declaration of a Discovery as a CommercialDiscovery.

5.1.12 To review an d a ppr ove an y proposed p lan for join t developm ent

5.1.12A-To finalise proposal for formation of a joint stock company for

developing a Commercial discovery.

5.1.13 To review and determine the area that may be voluntari ly relinquished.

5.1.14 To review and approve such other mat ters wi th respect to JointOperat ions in the Contract Area as may be referred to the Operat ingCommittee by any member of the Operating Committee.

5.1.15 Any other matter which is required by the terms of this Agreement to beapproved by the Operating Committee.

5.2 Unless otherwise agreed, th e Opera ting Comm ittee sh all m eet at leas t onceevery six months at the office of the Operator or elsewhere as the Parties shallunanimously decide . Addi t ional meet ings may be requested and convened byan y Par ty. A Party which wish es to hold an ad dit iona l m eeting sh all give notice


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at least twenty (20) days before the proposed meeting date, specifying theproposed t ime, place an d agenda of th e m eeting. In cas e of em ergency, ameet ing shal l be convened whenever necessary, upon such not ice as shal l bereasonable in the c i rcumstances . Mat ters not included in the agenda may betaken up wi th the unanimous consent of a l l Par t ies (whether present a t the

meeting or otherwise).

5.3 Th e Cha irm an of th e Opera ting Comm ittee, who will direct th e m eetin g an dprepare th e minu tes , shal l be a representa t ive of the Operator. The m inu tesshal l include the names of the representa t ives present , the Par t ies theyrepresent an d an y formal ac t ion taken by the Operat ing Comm it tee . Theminutes shal l be deemed correct and approved when the Operator receiveswrit ten , telex or facs im ile ap proval from th e Parties. Th e Cha irm an s ha llmaintain a permanent f i le of al l Operating Committee determinations.

5.4 An y of th e Parties m ay su bm it m att ers for determ ination with out holding ameeting provided such matters are submitted by facsimile, telex oracknowledged telegram to the other Parties. In such event, the other Partiesshall vote by giving advice by facsimile, telex or acknowledge telegram of suchvote to the submitt ing Party within thirty (30) days with copies to all the otherPar t ies unless the communicat ion re la tes to the deepening, complet ing, s ide-tracking, plugging back, reworking, coring, test ing or abandoning of a well onwhich dril l ing equipment is located, in which case each Party will vote within

seventy two (72) hou rs. A failu re to vote sha ll be deem ed to be a n egativeresponse .

5 .5 Each representa t ive or a l tern ate representa t ive a t the cost and expens e of thePar ty it represen ts s ha ll be ent it led to h ave present a t a ny Operat ing Comm it teemeet ing such reasonable number of advisors as they may desi re and which areapp ropr ia te to the Joint Operat ions m at ters u nd er cons idera t ion.

5.6 Su bject to Article 8 of th is Agreemen t all determ ina tions of th e Opera tingComm ittee sh all be m ad e by seventy five percen t (75%) vote of th e Participa tingInterests with each Party voting according to i ts Participating Interest and suchdeterminat ions sh al l be binding on the Par t ies .


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5.7 The lodgin g, food, tra n sporta tion an d inciden tal costs incu rred byrepresenta t ives on the Operat ing Commit tee to a t tend meet ings of theOperating Committee shall be borne by the respective Parties they represent.

ARTICLE- 6

PROGRAMMES AND BUDGETS

6.1 On or before th e 1s t da y of Novemb er of each Year, Operator sha ll su bm it to th ePar t ies a recom men ded operat ing program m e an d bu dget for the Contract Areafor the su bsequ ent f ina ncia l year, which operat ing program me a nd bu dget sh al linclude as a minimum the work and expendi ture required to be performed orincu rred du ring su ch finan cial year. At the sam e tim e as tha t finan cial year sprogram and budget i s submit ted , a provis ional program for the next

su cceeding fina ncia l year sh al l be presented by the Operator. Operator sha llsubmit an operat ing program and budget as soon as poss ible af ter theexecution of this Agreement for the remainder of the Year in which thisAgreemen t is executed.

6.2 On or before th e 30t h of Novemb er of each Year, the Opera ting Comm ittee sh allag ree upon an d adop t an opera t ing p rogram me a nd bud ge t fo r the su bsequen tyear which shal l include as a minimum the work and expendi ture required tobe performed or incu rred u nder th e Contract du r ing su ch year. At the t ime of

agreeing upon and adopt ing an operat ing programme and budget , theOperating Committee shall provisionally consider, but not act upon or adopt, anoperat in g program m e for the next su cceeding Year. As soon as pos sible afterthe adopt ion of an operat ing programme and budget , Operator shal l provide acopy thereof to each Party.

6.3 Ea ch bud get sh all be su bdivided int o th e two m ajor fu n ctiona l categories, i.e .explora t ion and appraisa l , and wi thin each of those by sub-categor ies fur therbroken down by program m ed activity an d in dividua l projects. Pur cha ses of materials and supply inventory not specifically made for an approved budgetproject will be bu dgeted as a sepa ra te item . Each in dividu al project costingmore than one hundred thousand Uni ted Sta tes Dol lars (U.S. $100,000) perprogram will be either labelled as Firm or To Mature depending upon thedegree of complete details fu rn ish ed at th e t im e of bu dget presen tat ion.


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6.4 For a project to be con sidered Firm with in the bud get i t will requ ire progra mdescription, objectives, cost estimates and economic justif ication sufficientlycomplete an d in su ch d etail as to allow th orough evalua tion of th e project .

6 .5 Projects tha t do not meet th is presenta t ion s tan dard a t the t ime of bu dgetform u lation m ay also be included in th e bu dget to receive ap proval in principle,an d will be lab elled as To Matu re. Su ch pr ojects m u st be su bsequ ent ly fu lly

justif ied to the Operating Committee and receive i ts specific approval prior tothe physical commen cement of the project .

6.6 Opera tor sh all su bm it to th e Parties holding a Participa ting Int erest for priorapproval Authorisation Expenditure Requests (AERs) covering each individualproject within the budget in the following categories and shall obtain approvalprior to undertaking the following projects,(A sample AER is Exhibit C)

(a) Licences - an y in it ial cas h pa ymen t for a l icence.

(b) Explora tion - qu ar terly pr ojects for geological an d geophys ical work, coredril l ing and concession rentals after any init ial payment, and overheadcha rges ap plicab le to geological an d geophysical operations . Under

specia l c ircum stan ces Operator sh al l obta in separa te app roval for m ajorgeological or geophysical projects, which are in themselves in excess of fifty thou sa nd United Sta tes Dollar s (U.S. $5 0,00 0).

(c) Drilling:

i) Ea ch Explorat ion an dii) de lin ea tion well.

iii) Deep en ing of a n y well be low origin a l tota l de pt h , involvingexplorator y footage.


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iv) Workovers in excess of one hu n dred th ous an d United Sta tesDollars (U.S. $100,000) for any well, including deepening in todevelopment zones.

(d) Plan t an d equipment .

i) Ind ividu al const ru ct ion projects an d equipment pu rcha sesexceeding fif ty thousand United States Dollars (U.S. $50,000)each .

ii) Equ ipping of wells exceeding one h u nd red th ous an d United Sta tes

Dollars (U.S. $1 00 ,00 0). Equ ipping of wells inclu des gener ally th epurchase and installat ion of equipment and material for l if t ing,hea t ing, s tor ing a nd otherwise h an dl ing produ ct ion.

ii i) Projects an d pu rch as es costing less th an fifty th ous an d UnitedStates Dollars (U.S. $50,000) each shall be approved by Operatorbut shal l be included for informat ion purposes in approvalrequests s u bm it ted mon thly to the Par t ies .

iv) Storehouse s tocks - qua r ter ly comm itmen ts for pu rcha ses of ad van ce ma terials for projects n ot yet app roved.

v) Unu su al comm itmen ts of an y kind .

(e) The AERs sh al l be bas ed on the bes t curren t es t ima tes in han d an d sh al lbe developed prior to th e availab ility of firm contra ct rates . Opera torshal l a lso submit supplements for approval when i t i s ant ic ipated thatAERs will be overexten ded b y more th an ten per cen t (10 %).

(f) App roval of an AER sh all be confirm ed by retu rn ing a signed copy of th eAER to the Op erat or.


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ARTICLE 7

COSTS AND EXPENSES

7.1 All costs and expens es incu rred by th e Opera tor on beha lf of th e Parties incarr ying out J oint Op erat ions u n der th is Agreemen t (wheth er or not sp ecificallym ent ioned here in) sh al l be born e an d p aid by the Pa r t ies in p ropor t ion to th eirPar t ic ipat ing Interes ts a nd sh al l be determined an d/ or a llocated in a ccordan cewith cu rrent accou nt ing procedures as prescr ibed in the Accou nt ingProcedur e , a t tached h ere to an d ma de a par t h ereof.

7.2 In th e event of an y conflict between this Agreemen t and th e ap plicab leprovis ions conta ined in the Account ing Procedure or in any supplemental

account ing ins t ruct ions approved by the Operat ing Commit tee , the appl icableprovisions in the body of this Agreement shall govern to the extent of suchconflict.

7.3 The terms an d provisions of th e Accoun ting Procedur e m ay be cha n ged orm odified a s a greed by the Pa rties from time to t ime .

7 .4 Au di ts of Operator s accou nts an d records rela t ing to the accou nt ing m adeu nd er this Agreemen t sh all be condu cted as provided for in th e Accoun tingProcedure .

7.5 Inventories of J oin t Opera tions as sets sha ll be tak en as provided for in theAccoun ting Procedu re.

7 .6 Default

i) If an y Par ty (h ereina fter called th e Defau ltin g Par ty) fails to pa y in fu llits s ha re of an y Cash Call with in 30 d ays from t he d ate of cas h ca ll (Du eDate) as provided in the body of this Agreement or in the AccountingProcedure :


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a) The Opera tor sh all notify all Parties of su ch defau lt no later th anth e fifth (5th ) Bu sines s Da y from t h e Due Da te.

b) The Parties other th an th e Defau lt ing Party (h erein after called th eNon-Defaulting Parties) shall contribute, as hereinafter provided,the am oun t in defau lt .

c) Within th ree (3) Bu sin ess Days followin g th e n otification by th eOperator under (a) above, the Operator shall notify the Non-Defaul t ing Par t ies of the amount in Defaul t and shal l make afu rth er Cas h Call to the Non-Defau lt ing Parties, with a copy to the

Defaulting Party.

d) If su ch defau lt continu es, each of th e Non-Defau lt ing Parties, inthe pr opor t ion th at i t s th en cu rrent Par t ic ipat ing Interes t b ears tothe total of the then current Participating Interests of al l Non-Default ing Parties shall pay the amount specified in the Cash Callissu ed pu rsu an t to (c) above no la ter tha n ten (10) Bus iness Daysfrom date of receipt of such notice, and shall continue to pay, inaddi t ion to i t s Par t ic ipat ing Interes t share of subsequent Cash

Cal ls , the same propor t ion of that par t of a l l subsequent CashCal ls a t t r ibutable to the Defaul t ing Par ty unt i l such t ime as theDefault ing Party has remedied i ts default as hereinafter providedor u nt il , pur su an t to Article 7.7 th e Defau lt ing PartysParticipating Interest has been diluted or the Non-Default ing Partyha s withdra wn. Any Non-Defau lt ing Party th at fails to m ak epayment of the amount speci f ied in the Cash Cal l as i ssued to i tpursuant to paragraph (c) above and any subsequent Cash Cal lssh all itself become a Defau lt ing Pa rty.

e) The Opera tor sh all prom ptly n otify th e Parties when ever a defau lthas been remedied .

i i) Th e Defau lt ing Party sh all h ave th e right to rem edy i ts defau lt u p to th etime of reduction of i ts Participating Interest by payment of the amount


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due together wi th in teres t thereon calcula ted a t the LIBOR rate on theDue Date plus two percent (2%) per annum, such in teres t beingcompounded on a monthly bas is throughout the per iod of thedelinqu ency. All in terest received by the Operat or sh all be pa id to th eNon-Default ing Parties as well as any funds advanced in respect of the

amount in default refunded, in the proportions specified in Article 7.6 (i)(d).

i ii) Th e Non-Defau lt ing Parties sh all at al l t imes h ave a l ien on th eDefau lt ing Partys Pa rticipa ting In terest s h are of Petroleu m to secu re th epayment, in full , of the amount in default together with interest asprovided in Article 7.6 (ii) and, for the purpose of enforcing such lien,sh all ha ve th e righ t to requ ire th e pu rch as er of th e Defau lt ing Partyssh are of Pet roleum to ma ke pa yment in r espect thereof to the Operator or

whomsoever they nominate unti l the Non-Default ing Parties haverecovered, in full , the amount in default together with interest asprovided in Article 7.6(ii). Su ch p u rch as er sh all be en ti t led to rely uponinforma tion given to it by th e Opera tor for an d on beh alf of th e Parties a sto the amount in defaul t and in teres t due, and the Operator orwhomsoever i t nominates , shal l be empowered to give such purchaser afull and complete receipt in respect of such payment.

iv) All su m s which m ay become pa yable to a Non-Defau lt ing Party u n der

Article 7.6(iii) shall be paid by the Operator to it (or to a designated bank accou n t of th e Non -Defau lt ing Partys ch oice) as soon a s p ossible andsh al l be app lied firs t to accru ed in teres t a nd then to reduce th e pr incipalamount of the defaul t , and any res idual balance shal l be paid promptlyto th e Defau lt ing Party. An y foreign excha n ge gain s or losses a scalculated by the Operator shall be for the account of the Default ingParty.

7.7 Cont inuat ion of Defaul t .

i) After an y defau lt ha s continu ed for th irty (30) Bu siness Days from th edate of writ ten notice of Default under Article 7.6 and for as longthereaf ter as the Defau lt ing Par ty remains in defau lt on a ny paymen t du eunder this Agreement, the Default ing Party shall not be enti t led to voteon a ny m at ter coming before the Opera t ing Comm it tee du r ing th e per iod


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su ch defau lt continu es. Unless agreed otherwise by th e Non-Defau lt ingParties, the voting interest of each Non-Default ing Party shall be in theproportion which i ts Participating Interest bears to the total of theParticipa ting Int erest of al l th e Non-Defau lt ing Parties. An y m atterrequir ing unanimous vote of the Par t ies shal l be deemed to exclude the

Default ing Party. Notwithstanding the foregoing, the Default ing Partysh all be deem ed to ha ve ap proved, an d sh all join with th e Non-Defau lt ingPar t ies in taking any act ion to m ainta in a nd preserve the Contract .

ii) In the event that the defau lt continu es for m ore th an Ninety (90) da ys(th e Defau lt Period) an d th e Defau lt ing Party does not pa y th e am oun tin defaul t p lus accrued in teres t by the end of such t ime, a propor t ion of the Participating Interest of such Default ing Party shall , at the soleelection of the Non-Defaulting Parties be forfeited to the Non-Defaulting

Parties to reflect th e rat io tha t th e Participa ting In terest of the Defau lt ingPar ty bears to the cu mu lat ive contr ibu t ion m ade b y the Defau lt ing Par tyto the cumulat ive contr ibut ion made plus amount in defaul t of theDefaulting Party.

Following such forfeiture the reduced Participating Interest of theDefaulting Party shall be in accordance of the following formula, excepttha t in the ca se of a d efau lt on th e firs t Ca sh Call made on a

Party, ten percent (10%) of the Participating Interest of theDefau lt ing Party s ha ll sta nd forfeited :-

A = (B/ (B+C)) x D wh ere :

A = th e redu ced Participa ting Int erest of th e Defau lt ing Party.

B = th e total contribu tion s to th e J oin t Opera tions costs of th e

Defaul t ing Par ty up to but not including theam oun t in defau lt .

C = the am oun t in defau lt .

D = Participa ting Int erest of th e Defau lt ing Party.


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Su ch forfeitu re will not res tore th e Defau lt ing Partys powers a n d r igh tsforfeited u n der Article 7.7(i) u nt il su ch Defau lt ing Pa rty h as pa id th e firstCash Call following the date of such forfeiture. If the Defaulting Partyforfeits fifty percent (50%) or more of its Participating Interest as at theDu e Da te (fifty percen t t imes Participa ting In terest) to th e Non-Defau lt ing

Parties under this Article, such Default ing Party Operating Committeemeans a commit tee to evaluate and approve budgets , work programmeprogress or pet roleum operat ions an d m an y other exigencies a s ou t linedin variou s Articles a n d clau ses an d d efin ed a t Article 5 of this Agreemen t.The headings of the Articles and Clauses in this Agreement are insertedfor convenience of reference only and shall not affect the meaning orconstruction of this Agreement. shall , at the election of the Will ingParties, forfeit all of its Participating Interest to such Non-DefaultingParties who shall assume such forfeited Participating Interest , includingthe obligations relative thereto, in proportion to their Participating

Interes ts or in such other propor t ion as unanimously agreed by them.The Defaul t ing Par ty shal l execute such documents as are necessary totra ns fer i ts Participa ting Int erest a t i ts sole cost .

iii) Notwiths ta n ding th e pr ovision s of ar ticle 7.7 (ii) in th e event th at as aresult of a forfeiture by the Default ing Party of a part of i ts ParticipatingInterest pursuant to the provisions of Article 7.7(i i) , the remainingParticipa ting In terest of th e Defau lt ing Party falls below ten percen t (10%)the Non-Defaul t ing Par t ies shal l assume such Par t ic ipat ing Interes t of

the Default ing Party in proportion to their Participating Interest or insu ch other propor t ion as u na nimous ly agreed by them .

7.8 Forfei ture to be Without Prejudice to othe r rem edies and no right of SetOff.

i) Th e foregoin g pr ovision s, includ ing bu t n ot lim ited to th e tra n sfer of th eDefau lt ing Par tys Pa rticipa ting Int erest a re with out prejud ice to an yother remedies or r ights which the Non-Default ing Parties may haveagains t th e Defau lt ing Par ty with resp ect to a defau lt .

ii) Each Par ty ackn owledges an d accepts tha t a fu nda m ental pr inciple of th is Agreement i s that each Par ty must pay i t s Par t ic ipat ing Interes tshare of a l l amounts due under th is Agreement as and when required.


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Accordingly, any Party which becomes a Default ing Party undertakesthat , in respect of ei ther any exercise by the Non-Default ing Parties of an y rights u nd er or th e ap plication of an y of th e provisions of Articles 7 .6or 7.7 such Party shall not raise by way of set off or invoke as defence,whether in law or equi ty, any fa i lure to pay amounts due and owning

under th is Agreement or any a l leged or unl iquidated c la im that suchPar ty may have agains t Operator or any Non-Operator, whether suchcla im ar ises un der th is Agreemen t or o therwise . Su ch Par ty fu r theru nd er takes not to ra ise by defence, whether in law or in equi ty, tha t th enature or the amount of the remedies granted to the Non-Defaul t ingParties is unreasonable or excessive.

7 .10 Any Par ty ma y ma ke an a ddi t ional contr ibut ion on beh alf of an other Par ty so asto sa tisfy a Cas h Call of su ch other Pa rty in accorda nce with th is Article.

ARTICLE 8

OWNERSHIP OF ASSETS

8.1 Su bject to Art ic le 2 and 8 .3 hereu nd er, a l l ass e ts acqu ired by Operator for theJ oint Op erat ions sh all be owned by the Pa rties in p roportion t o their respectivecontributions to the costs of acquisit ion of such assets.

8.2 Unless th e Opera ting Comm ittee previous ly au th orises otherwise, Opera torshal l acquire for the Joint Operat ions only such assets as are reasonably

estimated to be required in carrying out the operations provided for in approvedJ oint Operat ions program s a nd bu dgets , or revis ions thereof, i t be ing in tendedthat Operator shal l not unreasonably s tockpi le mater ia ls and equipment forfu tu re u se withou t th e ap proval of the Operat ing Comm it tee .


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8.3 When ever Operator cons iders tha t an y J oint Operat ions asset is no longerneeded in carrying out of the Operations, Operator shall notify the Parties andsuch surplus assets shall be disposed of as provided in Article 9.4

8.4 Each Par ty sh al l separ ate ly se ll an d dispose of it s in teres t in an y ass et nolon ger required for the J oint Op erat ions ; provided th at a n y Part y may delegateto Operator for periods of not more than one (1) year authority to sell anddispose of such asset and the proceeds of any such sa le shal l ref lec t thepercentage ownersh ip which th e Par t ies ha ve in s u ch a ssets .

8 .5 Operator ma y a lso u t ilise in the operat ions equipmen t owned and m adeavai lable by any Par ty and charges to the Joint Operat ions for use of suchseparate ly-owned equipment shal l be made as provided in the Account ingProcedure .

8.6 For projects in volvin g expend itures for equ ipm ent , su pplies an d services of onemill ion United States dollars (U.S.$ 1,000,000) or more, any Party may furnishin kind (in whole or in Part) i ts Participating Interest share of the necessaryequipment , suppl ies and services , provided such furnishing in k ind does notinterfere with or add to the cost of the programs and projects being carried outfor the Joint Account as reasonably determined by Operator nor inhibitOpera tor s a bility to disch ar ge its obligation to con du ct th e operations u nd erth is Agreemen t pru den tly, efficiently and in a t imely m an ner .

ARTICLE 9

INFORMATION, REPORTS AND CONFIDENTIALITY

Opera tor sh all fu rn ish to the Parties da ta, in forma tion an d followin g reports :

9.1.1 Daily well progress report (for Exploration and Appraisal Wells) whichshall include for the day concerned, a brief description of the work performed, the number of feet dri l led, the type and depth of theformat ion or format ions penetra ted, the s ize and landed depth of anycasing landed, the type and resul ts of any tes ts made, and such other


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well information or data as the Parties from time to t ime may reasonablyspecify.

9.1 .2 Du ring drillin g, da ily rep orts of cu m u lative Well Costs .

9.1.3 Mont hly report of J oint Opera tions wh ich sh all in clu de a su m m ar y of allservices and all Exploration, Appraisal , dri l l ing and testing Operationsperformed during the period covered by such report .

9.1.4 Im m ediate reports on well developm ents of significan ce, su ch a s blow-ou tor Discovery, an d imm ediate n otice of sp ecial event s of im porta nce t o theJ oint Oper ations, s u ch a s: fire, accident, sa botage or acts of Godinvolving loss of life or serious property damage; strikes and riots;significant competitor activit ies; or GOI actions threatening or adverselyaffecting the rights an d in terests of th e Parties. Su ch im m ediate reportsor notices shall be given by telex, telegraph, telephone or equivalentmea ns an d confirm ed in writ ing.

9.1.5 A comprehensive final report upon the completion of each significantph ase in the operat ions .

9 .1 .6 Su ch other repor ts as the Par t ies ma y from t im e to t ime request a s to a l llands, concessions, surface right, easements, r ight-of-way, facil i t ies,equipment , mater ia ls and suppl ies acquired by or d isposed of byOperator purs u an t to th is Agreemen t .

9.2 Su bject to Article 10.3 , th e Parties sh all ha ve fu ll access at al l reas ona ble t imesto a l l of the J oint Operat ions a nd ma y:

9.2.1 Ins pect al l records, books and accou n ts, data s tu dies, logs, su rveys, files,ma ps an d other inform at ion kept by or available to Operator ;

9.2.2 Receive sa m ples of cores, well cu tt ings a nd Petroleu m ;

9.2.3 Have copies m ad e (first copy at J oin t Operat ions expen se) of al l da ta orinform at ion, inclu ding laboratory an alyses a nd ma ps;


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9.2.4 Have special stu dies perform ed by Opera tor (at su ch requ esting Par tysexpense , unless approved by Operat ing Commit tee) to the extent andwhen stu dies do not inter fere with or delay Operator s p erforma nce of itsdu t ies u nd er th is Agreement ; an d

9.2 .5 Requ est an d receive from Operator forecas ts , schedu les , s ta tem ents ors ta tu s repor ts where reas onable an d wh ere not o therwise pr ovided for inth is Agreemen t, prepa ra tion costs of which sh all be for su ch Pa rtysaccoun t u nless a pproved by the Operat ing Comm it tee .

9.3 Nothing in th is Agreemen t sha ll requ ire any Party to divu lge propr ietar ytechnology to the other Parties, and subject to Article 22 of the Contract thefollowing principles as to utilisation and protection of proprietary technology inthe J oint Operat ions s ha ll apply:

9.3.1 Opera tor ma y from time to t im e uti lise its proven proprietary techn ologyat Joint Operat ions expense in the conduct of Joint Operat ions andsubject to Art ic le 10.3 .2 , may take such reasonable precaut ions asOperator deems necessary or desirable (including agreement with orcommitments f rom i ts employees , contractors and agents agains t suchdisclosure) to prevent disclosure of or enti t lement to i ts proprietarytechnology including improvements and inventions result ing from usehereu nd er) to others .

9.3.2 Non-Operators shall have access to basic f ield data obtained throughOpera tor s u ti lisa tion of propr ietar y techn ology an d to fina l ma ps , da ta,information and conclusions result ing from any such uti l isation, withent i t lemen t to copies of su ch b as ic an d f ina l data , in terpre ta t ions , m aps ,informa tion a n d conclus ions a s pr ovided for in t his Agreemen t.

9.3.3 An y Par ty ma y at its own expen se u ti lise i ts proprietary techn ology indevelopin g from J oin t Opera tion s field d ata wha tever inform ation orconclusions i t desires without the obligations to disclose suchinformation, i ts result or conclusions to the Parties without adverselyaffectin g J oint Opera tion .


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9.3.4 Ea ch Par ty uti lising proprietary techn ology as m ent ioned in th is Article10.3 shall hold all other Parties free and harmless from all third partycla ims, charges and damages ar is ing out of such ut i l i sa t ion, includingbu t n ot lim ited to c la ims bas ed on paten t infr ingement .

9.3.5 Should future difficult ies or controversies between the Parties occurregarding application of the principles of this Article 10.3, the Partiesshall consult in good faith with the view to best possible uti l isation of proprietary technology in the Joint Operations, giving due regard to eachpa rtys r igh t to protect the pr oprietary na tu re of its tech n ology and th ePar t ies , r ight and need for access to data and informat ion as wel l as tofinal results for justif iable determinations of programmes and budgets.

9 .4 Except as otherwise provided here in , each Par ty u nder ta kes to t rea t asconfidential , and prevent disclosure to any third party of any and allinformat ion and data obta ined in the Joint Operat ions and re la t ing to theContract Area or to Operat ions u nder ta ken pu rsu an t to th is Agreemen t .

9.4 .1 In cons idera tion a Party (Disclosin g Par ty) a llowin g th e receiving Par ty(Receivin g Par ty) acces s to th e Confiden tial Inform at ion , th e Receivin gParty agrees to keep th e Confidential In forma tion confidential an dack nowledges tha t the Disclosing Part y considers th e informa tion disclosedto th e Receivin g Par ty to be pr oprieta ry. The Receivin g Par ty sh all n otdisclose th e Confidential Informa tion to an y one except in accorda ncewith th e followin g term s :

a) Th e Receiving Par ty agrees to keep th e Confiden tial Inform at ion st rictlyconfiden tial an d su bject to su b-clau se (b) to (d) inclus ive, below,agrees not to disclose su ch Confiden tial Informa tion to an y pers on in a nym an n er or m ode wha tsoever (inclu ding by m ean s of ph otocopy orreprodu ction) with out the prior writ ten cons ent of th e Disclosing Party,

su ch consent not being u nrea sona bly withh eld .

b) The Receivin g Par ty m ay disclose th e Confiden tial Inform at ion with ou tth e prior writ ten cons ent of th e Disclosing Party to th e extent su chinformation


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i) is already in th e pu blic dom ain or comes in to th e pu blic dom ain othertha n throu gh a breach of the terms of th is Agreemen t by theReceiving Party or by an y person to whom d isclosu re of ConfidentialInform at ion by the Receiving Par ty is perm it ted purs u an t to Su b-Clau se (c) or (d) b elow ; or

ii) is requ ired to be disclosed u nd er applicab le law or by a govern m enta lorder, decree, regulation or ru le binding u pon th e Receivin g Partyprovided th at , as soon as pra cticab le, th e Receivin g Party sh allgive prior writ ten n otice to th e Disclosing Party th at su chdisclosu re is required and cons u lts with th e Disclosing Party onwhether, an d if so what ac t ion sh ould be taken to res is t therequirement .

c) Th e Receiving Par ty m ay d isclose th e Confiden tial In form at ionwith out th e prior writ ten cons ent of th e Disclosing Party to th eRece ivin g Pa rt ys Affiliat e.

d) Th e Receiving Pa rty m ay also disclose th e Confiden tial Inform at ionwith out th e prior writ ten consen t of th e Disclosing Party to su ch of th efollowing pers ons wh o have a clear n eed to access i t for the pu rpose of evalua ting, n egotiating or ad vising on m att ers ar ising out of th isAgreem en t e.g. em ployees, officers an d directors of th e Receivin gParty.

e) Th e Receivin g Par ty m a y also disclose th e Confiden tial In form at ionwith prior in timat ion to an y professiona l ad viser or fin an cialin sti tu tion reta in ed by th e Receiving Party for th e pu rpose of evalua tingth e Confiden tial In form ation or evalua ting fina n cin g, negotiating orad vising on mat ters ar ising out of th is Agreemen t.

f) Prior to m ak ing a n y disclosu re of Confiden tial Inform at ion asper m itted u n der Su b-Clau se (c) or (d) ab ove, th e Receivin g Par ty willprocu re th at th e proposed recipient of su ch Confiden tial Inform ationis ma de awar e of th e term s of th is Article an d the Receivin g Party willp rocure tha t each su ch p roposed recip ien t adheres to an d be boundby th e terms of th is Article as if th ey were a pa rty to th e extent of agreem ent con tained in t h is Article.

9.4.2 Notwith sta n ding an ything conta ined in her ein ab ove, th e provisions of th isArticle sh all continu e an d bind th e Par ties for a period not exceeding Five(5)Years from th e da te of term in ation of th e Agreemen t.


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ARTICLE 1 0

WORK PROGRAMME COMMITMENT

The Parties shall carry on the Work Programme as given in the Contract . Incase of Minimum Work Programme, the Operator i s author ised to take a l lac t ions necessary as per the commitment made in the Contractn otwith sta nd ing a ny difference of opinion in Opera ting Comm ittee. The decisiontaken by the Operator for meet ing the contractual commitment wi th respect toMinimu m Work Program m e sh al l be fina l and bind ing on the Par t ies .

ARTICLE 11

RELINQUISHMENT

11.1 When i t becomes necessa ry pu rsu an t to the terms of the PEL to re linqu ishportion s of th e Contra ct Area:

11.1 .1 Th e Parties h olding a Par ticipa ting Int erest s h all m ak e reas ona ble besteffor ts to reach agreement on the area proposed to be re l inquished onehundred twenty (120) days before such re l inquishment i s required to bema de. If su ch Par t ies are un able to reach un an imou s agreement n inety(90) days pr ior to the date on which the area or areas must berelinquished, the following procedure shall be observed provided allselections of the area or areas to be relinquished are within therequirements an d res t r ic t ions of the Contra ct :

a) In the event Par ties h olding at leas t sixty percen t (60%) of th e totalPar t ic ipat ing Interes ts agree on an area or areas to bere linqu ish ed, su ch ar ea or areas s ha ll be re linqu ish ed.


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b) In respect to an y area or areas to be re linqu ish ed on which theParties holding at least sixty percent (60%) of the totalParticipating Interests cannot agree, each Party shall select apropor t ionate par t of the remaining area or areas to be re ta inedequ al to its Pa rticipa ting In terest .

11.1 .2 The Operator sh al l proceed in a t imely man ner to re linqu ish the area orareas determined in accordance wi th the foregoing procedures andpu rsu an t to Ac t and Rules .

ARTICLE 1 2

WITHDRAWAL

12.1 An y Party m ay with dra w from th is Agreemen t at an y t ime provided tha t dur in gthe Exploration Period no Party shall withdraw unti l al l the ExplorationOperat ions obligat ions ha ve been met a nd comp leted.

12.2 The Par ty desiring to with dra w (h erein after called th e With dra wing Party) sh allgive notice of intention to withdraw to the other Parties at least forty five (45)days in a dvance of the date of withdr awal an d s u ch not ice sh al l conta in:

12.2 .1 Design ation of th e effective d ate for withdr awal, which sh all be th e lastday of a Calend ar Month ;

12.2 .2 An offer to as sign, withou t comp ens ation, to th e other Parties h aving aPar ticipa ting In teres t all of th e Withd ra win g Par tys right, title an dinterest in th e Con tra ct Area, a nd all J oin t Property, such offer to be

conditioned on the receiving Parties assumption, subject to Article 13.4,of all future obligation related to the right, title and interest offered.

12.2 .3 Th e other Parties s h all have th irty (30) days from d ate of receipt of su chnotice to notify the withdrawing Party whether they accept the offer andelect to receive the assignment provided for in Article 13.2.2.


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(a) If one or m ore of th e other Par ties h avin g a Par ticipating Int erestgives notice of acceptance and election to receive such anass ignment wi thin such th i r ty (30) day per iod, the Par t ies shal l

promptly execute and del iver and do and perform al l ac ts andthings necessa ry an d appropr ia te to effect su ch ass ignmen t . If more than one of the other Parties elects to receive theas signm ent , the With dra wing Partys interest s ha ll be ap portionedamong the ass ignees in the propor t ion that the Par t ic ipat ingInterest of each (prior to assignment) bears to the total of thePar t ic ipat ing Interes t of a l l such ass ignees unless anotherapportionment is agreed to by all the assignees.

(b) If n one of th e oth er Par ties h aving a Par ticipa ting In teres t givesnotice of i ts acceptance and election to receive such an assignmentwithin the thirty (30) day period, the Parties shall promptly causeOperator to wind up the Joint Operat ions and the Par t ies shal l doand perform al l ac ts and th ings necessary and appropr ia te to th isend, including termination of the Contract , subject to approval of Opera ting Comm ittee. In su ch event al l Parties, in clu ding th eWithdrawing Party, shall continue to be responsible for theirrespective Participating Interest share of al l f inancial and otherobl igat ions hereunder and under the Contract unt i l the Contractis terminated without further obligation of the Parties and finalse t t lement h as been ma de am ong the Pa r t ie s .

12.2 .4 In th e event of an as signm ent u nd er Article 12.2 .3 (a), th e With dra wingParty shall be responsible for i ts f inancial obligations accrued under theContract and this Agreement up to the date of giving notice of intentionto withdraw, including but not l imited to payment of i ts full share of costs and expenses as to any particular well , geophysical survey or otherindividu al project investm ent for which th ey were com m itted either u n derthe terms of the Contract or through an approved program or budgetwhich has been commenced (or funds therefor commit ted) before suchdate of notice, even though completion thereof may post date such dateof notice, except to the extent such obligations shall be assumed or paidby any th i rd par ty which acquired f rom the remaining Par ty or Par t ieswithin three (3) months of the effective date of withdrawal all or part of th e in terest as signed by the With dra win g Party. Th e With dra win g Partysh al l not be obligated for an y obl igat ions or commitmen ts u nd er taken by


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the remaining Parties after the date of giving notice of withdrawal, butthe Withdrawing Party shall be obligated for i ts Participating Interestshare of any obl igat ions which may accrue under the Contract pr ior toth e da te of notice.

12.3 Th e With dra wing Party sha ll rem ain l iab le an d obligated for its Participa tingInteres t share of a l l expendi ture accruing to the Joint Account under anyrelevant Programme and budget pr ior to the date on which the not ice of wi thdrawal was given and a lso to pay a l l cos ts and expenses incurred by theother Par t ies in conn ect ion wi th su ch withd rawal .

12.4 A Withdra win g Party sha ll not be allowed to with dra w from th e Contr act an dthis Agreement if i ts Participating Interest is subject to any l ien, charges orencumbrance o the r than those a r i s ing under the Con t rac t un less the o the rParties are will ing to accept the assignment subject to the addit ional l ien,cha rges o r encum bran ce.

12.5 In th e event a Party or Parties elect to receive an a ss ignm ent of th e With dra win gPartys interes t , al l cost of th e as sign m ent, inclu ding nota rial and registr ationfees and transfer taxes, shall be the sole obligation of such Party or Parties inthe proportion of the Participating Interest each receives to the totalPar t ic ipat ing Interes t ass igned and such Par ty or Par t ies shal l indemnify theWithdrawing Par ty agains t and hold i t harmless f rom any fur ther cos ts ,expens es or liabilit ies incu rred u n der th e Con tra ct from th e dat e of notice.

ARTICLE 1 3

SALE, TRANSFER AND ASSIGNMENT

13.1 Th e right to sell, as sign or tran sfer a Participa ting Int erest , in whole or in pa rt ,sh al l be su bject to the consent of o ther Par t ies a nd to the terms of the Contra ct

an d Article 11 a n d 12 a n d th e followin g pr ovisions of Article 13 .

13.2 An y Party sha ll h ave th e right at a ny t im e, with or with out comp ens ation, to sell, tra ns fer a n d a ss ign to an Affiliate all or pa rt of its r ight, t i t le an d interes t in th eContract Area an d in an d u nd er th is Agreemen t provided the a ss ignee as su m esall of th e Part ys obligation with res pect to s u ch in teres t an d s u ch Affiliate is


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considered by other Parties comparable technically and financially and assignorprovides a bank guarantee to the extent of commit ted and addi t ional work p rogramme.

13.3 Rights o f First Refusal

13 .3.1 If an y Par ty (Tra n sferring Part y) wish es to sell, as sign or tra n sfer all orany part of i ts Participating Interest (Sale Interest) other than to anAffiliate it shall notify each of the other Parties in writing of its desire todo so and i f i t wishes i t may s ta te the pr ice and other mater ia lcomm ercial term s u pon which i t is will ing to dispose of the Sa le Int erestor it ma y requ est offers for the Sa le Int erest . Each of th e oth er Partiesshall then have a period of forty-five (45) days after receipt of such

n otice (J V Negotiat ing Period) in wh ich t o m ak e a firm offer in writin gto, and negotiate with, the Transferring Party for al l or part of the SaleInterest . If the Transferring Party accepts any such offer the related saleof all or part of the Sale Interest shall be completed (other than forreceipt of GOI approval) within forty five (45) days after the end of theJ V Negotiating Period failing which th e pr ovision s of th is Article 13.3 .1shall be re-applied. If the Transferring Party does not receive any suchoffer(s) from the other Parties or does not accept such offer(s) from theother Pa rties (wheth er for al l or pa rt of th e Sale Int erest) it m ay tra ns ferall or part of the Sale Interest to a third party (subject always to theother provisions of this Article 13 provided that:

13.3 .1 .1 su ch t ran sfer sh al l be a t a pr ice an d on other comm ercia lterms no more favourable to the th i rd par ty than the f inalpr ice and terms on which the Transferr ing Par ty and anyother Party offer or failed to agree for all or part of the SaleInteres t ; an d

energy contracting & negotiation-4

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