Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698083697210.pdf (Sierra Leone)
\ \ I BLOCK 10B-10 fi t( tr ,:t tx) SIERRA LEONE PETROLEUM LICENCE AGREEMENT A-Z Petroleum Products (S.1.)

Limited Petroleum Licence PARLIAMENT '-!BRARY ' T0WER l!

!tI Fn5;TO'jii'j TABLE OF'CONTENTS ARTICLE 1 ARTICLE 1 .INTERPRETATION z 3 !
I 0 ARTICLE 2 - SCOPE OF THE LICENSE AND LICENSE AREA ARTICLE 3 - STATE PARTICIPATION ARTICLE4-LICENSETERM ARTICLE 5 - PERFORMANCE GUARANTEE ARTICLE 6 -MINIMUM EXPLORATION PROGRAMME z ARTTCLE 7 -RELTNQUTSHMENT g ARTICLE 8 -OBLIGATIONS AND RIGHTS OF LICENSEE g ARTICLE 9.
ANNUAL WORK PROGRAMME AND BUDGETS UCTION OF CRUDE OIL SIONS FOR NATURAL GAS 1O ARTICLE 1O - COMMERCIALIW 11 ARTICLE 11- P 12 ARTICLE 12 - MEASUREMENT AND PRICING OF CRUOE OIL 13 ARTICLE 13 - LICENSE FEES 14 ARTICLE 14 - FOREIGN EXCHANGE TRANSACTIONS 15 ARTICLE 15 - SPECIAL P 16 ARTICLE 16 - DOMESTIC SUPPLY REQUIREMENTS (CRUDE OIL} 17 ARTICLE 17 - LICENSEE TO KEEP RECORDS ,I8 ARTICLE 18 - INFORMATION AND CONFIDENTIALITY 19 ARTICLE ,I9 - MONITORIN OF PETROLEUM OPERATIONS 20 ARTICLE 20 - COMMENCEMENT AND 21 ARTICLE 21 - ACCOUNTING AND AUDITING 22 ARTICLE 22 - PURC 23 ARTICLE 23 - EMPLOYMENT AND TRAINING 24 ARTICLE 24 - IMPORT AND EXPORT ING AND PROCUREMENT DONMENT ANO PLUGGING OF WELLS \ Page I of97 7 l I Page 4 9 1',| 13 13 15 17 't8 20 23 24 25 26 27 28 32 33 34 36 37 38 40 41 42 43 M 44 45 46 48 50 51 54 56 58 60 73 15 25 ARTICLE 25 - PROTECTION OF RIGHTS 26 ARTICLE 26 - FORCE MAJUERE 27 28 29 30 31 ARTICLE 27 - SOCIAL PROGRAMMES ARTICLE 28 - CONSULTATION.
ARBITRATION AND INDEPENDENT EXPERT ARTICLE 29 - ASSIGNMENI ARTICLE 30 - BONUSES ARTICLE 31 - ADMINISTRATION OF CONTRACT 32 ARTICLE 32 - IMPLEMENTATION OF LICENSE 33 34 ARTICLE 33 - STABILITY OF CONTRACT ARTICLE 34 - NOTICE ANNEX 1: LICENCE AREA AND MAP OF LICENSE AREA ANNEXES 1 2 3 ANNEX 2: ACCOUNTING GUIDE ANNEX 3: FORM OF GUARANTEE ANNEX4: FISCALTERMS 4 N I I I .L -L I Page 2 of 97 fr' I PE'IROLEUM (DGLORATION AND PRODUCTION LICENCE NO: 2O13I1OB-1O/OO8 MADE: - OF --- 2013 LAID BEFORE PARLIAMENT: - OF --- 2013 COMING INTO FORCE: DAY OF 2013 The Director General of the Petroleum Directorate in exercise of Executive Powers conferred on him by H.E the President of the Republic of Sierra Leone on the 20s day of December 2011, hereby grants the following Petroleum Exploration and Production Licence to: - - A-Z Petroleum Products (S.L.)
Limited.

a company incorporated in Sierra Leone under the the Companies Ac of 2009, on the 12ft day of May 2010 and issued with certificate No C.F .135212010, and with its registered address at lF Scan Drive, Freetown Siena Leone; (hereinafter referred to as "the Licensee").

CTTATION AND COMMINCEMENT This Licence may be cited as the Petroleum @xploration and Production) Licence No: 2013/108-10/008 for Block SL 10B-10 and shall come into force on this _ day of _, 2013.

WITNESSETH: I 1 3.

4.


All Petroleum existing in its natural state withi n Sierra Leone is the property of the Republic of Sierra Leone and held in trust by the S tate.

The Licence Area that is the subject matter of this Petroleum Licence has been declared open for Petroleum Operations by the Director General, and the Govemment of Sierra Leone desires to encouage and promote Exploration, Development and Production within the said area.
Any obligations which are to be observed and performed by the Licensee, shall at any time at which the Licensee is more than one person, bejoint and several obligations.

Licensee, having the financial ability, technical competence and professional skills necessary for carrying out the Petroleum Operatioos herein described, hereby accept the offer of this Petroleum Licence granted by the State for the Exploration, Development and Production of the Petroleum resources ofthe said area.
NOW THEREFORE in consideration of the mutual covenants hereinafter provided for and the performance and observance by the Licensee of all the terms and conditions hereof, the \ Page 3 of9?
r Director General of the Peholeum Directorate, in exercisc of the powers conferred upon him by execulive order and all other powers in that behalf enabling him, hereby grants to the Licensee, licence and liberty duriag the contiluance ofthis Licence and subject to the provisions hereofto search for, explore, develop and produce petroleum in the Licence Area referred to in Annex 1 of this Licence.
IT IS HERIBY AGREED AND DECLARED AS FOLLOWS: INTERPRE-TATION ARTICLE 1 1.1 In this Licence: 1.2 "The Act" means the Petroleum (Exploration and Production) Act 201 1.

1.3 "Accounting Guide" means the accounting guide which is attached hereto as Annex 2 and made a part hereof.
1.4 "Affiliate' means any person, whether a natural person, corporation, partnership, unincorporated association or other entity: a) in which one of the Parties hereto directly or indirectly holds more than fifty percent (50%) ofthe share capital or voting rights; b) which holds directly or indtectly more than fifty percent (50%) of the share capital or voting rights in a Party hereto; c) in which the share capital or voting rights are directly or indirectly and to an extent more than fifty percent ( j0%) held by a company or companies holding directly or indirectly morc than fifty percent (50%) of the share capital or voting rights h a Party hereto; or d) which holds directly five percent (5%) or more of the share capital or voti:rg rights in Licensee.
1.5 "Appraisal Progam" means a progam carried out following a Discovery of Petroleum for the purpose of delineating the accumulation of Petroleum to which that Discovery relates in terrns of thickness and lateral extent and estimating the quantity of recoverable Petroleum therein.

1.6 "Appraisal Well' means a well drilled for the purposes of an Appraisal Program.

l,T"Associated Gas" means Natural gas produced from a well il association with Crude oil.
I 1 I .L \ Page 4 of97 1.8 "Barrel" means a quantity or unit of Crude Oil equal to forty two (42) United States gallons at a temperature of sixty (60) degrees Fahrc-nheit and at 14.65 psia pressure.

1.9 "Block" means a Licence area as depicted on the reference map prepared by the Director General in accordance with the provisions of the Petroleum Act.
1.10 "Business Day" means a day (other than a Saturday or Sunday) on which the clearing banks in the City of Freetown, Sierra Leone and London, United Kingdom are open for business.

l.1l "Carried Interest" means an interest held by the State in respect of which the Licensee pays for the Exploration and Development costs without any entitlement to reimbursement from the State unless otherwise agreed by the Parties .
l.l2 "Calendar Year" means the period of twelve (12) months of the Gregorian calendar, commencilg on January 1 and ending on the succeeding December 31.

1.13 ttCommercial Discovery" means a Discovery which is determined to be commercial in accordance with the provisi,,ns of this Licence.
l.l4 "Commercial Production Period" means in respect of each Development and Production Area the period from the Date of Commencement of Commercial Production until the termination of this Licence or earlier reli-nquishment of such Development and Production Area.
1.15 "Contract Area' and ttl,icence Alea" means the area covered by this Licence in which Licensee is authorized to explore for, develop and produce Petroleum , which is described in Annex I attached hereto and made a part of this Licence, but excluding any portions of such area in respect of which Licensee's rights hereunder are from time to time relinquished or surrendered pursuant to this Licence.
1.16 "Contract Year"a period of twelve (12) calendar months, commencing on the Effective Date or any anniversary thereof.

l,l7 "Crude Oil" means hydrocarbons which are liquid at 14.65 psia pressure and sixty (60) degrees Fahrenheit and includes condensates and distillates obtained from Natural Gas.
1.18 "Date of Commencement of Commercial Productiont' means, il respect of each Development and Production Area, the date on which production of Petroleum under a progrcm ofregular production, Iifting and sale commences.

1 l9 "Date of Commercial Discovery" mcans the date of approval of the Development Plan.
1.20 "Default" means failure on the part of the Licensee to: \ Pagc 5 of97 rv" l I I I I I I (a) (b) observe or perform any of its duties or obligations under the Licence comply with any court or arbitral order arising out ofor il connection with the Licence or the enforcement thereof.
l.2l "Development" or "Development Opc rations" means the preparation of a Development Plan, the building and instajlation of facilities for Production, and includes drillhg of Development Wells, construction and installation of equipment, pipelines, facilities, plants and systems, in and outside the Licence Area, which are required for achieving Production, treatnent, transport, storage and lifting of Petroleum, and preliminary Production and testing activities carried out prior to the Date of Commencement of Commercial Production, and iacludes all related planning and administrative work, and may also include the construction and installation of secondary and tertiary recovery systems.
1.22 "Development Costs" means Pekoleum Costs hcurred in Development Operations.

1.23 "Development and Production Area" means that portion ol the Licence Area reasonably determined by Licensee on basis ofthe available seismic and well data to cover the area extent of an accumulation of Petroleum constituting a Commercial Discovery, enlarged in area by ten percent (10%), where possible, such enlargement to extend uniformly around the perimeter of such accumulation.
1.24 "Development Period" means in respect of each Development and Production Area, the period from the Date of Commercial Discovery until the Date of Conunencement of Commercial Production.

1.25 (Development Plan' means the plan for development of a Commercial Discovery prepared by Licensee.

1.26 "Development Well" means a well drillcd in accordance with a Development Plan for producing Petroleum, for pressure maintenance or for increasing the Production rate.
1.27 "Director General" means The Director General of the Petroleum Directorate appointed under Section 8 of the Act, and where the context so applies, the person appointed by the President of Siena Leone to oversee the administration of the Act and all aspects of petroleum resources m.rnagement until the establishment of a Ministry and the appointrnent of a Minister with responsibility for petroleum matters.
1.28 "Discovery" means finding durilg Exploration Operations an accumulation of Petroleum which can be and is recovered at the surface in a flow measurable by conventional petroleum industry testing methods.

1,29 "Discovery Area" means that portior of the Licence Area, reasonably determined by Licensee on the basis of the available seismic and well data to \ Page 6 ot91 ) I I I I cover the area extent of the geological structure in which a Discovery is made.
A Discovery Area may be modified at any time by Licensee ifjustified on the basis of new information, but may not be modified after the date of completion of the Appraisal Program.

1.30 "Effective Date" means the date on which this Petroleum Licence Agreement comes into effect and, unless otherwise provided, shall be the date of ratification of this Petroleum Licence Agreement by the Parliament of the Republic of Sierra Leone.
1.31 "Exploration" or "Exploration Operations" means the search for Petroleum by geological, geophysical and other methods and the drilling of Exploration Well(s) and includes any activity in connection therewith or in preparation thereof and any relevant processing and appraisal work, including technical and economic feasibility studies, that may be carried out to determine whether a Discovery of Petroleum constitutes a Commercial Discovery.
1.32 "Exploration Period" means the period commencing on the Effective Date and continuing during the time provided within which Licensee is authorized to carry out Exploration Operations and shall include any periods of extensions provided for in this Licence.

The period shall terminate with respect to any Discovery Area on the Date of Commercial Discoverl in respect of such Discovery Area.
1.33 "Exploration Well" means a well drilled rn the course of Exploration Operations conducted hereunder during the Exploration Period, but does not include an Appraisal Well.
1.34 "Force Majeure" means any event beyond the reasonable conhol of the Party claiming to be affected by such event which has not been brought about at its instance, including, but not limited to, earthquake, storrn, flood, lightning or other adverse weather conditions, war, embargo, blockade, strike, riot or civil disorder which could hinder the perforrnance of the Party's obligations.

Force Majeure is not applicable to any default by Licensee to pay any sum of money due under this Licence.
1.35 "Foreign National Employee" means an expatriate employee of Licensee, its Afhliates, or its Sub-contracton who is not a citizen of Sierra Leone.

f36 "Gross Production" means the total amount of Petroleum produced and saved from a Development and Production Area during Production Operations which is not used by Licensee in Petroleum Operations; Gross Production".

1.37 "IT Act' means the Sierra Leone lncome Tax Act of 2000 and all amendments thereto.
1.38 "LIBOR" means the interest rate per annum equal to the British Bankers Association London lnterbank Offered Rate for one month U.S. dollar deposits, as \ Pag.1 oI97 rr' i i- I ) I i t I published in London by the Financial Times or if not published, then by The Wall Street Joumal.
1.39 "Licence Area" means the area covered by this Licence in which Licensee is authorized to explore for, develop and produce Petroleum, which is described in Ar:nex I attached hereto and made a part of this Licence, but excluding any portions of such area in respect of which Licensee's rights hereunder are from time to time relinquished or surrendered pursuant to this Licence.
f.40 "Licensee" means the person or persons to whom the Licence is granted, their successors and any person or persons to whom the rights conferred by this Licence may lawfully have been assigned, Where two or more persons are the Licensee any reference to the Licensee is a reference to any ofthese persons.
1.41 "The Licence" means the right granted by the Director General Petroleum Directorate acting on behalf of the govemment of Sierra Leone, to explore for and produce hydrocarbons in tle Licence Area contained in Annex 1 attached hereto.

1.42 "The Minister" means the same as is defined in The Act.

1.43 "Month" means a month of the Calendar Year.


1.44 "Nafural Gas" means all hydrocarbons uhich are gaseous at 14.65 psia pressrue and sixty (60) degrees Fahrenheit temperarure and includes wet gas, dry gas and residue gas remaining after the extaction of liquid hydrocarbons from wet gas.

1.45 "Non-Associated Gas" means Natural Gas produced from a well other than in association with Crude Oil.

1.46 "Operrtor" means the same as is defined in The Act.
1.47 "Participating Interest" means the undivided percentage interest of each Party ir the rights and obligations derived from the Petroleum Licence Agreement.

f.48 "Party" means the State or the Licensee, as the case may be.

1.49 "Petroleum" means Crude Oil or Natural Gas or combination of both.
1.50 "Petroleum Costs" means all expenditures made and costs incuned in the conduct of Petroleum Operations hereunder, determined in accordance with the Accounting Guide attached hereto as Anne\ 2. l.5l "Petroleum Licence Agreement" means rhis petroleum licence together with all its appendices, annexes, schedules forming an integral part hereof, together with any extension, renewal, replacement or modification hereto which may be agreed between the Parties from time to time.

I I \.

Pagc t of97 / I I I J.


1.52 "Petroleum Operations" means all activities, both in and outside Sierra Leone, relating to the Exploration for, Development, Production, handling and transportation of Petroleum contemplated under this Licence and includes Exploration Operations, Development Operations and Production Operations and all activities in connection therewith; 1.53 "Petroleum Product" means any product derived from Peholeum by any 1.5.1 refining or other process.
"Production" or ttProduction Operations" means activities not being Development Operations undertaken in order to extract, save, teat, measrue, handle, store and transport Petroleum to storage and/or loading points and to carry out any type of primary and secondary operations, including recycling, recompression, maintenance of pressure and water flooding and all related activities such as planning and administrative work and shall also include maintenance, repah and replacement of facilities, and well workovers, conducted after the Date of Commencement of Cornmercial Production of the respective Development and Production Area.
1.55 "Production Costs" means Petroleum Costs incurred in Production Operations.

1.56 "Quarter" means a quarter, commencing January 1, April l, July 1 or October 1.

1.57 "Remedy" means to make good, or maki-ng good, such Default including performing the obligation of Licensee under the Licence.

1.58 "Sierra Leone" means the territory ofthe Republic of Sierra Leone and includes the sea, seabed and subsoil, the Continental Sheli the exclusive economic zone and all other areas within the jurisdiction.
1.59 "Specified Rate" means London Interban k Offered Rate "LIBOR' plus two and half per cent (2.5%).

1.60 "Standard Cubic Foot" or "SCF' means the quantity of gas that occupies one (1) cubic foot at 14.65 psia pressure and sixty (60) degrees Fahrenheit temperahue.

1.61 "State" means the Government ofthe Republic of Sierra Leone 1,62 "Subcontractor" has the meaning assigrred to that term in the Petroleum Act 1.63 "Work Program" means the annual plan for the conduct of Petroleum Operations.
\ ARTICLE 2 Page 9 of97 SCOPE OF TTII UCENCE AND LICENCE AREA 2.1 ,) 2.3 2.4 ,< 2.6 This Licence provides for the Exploration lbr and Development and Production of Petroleum in the Licence Area by Licensee.

A-Z Petroleum Products (S.L.)

Limited is hereby appointed Operator with one hundred percent (100%) Participating lnterest in the Licence.
Subject to the terms of this Licence, Operator shall be responsible for the execution of such Petroleum Operations as are required by the provisions of this Licence and is hereby appointed as the exclusive entity to conduct Petroleum Operations in the Licence Area.

The Director General authorises the Licensee pursuant to the terms set forth herein to carry out all the useflrl and necessary Petroleum Operations in the Licence Area.
The Licensee undertakes, for all the rvork necessary for carrying out the Petroleum Operations provided for hereunder, to comply with good intemational petroleum industry practice and to be subj ect to the laws and regulations in force in Sierra Leone unless otherwise provided under this Licence .
The Licensee shall maintain all apparatus and appliances and all wells which have not been abandoned and plugged as provided by Article 20.8 of this Licence in good repair and condition and shall execute all operations in or in connection with the exploration area in a proper and workmanlike manner in accordance with methods and practice of exploration customarily used in best oilfield practices and without prejudice to the generality of the foregoing provision the licensee shall take all steps practical i-n order (a) to prevent the escape or waste of petroleum discovered in the exploration area; (b) (c) (d) to conserve the exploration area for production operations; to prevent damage to Petroleum bearing strata; to prevent the entrance of water through wells to Petroleum bearing strata and; (e) to prevent the escape of Petroleum into any waters in or around the vicinity of the Exploration Area.
71 The Licensee shall comply with any instnLctions from time to time given by the Director-General in writing relating to an1 of the matters set out in the foregoing paragraph.

If the licensee objects to any such instruction on the ground thal it is unreasonable he may, within fourteen dal s ftom the date upon which the same was given, meet with the Director General to raise its objections to tl-re Directive \ Page 10 of97 r/z I I I I and provide altematives that will meet the DLector General's objectives.
If after the meeting, Director General informs Licensee in writing that notwithstanding its objections, Licensee should comply with his original written directives, Licensee may within fourteen days (14) days of receiving the written instruction refer the matter to arbitration in the manner provided in Article 28.

If the matter is of a technical nature, it may be referred for sole expert determination in the manner provided for in Article 28.7 .
The Licensee shall give notice to the Director General of any event causing escape or waste of Petroleum, damage to Petroleum - bearing strata or entrance of water through wells to Petroleum bearing strata forthwith after the occurrence of that event and shall, forthwith after the occurrence of any event causing escape of Petroleum into the sea, give notice of the event to the Chairperson of the Environment Protection Agency and Director General Petroleum Directorate The Licensee shall not carry out atry operations authorized by this Licence in or about the Exploration Area in such marurer as to interfere unjustifiably with navigation or fishi:rg in the waters of the Exploration Area or with the conservation ofthe living resources of the sea.
2.8 2.9 2.10 The Licensee shall bear alone the financial risk associated with the performance of the Petroleum Operations.

The Petroleum Costs related thereto shall be recoverable by the Licensee in accordance with the provisions of the terms of this Licence.
2.11 In the event that no Commercial Discovery is made in the Licence Area, or that Gross Production achieved from the Licence Area is insufficient fully to reimburse Licensee in accordance with the terms of this Licence, then Licensee shall bear its own loss; the Director General and the State shall have no obligations whatsoever to Licensee in respect of such loss.
2.12 During the term hereof, in the event of Production, the total Production arising from the Petroleum Operations shall be shared between the parties according to the terms set forth in this Licence.

2.13 On the Effective Date, the Licence Area shall be the area referred to as Block SL I 0B- I 0 as defined in Annex One ( I ) .

2.14 As of the Effective Date, the Licence Area shall cover a total of approximately One Thousand Nine Hundred and Thirteen Square Kilomehes (1,913 Sq.
I(m) as depicted by Annex (1) One and shall from time to time during the Term of this Licence be reduced according to the terms herein.

During the Exploration, Licensee shall pay rentals to the State for that area included within the Licence Area at the begtrning of each Contract Year according to the provisions of this Licence.

\ ARTICLI3 Page I I of97 STATE PARTICIPATION 3.1 3.2 3.3 3.4 3.5 3.6 The Licensee shall have one hundred percent (100%) interest in the Licence Area during the Exploration Period.
Subject to Article 3.3 below, the State shall have a ten percent (10%) initial Carried Interest with respect to all Development Operations.

The State's initial Carried Interest shall be a working interest with respect to all Production Operations.
In addition to the initial interest provided tbr in Article 3.2 above, the State shall have the oplion in respect of each Developrnent and Production Area to contribute a proportionate share not exceeding five percent (5%) of all Development and Production Costs in respect of such Development and Production Area, (or make arrangements satisfactory to Licensee to that effect) thereby acquiring an Additional Interest of up to five percent (5%) in Petroleum Operations in such Development and Production Area.
The Director General shall notifr in writing the Licensee of its option within ninety (90) days of the Date of Commercial Discovery.

If the State exercises the option pursuant to Articles 3.2, the Participating lrterests of the company comprising the Licensee provided in Article 2.2 of this Licence shall be proportionally reduced as follows: A-Z Petroleum Products (S.L.)
Limited's one hundred percent (100%) Participating lnterest shall be reduced to ninety percent (90%) and if the State exercises its option pursuant to Article 3.3 the Participating lnterest of A-Z Petroleum Products (S.L.)

Limited's shall be further reduced by five percent (5%) to eighty five percent (85%) with the State holding the remaining ten percent (10%) or fifteen percent (15%) Participating Interest as the case may be in all Petroleum Operations and all rights under this Licence.
For the Additional lnterest as provided for in Article 3.3 within six (6) months of its election, the State shall reimburse Licensee for all expenditure attributable to State's Additional Interest and incurred from the Date of Commercial Discovery to the date the Director General notifies Licensee of its election.
For the avoidance ofdoubt the State shall only be liable to contribute to costs: (a) lncurred in respect of Development Operations in any Development and Production Area to the extent onl) of any Additional Interest acquked in such Development and Prcduction .\rea under Article 3.3.

(b) lncurred in respect of Production Operations in any Development and Production Area both to the extent of: l. It's ten percent (10%) initial interest N P^gc 12 of97 j I I L L L L t- I t- I I l ll.
Any Additional Intetest .rcquired in such Development and Production area under Artic le 3.3.

3.7 3.8 All Development Costs incurred by the Licensee on behalf of the State shall be fully recoverable subject to a maximum of forty percent (40%) ot the State's share of the oil and gas production attributable to the State's ten percent (10%o) lnterest in any given financial year.

All unrecovered costs shall be carried forward until such costs are firlly recovered.
If the oil and gas production ceases before the amounts funded by Licensees are fully reimbursed, the State is under no obligation to pay to Licensee the unrecovered amounts.

LICINCE TERM ARTICLT 4 {.1 4.2 4.3 4.4 The Licence Term shall be for a period of thirty (30) years Aom the Effective Date, unless sooner cancelled or terminated as provided for in the Act or this Licence Agreement.
The Exploration Period shall commence on the Effective Date of this Licence, and shall last a maximum of seven (7) years which shall be divided into an initial exploration period of three (3) years, a first extension period and a second extension period ofup to two (2) years each.
For each well drilled by the Licensee during the Initial Exploration Period, the Initial Exploration Period shall be extended by three (3) months and the commencement of subsequent periods shall be postponed in their entirety accordingly.

Extension to be subject to such reasonable terms and conditions as the Director General may stipulate to assure performance of the work in accordance with Section 46 of The Act.
The term of this Licence may be extended only once and for a period not exceeding ten years on such terms and conditions as the Director General may deem fit.

PERFORMANCE CUARANTEE ARTICLE 5 5.1 Within sixty (60) days of the Effective Date, the Licensee shall deliver to the Director General a performance security in the amount stipulated in Article 6.2 (a) \.

Prge 13 of97 .
Prge 13 of97 .

i <, (2 5.4 5.5 5.6 5.8 5.9 \ as the minimum expenditure in the initial Exploration Period to guarantee the performance ofthe work obligation under rhis Licence.
Within sixty days from the day the Licensee elects to enter into any extension period in accordance with Article 4 of this Licence, the Licensee shall deliver to the Director General, subject to Article 6.2. a performance security in the amount of the minimum expenditure specified in Article 6.2 (b) for the first extension period and Article 6.2 (c) for the second extension period to guarantee the performance ofthe work obligation for thar period.
All performance security delivered under this Licence, shall be in the fomr of an unconditional and irrevocable bank guarantee as stipulated in Annex 3 of this Licence or ia any such wording acceptable to the Director General, from a reputable bank in good standing, and shall be denominated in United States Dollars.
The performance security shall be issued either (a) by a foreign bank through a correspondent bank located in Sierra Leone, or (b) with the agreement of the Director General directly by a foreign bank acceptable to the Director General.

Licensee may with the approval of the Director General provide such other form of security for the minimum work expenditure, to guarantee the performance of their work obligation.
Licensee shall also provide a legal opinion from its legal advisors in a form acceptable to the State, to the effect that the aforesaid guarantees have been duly signed and delivered on behalf ofthe guarantors with due authority and is legally valid and enforceable and binding upon them; All letters of guarantee issued under this Lrcence shall remain effective for six (6) months after the end of the relevant Exploration Period for which it has been issued, except as it may be expired prior to that time in accordance with the terms thereof.
Where the Licensee completes part of the minimum exploration Work Programme, the Director General shall permit the Licensee to reduce the guarantee by an amount equivalent to the expenses hcurred in respect of the work completed for the stipulated period.

Upon completion of the minimurn exploration Work Programme within the stipulated period, the Director General shall retum the guarantee to the Licensee.
In the circumstances of a Default, to unde rtake the minimum work obligation by the end of the period for which the perfomiance security is deposited, the Director General shall immediately fumish the guaranteeing bank with all relevant document evidencing non-perfonnance of the work obligation and shall make a written demand on the guarantee copying the Licensee, and the minimum expenditure for the period shall be paid to the Director General by the guaranteeing bank without recourse to court action.
P^ge 14 of97 * i I 5.10 Demand shall not be made on the guaranree by the Director General for Default due to Force Majeure, but the guarantee shall be extended for the period through which Force Majeure is claimed.

MINIMUM DQLORATION PROGRAM ARTICLE 6 6.1 6.2 Exploration Operations shall begin as soon as practicable and in any case not later than ninety (90) days after the Effective Date.
Subject to the provisions of this Article, in discharge of its obligations to carry out Exploration Operations in the Licence Area, the Licensee shall during the several phases into which the Exploration Period rs divided carry out the work specified hereinafter: a) Initial Exploration Period: Commencing on the Effective Date and terminating at the end of the Third Contract Year; Description of Work: Licence a minimum of 1,200 line Km of existirg 2D seismic.
Process and interpret acquired 2D data and incorporate new Gravity and magnetic data covering the entire block.

Acquisition of any other G&G data that may ir:crease the understanding of the petroleum play.

Process, interpret and demarcate prospects and areas of interest.

Start process for the acquisition of3D data Minimum Expenditure: Licensee's minimum expenditure for the work in the Initial Exploration Period shall be Ten Million United States Dollars (us$10,000,000).
b) First Extension Period: Commencing at the end of the lnitial Exploration Period and terminating at the end of the Fifth year of the Contract Period.

Description of Work: Acquisition of a minimun 900 sq km of new 3D seismic.

Process and interpret acquired 3D data to determine drillable prospect.

Any other G&G data that will increase the understanding of both blocks.

One Contingent exploration well.


Minimum Expenditure: Licensee s minimum expenditue for the work in the First Extension Period shall be Fifteen Million United States Dolla$ (us$15,000,000).

Pag.

l5 of97 \ Tl c) Second Extension Period: Comnrencing at the end of the First Extension and terminating at the end of the Seventh year of the Contract Period.

Description of Work: Interpretation of 3D seismic dat4 mapping and ranking of prospects and firm commitment to drill at least one exploration well.
Minimum Expenditure: Minimum expenditure for work in the Second Extension Period shall be Fifteen Million United States Dollars (us$ r s,000,000).

d) Work and expenditures accomplished in any period in excess ofthe above obligation may be applied as credit in satisfaction of obligations called for in any other Period.
The fulfillment of any work obligation shall relieve Licensee of the corresponding minimum expenditure obligation, but the firlfillment of any minimum expenditure obligation shall not relieve Licensee of the corresponding work obligation.

No Appraisal Wells drilled or seismic surveys carried out by Licensee as par of an Appraisal Program and no expenditure incurred by Licensee in carrying out such Appaisal Progam shall be treated as discharging the minimum work obligations hereunder.
The seismic program, when combined with existing data, shall be such as will enable a study of the regional geology ofthe Licence Area and the preparation of a report thereon with appropriate maps, cross sections and illustrations, as well as a geophysical survey of the Licence Area which, when combined with existing data, shall provide: a) b) a minimurn seismic grid adequate to defrne prospective drill sites over prospective closures as interpreted tiom data available to Licensee, and a seismic evaluation of structural and stratigraphic conditions over the remaining portions of the Licence Area.
6.3 6.4 6.5 Each of the Exploration Wells referred to above shall be drilled to a minimum depth of two thousand five hundred mehes (2,500m), after deduction of the water depth, or to a lesser depth if the continuation of drilling performed in accordance with good intemational petroleum industry practice is prevented for any of the following reasons: a) b) \ the basement is encountered at a conEactual depth; lesser depth than the minimum continuation of drilling presents an obvious danger due to the existence of abnormal formation pressure; Pagc 16 of97 / I I c) d) rock formations {re encountered the hardness of which prevents, in practice, the continuation of drilling by the use of appropriate equipment; petroleum formations are encountered the crossing of which requires, for their protection, the laying of casin,qs preventing the minimum contractual depth from being reached.
In the event ttrat any of the above reasons occurs, the Exploration Well shall be deemed to have been drilled to the minimum contractual depth.

Notwithstanding any provision in this Article to the contrary, the Director General and the Licensee may, at any time, agree to abandon the drilling of a well at a lesser depth than the minimum contractual depth.
If duriag an Exploration Period the Licensee has performed its work cornmitments for an amount lesser than the amount specified above, it shall be deemed to have fulfilled its investrnenr obligations relating to that period.

Conversely, the Licensee shall perform the entirety of its work commitments set forth in respect of an Exploration Period er en if it results in exceeding the amount specified above for that period.
If in the course of drilling an Exploration Well, the Licensee concludes that drilling to the minimum depth specified in Article 6.5 above is impossible, impracticable or imprudent in accordance with accepted intemational petoleum industry drilling and engineering practice, then Licensee may plug and abandon the Exploration Well.
During the Exploration Period, Licensee shall have the right to perform additional Exploration Operations, including without limitation performing gavity and magnetic surveys, drilling stratigraphjc wells and performing additional geological and geophysical studies, provided the minimum work obligations are performed within the applicable period.
6.6 6.7 6.8 6.9 6.10 During the Exploration Period, Licensee shall deliver to the Director General reports on Exploration Operations conducted during each Calendar Quarter within thirfy (30) days following the end of that Quarter.

Further requests for information by the Director General shall be complied with within a reasonable time and copies of documents and other material containing such information shall be provided to the Director General.
RELINOUISHMINT ARTICLI T 7.1 Except as otherwise provided in this License, Licensee shall relinquish portions of the Licence Area in the manner provided hereunder.

\ Png.

17 oI97 7/ I I a) b) c) If on or before the expiration of the lnitial Exploration Period, Licensee elects to enter into the First Extension Period, then at the cornrnencement of the First Extension Period the area retained shall not exceed fifty percent (50%) ofthe Licence Area existing as at the Effective Date.
If on or before the expiration of the First Extension Period, Licensee elects to enter into the Second Extension Period, at the commencement of the Second Extension Period the area retained shall not exceed twenty five percent(2s%) of the Licence Area existing as at the Effective Date.

On the expiration of the Second Extension Period, Licensee shall reli:rquish the remainder of the retained Contract Area subject to Article 7.2.
The provisions of Article 7.1 shall not be read or construed as requidng Licensee to relinquish any portion of the Contract Area which constitutes or forms part of either a Discovery Area or a Developmenl and Production Area, PROVIDED however, that if at the end ol the Initial Exploration Period or the First Extension Period as the case may bc Licensee elects not to enter into the First or Second Extension Period, Licensee shall relinquish the entire Licence Area.
Nothiag in this provision shall be construed as requiring the Licensee to relinquish the remainder of the Licence Atea under Article 7.1 ( c ) above where the Licensee has been $anted a further extension on the Second Extension Period until the end of the further extension.
Each area to be relinquished pursuant to this Article shall be selected by Licensee and shall be measured as far as possible in terms of continuous and compact units of a size and shape that will permit the carrying out of Petroleum Operations in the relinquished portions subject to the approval of the Director General.

11 /.., 7.4 OBLIGATIONS AND RIGHTS OF LICENSEE ARTICLE 8 8,1 Licensee shall maintain an office in Siena Leone at which notices shall be validly served.
Licensee shall appoint a Country Manager and assign to those offrces such representatives as it shall consider necessary for the pulposes of this Licence.

The Country Manager and staff shall be entrusted by Licensee with sufficient power to act on behalf of Licensee and carry out all local written directions given to them by the State under the terms of this Licence.

8,2 Subject to the provisions of this Licence.
Licensee shall be responsible for the conduct ofPefioleum Operations and shall: Page 18 of97 \ rl I I I (a) (b) conduct Petroleum Operations with utrrost diligence, efEciency and economy, in accordance with accepted Petroleum Industry practices, observi.g sound technical and engineering practices using appropriate advanced technology and effective equipment, machinery, materials and methods; ensure compliance with the Act and any other law and regulations promulgated by the State; including ensuring the maximum conservation of Petroleum in the Licence Area in accordance with accepted Petroleum industry practices; (c) prepare and maintain in Sierra Leone full and accurate records of all Peholeum Operations performed under this Licence.
8.3 In connection with its performance of Petroleum Operations, Licensee shall have the rigbt within the terms of applicable law: (a) to use public lands in accordance with existing law for installation and operation of shore bases, and terminals, harbours and related facilities, pipelines from fields to terminals and delivery facilities, camps and other housing; (b) (c) (d) (e) (0 N to receive licenses and permission to install ald operate such communications and transportation facilities as shall be necessary for the efficiency of its operations; subject to local content requirements, to bring to Siena Leone such number of Foreign National Employees as shall be necessary for its operations, including employees assigned on pennanent or resident status, with or without families, as well as those assigned on temporary basis such as rotational employees; to provide or zurange for reasonable housing, schooling and other amenities, permanent and temporary, for its employees and to import personal and household effects, furniture and vehicles, for the use of its personnel in Siena Leone; to be solely responsible for provision of health, accident, pension and life insurance benefit plans for its Foreign National Employees and their families; and such employees shall not be required to participate in any insurance compensation or other employee or social benefit programs established in Sierra Leone; provided, however, that Licensee shall be responsible for social benefit programs and insurance benefit plans which apply under the law to employees who are Sierra Leone nationals; to have, together with its personnel.
at all times the right of ingress to and egress from its offices in Sierra Leone, the Licence Area, and the facilities associated with Petroleum Operations hereunder in Sierra Leone including P.ge l9 of97 rr' the offshore waters, using its owned or chartered means of land, sea and air transportation; (g) to engage such Subcontractors, eypatriate and national, including also consultants, and to bring such Subconfiactors and their personnel to Sierra Leone as fie necessary in order to carry out the Petroleum Operations in a skillful, economic, safe and expeditious manner; and said the Subcontractors shall have the same rights as Licensee specified in this Licence to the extent they are engaged by Licensee for the Petroleum Operations hereunder.
8.4 The Dtector General shall assist Licensee in carrying out Licensee's obligations expeditiously and efEciently as stipulated in this Licence, and in particular the Director General shall use its best efforts to assist Licensee and its Subcontractors to: (a) establish supply bases and obtain necessary communications facilities, equipment and supplies; (b) obtain necessary approvals to open and operate bank accounts in Sierra Leone; (c) obtain entry visas and work permits for such number of Foreign National Employees of Licensee and its Subcontractors engaged in Petroleum Operations and members of thet l'amilies who will be resident il Sierra Leone and make arrangements for their travel, medical services and other necessary amenities; (d) obtain the necessary permits to transport documents, samples or other forms of data to foreign countries for the purpose of analysis or processing if such is deemed necessary for the puqposes of Petroleum Operations; 8.5 The Director General shall use his best eftbrts to render assistance to Licensee in emergencies and major accidents, and such other assistance as may be requested by Licensee, provided that any reasonab I .'
expenses involved in such assistance shall be bome by Licensee.
ANNUAI WORK PROGRAMS AND BUDGE'TS ARTICLE 9 9.1 Without prejudice to the rights and obligations of Licensee for day+o-day management of the operations, the Director General shall ensure that all Work Programs and Development Plans are complied with and also that accounting for costs and expenses and the maintenance of records and reports conceming the Petroleum Operations are carried out in accordance with this Licence and the \ PaEe20 of97 rr' I l I I I I q, 9.3 9.4 9.5 9.6 9.7 9.8 9.9 9.10 \ accounting principles and procedures generally accepted in the international Petroleum industry.
Each Work Program submitted to the Director General pursuant to this Article and every revision or arnendment thereof shall be consistent with the requirements set out in this Licence relating to minimum work and expenditure for the period of the Exploration Period in which such Work Program or budget falls.
The work obligations referred to in Article 6 shall be described in an annual plan, drawn up in due detail and with the respective budget, to be prepared by the Licensee and submitted to the Director General for review and approval.

The annual work program should be submitted to the Director General no less than sixty (60) days before the start ofthe year in question.
The Director General will review Work Programs and budgets and any amendments or revisions thereto, and Appraisal Programs submitted to him by Licensee pursuant to this Article.

In the event of all or part of the annual plan being refused, the Director General shall notiff in writing the Licensee of the fact within forty-five (45) days of receiving the plan, indicating the reasons lbr the refusal.

If the plan is trot refused within the period referred to in Article 9.6, the plan may !6 i mJ'lemented.
In the event of refusal under para$aph 9.6, the Licensee shall &aw up a new plan, or rectiff the previous plan, which shall be submitted to the Director General.

If refused under Article 9.6 following subrnission by the Licensee of a new plan, the Director General may propose amendrnents or modifications to the Annual Work Program and corresponding Annual Budget.
ln such event the Director General and the Licensee shall meet as soon as possible to review the amendments or modifications proposed by the Director General and establish by mutual agreement the Annual Work Program and corresponding Annual Budget.

The parts of the Amual Work Program for which the Director General does not require amendment or modification will be deemed approved and must be completed by the Licensee within the stated time period, provided they may be undertaken on an individual basis.
With respect to the parts of the Annual Work Program for which the Director General proposes any amendment or modification, the date of approval o[ the Annual Work Program and corresponding Amual Budget shall be the date on which the Director General and the Licensee reach the aforementioned mutual agreement.
In the event the Director General and thc Licensee do not reach an agreement regarding the amendments and modifications proposed by the Director General Pagezl ofn r/ within one hundred and twenty (120) days from the receipt ofthe refusal, either of the Parties may decide to refer the matter to a Sole Expert in accordance with A-tticle 28.7.
Upon failure of the Parties to reach agreement with respect to their dispute being resolved by a Sole Expert or upon failure of the Sole Expert to decide the matter timely, any Party may call for arbitration under Article 28.1.

9.11 However, during the Exploration Period, the Minimum Exploration Program and the corresponding budget prepared by the l-icensee after the said meeting shall be deemed approved provided that they conrply with the obligations set forth in Article 6.
9.12 Each part of the Minimum Exploration Prograrn or Work Program and its corresponding budget for which the Director General has not asked for any revision or modification within the above period of forty five (45) days, shall be carried out by the Licensee in the applicable time period.
9.13 Ifthe Director General omits to give the Licensee notice of its intention to revise or modifr the Minimum Exploration Program or a Work Program, within the above period of forty five (45) days, then rhe Minimum Exploration Program and the conesponding budget submitted by the Licensee shall be deemed approved by the Director General.

9,14 The Licensee may submit addenda to the arurual work plan to the Director General provided they are jusified on technical grounds.
9.15 After the date of the first Commercial Discovery, Licensee may submit a proposal for the drilling of an Exploration Welt or Wells not associated with the Commercial Discovery and not otherwise required to be drilled hereunder.
9.16 From the first occurring Date of Cormercial Discovery, the Licensee: (a) Within sixty (60) days after the Date of Commercial Discovery shall prepare and submit to the Director General any revisions to its annual Work Program and budget that may be necessary for the remainder ofthat Contract Year and for the rest ofthc Exploration Period.
(b) At least nfu:ety (90) days before tl',e Commencement of each subsequent Calendar Year, Licensee shall subnrit to the Director General for review a Work Program and budget setting forth all Development and Production Operations which Licensee proposes to carry out in that Calendar Year and the estimated cost thereof and shall also give an indication of Licensee's plans for the succeeding Calendar Year.
(c) Within sixty (60) days of the Date of Commencement of Commercial Production and thereafter not later than one hundred and twenty (120) days before the commencement of each Calendar Year, Licensee shail submit to the Director General an annual production schedule which shall be in accordance with good intemational petroleum industry practice, and iL N Palc2z ol97 rr' shall be desiped to provide the most effrcient, benefrcial and timely production of the Petroleum resources.
9.17 The Licensee shall provide The Director General with lifting schedules for Development and Production Areas as well as Licensee's reports on the conduct of Petroleum Operations.

COMMIRCIAIITY ARTICLE 10 10.1 The provisions of Section 50 and other relevant sections ofthe Act shall apply.

10.2 Unless Licensee and the Director General otherwise agtee in any particular case, Licensee shall have a period of two (2) years from the date of Discovery to complete the Appraisal Program.
10.3 Licensee shall commence appraisal work within one (1) year from the date of submission of the Appraisal Program to the Director General.
10,4 If Licensee inforrns the Director General that the Discovery is not commercial, then Licensee shall relinquish such Discovery Area; provided, however, that in appropriate cases, before declaring that a l)iscovery is not commercial, Licensee shall consult with the Director General an,-l may make appropriate representations proposing minor changes in the fiscal and other provisions of this Licence which may, in the opinion of Licensee, affect the determination of commerciality.
The Director General may, where feasible, and in the best interests of all parties agree to make such changes or modifrcations in the existing arrangements.

In the event the Parties do not agree otr such ghanges or modifications, then Licensee shall relinquish the Discovery Area.
10.5 If Licensee informs the Director General that the Discovery is considered by Licensee to be commercial, Licensee shall not later than one hundred and eighty (180) days thereafter, prepare and submit to the Director General a Development Plan.

f0,6 The Development plan shall be based on er,gineering studies and shall include (a) the revisions proposed by the Director General, to the Development Plan as submitted, and the reasons thereof.
10.7 Where the Development Plan is not approved by the Director General, the Parties shall within a period of thirty (30) days from the date of the notice by the Dtector General as referred to above, meet to agree on the revisions proposed by the Director General to the Development Plan.
N Pag.23 of97 4 10.8 In the event that Licensee indicates that a Discovery does not at the time merit appraisal, or after appraisal does not appear to be commercial but may merit appraisal or potentially become commercial at a later date during the Exploration Period, then Licensee need not relinquish the Discovery Area and may continue its Exploration Operations in the Licence Area during the Exploration Period provided that the Licensee shall explain what additional evaluations, including Exploration work or studies, and or may be planned in order to determine whether subsequent appraisal is warranted or that the Discovery is commercial.
After completion of the evaluations, Licensee shall make the indications called for under this Article and either proceed wirh appraisal, confirm commerciality or relinquish the Discovery Area.

In any case.

if at the end of the Exploration Period Licensee has not proceeded with an Appraisal Program or declared that the Discovery is Commercial, then the Discovury Area shall be relinquished.
f0.9 Nothing in this Article shall be read or construed as requiring Licensee to relinquish any area which constitutes or forms part of another Discovery Area in respect of which: (a) Licensee has given the Director General a sep ate notice indicating that such Discovery merits appraisal or confirmation; or (b) Licensee has given the Director General a separate notice indicating that such Discovery is commercial; or (c) Any area which constitutes or tbrms part of a Development and Production Area.
PRODUCTION OF CRI,JDE OIL ARTICLE X 11.1 Gross Production of Crude Oil tom each Development and Production Area shall be distributed in the following sequence and proportions: (a) The rate of Royalty for Oil Productron shall be ten percent (10%) and shall be delivered to the State as Royalty as defined in Section 2 of Annex 4 attached hereto.
O) After distribution of such amounts of Crude Oil as are required pursuant to (a) above, the remaining Crude Oil produced from each Development and Production area shall be the Licensee's and, the State on the basis of thei respective Participating Interests pursuant to Article 2 and Article 3. ll.2 Licensee shall have the right freely to export and dispose of all of its Petroleum pusuant to this Article subject to Article 16.
\ Page24 of91 I I L 11.3 The Parties shall through consultation cnter into supplementary agreements concemi-ng Crude Oil lifting and tanker schedules, loading conditions and Crude Oil metering at the end of each Calendar Y ear.

The Crude Oil to be distributed or otherwise made available to the Parties in each Calendar Year in accordance with the preceding provisions of this Article shall iruofar as possible be in reasonably equal monthly quantities.
ARTICLE 12 MEASUREMENT AND PRICING OF CRTIDE OIL l2.l Crude Oil shall be delivered by Licensee trr s16y4t.

tanks constructed, maintained and operated in accordance with applicabl.

laws and good intemational petroleum industry practice.

Crude Oil shall be metered or otherwise measured for quantity and tested for quality in such storage tanks for all purposes of this Licence.

Any Party may request that measurements and tests be done by an intemationally recosnized inspection company.
Licensee shall arrange and pay for the conduct of any measurement, or test so requested provided, however, that in the case of (1) a test requested for quality purposes and (2) a test requested on metering (or measurement) devices, or where the test demonstrates that such devices are accurate within acceptable tolerances, the Party requesting the test shall reimburse Licensee for the costs associated with the test or tests.
12.2 Licensee shall keep frrll and accurate accounts conceming all Petroleum measured as aforesaid and provide the Director General with copies thereof on a monthly basis, not later than ten (10) days after the end of each month.
12.3 The market price for Crude Oil delivered by Licensee hereunder shall be established with respect to each lifting as follows: (a) On Crude Oil sold by Licensee in arm's length commercial transactions, the market price shall be the price actually realized by Licensee on such sales; O) On other sales by Licensee, or on exports by Licensee without sale, the market Prices shall be determined by reference to world market prices of comparable Crude Oils sold in arm's length transactions for export in the major world petroleum markets, and adjusted for oil quality, location and conditions of pricing, delivery and payment.
(c) sales at an arm's len4h commercial transactions shall mean sales to purchasers independent of the seller, which do not involve Crude Oil exchange or barter transactions, govemment to government transaction, sales dtectly or indirectly to Afhliates, or sales involving consideration other than payment in United States Dollar or currencies convertible Paze25 ot91 thereto, or affected in whole or in part by considerations other than the usual economic incentives for comnrercial arm's length Crude Oil sales.
(d) the price of Crude Oil shall be expressed in United States Dollars per barrel, F.O.B.

the point ofdelivery by Licensee; (e) if the quality of Crude Oils produced from the Licence Area is different, the market price shall be determined separately for each type sold and./or exported by Licensee.

12.4 Licensee shall notifr the Director General of the Market Price determined by it for its respective [Aing during each Quarter not latq than thirty (30) days after the end ofthat Quarter.
l2.S If the Director General considers that the price notified by Licensee was not corectly determined, it shall so notifr Licensee not later than thirty (30) days after notification by Licensee of such price, and the Director General and Licensee shall meet not later than twentl' (20) days thereafter to agree on the conect market price.
12.6 If the Parties fail to agree on the market price applicable to a given quarter within seventy five (75) days after the end of that quarter, the Director General or the Licensee may immediately submit to an expert, appointed in accordance with the following paragraph, the determination of the Market Price (including the determination of reference crude oils if the Parties have not determined them).
The Sole Expert shall determine the price within thirty (30) days after his appointrnent and his conclusions shall be final and binding on the Parties.

The Sole Expert shall decide in accordance with the provisions of this Article and Article 28.
12,7 The Sole Expert shall be selected by agreement between the Parties or, if no agteement is reached, by the intemational centre of technical expertise of the Intemational Chamber of Commerce in accordance with its rules on technical expertise, at the request of the most diligent Party.

The expert costs shall be charged to the Licensee and included in the Petroleum Costs.
LICENCE FEES ARTICLE 13 13.1 Licensee shall, be subject to the annual Licence fees set out in Article 13.2, based on the acreage of the Licence Area held during the period under consideration.

13.2 Annual Licence fees are payable to the Petroleum Directorate per squarc kilometer of the area under Licence in the amounts as set forth below: Page26 of 91 \ I Phase of Operation Licence fees per annum Initial Exploration Period US $40 per sq.

km.

I st Extension Period US $60 per sq.

km.


2nd Extension Period US $85 per sq.

km.

Development and Production Area US $110 per sq.

km.

13.3 An additional surcharge of US$20 per sq.

km will be applied to any additional extension granted.

13.4 The Licence Fee shall be paid il advance tbr the Contract Year, and is due on the Effective Date and annually thereafter on the annivetsary of the Effective Date until the termination of this Licence.
ARTICLE 14 FOREIGN D<CFIANGE TRANSACTIONS l4.l Licensee shall for the purpose of this Licence be entitled to receive, remit, keep and utilize fteely abroad all the foreign c urrency obtained from the sales of the Petroleum assigned to it by this Licence or purchased hereunder, or from transfers, as well as its own capital, receipts from loans and in general all assets thereby acquired abroad.
Upon making adequate arrangements with regard to its commitnent to conduct Petroleum Operations, Licensee shall be free to dispose of this foreign.

currency or assets as it deems fit.

14.2 Licensee shall have the right to open and maintain in Siena Leone bank accounts in foreign crlrency and Sierra Leone currency.
No restriction shail be made on the import by Licensee of funds assigned to the performance of the Petroleum Operations, in accordance with applicable law and Licensee shall be entitled to purchase Sierra Leone cr[Tetrcy through authorized means, without discrimination, at the prevailing rate of e\change; provided, however, that such prevailing rate applicable to Licensee herer.rnder for all transactions for converting Sierra Leone crurency into U.S.
Dollars, and vice versa, shall be at a buying or selli::g, as the case may be, rate of exchange not less favorable to Licensee than that quoted by the State or its foreip exchange control authority to any person or entity on the dates of such conversion.
14,3 Licensee shall be entitled to convert in an authorized manner into foreign currencies of its choice funds imported by Licensee for the Petroleum Operations N P.gc27 of91 I I and held in Sierra Leone which exceed its local requirements at the prevailing rate of exchange and remit and retain such foreign currencies outside Siena Leone.
14.4 Licensee shall have the right to make direct payments outside of Sierra Leone from its home offrces or elsewhere to its Foreign National Employees, and to its Subcontractors and suppliers for wages, salaries, purchases of goods and performance of services, whether imponed ir:to Sierra Leone or supplied or performed therein for Petroleum Operations carried out hereunder, in accordance with the provisions of this Licence, in respect of services performed within the framework of this Licence, and such payments shall be considered as part of the costs incurred in Petroleum Operations.
In the event of any changes ia the location of Licensee's home or other oflices, Licensee shall so notiff the Director General.

AII such pa)ments however shall be subject to the Income Act 2000 and other relevant financial Acts and Regulations currently in force.

14.5 A-[ payments which this Licence obligates Licensee to make to the State shall be made in U.S.

Dollars, except as requested otherwise.


All payments shall be made by wire transfer in immediately available l unds to a bank to be designated by the Director General, and reasonably accessible to Licensee by way of its being able to receive payments made by Licensee and give a confirmation of receipt thereof, or in such other manner as may be mutually agreed.
14.6 All payments which this Licence may obligate the Director General or the State to make to Licensee shall be made by wire transfer in immediately available funds in U.S.

Dollars to a commercial bank to be desipated by Licensee.

ARTICLE 15 SPECIAL PROVISIONS FOR NATURAL GAS PART 1- GENERAL 15.1 Licensee shall have the right to extact Condensate and Natural Gas liquids for disposition under the provisions relating to Crude Oil.
Residual Natural Gas remaining after the extraction of Condensate and Natural Gas Liquids is subject to the provisions of this Article.

15.2 When gas flaring is authorized in accordance with The Act, the Director General may determine that a relevant fee be charged in accordance with the quantity and quality of the gas flared and with its location.
15.3 Licensee shall have the right to use Naturat Gas produced from any Development and Production Area for Petroleum Operations within the Licence Area such as for, but not limited to, reinjection for pressure maintenance and/or power generation.
Page29 of97 PART II - ASSOCIATED GAS 15.4 Based on the principle of full utilizar ion of Associated Gas and without substantial impediment to Crude Oil production, the Development plan of each Development and Production Area shall include a plan of utilization for Associated Gas.

PART III - NON-ASSOCIATED GAS 15.5 Licensee shall notift the Director General in writing as soon as any discovery of Non- Associated Gas is made in the Licence Area.
f5,6 As soon as possible after the technical evaluation of the test results of such discovery is complete and in any event not later than one hundred eighty days (180) days from the date of Discovery, the Licensee shall by a further notice in writiag to The Director General (the "Notice") indicate whether in Licensee's opinion the Discovery merits Appraisal.
15.7 Where the Licensee's Notice indicates that the Discovery does not at that time merit Appraisal but may merit Appraisal or additional evaluation at a later date during the Exploration Period, then the Licensee need not submit a proposed Appraisal Program at that time but instead shall indicate what other studies or evaluation may be wananted before an Appraisal Program is undertaken.
ls.8 Where the Licensee's Notice indicates that the Discovery merits the drilling of one or more Appraisal Wells at that time.

the Licensee shall prepare and submit the appropriate Appraisal Program which Program shall be scheduled to be completed within two (2) years of the submission of the Notice to the Dhector General.
15.9 Not later than ninety (90) days from the date on which the Appraisal Program relating to a Discovery is concluded, the Licensee shall submit a report containing the results of the Program.
If the reporr concludes that the Discovery merits commercial assessment, the Licensee shall notify the Director General within one hundred eighty (180) days from the date on which the Appraisal Program relatiag to the Discovery was completed of a Program of such assessment and shall conduct such Program during the rest of the Exploration Period.
Notwithstanding the above, the Licensee may also notify the Director General that commercial assessment of the Discovery is not wananted at that time but the Discovery may merit such assessment at a later date during the Exploration Period.

15.10 The purpose of the commercial assessment shall be to study the uses to which production from the Discovery Area can be devoted and whether involving exports or domestic utilization.
As part ol the assessment, the Parties shall also pursue discussions on the required contactual arrangements for disposition of the Natural Gas to potential puchasers and/or consumers of the Natual Gas.

N Page29 of97 rzz ) I .-r 15.11 Licensee may consult with the Director General and may make appropriate representations proposing miflor changes in the fiscal and otler provisions of this Licence which may, in the opinion of Licensee, affect the above determinations.
The Director General may, where feasible and in the best interests of the Parties, agree to make such cha'rges or modifications in the existing arrangements.
15.12 Nothing in this Part III of Article 15 shall be read or constued as requiring Licensee to relinquish any area (a) which constitutes or forms part of another Discovery Area in respect of which Licensee has given to the Director General a separate notice indicating that such Discovery merits confirmation or commercial assessments; or (b) which constitutes oi forms part of a Development and Production Area.
PART TV - NATI'RAL GAS PROJECTS 15.f3 If at any time during the commercial assessment Licensee informs the Director General in writing that the Discovery can be produced commercially, it shall as soon as reasonably possible thereafter submit its proposals for an agreement relating to the development of the Discovery on the principles set fo(h in this Part IV of Article 15.
The Director General r,rndertakes on receipt of such notice to negotiate in good faith with Licensee with a view to reaching agreement on terms for zuch production.

Any such agreement will be based on terms and fiscal requirements which shall be no less favorable to Licensee than those provided elsewhere in this Licence.
15.r4 If at any time during the commercial assessment Licensee has identified a mmket in Sierra Leone for the reserves of Associated and/or Non-Associated Gas or any part thereof that can be saved without preludice to an export project, the Pades shall proceed in good faith to negotiate the appropriate contractual arrangements for the disposition of the Gas.
In the evcnt of a domestic market for such Gas, Licensee shall receive for delivery onshore of its share of the Gas a price to be agreed between the Director General and Licensee taking iato account among other things the cost of developing the Gas and the uses which will be made of the Gas.
15.15 In the event of a Discovery of Natural Cas in the Licence Area which is to be developed and commercially produced, the provisions of this Licence in respect to interests, rights and obligations of the Parties regarding Crude Oil shall apply to Natural Gas, with the necessfiy changes in points of detail, except with respect to specific provisions in this Licence conceming Natural Gas and different or additional provisions conceming Natural Gas which may be agreed by the Parties in the future.
15.16 The system for the allocation of Natural Gas among the Parties shall follow the same general format as provided for Crude Oil, with the exception that the royalty \ Page 30 of97 I I to be delivered to the State on Natural Gas shall be at the rate of 50% as indicated in Annex 4 as an incentive to enhance the viability of a Gas project on the basis herein provided for.
15.17 The Parties recognize that projects for the development and production of Natural Gas are generally long-term in nature for both the project developers and the customers who purchase the Natural Gas.

Substantial investments and dedication of facilities require long-term commitments on both sides.
This Licence, being for a specific term of years, may not cover the length of time for which customers in given cases will require commitments on the part of the Parties to this Licence to deliver their respective shares of the output.

Accordingly the Parties agree to consider undertaking such commitments where rcasonably required for the efficient and viable development of a Natural Gas project.
It is recognized that, unless otherwise ageed by the Parties hereto, Licensee will have no right or interest in the project or the Natural Gas produced and delivered after the term of this Licence has expired.
15.18 The Parties will consider collaboration in obtaining any common extemal financing available for Natural Gas processing or Narural Gas utilization facilities, including project financing; horlever, each Party shall remain free to finance extemally its share ofsuch facilities to the extent it prefers to do so.
15.19 a) Where Licensee has during the continuance of the Exploration Period made a Discovery ofNon-Associated Gas but has not before the end ofthe Exploration Period declared that Discovery to be commercial, the Director General may, if Licensee so requests, enter into a new Petroleum Agreement with Licensee in respect of the Discovery Area to which that Discovery relates; b) A Petroleum Licence granted pursuant to this Article i) shall unless the Discovery in respect of which the Licence has been made is declared by Licensee to be commercial continue in force for an initial period not exceeding five (5) years; iD shall in the event that the Discovery is declared by Licensee to be commercial a) b) continue in force for an aggregate period not exceeding thirty (30) years; and/or include, or be deemed to include, all the provisions which mutatis mutandis, would have applied to a commercial Discovery of Non-Associated Gas if N Page 3l of97 Licensee had declared such Discovery to be commercial under this Licence; arrd iii) shall contain in respect of the initial period or of any renewal period details of the evaluations or studies which Licensee proposes ro undertake in order to determine or keep under review the commerciality of the discovery.
c) Where Licensee has not, before the end of the initial period, declared the Discovery to be commercial and the Director General has in his discretion determined that further evaluation or studies may be required before the Discovery can be declared commercial, the right of Licensee to retain the Discovery Area shall continue for a further period not exceeding in the aggegate five (5) years.
The right of Licensee to retain the Discovery Area aforesaid shall be secured by the renewal of the Licence referred to in this Article 15 or where necessary by a new Licence entered into by the Parties for that purpose.
DOMESTIC SUPPLY REOTIIRIMENTS (CRLIDE OII) ARTICLE 16 16.f Crude Oil for consumption in Sierra Leone (in this Article called the "Domestic Supply Requirement") shall be supplied, to the extent possible, by the State from its respective entitlement under this Licence and under any other contract for t}re production of Crude Oil in Sierra Leone.
16,2 In the event that Crude Oil available to the State is insufficient to fulfill the Domestic Supply Requirements, Licensee shall be obliged together with any thnd parties which produce Crude Oil in Siena Leone, to supply a volume of Crude Oil to be used for such Domestic Supply Requirements, calculated on the basis of the ratio of Licensee's entitlement to Crude Oil to the similar entitlements of all such third parties and provided that Licensee's obligation to supply Crude Oil for purposes of meethg the Domestic Supply Requirement Crude Oil shall not exceed fifty percent (50%) of the total ot'Licensee's said entitlement under this Licence.
The State shall purchase any Crude Oil supplies by Licersee pursuant to this Article at a mutually agreed price based on the appropriate intemational market price determined under this Licence for the Month of delivery, and the State shall pay such prices within thirty (30) days after receipt of invoice, failing which Licensee's obligations in respect of the Domestic Supply Requirement under this Article 16 shall be suspended until payment is made good, at which time deliveries shall be resumed subject to any alternative commitnents that may have been reasonably entered into by Licensee to dispose ofthe Domestic Supply Requirement Crude Oil during the period of Default in payment.
\ Pag.32 of97 i I I I I I l I I T I I LICENSEE TO KEEP RECORDS ARTICLE 17 l7.l Licensee shall keep the Director General regularly and fully informed of operations being carried out by Licensee and provide the Director General with all information, data, (frlm, paper, digital lbrms and magnetic tapes), samples, interpretations and reports, (including progress and completion reports) including but not limited to the following: (a) processed seismic data and interpretations thereof; (b) the site of and ntrmber assigned to every well; (c) the subsoil and strata through which the well was drilled; (d) the casing inserted in any well and any alteration to such casing (e) any petroleum , water ,mines encountered in the course of such activities; (D well data, including but not limited 1o electric logs and other wireline surveys, and mud logging reports and logs, samples of cuttings and cores and analyses made therefrom; (g) any reports prepared from drillhg data or geological or geophysical data, including maps or illustrations derived therefrom; (h) well testing and well completion reports; (l) reports dealing with locations surveys, seabed conditions and seafloor hazards and any other reports dealing with well, platform or pipeline locations; 0) reservoir investigations and estimates regarding reserves, field limits and economic evaluations relating to future operations; (k) daily, weekly, monthly and other regular reports on Petoleum Operations; 0) comprehensive final reports upon the completion of each specific project or operation; (n) contingency programs and reports on safety and accidents; (n) procurement plans, subcontractors and contracts for the provision of services to Licensee; and (o) such other matters as the Director General may from time to time direct.
\.

Page 3l of97 r/ 17.2 The Licensee shall keep in Sierra Leone accurate geological plans and maps relating to the Exploration Area and such other records in relation thereto as may be necessary to preserve all information that the licensee has about the geology of the Exploration Area.
l7,3 The Licensee shall deliver copies of the said records, plans and maps referred to in the two foregoing paragraphs to the Director General when requested to do so, either: (a) within any time limit specified in the request;or (b) if there is no time limit specified , rr ithin four weeks of the request.
17.4 All information, dat4 logs, reports, samples collected, processed or analysed pursuant to this Licence shall remail the property of the State but the Licensee shall have the right to retain for its own use in connection with the conduct of Petroleum Operations under this Licence copies of data well logs, maps, map.etic tapes, other geological and geophysical information, portions of core samples and copies of reports, studies and analysis referred to in Article 17.1 .

INFORMATION AND CONFIDENTIALTTY.


ARTICLE 18 18.1 Not later than ninety (90) days following the end ofeach Calendar Year, Licensee 5hall sulmi1 to the Director General a report covering Petroleum Operations performed i-n the Licence Area during such Calendar Year.
Such report shall include, but not be limited to: (a) statement of the number of Exploration Wells, Appraisal Wells and Development Wells drilled, the depth of each such well, and a map on which ilrilling locations are indicated; (b) statement of any Petroleum encountered during Petroleum Operations, as well as a statement of any fresh water layers encountered and of any other minerals discovered; (c) statement of the quantity and quality of Petroleum produced and of all other minerals produced therewith from the same reservoir or deposit; (d) sunmary of the nature and extent of all exploration activities in the Licence Area; and (e) a general summary ofall Pefioleum Operations in the Licence Area.
\ Pagc 34 of97 r/ I l I 18.2 AII data information, reports and statistics including interpretation and analysis which the Licensee is or may from time ro time be required to fumish under the provisions of this Licence shall be supplied at the expense of the Licensee and shall not (except with the consent in writing of the Licensee which shall not be unreasonably withheld) be disclosed to any person not in the service or employment of the State of Siena Leone 18.3 The provisions of Article 1 8.2 shall not prevent disclosure: (a) By the Director General or the State to any agency of the State or to any adviser or consultant to the Director General or the StaLc: ll, ur, for the purpose of obtaining a Petroleum Licence in respect of any acreage adjacent to the Licence Area; or for the purpose of complying with the State's international obligations for the submission of statistics and related data.
b) By Licensee: l. u. lll.

lv.
v to its Affiliates, advisers or consultants; to a bona fide potential assignee of all or part ofLicensee's interest hereunder; to banks or other lending institutions for the purpose of seeking extemal financing ofcosts ofthe Petroleum Operations; to non-affrliates who shall provide services for the Petroleum Operations, including Subcontractors, vendors and other service contraclors, where this is essential for their provision of such services; to governmental agencies for obtaining necessary rulings, permits, licenses and approvals, or as may be required by applicable law or financial stock exchange, accounting or reporting practices.
18,4 Any Party disclosing information or providing data to any third party under this Article shall requ e such persons to undert.rke the confidentiality of such data.
PaEe 35 ol97 I I I I .t- I \ MONITORING OF PETROLEUM OPERATIONS ARTICLE 19 19.1 The Director General of the Petroleum Directorate shall be responsible for monitoring and inspecting all activities undertaken by the Licensee under the scope of this Petroleum Licence 19.2 The Director General or his duly authorized representatives shall have the right of access to all sites and offices of Licensee and the right to inspect all buildings and installations used by Licensee relating to Petroleum Operations.
Such inspections and access shall take place il consultation with Licensee and at such times and in such manner as not unduly to interfere wrth the normal operations of Licensee.

Such representatives may make a reasonable number of surveys, drawings, and tests for the purpose of enforcing this Licence.
They shall, for this purpose, be entitled to make reasonable use of the mac hinery and instruments of the Licensee on the condition that no danger or impediment to the operations hereunder shall arise directly or indirectly from such use.

Such representatives shall be given reasonable assistance by the agents and employees of the Licensee so that none of their activities endanger or hinder the safety or efficiency of the operations.
The Licensee shall offer such representatives all privileges and facilities accorded to its own employees in the field and shall provide them, free of charge, the use of reasonable office space and of adequate housing while they are in the field for the purpose of facilitatilg the objectives ofthis Article.

19.3 Licensee shall save and keep a representalive portion ofeach sample of cores and cuttings taken from drilling wells, to be disposed of, or forwarded to the Director General.
All samples acquired by the Licensee for their own purposes shall be considered available for inspection at any reasonable time by the Director General or his representatives.

19,4 The Licensee shall provide the Director Ceneral with copies of any and all data (including, but not limited to, geological and geophysical reports, logs and well surveys), inforrnatiou and interpretation of such data, and other relevant information in Licensees possession.
19.5 Licensee shall provide an effective and safe system for disposal of water and waste oil, oil base mud and cuttings in accordance with accepted Petroleum Industry practice, and shall provide for the safe completion or abandonment of all boreholes and wells.
19,6 If Licensee's failure to comply with the requirements of Article 19.5 results in the release of Petroleum or other materials on the seabed, in the sea, on land or in fresh water, or if Licensee's operations result in any other form of pollution or otherwise cause harm to fresh water, marine, plant or animal life, Licensee shall, in accordance with accepted Petroleum Industry practice, promptly take all Page 36 of 91 rzz !
t L L necessary measures to control the pollution, to clean up Petroleum or released material, or to repair, to the maximum extent feasible, damage resulting Ilom any such circumstances.

The cost of clean-up and repair activities shall be borne by Licensee.
19.1 The Licensee shall fumish to the Director (ieneral all logs, operational reports and incident reports on their activities by the tenth (l0s) day of the end of each month and at intervals of three (3) months thercafter during the period in which this Licence is in force a retum in a form from time to time approved by the Director General ofthe progtess ofhis operations in the Licence Area.
19.8 If it is determined that a particular Petroleum Operation may endanger the lives of persons or the preservation of the envi ronment, the Director General, after consulting Licensee, may: (a) order such Petroleum Operation to be suspended; (b) order the withdrawal of all persons from the locations deemed dangerous, in coordiaation with the relevant State authorities; (c) order the suspension of the use of any machine or equipment which may jeopardize the said values.
19.9 Licensee shall notifr the Diector General immediately in the event of any emergency or accident and shall take such action as may be prescribed by its emergency procedures and by accepted Petrole,,m lndustry practices.

COMMENCEMENT AND ABANDONMENT AND PLUGGING OF WELIS ARTICLE 20 20.1 The Licensee shall not commence or recommence the drilling of any well without the consent in writing of the Director General.
20.2 The Licensee shall not abandon any well without the consent in writing of the Director General.

20.3 The Licensee shall ensure compliance with any conditions subject to which any consent under either of the foregoing paragraph is given.
20.4 If any such condition under Article 20.1 of this Article relates to the position, depth or direction of the well, or to any casing of the well or if any condition under either Article 20.1 or 20.2 relates to any plugging or sealing of the well, the Director General may from time to time direct that the well and all records relating thereto shall be examined in such ntanner, upon such occasions or at such \ Page 37 of97 rzz l i l I I I L L intervals and by such person as may be specified by the Director General's dtection and the Licensee shall pay to any such person or to the Director General such fees and expenses for such examination as the Director General may specifu 20.5 The plugging of any well shall be done in accordance with a specification approved by the Director General applicable to that well or to wells generally or to class of wells to which the well belongs and shall be carried out in an efficient and workmanlike manner.
20.6 Subject to Article 20.7 of this Licence A$eement, any Well drilled by the Licensee pusuant to this Licence shall be plugged and sealed in accordance with Article 20.2,20.3,20.4 and 20.5, not less than one month before the expiry or determination of the Licensee's rights in respect of the area or part thereof in which that well is drilled.
20.7 A direction by the Director General mal be given by notice in writing to the Licensee not less than one month before the Licensee's rights in respect of the area or part thereof in which the well is situate expire or determine so as to relieve the Licensee of the Obligation imposed by Article 20.6 of this Article to plug and seal the well.
20.8 Any rvell that, pursuant to a direction by the Director General Under Article 20.7 of this Article, has not been plugged and scaled, shall be left in good order and fit for further working together with all casings and well head fixtures the removal whereof would cause damage to such wells 20.9 All casings and fixtures left in position pursuant to Article 20.7 of this Article shall be the property of the State.
ACCOUNTING AND AUDITING ARTICLE 21 2l.l Licensee shall maintain, at its oflices in Siena Leone, books of account and supporting records in the manner required by applicabte law and accepted accounting principles generally used in the petroleum industry and shall frle reports, tax retums and any other documents and any other financial retums which are required by applicable law.
21.2 In addition to the books and reports required by futicle 21.1 above, Licensee shall maintain, at its oftice in Sierra Leone, a set of accounts and records relating to Petoleum Operations under this Licence.

Such accounts shall be kept in accordance with the requirements of the applicable law and accepted accounting principles generally used in the industry.
These shall include reports of (a) the quantity ofpetroleum in the form ofgas rvon and saved \ PaBe 38 of97 Fl (b) (c) (d) the quantity of petroleum in any other form won and saved.
the name and address of any per.on to whom any Petroleum has been supplied by the Licensee, the quantity so supplied , the price thereof or other consideration thereof and the place to which the Petroleum was conveyed pursuant to the agreement for such supply and Such other particulars as the Director General may from time to time direct.

21.3 The accounts required by Articles 2l.l and 21.2 shall be kept in United States Dollars.
21.4 Licensee will provide the Director Gencral with quarterly summaries of the Petroleum Costs incurred under this Licence.

21.5 The Director General shall review all financial statements submitted by the Licensee as required by this Licence, and shall signify its provisional approval or disapproval of such statements in writing within ninety (90) days of receipt, failing which the financial statements as submitted by Licensee shall be deemed approved by the Director General.
21.6 Notwithstanding any provisional approval pursuant to Article 21.5 the Director General shall have the right at its sole expense and upon giving reasonable notice in writing to Licensee to audit the books and accounts of Licensee relating to Petroleum Operations within two (2) years from the submission by Licensee of any report of financial statement.

The Director General shall not, in carrying out such audit, interfere unreasonably with the conduct of Petroleum Operations.
Any such audit shall be completed within nine (9) months after commencement.

Licensee shall provide all necessary facilities for auditors appointed hereunder including working space and access to all relevant personnel, records, files and other materials.

21.7 During the term of this License, Licensee shall be subject to such fiscal and accounting terms and guides as are contained in Annex 2 and Annex 4, which shall form part of this Agreement.
21.8 Subject to any adjustments resulting from such audits, Licensee's accounts and financial statements shall be considered to be correct on expiry ofa period of two (2) years from the date oftheir submission unless before the expiry ofsuch two year period the Director General has notified Licensee ofany exceptions to such accounts and statements.
\ Page 39 of97 r/4 PURCHASING AND PROCUREMENT ARTICLE 22 22,1 ln the acquisition of plant, equipment, services and supplies for Petroleum Operations, Licensee shall give preference to materials, services and products produced in Siena Leone, of the same or superior quality, if such materials, services and are available and can be supplied in due time at prices, which are no more than ten percent (10%) higher than the imported items including transportation, insurance costs and customs charges due.
22.2 For the purposes ofthe provisions ofArticle 22.1, Siena Leonean companies shall be mandatorily consulted on the same terms as those used for consulting compeni$ 61 the intemational market.
1) 7, The Licensee shall always contract local scrvice providers, to the extent to which the services they provide are similar to those available on the intemational market, and their prices, when subject to lhe same tax charges, are no more than ten percent (10%) higher than the prices chorged by foreign contractors for similar services.
22.4 ln furtherance of the obligations under this Article, during the term of this Licence, Licensee shall prepare in respect of each Year a local procurement statement, containing the following information: (a) the amount of expenditure incurred by the Licensee directly, or indirectly through its Subcontractors, on goods supplied, produced or manufactued in Siena Leone; (b) (c) (d) (0 the amount of expenditure incurred by the Licensee directly, or indirectly through its Subcontractors, on :ervices provided by Sierra Leonean entities; the respective percentages that the expenditures recorded under items (a) and (b) above represent of the Licensee's total expenditures; a detailed description of the procedures adopted during the Year to identiff and purchase goods and services from Sierra Leonean suppliers; and a detailed exposition ofhow the local purchases for the Year as recorded under items (a) and (b) above c(tmpared with the projected purchases included in the budget statement lirr that Year, with explanations for any signifi cant variations.
22,5 The local procurement statement shall be submitted to the Director General within sixty (60) days after the end of each Year and shall be published in the Sierra Leone gazette and in at least one local newspaper.
\.. PaEe 40 of97 rlz EMPLOYN4ENT AND TRAINING ARTICLE 23 23.1 For Licence Area covered under this Licerrce (Block SL 108-10 ) Licensee shall pay to the Training Research and Development Fund, the sum of two hundred thousand United States Dollars (JS$200,000) every year from the Effective Date during the exploration and development period, and four hundred thousand United States Dollars (US$400,000) for each Contract year after declaration of commerciality, which the State shall use at its sole discretion to train Sierra Leonean personnel atrd transfer the management and technical skills required for the efficient conduct of Petroleum Operations, and for other general and educational training purposes.
This sum shall be paid on the Effective Date ofthe Licence and on every anniversary of the llffective Date for the Exploration and Development Period and on the commencement of the Commercial Production Period and for the duation of this Licence 23.2 Where qualified Sierra Leone personnel ale available for employmenl, Licensee shall be required to employ Sierra Leone eilizens in all categories and functions, except if there are no Sierra Leone citizens in the national markel with the required qualifications and experience, under terms to be regulated.
23,3 National and foreign workers employed by Licensee who occupy identical professional categories and carry out identical frrnctions shall enjoy the same rights of remuneration and the same working and social conditions, without any type of discrimination.
23,4 Licensee shall, if so requested by the Director General, provide opportunities for a mutually agreed number of employees norninated by the Director General to be seconded for on-the-job training or attaclment to all phases of its Petroleum Operations under a mutually agreed secondrnent contract.

23.5 Licensee shall regularly provide to the Director General information and data relating to worldwide Petroleum science and technology, Petroleum economics and engineering available to Licensee.
It is agreed that there will be no disclosure or transfer of any documents, data, know-how, technology or other information owned or supplied by Licensee, its Affiliates, or non-affiliates, to third parties without Licensee's prior written consent.

and then only upon agreement by the recipients to retain such information in strict confidence during the life of this Licence.
23,6 Licensee shall ensure that at least 20ot o of Management Staff and 50/6 of intermediate Staff be sourced from the li,cal labor market, and the ratio to be progressed to 60Yo and 80% respective Iy after 5 years.

A knowledge/skills \ Page 4l of97 rl hansfer plan to be submitted where non-availability of suitable skills can be demonstrated.
23.7 In fi.rtherance of its obligations under this Article, Licensee shall during the term of this Licence, prepare in respect of eacli Year a local employment statement, containing the following information: (a) the number of Sierra Leoneans urnployed by the Licensee directly, or indirectly through its Subcontract(,rs, their level within the organization and their salary scale; (b) the mean salary of foreign emplol ees hired by the Licensee directly, or indirectly through its Subcontractors, at the same levels as the Sierra Leonean worken; (c) the percentage that the number of Sierra Leoneans employed by Licensee or Subcontractor represent of the total number of Licensee and Sub- contractors employees respectively: (d) the percentage that the total salarics of Sierra Leoneans employed under items (a) above represents of thc Licensee and Subcontractor's total salaries.
(e) a detailed exposition ofhow the nurnber ofnew Sierra Leoneans hired and trained for the Calendar Year compared with the projected recruitment for that Year and how the total number of Siena Leoneans employed compmed with the previous two years, with explanations for any sigrrifi cant variations.
23.8 The local employment statement shall be submitted to the Director General within sixty (60) days after the end of each Calendar Year and shall be published in the Sierra Leone gazette and in at least one locel newspaper.
IMPORT AND D(PORT ARTICLE 24 24,1 The Licensee shall have the right to import into Sierra Leone, in its own name or on behalf of its contractors and Subcontractors, all the technical equipment, materials, machinery, tools, goods and supplies necessary in the Licensee's opinion for the proper conduct and achievements of the Petroleum Operations; that includes but is not limited to, drilling, exploration, development, production, transportation, sales and marketing, equipment, pipelines, tanks, geological and geophysical tools, boats, ships, launches.
drilling barges, ships and platforms, production platforms, civil engineering and telecommunication equipment, power plants and all related equipment, aircriift, automotive equipment and other vehicles, instruments, tools, spare parts, alLoys and additives, camping equipment, protecti\,e clothing and equipment, merlr;al, surgical and sanitarl, equipment, \ Page 42 of 97 7z supplies and instruments necessary for thc installation and operation of hospitals and dispensaries, documentation equipment, construction materials of all qpes, lumber, office fumiture and equipment, automobiles, explosives, chemicals, fuels, ship supplies, pharmaceutical products, medicines.
24,2 The Licensee shall have the right to import into Sierra Leone, in its own name or on behalf of its Contractors, Subcontractors and Agents the fumiture, clothing, household appliances and all personal effects for all the Foreign National Employees and their families assigned to rrork in Sierra Leone for the Licensee or its Contractors, Subcontractors or Agents.
24.3 The Licensee, its Contractors, Subcontractors and Agents shall have the right to re-export from Sierra Leone free of all drrties and taxes and at any time, all the items imported under Article 24.1 and 24.1 which are no longer necessary for the Petroleum Operations.
24.4 All the technical material, materials, machinery and tools, goods and supplies specified in Article 24.1 which the Licensee, its Contmctors, Subcontractors and Agents, thet Foreign National Employees and their families will have the right to import in one or more shipments to Sierra Leone shall be fully exempt of all duties and taxes payable as a result of such importation.
PROTECTION OF RIGHTS ARTICLE 25 25.1 The State shall take all necessary and possible steps to facilitate the implementation by the Licensee of the objectives of this Licence, and to protect the property and operations of the Licensee, its employees and agents in the territory of Sierra Leone.

25.2 At the duly justified request of the Licensee, the State shall prohibit the construction of dwelling or business buildings in the vicinity of installations, which the Licensee may declare dangerou.
as a result of its operations.

It shall take all necessary precautions to prohibit .rnchoring in the vicinity of submerged pipelines at river passages, and to prohibit any hindrance to the use of any other installation necessary for the Petroleum Operations whether on land or offshore.
25.3 The Licensee shall take out and cause to be taken out by its conuactors and subcontractors, in respect of the Petroleunr Operations, all insurances of the tlpe and for such amounts customarily used in the international Petroleum Industry, including without limitation third party liability insurance and insurances to cover damage to property, facilities, equipment and material.
25.4 Upon the entry into Sierra Leone of all Foreign National Employees of Licensees, its Affiliates, Non-Affiliales and Subcontractors and their Agents, lhe Director \ Page 43 of97 General shall facilitate the issue of the documents necessary for the entry to all such Foreign National Employees, such as entry visas, working permits, exit visas and other related documents.
25.5 At the request of the Licensee, the Director General shall facilitate any immigration formalities at the points of entry into and exit ftom Siena Leone in respect of all such Foreign National Employees and their families.

25,6 All the Foreign National Employees required for the conduct of the Petroleum Operations shall be under the Licensee's luthority or that of its Affiliates, Non- Affiliates, Subcontractors and Agents, in thcir capacity as employers.
Their work, number of working hours, salaries and any other matters relating to their employment conditions shall be determined by the Licensee or its Aft'lliates, Non- Affiliates, Subcontractors and Agents.

FORCE MAJzuRE ARTICLE 26 26.1 The provisions of Section 149 of The Act on Force Majeure shall apply mutatis mutandis.

26.2 Obligations other than those affected b1 Force Majeure shall continue to be performed in accordance with the provisions of this Licence.
ARTICLE 27 SOCIAL PROGRAMS 27.1 During the Exploration Period, Licensee commits to spend: (a) two hundred and fifty thousand United States Dollars (US$250,000) during the initial exploration period.

(b) two hundred and fifty thousand United States Dollars (US$250,000) during the first extension period and (c) two hundred and fifty thousand United States Dollars (US$250,000) during the second extension period.
for a total of seven hundred and trfty thousand United States Dollars (US$750,000) on social programs relating to areas of housing, health, education, sanitation, agriculture, and/or small and medium enterprise development for the whole Exploration Period.

N\ \ PaEe 44 of97 rr' 27,2 Licensee shall work with the Petroleum Directorate and identified communities to design and implement strategic community engagement progmms to advance health, education and sustainable socioeconomic development.
27 ,3 While Licensee shall collaborate with the Petroleum Directorate in the implementation of these social programs.

Licensee shall at its sole discretion determine the appropriation of these funds.

21.4 Licensee at the request of the Director General can combine and coordinate efforts with other oil and gas exploration companies in Sierra Leone in the implementation of joint social projects.
27.5 Funds under this program shall be used in a judicious manner and Licensee shall account for all expenditures under this program.

21.6 Accounting for the use of these funds shall be included in the annual budget, and shall be included in quarterly and arurual reports due to the Director General and shall be subject to the same Audit terms.
CONSULTATION, ARBITRATION AND INDEPENDENT EXPERT ARTICLE 28 28,1 Any dispute or difference arising between the State on one hand and Licensee on the other in relation to or in connection with or arising out of any terms and conditions of this Licence shall be resolved by consultation and negotiation.
In the event that no agreement is reached within thirty (30) days after the date when either Party notifies the other that a dispute or difference exists within the meaning of this Article or such longer period specifically agreed to by the Parties or provided elsewhere in the Licence, anv Party shall have the right subject to Article 28.8 to have such dispute or d it'ference setlled through international arbination under the rules and procedures and under the auspices of the International Chamber of Commerce.
28.2 The tribunal shall consist of tluee (3) arbitrators.

Each Party to the dispute shall appoint one (1) arbitrator and those so appointed shall designate an umpire arbitrator.
If a Party's arbitrator and/or the umpire arbitrator is not appointed within the period provided in the nrles, such Party's arbitrator and/or the umpire arbitrator shall at the request of any Party to the dispute be appointed by the lntemational Charnber of Commerce 28.3 No arbitrator shall be a citizen of the homc country of any Party hereto, and shall not have any economic interest or relationship with any such Party.

28.4 The arbitration proceedings shall be conducted in London, England.
The proceedings shall be conducted in the English language.

\xN Page 45 of97 28.5 If the opinion of the arbitrators are divided on issues put before the tribunal, the decision of the majority of the arbitrators shall be determiaative.

The award of the tribunal shall be final and binding upon the Parties.

The award may be submitted to a court of appropriate jurisdiction to implement as ajudicial decree.
28.6 The right to arbitrate disputes arising out of this Licence shall survive the termination of this Licence.

28.7 In lieu of resorting to arbitration, the Parties to a dispute arising under this Licence, including the Accounting Guide, which such Parties by mutual agreement may consider appropriate may be referred for determination by a Sole Expert to be appointed by agreement of the Parties.
In such case, the Parties shali agree on the terms of reference for such proceeding, the schedule of presentation of evidence and testimony of witnesses.

and other procedural matters.

The decision of the Sole Expert shall be final and binding upon the Parties.

The Sole Expert shall have ninety (90) days after his appointment to decide the case, subject to any extensions mutually agreed to by the Parties to the dispute.
Upon failure of the Sole Expert to decide the rnatter timely, any Party may call for arbitration under Article 28.I above.

28.8 Each Party to a dispute shall pay its own counsel and other costs of litigation; however, costs of the arbitration tribunal shall be allocated in accordance with the decision of the tribunal.
The costs and lees of the sole expert shall be.borne equally by the Parties to the dispute, and each Party shall bear its own costs of preparing the materials for and making presentations to the sole expert.

28.9 The State confirms that it can validly be a party to an arbitration as well as to expert detennination procedures, and will not contest the arbitrability of any dispute resolution mechanisms detailed herein.
Consequently the State consents to, and will not object, the enforcement or execution of any determination, ruling, award or judgment, which is rendered in accordance with this article 28 against it or any of its assets and shall not contest or invoke any grounds whatsoever to impede or hinder such enforcement or execution.
28.10 A person who has been appointed as Sole Expert may not subsequently be appointed to act as an arbitrator in an arbitration relating to any similar dispute resolution between the Parties.
ASSIGNMENT ARTICLE 29 29.1 The Licensee shall not, except with the consent in writing ofthe Director General and in accordance with the conditions (if any) of the consent, do anything whatsoever, whereby under the law (inc luding the rules of equity), any right \ Page 46 ol97 granted by this Licence or derived from a right so ganted becomes exercisable by or for the benefit ofor in accordance with the directions of another person.
29.2 All or part ofthe rights and obligations arising from this Licence may be assigned by any of the entities constituting the Licensee ("the Assignor") to third parties whose technical and financial reputation is well established ("the Assignee"); the assignees with the other entities constituting the Licensee shall thereafter be jointly and severally liable for the obligations arising from this Licence.
29.3 The terms of any joint and several assignrnent and ownership shall be subject to the prior approval ofthe Director General 29.4 To enable consideration to be given to any request for the Director General's consent referred to in Articles 29.3, the following conditions must be fulfilled: (a) All the obligations of the assignor deriving from this Licence must have been duly firlfilled as of the date such request is made.
(b) The instrument of assignment must include all the terms of the Assignment, and provisions stating precisely that the assignee is bound by all covenants contained in this Liccnce and any modifications or additions in writing that up to such time nray have been made.

A draft of such instrument of assignment shall be submitted to the Director General for review and approval before being firrmally executed.
(c) The assignor(s) must submit to the l)irector General reasonable documents that evidence the assignee's financial and technical competence.

(d) Once the assigror and a proposed third party assignee, other than an Afhliated Company, have agreed the final conditions of an assignment, the assigr.or shall disclose in details such final conditions in a written notification to the Director General.
The State, shall have the right to acquire the interest intended to be assigned, if, within Thirty (30) days from assignor's written notification, the Director General informs the assignor by a written notification that it accepts the same conditions agreed to with the proposed third party assignee.
If the Director General does not give such notification withil the Thirty (30) day period, the assigror shall have the right to assign to the proposed third party assignee, subject to the Director General's approval under Article 29.3 of this Licence.

(e) As iong as the assignor shall hold any interest under this Licence, the assignor together with the assignee shall be jointly and severally liable for all duties and obligations of Licensee under this Licence.
\ Page 41 ot91 7./ 29.5 On the date of approval of each assignrrient requested by any of the entities constituting the Licensee to any Assignec in accordance with the terms of this Licence in the following cases: (a) During any Exploration period, in case any ofthe entities constituting the Licensee assigns i1 whole or in part of its rights, privileges, duties and obligations to any Assignee other than an Affiliate Company of the same entity constituting the Licensee, the Assignee shall pay to the State the sum of Two Million Five Hundred Thousand United States Dollars (US$2,500,000) as Assignment Fees.
(b) During any Development or Production Period, in case any of the entities constituting the Licensee assigns in whole or in part of its rights, privileges, duties and obligations to any Assignee other than an Affiliate Company of the same entily constiruting the Licensee, Assignor shall pay to the Director General the sum Trro Hundred and Fifty Thousand United States Dollars US$250,000 and Assignee shall pay to the State the sum of Four Million United States Dollars (US$4,000,000) as Assignment Fees.
(c) In case ofan assignment by any of the entities constituting the Licensee to an Affiliate company ofJhe same cnlity constituting the Licensee during the Exploration phase; Assignee shall pay to the Director General the sum of Two Hundred and Fifty Thousand US Dollars (US$250,000) as Assignment Fee, and in the case ol'an Assignment by any of the entities constituting the Licensee to an /\ffiliate company of the same entity constituting the Licensee during the Development or Production Phase, Assignee shall pay to the Director General the sum of Five Hundred Thousand US Dollars (US$500,000) as Assignment Fee.
29.6 All fees paid in accordance with Article 29.5 shall be deductible only ftom Capital Gains Taxes due to the State.
29,7 Wherein (a) any of the entities constituting the Licensee ("Assignor") assigns all or a part of its Participating Interest to a third party ("Assignee") in accordance with this Article 29; (b) the Assignee provides an irrevocable, unconditional bank guarantee fiom a reputable bank of good standing, acceptable to the State, in favour of the State, for an amount equal to the assignee's Participating Interest share of the estimated expenditure of the Minimum Work Programme of the Exploration Phase current at the Efl'ective Date ofthe assignment; (c) the Assignee provides performance guarantee and legal opinion in terms of Article 5; and (d) the assignment of Participating Interest is executed by all Parties; \ Page 48 of97 rr' then the Director General shall release the guarantee given by the assignor under Article 5 to the extent ofthe amount oflhe guarantee provided by the assignee ARTICLE 30 BONUSES 30.1 Signature Bonus (a) Licensee shall pay to the State in Cash as a signature bonus the sum of five million United States Dollars (US$5,000,000) no later than thirty (30) days after the Effective Date of this Licence.
30.2 Development Bonus (a) Licensee shall pay to the State in cash as a Development bonus the sum of one million United States Dollars (US$1,000,000) on the date of the approval of each Commercial Development 30.3 Extension Bonus Licensee shall pay to the State in cash the Sum of five million United States Dollars (US$2,000,000) as an extension bonus no later than thirty (30) days after the approval date of entry into any further extensions other than that provided for the first and second extension under the work pro$am.
This Bonus may be waived at the Discretion of the Director General for extensions granted undcr Section 46 (a) and (5) ofThe Act.

30.4 Production Bonus (a) Production Bonuses shall be based on cumulative production milestones.
These Bonuses shall be paid to the State only once, in Cash at the amounts set below, and shall be paid within thirty days (30) ftom the date on which all cumulative oil production from the Licence Area exceeds Three Hundred Million banels of oil or oil equivalent (300 MMBOE) and at each subsequent One Hundred Million banels of oil or oil equivalent (100 MMBOE) incremental production as stated below.

i. ii.
Bonus payment of ten rnillion United States Dollars (US$ 10,000,000) shall be paid for reaching three hundred million barrels of oil or oil equivalent (300 MMBOE); Bonus of twenty million United States Dollars (JS$ 20,000,00) shall be paid for reaching four hundred million banels ofoil or oil equivalent (400 MMBOE); N Page 49 of97 lll lv Bonus of thirty million Linited States Dollars (US$30,000,000) shall be paid on reaching five hundred million banels of oil or oil equivalent (5 00 MMBOE); Bonus of forty million United States Dollars (US$ 40,000,000) shall be paid on reaching six hundred million banels of oil or oil equivalent (600 MMBOE); Bonus of fifty million United States Dollars (US$ 50,000,000) shall be paid on reaching seven hundred million barrels of oil or oil equivalent (700 MMBOE) and for every additional one hundred million barrels of oil or oil equivalent (100 MMBOE) thereafter.
(b) Gas shall be taken into account for purpose of determining the total production from the Licence Area under this Article by converting daily Gas delivered into equivalent l,anels of Crude Oil production in accordance with the following formula for each unit of one thousand (1,000) standard Cubic Feet of Gas: Equivalent Banels of Oil Per MSCF = H x 0.167 Where: MSCF = one thousand Standard Cubic Feet of Gas.

H = the number of million British Thernral Units (MMBTU) per MSCF.
30.5 Technolory Bonus Licensee shall pay to the Director General the sum of five hundred thousand United States Dollars (US$500,000) as a technology bonus, which the Directorate may use at its discretion to acquire leading edge technology and equipment, inftastructure improvement and research and development, for the efficient conduct of Petroleum Operations.

Payment shall be made only once, on the frrst anniversary of the Effective Date.
30.6 The Director General shall act as agenl for the State in the invoicing and collection of all Petroleum or Amounts accruing to the State under this Article and delivery or payment to Director General by Licensee shall discharge Licensee's liability.

30.7 All the above mentioned bonuses shall in no event be recovered by Licensee.
ADMINISTRATION OF CONTRACT ARTICLE 31 31.1 This Licence and the relationship between the State and the Director General on one hand and Licensee on the other shall be govemed by and construed with the laws of the Republic of Siena Leone.
\ Page 50 of97 r/ 31,2 Any Party failing to pay any amounts payable by it under this Licence (including the provisions of Annex 2 and 4) on the respective dates on which such amounts are payable by such Party hereunder shall be obligated to pay interest on such unpaid amounts to the Party to which such amounts are payable.

The rate of such interest with respect to each day of delay ,luring the period of such non-payment shall be the Specified Rate.
Such interest shall accrue from the respective dates until such amounts are payable and until the amounts are actually duly paid.

The Party to whom any such amount is payable may give notice ofnon-payment to the Party in Default and if such amount is not paid within thirty (30) days after such notice, the Party to which the amount is owed may, in addition to the interest referred to above, seek remedies available pursuant to the arbitration provision hereunder.
3f3 The rights and obligations rmder this Licence of the State on the one hand and Licensee on the other shall be separate and proportional and not joint.

This Licence shall not be construed as creating a partnership or joint venture, nor an association or trust or as authorizing arry Party to act as agent, servant or employee for any other Party for any purp(,se whatsoever.
31.4 The duties and obligations of each Party constituting Licensee hereunder shall be joint and several and it is recognized that each such Party shall own and be responsible for its undivided Interest in the rights and obligations of Licensee hereunder; provided, however, that the following payments shall be the separate obligation ofand shall be made by each Party which constitutes the Licensee: (a) Payments of income tax under the lerms ofthis Licence; (b) Payments of royalty under the terms ofthis Licence; (c) Payments of Licence fees under the terms ofthis Licence; (d) Payment of assignment fees under the terms ofthis Licence.
IMPLEMENTATION OF LICENCE ARTICLE 32 32,L The Parties agree to cooperate in every possible manner to achieve the objectives of this License.

The Director General shall facilitate the gant of any permits, licenses, access rights, appropriate services and facilities required by the Licensee for the performance of the Petroleum Oper:Ltions.
32,2 Ifthe Director General considers that the l.icensee has committed a breach in the performance ofany of its obligations, it shall so notiff the Licensee in writing and the Licensee shall have Forty Five (45) days to Remedy the breach or refer the matter to Arbitration in accordance with the provisions of this Licence.
\ Page 5l of97 r/ 32.3 If any of the events specified in the following paragraph shail occur then and in any such case the Director General may revoke this Licence and thereupon the same and aU rights hereby granted shall cease and determine but subject nevertheless and without prejudice to any obligation or liability incurred by the Licensee or imposed upon him by or under the terms and conditions hereof.
32.4 The breach by the Licensee of the provisi, rrs of this Licence may give rise to the termination thereof by the State upon thc uncorrected occurrence of any of the events or failures to act listed below: (a) the submission by Licensee to the Director General of a written statement which the Licensee knows or should have known to be false in a particular material matter; (b) the assignment or purported assignment by Licensee, of this Licence contrary to the assignment provisions hereunder; (c) the insolvency or bankruptcy of Licenseeor the entry of the Licensee into liquidation or receivership, whethel compulsory or voluntary, and there is justifiable anticipation that the obligations of Licensee hereunder will not be performed; (d) the failure of Licensee to fulfill its minimum work obligations under Article 6 of this agreement unless the Director General has waived the Default; (e) (0 (e) the substantial and material failure by Licensee to comply with any of its obligations pursuant to Article 8 hereof; the failure of the Licensee to provide the required performance guarantee within sixty (60) days of the Effective Date for the lnitial Exploration Period or within sixty (60) days of entrance into any extension period.
the failure by Licensee to make .my payment of any sum due to the Director General or the State purs uant to this Licence within forty five (45) days after receiving notice that such payment is due.
(h) If Licensee intentionally extracts any mineral other than petroleum, not authorized by this Licence, or without the authorization of the Government, except such extractions that may be unavoidable as a result of the operations conducted hereunder in accordance with accepted peholeum industry practice, and which shall be notified to the Director General as soon as possible.

(i) any breach or non-observance by the Licensee ofthe terms and conditions of an approved Development Plan.
\ Page 52 of97 r/ 0) If the Licensee is a company and there is a change in the control of the Licensee the Licensee shall notifo the Director General within three (3) months prior to a change in the control of the Licensee.

Upon receipt of the notice, the Director General may on reasonable grounds inform the Licensee in writing stating that the Director General proposes to revoke this Licence in pursuance ofthis paragraph.
(k) There is a change in the control of the Licensee for the purposes of Article 32.4 O of this Article whenever a person has control of the Licensee who did not have control of the Licensce when this Licence was granted.

For the purposes of determining whether for the purposes of this paragraph a person has control or had control ol- the Licensee if he holds a greater part in the Licence or more than one-third.
32.5 The Director General may terminate this Licence as to one of the parties comprising the Licensee, if the circumstances set forth in Article 32.4 are applicable to only that party in the manner set forth in Article 32.4.

32.6 The Director General may terminate this Licence as to one of the parties comprising the Licensee if the Operator irrforms the Director General that party has consistently defaulted in its obligations under the Joint Operating Agreement between the parties, il one or more of th.
parties holding shares in the Licence suspend their payments, requests the opening of negotiations for a compulsory composition, are declared bankrupt, go into liquidation or are in a similar situation.

32,7 If the Director General or the State believes an event or failure to act as described in Article 32.4afi 32.6above has occurred, a written notice shall be given to Licensee describing the event or failure.
Licensee shall have Forty Five (45) days from receipt of said notice to remedy the event or failure cited in the notice.

If after said Forty Five (45) days Licensee has failed to Remedy the Default, the Director General or the State may then Suspend or Terminate the Licensee unless the Licensee has refened the matter to Arbitration under this Licence.
32.8 lf so referred to Arbitration, the Direcr,,r General and/or the State may not terminate this Licence in respect of such event except in accordance with the terms of any resulting Arbitration Award.
32.9 Disputes regarding non-payment of Bonuses, Annual Licence Fees, Annual Training Fees (OR COULD BE ANY AMOUNT DUE TO THE STATE UNDER THIS LICENCE AGREEMENT) and non-receipt of bank guarantees for minimum work expenditure shall not be referred to Arbitration and such written Notice of Terrnination shall be effective without delay.

32.10 The terms and conditions of this Licence may be modified only in writing and by mutual agreement between the Parties.
\ Page 53 of97 32.11 32.12 The Director General shall represent the State under this Licence and is empowered to gant by due process, in thc name and on behalf of the State, any consent necessary or usefirl for the implementation of this Licence.
The Petroleum Directorate shall act as an agent for the State ia ttre collection of all petroleum or money apart from Duties and Taxes, accruing to the State under this Licence, and delivery or payment to the Director Generai by Licensee shall discharge Licensee's liability.

32.13 Headings in this Licence are inserted for purposes of convenience and reference and in no event shall define, restrict or describe the scope or object ofthe License or of any of its clauses.
32.14 Annexes 1,2,3 afi4 attached hereto shall forrn an integral part of this Licence.

32.15 Any waiver of the State concerning the performance of any obligation of the .

Licensee shall be in writing and signed by the Director General, and no waiver shall be implied if the Director General does not exercise any of its rights to which it is entitled under this Licence.
STABILITY OF CONTRACT ARTICLE 33 33,1 During the validity of the Licence, the State shall not do or cause to be done or permit any act, thing or omission whether legislative, executive or administrative which discriminates adversely and unfairlv against the Licensee without the prior agreement of the Parties, that may affect.
directly or ipso facto, the obligations and charges imposed on the Licensee through the provisions of the Licence, or that may adversely affect the rights and economic benefits of the Licensee provided in the Licence.
33.2 This shall apply, in particular, to the following: (a) Exemption from fees, duties and tares; (b) Obligations with regard to Royalties and profits tax; (c) Rights to keep and transfer abroad the funds and foreign currencies; (d) Non-discrimination for the charges for services rendered by the State for similar services provided within the public domain.
33.3 In the event that such changes were made by the Govemment of the Republic of Sierra Leone without the prior agreement of the Licensee, the Parties will agree on the necessary amendments in order to provide the Licensee with the same N Page 54 of97 financial terms, obligations and charges, as well as the same rights and economic benefits that existed before said changes occurred.
33.4 Where a Party considers that a significant change in the circumstances prevailing at the time the Licence was entered into.

has occurred affecting the economic balance of the Licence, the Party affected hereby shall notifr the other Parties in writing of the claimed change with a statement of how the claimed change has affected the relations between the Parties.
33.5 The other Parties shall indicate in writin,r their reaction to such representation within a period of one (1) month of reeeipt of such notification and if such significant changes are established by Parries to have occurred, the Parties shalt meet to engage in negotiations and shall ellect such changes in, or rectification of, these provisions as they may agree are necessary.

33.6 Where parties caffiot agree on new terms.


the matter may be subrnitted for arbitration or Sole Expert determination according to Article 28.
N Page 55 of97 \ ARTICLE 34 NOTICE 34.1 Any Notice, Application, Requests, Agreernents, Consent, Approval, Instruction, Delegation, Waiver or other corrmunication required or permitted to be given hereunder shall be in writing and shall bc deemed to have been properly given when delivered in person to an authorized representative of the Party to whom such notice is directed or when actually received by such Pa(y through registered mail, telefax or teleglam at the following address or at such other address as the Party shall specifo in writing fifteen ( I 5) days in advance: FOR TI-[E STATE: ADDR.ESS Director General Petroleum Directorate 43 Siaka Stevens Street Freetou'n, Sierra Leone FOR LICENSEE: ADDRESS: A-Z Petroleum Products (S.L.)
Limited.

lF Scan Drive, Freetown, Sierra Leone \ TEI EPHONE: +23:22222714 EMAIL: info@ed- sl.com TELEPHONE: EMAIL: +232'76 954298 chicasongloup @yahoo.com Page 56 of97 / IN \,!T[NESS WHEREOF the parties have caused this Licence to be executed by thef duly authorized representatives as of the date frst written above.

FOR THE STATE : represented by \^ITTNESSED: By: ) DR. KAIFALA MARAII RAYMOND SAIDU G ?
MINISTER OF FINANCE & f,CONOMIC DEVELOPMENT DIRE( fOR CENERAL PETROLEUIVI DIRECTORATE FOR LICENSEE: 7/qzs By: PROFESSOR CHARLES O. OFOEGBU A-Z PETROLEUM PRODUCTS 6.

LJ LMITED.

WITNESSED B os o6 13 MR. D NA CHIKA OKAFOR Paee 57 ot97 ANNEX I Attached to and made part of this Licence between the Republic of Sierra Leone and the Licensee.
LICENCE AREA/LICENCE AREA On the Effective Date, the Contract Area/Licence Area, designated as Block SL 108-10, is formed by the area included inside the perimeter constituled by the points indicated SL-108, SL- 10C, SL- 10D and SL- lOE on the map attached hereto.

The geographical coordinates of those points are the folk,wing, with reference to the Greenwich meridian.

sL-108-10 SL-1OB SL-1OC SL-1OD SL-1OE Area: 1913 sq.
km 120 28'.56" W 120 l1'00,' w 120 25', 54" W 120 43'53" W 60 00'35" N 50 47' 00',N 50 26', 56" N 50 41',28" N Those coordinates are only given for purposes of this Liccnce and shall not be considered as the boundaries ofthe national jurisdiction of Siena Leone.

The surface of the entire Licence Area above-defined is deemed to be equal to about one thousand nine hundred and thirteen Square Kilometres (1,913 Sq.Km).
.N Page 58 of97 MAP OF THE LICENCE AREA SIERRA LEONE PETROLEUM OFFSHORE BLOCK SL-1OB-10 AREA=1913 sq.km N A Y S E --r-l rc oc + Sierra L one _-.

'_-r_..- T- SL-1OB sL-10c 10E D' i I Legend !


erocr sL- 108,10 Reference scale='l :3,000,000 5L.1oB 112' 23'56' w sl-1oc l12o 1t'oo"w sL-10o lr2" 2s 54 w sL-1oE 112o43,53.w 50 47',@" N 5D 26', 56' N I rrru, o", lcoordin um=WGS 19E4 ate System=Goographic coordinate System(GCS) \ Page 59 of97 r/ ANND( 2 ACCOUNTING GUIDE The purpose of this Accounting Guide is to establish equitable methods as between the Parties for determining charges and credits applicable to operatiorls under the Licence.
Principles established by this Accounting Guide shall reflect the Licensee's actual costs.

I.1 GENERAL PROVISIONS 1.1.1 Words and terms appearing in this Annex shall have the same meaning as in the Licencc and to that end shall be defined in accordance with Article I ol the Licence.

1.1.2 In the event of a conflict between the provisions of the Accounting Guide and the provisions of the Licence, the provisions of the Licence shall prevail.
1.2 STATEMENTS REQUIRED TO BE SUBMITTED BY LICENSEE 1.2.1 Within forty-five (45) days liom the Effective Date, Licensee shall propose to the Direclor Genrral an outline of the chart of accounts, operating records and reports to be prepared and maintained, which shall describe the basis of the accounting principles and procedures to be used during the term of the Licence, and shali be consistent with normal practice of the intemational petroleum industry.
1.2.2 Within ninety (90) days of the receipt of such proposal the Director General shall either accept it or request such revisions as the Director General deems necessary.

Failure to notifu Licensee of any requested revisions within a ninety (90) day period shall be deemed acceptance of such proposal.
1.2.3 Within one hundred and eighty (180) days from the Effective Date, the Parties shall either agree on such outline or submit any outstanding issue for determination by a Sole Expert pusuant to the Arbitration provisions ol this Licence.

1.2.4 Following agreement over the outline Licensee shall prepare and submit to the Director General formal copies of the chart of accounts relating to the accounting, recording and reporting functions listed in such outline.
Licensee shall also permit the Director General to inspect its manuals and to review ali procedures which are to be fbllowed under the Licence.
1.2.5 Without prejudice to the generality of the foregoing, Licensee shall make separate statements relating to Petroleum Operations for each Development and Production Area as follows: N Page 60 of97 r/ (a) Production Statement (see Section 5) (b) Value of Production Statement (see Section 6) (c) Cost Statement (see Section 7) (d) Statement of Expenditures and Reccipts (see Section 8) (e) Final End-of-Year Statement (see Section 19) (f) Budget Statement (see Section l0) (g) Long Range Plan and Forecast (see Section 13) I.3 LANGUAGE MEASUREMENT, AND UNITS OF ACCOUNTS r3.l The U.S. Dollar being thc currency unit for investmenls and compensation hereunder shlll therefore be the unit of currency for a1l bookkeeping and reporting under the Licence.
When trarisactions for an asset or liability are in currency other than the U.S. Dollar, the respective accounts shall be kept in such other crrrency as well as the U.S. Dollar.

1.3.2 Measurement required under this Arurex shall be in the metric system and Barrels.

1.3.3 The English language shall be employed.

1.3.4 Where necessary for purposes of clarification, Licensee may also prepare financial reports in other languages, units of measurement and currencies.
1.3.5 It is the intent of the Parties that no Party shall experience any gain or loss at the expense of or to the benefit of the other as a result of exchange of currency.

Where any such gain or loss arises it shall be charged or credited to the accounts under the Licence.
1.3,6 The rate of exchange for the conversion of currency shall be the rate quoted by the Bank of Siena Leone, or, where buying and selling rates are quoted, the arithmetic average of those rates, at the close of business on the date of such currency conversion.

1.3.7 Current Assets and Liabilities shall be translated at tle rate prevailing on the date of settlement of the account.

N'' Page 6l of97 rr' 1.3.8 To translate revenue received and expenditures made in currencies other than U.S.
Dollars, the average of the monthly rate between the currencies shall be used.

1.3.9 Expenditures made in U.S.

Dollars or other currencies in respect of capital items shall be translated at the rate prevailing at the date of acquisition.
CLASSIFICATION AND ALLOTMEN T OF COSTS AND EXPENDITURE SECTION 2Expenditure relating to Petroleum Operations shall be classified, as follows: a) Exploration Expenditure; b) DevelopmentExpenditure; c) d) ProductionExpenditure; Service Costs; and e) General and Adminislrative expenscs and shall be defined and allotted as herein below provided.

,7 EXPLORATION EXPENDITURE Exploration Expenditure shall consist of all direct.
indirect and allotted costs incurred in the search for Petroleum in the Licence Area, including but not limited to expenditure on: a) aerial, geographical, geochemical, paleontological, geological, topographical and seismic surveys, and studies and their interpretation; b) c) d) e) 0 \ borehole drilling and water drilling labor, materials and services used in drilling wells with the objective of finding new Petroleum reservoirs or for the purpose of appraisfurg of Peholeum reservoirs already discovered provided such wells are not completed as producing wells; facilities used solely for Exploration Operations, including access roads, where applicable, and purchased geological and geophysical information; service costs allotted to the Exploration Operations on an equitable basis; General and Administrative Experrses allotted to Exploration Opetations based on the percentage share of projected budget expenditure which will be adjusted to actual expenditure at the end ofeach year.
P^ce 62 of 97 2.3 DEVELOPMENTDGENDITURE Development Expenditure shall consist of expenditure ilcurred in Development Operations, including but not limited to expenditure on: a) b) c) d) drilling wells which are completed as producing wells and drilling wells for purposes of producing a Petroleum reservoir already discovered, whether these wells are dry or producing; completing wells by way of installation of casing or equipment or otherwise after a well has been drilled for the purpose of bringing such well into use as a producing well; intangible drilling costs such as labor, consumable material and services having no salvage value which arc incurred in drilling and deepening of wells for producing purposes; field facilities such as pipelines, flow lines, production and ueatment units, wellhead equipment, subsurface equipment, enhanced recovery systems, offshore platforms, Petroleum storage facilities and access roads lor production activities; engineering and design studies for lield facilities; service costs allotted to Development Operations on an equitable basis; e) f) g) General and Administrative Expenses allotted to Development Operations based on the percentage Fojected budget expendihre which will be adjusted to actual expenditue as the end of the year.
2.4 PRODUCTIONEXPEI\IDITURE Production Expenditure shall consist of but not limited to expenditure incurred in Petroleum Operations after the Date of Commenccment of Commercial Production, such expenditure being other than Exploration Expenditure, Development Expenditure, General and Administrative Expenses and Servicc Costs.
The balance of General and Administrative Expenses and Service Costs not allotted to Exploration Operations or to Development Operations under Section 2.2 and 2.3 shall be allotted to Production Expenditure.
2.5 SERVICE COSTS 2.5.1 Service Costs shall consist of but not be limited to direct and indirect expenditure incurred in support of Petroleum Operations, including the construction or installation of warehouses, piers, marine vessels, vehicles, motorized rolling equipment, aircraft, fire security stations, workshops, water and sewage plants, power \ Page 63 of97 rl plants, housing community and recreational facilities and fumiture, tools and equipment used in such construction or installation.
', a', Service Costs in any Calendar Year shall include the total costs incurred in such year to purchase and construct or install such facilities as well as the annual costs of maintaining and operating such facilities.

2.5.3 Service Costs will be regularly allotted on an equitable basis to Exploration Expenditure.

Development Expenditure and Production Expenditure.
2,6 GENERAL AND ADMIMSTRATIVE EXPENSES General and Administrative Expenses shall consist of: 2.6.1 main ofEce, field and general administrative costs, in the Republic of Sierra Leone, includirlg but not limited to supervisory, accounting and employee rt lations services; 2.6.2 An overhead charge for the .ictual cost of services rendered outside the Republic of Siena Letrrre by Licensee and its Affiliates for managing Petroleum Operations and for staff advice and assistance, including but not limited to financial, legal, accounting and employee relations services.
2.6.3 General and Administrative Expenses will be regularly allotted as specified in subsections 2.?

(I), 2.3 (e) arrd 2.4 to Exploration Expenditure, Development Expenditure and Production Expenditure.
SECTION 3 3.1 COSTS NOT ALLOWABLE TJNDERTHE LICENCE The following costs arrd expenses shall not be recoverable or allowable (whether directly as such or indirectly as part ofany other charges or expense) under the Licence: (a) commission paid to intermediaries by Licensee; (b) costs and charges incurred before the Effective Date including costs in respect ofpreparation, signature or ratification of this Licence; N'' PaE.. (A oI97 (c) expenditures in respect of any financial transaction to negotiate, float or otherwise obtain or secure funds for Petroleum Operations including, but not limited to, interest, commission, brokerage and fees related to such transactions, as well as exchange losses on loans or other financing, whether between Affrliates or otherwise; (d) expenditures incurred in obtaining, fumishing and maintaining the guarantees required under the Contract and any other amounts spent on indemnities with regard to non-fultlllment of contractual obligations; (e) attomey's fees and other costs ancl charges in connection with arbitration proceedings and sole expert determ ination pursuant to the Contract; (f) (g) (h) (i) 0) (k) (D (m) (n) (o) amounts paid with respect to non-fulfillment of contractual obligations; costs incurred as a result of failurc to insure where insurance is required pursuant to the Contract, or of failure to follow procedures laid down by an insurance policy or where the Licensee has elected to self-insure, or has under-insured; financing cost ofinventory and loss on disposal of inventory Costs which are not adequately supported and documented.
any bonus payments made by the Licensee except performance incentive bonuses paid to drilling contractors and services companies; any payrnents made to the State for failure to fulfill the minimum Exploration work obligations pursuant to Article 6 of the Contract; any fines and sanctions incurred for infringing the laws and regulations of Sierra Leone; any donation to the State carried out by Licensee unless otherwise agreed; the State's audit and inspection expenses incurred as a result of the absence of original documents in the Licensee's offices in Siena Leone; costs related to the assignment fronr the Licensee to any of its Affiliates or other Persons.
(p) petroleum marketing costs or costs of transporting petroleum beyond the Delivery Point; (O cost of arbitration under the Licence or dispute settlement by any independent expert under the terms ofthe Licence; (r) fines and penalties imposed by a competent Court oflaw; N. Page 65 of97 (s) costs incurred as a result of gr(,ss negligence or willful misconduct chargeable to Licensee or the Operator under the terms of the Licence.

.
.

.. 3,2 ALLOWABLE AI{D DEDUCTIBILE The costs and expenses set forth herein shall be for the purpose of determining allowable or non-allowable costs and expenses only and shall have no bearing on Licensee's eligibility or otherwise for deductions in computing Licensee's net income from Petroleum Operations for income tax purposes under the Licence.
3,3 CREDITS UNDER THE LICENCE The net proceeds of the following transactions will be credited to the accounts under the Licence: a) b) c) d) the net proceeds of any insurance or claim in connection with Petroleum Operations or any assets charged to the accounts under the Licence when such operations or assets were insured and the premiums charges to the accounts under the Licence; revenue received from third parties lor the use of property or assets charged to the accounts under this Licence; any adjustrnent from the suppliers or manufacturers or their agents in connection with a defective equipnrent or material the cost of which was previously charged to the account under the Licence; the proceeds received for inventory materials previously charged to the account under the Licence and subsequently exported from the Republic ofSierra Leone or transferred or sold to third parties without being used in the Petroleum Operations; 3.4 DUPLICATION OF CHARGES AND CREDITS Notwithstanding any provision to the contrary in this Annex, it is the intention that there shall be no duplication of charges or credits irt the accounts under the Licence.
N. Page 66 of97 MATERIAL 4.I VALUE OF MATERIAL CHARGED TO THE ACCOTJNTS TJNDER THE LICENCE Material purchased, leased or rented by Licensee lbr use in Petroleum Operations shall be valued at the actual net cost incurred by Licensee.
The net cost shall include invoice price less trade and cash discounts, ifany, purchase and procurement fees plus freight and forwarding charges between point of supply and point of shipment, freight to port of destination, insurance, taxes, customs duties, consular fees, other items chargeable against imported material, and any other related costs actually paid.

4,2 VALUE OF MATERIAL PURCHASED FROM AN AFFILIATE Licensee shall notifo the Director General of any goods supplied by an Affiliate of Licensee.
Material purchased from Affiliate of l.icensee shall be charged at the prices specified in Sections 4.2.1, 4.2.2 and 4.2.3.

4.2.1 New Material (Condition "A") New material shall be classified as Condition "A".

Such material shall be valued at the prevailing market price, plus expenses incuned in procuring such new materials, and in moving such materials to the locations where the material shall be used.
4.2.2 Used Material (Condition "B") Used material shall be classified as Condition 'B" provided that it is in sound and serviceable condition and is suitable for reuse rr ithout reconditioning.

Such materia!

shall be valued at not more than seventy five perrent (75%) of the current price of new matedal valued according to Section 4.2.1 above.
4.2.3 Used Material (Condition "C") Used material which is serviceable for original f'unction as good second hand material after reconditioning and cannot be classified as Condition "B" shall be classified as Condition "C".

Such material shall be valued at not more than fifty percent (50%) of the current price of new material valued according to Section 4.2.1 above.
The cost of reconditioning shall be charged to the reconditioned material provided that the value of such Condition "C" material plus the cost of recorrditioning does not exceed the value of Condition "B" material.

4,3 CLASSIFICATION OF MATERIALS Material costs shall be charged to the respective Exploration Expenditure, Development Expenditure, Operating Expenthture accounts at the time the material is acquired and on N Page 61 ol97 ?/ the basis of the intended use of the material.
Should such material subsequently be used other than as intended, the relevant charge will be transferred to the appropriate account.

4,4 DISPOSAL OF MATERIALS Sales of property shall be recorded at the net amount collected by the Licensee from the purchaser.

4.5 WARRANTY OF MATERIALS ln the case of defective material or equipment, an1 adjustment received by Licensee from the suppliers or manufacturers of such materials or their agents will be credited to the accounts under the Licence.
4,6 CONTROLLABLEMATERIALS 4.6.1 The Licensee shall control the acquisition, location, storage and disposition of materials wlrich are subject to accounting record control, physical inventorr and adjustment for overages and shortages (hereinafter referr.

cl to as Controllable Material).

4.6.2 Licensee shall conduct one physical inventory of the Controllable Material each Calendar Year which shall be completed prior to the end of the year.
4.6.3 The gain or loss resulting from the physical inventory shall be reflected in the stock records of Controllable Materials.

The Licensee shall compile a reconciliation of the inventory with a reasonable explanation for such gains or losses.

Failure on the part of the Director General to object to Licensee's reconciliation withi-n thirty (30) days of compilation of said reconciliation shall be regarded as approval by the Director General.
PRODUCTION STATEMENT SECTION 5 5.1 Subsequent to the Date of Commencement of Commercial Production from the Licence Are4 Licensee shall submit a monthly Production Statement to the Director General showing the following information for each Developmcnt and Production Area as appropriate: a) b) c) \ the quantity ofCrude Oil produced and saved ; the quantity ofNatural Gas produced and saved; the quantities of Pefioleum used for the purpose of conducting drilling and Production Operations, pumping to tield storage and re-injection; Page 68 of97 rl d) e) 0 (a) the quantities ofNatural Gas flared: the size of Petroleum stocks held at the begindng of the Month; the size of Petroleum stocks held at the end of the Month.
Such other particulars as the Dircctor General may from time to time dhect 5.2 The Production Statement of each Calendar Mr lth shall be submitled not later than ten (10) days after the end of such Month.

6.1 VALUEOF'PRODUCTIONSTATEMENT SECTION 6 6.1.1 Licensee shall prepare a statement providing calculations of the value of Crude Oil produced and saved during each Quarter based on the Market Price established under the Licence.
Such Statement shall be submitted to the Director General not later than thirty (30) days following the determination, notification and acceptance of the World Market Price to the Director General according to the Licence.

Report should also include the name and address of any person to whom any Petrolcum has been supplied by the Licensee, the quantity so supplied , the price thereof or other consideration thereof and the place to which the Petroleum was conveyed pusuant to the agreement for such supply.
COST STATEMENT 6,2 Licensee shall prepare with respect to each Quarter, a Cost Statement containing the following information: a) b) c) Total Petroleum Costs in previous (luarters, ifany; Petroleum Costs for the Quarter in (luestion; Total Petroleum Costs as ofthe end ofthe Quarter in question (subsection 7.1 (a) plus subsection 7.1 (b)).

Petroleum Costs for Exploration, Development and Production Operations as detailed above shall be separately identified for each Development and Production Area.
Petroleum Costs for Exploration Operations not directly attributable to a specific Development Area shall be shown separately.

\ Page 69 of97 rl 6.3 The Cost Statement of each Quarter shall be sut,mitted to the Director General no later than forty-five (45) days after the end of such Quarter.
STATEMENT OF EXPENDITUR-ES AND RECEIPTS SECTION 7 7,1 Subsequent to the Date of Commencement of Commercial Production Aom the Licence Area, Licensee shall prepare with respect to each Quarter a Statement of Expenditures and Receipts.

The Statement will distinguish between Exploration Expenditure and Development Expenditure and Production Expenditure and will identifr major items of expenditure within these categories.
The statement \irill show the following: a) b) c) d) actual expenditures and receipts for the Quarter in question; cumulative expenditure and receipts for the budget year in quesrion; latest forecast of cumulative expen(liues at the year end; and variations between budget forecast and latest forecast and explanations therefore.
7.2 The Statement ofExpenditures and Receipts of each Calendar Quarter shall be submitted to the Director General not later than forty-fi ve (45) days after the end ofsuch Quarter for provisional approval by the Director General.

FINAL END-OF-YEAR STATEMENT SECTION 8 8.1 The Licensee will prepare a Final End-of-Year Statement.
The Statement will contain information as provided in the Production Statement, \'alue of Production Statements, Cost Statement and Statements of Expenditures and Receipts, as appropriate.

The Final End-of- year Statement of each Calendar Year shall be submitted to the Diector General within nhety (90) days of the end of such Calendar Year.

BUDGET STATEMENT SECTION 9 9.1 The Licensee shall prepare an annual budget Stirtement.
This witl distinguish between Exploration Expenditure, Development Expenditure and Production Expenditure and will show the following: a) b) \ forecast Expenditures and Receipts for the budget year under the Licence; cumulative Expenditures and Receipts to the end ofsaid budget year, and PaBe 10 ol97 rl c) the most important individual items of Exploration, Development and Production Expenditures for said budget year.
9.2 The Budget may include a budget line or lines lbr unforeseen expenditures which, however, shall not exceed ten percent (10%) of the total budgetary expenditure.

9.3 The Budget Statement shall be submitted to the Director General with respect to each budget year no less than ninety (90) days before the star't of such year except in the case ofthe first year of the Licence when the Budget Statement shull be submitted within sixty (60) days of the Effective Date.
9.4 Where Licensee foresees that during the budget period expenditures have to be made in excess of the ten percent (10%) pursuant to Section 10.2 hereof, Licensee shall submit a revision of the budget to the Director General.
SECTION TO LONG RANGE PLAN AND FORECAST 10.1 Licensee shall prepare and submit to the Directr:r General the following: During Exploration Period, an Exploration Plan lor each year commencing as of the Effective Date which shall contain the following information: i) Estimated Exploration Costs showing outlays for each of the years or the number ofyears agreed and covered by the Plan.
iD Details ofseismic operations for each such year, iiD Details of drilling activities planned for each such year; iv) Details of inftastructure utilization and requirements.

10.2 The Exploration Plan shall be revised on each anniversary of the Effective Date.
Licensee shall prepare and submit to the Director General the first Exploration Plan for the Initial Exploration Period of two (2) years within sixty (60) days of the Effective Date and thereafter shall prepare and submit to The Director General no later than forty-frve (45) days before each anniversary of the Effective Date a revised Exploration Plan.
a) In the event of a Development Plan being approved, the Licensee shall prepare a Development Forecast for each calendar year of the Development Period, which shall contain the following information: i) iD forecast of the capital expenditure portions of Development and Production expenditures for each Calendar Year of the Development Period; forecast ofoperating costs lirr each Calendar Year; \'.
PaBe 7l of 91 r/ iiD forecast ofPetroleum production for each Calendar year; iv) description of main technologies employed; aad b) The Development forecast shall be revised at the begiruring of each Calendar Year commencing as of the second year of the first Development forecast.
Licensee shall prepare and submit to the Director General the first Development forecast within one hundred and twenty (120) days of the date when the first Development Plan is approved by the Director General no later than forty-five t15) days before each Calendar Year commencing as ofthe second year ofthe first Development forecast.
I().3 CHANGES OF PLAN AND FORECAST It is recognized by Licensee and The Director Gerreral that the details of the Exploration Plan and Development forecast may require changes in the light of existing circumstances and nothing herein contained shall limit the flexibility to make such changes.

Consistent with the foregoing the said Plan and Forecast may be revised annually.
N Page 72 of 97 r FORM OF GUARANTEE ANND( 3 1. dated In consideration of the Govemment of Sierra Leone represented by the Director General of the Petroleum Directorate (hereinafter referred to as "the State") having granted a Petroleum Licence for the block (trereinafter referred to as "Licence", which expression shall include all the terms, and amendments agreed to between the State and the Licensee, thereto), with M/s having its (hereinaftcr refened to as "Licensee", which registered office at expression unless repugnant to the context or meaning thereof include all its successors, administmtors, executors and assigns), and the State have agreed that the Licensee shall furnish to the State, a bank guarantee (hereinafter referred to as "Guarantee") towards its minimum financial obligations as provided in the Contract for US$(xxx) for the performance of its obligations under the Licence.
2.
We name ofthe Bank) registered under the Law of (in figures) and (US$ -_ and having its registered office at (hereinalier referred to as "the Bank", which expression shall unless repugnant to the context or meaning thereof includes all its successors, administrators, executors and assignsl do hereby guarantee and undertake 1o pay to the State, immediately on the first demand in writing, any/all money(s) to the extent of US$ in words) without any demur, reservation, contest or protest and/or without any reference to the Licensee.
Any such demand made by the State on the Bank by serving a written notice shall be conclusive and binding, without any proof, on the Bank as regards the amount due and payable, notwithstanding any dispute(s) pending before any court, tribunal, arbitrator, sole expert, conciliator or any other authority and/or any other matter or thing whatsoever, as liability under these presents being absolute and unequivocal.
We agree that the Guarantee herein contained shall be irrevocable and shall continue to be enforceable until it is discharged by the State in writing.

This Guarantee shall not be determined, discharged or affected by the liquidation, winding up, dissolution or insolvency of the Licensee and shall remain valid, binding and operative against the Bank.

3.
3.

The amount of this Guarantee may be reduced annually by the United States Dollar arnount(s) specified as having been spent by Contractor on the Work Programme during [Initial Phase] of the Exploration Period.

Such reduction will take place when the Bank receives such notice in writing in a letter from the Director General .
Such notice will be accepted as conclusive evidence that the work has been completed and the amount will be reduced as specified within five (5) days of the Bank receiving such notice from the Director General.
4 The Bank also agrees that the State at its option shall be entitled to enforce this Guarantee against the Bank as a principal debtor, in the first instance, without proceeding against the Licensee and notwithstanding any security or other guarantee that the State may have in relation to the Licensee's liabilities.

N Page 73 of9?

5.

6 7.

8.
The Bank further agrees that the State shall have fi:llest liberty without our consent and without affecting in any manner our obligations hereunder to vary any of the terms and conditions of the said Contract or to extend time of performance by the said Licensee from time to time or to postpone for any time or liom time to time exercise of any of the powers vested in the State against the said Licensee and to forebear or enforce any of the terms and conditions relating to the said Contract and we shall not be relieved from our liability by reason of any such variation, or extension being granted to the said Licensee or for any forbearance, act or omission on the part ofthe State or any indulgence by the State to the said Licensee or any such matter or thing whatsoever which under the law relating to sureties would, but for this provision, have effect ofso relieving us.
The Bank further agree that the Guarantee herein contained shall remain in full force during the period that is taken for the perfonnance of the Licence and all dues of the state under or by virtue of this Licence have been fully paid and its claim satisfied or discharged or till the State discharges this Guarantee in writing, whichever is earlier.

This Guarantee shall not be discharged by any change in our constitution, or in the constitution of the Licensee.
The Bank confirms that this Guarantee has been issued with observance of appropriate laws of the country ofissue.

9.

The Bank also agree that this guarantee shall be govemed and construed in accordance with [Siena Leone Laws] and subject to the exclusive jurisdiction of Sierra Leone courts 10.

Notwithstanding an1'thing contained herein above.


our liabilities under this Guarantee is limited to US$ _(in (in words) and our frgures) US$ Guarantee shall remain in force up to and including sixty (60) days after the expiry date/extended date.

Any claim under this Guarantee must be received before the expiry of sixty (60) days after the expiry date, or before the expiry ofsixty (60) days ftom the extended date if any.
If no such claim has been received by us within sixty (60) days after the said date/extended date the Petroleum Directorate's right under this guarantee will cease.

However, if such a claim has been received by us within and up to sixty (60) days after the said date/extended date, all the Petroleum Directorate's 's rights under this Guarantee shall be valid and shall not ccase until we have satisfied that claim.
day of In witness whereof, the Bank through its authorized offieers has set its hand and stamp on this was 200_ in and hereto duly aflixed by_ accordance with its bye-laws and this Guarantee was duly siped I he seal of day of 200 al this as required by the said bye-laws.
President & Director Pagc74 of97 Secretary Witness: N ANND( 4 FISCAL TERMS SECTION 1 INTERPRETATION 1.1 In this Annex 4, unless the context requires otheru ise- 1.2 1.3 1.4 "adjusted cost base" ofan asset has the meaning given in section 2 of the IT Act, but is determined without indexation under section 58(7) of that Act; "arrangement" has the meaning given in section 95 of the IT Act; "associate" has the meaning given in section 2 of the IT Act; "Commissioner-General of the NRA" means the Commissioner-General appointed under the National Revenue Authority Act, 2002; 1.5 "debt claim" and"debt obligation" have the meanings given in section 2 ofthe IT Act; 1.6 1.7 1.8 1.9 "derivative instrument" has the meaning prescribed by regulations and, in the absence ofregulations, takes its meaning from generally accepted accounting principles; "Petroleum Producertt-means a person engaged in petroleum production activities under a petroleum licenc "exploration operations"-with respect to a petroleum right, means "exploration" within the meaning given in section I of the Act; "excluded expenditure" me:urs - ia addition to unallowable costs under Arurex 2(a) income tax and PRRT;(b) bribes and expenditure incurred in corrupt practices;(c) interest, penalties ard fines payable to a government or a political subdivision of a Government of any country for breach of any law or subsidiary legislation; and(d)expenditure incurred as a consequence of breach of an Licence Agreement; l.l0 "financial cost" and "financial gaitr" have the meanings given in section 35 of the IT Act; 1.11 afiscal stability clause" refers to a clause in a Licence Agreement that wanants that the fiscal regime applying to a contracting party will continue to apply or not be altered to the detriment of the party; 1.12 "foreign currency instrument" has the meaning prescribed by regulations and, in the absence ofregulations, takes its meaning from generally accepted accounting principles; \.
Page ?5 of97 1.13 "generally accepted accounting principles" means the Intemational Financial Reporting Standards; 1.14 "llRA" means the National Revenue Authority established under the National Revenue Authority Act, 2002; 1.15 "relevant financial cost" and "relevant financial gain" mean-(a)a financial cost or a financial gain, respectively, with respect to a derivative or foreign exchange instrumenq or@) a loss or gain, respectively, with respect to a debt claim or debt obligation denominated in a currency other than that in which the person accounts for the purposes of this Act; 1.16 "relevant Ministry" and ttrelevant Minislslt'-(a) mean-with respect to petroleum, the Ministry and Minister responsible for management of petroleum matters; and(b) where there is no current Ministry or Minister, includes-(ii) with respect to petoleum, the directorate or agency and the person appointed to oversee the administration of the Act; l.l7 "revenue" has the meaning in section 2 ofthe National Revenue Authorily Act,2002; 1.18 "revenue law" means a law refened to in thc Schedule to the National Revenue Authority Act, 2002 1.19 "separate petroleum operation" has the meaning given in section 5; 1.20 "service fee" has the meaning given in section I l7 of the IT Act; 1.21 "underlying ownership or control" has the meaning given in section 2 of the IT Act; and "year of assessment" has the meaning given in sections 45,46 and 47 of the IT Act.
SECTION 2 ROYALTIES 2.1 Royalties are payable by the holder ofa petroleum right in respect of petroleum prcduced and saved pursuant to the righl.

2.2 2.3 2.4 2.5 Royalties are calculated by applyrng ttre relevant rates set out in paragraph I of the Second Schedule to the market value of the petroleum produced and saved as determined under paragraph 2 ofthe Second Schedule.
Royalties are payable at the time prescribed in paragraph 3 of the Second Schedule and in accordance with the procedure outlined in Annex 2 this Licence Agreement.

This section and the provisions referred to in it are subject to the State's right to receive royalties in kind pursuant to section 107 of the Act.
Assessment of Royalties N Page16 of97 (a) A person liable to pay royalties under this Act must, at the time the royalties are payable, file with the Commissioner-General of the NRA a retum of royalties and make payment.
(b) A retum filed under subsection 2.5 (a) must be in the manner and form prescribed specirying- i) iD the volume ofpetroleum liable for royalties; the market value of the petroleum calculated in accordance with Part I of the Second Schedule; iiD the amount ofroyalties for which the person is liable; any iv) any other information that the Commissioner-General may prescribe.
2.6 Subject to this section, the provisions of Part XVII of the IT Act (assessments) apply, with any necessary adaptations, to a retum filed under subsection (2.1).

In particular, a return filed under subsection 2.5 is- (a) treated as a self-assessment; but (b) subject to sections 102 (eopardy assessment) and 103 (amended assessment) of the IT Act.
SECTION 3 INCOME TAX PRTNCPTFS OF TAXATION 3.1 5.2 3.3 A person conducting petroler.rm operations is sub.ject to income tax with respect to those operations under the IT Act, but as modified by this Annex.

To the extent there is no modification, the standard rules in the IT Act applr,.

The provisions of the IT Act apply to the assessment and payment of income tax with respect to petroleum operations.
Income tax payable with respect to petroleum operations for a year of assessment is calculated by applyrng the rate set out in Part lt of the First Schedule to a person's chargeable income from petroleum operations tbr the year.

If the person has other chargeable income, that income is charged at the appropriate rate under the IT Act.
3.4 For the purposes of calculating a person's chargeable income from petroleum operations- (a) each sepamte petroleum operation is treated as an independent business and the percon must prepzlre accounts for that business separate from any othet activity of the person; and \ Page 11 ol n 7-/ (b) the person must calculate chargeable inconre, loss and income tax liability for the business independently for each year of assessment.
(c) Section 95 ofthe IT Act (arm's length standard) applies- i) iD to arrangements between a separate petroleum operation and other activities of the person conducting the petroleum operation (including other petroleum operations or refining or other processing operations of the person); a:rd as though the arrangements were conducted between associated persons.
3.5 3.6 In accordance with subsection 1.3, the transfer ofan asset to or fiom a separate petroleum operation is treated as an acquisition or disposal ol the asset, as the case requires.

Where two or more percons hold a petroleum right, they must caiculate their chargeable income from petroleum operations with respect to the right separately, but do so as though they were associated persons.

As a result, section 95 of the IT Act (arm's length standard) applies to a[angements between the persons.
SECTION 4 INCOME TAX SEPARATE PE'TROLEUM OPERATIONS 4.1 4.2 Subject to subsection 4.2 peholeum operations pertaining to each petroleum right constitute a separate petroleum operation.
The following nrles apply following an approval of commerciality within a petroleum licence area: (a) peholeum operations conducted with respect to a petroleum right to the date of approval and petroleum operations conducted with respect to the approved discovery area after that date are treated as conducted with respect to the same separate petroleum operation; and O) from the date of approval, petroleum operations conducted with respect to the petroleum dght that are not in respect ofthe approved production area are treated as a new separate petroleum operation.
4.3 Subsection (4.4) applies where- (a) there is an approval of commerciality with respect to an approved discovery area within a petroletrm licence area (whether or not there are prior approved discovery areas within the licence area); and N Pag.78 of97 (b) subsequently, but before any further approval of commerciality within the petroleum licence area, the holder ofthe petroleum licence relinquishes all of the licence area that is not subject to an approval of commerciality (whether the approval refened to in paragraph (a) or an earlier approval).
4.4 Where this subsection applies, petroleum operations conducted with respect to the relinquished area referred to in subsection (l .i)(b) from the date of approval of commerciality are treated as conducted with respect to the approved area referred to in subsection (4.3)(a), and so are ffeated as conducted with respect to the same separate petroleum operation.
4.5 Regulations may prescribe circumstances in r,r hich and extent to which petroleum operations conducted with respect to a pipeline permit are treated as conducted with respect to the same separate petroleum operation as that conducted with respect to an approved discovery area serviced by the pipeline.

In particular, the regulations may apportion pipeline costs between petroleum operations conducted with respect to more than one approved discovery area.
4.6 In this section- (a) @) "pipeline permit" means a permit granted under section 76 of the Act; and "reconnaissance perrnit" has the mganing given ir section 2 of the Act.
SECTION 5 INCOME TAX INCOME FROM PE'TROLEIA4 OPERATIONS 5.1 Subject to subsection 5.2, in calculating a persolr's income ftom a separate petroleum operation for a year of assessment, include the following: (a) the market value of petroleum produced and saved from the licence area that is disposed of or ffeated as disposed of during the year; O) compensation received, whether under a policy of insurance or otherwise, in respect ofloss or destruction of petroleum from the licence area; (c) amounts received i:r respect ofthe sale of information pertainilg to the operations or peholeum reserves; (d) gains from the assignment or other disposal of an interest in the petroleum right with respect to which the operation is conducted; \ Page 79 of 91 r/ (e) (D amounts required to be included under section 10 in respect of a positive balance in a decommissioning fund; and any other amounts derived by the person during the year from or incidental to the operation that are included in calculating income under the IT Act.
5.2 The market value of petroleum is determined in accordance with paragraph 2 of the Second Schedule.
SECTION 6 INCOMX TAX DEDUCTIONS FROM PEIROLEUM OPERATIONS 6.1 Subject to this section, in calculating a person's chargeable income from a separate petroleum operation for a year of assessment, deduct the following: (a) area fees, rent and royalties paid by the person under this Act or the Act with respect to the petroleum right; (b) expenditure (other than financial costs) incurred in respect of the petroleum operation on the following, but only if it has been expensed in the person's financial accounts and that expensi-ng is in accordance with generally accepted accounting principles : i) iD expenditure on reconnaissance, appraisal and exploration operations; and expenditure in developing petroleum operations and inftastructure, including as may be prescribed by regulations; (c) capital allowances granted with respect to the petroleum operation and calculated in accordance with Part II of the Second Schedule; (d) contributions to and other expenses incr.rrred in respect of a decommissioning fund for the peholeum operation as required under the Licence Agreement or decommissioning plan approved by the Minister responsible for management of petroleum matters; (e) expenses incurred by the person in the course of reclamation, rehabilitation and closure of the petroleum operation, but only to the extent fi.rnds in the relevant decommissioning fund are not yet available or are inadequate; and \ Page 80 of 97 (0 subject to subsection (6.2), arny other amounts incurred by the person during the year directly in the course of the operarion that may be deducted under the provisions of the IT Act.
6.2 No deduction is allowed in calculating chargeable income from a separate petroleum operation- (a) under sections 37, 40,43 and 44 of the IT Act (b) for an amount unless- D ii) it is incurred in the acquisition or improvement of a valuable asset used in the operation; or it is incuned in providing services or facilities for the operation and the armount constitutes income of the recipient that has a soluce in Sierra Leone (see section 89 of the IT Act); (c) to the extent the amount does not compll' with section 95 of the IT Act (arm's length standard); (d) for a bonus payment referred to in section i; or (e) for excluded expenditure.
6.3 6.4 6.5 In calculating a person's chargeable income from a separate petroleum operation for a year of assessment, relevant financial costs incurred during the year may be deducted only to the extent that relevant financial gains are included in calculating the income.

This limitation is in addition to that provided in section 35 of the IT Act (deduction of interest).
Any excess financial cost for which a deduction is not available under subsection (6.3) is carried forward and treated as a financial cost incurred in the following year of assessment.

However, section 88 ofthe IT Act (change of control) applies to restrict the carry forward of that excess.
The following are treated as the cost of a depreciable asset for which capital allowances are gmnted with respect to a separate petroleum operation in accordance with Part II of the Second Schedule: (a) the adjwted cost base ofthe petroleum right; (b) expenditure incurred in respect of the pctroleum operation and referred to in subsection (6.lXb) that- N. Page 8l of97 /r/ D iD in accordance with generally accepted accounting principles, is capitalised in the person's financial accounts; and does not otherwise fall to be included in the cost base ofan asset; and (c) bonus payments made in respect ofthe grant ofthe petroleum right and referred to in section 5.
Regulations may make fi.rther provision with respect to the deduction of amounts in calculating income from petroleum operations.

In particular, where goods or services are supplied to a pe[oleum right holder by an associated person, regulations may limit the deduction for any amount incurred by the right holder to the no profit amount refened to subsection (6.8).
The no profit amount is the actual costs incurred by the associated person in the provision of the goods or services, but excludes any cost incurred in favour of another associated person.
6.6 6.7 6.8 SECTION 7 INCOME TAX LOSSES FROM PE IROLELIT\4 OPERATIONS 7.t Section 32(2)(b) of the IT Act applies to allowable losses of a person from a separate petroleum operation with the following modifications: (a) tax payable may be reduced to 15% ofthe tax that would be due iflosses were not carried forward; O) (c) losses are used in the order in which they are incurred; and losses from the separate petroleum operation may be deducted only in calculating future chargeable income from that operation and not chargeable income from any other petroleum operations or non-petroleum activities.
SECTION 9 INCOME TAX DECOMMISSIONINC FUNDS 9.1 Amounts accumulated in or withdrawn from a decommissioning fund to meet decommissioning expenditure are exempt from tax.
N L Page 82 of97 9.2 Subsection (9.3) applies where there is a positive balance in the relevant decommissioning fund at any of the following times: (a) after a person completes rehabilitation of a separate petroleum operation conducted by the person; or (b) at the time the person breaches an approved decommissioning plan 9.3 Where this subsection applies, the positive balance is included in calculating the chargeable income of the person from the separate petroleum operation for the year of assessment in which the event referred to in subsection (9.2) occurs.
Further, the person may be liable for PRRT with respect to the positive balance (see section 19).

SECTION 10 INCOME TAX MINIMUM TAX 10.1 Part V ofthe IT Act does not apply to petroleum operations.

SECTION II PETROLETIM RISOIIRCE RENT TAX PRRT) PEIROLELII\4 RESOURCE RENT TAX IMPOSED 11.1 Petroleum resource rent tax ("PRRT") is payable by a petoleum licence holder that has accumulated net receipts for a year of assessnrent from Petroleum Operations of a Petroleum License.
ll.2 The amount of PRRT payable under subsection (ll.l) is calculated by applying the rate specified in Part III of the Second Schedule to the accumulated net receipts for the year.

11.3 For the purposes ofall PRRT provisions, but subject to section 17, Petroleum Operations conducted with respect to a Petroleum License is treated as a Petroleum Operation separate from any other Petroleum License.
1 1.4 A petroleum licence holder becomes liable to PRITT with respect to a sep{uate Petroleum Operation from the point Petroleum Operations cornmence with respect to this Licence.

I 1.5 PRRT is imposed in addition to any other tax or charge, including income tax.
N Page 83 of97 ll.6 Where two or more Licensee's hold a petroleum right, each shall separately and individually calculate PRRT, file PRRT tax ret ums and pay to the Govemment their chargeable PRRT from Petroleum Operations with respect to their right, SECTION 12 PE'TROLETIM RESOURCE RENT TAX PRRT) ACCTIMULATED D(PENDITLIRE NET RECEIPTS AND ACCI.IMULATED NET 12.1 Accumulated net receipts of a separate Petroleum Operation for a year of assessment is the extent to which- (a) net receipts ofthe operation for the year; exceeds o) accumulated net expenditure for that operation for the previous year of assessment (if any) as increased by the uplift specified in Part III of the Second Schedule.
12.2 Accumulated net expenditure for a separate Petrolcum Operation for a year ofassessment is the extent to which- (a) net expenditure for the operation for the year (if any); plus O) accumulated net expenditure for that operation for the previous year of assessment (if any) as increased by the uptift specified in Part III of the Second Schedule; exceeds (c) net receipts ofthe operation for the year (it any) SECTION 13 PE-TROLELIM RESOURCE RENT TAX PRRT) NET RECEIPTS AND NET D(PENDITURE 13.1 Net receipts ofa separate Petroleum operation for a year of assessment are the extent to which- (a) gross receipts of the operation for the year: exceed O) deductible expenditure ofthe operation for the year N Page 84 of97 13,2 Net expenditure ofa separate Petroleum operation for a year of assessment is the extent to which- (a) (b) deductible expenditure ofthe operation for the year; exceeds gross receipts of the operation for the year.
SECTION 14 PE'TROLzuM RESOURCE RENT TAX (PRRI) GROSS RECEIPTS 14.1 Subject to this section, gross receipts of a separate Petroleum Operation for a year of assessment is the sum ofthe following gross amounts (without deduction): (a) gross amomts directly included in calculating income from the Petroleum Operation for the year, including service fees, amounts received from the disposal of petroleum and other trading stock and, with respect to a positive balance in a decommissioning fund; (b) gross positive amounts included in calculating income from the petroleum operation for the year as required by section5, including consideration received on the disposal of depreciable, business or other assets; and (c) interest and other financial gains, including an amount treated as interest income under the IT Act; and 14.2 Gross receips ofa separate Petroleum Operation does not include- (a) subject to section 18, consideration received for the transfer ofa petroleum right.
14.3 An amount - (a) determined in accordance with section 95 of the IT Act (arm's length standard); and (b) may be included in the gross receipts of a year of assessment when it is actually received during that year.
N Page 85 of97 SECTION U PE"TROLEUM RESOLIRCE RENT TAX (PRRT) DEDUCTIBLE DGENDITURE l5.l Subject to this section, the deductible expenditme ofa separate Petroleum Operation for a year of assessment is the sum of the following gro ss amounts : (a) gross amounts in respect ofthe Petroleum Operation that are directly deducted in calculating chargeable income for the year and where the amounts are referred to in section 7; (b) gross expenditure included during the 1'ear in &e adjusted cost base of a depreciable or business asset used in the Petroleum Operation; (c) other gross expenditure that enters into the calculation of a net amount that is included in calculating income from the Petroleum Operation for the year; (d) other gross expenditure that enters into the calculation ofa net amount (such as a loss) that is deductible in calculating chargeable income from the petroleum operation for the year where that amount is referred to in section 7; (e) (D (e) the amount of income tax payable with respect to the Petroleum Operation for the year as calculated under section 4; and with respect to the year of commencement of Petroleum Operations, any amount provided for in section 17; interest or other financial costs, including :rn amount treated as interest under the IT Act; (h) The States Canied lnterest paid by Licensee's i 15.2 The deductible expenditure ofa separate Petroleum Operation does not include- (a) amounts claimed as capital allowances, but not to limit a deduction under subsection 15.1(b); (b) subject to section 17, amounts included in the adjusted cost base ofa petroleum rignt; (c) bonus payments referred to in section 5; anJ (d) payments to acquire an interest in the profits, receipts or expenditures of the Petroleum operation and payments made with respect to such interests.
N Page 85 of97 15.3 Expenditure is not deductible expenditure to ttre extent it exceeds the requirements of section 95 of the IT Act (arm's length standard).

SECTION T6 PE'TROLELIM RESOTIRCE RENT TAX (PRRT) YEAR OF COMMENCEMTNT 16.l This section applies with respect to the year of assessment in which a person commences Petroleum Operations under a petroleum licence (as to which, see dehnition of "Petroleum Operations" in section 1).
It applies for the purposes of allowing a deduction with respect to exploration expenditure incurred since the Effective Date up to the year of assessment.

16.2 Subject to this section, the deduction allowed under section 15(1)(f) is equal to the amount by which- relevant deductible expenditure; exceeds G) (b) relevant gross receipts.
16.3 Relevant deductible expenditure means expendinx'e- (a) incurred by the person exclusively on exploration in the relevant licence area since the Effective Date and (b) ofa type referred to in section 15 (other than section 15 (l)(f)), presuming that the petroleum operation in question is that conducted under the petroleum licence prior to the cornmencement.
16.4 Relevant gross receipts means receipts- (a) o) derived by the person from exploration in the relevant licence area since the Effective Date; and of a type refened to in section 14, presurning that the petroleum operation in question is that conducted under the petroleum licence prior to the commencement.
16.5 No amount is deductible under section 15(1X0 unless the relevant deductible expenditure and relevant gross receipts have been audited and certihed as conect by the \ Page 87 of97 Commissioner-General of the NRA.

Regulations may prescribe a time limit lor the Commissioner-General for conducting the audit and certification.
SECTION 17 PETROLEUM RESOURCE RENT TAX PRRT) TRANSFER OF PETROLEUM RIGFITS l7.l This section applies where a person transfers an interest in a petoleum right during a year of assessment together with the person's interest in the separate Petroleum Operation conducted under that right.
17.2 For the purposes of calculating any PRRT payabte by the transferee, the transferee is teated as- (a) having the same accumulated net expenditure for the Petroleum Operation for the year of assessment preceding the transfer as the transferor had (if any); (b) incurring the same deductible expenditure for the Petroleum Operation during the year of assessment of the transfer and to the time of transfer as the tramferor did (if any); and (c) deriving the same gross receipts for the Petroleum Operation duri,ng the year of assessment ofthe transfer and to the time o I transfer as the transferor did (if any).
17.3 Where a person transfers only a part of an interest in a petroleum right, the amounts referred to in subsection (17.2) Ne apportioned according to the amount of the interest g^nsferred.

SECTION 18 PETROLELIM RESOLIRCE RENT TAX PRRI) DECOMMISSIONING FIIND POSITIVE BALANCE 18.1 ln the ckcumstances provided for in section 9, the positive balance in a decommissioning fund may be included in calculating the chargeable income of a person from a separate petroleum operation.
18.2 An inclusion referred to in subsecdon (18.1) is also included in gross receipts for the purposes of calculating PRRT (see section l4(lxd)).

N Pagc 88 of97 I r/ SECTION 19 PE'TROLEUM RESOURCE RENT TAX PRRT) INSTALLMENTS OF PRRT 19.1 Petroleum Producer must, at the time the producer would be liable to file an estimate of chargeable income under section 113 of the IT Act, file an estimate of PRRT due with respect to the same year of assessment.
19.2 An estimate filed under subsection (19.1) must be in the manner and form prescribed estimating- (a) gross receipts, deductible expenditure, net receipts, net expenditure, acclmulated net receipts and accumulated net expenditure for the year of assessment from the separate Petroleum Operation; O) accumulated net expenditure for that operation for the previous year of assessment (if any) as increased by any uplift available; (c) where the producer estimates accumulated net receipts for the year of assessment, the amount of PRRT payable with respect to those receipts; and (d) ary other information that the Commissioner-General may prescribe; 19.3 An Petroleum Producer must file an estimate undet subsection (19.1) inespective of whether any amount of PRRT is estimated as payable.
19.4 An Petroleum Producer that estimates PRRT as payable for a year of assessment under subsection (19.3) must pay that PRRT by quarterl.v instalment at the same time as income tax would be payable under section I l3 of the IT Act.

19.5 Subject to this section, the procedure in section I I 3 ofthe IT Act applies to estimates and payment of instalments under this section as though PRRT were income tax.
SECTION 20 PE'IROLEUM RESOURCE RENT TAX PRRT) ASSISSMINT OF PRRT 20.1 A Petroleum Producer must, at the time the producer would be liable to file a retum of income under section 97 of the IT Act, file a return of PRRT due with respect to the same year of assessment.
N t- Page 89 of97 20.2 A retum filed under subsection (20.1) must be in the manner and form prescribed speciffing- (a) gross receipts, deductible expenditure, nel receipts, net expenditue, accumulated net receipts and accumulated net expenditure for the year of assessment from the separate ,.. Petroleum Operation; (b) accumulated net expenditure for that operation for the previous year of assessment (if any) as increased by any uplift available; (c) where the producer has accumulated net receipts for the year of assessment, the amount of PRRT payable with respect to those receipts; and (d) any other information that the Commissioner-General may prescribe 20.3 A Petroleum Producer must file a retum under subsection (20.1) irrespective of whether any amount of PRRT is payable for the year of assessment.
20.4 A Petroleum Producer that estimates PRRT as payable for a year of assessment under subsection (20.3) must pay that PRRT Qess any instalments paid under section 19) at the time the retum is filed.

20.5 Subject to this section, the provisions of Part XVIII of the IT Act (assessments) apply with any necessary adaptations to a retum filed under subsection (20.1).
In particular, a retum filed under subsection (20.1) is- (a) treated as a self-assessment; but (b) subject to sections 102 (eopardy assessment) and 103 (amended assessment) of the IT Act.

SECTION 21 PE'TROLEIIM RESOTJRCE RENT TAX PRRT) PRRT TRANSITION 2l.l For the purposes of imposing PRRT, "relevant deductible expenditure" and "relevant gross receips" referred to in section 16 may include amounts incuned or derived in a year of assessment prior to the year of commencenrent.
Pagc 90 of97 'r/ SECTION 22 GENERAL PRINCIPLES OF ADMINISTRATION 22.1 Subject to the Act, this Annex is administered in accordance with the following rules and procedures of the IT Act: (a) tax avoidance (section 96 of the IT Act); O) (c) recovery of tax (section 106 to 112 ofthe I.t Act); refunds oftax (section 115 ofthe IT Act); (d) records and investigation powers (Part XVI ofthe IT Act); (e) objections and appeals @art XVII of the IT Act); (0 interest and penalties @art XVIII of the IT .
{ct); and (g) administration (Part XD( of the IT Act).

22.2 The nrles and procedures referred to in subsection 22.1 apply with any necessary adaptations and, in particular, as though amounts payable under this Act were income tax.

22.3 For the purposes of section 133 of the IT Act, the holder of a petroleum licence must maintain accounts and records for the Petroleum Operations in accordance with generally accepted accounting principles.
22.4 The Minister responsible for finance may, by statutory instrument, make regulations- (a) for matters authorised to be made or prescribed under this Annex 4 by regulation; (b) amending, repealing or replacing provisions of the First, Second or Third Schedules, but not in a way that is inconsistent with any other provision of this Annex 4; (c) for the better carrying into effect and interpreting the priaciples, purposes and provisions of this Annex; and (d) requiring petroleum right holders to provide such information as may be prescribed, whether on an isolated or periodic basis.
\ Pagc 9l of97 7' SECTION 23 BONUS PAYIvIENTS 23.1 The terms and conditions for grant, transfer or assignment of a petroleum licence may provide for the payment of one or more bonuses llom the licensee, transferee or assignee, as the case requires.

23.2 A bonus under subsection (23.1) may be a lump sum or dependent on or calculated by reference to specific production targets.

23.3 Bonus payments are not deductible for income tax or PRRT purposes.
However, capital allowances are granted with respect to bonus payments, but for income tax purposes only.

(See sections 7 and l6).

23.4 ln this section, "bonus payment" does not include a fee prescribed by the Act or regulations made r.urder those Acts.
SECTION 24 ASSISIANCE OF OFFICERS OF PTIBLIC BODIES I 24.1 For the purposes of this Annex, the Commissioner-General of the NRA may request the officers of a public body, including bodies that provide security, to assist or protect the NRA and its officers ia the proper performance of thet firnctions.

Regarding those functions, see section 12 ofthe National Revenue Authority Act,2002.

24.2 Within the limits of its authority and resources.
a public body that receives a request under subsection (24.1) must do its best to provide assistance.

243 Without limiting the scope of subsection (24.1), officers of the relevant Ministries must provide officers of the NRA with all necessary information and assistance, including for the proper assessment, audit and collection ofall amounts due under this Act.

24.4 An NRA oflicer authorised for the function in question must supervise assistance provided by a public officer.
24.5 Section 165 ofthe IT Act (secrecy) applies to a public officer providing assistance under this section with respect to all information and documents that, solely by reason of the assistance provided, come into the public officer's possession.

Pagc92 of91 'r/ SECTION 25 PROHIBITION ON DISPOSAL OF PE'TROLEIA4 25.1 This section applies where the holder of a petroleum right fails to pay any amount due under this Act, including income tax referred to in Division II ofPart III.
25.2 Where this section applies the Commissioner-General of the NRA may serve a notice on all holders of a petroleum right who fails to pay any amount due under this Acg establishing a lien under section 107 of the IT Act, in favour of the Commissioner General until the outstanding amouDt has been paid.

25.1 The Commissioner-General may enforce payment of the amount by issuing distress proceedings under section 109 of the IT Act against the petroleum referred to ia subsection 25.2.
25.4 Where by reason of this section a holder of a pctroleum right pays tax due by a joint holder of that right, the holder may recover any loss from thejoint holder as a debt due.

25.5 A person who without reasonable excuse fails to comply with a notice issued under (subsection 25.2) is treated as wilfirlly evading tax for the purposes of section 154 of the IT Act.
SECTION 26 PROVISION OF FINANCIAL FORECASTS 26.1 Each relevant licence holder must- (a) on each of the occasions referred to in subsection (26.2) urd, on each of those occasions, for each year of the projected life of the licence (including any potential for extension), prepare forecasts of- i) ii) amounts, sources, methods, terms and conditions of financing of operations under the licence; exploration, development and operating costs as well as additional capital costs ir:curred after the commencement of commercial production; iii) production volumes and expected conditions of sale, particularly with respect to price; iv) production or profit sharing arrangements, including expected distributions, the policy on which distributions are to be based and the order of priority between distributions and other payments (especially interest and repayment of debt); \ Page 93 of9?
rr' v) taxes and other revenues to become payable to the Govemment of Sierra Leone and the manner in which those amounts are calculated; and vi) any other information as the Minister responsible for finance may prescrib€.
O) use an appropriate template provided by the Minister responsible for finance in makiag the forecasts referred to in paragraph (a); and (c) have appointed, by written notification to the Minister responsible for finance and at all times, an officer- D iD of sufficient seniority to be able to access the information referred to in paragraph (a); and who is to liaise with the Ministry of Finance and Economic Development regarding matters prescribed by this section.
26.2 Forecasts under subsection (26.1)(a)- (a) must be prepared twice each year, stating the forecasts as at 30 March and 30 September; o) (c) in the case of 30 March forecasts, must be forwarded to the Minister responsible for finance by no later than 15 April of the same year; and in the case of 30 September forecasts.

must be forwarded to the Minister responsible for finance by no later than 15 October ofthe same yeiu.

26.1 Upon receiving forecasts under subsection (26.?1.
the Minister responsible for finance may, by notice in writing, required the licence holder to provide further and better particulars as to the forecasts.

The licence holder rnust provide those particulars within 7 days ofreceiving the notice.
26.4 If a relevant licence holder becomes aware of facts that make the most recent forecasts referred to in subsection (26.lXa) inaccurate in a material particular, then the licence holder must immediately notift the Minister responsible for finance and provide updated information.
26.5 A failure by a relevant licence holder to compll with the requirements of this section constitutes- (a) impeding the administration of this Act for the purposes of section 155 of the IT Act (applied by section 22 ofthis Annex); and N Pagc94 olYT / I !.

(b) a serious breach of the terms and conditions upon which the licence is granted and so constitutes grounds upon which the licence may be revoked (see section I 15 of the Act).
26.6 Information received r.mder this section- (a) O) may be used within the Ministry of Finance and Economic Development for revenue forecasting and public financial management purposes, but is otherwise subject to the requirements ol section 165 of the IT Act (secrecy), with any necessary adaptations.
26.7 In this section, "relevant licence holder" means the holder ofa petroleum licence FIRST SCHEDULE - - PE'TROLETIM PART I: ROYAITIES ROYALTY RATES l. (1) Subject to subparagraph (2), the royalty ratcs referred to in section 2 are: (a) for crude oil - l0%; and O) for natural gas - 5%.

(2) Samples ofpetoleum produced and saved for purposes of assay, analysis or other examinatlsl or testing are exempt from the payment of royalties.
However, royalties apply if a sample is sold or an1 economic benefit is derived from its disposal.

(3) ln this paragraph- "crude oil" and "natural gas" have the meanings given in section 2 ofthe Act; and "sample" includes petroleum used in the commission of facilities that are used directly in the same separate Petroleum Operation from which the petoleum is produced and saved.

MARI(ET VALUE OF PETROLEUM 2.


The market value of petroleum- (a) is determined in accordance with the method prescribed in the petroleum agleement, but N Page 95 of97 rr' (b) is not less than the sale value receivable in a transaction meeting the requirements of section 95 of the IT Act (arm's length standard) without discount, commission or deduction.
TIME FOR PAYMENT OF ROYALTIES 3 Royalties with respect to petroleum produced or saved during a calendar month are payable/receivable on or before the last day ofthe tbllowing calendar month.

PART II: INCOME TAX INCOME TAX RATE 4.

The income tax rate for petroleum operations is 30%o CAPITAI AILOWANCES 5 (l) All capital allowance expenditure incurrcd in respect of petroleum operations during a year of assessment is placed in a separare pool.
Capital allowances are granted with respect to each pool at the rates provided for in subparagraph (2).
(2) Capital allowances are $anted for expenditure pooled under subparagraph 5(1) for a year of assessment at the following rares: Year of Assessment ln which expenditure incuned Second Year Third Year Fourth Year Amount of Capital Allowance 40% of expenditure 20% of expenditure 2070 of expenditure 20Yo of e ture (3) Capital allowances granted with respect to a particular year ofassessment must be taken in that year and cannot be defened to a later year ofassessment.
(4) Where an asset for which capital allorvances has been granted under this paragraph is disposed of (or deemed to be disposed ofl during a year of assessment- (a) if the consideration received for the disposal exceeds the written down value of the asset, the excess is included in calculating chargeable income from the petroleum operations for the year; N Pate 96 of9?
(b) (c) if the written down value of the asset exceeds the consideration received for the disposal, an additional capital allowance is granted for the year in an amount equal to the excess; and the relevant pools referred to in subparagraph 5(1) are reduced by the written down value ofthe asset.
(5) In this paragraph- "capital allowance expenditure" means expenditure for which capital allowances are available, either under section 6 of this ,{nnex or section 39 of the IT Act; and "written down value" of an asset means rhe adjusted cost of the asset less all capital allowances granted with respect to expenditure included in that cost.
PART III: PE'IROLELIM RESOTIRCE RENT TAX PRRT) PETROLEUM RESOT]RCE RENT TAXRATE 6. achieved during the year of assessment a rate of return of twenty two percent (22%).
The rate of PRRT for a year of assessment is thirty (30%) subject to the Licensee having T]PLIFT FOR ACCUMULATED NET EXPENDITUITE '7 (1) The uplift referred to in section 12 to be applied to accumulated net expenditure for a previous year ofassessment is- (a) ir: the case of a period of Petroleum Operations during the current year of assessment - 22Y;o pt annum applied to the period provided the Licensee have achieved during the year of assessment a rate of return of twenty two percert(22Y1; arrd O) in any other case - nil.
(2) In this paragraph, "period ofPetroleum Opirations"- (a) means a period during which Petro leum Operations are conducted under a petroleum licence; O) includes the period between the approval of commerciality and the commencement of production activities.

\ PaEc 97 of 97 ,t!tr-_ hi,'i',0.1-ll.l,' lllt; Ul I\01 i,tuv tt ;'i .,.N3Y'lvlluvd