Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698083632279.pdf (Sierra Leone)
SIERRA LEONE PETROLEUM LICENCE AGREEMENT NrMA HOT"OTNGS (Sr) LTD. BLOCK 10A-10 Petroleum Licence --'--*a ',-frnulnua'''i't towen tttt t LlB?.4?. '

L TREETO\IN TABLE OF CONTE\TS ARTICLE 1 ARTICLE 1 .
INTERPRETATION 2 ARTICLE 2 - SCOPE OF THE LICENSE AND LICENSE AREA 3 I I g Z c 9 10 11 ARTICLE 3 - STATE PARTICIPATION ARTICLE4-LICENSETERM ARTICLE 5 - PERFORMANCE GUARANTEE ARTICLE 6 - MINIMUM ORATION PROGRAMME ARTICLE 7 -RELINQUISHMENT ARTICLE 8 -OBLIGATIONS AND RIGHTS OF LICENSEE ARTICLE 9- ANNUAL WORK ROGRAMME AND BUDGETS ARTICLE 1O - COMMERCIALITY 11 - PRODUCTION OF CRUD ,12 ARTICLE 12 - MEASUREMENT AND PRICING OF CRUDE OIL .I3 ARTICLE 13 - LICENSE FEES 14 ARTICLE 14 - FOREIGN EXCHANGE TRANSACTIONS I5 ARTICLE 15 - SPECIAL PROVISIONS FOR NATURAL GAS I6 ARTICLE 16 - DOMESTIC SUPPLY REOUIREMENTS (CRUDE OLL) 17 ARTICLE 17 - LICENSEE TO KEEP RECORDS ,I8 ARTICLE 18 - INFORMATION ANO CONFIDENTIALITY 19 ARTICLE 19 - MONITORING OF PETROLEUM OPERATIONS DONMENT AND PLUGGING OF WELLS 20 ARTICLE 20 - COMMENCEMENT AND AB 2I ARTICLE 2,I - ACCOUNTING AND AUDITING 22 ARTICLE 22 - PURCHASING AND PROCUREMENT 23 ARTICLE 23 - EMPLOYMENT AND TRAINING 24 ARTICLE 24 - IMPORT AND EXPORT 25 ARTICLE 25 - PROTECTION OF RIGHTS Pag.
I of98 N Page 4 9 11 12 13 't4 17 18 20 22 23 24 25 26 27 31 t2 33 35 36 37 39 40 41 42 rur 26 27 28 29 30 31 32 33 34 ARTICLE 26 - FORCE MAJUERE ARTICLE 27 - SOCIAL PROGRAMMES ARTICLE 28 - CONSULTATION, ARBITRATION AND INDEPENDENT EXPERT ARTICLE 29 - ASSIGNMENT ARTICLE 30 - BONUSES ARTICLE 31 - ADMINISTRATION OF CONTRACT ARTICLE 32 - IMPLEMENTATION OF LICENSE ARTICLE 33 - STABILITY OF CONTRACT ARTICLE 34 - NOTICE ANNEXES 1 2 3 4 ANNEX 1: LICENCE AREA AND MAP OF LICENSE AREA ANNEX 2: ACCOUNTING GUIDE ANNEX3: FORM OFGUARANTEE ANNEX4: FISCALTERMS 43 43 44 45 47 49 50 53 54 56 58 71 73 Pagc 2 of98 V %f{A- PE'IROLEUM (DGLORATION PR DU CTIoN) LICENCE o NO: 2O13/1OA-1O/O08 MADE: ......... OF ........2O1l LAID BEFORE PARLIAMENT: ......... .... 2073 COMING INTO FORCE: 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 20ft day of December 2011, hereby grants the following Petroleum Exploration and Production Licence to: Nima Holdings (SL) Ltd. a company incorporated in Sierra Leone on the 27s September 2011 with registration number C.F.924l2011, and with its registered address at 112 Pademba Road , Freetown Sierra Leone; (hereinafter referred to as "the Licensee").
CITATION AND COMMINCEMINT This Licence may be cited as the Petroleum @xploration and Production) Licence No: 2013/10A-10/008 for Block SL l0A-10 and shall come into force on this day of 2013.

WITNESSETH: I 2 3 4 \, All Petroleum existing in its natural state withiu Siena Leone is the property of the Republic ofSierra Leone and held in trust by the State.
The Licence Area that is the subject matter of this Petroleum Licence has been declared open for Petroleum Operations by the Director Ceneral, and the Govemment of Sierra Leone desires to encourage 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, technicLrl competence and professional skills necessary for carrying out the Petroleum Operati,,ns herein described, hereby accept the offer of this Petroleum Licence granted by the State for the Exploration, Development and Production ofthe Petroleum resources of the said area.
Page 3 of9t PARLIAM NT 1";3i.4;l ITOUJER Hli.L f;::10'lii'l *ez 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 Director General of the Petoleum Directorate, in exercise of the powers conferred upon him by executive order and all other powers in that behalf enabling him, hereby $ants to the Licensee, licence and liberty duriq the continuance of this Licence and subject to the provisions hereofto search for, explore, develop and produce pefoleum in the Licence Area refened to in Annex 1 of this Licence.
IT IS FIEREBY AGREED AND DECLARED AS FOLLOWS: ARTICLE 1 INTERPRE'TATION 1.1 In this Licence: 1.2 1.3 1.4 1.5 1.6 1.7 "The Act" means the Petroleum @xploratron and Production) Act 201 l; "Accounting Guide" means the accountrng guide which is attached hereto as Annex 2 and made a pa hereof; ttAffiliate" 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 fi-fty percent (50%) of the share capital or voting rights; b) which holds directly or indirectly more than fifty percent (50%) of the share capital or voting rights in a Plrty hereto; c) in which the share capital or votin5 rights are directly or indirectly and to an extent more than fifty percent (50%) held by a company or companies holding directly or indirectly more than fifty percent (50%) of the share capital or voting rights in a Party hereto; or d) which holds directly five percent (5%) or more of the share capital or voting rights in Licensee; "Appraisal Program" means a program carried out following a Discovery of Petroleum for the purpose of delineating tl.re accumulation of Petroleum to which that Discovery relates in terms of tJrickness and lateral extent and estimating the quantity of recoverable Petroleum therein; "Appraisal Well" means a well drilled for the purposes of an Appraisal Program; "Associated Gas" means Natural gas produced from a well in association with Crude Oil; Page 4 of98 \ Bgr 1.8 1.9 1.r0 1.11 t.t2 1.13 "Barrel' means a quantity or unit of Crude Oil equal to forty two (42) United States gallons at a temperatue of sixty (60) degrees Fahrenheit and at 14.65 psia pressure; "Block" means a Licence area as depicted on the reference map prepared by the Director General in accordance with the pr,rvisions of the Petroleum Act; "Business Day" means weekday i.e.
Monday to Friday; "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 pades; "Calendar Year" means the period of twelve (12) months of the Gregorian calendar, commencing on January I and ending on the succeeding December 31; "Commercial 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 relinquishment of such Development and Production Area; 1.15 "Contract Area" and "Licence Area" means the area covered by this Licence in which Licensee is auttrorized to explore for, develop and produce Petroleum, which is described in Arurex 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 pwsuant to this Licence; 1.16 "Contract Year" means a period of twelve (12) calendar months, commencing on the Effective Date or any anniversary thereof; 1.17 "Crude Oil" means hydrocarbons which are liquid at 14.65 psia presstue and sixty (60) degrees Fahrenheit and includes condensates and distillates obtained from Natural Gas; 1.18 "Date of Commencement of Commercial Production" means, in respect of each Development and Production Area, the date on which production of Petroleum under a progmm of regular production, lifting and sale commences; l.l9 "Date of Commercial Discovery" means the date of approval of the Development Plan; 1.20 "Default" means failure on the part of the l-icensee to (a) observe or perform any ofits duties or obligations under the Licence Pagc 5 of98 ee#- (b) comply with any court or arbitral order arising out of or il connection with the Licence or the enforcement thereof.
l,2l "Development" or t'Development Operations" means the preparation of a Development Plan, the building and installation of facilities for Production, and includes drilling of Development Wells, construction and installation of equipment, pipelines, facilities, plants anJ systems, in and outside the Licence Are4 which are required for achieving Production, treatment, fansport, storage and lifting of Petroleum, and preliminary Production and testing activities carried out prior to the Date of Commencement of Commercial Production, and includes all related planning and administrative work, and may also include the construction and ir:stallation of secondary and tertiary recovery systems; 1.22 "Development Costs" means Petroleum Costs incurred in Development Operations; 1,23 "Development and Production Area" neans that portion of the Licence Area reasonably determined by Licensee on the 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 unifomrly around the perimeter of such accumulation; 1.24 "Development Period" means in respecr of each Development and Production Area, the period from the Date of Conrmercial Discovery until the Date of Commencement of Commercial Production.
1.25 (Development Plant' means the plan for development of a Commercia!
Discovery prepared by Licensee; 1.26 "Development Well" means a well drilled 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 rvhere 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 management until the establishment of a Midstry and the appointment of a Minister with responsibility for petroleum matters; 1.28 "Discovery" means finding during 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 portion of the Licence Area, reasonably determined by Licensee on the basis of rhe available seismic and well data to cover the area extent of the geological stnr.iture in which a Discovery is made.
A Discovery Area may be modified at any tirne by Licensee if justifred on the basis Page 5 of9t N, .%., of new information, but may not be modilied after the date of completion of the Appraisal Program; 1.30 "Effective Datet'means the date on whrch this Licence comes into effect and, unless otherwise provided, shall be the date of ratification of this Licence by 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 ouL to determine whether a Discovery of Petroleum constitutes a Cornrnercial Discovery; 1.32 "Exploration Period" meals 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 ter-minate with respect to any Discovery Area on the Date of Commercial Discoverf in respect of such Discovery Area; 1.33 "Exploration Well" means a well drilled in 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 control 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, storm, flood, lightning or other adverse weather conditions, war, embargo, blockade, strike, riot or civil disorder which could hinder the performance 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 arr expatriate employee of Licensee, its Affiliates, or its Sub-contractors who is nor a citizen of Sierra Leone; 1.36 "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 Operatj()ns; Gross Production"; 1.31 "IT Act" means the Income Tax Act of 2000 and all amendments thereto; 1.38 "Licensee" means the person or persons to whom the Licence is granted, their successors and any person or persons ID 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; Page 7 of98 \ @- 1.39 "The Licence" means the right to explore for and produce hydrocarbons issued by the Director General Petroleum Directorate acting on behalf of the government of Sierra Leone, and includes the Annexes attached hereto; 1.40 "The Minister" means the same as defined in The Act; l.4l "Month" means a month of the Calendar Year; 1.42 "Natural Gas" means all hydrocarbons which are gaseous at 14.65 psia pressure and sixty (60) degrees Fahrenheit temperature and includes wet gas, dry gas and residue gas remaining after the extraction of liquid hydrocarbons from wet gas; 1,43 "Non-Associated Gas' means Natural Gas produced from a well other than in association with Crude Oil; 1.44 "Operator" means the same as defined in The Act; 1.45 "Participating Interest" means the undivided percentage interest of each Party in the rights and obligations derived from the Petroleum Licence Agreement.
1.46 "Party" means t}te State or Licensee, as thc case may be; 1.47 "Petroleum" means Crude Oil or Natural Gas or combination of both; 1.48 "Petroleum Costs" mears all expenditures made and costs incurred in the conduct of Petroleum Operations hereunder, determined in accordance with the Accounting Guide attached hereto as Annex 2; 1.49 "Petroleum Operations" means all activities, both in and outside Sierra Leone, relating to the Exploration for, Devclopment, Production, handling and transportation of Petroleum contemplated under this Licence and includes Exploration Operations, Development Operations and Production Operations and all activities ia connection therewith; 1.50 "Petroleum Product" means any product derived from Petroleum by any refiniag or other process; 1.51 ttProduction" or "Production Operationst' means activities not being Development Operations undertaken in order to extract, save, teat, measure, handle, store and kansport Petroleum to storage and,/or loading points and to carry out any type of primary and secorrdary operations, including recycling, recompression, maintenance of pressur( and water flooding and all related activities such as planning and administrative work and shall also include maintenance, repair and replacement of facilities, and well workovers, conducted after the Date of Commencement of Cornmercial Production of the respective Development and Production Area; 1.52 "Production Costs" means Petroleum Costs incurred in Production Operations; Page 8 of98 \ @>#- 1.53 "Quarter" means a quarter, commencing January l, April 1, July I or October 1; 1.54 "Remedy" means to make good, or nraking good, such Default including performing the obligation of Licensee under the Licence; 1.55 "Sierra Leone" means the territory of the Republic of Sierra Leone and includes the se4 seabed and subsoil, the Continenral Shelf, the exclusive economic zone and all other areas within the jurisdiction o l' Sierra Leone ; 1.56 "Specified Rate'means the rate which the Barclays Bank, London, certifies to be the London lnterbank offered rate (LIBOR) in the London Interbank Eurodollar market on thirty (30) day deposits, in effect on the last business day of the last respective preceding month, plus two and halfper cent (2.570); 1,57 "Standard Cubic Foot" or "SCF" means the quantity of gas that occupies one (1) cubic foot at 14.65 psia presswe and sixty (60) degrees Fahrenheit temperatwe; 1.58 "State" means the Government of the RepLrblic of Sierra Leone; 1.59 "Subcontractor" has the meaning assigrred to that term in the Petroleum Act; 1,60 "Work Program" Operations.
means the annual plan for the conduct of Petroleum ARTICLE 2 SCOPE OF TI{E LICENCE AND UCENCE AREA 2.1 This Licence provides for the Exploration lor and Development and Production of Petroleum in the Licence Area by Licensee 2.2 Nima Holdings (SL) Ltd. is hereby appointed Operator with One Hundred percent (100%) Participating Interest in th.- Licence.
2.3 Subject to t}re terms of this Licence, Operator shall be responsible for the execution of such Petroleum Operations as are requted by the provisions of this Licence and is hereby appointed the exclusive entity to conduct Petroleum Operations in the Licence Area.

2.4 The Director General authorizes the Licensee, pursuant to the terms set forth herein, to carry out the useflrl and necessary Petroleum Operations in the Licence Area.
2.5 The Licensee undertakes, for all the \\,ork necessary for carrying out the Petroleum Operations provided for hereur.ler, to comply with good intemational Page 9 of98 \ wel petroleum industry practice and to be subj ect to the laws and regulations in force in Sierra Leone unless otherwise provided under this Contract.
2.6 The Licensee shall maintain all apparatus and appliances and all wells which have not been abandoned and plugged as proi ided by Article 20 of this Licence in good repair and condition and shall execurc all operations in or in connection with the exploration area in a proper and workmanlike manner in accordance with methods and practice of exploration custonrarily used in best oilfield practices and without prejudice to the generality of the foregoing provision the licensee shall take all steps practical in order (a) to prevent the escape or waste of petroleum discovered in the exploration zllea; (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 PetroleLrm into any waters in or around the vicinity of the Exploration Area.
The Licensee shall comply with any instructions from time to lime 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 that it is unreasonable he may, within fourteen days from the date upon which the same was given, meet with the Director General to raise its objections to the Directive and provide altematives that will meet the Director 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 sr,le expert determination in the manner provided for in Article 28.7.
The Licensee shall give notice to the I-,irector General of any event causing escape or waste of Petroleum, damage to Petoleum - bearing strata or entrance of water tbrough 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 any operations authorized by this Licence in or about the Exploration Area in such marrner as to interfere unjustifiably with navigation or fishing in the waters ol the Exploration Area or with the conservation ofthe living resources of t}re sea.
Page l0 of98 @*.

)1 2.8 2.9 \ 2,10 The Licensee shall bear alone the fiaancial risk associated with the performance of the Petrolerrm Operations.

The Petroleum Costs related thereto shall be recoverable by the Licensee in accordance with the provisions of the terms ofthis Licence.
2.ll In the event that no Commercial Discovery is made in the Licence Area, or that Gross Production achieved from the Licence Area is insuffrcient fully to reimburse Licensee in accordance with the terms of this Licence, then Licensee shall bear its own loss; the Dtector 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 l0A-10 as defi:red in Annex One (l).

2.14 As of the Effective Date, the Licence Area shall cover a total of approximately one thousand nine hundred and forty eight Square Kilometres (1,948 Sq.
Km) as depicted by Ar:nex (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 fol that area included within the Licence Area at the begiruring of each Contract \ ear according to the provisions of this Licence.

ARTICLE 3 STATE PARTICIPATION 3.1 3.2 3.3 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 ir:terest shall be a working interest with respeit to all Production Operations.
In addition to the initial interest provided tbr in Article 3.2 above, the State shall have the option in respect of each Developrnent and Production Area to contribute a proportionate share not exceeding 5% of all Development and Production Costs il respect of such Development and Production Area, (or make arrangements satisfactory to Licensee to that effect) thereby acquirirg an additional interest of up to 5% in Petroleum Operations in such Development and Production Area.
The Director General shall notifr Licensee of its option within ninety (90) days of the Date of Commercial Discovery.

\ Page I I of98 lpARut t.. t.AENT I L t \ rovl ER HITL I i.
-,- 1o'ilN @fi- 3.4 3.5 3.6 3.7 3.8 If the State exercises the Option pursuant ro Article 3.2, the Participating Interests of the Licensee provided in Article 2.2 of this Licence shall be proportionally reduced as follows: Nima Holdings (SL) l-imited's one hundred percent (100%) Participating Interest shall be reduced to ninety percent (90%) and if the State exercises the Option pwsuant to Article 3.3 the Participating lnterests of Nima Holdings (SL) Limited shall be further reduced by five percent 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 interest as provided for in Article 3.3 u ithin 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 Licensec 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 only of any Additional hrterest acquired in such Development and Production Area under Article 3.3.

O) Incurred in respect of Production Operations in any development and production area both to the extent o I i. ii.
Any additional interest :rcquired in such development and Its ten percent (10%) initial interest production area under Article 3.3.

AII Development costs incurred by the Licensee on behalf of the State shall be fully recoverable subject to a maximum of forty percent (40%) of the State's share of the oil and gas production attribtLtable to the State's ten percent (10%) Interest in any given filancial 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.

ARTICLE 4 LICENCE TERM 4.1 The Licence Term shall be for a period of Thirty (30) years from the effective date, unless sooner cancelled or terrninated as provided for in the Act or this Licence.

Page 12 of98 V c:>ru.


4.2 4.3 4.4 The Exploration Period shall commence ,,n 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 years each.
For each well drilled by 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 tenn of this Licence may be extended only once and for a period not exceeding ten years on such terrns and conditions as the Director General may deem fit.

PERFORMANCE GUARANTEE ARTICLI5 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) as the minimum expenditue in the initial Exploration Period to guarantee the performance of their work obligation under this Licence.
<, 5.3 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 Dhector 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 secorld extension period to guarantee the performance of their work obligation for that period.
All performance security delivered under this Licence, shall be in the form of an unconditional and irrevocable bank guarantee as stipulated in Annex 3 of this Licence or in any such wording acceptable to the Director General, and with or without such other wording that will be acceptable to the bank issuing the guarantee, 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 bark located in Sierra Leone, or (b) with the agleement of the Director General direetly by a foreign bank acceptable to the Director General.
5.4 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 of the guarantors with due authority and is legally valid and enforceable and binding upon them; Pagc 13 of98 V %-.
5.5 5.6 s.7 5.8 All letters of guarantee issued under this Licence 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 10 that time il accordance with the terms thereof.
Where Licensee completes part of the minimum exploration Work Programme, the Director General shall permit the Ljeensee to reduce the guarantee by an amount equivalent to the expenses incurrcJ in respect of the work completed for the stipulated period.

Upon completion of the minimum exploration Work Programme within the stipulated period, the Director General shall return the guarantee to the Licensee.
ln the circumstances of a Default, to undertake the minimum work obligation by the end of the period for which the perfomrance security is deposited, the Director General shall immediately fumish the guaranteeing bank with all relevant document evidencing non-performance ot the work obligation and shall make a written demand on the guarantee copy'ing 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.
5.9 Demand shall not be made on the guarantee 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.

MINIMIA4 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 Effeclive Date.
Subject to the provisions of this Article, in discharge of is obligations to c.ury out Exploration Operations in the Licence Area, Licensee shall during the several phases into which the Exploration Period is divided carry out the work specified hereinafter: a) Initial Exploration Period: Threc Years.

Commencing on the Effective Date and terminating at the end of the Thtd Contract Year; Description of Work: Licence a minimurn 1500 Sq.

Knr of existing 2D seismic.


Process and interpret acquired 2D dala to detemine &illable prospects.

Gravity and magnetic data coverage of the entire block.

Acquisition of any other G&G data that may increase the understanding ofthe petroleum play.

Pagc 14 of98 \ @a- Minimum Expendifure: Licensec's minimum expenditure for the work in the Initial Exploration Period shall be Five Million United States Dollars (US$5,000,000).

b) First Extension Period: Two Years.


Commencing at the end of the Initial Exploration Period and terminating at the end of the Fifth year of the Contract Period.

Description of Work: Interpretation of 3D seismic dat4 mapping and ranking of prospects.

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

c) Second Extension Period: Two Years.


Commencing at the end of the First Extension and terminating at the end of the Seventh year of the Contract Period.

Description of Work: lntegrating all data.

Firm Commitrnent to drill at least one exploration well.

Minimum Expenditure: Extension Period shall (us$ 1s,000,000).
Minimr-rrn expenditure for work in the Second be Fifieen Million United States Dollars d) Work and expenditures accomplished in any period in excess of the above obligation may be applied as credit in satisfaction of obligations called for in any other Period.

The firlfillment of any work obligation shall relieve Licensee of the corresponding minimum expenditure obligation, but the fulfilhnent of any minimum expenditure obligation shall not relieve Licensee of the conesponding work obligation.
6.3 6.4 No Appraisal Wells drilled or seismic sur',eys canied out by Licensee as part of an Appraisal Program and no expenditure incurred by Licensee in carrying out such Appraisal, Program 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 ofthe regional geology of rhe 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 existiag dat4 shall provide: Pagr l5 of98 V sdt4*r- a) h) a minimum seismic grid adequate to define prospective drill sites over prospective closures as interpreted trom data available to Licensee, and a seismic evaluation of structural and stratigraphic conditions over the remaining portions of the Licence ,\ rea.
6.5 Each of the Exploration Wells referred to above shall be drilled to a minimum depth of between Three (3) to Five (5) Kilometres, 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: c) the basement is encountered al a conhactual depth; lesser depth than the minimum d) e) D continuatiotr of drilling presents an obvious danger due to the existence of abnormal formation pressure; rock formations are 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 casings preventing the minimum contmctual depth from being reached.
In the event that any of the above reasons occurs, the Exploration Well shall be deemed to have been drilled to the minimum contractual depth.

6.6 6.7 6.8 6.9 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 contractua) depth.
If during an Exploration Period the Licensee has performed its work commitments for an amount lesser than rhe amount specified above, it shall be deemed to have frrlfilled its invesbnent obiigations relating to that period.

Conversely, the Licensee shall perform the entirety of its work commitments set forth in respect of an Exploration Period even 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 petroleum 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 gravity and magnetic surveys, drilling stratigraphic wells and performing additional Page l6 of98 \, %31l- I I I I I I J I geological and geophysical studies, provided the minimum work obligations are performed within the applicable period.
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.
RELINOUISHMENT ARTICLE 7 I 1.1 Except as otherwise provided in this Liccnse, Licensee shall relinquish portions ofthe Licence Area in the manner provided hereunder.
a) b) c) If on or before the expiration of the Initial Exploration Period, Licensee elects to enter into the First Extension Period, then at the commencement of the First Extension Period the area retained shall not exceed fifty percent (50%) of the Contract Area as at the Effective Date; If on or before the expiration ofthe 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 (2570) ofthe Contract Area as at the Effective Date; On the expiration of the Second Extension Period, Licensee shall relinquish the remainder of the retained Contract Area subject to Article 7.2.
7.2 The Provisions of Article 7.1 shall not be read or construed as requiring Licensee to relinquish any portion of the Contract Area which constitutes or forms part of either a Discovery Area or a Development and Production Area.

7.3 7.4 N I I provided however that if at the end of the Initial Exploration Period or the First Extension Period as the case may be Licensee elects not to enter into the First or Second Extension Period, Licensee shall relinquish the entire Licence Area.
Nothing in this provision shall be construed as requiring the Licensee to relinquish the remainder of the Licence r\rea under Article 7.1 (c) above where the licensee has been granted a frrther extension on the second extension period until the end of the further extension, Each area to be relhquished pursuant to this Article shall be selected by Licensee and shall be measured as far as possible in terms of continuous and Pagc l7 of98 @*- l compact units of a size and shape that wrll permit the carrying out of Pefoleum Operations in the relinquished portions subject to the approval of the Director General.
OBLIGATIONS AND RIGHTS OF LICENSEE ARTICLE 8.

8.1 8.2 Licensee shall maintain an office in Sierra Leone at which notices shall be validly served.

Licensee shall appoint a Country Manager and assign to those offices such representatives as it shall consider necessary for the purposes 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.

Subject to the provisions of this Licence.
Licensee shall be responsible for the conduct of Petroleum Operations and shall (a) conduct Petroleum Operations u rth utmost diligence, efficiency and economy, in accordance with accepted Petroleum lndustry practices, observing sound technical and engineering practices using appropriate advanced technology and effective equipment, machinery, materials and methods; (b) 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 flrll and accwate records of all Petroleum Operations performed under this Licence; 8.3 In connection with its performance of Petroleum Operations, Licensee shall have the right within the terms of applicable law; (a) to use public lands in accordance with existing law for installation and operation of shore bases, and terrlinals, harbours and related facilities, pipelines from fields to terminals arrd delivery facilities, camps and other housing; (b) to receive licenses and permission to install and operate such communications a1d 6ansportation facilities as shall be necessary for the efticiency of its operations; (c) subject to local content requirenrents, to bring to Sierra Leone such number of Foreign National Employees as shall be necessary for its Page 18 of98 l \ 4*t operations, including employees assigned on permanent or resident status, with or without families, as well as those assigned on temporary basis such as rotational employees; (d) to provide or arrange for reasonable housing, schooling and other amenities, permanent and tempor-ary, for ils employees and to import personal and household effects, f,rrniture and vehicles, for the use of its personnel in Siena Leone; (e) (0 (g) to be solely responsible for provisr.rn of health, accident, pension and life ilsurance benefit plans for its Foreign National Employees and their families; and such employees shalt not be required to participate in any insurance compensation or other gmployee 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 are Siena Leone nationals; "r'ho to have, together with its personnel.
at all times the right of ingress to and egress from its offices in Sierra Le()ne, the Licence Area, and the facilities associated with Petroleum Operatic,ns hereunder in Siena Leone including the offshore waters, using its owncd or chartered means of land, sea and air transportation; to engage such Subcontractors, e\patriate and national, including also consultants, and to bring such Subcontractors and their personnel to Sierra Leone as are necessary in order to carry out the Petroleum Operations in a skillful, economic, safe and expeditious manner; and said 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 Director General shall assist Licensee in carrying out Licensee's obligations expeditiously and efficiently as stipulated in this Licence, and in particular the Director General shall use its best efforts t,t assist Licensee and its Subcontractors to; (a) establish supply bases and obtain necessary communications facilities, equipment and supplies ; O) obtain necessary approvals to open and operate bank accounts in Siena 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 f'amilies who will be resident in Sierra Leone and make arrangements for their travel, medical services and other necessary amenities; Page l9 of98 .I \, oD' (d) obtain the necessary permits to tansport documents, samples or other forms of data to foreign countries for the purpose of analysis or processing if such is deemed necessary for the purposes ofPetroleum Operations; 8.5 The Director General shall use his best efforts to render assistance to Licensee in emergencies and major accidents, and such other assistance as may be requested by Licensee, provided that any reasonablc expenses involved in such assistance shall be bome by Licensee.
ANNUAI WORK PROGRAMS AND BUDGETS ARTICLE 9 9.1 Without prejudice to the righrc and obligations of Licensee for day-to-day management of the operations, the Dtector General shall ensure that all Work Programs and Development Plans are conrplied with and also that accounling 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 accounting principles and procedures generally accepted in the intemational Petroleum industry.
o, 9.3 9.4 9.5 9.6 9.7 Each Work Program submiued to the Director General pursuant to this Article and every revision or amendment thcreof shall be consistent with the requirements set out in this Licence relatirrg to minimum work and expenditure for the period of the Exploration Period in which such Work Program or budget falls; The work obligations refened 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 of the vear in question.
The Director General will review Wt,rk Programs and budgets and any amendmenls or revisions thereto, and A;,lrraisal Programs submiued to him by Licensee pursuant to this Article, ln the event of all or part of the annual plan being refused, the Director General shall notifl the Licensee of the fact within forty-five days of receiving the plan, inficating the reasons for the refusal.

If the plan is not refused within the period referred to in Article 9.6, the plan may be implemented.

Pag.
Pag.

20 of9t \ @// 9.8 If refused under Article 9.6, the Director General may propose amendments or modifications to the Annual Work Prograur and corresponding Annual Budget.

In such event the Director General and the Contmctor shall meet as soon as possible to review the amendments or modifications proposed by the Director General and establish by mutual agreement the Arurual Work Program and corresponding Annual Budget.
The parts of the Annual Work Program for which the Director General does not require amendment or rrodification 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 fuurual Work Program for which the Director General proposes any amendment or modification, the date of approval of the Annual Work Program and corresponding Annual Budget shall be the date on which the Director General and the Contractor reach the aforementionetl mutual agreement.
Il the event the Director General and the Contractor do rrot reach an agreement regarding the amendments and modifications proposed by the Director General within one hundred and twenty (120) days from the receipt of the refusal, the instructions of the Director General shall apply, and Licensee shall amend its Work Program and/or Budget accordingly.

9,9 The Licensee may submit addenda to the annual work plan to the Director General provided they are justified on technical grounds.
9.10 After the date of the frst Commercial Discovery, Licensee may submit a proposal for the drilling of an Exploration Well or Wells not associated with the Commercial Discovery and not otherwise r equired to be drilled hereunder.
9.ll From the first occurring Date of Commercr.rl 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 rema rder of that Contract Year and for the rest ofthe Exploration Period.
(b) At least ninety (90) days before the Commencement of each subsequent Calendar Year, Licensee shall submit 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) Withil sixty (60) days of the Dare of Commencement of Commercial Production and thereafter not latel than one hundred and twenty (120) days before the commencement of each Calendar Year, Licensee shall submit to the Director General an annual production schedule which shall be in accordance with good interrrational oilfield practice, and shall be designed to provide the most efficient, beneficial and timely production of the PeEoleum resources.
Page 2l of98 \ %' 9.12 The Licensee shall provide The Direct,,r General with lifting schedules for Development and Production Areas as well as Licensee's reports on the conduct of Petroleum Operations.

COMMIRCIAIITY ARTICLI IO 10,1 The provisions of Section 50 and other relevant sections ofthe Act shall apply; 10.2 Unless Licensee and the Director General otherwise agree in any particular case, Licensee shall have a period of two (2t )ears 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 ofthe Appraisal Program 16 the Director General.
10.4 If Licensee informs 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 Discovery is not commercial, Licensee shall consult with the Director General and may make appropriate representations proposing minor changes in the liscal and other provisions of this Licence which may, in the opinion of Licensee, affect the determination of commerciahty.
The Dkector General may, where feasible, and in the best interests of all parties agree to make such changes or modifications in the existing arrangements.

In the event the Parties do not aglee on such changes or modifications, then Licensee shall relinquish the Discovery Area.

f0.5 If Licensee informs the Director General that the Discovery is commercial, Licensee shall not later than one hundred and eighty (180) days thereafter, prepare and submit to the Director General a Development Plan.
10.6 The Development plan shall be based on engineering 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 frorl the date ofthe notice by the Director General as referred to above, meet to alree on the revisions proposed by the Director General to the Development Plan.
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 Pagc 22 of98 qr l -l i -l \ -l i I _l J its Exploration Operations in the Licencc Area during the Exploration Period provided that the Licensee shall explain 'vhat 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 with appraisal, confirm commerciality or relinquish the Discovery Area.

ln 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 Discovery Area shall be relinquished.
10.9 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 separate 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) Aly area which constitutes or lorms part of a Development and Production Area.
PRODUCTION OF CRUDE OIL ARTICLE 11 I1.1 Gross Production of Crude Oil from each I )evelopment and Production Area shall be distributed in the following sequence and proportions: (a) The rate of Royalty for Oil Production shall be as indicated in Annex 4 and shall be delivered to the State as royalty.
(b) After distributiou of such amounts of Crude Oil as are required pusuant 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 their respective participating Interests pursuant to Article 2. ll.2 Licensee shall have the right freely to export and dispose of all of its Petroleum pursu{u'lt to this Article subject to Article I r,.
ll,3 The Parties shall through consultation cnter into supplementary agreements conceming Crude Oil lifting and tanker schedules, loading conditions and Crude Oil metering at the end of each Calendar }'ear.

The Crude Oil to be distributed or otherwise made available to the Parties in each Calendar Year in accordance with Page 23 of98 \ 1 ..1 -.1 I J l J j J J J .l -l the preceding provisions of this Article shall insofar as possible be in reasonably equal monthly quantities.
MEASUREMENT AND PRICING OF CRUDE OIL ARTICLE 12 12.1 Crude Oil shall be delivered by Licensee to storage tanks constructed, maintained and operated in accordance with applicrble Iaws and good oilfield 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 internationally recogaized 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 I']arty requesting the test shall reimburse Licensee for the costs associated with the tcst or tests.
12,2 Licensee shall keep firll and accurate accorLnts 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 ofeach month.
123 The market price fot 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 transns1is15, the market price shall be the price actually realized by Licensee on such sales; (b) On other sale by Licensee, on exports by Licensee without sale, the market Prices shall be determined by reference to world market prices of comparable Crude Oils sold in amr's length transactions for export in the major world petoleum markets, and adjusted for oil quality, location and conditions of pricing, delivery and payment.
(c) sales in arm's length commercral transactions shall mean sales to purchasers independent of the seller, which do not involve Crude Oil exchange or barter transactions, government to government transaction, sales directiy or indirectly to Affrliates, or sales involving consideration other than payment in U.S. Dollar or currencies convertible thereto, or aflected in whole or in part by considerations other than the usual economic incentives for commercial arm's length Crude Oil sales.
(d) the price of Crude Oil shall be expressed in U.S.

Dollars per banel, F.O.B.

the point of delivery by Licensee; Pagc 24 of98 9*r- -i -t l I J I -l J I I J .t -l (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 notiff the Director Genera I of the Market Price determined by it for its respective lifting during each Quarrer not later than thtty (30) days after the end of that Quarter.
12.5 If the Director General considers that the price notified by Licensee was not correctly determined, it shall so notify 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 twent-v (20) days thereafter to agree on the correct 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 e\pert, 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 expert shall determine the price within thirty (30) days after his appointrnent and his conclusions shall be final and binding on the Parties.

The expert shall decide in accordance with the provisions o t this Article.

12,7 The expert shall be selected by agreement between the Parties or, if no agreement is reached, by tle international centre of technical expertise of the lntemational 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.

ARTICLE 13 LICENCE FEES 13.1 The Licensees shall, be subject to the follorving Amual Licence Fees 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 square kilometer ofthe area under Licence in the amounts as set forth below: Phase of 0perafion Licence Fees Per annum Initial Exploration Period US $40 per sq.

km.
km.

l st Extension Period US $60 per sq.

km.

Pagc 25 of98 \ w- -r l I i I I I 2nd Extension Period US $85 per sq.

km.

Development and Production Area US $110 per sq.

km 13.3 An additional surcharge of $20 per sq.

km will be applied to any additional extension gmnted.

13,4 The Licence Fee shall be paid in advance for the entire year, and is due on the Effective Date and annualiy thereafter on the anniversary of the Effective Date until the termination of this Licence.
ARTICLT 14 FOREIGN E(CHANGE TRANSACTION S l4.l Licensee shall for the purpose of this Licence be entitled to receive, remit, keep and utilize freely abroad all the foreign currency obtained ftom the sales of the Peholeum 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 commitment to conduct Petroleum Operatrons, Licensee shall be free to dispose of this foreign curency or assets as it deenrs fit.

14.2 Licensee shall have the right to open and maintain in Sierra Leone bank accounts in foreign crrrrency and Siena Leone currency.
No restriction shall be made on the import by Licensee of funds assigned to the performance of the Petroleum Operations, il accordance with applicable law and Licensee shall be entitled to purchase Sierra Leone crnrency through authorized means, without discrimination, at the prevailing rate of erchange; provided, however, that such prevailing rate applicable to Licensee hereunder for all transactions for converting Sierra Leone curency into U.S.
Dollars, and vice versa, shall be at a buying or selling, 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 foreip.
currencies of its choice funds imported by Licensee for the Petroleum Operations 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 dilect payments outside of Sierra Leone from its home offices or elsewhere to its I oreign National Employees, and to its Subcontractors and suppliers for wages.
salaries, purchases of goods and performance of services, whether imported into Siena Leone or supplied or Page 26 of98 \ w l -l l I -'] I -i : I i I -l -l pedormed 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 paynrents shall be considered as part of the costs incurred fur Petroleum Operations.

In the.
In the.

event of any changes in the location of Licensee's home or other officcs, Licensee shall so notifi the Director General.

All such payments however shall be subject to the Income Act 2000 and other relevant financial Acts and Regulations currently in force.

14.5 All 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 mutuallv 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 designated by Licensee.

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

15,2 When gas flaring is authorized in accordarrce 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 Natural 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.
Pagc2l of98 \, w -l I -.1 PART II _ ASSOCIATED GAS 15.4 Based on the principle of full utilization of Associated Gas and without substantial impediment to Crude Oil production, the Development Plan of each Development and Production Area shrLll include a plan of utilization for Associaled Gas.

PART III - NON.ASSOCIATED GAS 15.5 Licensee shall notify the Director General in wfiting as soon as any discovery of Non- Associated Gas is made in the Licence Area.
15.6 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, Licensee shall by a fi.rther notice in writing to The Director General (the 'Notice") indicate whether in Licensee's opinion the Discovery merits Appraisal.
15.7 Where Licensee's Notice indicates that thc Discovery does not at that time merit Appraisal but may merit Appraisal or addrtional evaluation at a later date during the Exploration Period, then Licensee nued not submit a proposed Appraisal Program at that time but instead shall indicate what other studies or evaluation may be warranted before an Appraisal Program is undertaken.
15.8 Where Licensee's Notice indicates that the Discovery merits the drilling of one or more Appraisal Wells at that time, 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 Director General.

15.9 Not later than ninety (90) days from the date on which the Appraisal Program relating to a Discovery is concluded, Licensee shall submit a report containing the results of the Program.
If the report concludes that the Discovery merits commercial assessment, Licensee shall notify the Director General within one hundred eighty (180) days from the date on which the Appraisal Program relating 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, Licensee may also notiry the Director General that commercial assessment of the Discovery is not warran ted 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 assessmer)t shall be to study the uses to which production ftom the Discovery Area can be devoted and whether involving exports or domestic utilization.
As part of the assessment, the Parties shall also pursue discussions on the required contractual anangements for disposition of the Nanral Gas to potential purchasers and/or consumers of the Natural Gas.

15.11 Licensee may consult with the Director General and may make appropriate representations proposing minor changes in the fiscal and other provisions of this Page 28 of98 4L Licence which may, in the opinion of Licensee, affect the above determinations.
The Dtector General may, where feasible and in the best interests of the Parties, agtee to make such changes or modifications in the existing arrangements.
15.12 Nothing in this Part III of Article 15 shall be read or construed as requiring Licensee to relinquish any area (a) which constitutes or forms part o1'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 O) which constitutes or forms part of a Development and Production Area.
PART IV _ NATURA.L GAS PROJECTS 15.13 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 subLnit its proposals for an agreement relating to the development of the Discovcry on the principles set forth in this Part IV of Article I 5 .
The Director Gene ral undertakes on receipt of such notice to negotiate in good faith with Licensee with a view to reaching agreement on terms for such 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.
15.14 If at any time during the commercial assessment Licensee has identified a market in Sierra Leone for the reserves of Associated and/or Non-Associated Gas or any part thereof that can be saved without prc'iudice to an export project, the Parties shall proceed in good faith to negotiate the appropriate contractual arrangements for the disposition of the Gas.
ln the event 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 Diector General anrl Licensee taking into account among other things the cost of developing the Cas and the uses which will be made of the Gas.

15.15 In the event of a Discovery of Natura!


Cas in the Licence Area which is to be developed and commercially produced, the provisions of this Licence in respect to fulterests, rights and obligations of the Parties regarding Crude Oil shall apply to Natural Gas, with the necessary changes in points of detail, except with respect to specific provisions in this Licence concemi-ng 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 (las among the Parties shall follow the same general format as provided for Crudc Oil, with the exception that the royalty to be delivered to the State on Natural Gas shall be at the rate indicated in Annex J lr \ Page 29 of98 @1- 15.r7 4 as an incentive to enhance the viabilit_v of a Gas project on the basis herein provided for.
The Parties recognize that projects for the development and production of Natral 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 commitrnen t s on both sides.
This Licence, being for a specific terrh 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 or"rtput.

Accordingly the Parties agree to consider undertaking such commitments where reasonably requied for the efficient and viable development of a Natural Gas project.
It is recogrized that, unless otherwise agreed 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 corrmon extemal financing available for Natural Gas processing or Natural Gas utilization facilities, including project fmancing; horvever, 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 eontinuance of the Exploration Period made a Discovery of Non-Associatcd Gas but has not before the end ofthe Exploration Period declared that Drscovery 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: D iD shall unless the Discovery in respect of which the Licence has been made is dcclared by Licensee to be commercial continue in force for an initial period not exceeding five (5) years; shall in the event thar the Discovery is declared by Licensee to be commercial a) b) continue in force for an exceeding thirty (30) years; aggegate period not include, or be deemed to include, all the provisions which mutatis mutandis, would have applied to a commercial Discovery of Non-Associated Gas if Licensee hrrd declared such Discovery to be commercial Lrnder this Licence; Pag.
30 of98 \, %;q- I I I I iii) shall contain in respect of the initial period or of any renewal period details of the evaluations or studies which Licensee proposes to 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 riglrt of Licensee to retain the Discovery Area aforesaid shall be secured b1 the renewal of the Licence referred to in this Article 15 or where necessar \r by a new Licence entered into by the Parties for that purpose.
DOMESTIC SUPPLY REOTIIREMENTS (CRUDE OIL) ARTICLE 16 16.f Crude Oil for consumption in Sierra Leone (in this Article called the "Domestic Supply Requirement") shall be supplied, tr) the extent possible, by the State from its respective entitlement under this Licenee and under any other contract for the production of Crude Oil in Sierra Leone.
16,2 ln the event that Crude Oil available to the State is insufficient to fulfill the Domestic Supply Requirements, Licensee shall be obliged together with any third parties which produce Crude Oil in Sierra Leone, to supply a volume ofCrude Oil to be used for such Domestic Supply Requirements, calculaled 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 meeting the Domestic Supply Requirement Crude Oil shall not exceed the total of Licensee's said entitlement under this Licence.
The State shall purchase any Crude Oil supplies by Licensee pwsuant to this Article at the weighted average 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 b< resumed subject to any altemative commitments that may have been reasonably entered into by Licensee to dispose of the Domestic Supply Requirement Cmde Oil during the period of Default in payment.
Pagc 3l of98 \ @1- -l ..t .T I 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, dat4 (fiIm, paper, digital fonns 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 number assigred to e very well (c) the subsoil and strata through whicl, the weil was drilled (d) the casing inserted in any well and any alteration to such casing (e) any petroleum, water ,mines encountered in the course ofsuch activities (f) well data, including but not limited to 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 drilling data or geological or geophysical data, including maps or illustrations derived therefrom; (h) rvell testing and well completion reports; (i) 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 Petroleum Operations; () comprehensive final reports upon lhe completion of each specific project or operation; (m) contiagency programs and reports i,n safety and accidents; (n) procuement plans, subcontractors and contracts for the provision of services to Licensee.
(o) such other matters as the Director Ceneral may from time to time direct Pag.

l2 of98 \ wt -t : i I l ..1 J -.1 -.1 17.2 The licensee shall keep in Siena Leonu accurate geological plans and maps relating to the Exploration Atea and such ,,rher records in relation thereto as may be necessary to preserve all information th.rt the licensee has about the geology of the Exploration Area.
17.3 The licensee shall deliver copies ofthe saicl 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, u ithin four weeks of the request.
17.4 All information, dat4 logs, reports, samples, collected, processed or analysed pwsrunt to this Licence shall remain 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, magnetic tapes, other geological and geophysical information, portions of core samples and copies of reports, studies and analysis refened to in Article 17.1.

INFORMATION AND CONFIDENTIALITY.


ARTICLE 18 18.1 Not later than ninety (90) days following the end of each Calendar Year, Licensee shall submit to the Diector General a report covering Petroleum Operations performed in 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 drilling locations are indicated; (b) statement of any Petroleum encountered during Petoleum 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 tiom the same reservoir or deposit; (d) summary of the nature and extent of all exploration activities in the Licence Area; (e) a general summary ofall Petroleum Operations in the Licence Area.
Psge 33 of 98 \ w I I l I ,i -.1 J t -t I I 18.2 All data, information, reports and statistics including interpretation and analysis which the Licensee is or may from time to time be required to furnish 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 Sierra Leone 18.3 The provisions of Article 18.2 shall not prevent disclosure: (a) By the Director General or the Statc To any agency of the State or to any adviser or consuitant to the Director General or the State; ll, iii.
For the purpose of obtaining a Petroler.rm Licence in respect of any acreage adjacent to the Licence Area; or For the purpose of com;rlying with the State's intemational obligations for the submissitrn of statistics and related data.

b) By Licensee l. u. lll.

lv.
v. to its AfEliates, 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 Operationsl to non-affiliates who shall provide services for the Petroleum Operations, including Subcontractors, vendors and other service contractors, where this is essential for their provision of such services; to govemmental agencies for obtaining necessary rulings, permits, licenses and approvals, or as may be required by applicable law or fnancial stock exchange, accounting or reporting practices 18.4 Any Party disclosing information or providing data to any third parry under this Article shall require such persons to undertake the confidentiality ofsuch data.
Page 34 of98 \, @r4 MONITORING OF PETROLEUM OPERATIONS ARTICLE 19 f9.1 The Director General of the Petroleum Directorate shall be responsible for monitoring and inspecting all activities rLndertaken by the Licensee under the scope ofthis Petroleum Licence lg.2 The Director General or his duly authorized representalives shall have the right of access to all sites and ofEces 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 in consultation with Licensee and at such times and in such manner as not unduly to interfere ra ith the normal operations of Licensee.

Such representatives may make a reasonable number of surveys, drawings, and tests for the purpose of enforcing this Lieence.
They shall, for this purpose, be entitled to make reasonable use of the machinery and instruments of &e Licensee on the condition that no danger or imped r ment 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, Aee of charge, the use of reasonable omce space and of adequate housing while they are in the field for the purpose of facilitating the objectives ofthis Article.

19.3 Licensee shall save and keep a representatrve portion ofeach sample of cores and cuttings taken from drilling wells, to be disposed of, or forwarded to the DLector General.
All sarnples 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 General with copies of any and all data (including, but not limited to, geological and geophysical reports, logs and well surveys), information and interpretatior 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 lndusty 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 othff materials on the seabed, in the sea, on land or in fresh water, or if Licensee's operations rcsult in any other form of pollution or otherwise cause harm to fiesh water, marine, plant or animal life, Licensee shall, in accordance with accepted Petroleum Industry practice, promptly take all Page 35 oi98 \, w I J I J i -.1 -.t necessary measures to contol the pollution, to clean up Petroleum or released material, or to repair, to the maximum extcnt feasible, damage resulting from any such circumstances.
The cost of clean-up and repair activities shall be bome by Licensee.

19.7 The Licensee shall furnish to the Director tjeneral all logs, operational reports and incident reports on their activities by the tenth (l0s) day of the end ofeach month and at intervals of three (3) months thereafter 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 progress ofhis opemtions in the Licence Area.
f9.8 If it is determined that a particular Petroleum Operation may endanger the lives of persons or the presewation of the env ironment, the Director General, after consulting Licensee, may: (a) order such Petroleum Operation to be suspended; (b) order t}re withdrawal of all persons from the locations deemed dangerous, in coordination 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 notify the Director 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 Perroleum Industry practices.

COMMINCEMINT AND ABANDONMENT AND PLUGGING OF IVELI-S ARTICLE 20 20.f 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 utder either ofthe foregoing paragraph is given.
20,4 If any such condition under Article 20.1 of this clause 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 .Lny 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 manner, upon such occasions or at such Page 36 of98 N \ -r4/ intervals and by such person as may be specified by the Director General's direction and the Licensee shall pay to anl' such person or to the Director General such fees and expenses for such examination as the Dtector 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 effrcient and workmanlike manner.
20,6 Subject to Article 20.7 of this Licence , anv Well drilled by the Licensee pwsuant to this Licence shall be plugged and sealed in accordance with Article 20.2,20.3, 20.4 ar,d 20.5, not less than one montJr betore 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 may 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 b1 .Article 20.6 of this Article to plug and seal the well.
20.8 Any well that, pursuant to a direction by the Director General Under Article 20.7 of this Article, has not been plugged and sealed , 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 20J A11 casings and fixtues left in position pusuant to Article 20.7 of this Article shall be the property ofthe State.
ACCOUNTINC AND ATIDITING ARTICLE 21 2l,l Licensee shall maintain, at its offices in Sierra Leone, books of account and supporting records in the manner required by applicable law and accepted accounting principles generally used in the petroleum industry and shall file reports, tax retums and any other documents and any other financial retums which arc required by applicable law.
2L.2 In addition to the books and reports required by Article 21 .1 above, Licensee shall maintain, at its office in Sierra Leone, a set of accounts and records relating to Petroleum 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 of petroleum in the fonn of gas won and saved Pag.
37 of98 N 4W I I 1 I (b) (c) (d) the quantity of petroleum in any other form won and saved.
the name and address of any person 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 agreemeni for such supply and Such otler particulars as the Dircctor General may Aom time to time direct 21.3 The accounts required by Articles 21.1 and 21.2 shall be kept in United States Dollars.
21,4 Licensee will provide the Director General with quarterly summaries of the Peholeum Costs incurred under this Licence.

21,5 The Director General shall review all llnancial statements submitted by the Licensee as required by this Licence, and shall signiff its provisional approval or disapproval of such statements in writing within ninety (90) days of receipt, failing which the financial statements as sLrbmi$ed by Licensee shall be deemed approved by the Director General.
2L,6 Notwithstanding any provisional approval pursuaDt 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 t'oro (2) years from the submission by Licensee of any report of financial statement.

The Dilector General shall not, in carrying out such audit, interfere urueasonably with the conduct of Petroleum Operations.
Aay 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 of a period of rwo (2) years from the date of their submission unless before the expiry of such two year period the Director General has notifiud Licensee ofany exceptions to such accounts and statements.
P.gc 38 of9t \ @ I -.1 t -l -1 -l I I I -l I -.,1 i Il -l l -l -l -t PURCIIASING AND PROCUREMENT ARTICLX 22 22.1 In the acquisition of plant, equipment, services and supplies for Petroleum Operations, Licensee shall give preferenee to materials, services and products produced in Sierra Leone, of the same .rr superior quality, if such materials, services and products can be supplied in Jue time at prices, which are no more than ten percent (10%) higher than the inrported items including transportation, insurance costs and customs charges due.
22.2 For the purposes of the provisions of Article 22.1, Sierra Leonean companies shall be mandatorily consulted on the same terms as those used for consulting companies on the intemational market.
22.3 The Licensee shall always Contract local service providers, to the extent to which the services they provide are similar to those available on the intemational market, and ttreir prices, when subject to rhe same tax charges, are no more than ten percent (10%) higher than the prices charged 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 informirtion: (a) The amount of expenditure incurred by the Licensee directly, or indirectly through its Subcontractors, on goods supplied, produced or manufactured in Siena Leone (b) the amount of expenditure incurred by the Licensee directly, or indirectly through its Subcontractors, on services provided by Sierra Leonean entities; (c) the respective percentages that the expenditures recorded under items (a) and (b) above represent of the Licensee's total expenditues; 22.5 a detailed description of the procedures alopted dtring the Year to identifr and purchase goods and services from Sierra Lconean suppliers; and 22,6 a detailed exposition ofhow the local purchases for the Year as recorded under items (a) and (b) above compared with the projected purchases included in the budget statement for that Year, with explanations for any significant variations; 22J 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 Siena Leone gazette and in at least one local neu spaper.
Pagc 39 of98 @/ EMPLOYMENT AND TRAINING ARTICLE 23 23.1 For each Block held under Licence, Licensee shall pay to the Training Research and Development Fund, the sum of two hundred thousand US dollars (JS$200,000) every year from the Effective Date during the Exploration and Development period, and five hundred thousand US dollars (US$500,000) for each contract year during the production period, which the State shall use at its sole discretion to train Sierra Leonean personnel and transfer the management and technical skills required for the efficient conduct ofPetroleum 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 Effective Date, for the duration of this Licence .

23.2 Where qualified Sierra Leone personnel are available for employment, Licensee shall be required to employ Sierra Leone citizens in al1 categories and functions, except if there are no Sierra Leone citizens in the national market with the required qualifications and experience, under terms to be regulated.
233 National and foreign workers employed by Licensee who occupy identical professional categories and carry out idcntical firnctions shall enjoy the same rights of remuneration and the same worling 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 nominated by the Director General to be seconded for on-the-job lsining or attachment to all phases of its Petroleum Operations tmder a mutually ageed secondment contract.

23.5 Licensee shall regularly provide to the Director General Inforrnation 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, knora -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 srrict confidence during the life of this Licence.
23,6 Licensee shall ensure that at least 20% of Management Staff and 50%o of intermediate Staff be sourced ftom the local labor market, and the ratio to be progressed to 60% and 80% respectively after 5 years.

A knowledge/skills transfer plan to be submitted where non-availability of suitable skills can be demonstrated.
\ I I I Page 40 of98 @- 23.7 In firrtherance of its obligations under this Article, Licensee shall during the term of this Licence, prepare in respect of each Year a local employment statement, containing the following information: (a) the number of Sierra Leoneans ernployed by the Licensee directly, or indirectly through its Subcontractors, their level within the organization and their salary scale; (b) the mean salary of foreigr emplol'ees hired by the Licensee directly, or indirectly through its Subcontractors, at the same levels as the Sierra Leonean workers; (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 salaries of Sierra Leoneans employed under items (a) above represents of the Licensee and Subcontractor's total salaries.

(e) a detailed exposition of how the number ofnew Sierra Leoneans hired and trained for the Year compared with the projected recruitment for that Year and how the total number of Sierra Leoneans employed compared with the previous two years, with explanatilns for any signiflcant variations.
23.8 The local employment statement shall be s,rbmitted 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.
IMPORT AND D@ORT ARTICLE 24 24.1 The Licensee shall have the right to import into Siena 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 achie vements 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, aircraft, automotive equipment and other vehicles, instruments, tools, spare parts, alloys and additives, camping equipment, protective clothing and equipment, medical, surgical and sanitary equipment, supplies and instruments necessary for the installation and operation of hospitals and dispensaries, documentation equipment, comtruction materials of all types, Page 4l of98 \ w- !
I J lumber, office furniture and equipment, auromobiles, explosives, chemicals, fuels, ship supplies, pharmaceutical products, medicines.

24.2 The Licensee shall have the right to imporr into Sierra Leone, in its own name or on behalf of its Confiactors, Subcontractors and Agents the fumitute, clothing, household appliances and all personal effects for all the Foreign National Employees and thet families assigned to work in Sierra Leone for the Licensee or its Contractors, Subcontractors or Agents.
24.3 The Licensee, its Contractors, Subcontracrors and Agents shall have the right to re-export from Sierra Leone free of all drrries and taxes and at any time, all the items imported under Article 24.1 md 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 Contractors, Subcontractors and Agents, their 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 obrectives of this Licence, and to protect the property and operations of the Licensee, its employees and agents in the territory of Siena Leone.
25.2 At the duly justified request of the Lrcensee, the State shall prohibit the construction of dwelling or business buildings in the vicinity of installations, which the Licensee may declare dangerous as a result of its operations.

It shall take all necessary precautions to prohibit anchoring in the vicinity of submerged pipelines at river passages and to prohibit any hindrance to the use of any ottrer installation necessary for the Petroleum Operations whether on land or offshore.
25.3 The Licensee shall take out and cause t() be taken out by its contractors and subcontractors, in respect of the Pefioleunr Operations, all insurances of the type and for such amounts customarily used irr the international Petroleum industry, trcluding without limitation third party liahility insurance and insurances to cover damage to property, facilities, equipment arrd material.
25,4 Upon the entry into Sierra Leone of all Foreign National Employees of Licensees, its Affiliates, Non-Affrliates and Subcontractors and their Agents, the Director General shall facilitate the issue of the documents necessary for the entry to all Pagc 42 of98 N ---tsU- -] I I I -..1 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 llom Sierra Leone in respect of all such Foreign National Emplovees and their families.

25.6 All the Foreign National Employees required for the conduct of the Petroleum Operations shall be under the Licensee's authority or that of its Afflliates, Non- Affiliates, Subcontractors and Agents, in their 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 Affiliates, Non- Affiliates, Subcontractors and Agents.

.

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

26.2 Obligations other than those affected by Force Majeure shall continue to be performed in accordance with the provisions of this Licence.
SOCIAL PROGRAMS 27.1 During the Exploration Period, Licensee commits to spend: ARTICLE 27 (a) five hundred thousand United States Dollars (US$500,000) during the initial exploration period, O) five hundred thousatrd United States Dollars (US$500,000) during the fust extension period and (c) five hundred thousand United States Dollars (US$500,000) during the second extension period, for a total of one million five hundred thousand United States Dollars (US$1,500,000) on social programs relating to areas of housing, health, education, sanitation, agriculture, and/or small and medium enterprise development for the whole Exploration Period' Pag!
43 of98 \ w*t- -l I I -.,1 J I I I -J I J 27.2 27.3 27.4 27.5 27_6 27.7 Licensee shall work with the Petroleum Directorate and identified communities to design and implement strategic community engagement programs to advance health, education and sustainable socioeconomic development.

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.
Licensee at the request of the Director General can combine and coordinate efforts with other Petroleum Industry Staleholders in the implementation ofjoint social projects.

Licensee at the request of the Director General can combine and coordinate efforts with other Petroleum Industry stakeholders in the implementation of joint social projects.

Funds under this program shall be used in a judicious marmer and Licensee shall account for all expenditures under this progrirm.
Accounting for the use of these funds shall be i-ncluded in the annual budget, and shall be included in quarterly and annual reports due to the Director General and shall be subject to the sarne Audit terms.

CONSI,]LTATION, 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 resolvcd by consultation and negotiation.
[n 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 meadng of this Article or such longer period specifically agreed to by the Parties or provided elsewhere in the Licence, anl'Party shall have the right subject to Article 28.8 to have such dispute or d ilference settled though intemational arbitration under the rules and procedures and under the auspices of the Intemational Chamber of Commerce 2a.2 The tribunal shall consist of ttuee (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 rules, such Party's arbitrator and/or the umpire arbitrator shall at the request of any Party to the dispute be appointed by the Intemational Chamber of Commerce Page ,14 of98 N @1- I I I I J I .J -.]
-l 28.3 No arbitrator shall be a citizen of t}te 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, or at such other location as selected by the arbitrators unanimously.

The proceedings shall be conducted in the English language.
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 determinative.

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 ln lieu of resorting to arbitration, the Parties to a dispute arising under this Licence, including tle Accounting Guide, which such Parties by mutual agreement may consider appropriate may be referred for deterrnination by a sole expert to be appointed by agreement of the Parties.

ln such case, the Parties shall agree on the terms of reference for such proceeding, the schedule of presentatiotr 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 Pades to the dispute.

Upon failure of the sole expert to decide the matter timely, any Party may call for arbitration under Article 28.1 above.
28.8 Each Party to a dispute shall pay its own counsel and otler costs of litigation; however, costs of the arbitration tribunal shall be allocated il accordance with the decision of the tribunal.

The costs and l'ees of the Sole Expert shall be borne equally by the Parties to the dispute.
ASSIGNMENT ARTICLE 29 29.1 The Licensee shall not, except with the consent in writing of the Dkector General and in accordance with the conditions (if any) of the consent, do an1'thing whatsoever, whereby rmder the law (including the rules of equity), any right granted by this Licence or derived from a r rght so granted becomes exercisable by or for the benefit ofor in accordance with rhe directions of another person.
29,2 All or part of the rights and obligations arishg from this Licence may be assigned by any of the entities constituting the Licensee to third pades whose technical and financial reputation is well established; the assignees with the other entities N Page 45 of 98 -its r f.,ci.

f.'i,'" 1s\t .

*fr I I I 29.3 29.4 constituting the Licensee shall thereafter be jointly and severally liable for the obligations arising from this Licence.
The terms of any joint and several assignment and ownership shall be subject to the prior approval of the DLector General 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 assignol deriving from this Licence must have been duly fulfilled as of the date strih request is made.
(b) The instnmrent of assignment rnust include all the temrs of the Assignment, and provisions stating precisely that the assignee is bound by all covenants contained in this Licence and any modifications or additions in wdting that up to such time may have been made.

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

(d) Once the assignor and a proposed third party assignee, other than an AfEliated Company, have agreed the final conditions of an assignment, the assignor shall disclose in details such fmal conditions in a written Dotification to the Director General.
The State shall have the right to acquire the interest intended to be assigned, if, within Thirty (30) days from assipor's written notification, the Director General informs the assigrror 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 rrithin the Thirty (30) day period, the assignor 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 long as the assignor shall hold any interest under this Licence, the assigrror together with the assignee shall be jointly and severally liable for all duties and obligations of Licensce under this Licence.
29.5 On the date of approval of each assignment requested by any of the entities constituting the Licensee to any Assignee in accordance with the terms of this Licence in the following cases: (a) During any Exploration Period, in case any of the entities constituting the Licensee assips in whole or in part of its rights, privileges, duties and obligations to any Assignee other than an Affrliate Company of the same entity constituting the Licensee, the Assigree shall pay to the State the Page 46 of98 \ -w sum of Two Million Five Hunlired Thousand United States Dollars (US$2,500,000) as assignment fee5 (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 ro any Assignee other than an Affiliate Company of the same entity constiruting the Licensee, Assignor shall pay to the Director General the sum Tuo 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) ln case of an assignment by any ol the entities constituting the Licensee to an Affrliate company of the same ontity constituting the Licensee during the Exploration phase; Assignee shall pay to the Director General the sum of Two Hun&ed and Fifty Thr-, usand 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 from 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 iL third party ("Assignee") in accordance with this Article 29; (b) the Assignee provides an irrevocable, unconditional bank guarantee from a reputed bank of good standing, acceptable to the State, in favour of the State, for an arnount 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 of the assignmenq (c) the Assignee provides performance guarantee and legal opinion in terms of Article 5; and (d) the assignment of Participating Intcrest is executed by all Parties; then the Director General shall release the guarantee given by the assignor under Article 5 to the extent ofthe amount ofthe guarantee provided by the assignee ARTICLE 30 Page 47 of98 \, BONUSES 30.1 Signature Bonus (a) Licensee shall pay to the State in Cash as a signature bonus The Sum of Three Million United States Dollars (US$3,000,000) no later than fourteen business days after the Effective Date ofthis 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 DL,llars (US$1,000,000) the date of the approval of each Commercial Deve lopment.
30.3 Extension Bonus (a) Licensee shall pay to the State in Cash the Sum of Five Million US Dollars (US$5,000,000) as an extension bonus no later than Thirty days after the approvai date of entry int,, a1y fi.rther extensions other than that provided for the first and second ertension under the work program.

This Bonus may be waived at the D iscretion of the Director General for extensions granted under 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) from the date on which all cumulative oil production from the Licence Area exceeds Three Hundred Million barrels of oil or oil equivalent (300 MMBOE) and at each subsequent One Hundred Miliion barrels ofoil or oil equivalent (100 MMBOE) incremental production .rs stated below.
l. lt. lll.
lv Bonus payment of Ten t4illion 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 Llnited States Dollars (US$ 20, 000,00) shall be paid for reaching four hundred million barrels of oil or oi1 equivalent (400 MMBOE); Bonus of Thirty Million I nited States Dollars (US$30,000,000) shall be paid on reaching fl le hundred million barrels of oil or oil equivalent (500 MMBOE); Bonus of Forty Million United States Dollars (US$ 40,000,000) shall be paid on reaching six hundred million barrels of oil or oil equivalent (600 MMBOE) ; Pagc 48 of98 V d v. Bonus of Fifty Million United States Doilars (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 banels of oil or oil equivalent (100 MMBOE) thereafter.
(b) Gas shall be taken inio account lor purpose of determining the total production fr.

om the Licence Area under this Article by converting daily Gas delivered into equivalent barrels 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 Thermal Units (MMBTU) per MSCF.
30.5 Technologr Bonus (a) Licensee shall pay to the Director General the sum of Five Hundred Thousand U.S.

Dollars (US$ 500.000) as a technology bonus, which the Directorate may use at its discretirrn to acquire leading edge technology and equipment, infrastructure improvement and research and development, for the efficient conliuct of Petroleum Operations.

Payment shall be made only once, on the fir:.r anniversary ofthe Effective Date.
30.6 The Director General shall act as agenr 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 Sierra Leone.
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 rcspective 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 rvith respect to each day of delay during the period of such non-payment shall be the rate which the Barclays Bank, London, certifies to be the London Interbank offered rate (LIBOR) in the London Interbank Eurodollar market on thirty (30) day deposits, in effect on the' last business day of the respective preceding Month, plus Two and half perccnt (2.5%).
Such interest shall accrue Page 49 of98 \ w* from the respective dates until such amounts are payable and until the amounts are actually duly paid.

The Party to whonr any such amount is payable may give notice of non-payment to the Party in Dcfault and if such amount is not paid within fifteen (15) 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.
31.3 The rights and obligations under 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 creatinl' a partnership or joint venture, nor an association or trust or as authorizing ary Party to act as agent, servant or employee for any other Party for any purp,,!e whatsoever.
31.4 The duties and obiigations of each Party c.)nstituting Licensee hereunder shall be joint and several and it is recosnized that each such Party shall own and be responsible for its undivided lnterest 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 terms of this Licence; (b) Payments of royalty under the terms of this Licence; (c) Payments ofLicence fees under the terms ofthis Licence (d) Payment of assig@ent fees under the terms of this 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 grant of any permits, licenses, access rights, appropriate services and facilities required by the Licensee for the performance of the Petroleum Opentions.
32.2 If the Director General considers that the I icensee has committed a breach in the performance of any of its obligations, it shrrll so notify the Licensee in writing and the Licensee shall have Forty Five (45) rtays to remedy the breach or refer the matter to Arbitration in accordance with thc provisions of this Licence.
32.3 If any of the events specified in the follor.ving paragraph shall occur then and in any such case the Director General may revoke this Licence and thereupon the same and all 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.
Pagc 50 of98 \ %#- 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 tht uncorrected occurence of any of the events or failures to act listed below.
(a) (b) (c) 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; the assignment or purported assignment by Licensee, of this Licence contrary to the assignment provisions hereunder; the insolvency or bankruptcy ofLiuensee or the entry of the Licensee iato liquidation or receivership, whethe l 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) the substantial and material failure by Licensee to comply with any of its obligations pursuant to Article 8 hereof; (f) the failure of the Licensee to provide the required Performance Security within Sixty (60) days of the Effective Date for the lnitial Exploration Period or within Sixty (60) days of cntrance into any extension period.
(g) the failure by Licensee to make irny payment of any sum due to the Director General or the State pur uant to this Licence within forty five (45) days after receiving notice thal such payment is due.
(h) If Licensee intentionally exffacts any mineral other than petroleum, not authorized by this Licence, or without the authorization of the Govemment, except such extractions that may be unavoidable as a result of the operations conducted hereunder in accordance with accepted petroleum industry practice, and which shall be notified to the Director General as soon as possible.

(i) CI) any breach or non-observance by tlre Licensee of the terms and conditions of an approved Development Plan.
If the Licensee is a company and ihere is a change in the control of the notice in writing stating that the Licensee and the Director General 'erves Director General proposes to revoke this Licence in pursuance of this paragraph unless such a further change in control of the Licensee as is specified in the notice takes place w'ithin the period of three months beginning with the date of service of the notice and that further change does not take place within that period.
Pagc 5l of98 \ @| (k) There is a change in the connol of Lhe Licensee for the purposes of Article 32.4 O of this Article whenever a person has conEol ofthe Licensee who did not have control of the Licensce when this Licence was $anted.

For the pu4roses of determining whethcr for the purposes of this paragraph a person has control or had control o r' the Licensee if he holds a greater part in the Licence or more than One-Third.
32.5 The Director General may terminate th is 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 informs the Director General that that pa$.v has consistently defaulted in its obligations under the Joint Operating Agreement between the parties, ifone or nrore of the parties holding shares in the Licence suspend their payments, requesrs the opening of negotiations for a compuisory composition, are declared barrkupt.

go into liquidation or are in a similar siruation.


32.7 If the Director General or the State belier.es an event or failure to act as described in Article f2.4 afi 32.6 above has occurred, a written notice shall be given to Licensee describing the event or failure.

Licensee shall have Forly 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 referred the matter to Arbitmtion under this Licence.

32,8 If so referred to Arbitration, the Direct,rr 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 AMOLTNT DUE TO THE STATE TINDER THIS LICENCE AGREEMEN'I) and non-receipt of bank guarantees for minimum work expenditure shall n,.rt be referred to Arbitration and such written Notice of Termination shall be efiictive without delay.

32.10 The terms and conditions of this Licence rnay be modified only in writing and by mutual agreement between the Parties.
32.11 The Director General shall represent the State under this Licence and is empowered to grant by due process, in the name and on behalf of the State, any consent necessary or useful for the implementation of this Licence.

32,12 The Peholeum Directorate shall act as an agent for the State in the collection of all peholeum or money apart from Duties and Taxes, accruing to the State under this Licence, and delivery or payment to ihe Director General by Licensee shall discharge Licensee's liability.
Page 52 of98 \ @ 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 of the License or of any of its clauses.

32.14 Annexes 1,2,3 and 4 attached hereto shall lorm an integral part ofthis Licence.
32.15 Aly waiver of the State conceming the performance of any obligation of the Licensee shall be in writing and signed bv the Director General, and no waiver shall be implied if the Director General Joes not exercise.any of its rights to which it is entitled rlnder this Licence.
ARTICLE 33 STABILITY OF CONTRACT 33.1 During the validity ofthe Licence, the Stare guarantees that no future government acts shall apply to the Licence without the prior agreement of the Parties, that may affect, directly or ipso facto, the obligatiors and charges imposed on the Licensee through the provisions of the Licence, or I rat may adversely affect the rights and economic benefits ofthe Licensee providett in the Licence.
33.2 This shall apply, in particular, to the follorr ing: (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 hr 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 1rr provide the Licensee with the same financial terms, obligations and charges, as well as the same rights and economic beneflts that existed before said changes oecurred.

33.4 Where a Party considers that a significant change in the circumstances prevailing at the time the Licence was entered into.
has occuned affecting the economic balance of the Licence, the Party affected hereby shall notify the other Parties in wliting 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 g their reaction to such representation within a period of one (l) month of receipt of such notification and if such Page 53 of98 \ @f significant changes are established by Panies to have occurred, the Parties shall meet to engage in negotiations and shall e1'tect such changes in, or rectification of, tlese provisions as they may agree are neccssan'.
33,6 Where parties cannot agree on new terrrs, the matter may be submitted for arbitration or sole expert determination according to Article 28.
Page 54 of98 V <wF- NOTICE ARTICLE 34 34.f Any Notice, Application, Requests, Agreements, Consent, Approval, Instruction, Delegation, Waiver or other communicar ron required or permitted to be given hereunder shall be in writing and shall bc deemed to have been properly given when delivered in irerson to an authorizeJ representative of the Party to whom such notice is directed or when actually received by such Party through registered mail, telefax or telegrarn at the following address or at such other address as the Party shall speci$ in writing fifteen (15) days in advance: FOR TFIE STATE: ADDRESS: Director General Petroleum Directorate 43 Siaka Stevens Street Freetown, Sierra Leone FOR LICENSEE: ADDRESS: Nima Holdings (SL) Limited.
I 12 Pademba Road, Freetown, Sierra Leone EMAIL: +23 : 22222714 intb@pd-sl.com TELEPHONE: EMAIL: +23]76 135 195 rwalters@nimahol dingsllc.com IN WTINESS WHEREOF the parties have caused thi: Licence to be executed by their duly authorized representatives as of the date first written abor e. Page 55 of98 \ @ FOR THE STATE: represented by WITNESSED By, ft />'J DR. KAIFALA MARAII MINISTER OF FINANCE & ECONOMIC DEVELOPMENT RAYMOND SAIDU KARGBO DIRE('f OR GENERAL PETROLEUM DIRECTOTL{TE z7/ tc/t t FOR LICENSEE: ,4@ By T MICHAEL F. HARNESS NIMA HOLDINGS 6U LIMITED B)'' t3 6 MOHAMED SOWA TURAY NIMA HOLDINGS 6L} LIMITED Page 56 ol98 4tt- ANNEX 1 Attached to and made part of this Licence between the Republic of Sierra Leone and the Licensee.
LICENCE AREA,/LICEN(' E AREA On the Effective Date, the Contract Area/Licence Area.

designated as Block SL 10,4'-10, is formed by the area included inside the perimeter constituted by the points indicated SL-10A, SL- 10B, SL-l0E and SL-10F on the map attached hereto.

sL-10A-10 SL-1OA SL-IOB SL-IOE SL-IOF Area = 1948 sq.

km 120 47',00'w 120 28'56.'


W 120 43',53" \\ 130 03' 50" \\ 60 14'00., N 60 00'35" N 50 41'2g" N 50 57',34" N The geographical coordinates of those points are the following, with reference to the Greenwich meridian.

Those coordinates are only given for purposes of this Licence and shall not be considered as the boundaries ofthe national jurisdiction of Sierra Leone.
The surface of the Licence Area above defined is deemed to be equal to about One Thousand Nine Hundred and Forty Eight Square Kilometres (1,948 sq Km).
Pagc 57 of98 N %t- MAP OF THE LICENCE AREA Pag€ 58 of98 \- @71- SIERRA LEONE PETROLEUM OFFSHORE BLOCK SL.1OA.1O AREA='!948 sq.km ATL ANTIC ( C SIERRA LEONE SL-1 I sL-108 1 OE :{.+' s f I I o 40 30 160 2,1C 320 Kito@le6 Reference Scale=1 :3,000,000 Legend I atock Boundarv Block sL- 108-10 Block id LonEituide Latitude sL-108 sL-10c sL-10D sL-10E 120 28 s6',W 120 11 00" W 120 25 54', W 120 43 53'W 60 00' 35' N 50 47 00'N s0 26'56',N 5041',28',N Map Daturn-WGS 1984 Coordinate Systsm=Geogra pn ic Cordinate System(GCS) Pagc 59 of98 \ @fl- SIERRA LEONE PETROLEUM OFFSHORE BLOCK SL.1OA-10 AREA=1948 sq.km rI *{.}
I s I ATLANTIC OCEAN SIERRA LEONE SL-1OA 10F SL.1OB E1 0 Reference Sca le=1 :3,000,00 ol Legend Block Boundary I - sL- 10A-10 sL,10A lsL-1oB l5L-1oE lsL.loF Area=1948 sq.km Longitude 12o,:7,00.
W 120 28', 56'W 120 41', 53" W 13001'50'w Latitude 60 14', 00" N 60 00'35'N 5041',28'N 50 57', 34" N Map Datum=WGS 1984 Coordinate Syslom=Geographic Cordinate System(GCS) Page 60 of98 \, @tf ACCOUNTING GUIDE ANNEX2 The purpose of this Accounting Guide is to establish equitable methods as between the Parties for determintrg charges and credits applicable to operatiorls under the Licence.

Principles established by this Accounting Guide shall reflect the Liccnsee's actual costs.
1.1 GENERAL PROVISIONS 1.1.1 Words and terms appearing in this Annex shall have the same meaning as in the Licence and to that end shall be defined in accordance with Article 1 ol the Licence.

1.1.2 In the event ofa con{lict between the provisions ofthe Accounting Guide and the provisions ,rf 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 riom the Effective Date, Licensee shall propose to the Director General 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 .

)f the Licence.

and shall be consistent with normal practice of the rrrternational petroleum industry.
11) Within ninety (90) days of the receipt of such proposal the Director General shall either accepr it or request such revisions as the Director General deems neeessary.

Failure to notifl 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 detemrination by a Sole Expert pursuant to the Arbitration provisions ot this Licence.

1.2.4 Following agreement over Lhe 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 inspcct its manuals and to review all procedures which are to be tollowed 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: Page 6l of98 \, @J^ (a) (b) (c) (d) (e) (0 (e) Production Statement (see Section -i) Value ofProduction Statement (see Section 6) Cost Statement (see Section 7) Statement of Expenditures and Recuipts (see Section 8) Final End-of-Year Statement (see Section 19) Budget Statement (see Section 10) Long Range Plan and Forecast (see Section 13) 1.3 LANGUAGE MEASUREMENT, AND UNI'I'S OF ACCOUNTS 1.3.1 The U.S. Dollar being the currency unit for investments and compensation hereunder sh;itl therefore be the unit of currency for all bookkeeping and reporting under the Licence.
When transactions for an asset or tiability are in currency other than the U.S. Dollar, the respective accounts shall be kept in such other curency as well as the U.S. Dollar.

1.3.2 Measurement required undcr this Annex shall be in the metric system and Barrels.

1.3.3 The English language shall be employed.

f 3.4 Where necessary for purpo.

;es of clarification, Licensee may also prepare financial reports in other languages, units of measurement and currencies.
r3.5 It is the intent of the Parties that no Party shall experience any gain or loss at the expense of or ro 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 Bant ol Sierra Leone, or, where buying and selling rates are quoted, the arithmetic average ofthose rates, at the close of business on the datc of such currency conversion.

1.3.7 Current Assets and Liabirities shall be translated at the rate prevailing on the date of setrle'ment ofthe account.

Pagc 62 of98 N .%- 1.3.8 To translate revenue received and expenditures made in currencies other than U.S.
Dollars, thc average of the monthly rate between the currencies shall be used.

1.3.9 Expenditures made in U.S. t)ollars or other currencies in respect of capital items shall be transllted at the rate prevailing at the date of acquisition.
CLASSIX'ICATION AND ALLOTMENT OF COSTS AND EXPENDITURE SECTION 2 Expenditure relating to Petroleum Operations shall be classified, as follows: a) Exploration Expenditwel b) DevelopmentExpenditure; c) d) Production Expenditure; Service Costs; and e) General and Administrative expens.s and shall be defined and allotted as herein below provided.

2.2 EXPLORATIONEXPENDITURE Exploration Expenditure shall consist of all direct.
indirect and allotted costs incurred in the search for Petroleum in the Licence Area, inclr-rding but not limited to expenditure on: a) aerial, geographical, geochemical, paleontological, geological, topogmphical and seismic surveys.
and studies and their interpretation; b) c) d) e) 0 borehole drilling and water drilling labor, materials and services usecl in drilling wells with the objective of finding new Petroleum reservoirs or for the purpose of appraising of Petroleum 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 Expenses allotted to Exploration Operations based on the percentage share of p,-ojected budget expenditure which will be adjusted to actual expenditue ar the end of each year.
Page 63 of98 \.
w 2.3 DEVELOPMENTEXPENDITURE Development Expenditure shall consist of erpenditure incurred in Development Operations, including but not limited to expenditure on: a) b) c) d) drilling weils which are complete(i as producing wells and drilling wells for purposes of producing a Perroleum 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 treatment units, wellhead equipment, subsurface equipment, enhanced recovery systems, offshore platforms, Peholeum storage facilities and access roads for production activities; engineering and design studies for tleld facilities; service costs allotted to Developmcnt Operations on an equitable basis; e) f; g) General and Administrative Exper-,.cs allotted to Development Operations based on the percentage projectcd budget expenditure which will be adjusted to actual expenditure as the end of the year.
2.4 PRODUCTIONEXPENDITURE 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 Service Costs.
The balance of General and Administrative Expenses and Service Costs not allotted to Exploration Operations or to Development Operations under Section 2.2 antl 2.3 shall be allotted to Production Expenditure.
2.5 SERVICE COSTS 2.5.1 Service Costs shall consisr of but not be limited to direct and indirect expenditure incurre.l in support of Petroleum Operations, including the construction or installation of warehouses, piers, marine vessels, vehicles, mr)rorized rolling equipment, aircraft, fire secwity stations, workshops, water and sewage plants, power Page 64 of98 \ W plants, housing community :Lnd recreational facilities and fumiture, tools and equipment used in such construction or installation.
1<) 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 annuai costs of maintaining and operating such facilities.

2.5.3 Service Costs will be regularly allotted on al equitable basis to Explomtion Expenditure.

Development Expenditure and Production Expenditure.
2.6 GENERAL AND ADMINISTRATIVE EXPI.,NSES General and Administrative Expenses shall consist of: 2.6.1 main office, field and generel administrative costs, in the Republic of Sierra Leone, including but not limited to supervisory.
accounting and employee reiations services; 2.6.2 An overhead charge for the :rctual cost of services rendered outside the Republic of Sierra Let,rre by Licensee and its Affiliates for managing Petroleum Operarions and for staff advice and assistance, including but not limited to frnancial, legal, accounting and employee relations services.
2.6.3 General and Administrative Expenses will be regularly allotted as specified in subsections 21 (l), 2,3 (g) and 2,4 to Exploration Expenditure, Development Expenditure and Production Expenditure.
SECTION 3 3.1 COSTS NOT ALLOWABLE UNDER THE LICENCE The following costs and 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 htermediaries hy Licensee; (b) costs and charges incurred before the Effective Date including costs in respect ofpreparation, signature or ratification of this Licence; N Page 65 of98 N1 It L\ N\I\ 10\{ t8' ll BRNR'i 7 r-l$ ,.1 qr# (c) (d) (e) (f) (g) (h) (i) CI) (k) 0) (m) (n) (o) expenditures in respect of any financial transaction to negotiate, float or otherwise obtain or secure funds lirr p",ror"u- Operations including, but not limited to, interest, commissi(,n, brokerage and fees related to such transactions, as well as exchang.
Iosses on loans or other financing.
whether between Affiliates or other ,vise: expenditures incurred in obtaining, furnishilg and maintaining the guarantees required urder the Contract and any other amounts spent on indemnities with regard to non-fultl llment of contractual obligations; attomey's fees and other costs and charges in connection with arbitration proceedings and sole expert determ ination pursuant to the Contract; amounts paid with respect to non-firlfillment of contractual obligations; costs incurred as a result of failure to insure where insurance is required pwsuant to the Contract, or of faillrre to follow procedures laid down by an insurance policy or where t}re Licensee has elected to selfinsure, or has under-insured ; fmanchg cost of inventory and loss on disposal of inventory Costs which are not adequatel]- suprorted and documented any bonus payments made by the Licensee; any payments made to the State for failure to fir1fill the minimum Exploration work obligations pursuant to Article 6 of the Contract; any fines and sanctions incurred lbr infringing the laws and regulations of Sierra Leone; any donation to the State carried oLr: by Licensee unless otherwise agreed; the State's audit and inspection expenses incuned as a result of the absence oforiginal documents in the Licensee's offices in Sierra Leone; costs related to the assignment fronr the Licensee to any of its Affrliates or other Persons.
(p) petroleum marketing costs or costs of transporting petroleum beyond the Delivery Point; (q) cost of arbitration under the l-i-ence or dispute settlement by any independent expert under the terms .
)lthe Licence; (r) fines and penalties imposed by a cor)lpetent Court of Law; Pagc 66 of98 \ x1sl- G) costs incurred as a result of grtrss negligence or willful misconduct chargeable to Licensee or the Operator under the terms ofthe Licence.... 3.2 ALLOWABLE AND DEDUCTIBILE The costs and expenses set.forth herein shall be ii r 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 conrputing Licensee's net income from Petroleum Operations for income tax purposes untier the Licence.
3.3 CREDITS UNDERTHE 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 parlres for the use of property or assets charged to the accounts under this i icencer any adjustment from the suppliers or manufacturers or their agents in corlection with a defective equipurent or material the cost of which was previously charged to the account u L-rder the Licence; the proceeds received for inventory materials previously charged to the account under the Licence and subsequently exported from the Republic of Sierra Leone or transferred or sold to third parties without being used in the Petroleum Operations; 3.4 DUPLICATION OF CHARGES AND CREI)ITS Notwithstanding any provision to the contrary in rhis Annex, it is the intention that there shall be no duplication ofcharges or credits in the .rccounts under the Licence.
Pag.67 of98 \ MATER]AL 4.I VALUE OF MATERIAL CHARGED TO TI{E .

{CCOUNTS UNDER 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 c(,sts actually paid.

4.2 VALUE OF MATERIAL PURCHASED FR()M AN AFFILIATE Licensee shall notifr the Director General of any goods supplied by an Affiliate of Licensee.
Material purchased from Affrliate 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 incurred i:r procuring such new materials, and in moving such materials to the locations where the rrraterial shall be used.
4.2.2 Used Material (Condition l)") Used material shall be classified as Condition 'B" provided that it is in sound and serviceable condition and is suitable for reuse rvithout reconditioning.

Such material shall be valued at not more than seventy five pelcent (75%) of the current price of nen' material valued according to Section 4.2.1 above.
4.2,3 Used Material (Condition "C") Used material rvhich is serviceable for original tunction 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 frfty 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 "8" material.

4.3 CLASSIFICATION OF MATERIALS Material costs shall be charged to the respective l'-xploration Expenditure, Developmenl Expenditure, Operating Expenditure accounts at tire time the material is acquired and on Page 68 of98 \ \2$e#- the basis of the intended use of the material.
Should such material subsequently be used other than as intended, the relevant charge will be Lransferred to the appropriate account.

4.4 DISPOSAL OF MATERIALS Sales of property shall be recorded at the net am()unt collected by the Licensee from the purchaser.

4.5 WARRANTY OF MATERIALS In the case of defective material or equipment, any adjustrnent 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 which are subject to accounting record control, physical inventory and adjustment for overages and shortages (hereinafter refen ed 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 irom 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 6[iect to Licensee's reconciliation within 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 Area, Licensee shall submit a monthly Production Statement to the Director General showing the following information for each Development and Production Area as appropriate: a) b) c) N the quantity ofCrude Oil produced and saved ; the quantity ofNatuml Gas produccd and saved; the quantities of Petroleum used for the purpose ofconducting drilling and Production Operations, pumping to t-reld storage and re-injection; Page 69 of98 w d) e) 0 (a) the quantities ofNatural Gas flared: the size of Petroieum stocks held aL the begiruring ofthe Month; the size of Petroleum stocks held aL the end of the Month.
Such other particulars as the Director General may from time to time direct 5.2 The Production Statement of each Calendar Mr,nth shall be submitted not later than ten (10) days after the end ofsuch Month.

6.T VALUE OF PRODUCTION STATEMENT 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 establislied under the Licence.
Such Statement shall be submitted to the Director General not later than thirty (30) days following the determ jnation, notiflcation and acceptance of the World Market Price to the Director General according to the Licence.
Report should als,, include the name and address of any person to whom any PetrolrLLm has been supplied by the Licensee, the quantity so supplied, tire price thereof or other consideration thereof and the place to which the Petroleum was conveyed pursuant to the agteement 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, if any; Petroleum Costs for the Quarter in (luestion: Total Petroleum Costs as of the end of the 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 70 of98 rN \-- -r* 6.3 The Cost Statement of each Quarter shall be sui)mitted to the Director General no later than forty-five (45) days after the end of such Quarter.
STATEMENT OF EXPENDITURES AND RECEIPT5 SECTION 7 7 ,l Subsequent to the Date of Commencement of Commercial Production from the Licence Are4 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 identif, major items of expenditure within these categories.
The statement wil I show the following: a) b) c) d) actual expenditures and receipts for rhe Quarter in question; cumulative expenditure and receipts tbr the budget year in question; latest forecast of cumulative expenditures at the year end; and variations between budget forecasr and latest forecast and explanations therefore.
7,2 The Statement ofExpenditures and Receipts o1'each Calendar Quarter shall be submitted to the Director General not later than forqv-fi ve (45) days after the end ofsuch Quarter for provisional approval by the Director General.

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

The Final End-of- year Statement of each Calendar Year shall be submincd to the Director General within ninety (90) days ofthe end ofsuch Calendar Year.

BUDGET STATEMENT SECTION 9 9.1 The Licensee shall prepare an annual budget St,Ltement.
This will distinguish between Exploration Expenditure, Development Expenditure anJ Production Expenditure and will show the following: a) b) forecast Expenditures and Receipts lbr the budget year under the Licence; cumulative Expenditures and Recerpts to the end ofsaid budget year, and Page 7l of98 N .W c) the most important individual itcins of Exploration, Development and Production Expenditures for said bLrdget year.
9.2 The Budget may include a budget line or lines lbr unforeseen expenditures which, however, shall not exceed ten percent (l0oZ) 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 stirrt ofsuch 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 ofthe ten percent (10%) pursuant to Section I 0.2 hereof, Licensee shall submit a revision of the budget to the Director General.
SECTION 1() LONG RANGE PLAN AND FORECAST 10.1 Licensee shall prepare and submit to the Direct,,r General the following: During Exploration Period, an Exploration Plar: tor each year commencing as of the Effective Date which shall contain the following irrtbrmation: i) Estimated Exploration Costs showing outlays for each of the years or the number ofyears agreed and covered by the Plan.
iD Details of seismic operations for each such year, iiD Details ofdrilling activities plannecl for each such year; ir) Details of infrastructure utilization .rnd requirements.

10.2 The Explbration Plan shall be revised on eacir andversary 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-five (45) days before each armiversary 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 cLrntain the following information: i) forecast of the capital expcnditure portions of Development and Production expenditures for each Calendar Year of the Development Period; iD forecast of operating costs iirr each Calendar Year; Page'12 of 98 %/- iiD iv) forecast of PeEoleum production for each Calendar year; description ofmain technologies employed; and b) The Development forecast shall be revised at the beginning of each Calendar Year commencing as of tlre second year of the first Development forecast.
Licensee shall prepare i,rrd submit to the Director General the first Development forecast within ,ne hundred and twenty (120) days of the date when the first Developr:.-nt Plan is approved by the Director General no later than forty-five r15) days before each Calendar Year commencing as of the second year ofthe first Development forecast.
IO.3 CHANGES OF PLAN AND FORECAST It is recognized by Licensee and The Director General that the details of the Exploration Plan and Development forecast may requirc changes in the light of existing circumstances aod nothing herein contained shull limit the flexibility to make such changes.

Consistent with the foregoing the sard PIan and Forecast may be revised affrually.

Page 7l of 98 \, <w- 1.
2 FORM OF GUARANTEE ANNEX 3 dated In consideration of the Govemment of Sierra Lec'rle represented by the Director GeneraL of the Petroieum Directorate (herefurafter referrc I to as "the State") having granted a Petroleum Licence for the block (hereinafter referred to as "Licence", which expression shall include all the terms, and amendments agreed to between the State and the Licensee, thereto), '"vith Inls having its (hereinaflcr referred to as "Licensee", which registered office at expression unless repugnant to the context or meiining thereof include all its successors, administrators, executors and assigns), and the State have agreed that the Licensee shall fumish to the State, a bank guarantee (hereinafter referred to as "Guarantee") towards its minimum financial obligations as provided in the Contract for US$(xxx) for the performance of its obligations under the Licence.
figures) and (US$ _ _ of the Bank) registered unJer the Law of We _(name and having (hereinatier referred to as "the Bank", which its registered office at expression shall unless repuglant to the context or meaning thereof includes all its successors, administrators, executors and assignsl do hereby guarantee and undetake to pay to the State, immediately on the first dema:rd in writing, any./all money(s) to the in words) without any demur, extent of US$ _(in.
reservation, contest or protest and/or without an' reference to the Licensee.

Any such demand made by the State on the Bank by servirrg 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 anl 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 agee 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 insoh ency 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 amount(s) specified as having been spent by Conr.actor on the Work Programme during flnitial Phase] of the Exploration Period.

Such r.,luction will take place when the Bank receives such notice in writing in a letter from th.'

Director General.
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 i:rstance, without proceeding against the Licensee and notwithstanding any security or other guarantee that the State may have in relation to the Licensee's liabilities.
Page 74 of98 <ry 5 6 '7 8 The Bank further agrees that the State shall have fullest liberty without our consent and without affecting in any manner our obligations hereunder to vary any of the terms and condilions of the said Contract or to extend timc 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 Licensce and to forebear or enforce any ofthe 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 Lhing whatsoever which under the law relating to sureties would, but for this provision, hlve effect of so relieving us.
The Bank further agree that the Guarantee herein contained shall remain in full force during the period that is taken for the performance of the Licence and a1l 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 ofthe country of issue.

9 The Bank also agree that this guarantee shall be ',lovemed and construed in accordance with [Sierra Leone Laws] and subject to the exclLr: rve jurisdiction of Siena Leone courts 10.
Notwithstanding anything contained herein above, our liabilities under this Guarantee is limited to US$ (in figures) US$ (in words) and our and including sixty (60) days Guarantee shall remain in force up to after the expiry date/extended date.

Any claim rrnder this Guarantee must be received before the expiry of sixty (60) days after the expirl' date.

or before the expiry of sixty (60) days from 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 P:troleum Directorate's right under this guarantee will cease.

However, if such a claim hrLs been received b,v us within and up to sixty (60) days after the said date/extended date, rLll the Petroleum Directorate's 's rights under this Guarantee shall be valid and shall not ccase until we have satisfied that claim.
dav of In witness whereof, the Bank through its authorized officers has set its hand and stamp on this was _In and hereto duly affixed by_ accordance with its bye-laws and this Guarantee was duly signed by_ as required by the said byeJaws seal of day of 200_ at -l'he 200 this Secretary Witness: President & Director Pag.75 of98 @r ANNEX 4 FISCAL TERMS SECTION 1 INTERPRETATION 1.1 In this Annex 4, unless the context requires otherr" ise- t.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 "adjusted cost base" of an asset has the meaning given in section 2 of the lT 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; "debt claim" and "debt obligation" have the melnings given in section 2 of the IT Act; "derivative instrument" has the meaning prescrbed b1, regulations and, in the absence ofregulations, takes its meaning from generally arcepted accounting principles; "Petroleum Producer"-means a person engagcd in petroleum production activities under a petroleum licence "exploration operations"-with respect to a petroleum right, means "exploration" within the meaning given in section I of the AcU "excluded expenditure" means - in addition to unallowable costs under amex 2 (a) income tax and PRRT; (b) bribes and erpenditure incurred in comrpt practices; (c) interest, penalties and fines payable to a govemment or a political subdivision ofa Govemment of any country for breach of any law or subsidiar.v legislation; and (d) expenditure incurred as a consequence ofbreach c't'an Licence Agreement; 1,10 "financial cost" and "financial gain" have the rneanings given in section 35 of the IT Act; 1.11 "fiscal stability clause" refers to a clause in a Lieence Agreement that warrants 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 of regulations, takes its meaning from generally accepted accounting principles; Pag€ 76 of98 \ --meit 1.13 "generally accepted accounting principles" means the Intemational Financial Reporting Standards; l.l4 1.15 "NRA" means the National Revenue Authority established under the National Revenue Authority Act, 2002; "relevant financial cost" and "relevant financial gain" mean- (a) financial cost or a frnancial gain, respectively, with respect to a derivative or foreign exchange instrument; or (b) a loss or gain, respectivel-r - with respect to a debt claim or debt obligation denominated in a currency other than tirat in which the person accounts for the purposes of this Act; a 1.i6 l'relevant Ministry" and "relevant Minister"- (ri1 mean-with respect to petroleum, the Ministry and Minister responsible for managemenr of petroleum matters; and (b) where there is no current Ministry or Minister, includes- i ii) with respect to petroleum, the directorate or agency and the person appointed to crversee the administration of the Act; 1.17 "revenue" has the meaning in section 2 ofthe Narional Revenue Authority Act,2002; 1 l8 "revenue law" means a iaw referred to in the 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 1 l- ofthe IT Act; 1.21 "underlying ownership or control" has the mer.ning given in section 2 of the IT Act; and "year of assessment" has the meaning given in sections 45, 46 ond 4'7 of the IT Act.
SECTION 2 ROYALTIES 2.t 2.2 2.3 a ,,1 2.5 N Royalties are payable by the holder ofa petroleum right in respect ofpetroleum produced and saved pursuant to the right.

Royalties are calculated by applying the relevar,i rates set out in paragraph I of the Second Schedule to the market value of the petro rLrm produced and saved as determined under paragraph 2 of the Second Schedule.
Royalties are payable at the time prescribed in paragraph 3 ofthe Second Schedule and in accordance with the procedure outlined in Annex 2 this Licence Agreement.

This section and the provisions referred to in it ale subject to the State's right to receive royalties in kind pursuant to section 107 of the Act.
Assessment of Royalties PaEc 77 of98 W (a) (b) A person liable to pay royalties under this Act must, at the time the royalties are payable, file with the Commissioner-Gener al of the NRA a retum of royalties and make payment.
A retum filed under subsection 2.5 (a) must be in the manner and form prescribed specifying- i) iD the volume of petroleum liable for r-oyalties; the market value of the petroleum calculated in accordance with Part I of the Second Schedule; the amount ofroyalties for which tJre person is liable; any any other information that the Com rnissioner-General may prescribe.
iiD iv) 2.6 Subject to this section, the provisions of Part X\ III of the IT Act (assessments) apply, with any necessary adaptations, to a retum filed -rnder subsection (2.1).

In particular, a. retum filed under subsection 2.5 is- (a) (b) treated as a self-assessment; but subject to sections 102 (eopardy assessment) and 103 (amended assessment) of the IT Act.
SECTION 3 INCOME TAX PRINCIPLES OF TAXATION 3.1 3.2 5 ..1 A person conducting petoleum operations is subj ect to income tax with respect to those operations under the IT Act, but as modified b1 this Amex.

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

The provisions of the IT Act apply to the assessrnent and payment of income tax with respect to petroleum operations.
lncome tax payable with respect to petroleum operations for a year of assessment is oalculated by applying the rate set out in Part II of the First Schedule to a person's chargeable income from petroleum operations 1br 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 ofcalculating a person's chargeable income from petroleum operations- (a) each separate petroleum operation is trearcd as an independent business and the person must prepare accounts for that busjless separate from any other activity of the person; and Page 78 of98 \- --w (b) (") the person must calculate chargeable incone, loss and income tax liability for the business independently for each year of asscssment.
Section 95 ofthe IT Act (arm's length stan.iard) applies- i) iD to arrangements between a sep;rrate 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); and as though the arrangements were conducted between associated persons.
In accordance with subsection 1.3, the transfer ol rn asset to or from a separate petroleum operation is treated as an acquisition or disposal o rhe asset, as the case requires.

Where two or more persons hold a petroleum right, they must calculate 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 zurangements between the per-:ons.
3.5 3.6 SECTION 4 INCOME TAX SMARATE PI'TROLETIM OPERATIONS 4.1 4.2 Subject to subsection 4.2 petroleum operations pertaining to each petroleum right constitute a separate petroleum operation.
The following rules apply following an approval of commerciality within a petroleum licence area: (a) petoleum 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 (b) from the date of approval, petroleum op(rations conducted with respect to the petroleum right that are not in respect of r1,e 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 uitir respect to an approved discovery area within a petroleum licence area (whether or not there are prior approved discovery areas within the licence area); and Page 79 of98 \ @J 4.4 4.5 (b) subsequently, but before any further sqrproval of commerciality within the petroleum licence area, the holder of the petroleum Iicence relinquishes all of the licence area that is not subject to an approval of commerciality (whether the approval referred to in paragraph (a) or an earlier approval).
Where this subsection applies, petroleum oper.rtions conducted with respect to the relinquished area referred to in subsection (l l)(b) from the date of approval of commerciality are Eeated as conducted with respcct to the approved area referred to in subsection (a.3)(a), and so are treated as condueted *'ith respect to the same separate peuoleum operation.
Regulations may prescribe circumstances in uhich and extent to which petroleum operations conducted with respect to a pipeline permit are treated as conducted with respect to the same separate peholeum operation as that conducted with respect to an approved discovery area serviced by the pipeline.

ln 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) (b) "pipeline permit" means a permit granted urrder section 76 of the Act; and "reconnaissance permit" has the meaning given in section 2 ofthe Act.
SECTION 5 INCOME TAX INCOME FROM PE'TROLEUM OPERATIONS 5.1 Subject to subsection 5.2, in calculating a person's income from a sepfiate petroleum operation for a year ofassessment, include the following: (a) (b) (c) the market value of petroleum produced and saved from the licence area that is disposed of or heated as disposed of during the year; compensation received, whether under a policy of insurance or otherwise, in respect of loss or destruction ofpetroleum tiom the licence area; amounts received il respect ofthe sale of information pertaining to the operations or petroleum reserves; (d) gains from the assignment or other disposrrl of an interest in the petroleum right with respect to which the operation is conclucted; Page 80 of98 w (e) (0 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 irr accordance with paragraph 2 of the Second Schedule.
SECTION 6 INCOME TAX DEDUCTIONS FROM PETROLEUM OPER,AT]ONS 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 expensing is ,n accordance with generally accepted accounting principles: i) ii) expenditure on reconnaissance.
applaisal and exploration operations; and expenditure in developing petroleum operations and infrastructure, including as may be prescribed by regulations; (c) capital allowances ganted with respect to Lhe petoleum operation and calculated in accordance with Part II of the Second Schedule; (d) contributions to and other expenses incrrrred in respect of a decommissioning fund for the petroleum operation as reqLLired under the Licence Agreement or decommissioning plan approved by the Nlinister responsible for management of peftoleum matters; (e) expenses incurred by the person in the course of reclamation, rehabilitation and closure of the petroleum operation, but only to the extent funds in the relevant decommissioning fund are not yet available or are inadequatel and Page 8l of98 \ @* (0 subject to subsection (6.2), any other amounts incurred by the person during the year directly in the course of the operalion that may be deducted under the provisions ofthe IT Act.
6.2 No deduction is allowed in calculating chargeat le income from a separate petroleum operation- (a) under sections 37,40,43 and 44 ofthe IT .\ct (b) for an amount unless- i) ii) it is incurred in the acquisition or irnprovement of a valuable asset used in the operation; or it is incurred in providing sen'ice.
or facilities for the operation and the amount constitutes income of thr recipient that has a source in Sierra Leone (see section 89 ofthe IT Ac: : (c) to the extent the amount does not comply 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 In calculating a person's chargeable income frolr a separate petroleum operation for a year of assessment, relevant financial costs inctr,'red during the ye.u 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 incured in the following year of assessment.

However, section 88 of the IT Act (change of control) applies to restrict the carry forward of that excess.
The following are treated as the cost of a depreci.Lble asset for which capital allowances are granted with respect to a separate petroleum operation in accordance with Part II of the Second Schedule: (a) (b) the adjusted cost base ofthe petroleum rigi,t; expenditure incurred in respect of the petroleum operation and referred to in subsection (6.lxb) that- Page 82 of98 sbsr 6.3 6.4 6.5 \.
D iD in accordance with generally accepted accounting principles, is capitalised in the person's frnancial accounts: rind does not otherwise fall to be incluc-d in the cost base ofan asset; and (c) bonus payments made in respect of the grarrr of the petroleum right and referred to in section 5.

Regulations may make further provision with re spect to the deduction of amounts in calculating income from petroleum operations.
In particular, where goods or seryices are supplied to a petroleum right holder by an associated person, regulations may iimit the deduction for any amount incurred by the right holder to the no profit amount referred to subsection (6.8).

The no profrt amount is the actual costs incurred bi the associated person in the provision of the goods or services, but excludes any cost incurred in lavour of another associated person.
6.6 6.7 6.8 SECTION 7 INCOME TAX LOSSES FROM PE'TROLEUM OPERATIONS 7.1 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) (b) (c) tax payable may be reduced to 15% ofthe lax that would be due iflosses were not carried forward; losses are used in the order in which they aie 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 DECOMMISSIONING FUNDS 9.1 Amounts accumulated in or withdrawn fronr a decommissioning expenditure are exempt from tax.

decommissioning fund to meet Page 83 of98 @ 9.2 Subsection (9.3) applies where there is a positive balance in the relevant decommissioning fund at any of the following timcs: (a) after a person completes rehabilitation of a separate petroleum operation conducted by the person; or (b) at the time the person breaches an approvei decommissioning plan.
9.3 Where this subsection applies, the positive birlance is included in calculating the chargeable income of the person from the sepante 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 positir e balance (see section 19).
SECTION 10 INCOME TAX MINIMUM TAX 10.1 Part V ofthe IT Act does not apply to petroleum operations SECTION 11 PE-TROLEUM RESOURCE RENT TAX (PRR]) PTTROLEUM RESOURCE RENT TAX IMPOSID 11.1 Petroleum resource rent tax ("PRRT") is payable by a petroleum licence holder that has accumulated net receipts for a year of assessn,cnt from Petroleum Operations of a Petroleum License.
11.2 The amount of PRRT payable under subsection 111.1) is calculated by applying the rate specified in Part III ofthe 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 Pefioleum Operation separate from any other Petroleum License.
11.4 A pekoleum licence holder becomes liable to PzuiT with respect to a separate Petroleum Operation from the point Petroleum Operations coirmence with respect to this Licence.
1 1.5 PRRT is imposed in addition to any other tax or charge, including income tax Page 84 of98 4W-- I 1.6 Where two or more Licensee's hold a petrole um right, each shall separately and individually calculate PRRT, frle PRRT tax relurns and pay to the Govemment their chargeable PRRT from Petroleum Operations with respect to their right, SECTION 12 PE'TROLEUM RESOURCE RENT TAX (PRRT) ACCUMULATED E)GENDITURI NET RECEIPTS AND ACCUMULATED NET l2,l 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; erceeds (b) accumulated net expenditure for that ()peration for the previous year of assessment (if any) as increased by the Lr1,lift 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) (b) net expenditure for the operation for the year (ifany); plus accumulated net expenditue for that operation for the previous year of assessment (if any) as increased by the uplift specified in Part III of the Second Schedule; exceeds (c) net receipts ofthe operation for the year (i: an1).
SECTION 13 PETROLETIM RESOURCE RENT TAX (PRRT) NET RECEIPTS AND NET D(PENDITURE 13.1 Net receipts of a separate Petroleum operation foi a year of assessment are the extent to which- (a) (b) gross receipts ofthe operation for the year: exceed deductible expenditure of the operation for rhe year Page 85 of98 wr 13,2 Net expenditure ofa separate Petroleum operation for a year of assessment is the extent to which- G) (b) dedtictible expenditure of the operation for the year; exceeds gross receipts of the operation for the year SECTION 14 PE'TROLEUM RESOURCE RENT TAX (PRRT) GROSS RECEIPTS 14.1 Subject to this section, gtoss receipts of a separate Petroleum Operation for a yeal of assessment is the sum of the following gross amounts (without deduction): (a) (b) (c) gross amounts directly included in cal;ulating income from the Petroleum Operation for the year, including service lies, amounts received from the disposal of petroleum and other trading stock and.
rvith respect to a positive balance in a decommissioning fund,; gross positive arnounts included in calculating income from the petroleum operation for the year as required by section5, including consideration received on the disposal ofdepreciable, business or other assets; and interest and other financial gains, including an amount treated as interest income under the IT Act; and 14.2 Gross receipts ofa separate Petroleum Operation does not include- (a) subj ect to section 18, consideration receivc.l 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.
Page 86 of98 *fl SECTION 15 PE'TROLzuM RESOTIRCE RENT TAX (PRRT) DEDUCTIBLE EXPENDITURE 15.1 Subject to this section, the deductible expenditure ofa separate Petroleum Operation for a year ofassessment is the sum ofthe following gross amounts: (a) gross amounts in respect of the Petroleum Operation that are directly deducted in calculating chargeable income for the yeal and where the amounts are referred to in section 7; (b) gross expenditure included during the vear in the adjusted cost base of a depreciable or business asset used in the Pctroleum Operation; (c) (d) (e) (0 (e) other gross expenditure that enters into tire calculation of a net amount that is included in calculatiirg income from the Petroieum Operation for the year; other gross expenditure that enters into thc- calculation of a net amotmt (such as a loss) that is deductible in calculating chargeable income from the petroleum operation for the year where that amount i' referred to in section 7; the amount of income tax payable with resDect 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 an amount heated as interest under the IT Act; O) The States Carried Interest paid by Licensre's.
15.2 The deductible expenditure ofa separate Petroleur r Operation does not include- (a) amou.nts 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 right; bonus payments referred to in section 5; and payments to acquire an interest in the profits, receipts or expenditures of the Petroleum operation and payments made u ith respect to such interests.
PaSe 87 of98 (c) (d) \ @- 15.3 Expenditure is not deductible expenditure to the extent it exceeds the requirements of section 95 of the IT Act (arm's length standard).

SECTION 16 PE'TROLEUM RESOURCE RENT TAX (PRRT) YEAR OF COMMENCEMXNT 16.1 This section applies with respect to the year of as.essment in which a person commences Peholeum Operations under a petroleum licence (as to which, see definition of "Petroleum Operations" in section l).
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- (a) relevant deductible expenditure; exceeds (b) relevant gross receipts.
16.3 Relevant deductible expenditure means expenditure- (a) incurred by the person exclusively on exploration in the relevant licence area since the Ef[ective Date and (b) ofa tlpe referred to in section 15 (other than section 15 (1)(f)), presuming that the petroleum operation il question is that conducted under the petroleum licence prior to the commencement.
16.4 Relevant gross receipts means receipts- (a) derived by the person from exploration rn the relevant licence area since the Effective Date; and (b) of a type refened to in section 14, presLirning that the petroleum operation in question is that conducted under thc petoleum licence prior to the commencement.
16.5 No amount is deductible under section l5(1)(f) unless the relevant deductible expenditure and relevant gross receipts have been audited and certified as correct by the Pegc 88 of98 @/_- Commissioner-General of the NRA.

Regulatio:rr may prescribe a time limit for the Commissioner-General for conducting the audit ard certification.
SECTION 17 PE'TROLEUM RESOURCE RENT TAX (PRRT) TRANSFER OF PETROLTTIN,{ RIGHTS 17.1 This section applies where a person transfers an interest in a petroleum right during a year ofassessment together with the person's inter:st in the separate Petroleum Operation conducted ulder that right.
17.2 For the purposes of calculating any PRRT payable by the transferee, the transferee is treated as- (a) having the same accumulated net expendirLrre for the Petroleum Operation for the year of assessment preceding the transfer as the transferor had (if any); (b) incurring the same deductible expenditure lor the Petroleum Operation during the year of assessment of the transfer and to rhe time of transfer as the transferor did (if any); and (c) deriving the same gross receipts for the Peholeum Operation during the year of assessment of the transfer and to the time oftransfer 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) arc apportioned irccording to the amount of the interest transferred.

SECTION 18 PETROLEUM RXSOURCE RENT TAX PRRT) DECOMMISSIONING FUND POSITIW BALA-.

{CE 18.1 In the circumstances provided for in section 9, the positive balance in a decommissioning fund may be included in calculating the chargeai.le income of a person from a separate petroleum operation.
18.2 An inclusion referred to in subseclion (18.1) is also included in gross receipts for the purposes of calculating PRRT (see section la(1Xal).

Page 89 of98 @,1" SECTION 19 PE'IROLEUM RESOURCE RENT TAX PRRT) INSTALLMINTS OF PRRT 19.1 Petroleum Producer must, at the time the produccl would be liable to file an estimate of chargeable income under section 113 of the IT ,\ct, 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) (b) (c) (d) gross receipts, deductible expenditure.
net receipts, net expenditure, accumulated net receipts and accumulated net expenditrLre for the year of assessment from the separate Petroleum Operation; accumulated net expenditue for that .rperation for the previous year of assessment (if any) as increased by aay up i i tl available; where the producer estimates accumuiated net receipts for the year of assessment, the amount of PRRT payable with respect ro those receipts; and any other information that the Commissioner-General may prescribe; 19.3 An Petroleum Producer must file an estimate under subsection (19.1) irrespective of whether any amount of PRRT is estimated as payable.
I9.4 An Petroleum Producer that estimates PRRT as nayable for a year of assessment under subsection (19.3) must pay that PRRT by quarterl\ instalment at the same time as income tax would be payable under section 113 ofthe IT ,'\ct.

19.5 Subject to this section, the procedure in section 11i of the IT Act applies to estimates and payment of instaiments under this section as though PRRT were income tax.
SECTION 20 PE'IROLEIII\4 RESOURCX RENT TAX @RRT) ASSESSMENT OF PRRT 20.1 A Petroleum Producer must, at the time the procl.rcer would be liable to file a return of income under section 97 of the IT Act, file a retunr of PRRT due with respect to the same year of assessment.

Page 90 of98 w/* 20.2 A retum filed under subsection (20.1) must be in the manner and form prescribed specifuing- (a) goss receipts, deductible expenditure.
ner receipts, net expenditure, accumulated net receipts and accumulated net expenditLrre for the year of assessment from the sepamte ... 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 rcceipts for the year of assessment, the amount of PRRT payable with respect to tlrose 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 Peholeum Producer that estimates PRRT as payable for a year of assessment under subsection (20.3) must pay that PRRT (less 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 Lrrrder 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 PETROLEUM RESOURCE RENT TAX (PRR]) PRRT TRANSITION 2l.l For the purposes of imposing PRRT, "relevant deductible expenditure" and "relevant gross receipts" refened to in section 16 may include amounts incurred or derived in a year of assessment prior to the year of commencement.
N \, Page 9l of98 =w 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); (b) recovery of tax (section 106 to 112 ofthe If Act); (c) refunds of tax (section I 15 of the IT Act): (d) records and investigation powers (Part X\ ol the IT Act); (e) objections and appeals (Part XVII of the I'i Act); (0 interest and penalties (Part XVIII ofthe IT Act); and (g) administration (Part XIX of the IT Act).
22.2 The rules and procedures referred to in subsection 22.7 apply with any necessary adaptations and, in particular, as though amounts l'uyable under this Act were income tax.

223 For the purposes of section 133 of the IT Act, rhe holder of a petroleum licence must maintain accounts and records for the Petroleum ( )perations 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) (c) 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; for the better carrying into effect and interpreting the principles, purposes and provisions of this Annex; and (d) requiring petroleum right holders to f ovide such information as may be prescribed, whpther on an isolated or peric,.iic basis.
N Page 92 of98 :t*- SECTION 23 BONUS PAYMENTS 23.1 The terms and conditions for grant, transfer or assignment of a petroleum licence may provide for the payment ofone or more bonuses fiom 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.

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

(See sections 7 and l6).

23.4 In this section, "bonus payment" does not include a fee prescribed by the Act or regulations made under those Acts.
SECTION 24 ASSISTANCE OF OFFICERS OF PUBLIC BODIIS 24.1 For the purposes of this Arurex, the Commissioner-General of tle NRA may request the offrcers of a public body, including bodies that provide security, to assist or protect the NRA and its officers in the proper performancr of their functions.

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

24.2 Within the limits of its authority and resources.

a public body that receives a request under subsection (24.
I ) must do its best to provide assistance.

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

24.4 An NRA officer authorised for the function in question must supervise assistance provided by a public officer.
24.5 Section 165 of the IT Act (secrecy) applies to a prLblic officer providing assistance under this section with respect to all information and tr,rcuments that.

solely by reason of the assistance provided, come into lhe public officer'.

r.rossession.

Pag!

93 of98 %*- SECTION 25 PROHIBITION ON DISPOSAL OF PETROLzuM 25.1 This section applies where the holder of a petrolcum right fails to pay any amount due under this Act, including income tax referred to in Division II of Part 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 nay any amount due under this Act, establishing a lien under section 107 of the I1 Act.
in favour of the Commissioner General until the outstanding amount has been pa:d. 25.3 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 in subsection 25.2- 25.4 Where by reason of this section a holder of a petroleum right pays tax due by a joint holder ofthat right, the holder may recover any lo.s fiom thejoint holder as a debt due.
25.5 A person who without reasonable excuse fails ro comply with a notice issued under (subsection 25.2) is treated as wilfully evading tar 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 si.bsection (26.2) arrtd, 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) iiD ir) amounts, sources, methods, terms and conditions of financing of operations under the licence; exploration, development and operuting costs as well as additional capital costs incuned after the commencenrent of commercial production; production volumes and expected conditions of sale, particularly with respect to price; production or profit sharing arangements, including expected distributions, the policy on which distributions are to be based and the order of priority between distribr:tions and other payments (especially interest and repayment ofdebt): \, Page 94 of 98 <4d- (b) (c) v) vi) taxes and other revenues to beconic payable to the Govemment of Sierra Leone and the marner in which those amounts are calculated; and any other information as the Nlinister responsible for finance may prescribe.
use an appropriate template provided by the Minister responsible for finance in making the forecasts referred to in paragraph (a); and have appointed, by written notiiication to the Minister responsible for finance and at all times, an offrcer- i) of suffrcient seniority to be able r\) access the information referred to in paragraph (a); and iD who is to liaise with the Ministry , I' Finance and Economic Development regarding matters prescribed by this section.
26.2 Forecasts under subsection (26.1)(a)- G) must be prepared twice each year, stating the forecasts as at 30 March and 30 September; (b) in the case of 30 March forecasts, must b. forwarded to the Minister responsible for finance by no later than 15 April ofthe same year; and (c) in the case of 30 September forecasts.

must be forwarded to the Minister responsible for finance by no later than 15 ()ctober ofthe same year.
26.3 26.4 Upon receiving forecasts under subsection Q6.2t, 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 of receiving the notice.
If a relevant licence holder becomes aware of facts that make the most recent forecasts referred to in subsection (26.1)(a) inaccutate in a material particular, then the licence holder must immediately notiff the Minister responsible for finance and provide updated information.

26.5 A failure by a relevant licence holder to comply.
with the requirements of this section constitutes- (a) impeding the administration of this Act fo: the purposes of section 155 of the IT Act (applied by section 22 of this Annex); rmd Page 95 of98 4e{- (b) a serious breach of the terms and conditions upon which the licence is granted and so constitutes grounds upon which the lice rce may be revoked (see section 115 of the Act).
26.6 Information received under this section- (a) may be used within the Ministry of Finance and Economic Development for revenue forecasting and public financial management purposes, but (b) is otherwise subject to the requirements of section 165 of the IT Act (secrecy), with any necessary adaptations.

26.7 In this section, "relevant licence holder" means thc holder ofa petroleum licence.

FIRST SCHEDULE - - PE'IROLEUM PART I: ROYALTIES ROYALTYRATES 1.
(1) Subj ect to subparagraph (2), the royalty ratcs referred to in section 2 are: (a) for crude oil - l0%; and' (b) for natural gas - 5%o.

(2) (3) Samples of petroleum produced and saved lor purposes of assay, analysis or other examination or testing are exempt from the payment of royalties.

However, royalties apply if a sample is sold or ar.

economic benefit is derived from its disposal.


In this paragraph- "crude oil" and "natural gas" have the mea:rings given in section 2 of the Act; and "sample" includes petroleum used in the commission of facilities that are used directly in the same separate Petroleum Operation from which the petroleum is produced and saved.

MARKET VALUE OF PETROLEUM 2.


The market value of petroleum- (a) is determined in accordance with the rnethod prescribed in the petroleum agreement, but \ Page 96 of98 @L- (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 PAY}IENT OF ROYALTIES -) Royalties with respect to petroleum produced or saved during a calendar month are payable/receivable on or before the last day of the fbllowing calendar month.

PART II: INCOME TAX INCOME TAX RATE 4.

The income tax rate for petroleum operations is 30%.

CAPITAL ALLOWANCES 5 (1) All capital allowance expendilure incr.rn-,.

J in respect of petroleum operations during a year of assessment is placed in a separaL; pool.
Capital allowances are granted with respect to each pool at'the rates provided for in subparagraph (2).
(2) Capital allowances are granted for expenditure pooled under subparagraph 5(1) for a year of assessment at the following rates: Year of Assessment In which expenditure incurred Second Year Third Year Fourth Year Amount of Capital Allowance 40oh of cx enditure 20% of cx enditure 20% oi ,r enditure 20%o ol -t enditure (3) Capital allowances granted with respect to a particular year of assessment must be taken in that year and cannot be deferred to a later year of assessment.
(4) Where an asset for which capitai allo,,vances has been granted under this paragraph is disposed of (or deemed to be disposed of) 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 tire year; \, Page 97 of98 eF .
": \\sl "'\\$ d \r )j' $ .t:-1 ,J6\ (b) if the rrritten down value of the asset exceeds the consideration received for the disposal, an additional capiLal allowance is granted for the year in an amount equal to the excess; and (c) the relevant pools referred to in subparagraph 5(1) are reduced by the written down value of the asset.
(5) In this paragraph- "capital allowance expenditure" means ex lrenditure for which capital allowances are available, either under section 6 of this .A.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.fROLEUM RESOTIRCE RENT TAX PRRT) PETROLEUM RESOURCE RENT TAX RATE 6.
The rate ofPRRT for a vear of assessment is 30% UPLIFT FOR ACCUMULATED NET EXPENDITUITE 7 (1) The uplift referred to in section 12 to be rpplied to accumulated net expenditure for a,previous year of assessment is- (a) in the case of a period of Petroleun.r Operations during the currenl year of assessment - 22%o per annum applied to the period; and (b) in any other case - nil.
(2) In this paragraph, "period ofPetroleum Operations"- (a) (b) means a period during which Petroieum Operations are conducted under a petroleum licence; includes the period between the approval of commerciality and the commencement of production actir rties \ Page 98 of98