EX-10.5






Exhibit 10.5








 









 








Crude Oil Sales Contract of




Daan, Moliqing and Miao 3 Oil Fields of



Jilin Province



Beijing China



Dec 28th 2000







 









 







CRUDE OIL SALES CONTRACT OF




DAAN, MOLIQING AND MIAO 3 OIL FIELDS OF JILIN PROVINCE


This contract is made in Beijing on 28th of Dec 2000 between Microbes, Inc. (hereinafter
referred to as “MI”) and China National Petroleum Sales Corporation (hereinafter referred to as
“CNPSC”) (hereinafter referred to as “One Party” or “Both Parties”.



Whereas, “Petroleum Contract for Daan Oil Field, Jilin, the People’s Republic of China”, “Petroleum
Contract for Moliqing Oil Field, Jilin, the People’s Republic of
China” and “Petroleum
Contract for Miao 3 Oil Field, Jilin, the People’s Republic of China” (hereinafter referred to as
“Petroleum Contracts”) were signed between and by Global Oil Corporation (hereinafter referred to
as “GOC”) and China National Petroleum Corporation (hereinafter referred to as “CNPC”);



Whereas, “Modification Agreement of Petroleum Contract for Daan Oil Field, Jilin, the People’s
Republic of China”, “Modification Agreement of Petroleum
Contract for Moliqing Oil Field, Jilin, the
People’s Republic of China” and “Modification Agreement of Petroleum Contract for Miao 3 Oil
Field, Jilin, the People’s Republic of China” (hereinafter referred to as “Modification
Agreements”) were signed among and by MI, GOC and CNPC on Oct 25th, 2000, MI is totally
on behalf of the other company of Contractor-GOC:



Now, therefore it is mutually agreed as hereinafter set forth:



1. OBJECT OF THE CONTRACT



The object
of this contract is that CNPSC shall buy, and MI and GOC shall sell crude oil produced
and transported to designated delivery points and MI and GOC will be allocated its share according
to Petroleum Contracts and Modification Agreements.



2. EFFECTIVENESS AND TERMINATION OF THE CONTRACT



This contract shall remain in effect as per the terms and conditions outlined in Petroleum
Contracts.



3. DELIVERY POINTS



MI will transport crude oil produced from Daan, Miao 3 and Moliqing Oil Field respectively to
Mutou Pumping Station, Mutou Pumping Station and 250 Transfer Station (so-called delivery points
mentioned in Petroleum Contracts) at which crude oil enters the Pipeline System of CNPSC.



All the related cost associated with transporting and processing the crude oil before being
metered and entering Pipeline System of CNPSC should be paid according to Petroleum Contracts.



After the
oil is transferred across the Delivery Points, MI won’t be responsible for any loss,
damage incurred by oil or the loss of oil itself, or any claim, damage, expenditure, cost,
liability or any kind of lawsuit incurred or caused by oil (including but not limited to lawsuit
fees incurred by it), MI shall be indemnified from any liability or any loss incurred by it.



4. QUALITY STANDARDS AND QUALITY ANALYSIS
OF CRUDE OIL



Quality analysis of crude oil should be undertaken at the point of entry into Pipeline System
of Jilin Oil Field. The analysis will be performed by the State Bureau of Import and Export









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Commodities Inspection (hereinafter referred to as “State Bureau”) or any representative agency
authorized by the State Bureau pursuant to standards issued by the State Bureau of standardization
of the People’s Republic of China or by the Department or Unit authorized.



After quality analysis of crude oil, if no dispute about the above measured parameters exists, the
representatives of Both Parties should sign in the recording format as shown in the Annex I. If
there is any dispute about the above measured parameters, an independent inspector should be
designated to resolve the dispute. The relevant expenditure occurred in resolving dispute should
be shall be charged to Joint Accounts according to stipulations of Petroleum Contracts.



5. MEASUREMENT OF CRUDE OIL



Measurement of crude oil should be made at the point of entry into Pipeline System of Jilin Oil
Field, Metering devices should be installed at that point and
affirmed by MI and CNPSC. Any
metering device must meet relevant standards through certification
and test by the metering
agencies of Chinese Government or its authorized agencies. The meter is to be calibrated on a
monthly basis and authorized agents from MI and CNPSC must witness the calibration.



After completion of measurement of crude oil, if no dispute exists, the representatives of Both
Parties should sign in the record format outlined in Annex I. If there is any dispute, the
independent inspector should be designated to resolve the dispute. The relevant expenditure
occurred in resolving the dispute should be charged to Joint Accounts according to stipulations of
Petroleum Contracts.



6. PRICING OF CRUDE OIL



6.1 The price of crude oil should be determined once each month. The price for every calendar
month should be determined as follows;



Average the previous one-month prices of Daqing crude oil at Dalian Harbor, Liaoning Province,
which is published in “Platts Oilgram”, use the average price minus total fee of oil transportation
and sales. The price should be based on the following formula to
obtain the Amount to be invoiced
to CNPSC. For the crude oil sold to CNPSC by MI, MI will pay CNPSC the Total fee of oil
transportation and sales–52 Yuan RMB/Ton, this fee refers to all freights after crude oil enters
Pipeline System of CNPSC, any so called loss, any other fees imposed by any organization or
government authorities (except royalties) or tax (except 5% of Value Added Tax).



MV = Metered Volume after VAT and royalties are deducted and which belongs to MI and GOC defined
by Petroleum Contracts and Modification Agreements.



TF = Total fee of oil transportation and sales, 52 Yuan/ton



AP = Average Price



Amount to be invoiced to CNPSC shall be calculated as follows:




     MV  ́ (AP-TF)


The exchange rate for RMB to be converted to US Dollars shall be based on Annex II in
Petroleum Contracts.



6.2 The Calendar Month crude oil price should be determined no later than 10 days after first day
of the Calendar Month.









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6.3 If the
Calendar Month crude oil price can’t be agreed upon by Both
Parties because the price
information of Daqing crude oil at Dalian Harbor isn’t published
in “Platts Oilgram” or MI and
CNPSC both confirm that the prevailing price in international market is not applicable to the
current price in the location, then MI and CNPSC may propose to adopt a new price according to the
international oil price in Singapore for the crude oil with the closest API gravity. In that case,
payment should be made on the last posted price and Both Parties should enter into negotiations to
determine new representative price.



7. PROCEDURE OF DELIVERING



7.1 CNPSC is responsible for further delivering the same amount and quality of Crude Oil which was
measured at the point of entry into Pipeline System of CNPSC.



7.2 Annual crude oil delivery plan with a list for each month delivery for next Calendar Year
should be provided by MI no later than October
lst in the previous Calendar Year.



7.3 MI agrees to inform CNPSC of crude oil delivery quantity of next month no later than 15th day
of the Calendar Month. In case the difference of the monthly delivery is greater than quantity in
the list mentioned in 7.2 and this causes the difficulty for CNPSC to follow, then both Parties can
consult with each other to find an adjusted plan according to plan in Term 7.2.



8. CRUDE OIL ALLOCATED TO MI



No later than 10 days after the first day of each Calendar Month a crude oil allocation report for
the previous month prepared according to the directions of the Joint Management Committee confirmed
and signed by representatives of MI and CNPSC shall be provided to CNPSC. If MI and CNPSC are in
agreement, CNPSC shall pay MI at MI’s option in kind of crude oil or in US Dollars pursuant to this
quantity of crude oil. If any dispute exists, CNPSC should inform MI within 5 days after acceptance
of the allocation report.



9.
PAYMENT-IN-KIND AND CRUDE OIL EXPORT



If MI decides to export their proportionate share of the crude oil, then MI should inform CNPSC of
this intent in their quarterly delivery plan. CNPSC should inform MI the quantity of crude oil to
be exported within 30 days after receiving the crude oil
exporting plan. CNPSC shall give MI
necessary assistance.



10. PAYMENT-IN-CASH



10.1 MI should provide the invoices within 20 days after JMC provides crude oil allocation report
to CNPSC. Within 30 days after it receives the invoices, CNPSC
should pay MI as directed in the
above invoices in US dollars by wire transfer. MI might select to be paid with US Dollar or
Renminbi, when MI selects to by paid with Renminbi, the average price of selling and buying price
of Renminbi against US Dollar published by People’s Bank of China on the invoiced day will apply.



10.2 Any invoiced amount or portion thereof outstanding after the due date shall bear interest at a
rate per annum equal to the prime rate quoted by Citibank N. A. New York, at close of business on
such due date plus two (2) percentage points; such interest shall be made on a daily basis until
the outstanding amount plus accrued interest due is received.



10.3 In the event of a dispute between MI and CNPSC about the invoice amount, CNPSC shall make
timely payment of the undisputed portion of the invoice. The resolution of the disputed portion of
the invoice shall follow guidelines contained in Article 12. Upon settlement of the






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dispute of
the unpaid or overpaid portion of the invoice, if any, shall be settled promptly
with interest due by the responsible party.



10.4 Late payment shall be defined as payment after the due date as governed by Article 10.1. If
payment falls due on a Saturday or a bank holiday other than a Monday in the location where the
payment is to be made, payment shall be made on the preceding business day. If payment falls due
on a Sunday or a Monday bank holiday, then payment shall be made on the following
business day.



11. FORCE MAJEURE



11.1 No party to this Contract shall be considered in default of the performance of any of its
obligations hereunder, if any failure to perform or any delay in performing its obligations is in
conformity with all the events described in Petroleum Contracts as follows:



The performance of any obligations hereunder is prevented, hindered, or delayed because of any
event or combination of events which could not be foreseen and/or which is beyond the control of
such Party or its Affiliates:



Any such event or combination of events is the direct cause of preventing, hindering, or delaying
of such Party’s performance of its obligations hereunder; and



When any such event or combination of events has occurred, such Party has taken all reasonable
actions to overcome any cause that prevents, hinders, or delays performance of its obligations and
shall in so far as is practicable continue to perform its obligations hereunder



11.2
Notice of any events of force majeure and the conclusion thereof shall forthwith be given to
the other Party by the Party claiming of force majeure.



11.3 In the events of force majeure, Both Parties shall immediately consult in order to find an
equitable solution thereto and shall use all reasonable endeavors to minimize the consequences of
such force majeure,



11.4 If Petroleum Operations in the Contract Area are partially or entirely suspended as a result
of the force majeure referred to in Article 11 herein, this Contract may be extended by a period
not exceeding the corresponding period of such suspension.



11.5 Should the force majeure condition exist for a period of six (6) consecutive months, then in
such event Both Parties should consult to obtain handling method.



12. CONSULTATION AND ARBITRATION



12.1 Both Parties shall make their best efforts to settle amicably through consultation any
dispute arising about the performance or interpretation of any provision hereof.



12.2 Any dispute mentioned in Article 12.1 herein that has not been settled through such
consultation within ninety (90) days after the dispute arises may be referred to arbitration at the
request of either Party per Petroleum Contracts. The arbitration shall be conducted in accordance
with Petroleum Contracts.



12.3 The right to arbitrate disputes under the Contract shall survive the termination of the
Contract.



13. BREACH OF THE CONTRACT



If either Party to the Contract commits a material breach of the Contract, the other Party to the
Contract shall have the right to demand that such breach be remedied within a reasonably




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specified
period of time. However, such remedies shall include the direct loss but not indirect
loss.



14. NOTICE



14.1 All notices and other communication methods should be complete, and they should be
delivered to the listed address of other party by letter, telex, telegraph or facsimile.
All notices and pronouncement should be delivered in written, oral notice and pronouncement
should be confirmed in written form. Crude oil squaring sheet should be posted, and for the
posted notice the receipt time of normal business should be regarded as the receipt time.
For the notices delivered in the form of telegraph, telex or facsimile, the next working
day of delivery day shall be regarded as the date that the other party is notified. Any
party to this contract might notify other party the change of its address in written form.




	 	 	 
	Address of

	 	Address of
	China National Petroleum Sales Corporation

	 	Microbes, Inc. (Beijing Office):
	Zhouji Plaza, No. 16 Ande Road, Dongcheng
District,

	 	PO Box 910, Beijing China
	Beijing, China
	 	 
	Post Code: 100011 

	 	Post Code: 100083 
	Attention: Guo Liansheng

	 	Attention: Joseph Zhou
	Telephone: (86)-10-84886467 

	 	Telephone: (86)-10-62098326 
	Facsimile:
(86)-10-84886464 

	 	Facsimile: (86)-10-62098555 




14.2 Either Party to the Contract may change its address or representative by a
written notice to the other Party to the Contract.



15. THE APPLICABLE LAW



15.1 The validity, interpretation and implementation of the Contract shall be governed by
the laws of the People’s Republic of China. Failing the relevant provisions of the laws of
the People’s Republic of China for the interpretation or implementation of the Contract, the
principles of the applicable laws widely used in petroleum resource countries acceptable
to the Parties shall be applicable.



16. LANGUAGE OF THE CONTRACT AND WORKING LANGUAGE



This Contract is written in both Chinese and English languages and both versions have the
same effect.



This Contract shall become effective as of the date first above written.




	 	 	 	 	 	 	 	 	 
	China National Petroleum Sales Corporation	 	MICROBES, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	By: 

Name:

	 	/s/ Chen Yaohua
 

Chen Yaohua
	 	By:

Name:
	 	/s/ Joseph Zhou
 

Joseph Zhou
	 	 
	Title:

	 	Vice Manager

China National Petroleum Sales Corporation
	 	Title:
	 	Vice
President-China
Operations

Microbes, Inc.	 	 











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ANNEX 1




FORMAT FOR THE DELIVERY AND ACCEPTANCE ACT


The representative of Microbes, Inc. (MI), and the representative of CNPSC, have executed this Act
in confirmation of the  fact that the former has delivered and the latter has accepted at the point
of entry into Pipeline System of CNPSC, the crude oil in the quantity indicated below and with the
specifications indicated below measured in accordance with appropriate procedures and technical
methodology of the State Bureau of Standardization of the
People’s Republic of China.





			
	Date of measuring:	 	Date of quality analysis:






			
	Brief of measuring method:	 	 






			
	Brief of quality analysis method:	 	 







			
	Volume, Cubic Meters (m3):	 	Average Temperature (C):
	 
	Average Density, Gram Per Cubic cm (g/cm3):	 	Water Content, Percentage (%)






			
	Delivery Party
          (MI Representative)	 	 






			
	Acceptance Party       (CNPSC Representative)	 	 






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