EXHIBIT 10.1  










PARTICIPATION AGREEMENT  







Between  






BUTTES GAS & OIL
CO. INTERNATIONAL INC.  





And  





SASTARO LIMITED  








Dated:    May  







	
Confidential	Page 1	
18/08/2005 




















TABLE OF CONTENTS  




	 
	1. DEFINITIONS 	  	4 	 
	 
	2. INTERPRETATION 	  	7 	 
	 
	3. FUNDING OBLIGATIONS AND RETURN OF FUNDS 	  	8 	 
	 
	4. OPTION WELLS 	  	11 	 
	 
	5. INVESTOR AND OPERATOR ENTITLEMENTS AND PAYMENTS 	  	11 	 
	 
	6. AUDIT RIGHTS 	  	13 	 
	 
	7. OPERATOR’S BUY OUT OBLIGATION 	  	13 	 
	 
	8. TERM AND TERMINATION 	  	14 	 
	 
	10. OPERATOR REPRESENTATIONS & WARRANTIES 	  	18 	 
	 
	11. INVESTOR REPRESENTATIONS & WARRANTIES 	  	20 	 
	 
	13. CONFIDENTIALITY 	  	21 	 
	 
	15. FORCE MAJEURE 	  	23 	 
	 
	16. GOVERNING LAW AND ARBITRATION 	  	24 	 
	 
	17. NOTICES 	  	25 	 
	 
	18. MISCELLANEOUS 	  	25 	 





















 

















APPENDICES: 



Appendix 1:     Concession Map 

Appendix 2:      Operator Rates 

Appendix 3:      Form of Guarantee

Appendix 4:      Letter  









	
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THIS AGREEMENT  is made on and is
effective from the ___ day of May, 2005  



Between:  



BUTTES GAS & OIL CO. INTERNATIONAL
INC., a company incorporated in the Republic of Panama ("Operator"); and  



SASTARO LIMITED, a company
incorporated in Republic of Cyprus (“Investor”)  



WHEREAS:  



	(A)  	  	The
Operator is the holder of Petroleum and Gas rights in the Concession Area;           and  






	(B)  	  	The
Parties deem it inappropriate to structure this transaction as a           conventional
farm-in; and  






	(C)  	  	The
Parties deem it impractical to share the Field operating costs on any
          proportional basis as the Field is currently producing Petroleum to the sole
          account of the Operator and that production has a component of operating costs
          that are inseparable and the Parties believe a fixed operating cost to the
          Investor is an equitable solution; and  






	(D)  	  	The
Investor wishes to participate with the Operator in a drilling program in           the
Field and share in the proceeds from the sale of Petroleum upon the terms           set
out herein.  






NOW THEREFORE, it is agreed:  



	1.  	   	DEFINITIONS  






	(1)  	  	In
addition to the terms defined parenthetically herein, the following terms in
          this Agreement including in the Recitals shall have the following meanings:  






“Additional Costs” means
costs incurred pursuant to this Agreement to which Investor shall contribute being: (a )
transportation costs, if any, from the Existing Facilities to the point of sale of Crude
Oil to be shared in the proportion that the actual Barrels of Crude Oil comprised in the
Investor’s entitlement bears to the total Barrels of Crude Oil transported; (b) costs
downstream of the wellhead attributable to lifting, (e.g. demurrage, tugs, mooring master,
transportation for third party personnel, etc.) to be shared in the proportions of the
Production Revenue as between the Operator and Investor from each lift; and (c) 9.2% of
the Reworking cost of the Wells;  









	
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“Affiliate” means, in
relation to any Person, another Person that: controls such Person, is controlled by such
Person, or is controlled by any other Person which controls such Person. For the purposes
of this definition of Affiliate, “Control” in the case of a company means the
right to exercise, directly or indirectly, fifty (50%) percent or more of the voting
rights for the appointment of directors of the company being controlled;  



“Agreement” means this
agreement including all schedules, appendices and annexes;  



“Barrel” means a quantity
of crude oil or condensate equivalent in volume to a total of 42 United States gallons at
Standard Conditions;  



“Budget” means an estimate
of Drilling and Completion Costs to be prepared by the Operator and submitted to the
Investor for information purposes;  



“Confidential Information”
has the meaning given to it in Clause 13(1);  



“Concession Agreement”
means the concession agreement dated 29 December 1969 (as disclosed);  



“Concession Area” means
that part of the geographic area under the Concession Agreement which is the subject
matter of this Agreement and that remains under the control of the Operator and is
delineated in Appendix 1;  



“Crude Oil” means
hydrocarbons produced from the Reservoir which are in a liquid state at the wellhead or
separator and freed of water, sand and other foreign substances and shall include those
liquid hydrocarbons extracted or recovered from associated natural gas which is produced
in association with such hydrocarbons;  



“Drilling and Completion
Costs” means all costs necessary for the drilling, completion, suspension, connection
to and modification of the Existing Facilities to produce and recover production,
abandonment (if the Well is determined to be incapable of producing Petroleum in
commercial quantities) and installation of gas lift facilities relating to a Well
including all third party costs, inventory supplied by the Operator and Operator costs at
rates agreed as set out in Appendix 2;  



“Existing Facilities” means
the existing facilities situated within the Concession Area including:  



	  	(a)  	  	the
A, F and AP Platforms and other existing wellhead jackets;  





	  	(b)  	  	all
                    facilities connecting such platforms to each other;  






	  	(c)  	  	flare
and facilities                     connecting it to the foregoing; and  






	  	(d)  	  	all
facilities connecting the AP                     Platform to the floating storage unit
which is used for storing produced oil;  







“Expert” shall have the
meaning given the term in Clause 7(3);  






	
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“Field” means the Mubarek
Field, being the Crude Oil and Gas field within the Concession Area, and incorporates the
Thamama, Ilam and Mishrif reservoirs;  



“Force Majeure” has the
meaning given to it in Clause 15(1);  



“Government” means the
government of the Emirate of Sharjah one of the Emirates of the United Arab Emirates;  



“LIBOR” means the London
Interbank Offered Rate for one (1) Year US dollar deposits as quoted as of 11:00 hours
London time by the Reuters Monitor Money Rates Service (or such other service as may
replace it for the purpose of displaying such rates) or otherwise agreed by the Parties;  



“MOU” means Memorandum of
Understanding dated 22nd March 2005 entered into between Seaside Exploration Inc and the
Operator;  



“Obligation Wells” means
the two (2) directional wells to be drilled from the Existing Facilities into the
Reservoir to locations to be specified by the Investor;  



“Operator’s Guarantee”
means the guarantee given by the parent company of the Operator in favour of the Investor
in the form annexed in Appendix 3;  



“Operations” means those
operations and activities to be carried out by Operator in the Concession Area pursuant to
this Agreement;  



“Option Well(s)” means any
Well to be drilled from the Existing Facilities, other than an Obligation Well, in which
the Investor has earned an interest by exercising the Investor’s option granted in
Clause 4(1);  



“Party” means the Investor
or the Operator and “Parties” means the Investor and the Operator;  



“Person” may mean, any
organisation, governmental entity, firm, partnership, association, body corporate or
individual other than a Party;  



“Petroleum” means all
hydrocarbons in liquid or gaseous state and all substances other than coal from which
hydrocarbon liquids or gases can be extracted, derived or otherwise produced, including
asphalt and other solid hydrocarbons suitable for production with or dissolution into
hydrocarbon liquids or gases and all hydrocarbon liquids or gases produced therefrom which
are generally considered as petroleum products in liquid or gaseous form;  



“Production Revenue” means,
with respect to a Well, the total receipts from time to time from the sale of Petroleum
produced from that Well;  



“Reasonable and Prudent
Operator” means a person seeking in good faith to perform its contractual obligations
and in so doing and in the general conduct of its undertaking exercising that degree of
skill, diligence, prudence and foresight which would reasonably  









	
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and ordinarily be expected from a
skilled and experienced operator engaged in the same type of undertaking under the same or
similar circumstances and conditions; 



“Residual Value” means the
amount, in US dollars, that a willing buyer would pay to a willing seller for the
Investor’s interest (both as to Production Revenue less the costs specified in Clause
5(1) and 5(3) and the right to participate in any Option Wells identified, and expressly
agreed by the Parties in writing) under this Agreement. as determined by the Expert;  



“Reservoir”; means the
Ilam/Mishrif formation as shown in Appendix 1. In the absence of any characteristic log
criteria on which to define the top and base of the IMF the considerations in Clause
18(11) shall apply;  



“Reworking” means an
operation performed by Operator, at its own discretion , acting as a Reasonable and
Prudent Operator, conducted in the wellbore of a Well after it is completed and after
sustained production, to secure, restore, or improve production in a zone which is
currently opened to production or could be opened to production in the wellbore. Such
operations include, but are not limited to:  



	  	(a) 	  	
well
stimulation operations  






	  	(b) 	  	
recompleting
of a Well;  






	  	(c) 	  	
necessary
repair work to the Well as a result of equipment failure  






but exclude any routine repair or
maintenance work not involving re-entry of the wellbore, or drilling, sidetracking,
deepening, or plugging back of a Well.; 



“United States Dollars” or
“US$” means the lawfully currency of the United States of America; and  



“Wells” means Obligation
Wells and/or Option Wells as the context requires.  



	2.  	   	INTERPRETATION  






	(1)  	  	All
references in this Agreement to dates or periods of time shall be construed           in
accordance with the Gregorian calendar.  






	(2)  	  	The
headings in, and the Table of Contents of, this Agreement are for           convenience
only and shall not affect the construction of this Agreement.  






	(3)  	  	Unless
the context otherwise requires, reference to a Clause, Schedule, Appendix           or
Annex shall be a reference to a Clause, Schedule, Appendix or Annex in this
          Agreement.  











	
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	(4)  	  	If
there are any inconsistencies or conflicts between the provisions of the
          Schedules, Appendices and Annexes and the main body of this Agreement, the
          provisions of the latter shall prevail.  






	(5)  	  	Unless
the context otherwise indicates, “herein” and           “hereunder” mean,
respectively, in and under this Agreement.  






	(6)  	  	All
singulars hereunder shall include plurals and vice versa.  






	(7)  	  	Any
reference herein to this Agreement includes any permitted assignment,           novation,
supplement or amendment thereto.  






	(8)  	  	Unless
the context otherwise indicates, any reference hereunder to time means           the time
in the United Arab Emirates.  






	3.  	   	FUNDING
OBLIGATIONS AND RETURN OF FUNDS  






	(1)  	  	Subject
to Clause 3(3) the Investor shall pay to the Operator all Drilling and
          Completion Costs of the Obligation Wells to a maximum amount of US$25 million
          and the Operator shall pay all Drilling and Completion Costs of the Obligation
          Wells in excess of US$25 million.  






	(2)  	  	the
Investor shall pay its obligations set out in Clause 3(1) in accordance with
          the following schedule:  






	  	(a) 	  	
US$2.0
million in accordance with Clause 3(9);  






	  	(b)  	  	US$5.0
million on 30 June 2005;  






	  	(c)  	  	US$4.0
million on 15 October 2005;  






	  	(d)  	  	US$1.5
million on 1 November 2005  






	  	(e)  	  	US$
2.0 million on the 30 November 2005  






	  	(f)  	  	US$3.5
million on spudding of the first Obligation Well;  






	  	(g)  	  	US$3.5
million 30 days following spudding of the first Obligation Well; and  






	  	(h)  	  	US$3.5
million 60 days following spudding of the first Obligation Well.  






	(3)  	  	If
the Operator estimates that the Drilling and Completion Costs of the second
          Obligation Well will increase the total Drilling and Completion Costs of the
two           (2) Obligation Wells above US$25 million the Investor will have the option,
but           not the obligation, to pay these additional costs. The Investor shall have
15           days from receiving notice from the Operator that the Investor’s US$25
          million  











	
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obligation
limit is estimated to be exceeded by the Drilling and Completion Costs of the second
Obligation Well to notify the Operator that it wishes to pay these increased costs and
the Investor shall pay the Operator the amount of the estimated increase within ten (10)
days of any such notification to the Operator. Upon exercising this option the Investor
shall become obligated to pay the total costs of the second Obligation Well whether above
or below the Operator’s estimate.  






	(4)  	  	Not
later than 90 days following the completion of a Well, the Operator shall
          provide a report to the Investor showing an itemised comparison of the Drilling
          and Completion Costs incurred in respect of that Well against Budget for that
          Well.  






	(5)  	  	If
the actual Drilling and Completion Costs are less than the amounts paid by           the
Investor pursuant to Clauses 3(2) or, as the case may be 3(3), the Operator
          shall reimburse the Investor the difference between the actual Drilling and
          Completion Costs and the actual amounts paid by the Investor at the time of the
          report referred to in Clause 3(4), unless a default has occurred pursuant to
          Clause 3(11) in which case the Clause 3(11) shall prevail over this Clause
3(5).  






	(6)  	  	In
computing the Drilling and Completion Costs the Operator will charge the
          Investor only those actual costs incurred in respect of third parties after
          taking credit for all discounts afforded the Operator by third parties plus an
          Operator overhead charge equal to three (3) percent on all such third party
          (non-Affiliate) costs and in the case of costs payable to the Operator for
          services rendered by the Operator, such costs will reflect the rates set out in
          Appendix 3.  






	(7)  	  	Any
goods or materials used in Operations that are supplied from the           Operator’s
inventory will be charged at the lower of cost to the Operator           or fair market
value.  






	(8)  	  	The
Investor shall have the option, if the first Obligation Well has not been
          spudded by 1 August 2006 to demand repayment of all funds paid to 1 August 2006
          provided, however, that if on 1 August 2006 the Operator has a rig under
          contract to spud the first Obligation Well not later than 30 September 2006,
the           right to demand a repayment of funds shall be suspended until 30 September
2006           and if the first Obligation Well is not spudded by 30 September 2006 the
          Operator shall repay all funds paid by the Investor to that date if then
          demanded. If the Investor does not demand the repayment of funds by 30th
October           2006 then the Investor shall be deemed to have elected to have
continued with           the work program, with the Operator remaining obligated to spud
the first           Obligation Well as soon as reasonably possible thereafter. If
,however, the           Investor makes demand for repayment of the funds previously paid
by it, then the           Operator shall be entitled to deduct from the amount to be
repaid an amount           equal to 50% percent of the Drilling and Completion Costs
incurred to date (less           the Operators 3% overhead charge) after liquidating all
assets that have been           acquired as a part of Drilling and Completion Cost
expenditures, if any, and           crediting the amount so realized to the Drilling and
Completion Costs. The           liability of the Operator for  












	
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failure
to procure a drilling rig shall be limited to its obligation to repay the funds to the
Investor in accordance with this sub-clause 3(8).  






	(9)  	  	The
Investor shall not be required to make any payments hereunder until such           time
as the Operator has provided the Investor with a certificate signed by its
          external auditors certifying that as at 31 December 2004 the Operator’s
          assets are not less than US$ 100 million, the net current assets are not less
          than US$ 2.5 million and long term indebtedness is not more than US$ 25
million.           The first payment required pursuant to Clause 3(2) shall be payable
seven days           following receipt of the said certificate or seven (7) days
following the date           of this Agreement which ever last occurs. A certificate of
the President of the           Operator shall accompany the auditor’s certificate
certifying that there           has been no material adverse change in the financial
condition of the Operator           between the 31 December 2004 and the date of this
Agreement.  






	(10)  	  	The
Operator shall provide the Investor with the Operator’s Guarantee upon           the
signing of this Agreement.  






	(11)  	  	If
the Investor defaults in paying any amounts on the due dates set out in           Clause
3(2) then:  






	  	(a)  	  	if
less than US$12.5 million has been paid prior to the payment default then the
               Investor shall forfeit all funds paid by it and all interest in the
Obligation                Wells to the Operator in full satisfaction of all claims and
remedies the                Operator may have against the Investor with respect to that
payment default and                the right to participate in Option Wells and all other
rights of the Investor                under this Agreement shall terminate.  






	  	(b)  	  	if
at least US$12.5 million has been paid by the Investor prior to the payment
               default then the Operator agrees to complete the first Obligation Well and
pay                any Drilling and Completion Costs required for such completion if the
payments                made by the Investor are insufficient for such purpose.  






	(12)  	  	If
Clause 3(11)(b) applies and the Drilling and Completion Costs for the first
          Obligation Well were less than the amounts paid by the Investor prior to the
          default the Investor shall be entitled to share in Production Revenue from the
          first Obligation Well only in accordance with Clause 5(1) and all amounts paid
          by the Investor in excess of the Drilling and Completion Costs shall be
          forfeited to the Operator. The Operator shall have no further obligation to
          proceed with the second Obligation Well and the Investor’s right to
          participate in any Option Wells is terminated and the Operator may, at its
          option, proceed to develop the Field for its own account.  






	(13)  	  	If
Clause 3(11)(b) applies and the Drilling and Completion Costs for the first
          Obligation Well were in excess of the amounts paid by the Investor prior to the
          default; the Investor shall be entitled to share only in Production Revenue
from  












	
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the
first Obligation Well in accordance with the following formula: (Investor Funding for the
first Obligation Well / Drilling and Completion Cost for the first Obligation Well) *
Production Revenue entitlement percentages set out in Clause 5(1) * 50%, minus the costs
referred to in Clause 5(1)(a), (b) and (c). The Operator shall have no further obligation
to proceed with the second Obligation Well and the Investor’s right to participate
in any Option Wells is terminated and the Operator may, at its option, proceed to develop
the Field for its own account.  






	4.  	   	OPTION
WELLS  






	(1)  	  	Subject
to Clauses 3 (11), 3(12) and 3(13),if the Operator decides to drill an
          additional Well or Wells in the Reservoir the Investor shall have a rolling
          option to participate in all such Wells and upon exercise of the option the
          Investor shall be obligated to pay 100% of the Drilling and Completion Costs of
          any such Option Well.  






	(2)  	  	The
provisions of Clauses 3(4), 3(6) and 3(7) shall apply with respect to all
          Option Wells.  






	(3)  	  	The
Operator shall give the Investor notice of its intention to drill an Option
          Well together with the Budget for the Well, and the Investor shall have 60 days
          from receipt of said notice to exercise its option to participate. The notice
to           exercise the option to participate shall be in writing and given pursuant to
          Clause 17. A failure to exercise the option with respect to any Option Well
          shall terminate the rolling option with respect to any additional Option Wells.  






	(4)  	  	The
notice to exercise the option to participate in an Option Well shall be
          accompanied by a certified cheque or banker’s draft in favour of the
          Operator in the amount of US$2 million as a good faith deposit to be applied to
          the Drilling and Completion Costs of the Option Well. The Investor shall pay
the           balance of the Budgeted Drilling and Completion Costs of the Option Wells
upon           terms to be agreed  






	5.  	   	INVESTOR
AND OPERATOR ENTITLEMENTS AND PAYMENTS  






	(1)  	  	Subject
to the terms of Clause 5(4), Clause 5(7) and Clause 18(14), and provided           Clause
3(13) does not apply; the Investor shall be entitled to receive 75% of           the
combined Production Revenue from the Obligation Well(s) until the Investor           has
been reimbursed its total investment at which time the Investor’s
          entitlement shall be reduced to 40% of the combined Production Revenue from the
          Obligation Well(s) until the Investor has been reimbursed twice its total
          investment at which time the Investor’s entitlement shall be reduced to
          9.2% of the combined Production Revenue from the Obligation Wells (which
          percentage entitlement shall continue until the expiry of the term of this
          Agreement) minus:  












	
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	  	(a)  	  	14.5%
of the Investor’s entitlement to Production Revenue in each case to
               compensate the Operator for royalty obligations;  






	  	(b)  	  	US$3
for each Barrel of Crude Oil or equivalent comprised in the Investor’s
               entitlement as an agreed operating cost; and  






	  	(c)  	  	Additional
Costs.  






	(2)  	  	No
transportation or processing fees shall be chargeable to the Investor or
          deducted from the price of Gas when calculating the Production Revenue.  






	(3)  	  	Subject
to the fulfilment of the requirements set out in Clause 4, the Investor           shall
be entitled to receive 75% of the Production Revenue from each Option Well
          until the Investor has been reimbursed its total investment for that Option
Well           at which time the Investor’s entitlement shall be reduced to 40% of
the           Production Revenue from that Option Well until the Investor has been
reimbursed           twice its total investment for that Option Well at which time the
          Investor’s entitlement shall be reduced to 9.2% of the Production Revenue
          from that Option Well (which percentage entitlement shall continue until the
          expiry of the term of this Agreement), minus:  






	  	(a)  	  	14.5%
of the Investor’s entitlement to Production Revenue in each case to
               compensate the Operator for royalty obligations;  






	  	(b)  	  	US$3
for each Barrel of Crude Oil or equivalent comprised in the Investor’s
               entitlement as an agreed operating cost; and  






	  	(c)  	  	Additional
Costs.  






	(4)  	  	If
the Drilling and Completion Costs of the Obligation Wells exceed US$25           million
and those excess costs have been paid by the Operator then the Investor           shall
be entitled to share in Production Revenue from the Obligation Wells in
          accordance with the following formula minus the costs referred to in Clause
          5(1)(a), (b) and (c):  






	  	
US$
25 million / Total Drilling and Completion Cost for Obligation Wells * Production Revenue
entitlement percentages set out in Clause 5(1).  






	(5)  	  	The
Investor’s entitlement to Production Revenue shall accrue at the           wellhead.  






	(6)  	  	The
Operator shall pay the Investor the amounts of the Investor’s           entitlement
pursuant to Clauses 5(1) and 5(3) and within ten (10) days of           receipt of
Production Revenues by the Operator.  






	(7)  	  	If
the Drilling and Completion Costs of the Obligation Wells exceed US$25           million
and if the Investor exercises the option under Clause 3(3) and defaults           to pay
such excess costs; then the Investor shall be entitled to share in           Production  








	
18 May 2005	
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Revenue
from the Obligation Wells in accordance with the following formula minus the costs
referred to in Clause 5(1)(a), (b) and (c):  






	  	
Total
Investor funding for the Obligation Wells / Total Drilling and Completion Cost for
Obligation Wells * Production Revenue entitlement percentages set out in Clause 5(1) *
50%.  






	6.  	   	AUDIT
RIGHTS  






	(1)  	  	The
Investor shall at its sole cost and upon 60 days notice to the Operator have
          the right to audit, (through the services of an internationally recognized firm
          of accountants not in conflict with the Operator) the accounts and records of
          the Operator relating to Drilling and Completion Costs and all components of
          Production Revenue for a period of 24 months preceding the date of said notice.
          The Investor must take written exception to and make claim upon the Operator
for           all discrepancies disclosed by the said audit within six (6) months
following           the said 24 month period. The Operator and the Investor shall make
every effort           to resolve any claim resulting from an audit within a reasonable
time failing           which the matter shall be resolved pursuant to Clause 16. For the
avoidance of           doubt the audit scope should not include the time writing rates
agreed for           Operator personnel provided that such time writing is supported by
the project           time sheets duly approved by the Operator at the rates as set out
in Appendix 2.  






	(2)  	  	The
Operator shall not be required to produce any information or data to the
          Investor’s auditors other than information and data associated with the
          subject matter of the audit and reasonably necessary to perform the audit.  






	(3)  	  	The
Investor’s auditors are not entitled to any information or data that
          relates to field operating costs.  






	7.  	   	OPERATOR’S
BUY OUT OBLIGATION  






	(1)  	  	If
during the term of this Agreement the Concession Agreement is terminated then
          the Investor may require that the Operator pay to the Investor the Residual
          Value.  






	(2)  	  	The
Residual Value shall be assessed on the basis that the terms subsisting           prior
to the date of termination would have continued to the end of the economic           life
of the Field.  






	(3)  	  	Payment
of the Residual Value amount shall be made by the Operator to the           Investor not
later than 30 days following the determination of the Residual           Value.  












	
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	(4)  	  	If
the Operator becomes obligated pursuant to this Clause 7 the Parties shall,
          within 15 days from the date of the expiry or termination of the Concession
          Agreement, as the case may be, jointly select an independent petroleum
reservoir           engineer (“Expert”) to determine the Residual Value.  






	(5)  	  	If
the Parties cannot agree within the 15 day period on the Expert, either Party
          may request the President of the Institute of Petroleum, London, England, to
          select the Expert.  






	(6)  	  	The
Parties may provide their own views and justifications to the Expert on the
          Residual Value, within 15 days of such appointment. The Expert shall be
          requested to produce his determination of Residual Value within 45 days of his
          appointment and the Expert’s costs shall be payable by the Operator.  






	(7)  	  	The
Expert’s determination of Residual Value shall be final and binding           upon
the Parties and not subject to arbitration or litigation.  






	8.  	   	TERM
AND TERMINATION  






	This  	  	Agreement
shall continue in force until the Field has reached the end of its economic life as
determined by the Operator acting as a Reasonable and Prudent Operator or until
terminated pursuant to the terms hereof or pursuant to any applicable law but shall not
terminate on expiry or termination of the Concession Agreement but shall in any event
terminate on the Residual Value being paid.  






	9.  	   	RIGHTS
AND OBLIGATIONS OF THE OPERATOR  






	(1)  	  	A
committee shall be established with one representative of each Party (who           shall
be acceptable to the other Party acting reasonably, and who may be changed           from
time to time) for the purpose of keeping the Investor informed of the           current
Operations and proposed Operations to exploit the Obligation Wells and           intended
Option Wells. This committee shall have no authority and its sole           purpose is to
disseminate information relating to Operations to the Investor           that expand upon
and explain the information provided in the reports of the           Operator pursuant to
Clause 9(12) and 9(13). The Operator agrees to hold           meetings of the said
committee on the reasonable request of the Investor but not           more than once
every calendar quarter.  






	(2)  	  	Other
than the Investor’s right to determine the ultimate target locations           of
the Obligation Well(s) which determination shall be given by Investor not           later
than 45 days after service of notice by Operator, the Investor shall have           no
right to involve itself in any matters relating to decisions regarding
          Operations and the Operator shall have exclusive charge of and shall conduct
all           Operations. Operator shall have the right and obligation to drill to the
lowest           producible  












	
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interval
in the Reservoir formation (total depth). Upon being spudded each Well shall be drilled
until it reaches the total depth, and thereafter, it shall be Operator’s election to
(a) complete and connect; (b) suspend; or (c) abandon, all as soon as practicable.  






	(3)  	  	The
Operator may suspend any well upon prior consultation with Investor.  






	(4)  	  	No
Well shall be suspended for more than 12 months. Before the end of such           period,
the Operator shall elect (upon no less than 15 days notice to Investor)           either
to complete and connect or to abandon such well.  






	(5)  	  	The
Operator shall spud the second Obligation Well not later than 31 December           2006
and subject to the terms of this Agreement shall use reasonable efforts to           spud
the second Obligation Well prior to that date and complete the second
          Obligation Well by the 31 December 2006.  






	(6)  	  	The
Investor’s share of Petroleum produced from the Wells shall be marketed           by
the Operator free of cost to the Investor.  






	(7)  	  	The
Operator shall not encumber or pledge its interest in the Wells or           production
therefrom unless such encumbrance or pledge can be granted without           putting the
Investor’s interest in the Wells at risk.  






	(8)  	  	Except
in the case of transfer of the operatorship to an Affiliate (in which           case no
approval of the Investor shall be required), the Operator shall not           relinquish
operatorship of the Concession Area, without the approval of the           Investor which
approval shall not be unreasonably withheld nor engage any Person           as a contract
operator of the Concession Area without the approval of the           Investor (which
approval shall not be unreasonably withheld) but which approval           shall be deemed
to have been given in the case of Crescent Petroleum Company           Inc.  






	(9)  	  	The
Operator shall apply all funds received from the Investor in accordance with
          the relevant Budget. For each Well, Operator shall submit a Budget and such
          Budget shall not in any way prejudice the obligation to pay the Additional
          Costs; the payments set out in Clause 3(2) of this Agreement or (in the case of
          Option Wells) as determined pursuant to this Agreement. Operator may cash call
          at any time for any amount reasonably due pursuant to this Agreement and such
          cash call shall, in the absence of manifest error, not be subject to dispute by
          the Investor.  






	(10)  	  	The
Operator shall maintain in full force and effect all insurances with respect           to
Operations that a Reasonable and Prudent Operator would carry in the
          circumstances other than business interruption insurance. Prior to spudding the
          first Obligation Well Operator shall provide the Investor with certificates of
          Well insurance naming the Investor as a co-insured and thereafter provide the
          Investor with all subsequent certificates of Well insurance or amendments
          thereto.  












	
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	(11)  	  	The
Operator shall not agree to any amendment, variation or termination of the
          Concession Agreement or the Gas Sales Agreement without the consent of the
          Investor, if such amendment, variation or termination would adversely effect
the           interests of the Investor  






	(12)  	  	Operator
shall provide the Investor with the following data and reports with           respect to
the Operations:  






	  	(a)  	  	copies
of all logs or surveys, including in digitally recorded format if such
               exists;  






	  	(b)  	  	daily
drilling reports;  






	  	(c)  	  	copies
of all tests and core data and analysis reports;  






	  	(d)  	  	final
well recap report;  






	  	(e)  	  	copies
of plugging reports;  






	  	(f)  	  	copies
of final geological and geophysical maps, seismic sections and shot point
               location maps;  






	  	(g)  	  	engineering
studies, development schedules and quarterly progress reports on
               development projects;  






	  	(h)  	  	reservoir
and well performance reports, including reservoir studies and reserve
               estimates; and  






	  	(i)  	  	such
additional technical information as the Investor may reasonably request
               related to the Wells.  






	(13) 	  	              In
the conduct of Operations the Operator shall:  






	  	(a)  	  	perform
Operations in accordance with the provisions of the Concession                Agreement;  






	  	(b)  	  	conduct
all Operations in a diligent, safe and efficient manner in accordance                with
such good and prudent petroleum industry practices as are generally
               followed by the international petroleum industry under similar
circumstances                provided the Operator shall not be obliged to carry out any
Reworking and shall                not be liable for failure to do so.;  






	  	(c)  	  	exercise
due care with respect to the receipt, payment and accounting of funds                in
accordance with good and prudent practices as are generally followed by the
               international petroleum industry under similar circumstances;  











	
18 May 2005	
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	  	(d)  	  	prepare
and submit to the Investor a Budget for each Well. Each Budget submitted
               by the Operator shall:  






	  	  	(i) 	  	
identify
the operation;  






	  	  	(ii) 	  	
describe
the work;  






	  	  	(iii)	  	 contain Operator’s
best estimate of the total funds required to carry out such work having regard to the
fact that Operations of this nature are likely to result in unpredictable expenditure;  






	  	  	(iv)  	  	outline
the proposed work schedule;  






	  	  	(v)  	  	provide
a timetable of expenditures, if known; and  






	  	  	(vi)  	  	be
accompanied by such other supporting information as Operator, acting
                    reasonably, deems is necessary  






	  	(e)  	  	acquire
all permits, consents, approvals, and surface or other rights that may                be
required by it for or in connection with the conduct of Operations;  






	  	(f)  	  	subject
to the provisions of Clause 7.(1) to maintain the Concession Agreement                in
full force and effect;  






	  	(g)  	  	timely
pay and discharge all liabilities and expenses incurred in connection                with
the proper performance of Operations;  






	  	(h)  	  	pay
to the Government, within the periods and in the manner prescribed by the
               Concession Agreement, all periodic payments, royalties, taxes, fees and
other                payments arising under the Concession Agreement;  






	  	(i)  	  	carry
out the obligations of Operator pursuant to the Concession Agreement,
               including preparing and furnishing such reports, records and information
as may                be required;  






	(14)  	  	Operator
shall promptly notify the Investor and provide details upon the           occurrence of:  






	  	(a)  	  	any
written notice of default or termination received by the Operator with
               respect to the Concession Agreement,  






	  	(b)  	  	any
written notice of any pending or threatened claim, demand, action, suit,
               inquiry or proceeding related to the Concession Agreement or any
activities                carried out pursuant thereto, or  






	  	(c)  	  	any
material damage, destruction or loss to major assets in the Concession Area
               that could materially adversely impact the Investor.  












	
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	10.  	   	OPERATOR
REPRESENTATIONS & WARRANTIES  






	(1)  	  	The
Operator hereby represents and warrants to the Investor as of the date           hereof,
with the understanding that the Investor is relying on such           representations and
warranties, among other things, in entering into this           Agreement that:  






	  	(a)  	  	it
is a company validly existing and in good standing under the laws of the
               jurisdiction of its formation and it has the legal right, power, authority
and                qualifications to own its assets and conduct its business as currently
conducted                and to execute and deliver this Agreement and perform its
obligations hereunder;  






	  	(b)  	  	the
execution, delivery and performance by it of Operator’s obligations
               under this Agreement has been duly authorized by all necessary action on
its                part, and this Agreement has been duly executed and delivered by such
Party and                constitutes a legal, valid, and binding obligation of such
Party, enforceable                against it in accordance with its terms, subject to
bankruptcy, insolvency,                reorganization and other laws affecting creditors’ rights
generally;  






	  	(c)  	  	the
execution and delivery by Operator of this Agreement do not and the
               performance of its obligations under this Agreement by Operator will not:  






	  	  	(i)  	  	violate
any provision of its governing documents or any law presently in effect
                    applicable to it or its properties or assets;  






	  	  	(ii)  	  	result
in a breach of or constitute a default under any agreement or instrument
                    to or by which it or its properties or assets may be presently bound
or                     affected;  






	  	(d)  	  	that
to the best of its knowledge and belief, after due enquiry, there are no
               suits, judicial or administrative actions, proceedings or investigations
               (including, without limitation, bankruptcy, reorganization, insolvency or
               similar actions, proceedings or investigations) pending or, to its
knowledge,                threatened against it before any court or by or before any
governmental                authority that if decided adversely to its interest could
materially adversely                affect its ability to perform its obligations under
this Agreement;  






	  	(e)  	  	that
to the best of its knowledge and belief, after due enquiry, all
               governmental approvals and all consents, approvals or permissions of, and
               notifications or filings with, any Person necessary for the Operator’s
               valid execution, delivery and performance of this Agreement have been
obtained,                are in full force and effect and are final and not subject to
appeal;  






	  	(f)  	  	the
Concession Agreement; the Amendment agreement dated 7th April 1970; the
               amendment to the Concession Agreement dated 20th November  











	
18 May 2005	
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1971;
 the Memorandum of Agreement dated 2nd November 1978 and the extract from the Gas
Sales Agreement dated 13th June 1991; all as submitted to and signed by the Investor are
true copies of the original documents and are in full force and effect (save that certain
areas of the Concession Agreement unrelated to the requirements of this Agreement have
been relinquished and each agreement is amended by subsequent agreements in accordance
with the terms of those subsequent agreements) and no notice of default, termination, or
breach under the Concession Agreement and the other above-referred to documents has been
received by the Operator.  






	  	(g)  	  	the
Operator holds 100% of the rights in the Concession Agreement, free and
               clear of any liens, claims, burdens or encumbrances, other than the liens,
               claims, burdens or encumbrances in favour of the Government according to
the                terms of the Concession Agreement; and  






	  	(h)  	  	the
Concession Agreement contains the entirety of the obligation of Operator to
               the Government to the extent that no other material understanding or
agreement                exists between the Operator and the Government in relation to
the subject matter                of the Concession Agreement which adversely affects the
ability of the Operator                to perform its obligations under this Agreement.  






	(2)  	  	The
Investor shall not be entitled to claim that any circumstance, fact or           matter
constitutes a breach of the representations, warranties and undertakings           set
out in this Clause 10 to the extent that such circumstance, fact or matter           is
referred to in this Agreement expressly or by reference, or has otherwise           been
disclosed to it by the Operator..  






	(3)  	  	The
Operator makes no representations or warranties as to the amounts of           reserves
or the producibility thereof attributable to the Concession Area or as           to any
geological, geophysical, engineering, economic or other interpretations,
          forecasts or evaluations (whether or not provided by it or its advisors) in
          respect of the Concession Area; nor shall Operator have any responsibility or
          liability (whether as to the accuracy, interpretation or otherwise) with regard
          to any technical data or interpretations disclosed by it as part of the
          Confidential Information to the Investor (and/or their consultants or advisors
          and other parties acting on their behalf) or pursuant to the MOU prior to or
          during the subsistence of this Agreement. Accordingly no representation or
          warranty, express or implied, is made in relation to, (and no responsibility or
          liability shall attach to Operator or any of its Affiliates or to any of the
          advisors of Operator in relation to); the accuracy or completeness of the
          Confidential Information. Any liability therefor is hereby expressly disclaimed
          except in so far as Operator warrants that it has disclosed all material
          technical data to the Investor as part of the Confidential Information (such
          material technical data being as disclosed to the Investor prior to the date of
          the Agreement). The Investor shall indemnify the Operator in full in the event
          that any liability shall devolve upon the Operator as a result of the  











	
18 May 2005	
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Investor
holding out (or any third party holding out as a result of any action or inaction by the
Investor) that the Operator or any Affiliate of the Operator is responsible for the
interpretations or provenance of any technical information provided to or made available
to the public.  






	11.  	   	INVESTOR
REPRESENTATIONS & WARRANTIES  






	(1)  	  	The
Investor hereby represents and warrants to the Operator as of the date           hereof,
with the understanding that the Operator is relying on such           representations and
warranties, among other things, in entering into this           Agreement:  






	  	(a)  	  	it
is a company validly existing and in good standing under the laws of the
               jurisdiction of its formation and it has the legal right, power,
authority, and                qualifications to own its assets and conduct its business
as currently conducted                and to execute and deliver this Agreement and
perform its obligations hereunder;  






	  	(b)  	  	the
execution, delivery and performance by it of this Agreement has been duly
               authorized by all necessary action on its part, and this Agreement has
been duly                executed and delivered by such Party and constitutes a legal,
valid, and binding                obligation of such Party, enforceable against it in
accordance with its terms,                subject to bankruptcy, insolvency,
reorganization and other laws affecting                creditors’ rights generally;  






	  	(c)  	  	the
execution and delivery by it of this Agreement do not and the performance of
               its obligations under this Agreement will not:  






	  	  	          i  	  	violate
 any  provision  of its  governing  documents  or any law                presently in
effect applicable to it or its properties or assets; 






	  	  	          ii  	  	result
in a breach of or constitute a default under any agreement                or instrument
 to or by which it or its  properties or assets may                be presently bound or
affected; 






	  	(d)  	  	that
to the best of its knowledge and belief, after due enquiry, there are no
               suits, judicial or administrative actions, proceedings or investigations
               (including, without limitation, bankruptcy, reorganization, insolvency or
               similar actions, proceedings or investigations) pending or, to its
knowledge,                threatened against it before any court or by or before any
governmental                authority that if decided adversely to its interest could
materially adversely                affect its ability to perform its obligations under
this Agreement; and  






	  	(e)  	  	that
to the best of its knowledge and belief, after due enquiry all governmental
               approvals and all consents, approvals or permissions of, and notifications
or                filings with, any Person necessary for the Investor’s valid  












	
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execution,
delivery and performance of this Agreement have been obtained, are in full force and
effect and are final and not subject to appeal.  






	(2)  	  	There
is no information which would, but for the exception contained in Clause
          13(1)(b), be Confidential Information which is currently in its possession and
          that has been obtained from a third party which third party has represented
that           it has a right to disseminate such information.  






	12.  	   	INDEMNITIES  






	(1)  	  	Each
of the Parties agrees to indemnify and hold the other Party harmless for           any
claims, causes of action, or liabilities, which arise out of the breach of           any
of the warranties and representations under Clause 10 and 11 by the
          indemnifying Party.  






	(2)  	  	Subject
to Clause 18(14), the Operator will indemnify the Investor for any           withholding
taxes within the United Arab Emirates or other impositions or levies           within
Sharjah on the payments due to the Investor and ensure that the proceeds           due to
the Investor are not reduced below the amount the Investor is entitled to
          receive pursuant to Clauses 5(1) and 5(3)  






	13.  	   	CONFIDENTIALITY  






	(1)  	  	For
the purposes of this Agreement “Confidential Information” means           the
terms and conditions of this Agreement and all information disclosed to the
          Investor, its Affiliates and their directors, officers, employees and
          shareholders and their professional advisors, or consultants, under or in
          connection with this Agreement (which for the purposes of this Agreement shall
          be deemed to include any confidential information disclosed pursuant to the MOU
          or any information disclosed during any arbitration proceedings hereunder) but
          does not include any information which:  






	  	(a)  	  	is
already in the public domain or becomes available to the public other than as
               a result of a breach of this Agreement or of the MOU; or  






	  	(b)  	  	has
been acquired independently by a Party from a third party before or after
               the date of this Agreement which validly represents that it has a right to
               disseminate such information at the time such information is acquired by
such                Party.  






	(2)  	  	The
Confidential Information shall, until five (5) years after this Agreement           has
terminated):  










	
18 May 2005	
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	  	(a) 	  	
be
treated as confidential; and  





















	  	(b)  	  	not
(except as provided in Clause 13(3)) be disclosed in whole or in part by
               either Party to any other Person without the prior written consent of the
other                Party.  






	(3)  	  	No
Party shall be required to obtain the prior written consent of the other           Party
in respect of disclosure of Confidential Information:  






	  	(a)  	  	to
the directors and employees and Affiliates of such Party, provided that such
               party shall agree in writing to be bound by confidentiality provisions
               substantially the same as those contained in this clause 13;  






	  	(b)  	  	to
Persons professionally engaged by or on behalf of such Party, provided that
               such Persons shall be required to keep such information confidential;  






	  	(c)  	  	to
any lending or other financial institution in connection with the financing
               of such Party’s operations, but only to the extent required in
connection                with obtaining and maintaining such financing and subject to
such institution                agreeing in writing to be bound by confidentiality
provisions substantially the                same as those contained in this Clause 13;  






	  	(d)  	  	to
any bona fide intended assignee of the whole or any part of the rights and
               interests of the disclosing Party, but only to the extent required in
respect of                such proposed assignment and subject to the Operator approving
beforehand the                identity of the ultimate beneficial owner of the intended
assignee and such                intended assignee also agreeing in writing to be bound
by confidentiality                provisions substantially the same as those contained in
this Clause 13.  






	(4).  	  	The
Investor shall not make any announcements (which term shall include the           filing
or issuance of any prospectus, registration statement, sales document or           any
other similar document whether or not to enter the public domain) containing
          any Confidential Information or disclose any information in respect of this
          Agreement other than as permitted pursuant to sub clause 13 (3) (a) — (d)
          above; unless such announcements have first been provided in full to Operator
          and Operator has in its sole discretion agreed in writing and without
          qualification to such disclosure. Operator shall make its reasonable endeavours
          to respond to Investor as soon as possible. Should Operator in its response
          refuse approval to the announcement then Investor shall not make the
          announcement. In the event Operator consents to such disclosure, such consent
          shall be given entirely without liability or responsibility on the part of
          Operator. Furthermore, Investor undertakes to fully assume liability and not to
          defend any action taken against Investor by any third party on the grounds that
          the Operator had apparently approved the contents of or announcement of the
          disclosure. Investor accordingly waives its rights to take any action against
          the Operator in the circumstances described above in this sub-clause 13 (4) .  











	
18 May 2005	
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	(5)  	  	The
Investor agrees that the disclosure of Confidential Information in
          contravention of the terms of this Agreement may cause the Operator irreparable
          harm and damage and therefore agrees that a material disclosure in
contravention           of this Agreement shall entitle the Operator, in addition to any
other remedy,           to seek injunctive relief.  






	14.  	   	ASSIGNMENT  






The Investor shall have the absolute
right to assign the rights and obligations under this Agreement unless the Operator can
demonstrate that in its reasonable opinion the proposed assignee would materially impact
on the business and affairs of the Operator and must be subject to the approval of the
Operator not to be unreasonably withheld.  



	15.  	   	FORCE
MAJEURE  






	(1)  	  	The
term “Force Majeure” as employed herein shall mean any event not
          within the reasonable control of the Party claiming suspension/termination, and
          which by the exercise of due diligence such Party is unable to prevent or
          overcome.  






	(2)  	  	Subject
to the provisions of Clause 15(3), to the extent Force Majeure prevents           or
delays performance by a Party any resulting failure in performance shall not
          give rise to any rights or cause of action based on breach of obligation of
such           Party and such obligations shall be suspended for a period of time
sufficient to           enable the affected Party, acting with reasonable diligence, to
take action in           an economic manner to prevent the Force Majeure condition from
further           preventing or delaying performance of its remaining obligations under
the           Agreement. In the event that during the drilling phase of Operations the
period           of suspension continuously exceeds one week then the affected Party may
          terminate the rig contract (whereupon the obligation under this Agreement shall
          be suspended in relation to the Well so affected) by notice in writing to the
          other Party; In the event a Well or any obligation pursuant to this Agreement
is           suspended by Force Majeure then in the event such suspension continues
without           interruption for a continuous period of 365 days then the Investor may
at its           option terminate the obligations suspended for Force Majeure whereupon
the           Operator shall return the balance of any funds paid by the Investor after
          deducting any costs including Drilling and Completion Costs which were
          reasonably attributable to the suspension and/or incurred prior to the
          suspension .  






	(3)  	  	During
circumstances of Force Majeure, the Parties shall not be relieved from
          performing the following obligations under this Agreement:  






	  	(a) 	  	
to
pay money due or that may become due;  






	  	(b) 	  	
to
give any notice required; and  










	
18 May 2005	
22 	
 



















	  	(c) 	  	
the
obligations set out in Clause 15(4).  






	(4) 	  	The
Party invoking Force Majeure shall:  






	  	(a)  	  	notify
the other party immediately after determining the nature of the Force
               Majeure and the extent to which such Force Majeure suspends the affected
               Party’s obligations under this Agreement;  






	  	(b)  	  	keep
the other Party informed of the steps being taken by it to remove the
               effects of the Force Majeure; and  






	  	(c)  	  	resume
performance of its obligations as soon as reasonably possible, with                timely
notice to the other Party.  






	16.  	   	GOVERNING
LAW AND ARBITRATION  






	(1)  	  	This
Agreement shall be governed by and interpreted in accordance with the laws           of
England.  






	(2)  	  	All
disputes, controversies or claims that may arise between the Parties out of           or
in relation to this Agreement, or the breach, termination or validity of this
          Agreement, shall be finally settled by arbitration in the city of London
England           and shall be conducted in the English language pursuant to the rules of
the           International Court of Arbitration attached to the International Chamber of
          Commerce (“Court”) by three (3) arbitrators, one to be nominated by
          each Party and the third to be nominated by the two arbitrators nominated by
the           Parties or, failing agreement within 20 days after nomination of the second
          party-nominated arbitrator, by the Chairman of the Court. No matter relating to
          any such dispute, controversy or claim shall be referred to any judicial or
          other authority for any action which could interfere with or result in the
          imposition of any additional procedural or other limitation on the initiation
or           conduct of any proceedings in accordance with the rules or render
unenforceable           an award made pursuant to the rules. The award shall be final and
binding on the           Parties and their Affiliates with no procedure for appeal to any
court.           Judgement on the award rendered may be registered or entered in any
court having           jurisdiction over any of the Parties and their respective assets
or application           may be made in such court for a judicial acceptance of the award
or any order of           enforcement. If a dispute, controversy or claim is referred in
accordance with           the aforesaid to arbitration, the Parties shall nevertheless
continue to perform           their respective obligations under this Agreement.  











	
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	17.  	   	NOTICES  






	(1)  	  	Every
request, notice, invoice and other communication provided for in this           Agreement
shall be made in writing and shall be deemed to have been properly           given if
delivered in person to an authorized representative of the Party to           whom the
same is directed, or if sent by facsimile or by recognised courier           service
(postage charges prepaid) to the Party concerned at the following           address:  







	  	
Sastaro
Limited  







	  	
Office Address: 

Mailing Address:

Telephone:      

Fax:            	
22 Arch.Makarios III Avenue

PO Box 22096, Nicosia 1517, Cyprus

00357 224 58700

00357 226 78200
 









	  	
Buttes
Gas & Oil Co. International Inc.  







	  	
Office Address: 

Mailing Address:

Telephone:      

Fax :           

	
Crescent Tower, Al Buhairah Corniche, Sharjah

PO Box 211

Sharjah, United Arab Emirates

009716 5727000

0097165741170
 







	  	
Notices
will be deemed effective, and any time periods running from notices shall commence, as
follows:  






	  	  	(b)  	  	personal
delivery: on delivery  






	  	  	(c)  	  	facsimile:
on the date shown by a facsimile transmission report  






	  	  	(d)  	  	courier
service: when delivered  






	(2)  	  	                     Either
Party may change its address hereunder by giving the other Party prior
                    written notice.  






	18.  	   	MISCELLANEOUS  






	(1)  	  	This
Agreement supersedes and nullifies all previous representations, agreements           and
understandings, oral or written, concerning the subject matter hereof, and           no
such previous representations, agreements and understandings shall be used in
          any way whatsoever for construction or interpretation of this Agreement.  






	(2)  	  	No
amendments of or supplements to this Agreement shall be valid unless executed
          in writing by a duly authorized officer of each of the Parties.  










	
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	(3)  	  	Any
waiver of any right or remedy of a Party under this Agreement must be in
          writing and signed by that Party.  






	(4)  	  	Failure
to exercise or delay in the exercise of any right or remedy either Party           may
have under this Agreement or in connection herewith shall not operate as a
          waiver thereof, nor shall any single or partial exercise of any such right or
          remedy prevent any further or other exercise thereof or of any other such right
          or remedy.  






	(5)  	  	The
rights and remedies provided herein are cumulative and not exclusive of any
          rights and remedies provided by law. Each Party shall have the right to
exercise           a right of set off and to deduct sums due to it from any sums which
otherwise be           payable to the other Party.  






	(6)  	  	Each
Party is entering into this Agreement as a principal acting on its own           account
and not as the agent for any other Person.  






	(7)  	  	Pursuant
to s1(2)(a) of the Contracts (Rights of Third Parties) Act 1999 the           Parties
intend that no term of this Agreement may be enforced by any Person who           is not
a Party to this Agreement and the Act is excluded accordingly.  






	(8)  	  	Neither
Party shall be liable for indirect or consequential losses, loss of           production,
loss of revenue, exemplary or punitive damages or other losses of a           like
nature. Liability of Operator shall in any event be limited to damages           awarded
at arbitration for gross negligence and wilful default.  






	(9)  	  	If
either Party is in default in any payment due to the other Party hereunder           then
without prejudice to any other remedy available under the Agreement the           amount
in default shall bear interest at the rate of LIBOR plus 500 basis points
          compounded annually. In the event payment is not made when due then the right
to           terminate shall arise upon the expiry of 10 days written notice. The Parties
are           entitled to rights of set-off and the Investor’s right to the
Production           Revenue may be suspended for such time as may be necessary for the
Operator to           recover sums due to it from the Investor  






	(10)  	  	Nothing
in this Agreement shall be construed to mean that the Investor has an           interest
in the Concession Agreement or has made a loan to the Operator and the           Investor
acknowledges that the recovery of its share of the Drilling and           Completion
Costs will be solely dependent upon its right to receive its share of
          Production Revenue as calculated pursuant to this Agreement.  






	(11)  	  	In
the absence of any characteristic log criteria on which to define the top and
          base of the Ilam Mishrif section (due to, among other things, erosional
          unconformity, condensed sequences or faulting) the following considerations
          shall apply:  






	  	(a) 	  	
the
Ilam/Mishrif sequence is a Santonian-Turonian sequence;  











	
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	  	(b)  	  	shales
of Santonian, or younger age, shall be considered post-Ilam and                limestones
of Albian, or older age, shall be considered pre-Mishrif;  






	  	(c)  	  	the
top of the Ilam is therefore the first limestone of Santonian Age; and  






	  	(d)  	  	the
base of the Mishrif is therefore the top of Katiyah formation.  






	(12)  	  	This
Agreement constitutes the entire agreement between the Parties with respect           to
the subject matter contained herein and supersedes all prior agreements,
          representations, understandings and negotiations of the Parties. Each Party
          waives any claim or right of action against the other in respect of any such
          agreement, representation, understanding or negotiations.  






	(13)  	  	This
Agreement may be executed in one or more counterparts and when taken           together
shall constitute one and the same agreement.  






	(14)  	  	Should
there be any unilateral change of law by the Government or unilateral           change to
the fiscal terms of the Concession Agreement such that the economic           interests
of the Operator are adversely affected then the economic interests of
          theParties shall be adjusted on an equitable basis so that :  






	  	a)  	  	
in the case of change in the royalty, the revised royalty rate shall replace
those rates specified in Clause 5(1)(a) and 5(3)(a).  






	  	b)  	  	
in the case of change in any other fiscal terms, the Operator shall, acting
reasonably, allocate the impact of such change and provide appropriate
justification for such allocation.  






IN WITNESS WHEREOF the Parties have
duly executed this Agreement the day and year first above written. 




	

Buttes Gas & Oil Co. International Inc.





_______________________


Name 


Title 

	
SASTARO LIMITED





_______________________


Name 


Title 













	
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Appendix 1 to that
agreement between

Buttes Gas & Oil Co. International Inc. and 

Sastaro Limited made the _________ day of 

_________________ 2005  









CONCESSION MAP  











	
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Appendix 2 to that
agreement between

Buttes Gas & Oil Co. International Inc. and 

Sastaro Limited made the _________ day of 

_________________ 2005  









OPERATOR RATES 









	
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APPENDIX 2  



Schedule of Operator
Charge-Out Rates  







Section 1 : Operator Time Writing
Rates  






	
A.  Offshore Personnel: 
	
US$/Hour 
	Production Supervisor	 	59	 
	Senior Production Operator	 	37	 
	Production Operator	 	25	 
	Maintenance Supervisor	 	83	 
	Mechanical Specialist	 	37	 
	Mechanical Technician	 	24	 
	Electrical Technician	 	26	 
	Instrument Technician	 	22	 
	Roustabout	 	10	 









	
B.   Onshore Personnel: 
	
 
	General Manager	 	220	 
	Operations Manager	 	158	 
	Field Superintendent	 	135	 
	Senior Maintenance Engineer	 	92	 
	Legal Counsel	 	184	 
	Manager, Reservoir Development	 	163	 
	Senior Geophysicist	 	161	 








	
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C.  Warehouse Personnel: 
	
 
	Materials & Logistics Manager	 	116	 
	Warehouse supervisor	 	40	 
	Logistics Controller	 	26	 
	Materials Controller	 	21	 
	Warehouseman	 	23	 
	

	Crane Operator	 	17	 
	Roustabout	 	12	 









	
D.  Drilling Personnel:	 
	Drilling Manager	 	228	 
	Senior Drilling Engineer	 	258	 
	Senior Petroleum Engineer	 	205	 
	Materials & Logistics Supervisor	 	194	 
	Drilling Supervisor	 	234	 










	
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Section 2 : Crescent Warehouse & Storage
Charges  




		
	Storage Area	 	$0.74 per sq ft per year	 
	Pipe Rack	 	$120 per set per month	 
	Warehouse Charge	 	$409 per month	 
	20 Ton Crane	 	$20.5 per hour excluding operator	 
	3 Ton Crane	 	$10.9 per hour excluding operator	 
	3 Ton Pickup	 	$10.9 per hour excluding operator	 







	Note:  	  	The
above rates in Schedule 1 and 2 are subject to revision, e.g as costs increase. Operator
shall provide appropriate justification for the revision in charge-out rates. 












	
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Appendix 3 to that
agreement between

Buttes Gas & Oil Co. International Inc. and 

Sastaro Limited made the _________ day of 

_________________ 2005  








FORM OF GUARANTEE  









	
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GUARANTEE  



[Date] 






[ name of Sastaro Limited
] 



[ address of Sastaro
Limited ] 



	  	
Re:
Guarantee by parent company of Buttes Gas and Oil Co International Inc. (”
Guarantor”) on behalf of Buttes Gas & Oil Co. International Inc.
(“Guaranteed Party”) pursuant to that Participation Agreement
(“Agreement”) dated · , 2005, between · (” Investor”)
and Guaranteed Party. 






The Guarantor, a company organized
and existing under the laws of Bermuda with its principal office located at 19th Floor,
Crescent Tower, Buhaira Corniche, Sharjah in consideration of the Investor entering into
the Agreement and in its capacity as the parent company of Guaranteed Party, hereby
irrevocably and unconditionally guarantees to the Investor: (a) to discharge any liability
of Guaranteed Party that arises as a result of any third party claim lodged between 31st
December 2004 and the date of execution of the Agreement, against the Guaranteed Party;
and (b) to discharge any indebtedness of Guaranteed Party arising after the date of
execution of the Agreement but which has arisen as a result of any third party claim
against Guaranteed Party relating to the period prior to execution of the Agreement. For
these purposes third party claims shall mean any claim unrelated to the Agreement and/or
the MOU. The obligations as set out in (a) and (b) above (“the Obligations”) are
the only obligations that the Guarantor is obliged to guarantee pursuant to this
Guarantee. 



If, at any time, Guaranteed Party
fails, neglects, or refuses to perform the Obligations, then Guarantor shall, immediately
upon first written demand by the Investor, duly and punctually perform such Obligation as
if the Guarantor were itself the obligor. The Investor shall give prompt notice to the
Guarantor of any default by the Guaranteed Party in the performance of the Guaranteed
Party’s Obligation; provided, however, that any failure, delay or defect in the
giving of such notice or in the making of a demand for performance on the Guarantor under
this Guarantee shall not alter or affect the obligations of the Guarantor under this
Guarantee. In any written demand to the Guarantor, the Investor shall refer to this
Guarantee, state that the Guaranteed Party is in default in in respect of an Obligation,
state the amount being demanded of the Guarantor and designate the bank account to which
the said amount is to be deposited. 









	
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The Guarantor covenants and agrees
with the Investor that (i) waiver, settlement, release or termination by the Investor of
any terms, provisions, conditions and obligations of the Agreement; (ii) any modification
or amendment of the Agreement; (iii) the granting of indulgences or extensions of time to
the Guaranteed Party; (iv) the taking of, or the omission to take, any of the actions
referred to in the Agreement or any actions under this Guarantee; (v) any failure,
omission or delay on the part of the Investor to enforce, assert or exercise any right,
power or remedy conferred on the Investor in the Agreement or this Guarantee, or at law or
in equity, or the inability of the Investor to enforce any provision of this Guarantee or
the Agreement for any reason, other than for reasons of force majeure; (vi) any change in
the corporate existence, structure or ownership of the Guaranteed Party, the Guarantor or
the Investor; or (vii) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of assets, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization of other similar proceeding affecting the Guaranteed
Party or its assets, shall not in any way affect, change or release the Guarantor from its
obligations under this Guarantee, regardless of whether any of the foregoing were made or
done without notice to or the consent of the Guarantor, as the case may be. This Guarantee
shall remain in effect whether or not the Guarantor remains an Affiliate of the Guaranteed
Party unless and until, subject to the following sentence, the Investor consents in
writing to release the Guarantor from its obligations hereunder. If the Guarantor is no
longer an Affiliate of the Guaranteed Party, the Investor shall release the Guarantor from
its obligations hereunder if (a) a new guarantee is executed by a new guarantor, (b) the
new guarantee has substantially the same terms as this Guarantee, and (c) the new
guarantor has equal or greater financial capability to satisfy the obligations under the
new guarantee. The Investor shall not be required to consent to releasing the Guarantor
under any other circumstances. 



Guarantor hereby waives (i) any of
its rights and defences as surety or guarantor under any applicable law which may at any
time be inconsistent with this Guarantee, or which might otherwise constitute a legal or
equitable discharge of a surety or guarantor with respect to this Guarantee, and (iv) any
presentment, demand for performance, notice of non-performance or other occurrence of a
default under the Agreement, protests, notice of acceptance of this Guarantee, and any
other notice of any kind whatsoever in making any claim or demand hereunder.
Notwithstanding anything to the contrary in this Guarantee, any defence which would have
been available to the Guaranteed Party shall be deemed to be available to the Guarantor
except to the extent that any defence relates to the insolvency of the Guaranteed Party. 



This Guarantee shall be governed by,
construed, interpreted and applied in accordance with the laws of England, excluding any
choice of laws which would require the application of the laws of another jurisdiction.
Any dispute, controversy or claim arising out of in relation to or in connection with this
Guarantee shall be exclusively and finally settled by arbitration in accordance with
Clause 16(2) mutatis mutandis of the Agreement. 



The Guarantor shall not exercise any
claim, right, or remedy which the Guarantor may now have or hereafter acquire against the
Guaranteed Party that arises hereunder and/or from the performance by the Guarantor
hereunder including, without limitation, any 









	
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claim, remedy or right of
subrogation, reimbursement, contribution, indemnification, or participation in any claim,
right, or remedy against the Guaranteed Party or any security which the Guarantor now has
or hereafter acquires, whether or not such claim, right, or remedy arises in equity, under
contract, by statute, under common law or otherwise until all of the Guarantor’s
obligations hereunder have been fulfilled. This Guarantee shall continue to be effective
or be reinstated if at any time any payment made or value received with respect to the
Guarantor’s obligations is rescinded or must otherwise be returned by the Guaranteed
Party upon the insolvency, bankruptcy or reorganization of the Guarantor or the Guaranteed
Party, or otherwise, all as though such payment had not been made. 



This Guarantee may not be changed,
modified, discharged or terminated in any manner except with the prior written consent of
Guarantor. Any provision of this Guarantee which is prohibited or unenforceable in any
applicable jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. 



This Guarantee shall (i) inure to the
benefit of the Investor and its respective successors and (ii) be binding upon the
Guarantor and its respective successors. For the purposes of this Guarantee, the term
“Affiliate” shall mean in relation to the Guaranteed Party, any company that
directly or indirectly controls, is controlled by or is under common control with the
Guaranteed Party. “Control” means the ownership, directly or indirectly, of
fifty percent (50%) or more of the shares or voting rights in a company. 



Any call upon this Guarantee, and any
other notice hereunder, shall be sent to the Guarantor at the address first above stated. 



This Guarantee shall terminate upon
the earlier of: (a) the date of termination of this Agreement, or (b) the date when the
Investor has been reimbursed its total investment together with a further payment in a sum
equivalent to its total investment. 







IN WITNESS WHEREOF, the Guarantor has
caused this Guarantee to be duly executed and delivered by its duly authorized
representative as of the date first written above. 



By:  
_________________________ 



Name: 



Title:   President and
Chief Executive Officer 










	
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Appendix 4 to that
agreement between

Buttes Gas & Oil Co. International Inc. and 

Sastaro Limited made the _________ day of 

_________________ 2005  





on
letterhead of BGOI headed paper



[ Sastaro Limited ]

Re Sir Abu Nu’ayr Concession 



Dear Sir 



In consideration of US$1 paid by
Sastaro Limited (the receipt of which is hereby acknowledged by the Operator) and the
further consideration of Sastaro Limited entering into an agreement with the Operator to
assist in the finance of the development of the Mubarek Concession Area offshore the
Emirate of Sharjah United Arab Emirates, the Operator hereby grants for a period of 3
years a right of first refusal to Sastaro Limited to fund any work program to the three
(3) nautical mile limit proposed for the Sir Abu Nu’ayr Concession Area currently
held by Sharjah Petroleum Company,an affiliate of the Operator subject to the fulfillment
of the terms set out herein..The term Operator for the purpose of this letter includes
Operator or any of the affiliates of the Operator. 



Should the Operator desire to carry
out a work program in the Sir Abu Nu’Ayr Concession Area it shall give Sastaro
Limited the right to fund the program on the terms to be offered bona fide and in good
faith to an arms length third party. Such right shall be subject to the following
procedure. 



The Operator shall offer terms and
conditions that it intends offering to a third party, in a notice to Sastaro Limited ,
Sastaro Limited shall have the right to participate in the work program on the terms and
conditions set out in the said notice if, within thirty (30) days of the Operator’s
notice, Sastaro Limited delivers to the Operator a counter-notification that Sastaro
Limited accepts such terms and conditions without reservations or conditions. If Sastaro
Limited does not deliver such counter-notification, the third party may carry out the work
program as presented under the same terms and conditions (or upon more onerous terms than
those offered to Sastaro Limited) as those set forth in the notice to Sastaro Limited. If
Sastaro Limited presents the counter notification then Sastaro Limited shall be obliged to
proceed with the Work Program upon the terms set out in the notice. 



Further Buttes Gas & Oil Co.
International Inc (“Buttes”) hereby warrants to Sastaro Limited that Buttes will
cause the affiliate holding the Sir Abu Nu’Ayr Concession Agreement to honour this
obligation 



Yours truly,

Name 

Title President and Chief Executive Officer 









	
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