Exhibit
10.12


 


Technological Services Agreement


 


On Horizontal Water Jet Drilling for Daqing
Oil Field


 


Project Title:                                           Technological
Services for Horizontal Water Jet Drilling for Daqing Oil Field


 


Party A:                                                                  Daqing
Huajian Oil Technology Services Co., Ltd.


 


Party B:                                                                    Tianjin
New Highland Science Development Co., Ltd.


 


Place of
Execution: Daqing City


 


Date of
Execution: May 24, 2010


 

















 


Party A:                                                                            Daqing
Huajian Oil Technology Services Co., Ltd.


 


Party B:                                                                              Tianjin
New Highland Science Development Co., Ltd.


 


This Agreement
is made and signed into by and between Party A and Party B on the basis of
equal status, volition, and friendly consultation, with regard to the
technological services that Party B agrees to provide Party A for horizontal
water jet well drilling in Daqing Oil Field, so as to clarify the rights and
obligations for both parties, who shall perform the Agreement with full
responsibility and credibility.


 


WHEREAS,


 


1              The Content
and Scope of Technological Services


 


In
accordance with the design principles and construction technological
requirements that Party A specifies, Party B shall fulfill the following
aspects of work:


 


1.1           Responsible
to complete the project construction work of horizontal water jet well drilling
under the terms of the Agreement.


1.2           Provide the
tools, instruments, equipment, and facilities as required for the delivery of
technological services for horizontal water jet well drilling, responsible for
the adjustment, installation, and operation of its self-provided equipment and
tools, and responsible for the dismantling, repair, and maintenance, so that
the equipment and tools remain in good conditions during the time of project
construction.


1.3           Complete the
plan of construction design for horizontal water jet well drilling, and produce
plan modifications according to the actual conditions of on-site construction.


1.4           Submit to
Party A formal documents, including but not limited to the technological plan
and the technology summary for horizontal water jet well drilling.


 


2              Term of Technological
Services


 


2.1           The term of
technological services pursuant to the provisions of this Agreement is three
(3) years, starting from the date whereby this Agreement is signed into
effect.


 


3              Responsibilities
and Obligations of Party A


3.1           Part A
agrees to provide no less than 380 oil wells for Party B to work on during the
term of this Agreement and to provide the technological conditions as required
for the delivery of technological services indicated in this Agreement, and
ensure that the necessary equipment and downhole water jet units work properly,
so as to facilitate Party B’s efforts to provide the technological services in
accordance with the terms of this Agreement.


3.2           Party A
shall be responsible to submit to Party B requests for technological services,
and timely and accurately provide Party B with the geological design needed for
the performance of this Agreement, including the relevant data and documents on
geological strata and wells.


3.3           Party A
shall be responsible to organize and make available a working team with which
to support the construction work of horizontal water jet well drilling, shall
be responsible to provide the necessary water sources and electricity power and
shall be responsible to cover all the resultant costs. With regard to strata
that contain H2S, Party A shall be 


 

















 


responsible
to provide the necessary protective equipment and measures. Party B shall not
be held accountable for any accidents and/or construction delays due to the
quality defects of the aforementioned supporting services that Party A is
required to provide.


3.4           Party A
shall notify Party B of the on-site arrival date(s) of staff, equipment
and tools seven (7) days in advance.


3.5           Party A
shall review the construction design of the well in question submitted by Party
B, shall verify the construction design plan that Party B modifies onsite, any
special work plan, and the written instruction of work to be communicated
downhole, and shall be responsible for all the technological duties outside of
the scope of the technological services specified in this Agreement.


3.6           Party A has
the right to check the credentials and work capabilities of Party B’s staff,
and any staff failing to meet the mutually agreed requirements between Party A
and Party B will be replaced within the limit of seven (7) days. Party B
shall cover the resulting costs.


3.7           Party A has
the right to check the quality and safety of the equipment and instruments
rented by Party B as well as the right to forbid the use of any equipment or
instrument which does not comply with the pre-agreed standards between the two
parties. Representatives from Party A have the right to check, at any time, the
onsite duty performance status of engineers from Party B.


3.8           Party A
shall collaborate on the efforts of sending injured or sick onsite personnel in
an emergency state to the hospital for emergency care, and the medical costs
shall be covered by whoever is held accountable for that matter.


3.9           Considering
that the instruments and downhole equipment of Party B entail particular strata
features, if relevant strata features do not meet the construction requirements
of such instruments and equipment of Party B, Party A may not force Party B to
deliver equipment downhole and carry out construction work.


3.10         In the case
of abnormal situations downhole, Party A shall proactively coordinate with
Party B in taking counter-measures, and construction work may not be resumed
until such complicated situations are resolved.


 


4              Responsibilities
and Obligations of Party B


 


4.1           Party B
shall provide this project with professional technicians who must have onsite
construction work experiences and competence for this technological services
project.


4.2           Upon the
receipt of Party A’s notification, Party B shall timely organize and dispatch
its staff, equipment, and instruments to the site at the date/time designated
by Party A.


4.3           Party B
shall provide the specialized tools, drilling tools, instruments, and
supplementary parts as required for the project, and be responsible for their
dismantling, maintenance, and repair, so that they remain in good conditions at
any point of time.


4.4           Party B
shall complete the construction design for the well(s) in question in
accordance with the technological requirements of Party A, as well as its
geological design and engineering design. Party B shall provide the
technological services for horizontal water jet drilling on the basis of the
construction design reviewed and approved by Party A.


4.5           Party B
shall specify in writing the requirements, measures and drilling tools
combinations for onsite construction work, as well as the supporting work
demanded of Party A and shall deliver such document to the team leader of Party
A, who shall then direct the work instructions to the well-repair team.


4.6           During the
course of onsite construction work, construction personnel from Party B shall
discuss the construction measures with representatives from Party A according
to the actual circumstances of construction.


4.7           Party B
shall abide by all the rules and regulations that Party A has made for the
zones of production and living, and comply with Party A’s supervision.


 

















 


4.8           Party B
shall be responsible to dispatch its employees to reach locations designated by
Party A at time/date designated by Party A.


4.9           Party B
shall ensure that its employees strictly follow the ethnic group-related laws,
regulations, and policies in the area and respect the customs of the ethnic
groups. Party B shall be held solely accountable for the legal and economic
liabilities arising from its noncompliance.


4.10         During the
course of construction work, Party B shall be responsible to bear the economic
losses arising from any destruction, damage, drill-burying, drill-sticking and
similar circumstance of its instruments, tools, and equipment, if such is its
own fault; if not, whoever is responsible shall bear the economic losses.


4.11         Party B
shall strictly follow relevant national requirements for safe production as
well as industry-wide specifications. Party B shall be solely and fully
responsible for accidents if they are its own fault. If not, whoever has caused
them shall bear full liabilities.


4.12         Party B
shall strictly follow national requirements for environmental protection as
well as industry-wide specifications in this regard. Party B shall be solely
and fully responsible for accidents of environmental destruction and pollution
if they are its own fault. If not, whoever has caused them shall bear full
liabilities.


4.13         If accidents
are caused by unbalancing, Party A shall bear full liabilities.


 


5              Work
Relationship Between Party A and Party B


5.1           Party B
shall fully provide the construction services hereunder in accordance with the
request of Party A, while Party A shall require its working team to coordinate
with Party B proactively. The two parties shall support and help each other so
as to ensure the successful completion of the construction work under this
Agreement.


5.2           Party A has
the right to check, at any point of time, the status of the technological
services delivered by Party B in respect of the project(s) agreed
hereunder, so as to verify whether Party B’s construction plan complies with
the standards set out under the provisions of this Agreement.


5.3           As long as
the construction plan proposed by Party B is reasonable and feasible, it is
proper for Party A to send it as instructions for the work units. In the event
that representatives from Party A raise objections to the construction plan,
the written instructions of Party A shall be regarded as the official ones.


 


6              Fee, Billing
Settlement, and Project Acceptance


6.1           Fee for
horizontal water jet drilling technological services:


The fee for
the project (technological service fee and training fee) shall be based on the
actual horizontal footage, at the rate of 2,500 RMB/meter.


6.2           Payment
method:


Payments
shall be made on a monthly basis, on the basis of the actual horizontal footage
verified and accepted for the month.


6.3           If
construction cannot be completed as designed due to geological and/or
environmental reasons, the parties agree to early terminate the contract work
of horizontal water jet drilling. The payments for water jet drilling shall be
based on the actual work volume.


6.4           If Party A
decides to make changes or adjustments to the construction design according to
the actual conditions of onsite construction, it shall cover the resultant
costs.


6.5           Upon the
completion of construction for each well, Party A shall verify it according to
construction design, in which process Party B shall provide the necessary
facilitation. Verification shall be completed within ten (10) days after
the completion of Party B’s work. If Party A fails to complete verification
without any justifiable reasons, the work in question shall be deemed to have
passed verification. If the work does not pass verification according to the
construction design, Party B shall immediately make 


 

















 


correction,
and shall cover all the costs during the course of correction. After
correction, Party A shall conduct verification in the same manner as set out
above. Party A shall issue an acceptance document upon successful completion of
the verification.


 


7              Force
Majeure and Exemption from Liabilities


7.1           In the event
that this Agreement cannot be performed or cannot continue to be performed due
to force majeure (such as floods, inclement weather, and earthquake), neither
party shall be liable to the other party for any breach of contract
liabilities, nor shall the two parties be liable to compensate each other for
any economic losses resulting from such uncontrollable and unpredictable
natural disasters, except where any party hereto is obligated to predict and
prevent the same under the terms of this Agreement. After force majeure ends,
the parties shall consult each other as to whether to continue to perform this
Agreement.


7.2           If, during
the course of construction, construction is discontinued due to reasons
attributable to Party A, geological or strata structural factors, or natural
disasters or other force majeure events, Party B shall not bear any liabilities
for the direct or indirect losses caused by the same to Party A.
Discontinuation of construction due to such reasons shall not exempt Party A
from its obligations to make payments to Party B for the portion of
construction already completed.


 


8              Early
Termination or Suspension


8.1           Each party
has the right to terminate the Agreement early or suspend it on the strength of
any serious fault of the other party in the performance of this Agreement.


8.2           If, due to
its change of plan or similar reasons, Party A proposes to terminate the
Agreement early, it shall make payments to Party B for its services on the
basis of the actual work volume of Party B,
provided that in all cases the equipment relocation expenses shall
always be borne by Party A.


8.3           If, during
the course of construction, construction is prevented from being continued by
reasons attributable to Party A, geological or strata structural factors, or
natural disasters or other force majeure events, Party A and Party B may by
mutual agreement terminate the Agreement early.


 


9              Resolution
of Disputes


9.1           If any
dispute arises during the performance of the Agreement, both parties shall
prioritize friendly negotiation as the form of dispute resolution. If
negotiation fails, the parties shall bring a proceeding before the competent
People’s Court in the location where the Agreement is signed into effect.


 


10          Miscellaneous


10.1         The two
parties may by mutual agreement make changes to part of the provisions herein
and/or sign a supplementary contract in connection with any significant
difficult technological problem or any matter not covered hereunder which may
arise during the performance of this Agreement. Changes to the Agreement shall
be effected in writing and shall be signed and sealed by the two parties.


10.2         Notifications,
reports, correspondences and the like needed for the performance of this
Agreement shall be delivered in written form to the locations that each party
designates.


10.3         All written
and electronic materials completed during the course of the parties’
cooperation in connection with any well, including but not limited to
geological data and construction technological plans, shall be unconditionally
transferred to Party A, and Party B shall not retain any of them. Unless
permitted by Party A, Party B shall not 


 

















 


disclose any
such materials to a third party; otherwise, Party B shall be held accountable
for breach of confidentiality.


10.4         The
Agreement enters into effect as of the date of execution by the parties and
ends as of full settlement of all payments hereunder.


10.5         The
Agreement is signed in four (4) copies, with each party holding two
(2) of them. This Agreement becomes effective upon execution and sealing
by both parties.


 

















 


Party A:                 Daqing
Huajian Oil Technology Services Co., Ltd.


 


(Seal)


 


	
  /s/ Cao
  Wenxi

  	
   

  
	
   

  	
   

  
	
  (Name of
  Authorized Representative)

  	
   

  
	
   

  	
   

  
	
  Name: Cao
  Wenxi

  	
   

  



 


Date of
Execution: May 24, 2010


 


Place of
Execution: Daqing


 

















 


Party B:                 Tianjin New
Highland Science Development Co., Ltd.


 


(Seal)


 


	
  /s/ Xin
  Guoqiang

  	
   

  
	
   

  	
   

  
	
  (Name of
  Authorized Representative)

  	
   

  
	
   

  	
   

  
	
  Name: Xin
  Guoqiang

  	
   

  



 


Date of
Execution: May 24, 2010


 


Place of
Execution: Daqing