EXHIBIT 10.1



 





Exhibit 10.1




MASTER SERVICE CONTRACT




FOR




PROVISION OF UNDERBALANCED COILED TUBING DRILLING SERVICES




TO




CANARGO ENERGY CORPORATION




BY




WEUS HOLDING INC




WEATHERFORD CONTRACT REFERENCE NO: EU/RUS/DWS/040/04




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INDEX OF CONTENTS




Recital




Clause 1 — AGREEMENT




Clause 2 — LABOUR, WARRANTY, EQUIPMENT, MATERIALS, SUPPLIES AND SERVICES




Clause 3 — PAYMENT




Clause 4 — REPORTS TO BE FURNISHED BY CONTRACTOR




Clause 5 — INDEPENDENT CONTRACTOR RELATIONSHIP




Clause 6 — INDEMNITY OBLIGATIONS




Clause 7 — INSURANCE




Clause 8 — TAXES AND CLAIMS




Clause 9 — LAWS, RULES AND REGULATIONS




Clause 10 — FORCE MAJEURE




Clause 11 — PATENTS




Clause 12 — ASSIGNMENTS




Clause 13 — TERMINATION




Clause 14 — GIFTS AND GRATUITIES




Clause 15 — ILLEGAL DRUGS, ALCOHOL AND FIREARMS




Clause 16 — GOVERNMENT REGULATIONS




Clause 17 — SPECIAL CONDITIONS




Clause 18 — PURCHASE OPTION




Clause 19 — NOTICES




EXHIBIT A — ABBREVIATIONS AND DEFINITIONS




EXHIBIT B — SCOPE OF WORK

EQUIPMENT AND SERVICES SUPPLIED BY CONTRACTOR




EXHIBIT C — SCHEDULE OF PRICES




EXHIBIT D — COMPANY SUPPLIED ITEMS




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EXHIBIT E — INSURANCES




EXHIBIT F — DAILY FIELD REPORT EXAMPLE




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MASTER SERVICE CONTRACT




     THIS AGREEMENT (this “CONTRACT”), made and entered into and shall be
effective as of this 1st day of June 2004, by and between the parties herein
designated as “COMPANY” and “CONTRACTOR”.



	 	 	 	 	 
	COMPANY:	 	CANARGO ENERGY CORPORATION
	 
	 	 	 	 
	Address:	 	DELAWARE, USA
	 	 	2711 Centerville Road
	 	 	Suite 400
	 	 	Wilmington, 9808
	 	 	Delaware, USA
	 
	 	 	 	 
	CONTRACTOR:

	 	 
	 	WEUS Holding, Inc.
	 
	 	 	 	 
	Address:

	 	 	 	202 Industrial Boulevard,
	

	 	 	 	Houma
	

	 	 	 	Louisiana 70363







WITNESSETH: THAT,




     WHEREAS, COMPANY is engaged in the business of drilling oil and gas wells
on a contract basis for other companies, or for its own account, or is engaged
in the production of oil and gas, and in the course of such operations
regularly and customarily enters into contracts with independent contractors
for the performance of services relating thereto; and



     WHEREAS, COMPANY desires, as a matter of COMPANY policy, to establish and
maintain an approved list of contractors and to offer work or contracts only to
those contractors who are included on such approved list; and



     WHEREAS, CONTRACTOR represents that it has adequate equipment in good
working order and fully trained personnel capable of efficiently operating such
equipment and performing the SERVICES for COMPANY.



     NOW THEREFORE IN CONSIDERATION of the mutual promises, conditions and
agreements herein contained, the sufficiency of which is hereby acknowledged,
and the specifications and special provisions set forth in the exhibits
attached hereto and made a part hereof, the parties mutually agree as follows:




	1.0	 	AGREEMENT
	 
	 	 	Upon execution of this CONTRACT, COMPANY agrees that the name of
CONTRACTOR shall be added to the COMPANY approved list of contractors and
this CONTRACT shall remain in force and effect until 1st August 2005 or
until cancelled by either party by giving the other party ten (10) days
prior written notice at the respective address of either party or unless
terminated earlier by either party in accordance with the terms of this
Contract. If current work extends past such ten (10) day period, then
cancellation shall not be effective until the SERVICES required to




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	 	 	complete the then current work are completed. This CONTRACT including
the Exhibits hereto shall control and govern all SERVICES performed by
CONTRACTOR for COMPANY, under subsequent written work orders. Agreement
or stipulations in any such work order, delivery ticket, or other
instrument, used by CONTRACTOR not in conformity with the terms and
provisions hereof shall be null and void. No waiver by COMPANY of any of
the terms, provisions or conditions hereof shall be effective unless said
waiver shall be in writing and signed by an authorised officer of COMPANY
and specifically referencing this CONTRACT.
	 
	 	 	A list of definitions used in this Master Service Contract is contained
in Exhibit A.






	 	1.1	 	The following Exhibits A- G which are attached hereto shall
form part of this CONTRACT and all SERVICES shall be performed
pursuant to the provisions of this CONTRACT and the Exhibits hereto.






	2.0	 	LABOUR, WARRANTY, EQUIPMENT, MATERIALS, SUPPLIES AND SERVICES






	 	2.1	 	When notified by COMPANY by written work order, of the
requirement for SERVICES desired and upon acceptance of same,
CONTRACTOR shall commence furnishing same at the agreed upon time,
and continue such operations diligently and without delay, in strict
conformity with the specifications and requirements contained herein
and such work orders.
	 
	 	2.2	 	CONTRACTOR shall not employ in any work for COMPANY any
employee whose employment violates any labour, employment or other
applicable laws. CONTRACTOR shall not employ in any work for
COMPANY any employee who is a minor.
	 
	 	2.3	 	All SERVICES rendered or performed by CONTRACTOR shall be
done with due diligence in a good and workmanlike manner, using
skilled, competent and experienced workmen and supervisors, and in
accordance with good oilfield practices.






	 	(a)	 	Notwithstanding anything to the contrary
contained herein, the terms of this paragraph apply to any
SERVICES and to any equipment rented or leased with or without
an operator. CONTRACTOR shall use reasonable efforts to
ensure that all CONTRACTOR personnel furnished are competent
and rental equipment is in good condition. CONTRACTOR
personnel will attempt to perform the SERVICE requested;
however, because of the nature of the SERVICES to be
accomplished and unpredictable conditions, the results of such
SERVICES cannot be and are not guaranteed. CONTRACTOR
warrants the SERVICES provided hereunder for a period of
thirty (30) days. No warranty is given with respect to
engineering and technical information furnished by CONTRACTOR
or with respect to the results of the SERVICES provided by
CONTRACTOR. CONTRACTOR makes no warranty or representation,
express or implied, as to the design, operation, or quality of
the material or workmanship of rental equipment used to supply
the SERVICES provided to COMPANY hereunder, and CONTRACTOR
makes no warranty of merchantability or fitness of the
equipment for any particular purpose or any other
representation or warranty whatsoever.
	 
	 	(b)	 	CONTRACTOR shall have no responsibility for any
materials furnished and/or specified-by COMPANY. If COMPANY
wishes CONTRACTOR to specifically use certain materials in
lieu of materials that CONTRACTOR wishes to use then




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	 	 	 	COMPANY must accept the liability for same. However if
CONTRACTOR is to be totally in charge of its work then this
will not be a problem.
	 
	 	(c)	 	With regard to materials or equipment furnished
by third party vendors and/or suppliers, CONTRACTOR liability
therefore shall be limited to the assignment of such third
party vendor’s and/or supplier’s warranty to COMPANY, provided
such warranties are assignable.
	 
	 	(d)	 	Notwithstanding anything to the contrary
contained herein, the terms of this paragraph apply to the
sale of any equipment to COMPANY. CONTRACTOR warrants
equipment sold pursuant hereto to be free of defects in
material and workmanship for a period of one (1) year after
the date equipment is delivered. The above warranty does not
apply to (i) used equipment that has been repaired or worked
over; (ii) equipment that has been modified or subject to
improper handling, storage, installation, operation or
maintenance by COMPANY, including use of unauthorised
replacement parts; (iii) component parts not manufactured by
CONTRACTOR, whether purchased by CONTRACTOR or furnished by
COMPANY, such parts being subject to any applicable
manufacturer’s warranty; (iv) parts requiring replacement
because of natural wear and tear; (v) the design on those jobs
where CONTRACTOR prepared drawings or lists from designs
furnished by others; and (vi) models or samples furnished to
COMPANY as illustrations only of general properties of
equipment. CONTRACTOR liability for breach of this warranty
is expressly limited to the repair or replacement, at its sole
option, of any equipment or parts of equipment which prove to
be defective during the warranty period. This limited express
warranty, and the stated remedies for breach thereof, shall be
in lieu of any and all other warranties, express or implied,
including without limitation, warranties for merchantability
or fitness for any particular purpose.
	 
	 	(e)	 	Notwithstanding anything to the contrary
contained herein, it is expressly agreed and understood that
in the event CONTRACTOR’s EQUIPMENT that is in the possession
and control of COMPANY pursuant to this CONTRACT, whether
leased to COMPANY or stored at the WORKSITE, is not returned
or is damaged beyond repair, COMPANY will replace such
CONTRACTOR EQUIPMENT or reimburse CONTRACTOR with the current
replacement cost new. Should COMPANY decide to replace lost
or damaged CONTRACTOR EQUIPMENT, the replaced items should be
new and purchased or obtained from a reputable manufacturer
and should meet all original equipment manufacturer’s
specifications. COMPANY agrees to reimburse CONTRACTOR for
the cost of repair to such CONTRACTOR EQUIPMENT that are
damaged other than from normal wear-and-tear during the rental
period. However, before any major repairs are made to damaged
equipment, approval for such repairs must be secured from an
authorized representative of COMPANY. COMPANY shall not be
responsible if CONTRACTOR’s EQUIPMENT is damaged as a result
of CONTRACTOR’s negligent acts and/or omissions.






	 	2.4	 	CONTRACTOR agrees to maintain its equipment in good operating
condition at all times and shall use all reasonable means to control
and prevent fires and blowouts, protect the hole, and protect
Company’s equipment.




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	3.0	 	PAYMENT






	 	3.1	 	INVOICE PAYMENTS






	 	(a)	 	COMPANY shall have the right to audit CONTRACTOR
books and records relating to all invoices issued pursuant to
this CONTRACT. CONTRACTOR agrees to maintain such books and
records for a period of two (2) years from the date such costs
were invoiced and to make such books and records available to
COMPANY at any time or times within such two (2) year period.
	 
	 	(b)	 	CONTRACTOR may change such bank accounts and places
of payment, from time to time, by notice to COMPANY as provided
for in the CONTRACT, and upon receiving written agreement to
such change from COMPANY, which agreement shall not be
unreasonably withheld. All payments made hereunder shall be
subject to and in accordance with the exchange control or
monetary laws and regulations of Georgia and any other country
having jurisdiction over any payment to be made under this
CONTRACT.
	 
	 	(c)	 	If, at any time during the term of this CONTRACT, any
applicable law is imposed to prevent payment to CONTRACTOR in
the currency specified below, or to prevent repatriation of said
monies to the Country specified as the place of payment pursuant
to this clause, and the Parties are, after negotiating in good
faith, unable to establish an alternative and mutually
acceptable payment procedure, then CONTRACTOR shall have the
option to terminate this CONTRACT within thirty (30) days.
	 
	 	(d)	 	Invoices received later than two (2) months after the
termination of this CONTRACT shall be deemed invalid and COMPANY
shall have no obligation or liability to pay same. However, if
CONTRACTOR demonstrates to COMPANY’S satisfaction that an
invoice could not have been reasonably submitted within such two
(2) month period, the submission of the invoice shall be deemed
valid.
	 
	 	(e)	 	The CONTRACTOR shall be paid in accordance with the
prices, rates and provisions set out herein.
	 
	 	(f)	 	All payments required to be made by COMPANY to CONTRACTOR
pursuant to this CONTRACT shall be made to the following bank
accounts:





	 	 	 	 	 	 	 	 	 
	

	 	Bank Address:
	 	 	 	JP Morgan Chase Bank New York

	 
	 	 	 	 	 	 	 	 
	 	 	Account Name:	 	WEUS Holding, Inc.
	

	 	Account No.:
	 	 	 	323366597
	

	 	Swift Address:
	 	 	 	CHASUS33









	 	3.2	 	In the event COMPANY has overpaid an invoice, if a credit is
due, it will be paid thirty (30) days from date of Credit Invoice.
	 
	 	3.3	 	All invoices submitted by CONTRACTOR to COMPANY shall be
supported by relevant back-up documentation as set out in Exhibit B
Section 4. All invoices shall take account of the pre-payments made
by COMPANY.




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	 	3.4	 	The COMPANY shall make payment within fourteen (14) days
after receipt of such invoice (submitted pursuant to Clause 3.4) to
the CONTRACTOR’s nominated bank account as notified by CONTRACTOR to
the COMPANY.
	 
	 	3.5	 	Any invoice not complying with the provisions hereof may be
returned by the COMPANY to the CONTRACTOR whereupon the CONTRACTOR
shall submit a rectifying invoice.
	 
	 	3.6	 	No payment made by the COMPANY shall be construed as
acceptance in whole or in part of the performance by the CONTRACTOR
of any of its obligations under the CONTRACT.
	 
	 	3.7	 	In the event that CONTRACTOR is unable to meet its
obligations hereunder due to any event of Force Majeure as defined
in Article 10, any rates payable shall after 30 (thirty) days since
its occurrence be reduced to zero for the remaining duration of the
Force Majeure event.
	 
	 	3.8	 	Any payment made by COMPANY hereunder, including the final
billing where appropriate, shall not prevent COMPANY from reasonably
filing claims or prejudice its right to recover the amount of such
claims however they may have arisen.
	 
	 	3.9	 	Final payment for completed SERVICES can only be made after
the SERVICES performed have been completed and signed as completed
by both CONTRACTOR and COMPANY.
	 
	 	3.10	 	If the COMPANY disputes any item on an invoice received
pursuant hereto then it shall be entitled to withhold from payment,
without payment of interest, that amount in dispute until the
settlement provided that;






	 	(i)	 	the COMPANY notifies the CONTRACTOR of the
disputed item(s); and
	 
	 	(ii)	 	the CONTRACTOR issues a credit note for the
disputed portion of the said invoice following receipt of
which the COMPANY shall thereafter pay only the undisputed
portion of any such invoice.






	 	3.11	 	Payments Due to the CONTRACTOR
	 
	 	 	 	Without prejudice to any other of the COMPANY’s rights under the
CONTRACT or otherwise, COMPANY shall be entitled to deduct from any
payment due or becoming due to the CONTRACTOR under the CONTRACT, all
costs, damages or expenses for which the CONTRACTOR is liable to the
COMPANY under the CONTRACT.
	 
	 	3.12	 	Escrow Account
	 
	 	 	 	The Escrow Account is defined as a bank account jointly held by
COMPANY and CONTRACTOR opened with a UK clearing bank and
controlled by McGrigors Solicitors concurrently with the execution
of this Agreement. All prescribed amounts per the payment schedule
attached here to as Exhibit C paragraphs 6.0 and 6.1 shall be paid
into the Escrow Account at the time specified therein. All costs
incurred in the maintenance of the Escrow Account shall be to
COMPANY account. In the event that CONTRACTOR does not receive full
payment of any invoiced amount within two (2) weeks of receipt of
the invoice by COMPANY, the CONTRACTOR shall be entitled to receive
immediate




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	 	 	 	payment from the Escrow Account for all unpaid amounts regardless
of the age of any other unpaid invoices. McGrigors Solicitors shall
be authorised to make immediate payment to CONTRACTOR upon receipt
of a valid request to do so by CONTRACTOR. The request for payment
from CONTRACTOR, from the Escrow account will only be considered
valid if supported by a copy of the unpaid invoice(s) and proof
that COMPANY received one (1) or more of the unpaid invoices more
than two (2) weeks prior to the request for payment from the Escrow
account. In the event of termination of the CONTRACT by COMPANY or
CONTRACTOR, McGrigors Solicitors shall be authorised to make
immediate payment of all amounts held in the EscrowAccount plus
accrued interest at base plus (5%) to the CONTRACTOR. CONTRACTOR
shall refund within fourteen (14) days of receipt of COMPANY’s
invoice for any amounts due to COMPANY once all amounts due to
CONTRACTOR have been accounted for. In the event that COMPANY
enters into any form of insolvency proceedings or enters into any
form of composition or arrangement with COMPANY’S creditors all
rights and ownership of the funds held in the Escrow Account and
any accrued interest are legally transferred to CONTRACTOR. In this
event McGrigors Solicitors shall be authorised to make immediate
payment of the funds held in the Escrow account to CONTRACTOR.
McGrigors shall operate the Escrow Account in accordance with the
terms of the Escrow Account operating agreement to be agreed
between the parties and shall have no liability for so acting.
Such operating agreement shall be agreed between the parties no
later than one MONTH after CONTRACT signature






	4.0	 	REPORTS TO BE FURNISHED BY CONTRACTOR






	 	(a)	 	The quantity, description and condition of the SERVICES
furnished shall be verified and checked by CONTRACTOR, and all
delivery tickets shall be properly certified as to receipt by
CONTRACTOR’s representative. CONTRACTOR must obtain approval of
COMPANY’s representative on the WELLSITE of delivery tickets for
SERVICES for which CONTRACTOR is to be reimbursed by COMPANY.
	 
	 	(b)	 	CONTRACTOR shall immediately orally report to COMPANY, as
soon as practicable followed by an appropriate written report, all
accidents or occurrences resulting in death or injuries to
CONTRACTOR’s employees, agents or third parties, or damage to
property of COMPANY or third parties arising out of or during the
course of SERVICES to be performed hereunder. CONTRACTOR shall
furnish COMPANY with a copy (within ten (10) days) of all records
made by CONTRACTOR to CONTRACTOR’s insurer or governmental
authorities or to others of such accidents and occurrences.
	 
	 	(c)	 	CONTRACTOR shall immediately report (orally) to COMPANY, as
soon as practicable any information that may have a positive or
negative impact upon the traded CanArgo share price. Such
information shall be kept confidential and not transmitted, conveyed
or disseminated from the WELLSITE to parties other than COMPANY.
All technical information relating directly to the SERVICES
(electronic signals, responses and geological data) shall remain the
property of COMPANY.
	 
	 	 	 	Publicity of this campaign, results, experiences or otherwise by
CONTRACTOR must receive prior consent of the Companies Public
Relations Officer (Mr. Julian Hammond).




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	5.0	 	INDEPENDENT CONTRACTOR RELATIONSHIP
	 
	 	 	In the performance of the SERVICES by CONTRACTOR for COMPANY, CONTRACTOR shall be deemed to be an
independent CONTRACTOR, with the authority and right to direct and control all of the details of
the SERVICES, COMPANY being interested only in the results obtained. However, all work
contemplated shall meet the approval of COMPANY and shall be subjected to the general right of
inspection. COMPANY shall have no right or authority to supervise or give instructions to the
employees, agents, or representative of CONTRACTOR, but such employees, agents or representatives
at all times shall be under the direct and sole supervision and control of CONTRACTOR. Any
suggestions or directions given by COMPANY or its employees shall be given only to the
superintendent or other person in charge of CONTRACTOR’s crew, provided however, that in the
event any employee of COMPANY should give any order or instructions to the employees of
CONTRACTOR (which employee of COMPANY shall not in any event be authorised to do) and such order
is not countermanded by CONTRACTOR’s superintendent or other person in charge of CONTRACTOR’s
employees or crew, it shall be deemed that such orders or instructions are the orders or
instructions of CONTRACTOR. It is the understanding and intention of the parties hereto that no
relationship of master and servant or principal and agent shall exist between COMPANY and the
employees, agents, or representatives of CONTRACTOR, and that all SERVICES covered hereby shall
be performed at the sole risk of CONTRACTOR.
	 
	 	 	CONTRACTOR shall formally accept or refuse each well / WELLSITE / access roads as being suitable
for UBCTD operations in sufficient time for COMPANY to effect any civil engineering works or well
works that may be required to bring the locations up to an acceptable standard.. This process
may be approved in three stages (access roads, WELLSITE and then well) or simultaneously.
	 
	 	 	COMPANY shall formally accept return of the well / WELLSITE, with two (2) barriers in place once
CONTRACTOR has completed UBCTD operations and installed the liner.
	 
	 	 	CONTRACTOR is deemed to be in control and responsible for operating in a safe and competent
manner. Should civil engineering works be required during the currency of the CONTRACT,
CONTRACTOR shall inform COMPANY in good time such that downtime by CONTRACTOR is minimised.
COMPANY shall be responsible for effecting and payment of downtime associated with civil
engineering works.




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	6.0	 	INDEMNITY OBLIGATIONS






	 	6.1	 	Definitions. The following terms shall have the designated definitions.






	 	(a)	 	COMPANY GROUP includes, individually or in any
combination, COMPANY, its affiliates, CONTRACTORs (other than
CONTRACTOR) and entities for which COMPANY is performing
services for, and each of their respective directors,
officers, agents, representatives, employees and invitees.
	 
	 	(b)	 	CONTRACTOR GROUP includes, individually or in any
combination, CONTRACTOR, and its affiliates and CONTRACTORs,
and each of their respective directors, officers, agents,
representatives, employees and invitees.
	 
	 	(c)	 	Defend — the obligation of the indemnitor (i) to
defend the indemnitees at its sole expense, or at the
indemnitees’ election (ii) to reimburse the indemnitees for
the indemnitees’ reasonable expenses incurred in defending
themselves. Notwithstanding the indemnitee’s election of
option (i) above, the indemnitee shall be entitled to
participate in its defense at its sole cost.
	 
	 	(d)	 	Losses — claims, demands, causes of action,
losses, judgments, liabilities, indemnity obligations, costs,
damages or expenses of any kind and character (including
attorney’s fees and other legal expenses).






	 	6.2	 	CONTRACTOR. CONTRACTOR shall release, defend, indemnify, and
hold harmless COMPANY GROUP from and against any and all Losses
arising out of bodily injury or death or property damage or loss
(including patent or license infringement resulting from the use of
the CONTRACTOR GROUP’s property) suffered by any of the CONTRACTOR
GROUP in connection with this CONTRACT, regardless of how caused,
whether by the sole, joint or concurrent negligence (in any amount),
strict liability or other fault of any of COMPANY GROUP or a
pre-existing condition.
	 
	 	6.3	 	COMPANY. COMPANY shall release, defend, indemnify, and hold
harmless CONTRACTOR GROUP from and against all Losses arising out of
bodily injury or death or property damage or loss (including patent
or license infringement resulting from the use of the COMPANY
GROUP’s property) suffered by any of the COMPANY GROUP in connection
with this CONTRACT, regardless of how caused, whether by the sole,
joint or concurrent negligence (in any amount), strict liability or
other fault of any of CONTRACTOR GROUP or a pre-existing condition.
	 
	 	6.4	 	Insurance Support/Limitation. The mutual indemnity
obligations in Sections 6.2 and 63 above shall be supported by
insurance provided by the parties hereto in the amounts and the
types described in Exhibit E.
	 
	 	6.5	 	Notwithstanding anything to the contrary contained herein,
COMPANY hereby agrees to assume the entire responsibility and
liability for, and agrees to release, defend, indemnify and hold
CONTRACTOR harmless from and against all claims, liabilities,
damages and expenses (including without limitation attorneys’ fees,
court costs, expert witness fees and any other cost of defense) for
and arising out of the following specified types of claims, losses
or events:




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	 	1.	 	Loss or liability for damages or an expense
arising from property injury that results from reservoir or
underground damage, including loss of oil, gas, other mineral
substance, or water or the wellbore itself; or
	 
	 	2.	 	Loss or liability for damages or any expense
arising from cost of control of wild well, underground or
above the surface.






	 	 	 	This obligation to indemnify, defend and release applies regardless
of whether or not the claim or loss is occasioned by or results
from the actual or alleged negligence of CONTRACTOR or any other
person, or entity, in whole or in part, whether sole, joint, active
or passive, except to the extent the claim or loss is due to
CONTRACTOR’s sole negligence, gross negligence or wilful
misconduct.
	 
	 	6.6	 	Notwithstanding the foregoing, CONTRACTOR shall have sole
responsibility and liability for the control and removal of and
shall hold COMPANY harmless from property loss or damage, fines
and/or penalties from such pollution or contamination that results
from spills of fuels, lubricant, motor oils, pipe-dope, paints,
solvents, ballast, bilge, metallic objects and garbage in
CONTRACTOR’s sole possession and control, regardless of ownership,
regardless of whether or not occasioned by or resulting from the
negligence, strict liability, breach of warranty or other fault of
COMPANY, in whole or in part, whether sole, joint, active or
passive. The initiation of clean-up operations including control,
response and removal, by either party shall not be an admission of
assumption of liability by the initiating party or parties.
	 
	 	6.7	 	Notwithstanding anything to the contrary contained herein,
except when CONTRACTOR’s EQUIPMENT is lost or damaged as a result of
the sole negligence or wilful misconduct of CONTRACTOR, COMPANY
agrees to defend, indemnify and hold CONTRACTOR harmless from the
loss of or damage to CONTRACTOR’s EQUIPMENT occurring in the hole,
or in the drill string below the level of the rotary table. COMPANY
will replace such CONTRACTOR’S EQUIPMENT or reimburse CONTRACTOR
with the current lost in hole/damage beyond repair charge. Should
COMPANY decide to replace lost or damaged CONTRACTOR’S EQUIPMENT,
the replaced items should be new and purchased or obtained from a
reputable manufacturer and should meet all original equipment
manufacturer’s specifications. COMPANY agrees to reimburse
CONTRACTOR for the cost of repair to such CONTRACTOR EQUIPMENT that
is damaged other than from normal wear-and-tear during the rental
period. However, before any major repairs are made to damaged
equipment, approval for such repairs must be secured from an
authorised representative of COMPANY. COMPANY shall not be
responsible if CONTRACTOR’s EQUIPMENT is damaged as a result of
CONTRACTOR’s negligent acts and/or omissions. In addition should
CONTRACTOR’s EQUIPMENT that IS used downhole become contaminated due
to radioactivity then COMPANY shall be responsible for
decontaminating such CONTRACTOR EQUIPMENT and return to CONTRACTOR
on completion of decontamination. During such decontamination
process the CONTRACTOR EQUIPMENT shall remain on STACKED RATE to
COMPANY until returned to CONTRACTOR in an uncontaminated condition.
	 
	 	6.8	 	Indirect or Consequential Damages. The parties hereto waive
and release all claims against the other party for indirect,
special, punitive or consequential damages arising out of this
CONTRACT, regardless of whether caused or contributed to by the
sole, joint or concurrent negligence (in any amount), strict
liability or other fault of the other party or a




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	 	 	 	pre-existing condition. As used herein, “indirect or consequential
damages” shall include, but not be limited to, loss of revenue,
profit or use of capital, production delays, loss of product,
reservoir loss or damage, losses resulting from failure to meet
other contractual commitments or deadlines and downtime of
facilities or vessels.
	 
	 	6.9	 	No Limit. Except as otherwise provided herein, the foregoing
indemnity obligations shall not be limited to the amount of
insurance of the parties.
	 
	 	6.10	 	The provisions of this Section shall extend to and be
enforceable by and for the benefit of CONTRACTOR GROUP and COMPANY
GROUP.






	7.0	 	INSURANCE
	 
	 	 	CONTRACTOR shall carry insurance (with reliable insurance companies that
are satisfactory to COMPANY) in the amounts set forth in Exhibit E, such
insurance to be effective prior to the commencement of any SERVICES under
this CONTRACT. In each such policy, to the extent of the liabilities
agreed to be assumed by CONTRACTOR, CONTRACTOR shall cause (i) all
deductibles to be for CONTRACTOR’s account, (ii) the insurer to waive all
rights of subrogation against COMPANY GROUP, (iii) COMPANY GROUP to be
listed as additional insureds, and (iv) such policy to be primary as to
any other existing valid and collectible insurance of COMPANY GROUP or
otherwise. Before engaging in any work hereunder, CONTRACTOR shall
furnish COMPANY an executed Certificate of Insurance (in form
satisfactory to COMPANY) evidencing the foregoing insurance. CONTRACTOR
shall cause each insurer to agree to give COMPANY at least thirty (30)
days written notice of cancellation or expiration of any such policies or
of any other changes that would materially reduce the limits of coverage
of such policies. Notwithstanding any provision herein to the contrary,
failure to secure the insurance coverage, or the failure to comply fully
with any of the insurance provisions of this CONTRACT, or the failure to
secure such endorsements on the policies as may be necessary to carry out
the terms and provisions of this CONTRACT, shall in no way act to relieve
CONTRACTOR from the obligations of this CONTRACT, and shall constitute
grounds for the immediate termination of this CONTRACT by COMPANY (in
addition to any other rights or remedies available to the COMPANY).
	 
	8.0	 	TAXES AND CLAIMS






	 	8.1	 	CONTRACTOR agrees to pay all taxes, licenses, and fees
properly levied or assessed on CONTRACTOR in connection with or
incident to the performance of this CONTRACT by any governmental
agency and unemployment compensation insurance, old age benefits,
social security, or any other taxes upon the wages of CONTRACTOR,
its agents, employees, and representatives. CONTRACTOR agrees to
require the same agreements and be liable for any breach of such
agreements by any of its sub-contractors.
	 
	 	8.1	 	CONTRACTOR agrees to reimburse COMPANY on demand for all such
taxes or governmental charges that COMPANY may be legally required
to pay on account of employees of CONTRACTOR or its sub-contractors.
CONTRACTOR agrees to furnish COMPANY with the information required
to enable it to make the necessary reports and pay such taxes or
charges. At its election, COMPANY is authorised to deduct all sums
so paid for such taxes and governmental charges from such amounts as
may be or become due to CONTRACTOR hereunder.




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	 	8.2	 	If COMPANY is required by any appropriate government
authority whether of Georgia or elsewhere to withhold any sums from
payment to CONTRACTOR, COMPANY shall be entitled to do so without
compensating CONTRACTOR and CONTRACTOR will have no entitlement for
any additional remuneration from COMPANY in respect of such
withholding. COMPANY shall issue to CONTRACTOR such certificates
certifying the amounts of withholding within ninety (90) days of
such withholding.
	 
	 	8.3	 	CONTRACTOR agrees to pay all claims for labour, materials,
services, and supplies furnished to CONTRACTOR hereunder and agrees
to allow no lien or charge to be fixed upon the rig, the lease, the
well, the land on which the well is located, or other property of
COMPANY or the party for whom COMPANY is performing services with
respect to such claims. CONTRACTOR agrees to indemnify, protect,
defend, and hold COMPANY harmless from and against all such claims,
charges, and liens. If CONTRACTOR shall fail or refuse to pay any
claims or indebtedness incurred by CONTRACTOR in connection with the
SERVICES provided hereunder, it is agreed that COMPANY shall have
the right to pay any such claims or indebtedness out of any money
due or to become due to CONTRACTOR hereunder. Notwithstanding the
foregoing, COMPANY agrees that it will not pay any such claim or
indebtedness as long as same is being actively and properly
contested by CONTRACTOR and CONTRACTOR has taken all actions
necessary (including the posing of a bond when appropriate) to
protect the property interests of COMPANY or any other party
affected by such claim or indebtedness.
	 
	 	8.4	 	Before payments are made by COMPANY to CONTRACTOR, COMPANY
may require CONTRACTOR to furnish proof that there are no
unsatisfied claims for labour, materials, equipment, and supplies or
for injuries to persons or property not covered by insurance.






	9	 	LAWS, RULES AND REGULATIONS






	 	9.1	 	COMPANY and CONTRACTOR respectively agree to comply with all
laws, rules, and regulations which are now or may become applicable
to operations covered by this CONTRACT or arising out of the
performance of such operations. If either party is required to pay
any fine or penalty resulting from the other party’s failure to
comply with such laws, rules, or regulations, the party failing to
comply shall immediately reimburse the other for any such payment.
	 
	 	9.2	 	In the event any provision of this CONTRACT is inconsistent
with or contrary to any applicable law, rule, or regulation, said
provision shall be deemed to be modified to the extent required to
comply with said law, rule, or regulation, and this CONTRACT as so
modified, shall remain in full force and effect.
	 
	 	9.3	 	The laws of England shall govern the validity, construction,
interpretation and effect of this CONTRACT excluding any choice of
laws, which would otherwise require the application of laws, or any
other jurisdiction. Any dispute arising in connection with this
CONTRACT shall be exclusively settled by arbitration in the English
language in London Court of International Arbitration (the “Rules”),
provided that the provisions of this paragraph shall prevail in the
event of any conflict with such Rules. The arbitration panel shall
render its decisions in writing and such written decisions and
conclusions with respect to the disputes so settled shall be final
and binding on the parties to the arbitration proceeding and
confirmation and enforcement of the awards so rendered may be
obtained




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	 	 	 	and entered in any court having jurisdiction thereof. The
arbitration panel shall have no power or authority to make awards
or issue orders of any kind except as expressly permitted by this
CONTRACT and the substantive laws of England and in no event shall
the arbitration panel have the authority to make any award that
provides for punitive or exemplary damages.
	 
	 	9.4	 	Subject to the provisions of Section 6.10 A person who is not
a party to this CONTRACT has no right under the CONTRACTs (Rights of
Third Parties) Act 1999 to enforce any term of this CONTRACT, but
this does not affect any right or remedy of a third party which
exists or is available apart from that Act.






	10.0	 	FORCE MAJEURE
	 
	 	 	Except for the duty to make payments hereunder when due for SERVICES
already performed, and the indemnification provisions under this
CONTRACT, neither COMPANY nor CONTRACTOR shall be responsible to the
other for any delay, damage or failure caused by or occasioned by a Force
Majeure Event. As used in this CONTRACT, “Force Majeure Event” includes,
but is not limited to: acts of God, action of the elements, earthquakes
strikes, differences with workers, or any other causes (except financial)
beyond the control of either party. Delays due to the above causes, or
any of them, shall not be deemed to be a breach of or failure to perform
under this CONTRACT. Neither COMPANY nor CONTRACTOR shall be required
against its will to adjust any labour or similar disputes except in
accordance with applicable law. CONTRACTOR, but not COMPANY, shall be
relieved of it’s obligations under this Agreement in the event of the
following: warlike action, insurrection, revolution or civil strife,
piracy, civil war or hostile action, acts of public enemies, rules and
regulations of any governmental authorities having jurisdiction in the
premises or of any other group, organisation or informal association
(whether or not formally recognised as a government), inability to
procure material, equipment or necessary labour in the open market, acute
and unusual labour or material or equipment shortages, failures due to
inadequate infrastructure within Georgia including but not limited to
inadequate or lack of roads, communications, security etc.
	 
	 	 	The COMPANY or the CONTRACTOR, as the case may be, shall give notice to
the other Party promptly on becoming aware of any such cause, stating the
particulars thereof. The notifying Party shall promptly give further
notice if its performance of any such obligation is no longer hindered or
prevented as aforesaid. The time for performance of such obligation, and
any other obligations as are conditional upon such performance, shall be
extended by the period between each of the said notices provided that the
notifying Party shall make reasonable efforts to perform such obligation
prior to the time for performance extension as aforesaid.
	 
	 	 	In the event of the occurrence of any cause set out in Article 10 and
such cause prevails for a period in excess of ten (10) days, the Parties
agree to meet forthwith to mutually agree the way forward. If after five
(5) days (15 days after commencement of Force Majeure) agreement has not
been reached on the way forward then COMPANY shall have the right to
cancel the CONTRACT immediately and without any further payment. Any
Force Majeure occurrence shall never be just cause for COMPANY to
withhold any payment due to the CONTRACTOR under this CONTRACT.




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	11.0	 	PATENTS
	 
	 	 	In addition to all other indemnity provisions contained herein,
CONTRACTOR represents and warrants that the use or construction of any
and all tools and equipment furnished by CONTRACTOR and used in the
SERVICES provided for herein does not infringe on any license or patent
issued or applied for, and CONTRACTOR agrees to indemnify and hold
COMPANY harmless from any and all claims, demands, and causes of action
of every kind and character in favour of or made by a patentee, licensee,
or claimant of any rights or priority to such tool or equipment, or the
use or construction thereof, that may result from or arise out of
furnishing or use of any such tool or equipment by CONTRACTOR in
connection with the SERVICES.
	 
	12.0	 	ASSIGNMENTS
	 
	 	 	COMPANY and CONTRACTOR agree that neither party will assign nor delegate
this CONTRACT or any part of it or any of the SERVICES required hereunder
without prior written consent of the other party. If any assignment by
COMPANY is made that significantly alters CONTRACTOR’s financial burden,
CONTRACTOR’s compensation shall be adjusted to give effect to any change
in CONTRACTOR’s operating costs.
	 
	 	 	The parties recognise that the COMPANY has interests in a number of
different production sharing contracts in Georgia and accordingly the
COMPANY shall be entitled to assign the benefit and burden of all or any
part of this CONTRACT to any member of its group including without
limitation Ninotsminda oil Company limited and CanArgo Samgori Limited
provided that the COMPANY shall provide a parent company guarantee in
respect of any such assignee if required by CONTRACTOR. The COMPANY
shall further procure that the CONTRACTOR has access to the funds in the
Escrow Account on the same basis as that prior to the assignment.
	 
	13.0	 	SUSPENSION AND TERMINATION






	 	13.1	 	Except as otherwise provided in any Work Order or other
agreement between CONTRACTOR and COMPANY, COMPANY may, at any time,
at its sole discretion, terminate work covered by any written work
order issued hereunder, in which event CONTRACTOR shall be paid at
the applicable rates stipulated in Exhibit C for SERVICES rendered
up to the date of such termination. On notice of such termination,
CONTRACTOR shall promptly remove its personnel, machinery, and
equipment from the location and shall further co-operate with
COMPANY or its designee to ensure an orderly and expeditious
transition and completion of the SERVICES.
	 
	 	13.2	 	If the CONTRACTOR fails to perform any of its obligations as
specified in this CONTRACT herein or to provide any of the
CONTRACTOR’s EQUIPMENT the COMPANY’s representative shall notify the
CONTRACTOR in writing specifying the nature of such failure and
immediately thereafter the COMPANY shall have the right:
	 
	 	13.2.1	 	To shutdown operations or suspend the SERVICES until such time as
the CONTRACTOR shall have rectified any specified failure. In the
event of suspension of the SERVICES, in circumstances which would
not otherwise lead to an obligation under clause 6, CONTRACTOR shall
not be liable for any COMPANY costs whatsoever arising.




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	 	13.3.1	 	The CONTRACTOR shall, throughout the period of the CONTRACT,
maintain the applicable classification or certification of the
equipment. The COMPANY may suspend the SERVICES or terminate the
CONTRACT forthwith due to the failure of the CONTRACTOR to maintain
the classification or certification. Then the COMPANY may give
notice in writing to the CONTRACTOR to make good such breach,
failure, neglect, contravention or abandonment.
	 
	 	 	 	Should the CONTRACTOR fail to commence to remedy or refuse or fail
to prove to the COMPANY that it has taken and is continuing to take
measures to remedy the matters specified in the notice within a
period of not more than seven (7) days, or such other period as the
COMPANY may stipulate in the notice, the COMPANY shall have the
right to terminate the CONTRACT forthwith upon expiry of the period
of notice or upon such later date determined by the COMPANY.
	 
	 	13.3.2	 	In the event of any of:
	 
	 	 	 	(ii) the material breach by the CONTRACTOR of any of the other
terms and conditions of the CONTRACT; or
	 
	 	 	 	(iii) the CONTRACTOR,






	 	(a)	 	fails to proceed with the SERVICES with due diligence; or
	 
	 	(b)	 	Persistently or flagrantly neglects to carry out its or their
obligations under the CONTRACT; or
	 
	 	(c)	 	fails to comply with any reasonable instructions given
to it in writing by the COMPANY’s representative in connection
with the SERVICES, or






	 	 	(iv) the CONTRACTOR subcontracts any part of the SERVICES without
the prior written consent of the COMPANY; or
	 
	 	 	(v) the CONTRACTOR abandons the CONTRACT,
	 
	 	 	Then the COMPANY may give notice in writing to the CONTRACTOR to
make good such breach, failure, neglect, contravention or
abandonment.
	 
	 	 	Should the CONTRACTOR fail to commence to remedy or refuse or fail
to prove to the COMPANY that it has taken and is continuing to take
measures to remedy the matters specified in the notice within a
period of not more than seven (7) days, or such other period as the
COMPANY may stipulate in the notice, the COMPANY shall have the
right to terminate the CONTRACT forthwith upon expiry of the period
of notice or upon such later date determined by the COMPANY.
	 
	13.3.3	 	In the event of termination in accordance with the provisions of
this Section 13 the COMPANY shall not be liable for any further
payment to the CONTRACTOR other than any payment, which may be due
in respect of work done prior to the date of termination.
	 
	13.3.4	 	COMPANY may terminate this CONTRACT at any time (i) prior to the
payment pursuant to Exhibit C Clause 6.0 and 6.1 of $1,400,000 into
the Escrow Account; and (ii)




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	 	 	after the first two (2) wells have been completed by giving written
notice to the CONTRACTOR.
	 
	13.4	 	COMPANY’s rights and remedies as set out herein are without prejudice to
its other rights and remedies under this CONTRACT.
	 
	14.0	 	SUSPENSION DUE TO FAILURE OF BHA
	 
	14.1	 	In the event of a BHA failure that cannot be solved within a
reasonable period of time, CONTRACTOR shall suspend the whole of the
SERVICES or any part thereof on the written instruction of COMPANY and
shall take reasonable measures necessary to protect and secure the part
of the SERVICES executed up to the date of suspension. Thereafter,
STACKED RATE will apply for all CONTRACTOR EQUIPMENT and full rate for
all CONTRACTORS personnel remaining at WORKSITE, until the resumption
of work. Any additional cost reasonably and necessarily incurred by
CONTRACTOR arising from such suspension shall, subject to Clause 14.2,
be payable by COMPANY to CONTRACTOR upon substantiation by CONTRACTOR,
to the reasonable satisfaction of COMPANY.
	 
	14.2	 	Notwithstanding Clause 14.1, nothing shall be payable by COMPANY if
the suspension arises as a result of negligence on the part of
CONTRACTOR. However if CONTRACTOR has done everything reasonably
possible in preparing the correct BHA, and suspension still arises due
to unexpected conditions then COMPANY will pay CONTRACTOR STACKED RATE
for CONTRACTORS EQUIPMENT. COMPANY will also pay full rate for all
CONTRACTORS personnel remaining at WORKSITE.
	 
	14.3	 	In the event of any suspension, the COMPANY and the CONTRACTOR shall
meet at not more than seven (7) day intervals with a view to agreeing a
mutually acceptable course of action during the suspension.
	 
	14.4	 	In the event of suspension of the SERVICES, in circumstances which not
would otherwise lead to an obligation under clause 6, CONTRACTOR shall not
be liable for any COMPANY costs whatsoever arising.
	 
	15.0	 	GIFTS AND GRATUTIES
	 
	 	 	It is considered to be in conflict with the COMPANY’s interest for its
employees or any member of their immediate family to accept gifts,
payments, extravagant entertainment, services, or loans in any form from
anyone soliciting business, or who may already have established business
relations with the COMPANY. Gifts of nominal value and entertainment,
meals, and social invitations that are customary and proper under the
circumstances and do not place the recipient under obligation are
acceptable. If any employee of the COMPANY should solicit a gift or
gratuity from the CONTRACTOR, CONTRACTOR hereby agrees to notify an
officer of the COMPANY of such act. It is agreed that the COMPANY will
hold such notification in confidence, it is further understood that
failure by the CONTRACTOR to comply with the COMPANY’s policies regarding
gifts and gratuities may, at the COMPANY’s option, result in the
termination of this CONTRACT and may further preclude any future dealings
between the parties.




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	16.0	 	ILLEGAL DRUGS, ALCOHOL AND FIREARMS






	 	16.1	 	To help insure a safe, productive work environment, COMPANY
may establish a program designed to prohibit the use, transportation
and possession of firearms, drugs and/or controlled substances, drug
paraphernalia and alcoholic beverages on helicopters, boats,
offshore platforms, drilling locations, or COMPANY’s other premises.
Illegal drugs include marijuana, amphetamines, barbiturates,
opiates, cocaine, codeine, morphine, hallucinogenic substances (LSD)
and any similar drugs and/or chemicals synthetics deemed hazardous
by COMPANY.
	 
	 	16.2	 	Such programs, if established, upon notice shall apply to
CONTRACTOR’s employees, agents, servants and CONTRACTORs.
	 
	 	16.3	 	COMPANY specifically reserves the right to carry our
reasonable searches of individuals, their personal effects, and
vehicles when entering on and leaving COMPANY’s premises. The
searches will be initiated by COMPANY without prior announcement.
Individuals found in violation will be removed from COMPANY’s
premises immediately. Submission to such a search is strictly
voluntary; however, refusal may be cause for not allowing that
individual on the WELLSITE or COMPANY’s other premises. It is
CONTRACTOR’s responsibility to notify its employees of this
prohibition and its enforcement.






	17.0	 	GOVERNMENT REGULATIONS
	 
	 	 	CONTRACTOR shall comply with all applicable laws, rules and regulations
of any governmental, regulatory or other competent body having
jurisdiction over the CONTRACT and/or the WORKSITE.
	 
	 	 	Technical passports will be required for all CONTRACTOR equipment
imported into and utilised in Georgia. COMPANY shall assist CONTRACTOR
with translation of documentation to Georgian and securing such
passports. CONTRACTOR is obliged to provide COMPANY with brief technical
specifications of all equipment listed in Exhibits B and C as well as the
2 7/8” CT organised by CONTRACTOR on behalf of COMPANY at the latest two
(2) weeks after receiving payment for CT and Reel from COMPANY.
	 
	18.0	 	SPECIAL PROVISIONS
	 
	 	 	This CONTRACT including the Exhibits annexed hereto sets forth the entire
agreement between COMPANY and CONTRACTOR with respect to its subject
matter. All prior negotiations and dealings regarding the subject matter
hereof are superseded by and merged into the CONTRACT.
No modification of this CONTRACT shall be effective unless made in
writing and signed by both parties.
	 
	19.0	 	PURCHASE OPTION





COMPANY reserves the right to purchase part of or the entire CONTRACTOR spread
on the completion of activities in Georgia. The purchase price shall be based
upon Exhibit C, but if certain items need renewing then these may be provided
by CONTRACTOR at cost plus transportation.




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	20.0	 	NOTICES





	 	 	 
	COMPANY:

	 	CANARGO ENERGY CORPORATION
	

	 	PO BOX 291,
	

	 	St Peter Port,
	

	 	Guernsey
	

	 	GY1 1BQ
	

	 	FAX +44 (0)1481729982
	 
	 	 
	CONTRACTOR:

	 	WEUS Holding, Inc.
	

	 	Care of Weatherford UK Ltd
	

	 	Weatherford House
	

	 	Lawson Drive
	

	 	Dyce
	

	 	Aberdeen
	

	 	AB21 0DR
	

	 	Scotland, UK








	21.0	 	Counterpart Clause
	 
	 	 	This CONTRACT maybe executed in any number of counterparts
each of which when so executed shall itself and together
with the other counterparts be deemed to constitute an
original.





SIGNED ON BEHALF OF CANARGO ENERGY CORPORATION

/s/: David Robson



SIGNED ON BEHALF OF WEUS HOLDING, INC.

/s/: Doug Sedge



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Exhibit A




Abbreviations and Definitions




TECHNICAL




ACP  —  ANNULAR CASING PACKER




ASSY  —  ASSEMBLY




BHA  —  BOTTOM HOLE ASSEMBLY




BOP  —  BLOW OUT PREVENTERS




CT  —  COIL TUBING




UBCTD  —  UNBERBALANCED COIL TUBING DRILLING




EH  —  EASY HYDRAULIC




ESD  —  EMERGENCY SHUTDOWN




EUE  —  EXTERNAL UPSET ENDS




ID  —  INSIDE DIAMETER




MWD  —  MEASUREMENT WHILST DRILLING




N2  —  NITROGEN




OD  —  OUTSIDE DIAMETER




P&ID  —  PROCESS & INSTRUMENTATION DIAGRAM




PB  —  PLAIN BOTTOM




PCE  —  PRESSURE CONTROL EQUIPMENT




PDM  —  POSITIVE DISPLACEMENT MOTOR




PKR  —  PACKER




RETV  —  RETRIEVABLE




S/SEAL  —  SHEAR SEAL




21









 




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UBD  —  UNBERBALANCED DRILLING




WXN  —  WEATHERFORD NO GO NIPPLE




OTHER




C/W  —  COMPLETE WITH or COMES WITH




FOC  —  FREE OF CHARGE




HAZID  —  HAZARD IDENTIFICATION




HAZOP  —  HAZARD AND OPERABILITY STUDY




HRS  —  HOURS




HSE  —  HEALTH SAFETY AND ENVIRONMENT




KPI  —  KEY PERFORMANCE INDICATORS




MTH  —  MONTH




N/A  —  NOT APPLICABLE




QHSSE  —  QUALITY HEALTH SAFETY SECURITY AND ENVIRONMENT




QTY  —  QUANTITY




TBA  —  TO BE ANNOUNCED




TBC  —  TO BE CONFIRMED




USD  —  UNITED STATES DOLLARS




DFR  —  DAILY FIELD REPORT




22









 




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DEFINITIONS




“CONTRACTOR EQUIPMENT” shall mean all equipment, supplies, consumables and the
like necessary to complete the SERVICES.




“CONTRACT” shall have the meaning ascribed to it on page 4 herein and for the
avoidance of doubt shall include the Exhibits hereto.




“SERVICES” shall mean all work that the CONTRACTOR is required to carry out in
accordance with this CONTRACT and the provision of all materials, services and
equipment to be rendered in accordance with the CONTRACT.




“GOOD OILFIELD PRACTICES” shall mean recognised oil and gas drilling practices
carried out by a prudent and respected contractor or person.




“FAIR WEAR AND TEAR” shall, subject to anything else stated herein, mean wear
and tear on CONTRACTOR’s EQUIPMENT associated with normal operating conditions
which fall within the normal operating limits defined within equipment
technical specifications in the course of executing the SERVICES.




“GOOD OPERATING CONDITION” shall mean the ability to operate safely and
efficiently in accordance with manufacturers and CONTRACTORS operating
conditions.




“PAYMENT” shall mean payment of all monies due to CONTRACTOR by COMPANY in
accordance with Clause 3 herein.




“TERMINATION” shall have the meaning ascribed to it in Clause 13 herein.




“FORCE MAJEURE” shall have the meaning ascribed to it in Clause 10 herein




“MONTH” shall mean a calendar month




“DAY” shall mean a period of twenty four (24) hours commencing on 00:01 hours
and ending on 24:00 hours




“THIRD PARTY” shall mean any party other than COMPANY and CONTRACTOR.




“COMPANY PERSONNEL” shall means the employees and/or agents and/or servants of
COMPANY its Affiliates, Co-venturers and partners




“CONTRACTOR PERSONNEL” shall mean the employees and/or agents and/or servants
of CONTRACTOR its affiliates, and subcontractors




“WELLSITE” shall mean the well location at which the SERVICES will be carried
out in accordance with the CONTRACT.




“COMPANY GROUP” shall have the meaning ascribed to it in Clause 6 herein.




“CONTRACTOR GROUP” shall have the meaning ascribed to it in Clause 6 herein.




“DEFEND” shall have the meaning ascribed to it in Clause 6 herein.




“LOSSES” shall have the meaning ascribed to it in Clause 6 herein.




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Exhibit B

Scope of Works




Overview




COMPANY will commence a drilling campaign in Georgia during the second half of
year 2004. The “Georgia Drilling Campaign”, is planned to include the drilling
of as many as fourteen (14) wells in the Ninotsminda, Samgori, Manavi and other
fields. The first two (2) wells are firm commitment wells and are considered to
be a trial of Underbalanced Coiled Tubing Drilling (UBCTD) technology, and
further wells are contingent upon the performance of these initial two (2)
wells.




The wells defined above will be drilled from onshore locations with a single
drilling unit performing conventional drilling operations to run and set casing
in the top of the reservoir. Alternatively existing wells may be sidetracked
using conventional techniques, to place a casing string in or near the top of
the reservoir. Thereafter, a UBCTD Package would drill the reservoir section
using underbalanced or managed pressure drilling techniques, in order to reduce
well impairment and thereby increase potential productivity. The decision to
drill each well with UBD technology is dependent upon the availability of
equipment, successfully landing and cementing the production casing into the
top of the reservoir, if COMPANY’s geological prognosis indicates that the
reservoir is at the anticipated depth, if the wellbore stability proves to be
suitable for UBD, if the reservoir responses positively to being drilling
underbalanced or if the COMPANY presents any other reasonable reason. With the
exception of the first well, Manavi, each of the reservoir sections will be
approximately horizontal.




A two (2) phase circulating system using crude oil and nitrogen or natural gas
is planned to generate the underbalanced conditions required through the
reservoir section, however other fluids may be used (e.g. brine for Manavi). A
+/- 200 psi drawdown on the lowest pressured formation is planned.




Note : Hydrogen sulphide has not been reported from the producing reservoirs,
and therefore CONTRACTOR’S EQUIPMENT package is not H
2 S certified to meet
sour service specifications.




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SCOPE OF WORK




Summary Phase Definition




1.0 The SERVICES have three (3) distinct phases and the SERVICES include but
are not limited to;




1.1 Phase 1 — FEED Study and Planning





(a) Establish the PROJECT team;




(b) Define clear deliverables and accountabilities for all team members;




(c) Develop detailed PROJECT schedule and establish a stage gate process
that identifies key PROJECT milestones;




(d) Identify QHSSE deliverables;




(e) Assist in identification and prioritisation of UBD candidate wells,
including screening, flow modelling, well costing and risk analysis;




(f) Provide input into prioritisation and selection of actual UBD programme
wells.




(g) Develop detailed well plans and provide input into well specific safety
cases for all UBD programme wells;




(h) Verification of all UBD procedures;




(i) Identify contingency plans;




(j) Complete PROJECT execution plan for the SERVICES;




(k) Interface with drill rig contractor, facilities CONTRACTOR and COMPANY’S
other contractors;




(l) CONTRACTOR will provide training for COMPANY WELLSITE employees (e.g.
Pressure control, HSE, CT and UBD). These courses will be provided at
CONTRACTOR internal rates. COMPANY will pay for the courses before
CONTRACTOR EQUIPMENT mobilisation. Half of the cost paid to CONTRACTOR by
COMPANY will be repaid by CONTRACTOR to COMPANY evenly between wells five
and fourteen (5 — 14) up to a maximum total value of $45,000. If extra WORK
is added to the programme and a further six (6) wells are drilled CONTRACTOR
will repay the remaining half of the training costs evenly between wells
fifteen and twenty (15  — 20) up to a maximum value of $45,000 (the total
training value now being $90,000). Training dates to be agreed between the
parties.



1.2 Phase 2 — UBD Operations






     (a) Deliver the underbalanced conditions in the wells;



     (b) Provide onsite rig supervision and operational support and all
equipment;



     (c) Provide support from COMPANY base



     (d) Perform data acquisition and flow modelling;



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     (e) Capture key learning and knowledge;



     (f) Mobilise, install and demobilise equipment.



1.3 Phase 3 — Completion and Production Systems





(a) Completion Services




(b) Based on the planned well design and drilling program, CONTRACTOR
will identify the equipment, accessories and personnel necessary to
perform the following:




	 	(i)	 	Install completions in wells






(c) CONTRACTOR will also identify and recommend, in conjunction with
COMPANY, the consumables for each completion to be run in hole.




(d) CONTRACTOR will mobilize agreed equipment, consumables and personnel
upon call out by COMPANY.



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	1.4	 	Scope of SERVICES — Coiled Tubing Underbalanced Drilling Services
	 
	1.4.1	 	CONTRACTOR will supply CONTRACTOR’s EQUIPMENT and PERSONNEL as defined
herein to perform the SERVICES more specifically described below:
	 
	1.4.2	 	Planning and Preparation:






(a) Define additional equipment requirements in order to perform the
SERVICES.




(b) Perform Flow Modelling for finalized well designs.




(c) Create generic well programs suitable for translation and approval by
Georgian authorities.




(d) Identify and procure long lead UBD related items.




(e) Manage the design, procurement and build process for the coiled
tubing string and coiled tubing reel.




(f) Identify & resolve equipment interfaces between CONTRACTOR and
COMPANY.




(g) Generate Pipework & Instrumentation Diagram (P & ID), Flow Process
Diagram, Site Layout and Site HSE diagrams.




(h) Create a design basis (suitable for COMPANY procurement) of rig floor
scaffolding arrangement that can be pre-assembled and moved from well
site to well site for supporting CTD equipment.




(i) Verify Operational & Emergency Procedures.




(j) Define Mobilisation and Rig Up Plans.




(k) Define personnel (and training) requirements.




	1.4.3	 	QHSE:






(a) CONTRACTOR PROJECT Specific HSE Plan & PROJECT Interface Document




(b) Participate in PROJECT specific HAZID & HAZOP Reviews.




(c) Participate in Closure of Action Items identified from HAZID and
HAZOP’s.




(d) Ensure full compliance to Georgian HSE Rules & Regulations.




(e) Define CONTRACTOR QHSE goals.




(f) Define CONTRACTOR Key Performance Indicators (KPI’s).




(g) Ensure full compatibility within CONTRACTOR supplied items.




	1.4.4	 	Mobilisation:






(a) CONTRACTOR Mobilisation Plan is forwarded to COMPANY prior to actual
mobilization.




(b) CONTRACTOR to inform COMPANY of progress of CONTRACTOR EQUIPMENT (on
a daily basis) once mobilized, and to alert COMPANY to any unexpected
delays that could impact on COMPANY plan to utilise CONTRACTOR EQUIPMENT
during COMPANY Drilling Programme.




	1.4.5	 	Rig Up and perform Coiled Tubing Underbalanced Drilling Operations
ensuring that:






(a) CONTRACTOR performs all SERVICES in the COMPANY area of operations in
compliance with the COMPANY Health and Safety Document plans




(b) CONTRACTOR EQUIPMENT is rigged up as per the Rig Up plan and in
accordance with the P and ID and Site HSE Diagrams.




(c) CONTRACTOR EQUIPMENT is fully interfaced with COMPANY supplied
equipment




(d) Pressure Test all CONTRACTOR EQUIPMENT as per the Pressure Testing
program.




(e) Commission CONTRACTOR EQUIPMENT in accordance with the “Pre-Start
Audit / Commissioning Document”.



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(f) Perform and report on, Coiled Tubing Underbalanced Drilling
Operations in a safe and efficient manner - as defined in the CONTRACTOR
CT UBD Reference Manual and the COMPANY Well Specific CT UBD Drilling
Program.




(g) CONTRACTOR EQUIPMENT is rigged down as per the Rig Down plan.




	1.4.6	 	Demobilise CONTRACTOR EQUIPMENT ensuring that:






(a) CONTRACTOR EQUIPMENT is demobilized as per the Demobilisation Plan
either to the next well, the COMPANY defined secure holding area to be
stacked between wells, or back to CONTRACTORs base upon the termination /
conclusion of the CONTRACT.




(b) End of Job Reports / Reviews




(c) CONTRACTOR to participate in COMPANY directed After Action Reviews
following the conclusion of each well – to identify all Lessons Learned
during the course of the operation and consequently improve, and make
more safe and efficient – the UBD process.




(d) CONTRACTOR to review with COMPANY, the PROJECT Goals and KPI’s
following each well.

CONTRACTOR to furnish COMPANY with a detailed “End of Well Report”.



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2.0 SERVICES Supplied by CONTRACTOR




2.1 PROJECT Team comprising:




2.1.1 Full time members:




(a) PROJECT Manager:




The PROJECT Manager will be the focal point for all issues concerning the
PROJECT. He will be experienced in Coiled Tubing drilling, Directional
drilling, Underbalanced drilling and general drilling technology. The PROJECT
Manager will conduct all liaisons with COMPANY in the planning stages of the
PROJECT and will be the office focal point during operations. All other PROJECT
team disciplines will report to the PROJECT Manager.




(b) Coiled Tubing Engineer




The Coiled Tubing Engineer will be assisting the PROJECT Manager with all
aspects of Coiled Tubing technology with regard to the PROJECT.




(c) Underbalanced Drilling engineer

The Underbalanced Drilling Engineer will assist the PROJECT Manager with the
underbalanced well planning. He will conduct all flow modelling and will
coordinate production modelling.




2.1.2 Part Time Members:




(a) Directional Drilling Planner




The Directional Drilling Planner will conduct all necessary calculations and
schematics with regard to the PROJECT under the direction of the PROJECT
Manager.




(b) Logistics and Materials Planner




The Logistics and Materials Planner position will be conducted by various
persons within the CONTRACTOR departments. The coordination of logistics will
be under the supervision of the PROJECT Manager and the discipline engineers.




(c) QHSE Manager




All QHSE issues will be conducted and managed from CONTRACTOR’S QHSE department
in Aberdeen.




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	3.0	 	CONTRACTOR EQUIPMENT
	 
	3.1	 	Subject to finalisation and mutual agreement of workscope by COMPANY and
CONTRACTOR, prior to CONTRACTOR EQUIPMENT being mobilised and with the
exception of COMPANY provided items as listed elsewhere, CONTRACTOR shall
be responsible for providing all items of equipment required to perform
the SERVICES described herein.
	 
	 	 	If additional equipment to that mentioned above, is required by CONTRACTOR
to cater for an increased scope of SERVICES then such additional equipment
will be mobilized from its Point of Origin and charged for at mutually
agreed prices.
	 
	4.0	 	CONTRACTOR’S RESPONSIBILITIES





The responsibilities set out herewith describe the basic requirements for
SERVICES supplied by the CONTRACTOR to COMPANY to meet COMPANY’S drilling
programme in Georgia. The responsibilities represent minimum guidelines and in
no way limit the CONTRACTOR’S responsibilities hereunder.

CONTRACTOR must provide an indication of the time to mobilise the SERVICES,
including equipment, personnel and consumables, to the specified. The
CONTRACTOR is obliged to alert the COMPANY of any shortfalls in the supply of
the said SERVICES, and in sufficient time for the COMPANY to substitute all or
part of the SERVICE.




In addition to the requirements set forth elsewhere in this CONTRACT,
CONTRACTOR agrees to comply with the following provisions:





(a) CONTRACTOR is to prepare and verify the equipment, which is to be
assigned to the CONTRACT prior to mobilisation.




(b) On the WELLSITE, CONTRACTOR shall prepare and check equipment prior
to the commencement of any operation.




(c) Provide qualified personnel as set forth herein and any other
personnel mutually agreed upon as necessary for the performance of the
SERVICES.




(d) Supply all materials, supplies and spare parts necessary for the
continuous operation of CONTRACTOR’S services as defined in scope of
SERVICES with the exception of those items listed in Exhibit D COMPANY
Provided Items and 4.0 COMPANY’s Responsibilities.




(e) Field tickets must be completed and duly signed by COMPANY WELLSITE
representative on a daily basis for submission as backup with invoices.
Field tickets duly signed will be considered correct, approval will not
be unreasonably withheld. End of job invoices submitted without proper
backup will remain unpaid until proper supporting documentation is
submitted or until it is agreed between parties that unsupported items
can be withdraw and submitted with the next invoice..




(f) Provide and maintain all safety equipment and supplies necessary to
adhere to a safe and responsible operation while performing the SERVICES
covered under this CONTRACT.




(g) CONTRACTOR to approve of each WELLSITE and well prior to movement to
next well in good time to allow COMPANY to effect changes.




(h) CONTRACTOR’S PERSONNEL shall oversee all loading and unloading
activities of CONTRACTOR’S EQUIPMENT.



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(i)  CONTRACTOR shall be responsible for ensuring CONTRACTOR’S EQUIPMENT
is fitted with appropriate certified lifting equipment for
transportation and lifting operations.



CONTRACTOR’S PERSONNEL




CONTRACTOR shall supply résumés of all the proposed CONTRACTOR PERSONNEL and
include job title. The résumé should include each person’s education,
pertinent job experience, expertise and Point of Origin. All personnel
supplied by the CONTRACTOR must be professional in his field with appropriate
accredited certificates and credentials. COMPANY reserves the right to request
certification and documentation of criteria mentioned above, for any and/or all
CONTRACTOR’S PERSONNEL assigned to COMPANY WELLSITES during any phase of the
CONTRACT period.




Once key personnel are selected, COMPANY must be given a minimum of ten (10)
days notice and has the right of refusal concerning the transfer of said key
personnel by CONTRACTOR from COMPANY’S service. COMPANY shall also have the
right to approve replacement personnel if a transfer of CONTRACTOR’S personnel
takes place.




COMPANY reserves the right to limit the number of and the duration of stay of
all CONTRACTOR’S personnel at the WELLSITE within the CONTRACTOR’S defined safe
operating numbers.




COMPANY reserves the right to request in writing the removal of any and or all
CONTRACTOR’S PERSONNEL without exception and at COMPANY’S sole discretion.




A normal crew complement of nineteen (19) personnel will be required during
drilling operations. CONTRACTOR shall also provide relief personnel, if
applicable and if required by Georgian law if given sufficient notice by
COMPANY.




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Exhibit C

Schedule of Prices





	1.0	 	General
	 
	1.1	 	In consideration of performing and completing the WORK in accordance with
the provisions and requirements of this CONTRACT, CONTRACTOR shall be
compensated in accordance with the terms of this Exhibit C.
	 
	1.2	 	The rates and prices are exclusive of any incidence for Value Added Tax
applicable to the goods and services provided by the CONTRACTOR under the
CONTRACT. The amount of Value Added Tax chargeable thereon shall be paid
to the CONTRACTOR by the COMPANY in addition to any other payments
becoming due under the CONTRACT upon production of a valid tax invoice.
	 
	1.3	 	All prices are in US Dollars.
	 
	1.4	 	Where the Scope of Work is not clearly defined, reimbursement shall be
made on the basis of actual hours expended, as evidenced by timesheets
authorised by the COMPANY Representative, multiplied by the agreed
daily/hourly rates. Execution of such SERVICES shall be PROJECT
controlled against a pre-agreed estimate and programme and any variations
shall be highlighted to the COMPANY Representative in a timely manner. In
particular, any expenditure of manhours in excess of the estimated
manhours shall be pre-agreed with the COMPANY Representative, in writing.
	 
	1.5	 	Should compensation for the SERVICES be of a reimbursable nature
CONTRACTOR shall record all months/days/hours worked on timesheets/service
tickets. These timesheets/service tickets must be signed by the COMPANY
Representative, whose name will be advised. COMPANY will only accept
liability to pay for months/days/hours recorded on such signed
timesheets/service tickets. Substantiation of invoices shall include
timesheets, third party invoices and signed delivery tickets as
appropriate.
	 
	1.6	 	The COMPANY shall pay the CONTRACTOR the CONTRACT PRICE calculated in
accordance with the provisions of this Exhibit C and any variation orders
issued by COMPANY.
	 
	1.7	 	No reimbursement shall be made for SERVICES which are not performed in
accordance with the CONTRACT.
	 
	1.8	 	All rates are fixed and firm for the duration of the CONTRACT. Rates and
prices for the option periods shall be mutually agreed. Not withstanding
anything contained herein due to the extremely volatile world steel prices
CONTRACTOR cannot guarantee any sales prices of equipment, including but
not limited to CT and reel.




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	2.0	 	Equipment
	 
	2.1	 	MOBILISATION AND DEMOBILISATION





It has not yet been decided if CONTRACTOR will transport equipment to Georgia,
and COMPANY perform the rest of the mobilisation, or if COMPANY will perform
the entire process from Aberdeen to the well site. Fees may be altered to
reflect changes in Mobilising & Demobilising responsible party.




Technical certificates will be secured by COMPANY at COMPANY’s cost. CONTRACTOR
will support applications by provision of full technical documentation and
appropriate specification for equipment.




DEMOBILISATION — All costs and expenses associated with the DEMOBILISATION of
the supplied equipment are deemed to be covered by the CONTRACTOR and will be
covered by the lump sum demobilisation fee payable by COMPANY to CONTRACTOR
(transportation cost Exhibit C Section 9). COMPANY shall be responsible for all
labour, materials, parts, customs clearance, duties, technical certificates or
licences etc, for the complete delivery of all supplied equipment from the
WELLSITE to Point of Exit from Georgia.





	2.2	 	Equipment rental rates are inclusive of all packaging, craneage, slings
and container costs. No charges for such will be admissible. Rates are
fully exclusive of transportation costs to/from the CONTRACTOR’s Onshore
Base and COMPANY’s Shorebase which will be provided by COMPANY. In the
event that CONTRACTOR is requested to provide transportation then COMPANY
shall reimburse CONTRACTOR at documented third party cost.
	 
	2.3	 	Equipment Rentals
	 
	 	 	Charges in respect of rental equipment used shall, unless otherwise
agreed in writing, commence solely from the date such rental equipment is
shipped from CONTRACTOR’s Onshore Base and shall continue until such time
as returned thereto.
	 
	2.4	 	Equipment Rentals Onshore
	 
	 	 	Charges in respect of rental equipment used onshore shall, unless
otherwise agreed in writing:






	 	1.	 	Be calculated as per timesheets signed by an authorised
COMPANY Representative for rental equipment used on CONTRACTOR’s or
third party premises.
	 
	 	2.	 	Commence solely from the time rental equipment is delivered
to COMPANY’s designated delivery point and shall continue until such
rental equipment is notified as being ready for return to CONTRACTOR
for equipment used other than on CONTRACTOR’s premises.
	 
	 	3.	 	Not include any mobilisation or demobilisation charges
(including transportation, lifting and handling charges to and from
point of delivery/redelivery).




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	2.5	 	Failure in Service






	 	1.	 	When CONTRACTOR’s equipment fails whilst in service, and
operations are interrupted or halted, Zero Rates for all CONTRACTOR
equipment and services shall be invoked with effect from the start
of the interruption or halt. The cumulative Zero Rate time, as a
result of equipment malfunction or other service interruption, will
include all the time from the start of the interruption until
operations are resumed.
	 
	 	2.	 	In the event that it is established that following failure of
the CONTRACTOR’s equipment, CONTRACTOR has insufficient personnel
and equipment to commence, or complete any operation, the CONTRACTOR
shall be reimbursed at Zero Rate for equipment and personnel during
the period of delay whilst the WORKSITE suffers downtime due to
failure to provide same. The Zero Rate will apply to each day when
any part of that day has been lost due to such delay. The CONTRACTOR
shall be solely responsible for ensuring that sufficient back up
equipment is available at the WORKSITE and personnel at CONTRACTOR’s
onshore base in order to cover for such equipment malfunction, etc.






	2.6	 	All rates are to be fully inclusive of all maintenance charges which will
include, but will not be limited to, all inspection (pre, during and post
job), certification, re-builds, testing, consumable seals, expendable
parts, redress, repair and parts resulting from normal operational wear
and tear.






	 	Note: For abnormal wear and tear
	 
	 	1.	 	If the repair or re-dressing is required due to
tool defect or poor servicing, the cost of servicing will be
at no cost to COMPANY.
	 
	 	2.	 	COMPANY shall not compensate CONTRACTOR for the
costs of repair or refurbishment of any equipment for which it
is liable unless COMPANY has been requested to witness the
inspection thereof prior to such repair or refurbishment.
	 
	 	3.	 	In the event that COMPANY requests CONTRACTOR to
perform SERVICES outwith the normal operating parameters of
CONTRACTOR’s BHA EQUIPMENT (145°C and 5000psi differential
pressure between the inside of BHA and the outside of the BHA
i.e the annulus) then COMPANY shall reimburse CONTRACTOR for
all loss and or damage to CONTRACTOR EQUIPMENT.
	 
	 	4.	 	Cost to repair damage to BHA Stator which has
been caused by exposure to crude oil drilling medium will be
recharged to COMPANY.






	2.7	 	For any additional third party equipment, materials or services (outwith
the agreed rates and/or charges contained herein) requested by COMPANY and
provided by CONTRACTOR, CONTRACTOR shall be reimbursed at documented cost
with a five percent (5%) mark-up, save for, if applicable, CONTRACTOR’s
expenses incurred on COMPANY approved travel, which will be reimbursed at
documented cost.
	 
	2.8	 	Costs incurred by CONTRACTOR in making good damage to CONTRACTOR’S
downstream EQUIPMENT by erosion will be recharged to COMPANY at cost plus
five percent (5%). Choke redress kits will be charged as used according to
the table of consumables in Section 6.3.




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	2.9	 	It is CONTRACTORS intention to utilise a dedicated team to perform
maintenance on CONTRACTOR’S EQUIPMENT package during periods when the
equipment is not operating. However any maintenance/refurbishment of
directional drilling BHA which cannot be carried out in country of
operations will be returned to CONTRACTOR base of operations at cost to
CONTRACTOR. Transportation, importation, exportation will be the
responsibility and cost of COMPANY and will be performed as per clause 9.0
of this exhibit.
	 
	2.10	 	Additional equipment and services outwith those listed in Exhibit C will
be provided by CONTRACTOR in accordance with CONTRACTOR’s Handling
Equipment and Rental Product Lines Price List or Casing Consumables Price
List, as appropriate.
	 
	2.11	 	STACKED RATE:
	 
	 	 	Is payable any time the CONTRACTOR’S EQUIPMENT is rigged down, in transit
or stacked during inactive periods. No STACKED RATE will be payable
during transit between equipment Point of Origin and the Point of Entry
to Georgia, nor during the return trip. A total allowance of fourteen
(14) days will be made by CONTRACTOR to COMPANY for the process of
clearing customs, transporting CONTRACTOR’S EQUIPMENT from Point of Entry
in Georgia to the WELLSITE and returning CONTRACTOR’S EQUIPMENT to Point
of Exit in Georgia upon the conclusion of operations. This is a maximum
cumulative period and should these activities be effected quicker, it is
not transferable as a deductible.
	 
	2.12	 	OPERATING RATE:
	 
	 	 	Is payable on completion of rig up (when the BHA is made up and tested
and when the rig up has been approved by CONTRACTOR and COMPANY HSE
responsible persons according to agreed sign off sheet as being safe for
operations). The OPERATING RATE ceases once the equipment rig down
process begins (when the final BHA or toolstring is broken from the CT
string).
	 
	2.13	 	STANDBY RATE
	 
	 	 	Is payable at any time other than those listed above. This covers rig up
and rig down time, and will also cover times when CONTRACTOR’S EQUIPMENT
is ready for operations but cannot operate due to situations outwith
CONTRACTOR’s control. STANDBY RATE for rig up begins when the first item
of CONTRACTOR EQUIPMENT is placed on WELLSITE for each well. STANDBY RATE
for rig down ends when the last item of CONTRACTOR EQUIPMENT is uplifted
from WELLSITE, or placed in storage location on WELLSITE, at end of each
well.
	 
	 	 	It is intention of CONTRACTOR to have only one (1) crew and hence break
up the program with a (approximately) two week period of R&R for
CONTRACTOR PERSONNEL every four (4) to six (6) weeks, depending upon well
operations. No STACK RATE shall apply during this period. If however a
planned restart of operations is delayed by COMPANY beyond fourteen (14)
days then STACK RATE shall apply from (and including) the fifteenth (15)
day. No STACK RATE shall apply if CONTRACTOR delays restart of
operations.
	 
	 	 	Should a well be suspended or abandoned earlier than anticipated due to
no fault of CONTRACTOR, the fourteen (14) day FOC period between wells
will not be applicable. STACK RATE will apply from end of rig down on
suspended or abandoned well and will continue until restart of original
well or start of new well.




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	2.14	 	DURATION OF CHARGES
	 
	 	 	SERVICE/rental charges shall apply from the first day on which the
CONTRACTOR’S EQUIPMENT arrives at Point of Entry in Georgia until the day
it is returned to the Point of Exit. COMPANY has up to fourteen (14)
days without charges of the equipment being transported by ship, to
effect customs clearance, loading, unloading and transport between the
port and the WELLSITE and the reverse of the entire process on completion
of the drilling program. This fourteen (14) day allowance is a maximum
figure and cannot be carried over as a credit to other activities.
	 
	2.15	 	CONSUMABLES SUPPLY and DELIVERY
	 
	 	 	COMPANY will only be invoiced for items actually consumed. CONTRACTOR
will invoice for consumables only as detailed in the Daily Field Report
and signed by the COMPANY Representative. The aforementioned report
shall serve as the primary support documentation for the CONTRACTOR’S
invoice. (Example included in Exhibit G ).
	 
	 	 	A mutually agreed consumables list shall be produced by the CONTRACTOR
and shall be provided to the COMPANY. Adequate stock levels shall be
maintained throughout the duration of the PROJECT but overstocking is to
be minimised unless expressly requested by the COMPANY.
	 
	 	 	COMPANY shall not be restricted to the exclusive use of CONTRACTOR’S
consumables. Should CONTRACTOR fail to adequately supply a particular
consumable or the quality of the said consumable does not meet the
CONTRACT specifications, COMPANY may source a suitable alternative
elsewhere.
	 
	 	 	Transport of additional consumables from CONTRACTOR’S Base to the
WELLSITE will be for the account of COMPANY.
	 
	 	 	COMPANY will only accept consumables supplied by the CONTRACTOR arriving
at the WELLSITE in an undamaged condition. Liability for the risk of
damage to consumables during transit between the CONTRACTOR’S Base and
the COMPANY’S WELLSITE shall be at the cost of the CONTRACTOR
	 
	 	 	At the termination of the CONTRACT, CONTRACTOR will transport all
consumables no longer required by the COMPANY, back to CONTRACTOR’S Base.
There will be no re stocking fee. Any surplus consumables stock may be
offered to COMPANY for purchase at CONTRACTOR prices. However,
consumables returned from the WELLSITE in opened containers, or if
damaged by COMPANY and in non-resalable condition, shall be charged to
COMPANY at CONTRACT prices.
	 
	 	 	Consumables not included herein, but required by the COMPANY and supplied
by the CONTRACTOR, shall be available for purchase by COMPANY from the
CONTRACTOR’S Price List.




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	3.0	 	Personnel
	 
	3.1	 	Day rates shall, unless otherwise specified, be per calendar day or any
part thereof. Monthly rates where applicable shall be based on a thirty
(30) day month and any part month shall be charged on a pro rata basis.
	 
	3.2	 	Duration Of Personnel Charges
	 
	 	 	Unless otherwise noted, all personnel charges shall apply from day of
departure from Point of Origin until day of return to Point of Origin.
STANDBY rates are not applicable for personnel.
	 
	 	 	If CONTRACTOR PERSONNEL miss flights during transit / over night stays
(due to their own negligence), then associated additional personnel and
transportation costs including subsistence and lodging are the
responsibility of CONTRACTOR. In the event that operations cannot
commence due to key CONTRACTOR PERSONNEL missing flights (again, due to
their own negligence) then COMPANY shall not be liable for any equipment
or personnel charges during this period. It is the decision of the
COMPANY to decide if sufficient CONTRACTOR PERSONNEL are present to
commence operations, however CONTRACTOR reserves the right to overrule
COMPANY if CONTRACTOR feels that safety is being breached. In such a
situation, CONTRACTOR elects to go to Zero Rate until CONTRACTOR is
satisfied that sufficient CONTRACTOR PERSONNEL are on WELLSITE to ensure
safe operations.
	 
	3.3	 	One Month Break
	 
	 	 	It is the intention of both parties to have a four (4) week break over
the Christmas and New Year Period. Equipment and Personnel rates and
charges will not apply during this period. If COMPANY wishes to extend
this period for longer than four (4) weeks, then a retainer equivalent to
seventy five percent (75%) of total personnel day rate must be paid in
order to maintain consistency in personnel from CONTRACTOR. This will be
in addition to equipment STACKED RATE that begins after the four (4) week
period




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	4.0	 	NON PRODUCTIVE TIME





Should any of CONTRACTOR’S EQUIPMENT (excluding the coiled tubing itself) be
inoperable due to mechanical breakdown outwith what is considered to be normal
wear and tear, which leads to loss of the Underbalanced Coiled Tubing Drilling
Operation, reduced rates will be payable to CONTRACTOR for SERVICES as per the
following tables. Reduced Rates will continue until CONTRACTOR’S EQUIPMENT is
available to commence/recommence operations at the WELLSITE.




BHA NPT




NPT will not apply if the temperature of the well is above 145°C or
differential pressure between the inside of BHA and the outside of the BHA i.e
the annulus of over 5000psi.




If motor failure is due to drilling fluid damage CONTRACTOR will not accept NPT
after seven hours (7) of pumping time. If however a failure is due to
mechanical or electrical breakdown then CONTRACTOR will accept NPT for this.




In the event of a BHA failure hole conditioning will be performed outwith NPT
before Pulling Out of Hole on NPT.




	 	 	 
	Duration of loss of the
Underbalanced Operation
	 	% of Equipment
	(Cumulative per trip with 1 TRIP
	 	Operating Day Rate to
	being defined as 2 wells, i.e. if 3
	 	Apply to UBCTD
	wells are achieved then
	 	Equipment package.
	CONTRACTOR
is allowed thirty six (36) hours of NPT per trip)
	 	 
	 
	 	 
	0 - 24 hrs
	 	100%
	 
	 	 
	Greater than 24 hours
	 	0%







If NPT occurs on STANDBY RATE, then STANDBY RATES will apply for the hours of
NPT providing this occurs in the 0-24hr period of “paid for” NPT.




If NPT occurs on OPERATING RATE, then operating rates will apply for the hours
of NPT providing this occurs in the 0-24hr period of “paid for” NPT




	 	 	 
	Duration of loss of the
Underbalanced Operation (Cumulative
per trip with 1 TRIP being defined as
2 wells, i.e. if 3 wells are achieved
	 	% of Personnel Operating Day Rate
	then CONTRACTORS are allowed 36hrs of
	 	to Apply to UBCTD
	NPT per trip)
	 	Equipment package.
	 
	 	 
	0 - 24 hrs
	 	100%







If NPT is greater than 24hrs then a sliding scale of percentage personnel
payment is invoked. This scale is over 10 incremental steps from 90% to 0%
each accounting for 24 hrs (i.e. the 24th to
48th hours are at 90, assuming no
historical NPT has been accumulated).




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This scale is used over the course of the campaign therefore any NPT over 24hrs
per trip will cause the scale to slide downwards for the extra 24 hr periods of
NPT. If however there is no NPT, or less than
24hrs, on a particular trip, the scale can slide up again to a maximum of 100%.
If no NPT is incurred in a trip, and the dayrate is at 100%, then 24 hours are
added to the NPT free duration.




Should a major failure of the CONTRACTOR’S EQUIPMENT result in an extended
continuous delay, then CONTRACTOR shall demobilise its crew at its cost.





	5.0	 	CANCELLATION FEES
	 
	5.1	 	Cancellation by COMPANY





Notwithstanding anything contained herein, in the event that the two (2)
commitment wells are not drilled or the CONTRACT is terminated for any reason
by the COMPANY after 7days from MOBILISATION and prior to completion of the two
(2) commitment wells, then COMPANY shall pay CONTRACTOR the remaining value of
the Escrow Account as defined in MSC section 3.12 to a maximum total value of
one million four hundred thousand dollars (1,400,000 USD). COMPANY will also
pay all accrued certifying/documentation costs, MOBILISATION costs and coil
preparation costs incurred by CONTRACTOR up until point of cancellation.





	5.2	 	Engineering Charges





CONTRACTOR shall invoice COMPANY and COMPANY shall pay directly to CONTRACTOR
the amount of $120,000 per calendar month in advance, from CONTRACT signature,
until equipment MOBILISATION (Anticipated duration three (3) months). The
first payment shall be made within two (2) working days of CONTRACT signature,
into a CONTRACTOR nominated account. If a further fourth month is required
before MOBILISATION COMPANY shall pay a further $60,000. The total amount
shall however be capped to these four payments (i.e. $420,000). The actual
total will be repaid by CONTRACTOR to COMPANY in six equal amounts from the
completion of well three (3) until well eight (8).





	5.3	 	Late MOBILISATION by CONTRACTOR





If CONTRACTOR fails to mobilise CONTRACTOR’s EQUIPMENT from Aberdeen, and new
CT and reel from Houston (U.S.) within four months of receipt of payment from
COMPANY for purchase of CT and Reel as described in this exhibit section 6.1,
then CONTRACTOR shall pay to the COMPANY liquidated damages of $150,000 per
month (parts of month shall be pro-rated). Exception will be made where
COMPANY arranged logistics are late or problematic. Such liquidated damages
shall be capped at $600,000 (four (4) months).





	5.4	 	Post-MOBILISATION / Pre-Start cancellation by CONTRACTOR





In the event that the CONTRACTOR EQUIPMENT has been mobilised, but the
CONTRACTOR personnel have not and CONTRACTOR cancels the CONTRACT, then
CONTRACTOR shall be liable for all upfront engineering costs paid to CONTRACTOR
by COMPANY over the previous 3 or 4 months; MOBILISATION (accrued at that time)
and DEMOBILISATION costs/fees from that point, plus a one off payment of $150
000. CONTRACTOR will also repay any certification and preparation costs
charged for at this time. Furthermore, the reel (with COMPANY CT) will then
become the property of COMPANY and CONTRACTOR will deliver without charge to
POTI (COMPANY will be responsible for clearing customs).




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	5.5	 	Post Start of Operations cancellation by CONTRACTOR





If after MOBILISATION of CONTRACTOR personnel, CONTRACTOR elects to cancel the
CONTRACT, before two wells have been completed, then CONTRACTOR shall pay all
MOBILISATION and DEMOBILISATION costs/fees (from Aberdeen to COMPANY base and
back again). Furthermore, the reel (with COMPANY CT) will then become the
property of COMPANY and CONTRACTOR will deliver without charge to POTI (COMPANY
will be responsible for clearing customs).





	6.0	 	PAYMENT SCHEDULE






The following payment schedule has been developed in order to avoiding
imposing potentially onerous upfront payments or terms on COMPANY, whilst
providing CONTRACTOR Management with a sufficient degree of comfort and
security.




Key points are:




	 	•	 	COMPANY pay upfront for purchase of coiled tubing string and
coiled tubing reel. These two (2) amounts must be received by
CONTRACTOR prior to CONTRACTOR ordering the relevant equipment.
Receipt of these payments by CONTRACTOR triggers the start of the
four (4) month planned mobilisation timeline.
	 
	 	•	 	COMPANY shall be provided with a PROJECT management team from
PROJECT inception, ensuring operational goals are met. CONTRACTOR
will put in place a dedicated team as described in Exhibit B section
2 to co-develop a realistic PROJECT timeline and ensure the scope of
SERVICES is accurately defined and appropriate resources are
organized to meet the scope of SERVICES. This shall be deemed to
start from the time of signature of this CONTRACT.
	 
	 	•	 	It is the intention of COMPANY to Commit to drill at least
two (2) wells. Commitment to be assured by a pre payment of one
million four hundred thousand dollars US ($1,400,000) in accordance
with the cancellation schedule provided herein lodged in an Escrow
Account held by COMPANY Lawyers (McGrigors Solicitors). Should
costs spiral beyond that which has reasonably been envisaged by
CONTRACTOR and accepted by COMPANY then COMPANY may effect
cancellation after one (1) well with penalties as detailed in
section 5.1 of this Exhibit. Mobilisation of the CONTRACTOR
EQUIPMENT will not take place before the stated prepayment has been
lodged in the said Escrow Account.
	 
	 	•	 	CONTRACTOR shall furnish COMPANY with an invoice (supported
by approved Job Tickets) within one (1) week of the completion of
each well. COMPANY shall pay each invoice within two (2) weeks of
receipt. Failure to pay an invoice within the foregoing time period
triggers transfer from Escrow Account to CONTRACTOR of the invoiced
amount. COMPANY agrees to have sufficient funds in the Escrow
Account for two (2) wells ($1,400,000) and $700,000 for each well
thereafter. Items unsettled from one (1) well may be reconciled with
the bill for the subsequent well(s). Upon completion of the
programme, CONTRACTOR must supply final invoice (for incidentals)
within two (2) months of demobilisation of CONTRACTOR’S EQUIPMENT,
by the COMPANY to the Point of Exit in Georgia.




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	6.1	 	Milestone Table from CONTRACT signature until MOBILISATION of EQUIPMENT





The following table lists payments to be made by COMPANY to CONTRACTOR from
CONTRACT signature until MOBILISATION of EQUIPMENT




	 	 	 	 	 	 	 	 	 
	Payment description
	 	Time of Payment
	 	Payment
	 	Payment Type

	Payment for CT and Reel

	 	Within two (2) days
of contract
signature
	 	$	690,000	 	 	CASH
	Engineering Charge

(1st Month)

	 	Within two (2) days
of contract
signature
	 	$	120,000	 	 	CASH
	Engineering Charge

(2nd Month)

	 	One month after

Contract Signature
	 	$	120,000	 	 	CASH
	Engineering Charge

(3rd Month)

	 	Two months after

Contract Signature
	 	$	120,000	 	 	CASH
	Engineering Charge

(4th Month)

	 	If Equipment has
not mobilised then
3 months after
contract signature
	 	$	60,000	 	 	CASH
	Training Costs

	 	3 months after
contract signature
	 	Up to $90,000
	 	CASH
	Preparation costs for

back-up coil

	 	As invoiced by

CONTRACTOR
	 	$	135,000	 	 	CASH
	Two well pre-payment

into Escrow Account

	 	1 week before
equipment
Mobilisation
	 	$	1,400,000	 	 	ESCROW
	Certification costs

	 	When EQUIPMENT is
mobilised
	 	$	10,000	 	 	CASH







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	7.0	 	CONTRACTOR’S EQUIPMENT REPLACEMENT COSTS





The replacement costs (new) for CONTRACTOR’S EQUIPMENT is attached to each of
the Schedule of Prices listed in the CONTRACT and may be updated to include
additional tools or equipment, as approved by the COMPANY.





	7.1	 	Equipment replacement values





	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Total replacement
	Description (c/w contents)
	 	Qty
	 	cost (US$)

	4 Phase Separator
	 	 	1	 	 	 	294,788	 
	20 ft Container (UBD Back-up equipment,
extra pumps etc)
	 	 	1	 	 	 	32,042	 
	Pipe Basket (HP Piping, ESD valve and
Manifolds for separator)
	 	 	1	 	 	 	140,985	 
	Choke Manifold
	 	 	1	 	 	 	256,338	 
	Office/workshop (Datapro Equipment, Full
Toolbox, Electrical tools etc)
	 	 	1	 	 	 	269,154	 
	20 ft Spares Container (Spare Valves,
pipework, fittings, repair kits, air hoses,
instrumentation for UBS equipment)
	 	 	1	 	 	 	166,619	 
	20 ft Kill fluid Tank
	 	 	1	 	 	 	115,352	 
	Power Pack
	 	 	1	 	 	 	296,660	 
	Control Cab
	 	 	1	 	 	 	296,660	 
	Reel (2 3/8”) — back up reel
	 	 	1	 	 	 	273,000	 
	Reel (2 7/8”) — main reel
	 	 	1	 	 	Please see note below.
	Injector Basket c/w
	 	 	1	 	 	 	18,746	 
	Injector
	 	 	1	 	 	 	149,240	 
	Stuffing Box
	 	 	1	 	 	 	36,400	 
	90” Gooseneck
	 	 	1	 	 	 	15,834	 
	BOP Container
	 	 	1	 	 	 	409,318	 
	Fluid Pump
	 	 	1	 	 	 	455,000	 
	Fluid Pump
	 	 	1	 	 	 	455,000	 
	Fluid Pump
	 	 	1	 	 	 	455,000	 
	workshop Container (Spare pipework,
fittings, repair kits, full toolbox, etc
for CT equipment)
	 	 	1	 	 	 	56,420	 
	Scale Squeeze Container (Hoses, workshop,
further spares and ancillary equipment for
CT operations)
	 	 	1	 	 	 	56,420	 
	10 ft Container (Iron)
	 	 	1	 	 	 	72,800	 
	10 ft Container (Suction)
	 	 	1	 	 	 	72,800	 
	10ft 1/2 height container
	 	 	1	 	 	 	152,516	 
	S/SealBaskets c/w
	 	 	1	 	 	 	18,200	 
	Shear Seal
	 	 	1	 	 	 	131,040	 
	Koomey Unit
	 	 	1	 	 	 	137,410	 







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	 	 	 	 	 	 	Total replacement
	Description (c/w contents)
	 	Qty
	 	cost (US$)

	Sets 3 1/8” BHA
	 	 	3	 	 	 	804,375	 
	2 7/8” Motor
	 	 	4	 	 	 	150,000	 
	Dalen Stator Replacement Costs (worst case)
	 	 	1	 	 	 	3,000	 
	Sets Surface equipment
	 	 	2	 	 	 	191,100	 
	7” Casing Exit
	 	 	1	 	 	 	39,000	 
	7” Casing Exit Running Tools
	 	 	1	 	 	 	111,000	 
	6 5/8” Casing Exit
	 	 	1	 	 	 	32,000	 
	6 5/8” Casing Exit Running Tools
	 	 	1	 	 	 	111,000	 
	Packer Running Package
	 	 	1	 	 	 	22,550	 
	‘PB’ Retrievable Packer
	 	 	1	 	 	 	28,580	 
	Redress Kit
	 	 	1	 	 	 	6,825	 
	EH- Hydraulic Setting tool
	 	 	1	 	 	 	3,440	 
	Bakke Dimple connector Kit
	 	 	1	 	 	 	2,840	 
	Dimple tool with Dimple Head
	 	 	1	 	 	 	1,820	 
	Annular Casing Packer
	 	 	1	 	 	 	13,000	 
	Sleeve, sliding
	 	 	1	 	 	 	3,453	 
	Hydrow I RETV PKR
	 	 	1	 	 	 	9,348	 
	WXN Nipple
	 	 	1	 	 	 	255	 
	2-7/8” PUP
	 	 	1	 	 	 	723	 
	Wireline Entry Guide
	 	 	1	 	 	 	168	 
	2-7/8” PUP
	 	 	1	 	 	 	723	 
	N2 Converter
	 	 	1	 	 	 	450,000	 
	N2 Tank
	 	 	4	 	 	 	50,000	 
	TOTAL
	 	 	 	 	 	 	6,895,942	 







NOTE:




The replacement value for the reel is governed by the table in section 9.2.
Therefore if the reel is damaged beyond repair after payment has been received
for some wells, the payment COMPANY will pay CONTRACTOR is the equivalent money
COMPANY has received through discounted well Prices up to this point.




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	8.0	 	Preparation Costs





The following preparatory costs will be payable prior to mobilisation:




	 	 	 	 	 
	Backup coil testing and certification
	 	 	135,000	 
	Equipment inspection and certification (in Aberdeen):
	 	 	10,000	 








	9.0	 	Mobilisation Costs for UBCTD equipment package





All mobilisation figures assume that CONTRACTOR transports all CONTRACTOR
EQUIPMENT to Port of Entry in Georgia by sea and also includes air freight of
directional tools direct from Canada to Tbilisi airport.

Thereafter, COMPANY will be responsible for all transportation, customs
clearance, tariffs and duties within Georgia.




	 	 	 	 	 
	Mobilisation Charges
	 	Cost

	Coiled Tubing Underbalanced Directional equipment package
including Back up Coil but excluding nitrogen equipment
	 	 	243,905	 
	Coiled Tubing Underbalanced Directional equipment package with N2
equipment and backup coil
	 	 	265,905	 







	 	 	 	 	 
	De-Mobilisation Charges
	 	Cost

	Coiled Tubing Underbalanced Directional equipment package
including Back up Coil but excluding nitrogen equipment
	 	 	243,905	 
	Coiled Tubing Underbalanced Directional equipment package with N2
equipment and backup coil
	 	 	265,905	 







If COMPANY arranges shipping from Aberdeen then CONTRACTOR’S costs are limited
to trucking to harbour in Aberdeen and Mobilising Dalen equipment from Canada.
Therefore if COMPANY arranges shipping from Aberdeen, CONTRACTOR’S charges will
be:




	 	 	 	 	 
	Description
	 	Transportation Cost

	Craneage and Trucking in Aberdeen
	 	 	15000	 
	Dalen airfreight of equipment to Tbilisi
	 	 	35,000	 







These charges will apply for a de-mob arranged by COMPANY. Mobilisation for
additional equipment outwith the UBCTD package, such as fishing, milling,
casing exit and completion equipment will be charged at documented cost +10%.
In all cases this figure will be advised prior to mobilisation taking place.
Where practical, all additional equipment will be shipped with the main
equipment shipment.




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EU/RUS/DWS/040/04





	10.0	 	Coiled Tubing Drilling Equipment rates





	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Operational
	Item
	 	Description
	 	Stack Rate
	 	Standby Rate
	 	Rate

	 
	 	Coiled Tubing Package c/w	 	 	 	 	 	 
	 
	 	Control Cabin	 	 	 	 	 	 
	 
	 	Data Acquisition Unit	 	 	 	 	 	 
	 
	 	Power Pack	 	 	 	 	 	 
	1
	 	Injector	 	1,117	 	2,177	 	3,628
	 
	 	Stripper	 	 	 	 	 	 
	 
	 	Gooseneck	 	 	 	 	 	 
	 
	 	Back up 2 3/8” Reel	 	 	 	 	 	 
	 
	 	Workshop container	 	 	 	 	 	 
	 
	 	Fluid Pumping Package c/w	 	 	 	 	 	 
	 
	 	2 x Fluid Pump	 	 	 	 	 	 
	2
	 	Back Up Fluid Pump	 	1,375	 	2,733	 	3,911
	 
	 	2” Iron Container	 	 	 	 	 	 
	 
	 	4” Suction Basket	 	 	 	 	 	 
	 
	 	PCE Package c/w	 	 	 	 	 	 
	 
	 	Annular BOP	 	 	 	 	 	 
	 
	 	Blind Shear BOP	 	 	 	 	 	 
	 
	 	Pipe/Slip BOP	 	 	 	 	 	 
	3
	 	Shearseal BOP	 	2,136	 	2,848	 	3,275
	 
	 	Riser Sections	 	 	 	 	 	 
	 
	 	Pump in Tee’s	 	 	 	 	 	 
	 
	 	2 1/16” Gate Valves	 	 	 	 	 	 
	 
	 	Tree Crossover	 	 	 	 	 	 
	 
	 	Torque Equipment	 	 	 	 	 	 
	 
	 	Nitrogen Pumping Package c/w	 	 	 	 	 	 
	4
	 	Nitrogen Converter	 	468	 	1080	 	1648
	 
	 	4 x Nitrogen Tanks	 	 	 	 	 	 
	 
	 	HP Nitrogen Hoses	 	 	 	 	 	 
	 
	 	TOTAL	 	5,096	 	8,838	 	12,462








45









 




EU/RUS/DWS/040/04


	10.1	 	2 7/8” DRILLING STRING





To facilitate purchase of the coiled tubing string, CONTRACTOR shall invoice
and COMPANY will pay to CONTRACTOR the sum of three hundred and twenty two
thousand dollars (322,000 USD) to CONTRACTOR in advance of purchase.

CONTRACTOR will perform engineering and procurement services in advance of
purchase as far as is reasonably practicable, such that on receipt of payment,
manufacture of the coil can begin immediately.




The coiled tubing string will be cycled out at the end of the proposed SERVICES
scope. The string will therefore be fully owned by COMPANY and at the disposal
of COMPANY upon completion of the SERVICES. CONTRACTOR will manage the fatigue
life during the campaign FOC.





	10.2	 	CTD TUBING REEL





To facilitate purchasing of the coiled tubing reel, CONTRACTOR shall invoice
and COMPANY will pay the sum of three hundred and sixty eight thousand dollars
(368,000 USD) to CONTRACTOR in advance of purchase. CONTRACTOR will perform
engineering and procurement services in advance of purchase as far as is
reasonably practicable, such that on receipt of payment, manufacture of the
reel can begin immediately.




For the avoidance of doubt CONTRACTOR would wholly own the tubing reel and
drum, for the duration and after the proposed workscope, and COMPANY would be
re-reimbursed with a discount on the invoice for each well according to the
discount structure below:




	 	 	 	 	 
	Well
	 	Discount per Well USD

	1
	 	 	7360	 
	2
	 	 	7360	 
	3
	 	 	14,720	 
	4
	 	 	14,720	 
	5
	 	 	14,720	 
	6
	 	 	14,720	 
	7
	 	 	14,720	 
	8
	 	 	29,440	 
	9
	 	 	29,440	 
	10
	 	 	29,440	 
	11
	 	 	29,440	 
	12
	 	 	29,440	 
	13
	 	 	29,440	 
	14
	 	 	29,440	 
	Total Wells
	 	Total Discount
	14
	 	 	294,400	 







The discount structure covers the total cost of the reel, minus depreciation
for the first year of use, the total depreciation period would be deemed as
five (5) years. The discount structure is offered on a per well basis,
regardless of drilling duration on each well.




Should the full programme as set out in the table in this section, not be
completed as per CONTRACT then the reel will become the property of CONTRACTOR
at date of contract termination with no further amounts being due.




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EU/RUS/DWS/040/04





	10.3	 	Backup Coiled Tubing Reel





A backup 2 3/8” drilling string, is offered as backup for wells that are within
the technical limits of the tubing string. In the event that the backup string
is used, the OPERATIONAL RATE for the coiled tubing package will increase from
3,628 USD to 5,454 USD per day. The STANDBY RATE and the STACKED RATE will be
unchanged.





	10.4	 	Coiled Tubing Personnel Charges





Ten (10) crew members will be required for twenty four (24) hour operations.
The Field Engineer’s will act as focal point for the coiled tubing operation
and four (4) men per shift will be required for concurrent coiled tubing and
fluid pumping operations. Maintenance specialists are not part of the
operational crew, and may be mobilised separately from the main drilling crew.




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	RATE PER DAY /
	ITEM
	 	DESCRIPTION
	 	QUANTITY
	 	EACH

	1
	 	Field Engineer (Toolpusher)	 	 	2	 	 	 	1219	 
	2
	 	Supervisor (Driller)	 	 	2	 	 	 	1035	 
	3
	 	Senior Operator (Asst Driller)	 	 	2	 	 	 	864	 
	4
	 	Operator	 	 	2	 	 	 	741	 
	5
	 	Fluid Pump Operator	 	 	2	 	 	 	684	 
	6
	 	Maintenance Specialist	 	 	2	 	 	 	741	 







All personnel charges are ex-Point of Origin until return thereto.





	10.5	 	Coiled Tubing Consumables





	 	 	 	 	 	 	 	 	 
	Item
	 	Description
	 	Unit
	 	Price Per Unit

	 
	 	Gaskets	 	 	 	 	 	 
	1
	 	RX46 - 7 1/16” 5K	 	Sale	 	 	46	 
	2
	 	BX152 - 2 1/16” 10K	 	Sale	 	 	8	 
	3
	 	BX155 - 4 1/16” 10K	 	Sale	 	 	15	 
	4
	 	BX156 - 7 1/16” 10K	 	Sale	 	 	48	 
	5
	 	BX169 - 5 1/8” 10K	 	Sale	 	 	34	 
	 
	 	Elastomers	 	 	 	 	 	 
	1
	 	Stripper Rubber	 	Sale	 	 	137	 
	2
	 	Extrusion Ring	 	Sale	 	 	91	 
	3
	 	Annular Bag	 	Sale	 	 	4232	 







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	11.0	 	Underbalanced Systems Charges






	11.1	 	Equipment Charges





	 	 	 
	Quantity
	 	Description

	1

	 	ESD system
	1

	 	Separation System
	1

	 	Shale shaker
	1

	 	Filter System
	1

	 	Spark arrestor, flare stack and igniter
	1

	 	High Pressure Pipework Package
	1

	 	Low pressure Pipework Package
	1

	 	Gas detection system (manual)
	1

	 	8” Flare line Package
	1

	 	Containers and office







	 	 	 	 	 
	Description
	 	Rate/Day

	STACK RATE per day
	 	 	1,180	 
	OPERATING RATE per day
	 	 	4,800	 
	STANDBY RATE per day
	 	 	2,850	 








	11.2	 	Personnel Daily Charges





	 	 	 	 	 
	Description
	 	Rate/Day

	PROJECT Manager
	 	 	1,080	 
	Equipment Supervisor (Dayshift)
	 	 	980	 
	Equipment Supervisor (Nightshift)
	 	 	980	 
	Equipment Operator (Dayshift)
	 	 	880	 
	Equipment Operator (Nightshift)
	 	 	880	 







All personnel charges are ex-Point of Origin until return thereto.





	11.3	 	Consumables





	 	 	 	 	 
	Description
	 	Cost

	Shaker screens (pack of 3)
	 	 	900	 
	Choke redress kit
	 	 	 	 
	Choke gate 2” Reversible
	 	 	1,920	 
	Choke Seat 2” Seat Tungsten Carbide
	 	 	2,160	 







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	11.4	 	Rotating Head





	 	 	 
	Rental contract prices - per well basis
	 	Each model 7100

	Operating days - 15 day minimum per well
(Includes 2 x bearing assembly)

	 	USD 1,900 per day
	 
	 	 
	Transit days
	 	 
	(Rate begins when equipment leaves CONTRACTOR
base until return to CONTRACTOR Russian base)

	 	USD 900 per day
	 
	 	 
	Standby days

	 	USD 1,100per day
	 
	 	 
	MAIN SALE ITEMS
	 	 
	 
	 	 
	Model 7100 high pressure stripper rubbers.

	 	USD 1,800 each
	Model 7100 high pressure bowl gaskets.

	 	USD 330 each
	 
	 	 
	Bearing assembly refurbish charge
	 	 
	Bearing assembly refurbishing charges per

used bearing assembly

	 	USD 3,500 per bearing
	Bowl refurbishment charges per well

	 	USD 5,000 per bowl per well







Note: Stripper rubber usage depends on number of wells to be drilled.

Condition of Drill Pipe, Hex Kelly and proper BOP stack alignment will affect rubber usage.
(Estimated requirements will be reviewed with customer at time of order).




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	12.0	 	Directional Drilling Charges
	 
	12.1	 	Directional Drilling Equipment Charges





	 	 	 
	Item
	 	Cost

	Equipment STANDBY CHARGE
	 	3,200
	Equipment TRANSIT CHARGE
	 	1,200
	Equipment OPERATING RATE
	 	10,425
	Well planning
	 	1,000 / well
	Any additional revisions to well plan / side tracks
	 	350 / plan
	2 7/8” CONTRACTOR PDM w/adjustable housing
	 	295 /hr
	Motor stand by rate per motor per day not in use
	 	120
	Motor re-dress charges
	 	Cost + 15 %








	12.2	 	Lost in Hole Charges





	 	 	 
	Item
	 	Cost

	Coil Connector STC / Dimple

Double Flapper Check Valve

Cable Anchor

Orienter

Hydraulic Dump Valve

Hydraulic Release Tool

Quick Connect / Wet Connect

Secondary Double Flapper Check Valve

Optional Flow Operated Release Tool
	 	143,750
	Non Mag Collar
	 	5,950
	Digital Measuring Unit
	 	43,500
	Gamma
	 	27,175
	Internal and Annulus Pressure sensor
	 	47,750
	2 7/8” contractor PDM w / adjustable housing
	 	37,500









	12.3	 	Personnel Charges





	 	 	 	 	 
	Description
	 	Rate/Day

	Directional Driller (Days)
	 	 	920	 
	Directional Driller (Nights)
	 	 	920	 
	MWD Operator (Days)
	 	 	850	 
	MWD Operator (Nights)
	 	 	850	 







All personnel charges are ex-Point of Origin until return thereto.





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EU/RUS/DWS/040/04





	13.0	 	Additional Services
	 
	13.1	 	Casing Exit





7” — 32lbs/ft Whipstock




	 	 	 	 	 	 	 	 	 
	Item
	 	QTY
	 	Description
	 	Cost

	1
	 	1	 	Casing Exit from 7” - 32
lbs/ft using a 5.1/2” OD QuickCut Whipstock	 	 	39,000	 
	 
	 	 	 	Lumpsum price which includes the following:	 	 	 	 
	 
	 	 	 	Sale of single Whipstock	 	 	 	 
	 
	 	 	 	Operational and Redress Charges Clean Out Equipment	 	 	 	 
	 
	 	 	 	Operational and Redress Charges Casing Exit Milling Equipment	 	 	 	 
	 
	 	 	 	Operational and Redress Charges for Window Cleaning Trip	 	 	 	 
	2
	 	TBA	 	Daily Rental for 7” - 32 #/ft Casing Exit Package as per Equipment	 	 	525	 
	 
	 	 	 	List, which becomes affective after
leaving CONTRACTOR’s Base.	 	 	 	 







Associated Retrieval Equipment OPERATIONAL RATES (only for contingency
retrieval)




	 	 	 	 	 	 	 	 	 
	Item
	 	QTY
	 	Description
	 	Cost

	A
	 	1	 	Running Charge for Whipstock Hook	 	 	420	 
	B
	 	1	 	Running Charge for Whipstock Die Collar	 	 	420	 
	C
	 	1	 	Running Charge for Safety Joint	 	 	140	 
	D1
	 	1	 	Running Charge for Drop Ball Circulating Sub	 	 	80	 
	D2
	 	1	 	Redress Charge for Drop Ball Circulating Sub	 	 	90	 
	E1
	 	1	 	Running Charge for 4.3/4” Bumper Sub	 	 	175	 
	E2
	 	1	 	Redress Charge for 4.3/4” OD Bumper Sub	 	 	480	 
	F1
	 	1	 	Running Charge for 4.3/4” OD Super Fishing Jar	 	 	675	 
	F2
	 	1	 	Redress Charge for 4.3/4” OD Super Fishing Jar	 	 	1,100	 
	G1
	 	1	 	Running Charge for 4.3/4” OD Super Fishing Accelerator	 	 	750	 
	G2
	 	1	 	Redress Charge for 4.3/4” OD Super Fishing Accelerator	 	 	1,100	 







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6 5/8” Whipback Whipstock




	 	 	 	 	 	 	 	 	 
	Item
	 	QTY
	 	Description
	 	Cost

	1
	 	1	 	Casing Exit from 7” - 26
lbs/ft using a 5.1/2” OD Whipback Whipstock	 	 	32,000	 
	 
	 	 	 	Lump sum price which includes the following:	 	 	 	 
	 
	 	 	 	Sale of single Whipstock	 	 	 	 
	 
	 	 	 	Operational and Redress Charges Clean Out Equipment	 	 	 	 
	 
	 	 	 	Operational and Redress Charges Casing Exit Milling Equipment	 	 	 	 
	 
	 	 	 	Operational and Redress Charges for Window Cleaning Trip	 	 	 	 
	2
	 	TBA	 	Daily Rental for 7” - 26 lbs/ft Casing Exit Package as per	 	 	400	 
	 
	 	 	 	Equipment List, which only becomes affective after ten (10) days	 	 	 	 







Associated Retrieval Equipment — OPERATIONAL RATES (only for contingency
retrieval)




	 	 	 	 	 	 	 	 	 
	Item
	 	QTY
	 	Description
	 	Cost

	A
	 	1	 	Running Charge for Whipstock Hook	 	 	420	 
	B
	 	1	 	Running Charge for Whipstock Die Collar	 	 	420	 
	C
	 	1	 	Running Charge for Safety Joint	 	 	140	 
	D1
	 	1	 	Running Charge for Drop Ball Circulating Sub	 	 	80	 
	D2
	 	1	 	Redress Charge for Drop Ball Circulating Sub	 	 	90	 
	E1
	 	1	 	Running Charge for 4.3/4” OD Bumper Sub	 	 	175	 
	E2
	 	1	 	Redress Charge for 4.3/4” OD Bumper Sub	 	 	480	 
	F1
	 	1	 	Running Charge for 4.3/4” OD Super Fishing Jar	 	 	675	 
	F2
	 	1	 	Redress Charge for 4.3/4” OD Super Fishing Jar	 	 	1,100	 
	G1
	 	1	 	Running Charge for 4.3/4” OD Super Fishing Accelerator	 	 	750	 
	G2
	 	1	 	Redress Charge for 4.3/4” OD Super Fishing Accelerator	 	 	1,100	 







Fishing, Milling and Whipstock Personnel Charges




Fishing Tool Supervisor will be charged at USD$ 1,173 each day or part thereof.

All personnel charges are ex-Point of Origin until return thereto.




Fishing, Milling and Whipstock Mobilisation Charges




Transportation of bottom hole assemblies will be recharged at documented cost
plus ten percent (10%).




Fishing, Milling and Whipstock Consumable Charges




The run charge includes inspection and minor thread repairs. Parts damaged
beyond repair will be charged at documented cost plus fifteen percent (15%).




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	14.0	 	Completion Equipment
	 
	14.1	 	Lower Completion Costs





Rental Items




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	STANDBY	 	RUN	 	 
	 	 	 	 	 	 	RENTAL	 	CHARGE	 	REDRESS
	ITEM
	 	QTY
	 	EQUIPMENT DESCRIPTION
	 	(each)
	 	(each)
	 	(each)

	1
	 	 	 	COMPLETE PACKER DEPLOYMENT AND RETRIEVAL	 	 	11,800.00	 	 	 	6,650.00	 	 	Inclusive
	 
	 	 	 	CONTINGENCY PACKAGE	 	Per Month	 	per run	 	 	 	 
	 
	 	1	 	Hydraulic Setting Tool, requires
modification to run with ACP’s	 	or Per Part	 	 	 	 	 	 	 	 
	 
	 	2	 	3-1/8” CARSAC Stab-in Connector PAC-DSI Box/Pin	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	1	 	Toolstring Landing Plate	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	1	 	Type ‘T’ Safety segment Safety Clamp c/w spanner	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	1	 	Packer Retrieval Tool	 	 	 	 	 	 	 	 	 	 	 	 
	2
	 	 	 	FIELD PERSONNEL	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	1	 	Thru Tubing Supervisor : Packer Specialist (Aberdeen) per day	 	 	1,370.00	 	 	 	n/a	 	 	 	n/a	 







Note:




All equipment detailed above available ex Aberdeen. All Packages are fully
inclusive or redress and inspection rates.




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EU/RUS/DWS/040/04



Sale Items




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	COST	 	COST
	ITEM
	 	QTY
	 	EQUIPMENT DESCRIPTION
	 	(each)
	 	(total)

	1
	 	 	 	Wellserv 4.125”
‘PB’ Retrievable Packer - special manufacture
	 	 	 	 	 	 	 	 
	 
	 	1	 	Material Specification AISI 4140, 5000psi, 250°F
	 	 	28,580	 	 	 	28,580	 
	 
	 	 	 	Max. Hang-off Weight 20,000Lbs
	 	 	 	 	 	 	 	 
	 
	 	 	 	Upper Connection:  N/A Profiled Receptacle (Retrieval)
	 	 	 	 	 	 	 	 
	 
	 	 	 	Lower Connection: TBC (Premium Connection)
	 	 	 	 	 	 	 	 
	 
	 	 	 	(Re-Stocking Fee  - 40% of Purchase cost)	 	 	 	 	 	 	 	 
	2
	 	 	 	Redress Kit	 	 	 	 	 	 	 	 
	 
	 	1	 	For Wellserv 4.125”
‘PB’ Retrievable Packer	 	 	 	 	 	 	 	 
	 
	 	 	 	Includes Slip Housing Assembly, Nitrile Element, Shear Screws & Seals	 	 	6,825	 	 	 	6,825	 
	3
	 	 	 	Qualifying of 4.125” PB Packer to ISO 14310 V3	 	 	 	 	 	 	 	 
	 
	 	1	 	Packer qualified to standard to be
inside 4.276” id - 5” 18Lbs/ft	 	 	10,830	 	 	 	10,830	 
	4
	 	 	 	EH- Hydraulic Setting tool Pump out Plug	 	 	 	 	 	 	 	 
	 
	 	1	 	Pump out Flow through Adapter Plug
for setting of ACP’s	 	 	3,440	 	 	 	3,440	 
	 
	 	 	 	after activation of the PB Packer on the same run	 	 	 	 	 	 	 	 
	5
	 	 	 	Bakke Dimple connector Kit for
2-7/8” Coil	 	 	 	 	 	 	 	 
	 
	 	3	 	3-1/2” od x 2.563” id	 	 	2,840	 	 	 	8,520	 
	 
	 	1	 	Dimple tool with Dimple Head for
2-7/8” CT	 	 	1,820	 	 	 	1,820	 
	6
	 	 	 	Annular Casing Packer	 	 	 	 	 	 	 	 
	 
	 	2	 	Estimated Cost of an ACP.  Technical work still needs to be	 	 	13,000	 	 	 	26,000	 
	 
	 	 	 	performed to determine what type of ACP will be the best for	 	 	 	 	 	 	 	 
	 
	 	 	 	setting in open hole.  However this cost represents a worst case	 	 	 	 	 	 	 	 
	 
	 	 	 	cost and the price will only be lower rather than any higher.	 	 	 	 	 	 	 	 
	 
	 	2	 	Burst Disc Subs to allow setting of individual ACPs	 	 	1,100	 	 	 	2,200	 








NOTE:




Delivery six (6) to eight (8) weeks from order for manufacture and
qualification




Item 3 requires to be performed before the purchase of item 1




Item 4 is necessary if it is required to set the ACP’s in one (1) run along
with the setting of the PB Packer




54









 




EU/RUS/DWS/040/04





	14.2	 	Upper Completion Costs
	 
	14.2.1	 	5” Completion Costs





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Description	 	Sales Price	 	Total
	ITEM
	 	QTY
	 	5” Completion Equipment
	 	(Each)
	 	Price

	1
	 	2	 	Size 2.31” WL Sliding Sleeve,
up with 2,31”	 	 	3,080	 	 	 	6,160	 
	 
	 	 	 	WF nipple and 2 7/8” 6.4 lb/ft EU 8rd Box x	 	 	 	 	 	 	 	 
	 
	 	 	 	Pin 4130-45 L80	 	 	 	 	 	 	 	 
	2
	 	2	 	Hydrow I RETV PKR for 5” 15.00 - 18 lbs/ft	 	 	9,348	 	 	 	18,696	 
	 
	 	 	 	casing, with 2.7/8” 6.4 lb/ft EU 8rd Box x	 	 	 	 	 	 	 	 
	 
	 	 	 	Pin, hydraulic set, with nitrile 90-70-90	 	 	 	 	 	 	 	 
	 
	 	 	 	duro element & nitrile elastomers, std	 	 	 	 	 	 	 	 
	 
	 	 	 	steels flow wetted material, 7,000 psi	 	 	 	 	 	 	 	 
	 
	 	 	 	working press., 4.125 in max. O.D., 1.938 in	 	 	 	 	 	 	 	 
	 
	 	 	 	min. I.D., 34,000 lb straight pull release	 	 	 	 	 	 	 	 
	3
	 	2	 	“WF” Nipple Size:
1.875” with 2-7/8” 6.4	 	 	531	 	 	 	1,062	 
	 
	 	 	 	lb/ft EU 8rd Box x Pin with
1.875” Baker “F”	 	 	 	 	 	 	 	 
	 
	 	 	 	type Profile	 	 	 	 	 	 	 	 
	4
	 	2	 	2-7/8” Perforated PUP Jt with 2
7/8” EU 8rd	 	 	980	 	 	 	1,960	 
	 
	 	 	 	Box x Pin. 10’ long	 	 	 	 	 	 	 	 
	5
	 	2	 	“WR” Nipple Size:
1.875” with 2-7/8” 6.4	 	 	550	 	 	 	1,100	 
	 
	 	 	 	lb/ft EU 8rd Box x Pin with
1.875” Baker “R”	 	 	 	 	 	 	 	 
	 
	 	 	 	type Profile (1.822”) NO GO	 	 	 	 	 	 	 	 
	6
	 	2	 	Size 4.13 in Wireline Entry Guide, with 2	 	 	923	 	 	 	1,846	 
	 
	 	 	 	7/8” 6.4 lb/ft EU 8rd box up x entry guide	 	 	 	 	 	 	 	 
	 
	 	 	 	down, std steel flow wetted metallurgy,	 	 	 	 	 	 	 	 
	 
	 	 	 	2.484 in min. I.D.	 	 	 	 	 	 	 	 
	7
	 	2	 	Size 2.31” Model “D” Shifting tool for size	 	 	2,445	 	 	 	4,890	 
	 
	 	 	 	2.31” WL Sliding Sleeve.	 	 	 	 	 	 	 	 
	8
	 	2	 	Size 2.31” WFB-2 Check Valve (to run in item	 	 	2,300	 	 	 	4,600	 
	 
	 	 	 	1 and test tubing whilst running in hole)	 	 	 	 	 	 	 	 
	9
	 	2	 	Size 1.87” WFB-2 Check Valve (to run and set	 	 	1,950	 	 	 	3,900	 
	 
	 	 	 	in item 3 and set packer item 2)	 	 	 	 	 	 	 	 
	10
	 	2	 	Size 1.87” WRZB Bomb hanger (for hanging	 	 	1,750	 	 	 	3,500	 
	 
	 	 	 	gauges in item 5)	 	 	 	 	 	 	 	 
	11
	 	2	 	Size 2 3/8” Model WC-1 Running Tool (to run	 	 	295	 	 	 	590	 
	 
	 	 	 	and set item 5 and item 8)	 	 	 	 	 	 	 	 
	12
	 	2	 	Size 2 3/8” Model B Probe (to release item 5)	 	 	140	 	 	 	280	 









55









 




EU/RUS/DWS/040/04





	14.2.1	 	6 5/8” Completion Costs





NOTE that Item 14 Packer is not a standard CONTRACTOR product and pricing is
based on producing two (2) of. If a larger production run is required these
Packer costs will be revisited.




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Description	 	Sales Price	 	Total
	ITEM
	 	QTY
	 	6 5/8” Completion Equipment
	 	(Each)
	 	Price

	13
	 	2	 	Size 2.31” WL Sliding Sleeve,
up with 2,31” WF	 	 	3,080	 	 	 	6,160	 
	 
	 	 	 	nipple and 2 7/8” 6.4lb/ft EU 8rd Box x Pin	 	 	 	 	 	 	 	 
	 
	 	 	 	4130-45 L80	 	 	 	 	 	 	 	 
	14
	 	2	 	Hydrow I RETV PKR for 6 5/8” 24-32 lbs/ft casing,	 	 	19,432	 	 	 	38,864	 
	 
	 	 	 	with 2.7/8” 6.4 lb/ft EU 8rd Box x Pin, hydraulic	 	 	 	 	 	 	 	 
	 
	 	 	 	set, with nitrile 90-70-90 duro element & nitrile	 	 	 	 	 	 	 	 
	 
	 	 	 	elastomers, std steels flow wetted material, 7,000	 	 	 	 	 	 	 	 
	 
	 	 	 	psi working press., 5.500” in
max. O.D., 2.439” in	 	 	 	 	 	 	 	 
	 
	 	 	 	min. I.D., 34,000 lb straight pull release	 	 	 	 	 	 	 	 
	15
	 	2	 	“WF” Nipple Size:
2.250” with 2-7/8” 6.4 lb/ft EU	 	 	753	 	 	 	1,506	 
	 
	 	 	 	8rd Box x Pin with 2.250”
Baker “F” type Profile	 	 	 	 	 	 	 	 
	16
	 	2	 	2-7/8” Perforated PUP Jt with
2 7/8” 6.4 lb/ft EU	 	 	980	 	 	 	1,960	 
	 
	 	 	 	8 rd Box x Pin. 10’ long	 	 	 	 	 	 	 	 
	17
	 	2	 	“WR” Nipple Size:
2.250” with 2-7/8” 6.4 lb/ft EU	 	 	462	 	 	 	924	 
	 
	 	 	 	8rd Box x Pin with 2.250”
Baker “R” type Profile	 	 	 	 	 	 	 	 
	 
	 	 	 	(2.197”) NO GO	 	 	 	 	 	 	 	 
	18
	 	2	 	Size 4.13 in Wireline Entry Guide,
with 2 7/8” 6.4	 	 	923	 	 	 	1,846	 
	 
	 	 	 	lb/ft EU 8rd box up x entry guide down, std steel	 	 	 	 	 	 	 	 
	 
	 	 	 	flow wetted metallurgy, 2.484 in min. I.D.	 	 	 	 	 	 	 	 
	19
	 	2	 	Size 2.25” WFB-2 Check Valve (to run and set in	 	 	2,553	 	 	 	5,106	 
	 
	 	 	 	item 15 and set packer item 14)	 	 	 	 	 	 	 	 
	20
	 	2	 	Size 2.25” WRZB Bomb hanger (for hanging gauges in	 	 	1,750	 	 	 	3,500	 
	 
	 	 	 	item 17)	 	 	 	 	 	 	 	 
	21
	 	2	 	Size 2 7/8” Model WC-1 Running Tool (to run and	 	 	325	 	 	 	650	 
	 
	 	 	 	set item 19)	 	 	 	 	 	 	 	 
	22
	 	2	 	Size 2 7/8” Model “B” Probe (to release item 20)	 	 	155	 	 	 	310	 
	23
	 	2	 	Size 2 7/8” “SB” Pulling Tool (to retrieve item 20)	 	 	665	 	 	 	1,330	 








56









 




EU/RUS/DWS/040/04




Exhibit D




1.0 COMPANY supplied items




The following items of equipment, utilities and facilities will be supplied by
COMPANY for the duration of the CONTRACT at COMPANY’S cost. Where CONTRACTOR
has to advise COMPANY on specific requirements of COMPANY supplied items this
will be done no later than the MOBILISATION date of CONTRACTOR EQUIPMENT.




(a) Location Facilities / Services (to be specified by CONTRACTOR)




(b) Flat Location of adequate size with load bearing capacity to accept
CONTRACTOR EQUIPMENT complete with efficient drainage (to be specified and
approved by CONTRACTOR).




(c) Twenty four hour (24 hr) Site Security.




(d) Lighting to facilitate twenty four hour (24 hr) operations.




(e) Secure perimeter around WELLSITE.




(f) Onsite Accommodation for 2 x CONTRACTOR PERSONNEL.




(g) Onsite (heated) canteen, washroom, toilet and changing facilities for
WELLSITE personnel




(h) Lodging, subsistence and in country transport for all CONTRACTOR personnel.




(i) Multi entrance Visas to all CONTRACTOR personnel.




(j) Generator to serve the WELLSITE camp (to be specified by CONTRACTOR).




(k) Water Tank and water (not potable) (volume / usage to be specified by
CONTRACTOR).




(l) Diesel Tank and diesel (Volume, usage to be specified by CONTRACTOR).




(m) Safety / HSE Signage at entrance to the WELLSITE (to be specified by
CONTRACTOR).




(n) Muster Point Signage.




(o) Windsocks and stands.




(p) Appropriate and operational WELLSITE fire fighting equipment (to be
specified by CONTRACTOR).




(q) General Alarm (Audio and Visual) (to be specified by CONTRACTOR).




(r) Telephone lines for COMPANY and CONTRACTOR.




(s) Cranes and Forklift (to be specified by CONTRACTOR).




(t) Crude oil / diesel / brine (as required) for use as the drilling fluid.
(volumes to be specified by CONTRACTOR).




(u) Kill Fluid (volume to be specified by CONTRACTOR).




(v) Oil Storage tanks as required.




(w) Active tank system for drilling operations (To be defined by CONTRACTOR)




(x) Produced Water Storage tanks as required. To be defined by CONTRACTOR)




(y) Earthing Tie-in point.




(z) Weather Information for each WELLSITE location.




(aa) Steam / heat for CT UBD Package if required & temperature drops < 0 deg
C. (GBOC unit to be pre-approved by CONTRACTOR)




(bb) All necessary trucking and transportation of CONTRACTOR equipment in
Georgia




(cc) Tie-in points to COMPANY Export Lines, supply trucks etc, complete with
suitable connection for CONTRACTOR’S EQUIPMENT.




(dd) Waste Management — removal of solids, liquids etc and disposal of same at
controlled sites.




(ee) Cuttings tank.




(ff) Any COMPANY supplied BOP / Wellhead equipment to have been pressure tested
to API 16 Standards.




(gg) COMPANY to perform all / any WELLSITE welding.




(hh) COMPANY to supply electrician if required.




(ii) COMPANY to supply Export Line Operator when CONTRACTOR pumps fluid to the
export manifold.




57









 





EU/RUS/DWS/040/04



(jj) COMPANY to supply Anchor Blocks for Coiled Tubing Tower as required.




(kk) Lease gas together with specific information regarding pressure and volume
available, and compressor if required.




(ll) COMPANY to supply liquid nitrogen and conversion facility (Georgian unit
to be pre-approved by CONTRACTOR)




(mm) Support tower for CT Injector in accordance with Design Basis supplied by
CONTRACTOR and then approved by CONTRACTOR prior to usage.




(nn) Assistants will be supplied by COMPANY to support CONTRACTOR Project
Manager by performing such tasks as logistics management, procurement of local
items, arranging meals and accommodation and general administration etc. This
person will also be able to provide transport in the local area.




2.0 COMPANY’S RESPONSIBILITIES




In addition to the requirements set forth elsewhere in this CONTRACT, COMPANY
agrees to comply with the following provisions:





	 	(a)	 	Notwithstanding Clause 6.2 of the terms and conditions, COMPANY will
be responsible for security of CONTRACTOR EQUIPMENT for the entire
period of the CONTRACT.
	 
	 	(b)	 	COMPANY shall make available first aid and medical treatment to
CONTRACTOR PERSONNEL. COMPANY and CONTRACTOR to act jointly for any
medical evacuation of CONTRACTOR PERSONNEL, CONTRACTOR shall be
responsible for all emergency evacuation expenses.
	 
	 	(c)	 	COMPANY to request rig crew to assist CONTRACTOR in rig-up/rig-down
and any other tasks required as per standard oil industry practice.
	 
	 	(d)	 	COMPANY to approve each rigged up operation as being safe for
operations prior to CONTRACTOR going on to OPERATIONAL RATE. A “Well
Acceptance Signoff Sheet” will be developed and agreed prior to
mobilisation.
	 
	 	(e)	 	COMPANY’S other contractors must adhere to CONTRACTOR’S safety
regulations during CONTRACTOR operations.





COMPANY shall be responsible for all labour, materials, parts, customs
clearance, customs duties and fees, or licences etc, for the complete delivery
of all CONTRACTOR EQUIPMENT from Point of Entry in Georgia to the WELLSITE. At
no point shall any of the CONTRACTOR EQUIPMENT become the property of COMPANY.




3.0 TRANSPORTATION OF CONTRACTOR’S EQUIPMENT IN COUNTRY OF OPERATIONS




COMPANY shall be responsible for all transportation of CONTRACTOR’S EQUIPMENT
and PERSONNEL between COMPANY BASE, WELLSITES and Point of Entry.




COMPANY shall be responsible for the transportation of CONTRACTOR’S EQUIPMENT,
supplies, materials and spare parts from COMPANY BASE to the WELLSITE.




Upon termination of the CONTRACT, or at the direction of the COMPANY, COMPANY
shall be responsible for the transportation of all CONTRACTOR’S EQUIPMENT,
supplies, materials and spare parts from the WELLSITE or storage location to
the agreed point of handover or Point of Exit from Georgia.




58









 




EU/RUS/DWS/040/04




4.0 MEALS AND LODGING




Once CONTRACTOR personnel are mobilized as per CONTRACT, or at COMPANY’S
request; subsistence and lodging, will be provided by COMPANY in Georgia. The
COMPANY will also provide heated changing and eating area and washing/toilet
facilities for CONTRACTOR PERSONNEL at WELLSITE. The COMPANY, in consultation
with the CONTRACTOR, shall elect a suitable accommodation and generally fix a
daily allowance for subsistence and laundry for all personnel. The CONTRACTOR
PERSONNEL shall be required to alert the COMPANY Representative upon arrival at
the specific WELLSITE, and also of their departure. Copies of the relevant
hotel or lodging invoices, as well as any other receipts, not already paid by
the COMPANY, obtained by CONTRACTOR PERSONNEL in the course of the SERVICES
shall be authorised by the COMPANY Representative and lodged with the
CONTRACTOR invoice.




CONTRACTOR’S PERSONNEL or CONTRACTOR’S third party personnel not assigned
specifically to COMPANY operations will be for CONTRACTOR’S account unless
otherwise stated or approved in writing by an authorised COMPANY
Representative.




Transportation between accommodation and the WELLSITE will be provided for and
scheduled every twelve (12) hours. CONTRACTOR will bear the responsibility and
cost for transportation not related to normal scheduled crew change activities
unless otherwise stated or approved in writing by the COMPANY Representative.




5.0 TRAVEL COSTS




Transportation costs for CONTRACTOR PERSONNEL from Point of Origin to Georgia
and return to Point of Origin will be charged to COMPANY at cost plus ten
percent (10%). COMPANY reserves the right to supply all tickets to CONTRACTOR
PERSONNEL.




Transportation costs of all CONTRACTOR personnel in Georgia, will be the
responsibility of COMPANY and for COMPANY account.




6.0 PERSONNEL TRANSPORT




COMPANY shall supply suitable personnel transport (with driver and vehicle
insured for all loss relative to local laws) with each SERVICE supplied. It is
not expected that the full complement of crew will be licensed to drive a motor
vehicle and be proficient at so doing.




59









 




EU/RUS/DWS/040/04




EXHIBIT E

INSURANCES




Without prejudice to the provisions contained within Clause 7 — Insurances,
CONTRACTOR shall obtain and maintain in full force and effect the following
policies of insurances.




Employers Liability Insurance, with a limit of not less than five million
pounds sterling (£5,000,000) per occurrence or, if higher, the limit required
by applicable laws.

Comprehensive General Third Party Liability Insurance with a limit of not less
than five million pounds sterling (£5,000,000) combined single limit any one
(1) occurrence.




All insurances, which CONTRACTOR is obliged to carry under any applicable laws.




Any other insurances which CONTRACTOR acting as a diligent, prudent and
competent CONTRACTOR considers appropriate in terms of type, coverage and limit
taking into account the nature, extent, scope and location of the SERVICES.




60









 





EU/RUS/DWS/040/04



EXHIBIT F — DAILY FIELD REPORT EXAMPLE










61