Exhibit 10.24
 ENGLISH TRANSLATION OF CONTRACT AS SIGNED  OCTOBER 8, 2008
 SPECIFIC SERVICES CONTRACT FOR DEVELOMENT, PRODUCTION AND
UPGRADING OF CRUDE OIL
IN BLOCK 20, INCLUDING THE PUNGARAYACU OIL FIELD IN THE
ECUADORIAN AMAZON REGION
 ENTERED INTO BY AND BETWEEN
 EMPRESA ESTATAL DE PETRÓLEOS DEL ECUADOR, PETROECUADOR AND
ITS AFFILIATE EMPRESA ESTATAL DE EXPLORACION Y PRODUCCIÓN DE
PETRÓLEOS DEL ECUADOR, PETROPRODUCCION, AND IVANHOE ENERGY
ECUADOR INC.
UNDETERMINED AMOUNT
 CLAUSE 1: PARTIES TO THIS CONTRACT
 This Contract is entered into by and between Empresa Estatal de Petróleos del Ecuador,
PETROECUADOR and its Affiliate Company Empresa Estatal de Exploración y Producción de Petróleos
del Ecuador, PETROPRODUCCION, represented by the Rear-Admiral Luis Aurelio Jaramillo Arias and
Captain Camilo Delgado in their capacity as Executive President and Vice-President, respectively,
who have been duly authorized by the Contracting Committee of PETROPRODUCCION, as appears in the
documents attached hereto, hereinafter referred to as PETROECUADOR and PETROPRODUCCION, on the one
hand, and on the other, IVANHOE ENERGY ECUADOR INC., represented by its General Agent and Legal
Representative in Ecuador, Mr. Carlos Espinoza, who has been duly authorized by its Parent
Company, as appears in the documents attached hereto, hereinafter referred to as the CONTRACTOR.
 CLAUSE 2: BACKGROUND
 Description and Basic Principles -  On December 6, 2007, IVANHOE ENERGY ECUADOR INC.
submitted its offer and proposal for the development and production of Crude Oil in the Contract
Area, consisting of an Appraisal Stage, a Pilot Stage and the subsequent Exploitation Stage (that
includes the development and production periods). All Contract Stages will be implemented in a
period of 30 years, with the exploitation stage extendable by mutual agreement of the parties.
 2.1. STAGES:
 APPRAISAL STAGE - The Appraisal Stage will have a duration of up to 3 years and will begin
as of the date CONTRACTOR obtains the environmental permit. During the Appraisal Stage,
CONTRACTOR will undertake bi-dimensional seismic surveys over the southern portion of the
Pungarayacu Field believed to contain mobile oil. Depending on the results of the seismic surveys,
CONTRACTOR will perform drilling and testing of appraisal wells. CONTRACTOR will also use steam
generators to test the heavy oil formations for production.




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In the event that the technical data indicates that it is favorable to drill a well to the
pre-cretaceous formation, the work schedule submitted by CONTRACTOR may be amended for the period
it will take to appraise such well.
 PILOT STAGE - The Pilot Stage will commence when CONTRACTOR notifies PETROPRODUCCION of
its intention to enter such Stage. The Pilot Stage shall have a duration of up to three (3) years.
Among other works, in the Pilot Area selected, CONTRACTOR will perform bi-dimensional and
three-dimensional seismic studies and will drill wells. Construction of the first HTL Plant to
process heavy oil, will commence at the beginning of the Pilot Stage and will end when the HTL
Plant begins processing and upgrading Available Crude Oil.
 EXPLOITATION STAGE - (Includes the Development and Production Stages ) . The results
obtained during the Pilot Stage will determine whether CONTRACTOR will proceed into the
Exploitation Stage to develop and produce Crude Oil in the Pungarayacu Field and other
commercially exploitable and economically profitable Crude Oil reservoirs selected by CONTRACTOR
in the Contract Area. CONTRACTOR will notify PETROPRODUCCION when the results obtained warrant
proceeding with the Exploitation Stage.
 EARLY PRODUCTION or TEST PRODUCTION - Are the activities of development and production of
Available Crude Oil that the CONTRACTOR may perform during the Appraisal Stage and/or the Pilot
Stage. Said production will be ascribed to the permitted production rates as established in the
Regulations of Hydrocarbon Operations, which volumes of production will be recommended in
accordance with the provisions of Clause 8.1.,and for which the CONTRACTOR will receive payment
in accordance with the provisions of Clause 9.2.12.
 2.2 ANTECEDENTS. By Memorandum No. 3164 VPR-LEG-2007, of 22 August 2007, PETROPRODUCCION
requested the President and Members of the Council of Administration of PETROECUADOR to deliver the
technical information requested by IVANHOE ENERGY INC.
 The company IVANHOE ENERGY INC, presented 6 December 2007 its offer and proposal for the
development and production of the Area of the Pungarayacu Field, consisting of an Evaluation Phase,
a Pilot Phase and the subsequent Exploitation Phase (that includes the Development and Production
phases). All of the Phases of the Contract would be developed in a period of 30 years, extendable
by mutual agreement of the parties, for two additional periods of five years each, depending on the
interests of the State, in conformity with the Hydrocarbons Law and this Contract.
 By communication dated 10 December 2007, the company IVANHOE ENERGY ECUADOR INC reconfirmed the
designation of its representatives to prepare the proposal directed to the President of the
Republic and the power to initiate the work immediately, also reiterated its commitment to assume
all the risk of the investments of the project and all the existing legal requirements in Ecuador.
 By order NO. 7617 PPR-VPR-2007 of 13 December 2007, PETROPRODUCCION designated the members of the
commission to travel to Bakersfield, California, United States of America, to visit the
installations of IVANHOE ENERGY, that was done between 16 and 19 of December of the same year.
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On 27 December 2007 IVANHOE ENERGY INC.,sent to PETROPRODUCCION the documentation necessary to
satisfy the legal, technical and financial aspects to corroborate the information contained in the
proposal referred to and requested the designation of the personnel that for purposes of
confidentiality would have knowledge of the same.
 The Executive President of PETROECUADOR by order NO.508-PEP-2007 reported that after the visit to
the installations of the company in Bakersfield, California, United States of America, the
technicians of the sate company made an analysis of the information provided and considering that
the reserves of crude of the country are in large part heavy crude, considering that it would be
important to rely on the technical experience and financial capacity of IVANHOE ENERGY INC., to
optimize the Pungarayacu Field for the requirements of PETROPRODUCCION.
 By ResolutionNo.794-CEL 2008 of 1 February 2008, it was resolved without effect of Resolution No.
663-CEL-2003 of 13 August 2003, to authorize the start of the prebidding of Blocks 20 and 29 of the
Amazon Region and for the record it states that it corresponds to the Executive President of
PETROECUADOR and VICEPRESIDENTS of its Affiliates to deliver the available information of the
Areas / Blocks or petroleum fields to the interested companies.
 By Order No. 176-SJ461/DM 2008, of 11 April 2008 the Minister of Mines and Petroleum communicated
to the Executive President of PETROECUADOR that the legal basis that supported the signature of the
Contract with the company for the Development and Exploitation of the Heavy crudes of the
PUNGARYACU Field of the Ecuadorian Amazon Region is the Contract of Work, Goods and Specific
Services as contemplated in Art. 17 of the Hydrocarbons Law and in the Regulation of Contracting of
Works, Goods and Services of PETROECUADOR and its Affiliates issued by Executive Decree No. 652 and
published in the Official Register 194 of 19 October 2007 conforming to Order 630-DM-0707632 of 26
December 2007 and 051 DM-2008 of 17 January 2008 and Memorandum N-261-SJ-2008 of 19 March2008,
granting to PETROECUADOR the process and description of the respective Contract.
 By Resolution No. 44-DIR-2008 of 19 May 2008 adopted by the Board of PETROECUADOR, resolved (point
3) THE PUNGARAYACUFIELD,- THAT IN CONSIDERATION AND THAT UNTIL MARCH 2008, THERE MUST BE SIGNED
THE CONTRACT OF SPECIFIC SERVICES WITH THE COMPANY IVANHOE, FOR THE DEVELOPMENT AND PRODUCTION OF
HEAVY CRUDE OIL OF THE PUNGARAYACU FIELD, UTILIZING THE PATENTED TECHNOLOGY OF THIS COMPANY, AND
TAKING INTO ACCOUNT THAT THE CONTRACTORS MUST HAVE A PRICE PER PRODUCED BARRELTHAT INCLUDES ALL THE
COSTS, INVESTMENTS AND REASONABLE PROFIT AND RESOLVED TO REQUEST THE COMPANY IVANHOE TO PRESENT ITS
OFFER ON THESE TERMS WITHIN A PERIOD OF 30 DAYS AND IF NOT PRESENTED IN THIS PERIOD, THAT
PETROPRODUCCION WILL PREPARE THE BASES FOR BIDDING BY PUBLIC AND PRIVATE COMPANIES.
 By public letter of 15 May 2008 delivered before Notary 17, IVANHOE ENERGY INC.proved that it is
the sole provider and owner of the patents of the HTL technology.
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By letter S/N of 30 May 2008, the company IVANHOE ENERGY ECUADOR INC.presented for consideration
of the Executive President of PETROECUADOR its Proposal for the Integral Economic Development of
Block 20 in the sense that the services will be paid for by a fixed amount per barrel of
production.
 Under date of 10 June 2008 the Commission designated to Review the economic terms of the company
IVANHOE ENERGY INC.. issued a conclusive Acta on the proposal presented by the company for the
development and production of Block 20, the Pungarayacu Field.
 By Report No. 2465-VPR-2008, of 16 June 2008, the Vicepresident of PETROPRODUCCION made available
to the Contracting Committee of PETROPRODUCCION the documentation relating to the development and
production of the PUNGARAYACU field, of the offer presented and negotiated by the company IVANHOE
ENERGY ECUADOR INC.
 By Resolution 2008325 VPR-PPR-2008 of 17 June 2008, the Vicepresident of PETROPRODUCCION RESOLVED
to qualify the company IVANHOE ENERGY ECUADOR INCL. as the unique provider for the utilization of
the patented technology HEAVY TO LIGHT (HTL) for the upgrading of heavy crude, ordered the
publicity of the resolution and designated the Head of that Unit to coordinate the Contracts for
the execution of such resolution.
 The Contracting Committee of PETROPRODUCCION resolved pending a detailed report of the
Vicepresident of PETROPRODUCCION through the Negotiation Commission containing an analysis of the
economic aspects of the negotiation.
 By Order No. 3051 VPR-ACUM-2008, of 22 July 2008, the Vicepresident of PETROPRODUCCION presented
the report of the Negotiation Commission with the recommendation for the Contracting Committee of
PETROPRODUCCION.
 By Resolution No. 024-CC-PPR-2008-07-29, of 29 July 2008 the Contracting Committee of
PETROPRODUCCION resolved to award and authorized the signing of he contract with the company
IVANHOE ENERGY ECUADOR INC. the purpose of which is the provision of specific services, for the
development, production of the crude oil in the Pungarayacu Field in Block 20, providing the
technology, capital, equipment, machinery and other goods and services necessary for the
compliance with the obligations, utilizing the HTL Technology (Heavy to Light) patented as its
property, for the upgrading of the quality of the crude oil, confirmation of reserves and
complementary exploration in the precretaceous under its responsibility and risk, and for a period
of thirty years.
 CLAUSE 3: INTERPRETATION OF THIS CONTRACT
 3.1
    
    Interpretation: The Parties hereby agree to interpret this Contract in accordance
with the provisions of the Preliminary Section and Section XIII, Book IV, of the Codified
Civil Code of Ecuador. The titles and order of all paragraphs and subparagraphs used herein
are for identification and reference purposes only. Definitions shall apply equally to both
the singular and plural forms of the terms defined herein. Whenever the context may require,
all pronouns shall include the corresponding
masculine, feminine and neuter forms. The words include, includes and including
shall not be limiting and will be deemed as if they were followed by the phrase without
limitation., unless the context requires otherwise. Any agreements, documents,
instruments or laws defined or referred to in this Contract shall be deemed to include all
agreements, documents, instruments or laws amended, modified or supplemented from time to
time, including any agreements, documents or instruments by waiver or consent. All
references in this Contract to any particular Law shall be deemed to include any rules and
regulations passed under that Law. References to particular persons shall also refer to
their authorized predecessors, successors and authorized transferees.
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3.1.1
    
    Any tolerance by the Parties involving timely compliance of any obligations
under this Contract shall not imply in any event a change or amendment to its
provisions, and such failure to comply will not be a precedent for the interpretation
of this Contract, and shall not give rights to a Party in default of compliance of
its obligations under this Contract.3.1.2
    
    The provisions of this Contract shall prevail, in the event of
discrepancies between any laws entering into force after execution of this Contract
or those contained in complementary agreements and amendments, and any additional
agreements executed between the Parties and other documents that due to their legal,
technical or economic nature are deemed subordinate.3.1.3
    
    The provisions of the Contract herein specify and clarify the scope of such
provisions and shall prevail over them.3.2
    
    Language: This Contract has been written in Spanish and the Spanish version shall
be the only one valid for all purposes. Any correspondence between the Parties hereto shall
also be in Spanish, except technical reports that due to their nature need to be submitted in
another language, in which case, and if required by PETROPRODUCCION, such reports will
include a Spanish translation.The parties hereby agree that the specific services rendered under this Contract do not
imply a transfer of technology  know how  nor the total or partial assignment of rights
that are inherent to invention patents of the HTL process. Such patents are the
exclusive property of IVANHOE ENERGY ECUADOR INC. and its Related Companies. Therefore,
the Ecuadorian Government hereby agrees to honor such property rights, including all those
arising from International and Regional Agreements and local legislation on Intellectual
Property Rights.3.3
    
    Definitions: For the purposes of this Contract, the terms below shall have the
following meanings, unless the context of this Contract requires otherwise.3.3.1
    
    Fixed Asset: is any non-fungible movable or immovable asset,
acquired, constructed or supplied by CONTRACTOR for the activities foreseen under this
Contract, which have a useful life that exceeds one year.
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3.3.2
    
    Fiscal Year: Means the period from January 1 until December 31 of
each year, both dates inclusive.3.3.3
    
    Contract Area -Means Block 20 (that includes the Pungarayacu
Field) in which CONTRACTOR is authorized by virtue of this Contract to carry out
activities to confirm reserves, develop and produce hydrocarbons and related
exploration, at its own responsibility and risk, whose boundaries are clearly and duly
defined in Annex 1 to this Contract which is an integral part hereof.3.3.4
    
    Fiscalization.Means the technical-financial activities that
PETROPRODUCCION and the Dirección Nacional de Hidrocarburos will carry out to
determine volumes of Available Crude Oil and/or RTP Product (Fiscalizable
Production)sent to a Fiscalization and Delivery Center. Among other things, it
will serve to determine: (i) the Contractual Payment as established in Clause 9; and,
(ii) in the event that CONTRACTOR receives payment in kind, it shall mean the
Fiscalized Production to which CONTRACTOR is entitled to, before the HTL Plant begins
production, and thereafter, for operational reasons, the Fiscalizable Production may
consist of only Available Crude Oil or pure RTP Product or a blend of both.3.3.5
    
    Fiscalized Productionis the Available Crude Oil and/or RTP Product
that has been Fiscalized in a Fiscalization and Delivery Center.3.3.6
    
    Fiscalization and Delivery Centers: Are the sites agreed between
PETROPRODUCCION and CONTRACTOR, where the CONTRACTOR delivers to, and PETROPRODUCCION
receives from, and the Dirección Nacional de Hidrocarburos Fiscalizes, the
Fiscalizable Product (as defined in Clause 3.3.4). The Fiscalization and Delivery
Centers will require approval from the Ministry of Energy. CONTRACTOR shall have the
right to request from time to time an alternate Fiscalization and Delivery Center for
technical or operational reasons.3.3.6.1
    
    Measuring Devices: The Parties shall agree on the type of measuring devices
they will use to measure the Fiscalized Production at the Fiscalization and Delivery
Centers. Such devices, hereinafter referred to as Fiscalization Meters,
shall be inspected and calibrated regularly by independent inspectors mutually agreed
by the Parties. The measurements of Fiscalized Production with the Fiscalization
Meters shall be conclusive and will serve as basis to determine the volumes of
Fiscalized Production for purposes of the Contractual Payment that will be paid to
CONTRACTOR, as established in Clause 9 of this Contract.3.3.6.2
    
    Except for the Fiscalized Production taken by CONTRACTOR as payment, CONTRACTOR
will not bear any transportation costs from a Fiscalization and Delivery Center after
Fiscalization.3.3.7
    
    Executive Committee: Is a supporting body, comprised of three
officials from PETROPRODUCCION and three high level officials
of CONTRACTOR, that has for its purpose, to supervise, coordinate and recommend
timely actions, as the case may be, in order to optimize performance of this
Contract, as established in Annex III to this Contract, which contains the
details of the functions and duties of the Executive Committee.
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3.3.8
    
    Related Companies: a)Parent Companyis a Company that
directly or indirectly controls an Affiliate or Subsidiary, or any of the companies
that are shareholders of CONTRACTOR, in this case IVANHOE ENERGY LATIN AMERICA INC, a
Canadian company duly organized in the Province of British Columbia, Canada. b)
Affiliate is a company directly controlled by an Affiliate and indirectly
controlled by the Parent Company.; c)Subsidiary is a company directly
controlled by its Parent Company. The term control, as used in this sub-clause, shall
be interpreted within the context of a Parent Company-Affiliate relationship, where
the Parent Company owns more than 50% of the Affiliates capital. As regards to the
Affiliate-Subsidiary relationship, this percentage shall be 100%.3.3.9
    
    Appearing PartiesPETROECUADOR, PETROPRODUCCION and CONTRACTOR.3.3.10
    
    Consultants. Are the natural persons or legal entities independent and in
good standing , national or foreign, who provide services on the issues requiring
consultation.3.3.11
    
    CONTRACTOR: IVANHOE ENERGY ECUADOR INC, a company duly incorporated in the
Province of British Columbia, Canada, registered and qualified in Ecuador. CONTRACTOR
also means and includes any other Persons proposed by IVANHOE ENERGY ECUADOR INC., and
approved by PETROECUADOR and PETROPRODUCCION to participate as members of the
CONTRACTORs Group, as established in IVANHOE ENERGY ECUADOR INCs bylaws which were
registered at the Superintendencia de Compañías through Resolution No 0698 dated
March 4, 2008, and registered at the Quito Register of Commercial Concerns on March
11, 2008, and at the Dirección Nacional de Hidrocarburos on March 14, 2008 with
Records 0000488 to 0000584, establishing that CONTRACTOR may perform hydrocarbon
exploration, exploitation, transportation, storage, industrialization and
commercialization activities, as well as provide oil industry integrated services in
Ecuador or abroad, through partnerships or third party agreements.3.3.12
    
    Contract: Means this instrument, including its enabling documents and
annexes, referred to as Specific Services Contract for Development, Production and
Upgrading of Crude Oil in Block 20 whose object is to develop, produce and upgrade
heavy crude oil, confirm reserves and perform complementary exploration activities in
Block 20, at the expense and risk of CONTRACTOR, and by virtue of which CONTRACTOR is
entitled to receive the Contractual Payment set forth in the provisions of Clause 9.
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3.3.13
    
    Dollar: Means the currency of the United States of America and the legal
tender in the Republic of Ecuador.3.3.14
    
    Environmental Studies: Consist of forecasts or current identification of
potential environmental damages or changes, in order to establish preventive measures,
mitigation activities and rehabilitation measures of the environmental impact that may
occur due to performance of this Contract. These include Environmental Impact
Studies, Environmental Diagnoses, Environmental Management Plans and Environmental
Audits.3.3.15
    
    Appraisal Stage.Is the Project Stage set forth in sub-clause 2.1 of this
Contract.3.3.16
    
    Pilot Stage. Is the Project Stage described in sub-clause 2.1 of this
Contract.3.3.17
    
    Exploitation Stage. Means the Project Stage set forth in sub-clause 2.1 of
this Contract.3.3.18
    
    Effective Date: Is the date on which this Contract is registered in the
Hydrocarbons Records of the Dirección Nacional de Hidrocarburos, from which date the
terms of this Contract shall be effective.3.3.19
    
    Start-Up Date: Is the date on which the CONTRACTOR begins its operations,
within one hundred and eighty (180) days from the date of execution of this Contract.
Operations for this purpose shall include any arrangements to develop the
Environmental Studies and Environmental Management Plans. The above-mentioned term
will only be extended for duly justified reasons.3.3.20
    
    Force Majeureoracts of God: Means unforeseen circumstances beyond
control by the Parties, as provided in Article 30 of the Ecuadorian Civil Code. This
includes, but is not limited to earthquakes, seaquakes, flooding, landslides, storms,
fires, explosions, strikes, walkouts, social unrest, acts of war (declared or not),
sabotage or terrorist acts, acts or omissions of government authorities or state
entities, or any other events not mentioned in this sub-clause which are beyond
reasonable control by the Party affected, thus hindering or delaying performance of
one or several obligations under this Contract, including delays in obtaining approval
of environmental studies. However, Force Majeure shall not include operational or
administrative events imputable to CONTRACTOR and its subcontractors. It is hereby
intended and agreed that PETROPRODUCCION may allege as Force Majeure any act or
omission by other entities or authorities of the Ecuadorian Government when said acts
or omissions are due to facts that represent Force Majeure or Act of God. The term
Fortuitous Circumstances shall have the same meaning as Force Majeure.
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3.3.21
    
    Associated Gas: Mixture of hydrocarbons produced from the Crude Oil
Reservoirs, which become gas at surface pressure and surface temperature.3.3.22
    
    Gas Condensate: Mixture of hydrocarbons produced from a reservoir that
under surface pressure and temperature, become liquid.3.3.23
    
    Natural Gas: Mixture of hydrocarbons produced from Gas Reservoirs, which
remain as gas at surface pressure and temperature.3.3.24
    
    Heavy to Light (HTL) Technologymeans the patented RTPTMprocess
of Ivanhoe Energy Inc. and its Related Companies, which rapidly heats carbonaceous
materials, at temperatures above 400 degrees Centigrade per second, until reaching a
minimum temperature of 350 degrees Centigrade, but holds carbonaceous materials
together with the products originally decomposed by heat into a pyrolysis reactor, at
a minimum temperature of 450 degrees Centigrade during less than 5 seconds. Among
other applications, this process produces upgraded fuels arising from carbonaceous
materials, including heavy oil and bituminous raw materials. TheHTL Plantis
a technical construction that uses the HTL Technology to process Available
Crude Oil and create produces the RTP Product. TheRTP Productis the
product that results from processing the Available Crude Oil in an HTL Plant, which
upgrades the quantity and quality of the Available Crude Oil.3.3.25
    
    Appraisal Investments. Are all those costs, expenses, and investments
incurred directly by CONTRACTOR or indirectly through its Related Companies, during
the Appraisal Stage, as well as any additional expenditures made during the Pilot
Stage and Exploitation Stage, to evaluate the commerciality of hydrocarbon reservoirs
in the Contract Area, duly approved by the Executive Committee.3.3.26
    
    Development Investments. Are those expenditures, including costs, expenses
and payments, incurred directly by CONTRACTOR or indirectly through its Related
Companies, to develop and put into production the Crude Oil reservoirs in the Contract
Area during the Pilot Stage and Exploitation Stage, in accordance with the respective
Development Plan.3.3.27
    
    Production Investments. Expenditures, including costs, expenses and payments
directly incurred by CONTRACTOR, or indirectly through its Related Companies,
during the term of this Contract to produce Crude Oil in the Contract Area, and to
maintain and increase such production, thus incrementing the non-amortizable value of
the Fixed Assets, used for the performance of this Contract.
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3.3.28
    
    DomesticMarket:Means the Crude Oil volumes used to cover local Ecuador
needs, and includes:
 (a)
    
    Refining and industrialization in plants installed in Ecuador where the
production is used for local consumption;(b)
    
    Refining abroad to obtain by-products used for local consumption;
and(c)
    
    Countertrade or compensation to obtain by-products used for local
consumption
 PETROPRODUCCION shall deliver to CONTRACTOR all the information it may request
involving prices, quality and sales volumes, as well as the terms and conditions
of external sales for the oil and RTP Products produced in the Contract Area.
CONTRACTOR shall keep confidential all the information supplied by
PETROPRODUCCION.3.3.29
    
    Ministry:Means the Ministry of Mines and Petroleum of Ecuador.3.3.30
    
    Main Pipelines: Means the Pipelines, other lines and facilities required
to move the Fiscalizable Production to the Fiscalization and Delivery Center or to the
export terminals or industrial centers in Ecuador, as the case may be, which according
to Law are operated by PETROPRODUCCION and will be available to CONTRACTOR,.3.3.31
    
    Secondary Pipelines: Pipelines needed to move Fiscalizable Production from
the Fiscalization and Delivery Centers to the Main Pipelines.3.3.32
    
    Development Plan: Is the set of minimum or maximum activities and
estimated investments that CONTRACTOR intends to implement during the Exploitation
Stage to put into production the Crude Oil reservoirs in the Contract Area, approved
by the Executive Committee, PETROPRODUCCION and the Ministry of Energy. This
Development Plan must be based on all commerciality parameters, as well as on any
other factors that could affect the economic and technical feasibility to develop the
Commercially Exploitable Crude Oil reservoirs during the Exploitation Stage.3.3.33
    
    Crude Oil:is the mixture of hydrocarbons that exist in liquid form in the
natural reservoir, which remain liquid at atmospheric conditions of pressure and
temperature. a)Available Crude Oilis the Crude Oil produced after deducting
quantities used in operations or unavoidably lost.3.3.34
    
    RTP Product.Is the product that results from upgrading Available Crude
Oil in an HTL Plant, with a higher API grade, reduced levels of viscosity, metals and
sulphur, by using the HTL Technology.
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3.3.35
    
    International Market Price. Is the last weighted average price received by
PETROPRODUCCION in a calendar month, per volume of Available Crude Oil external cash
sales (including spot or long term sales), to independent buyers, on competitive
terms, but excluding volumes for countertrade or barter or compensation and adjusted
by quality; equivalent to the Available Crude Oil and Crude Oil used for payments in
kind, according to international petroleum practices. These prices shall be FOB
Ecuadorian port (main export terminal) and in Dollars per Barrel.3.3.36
    
    In the event that external sales have payment terms exceeding 30 days, the cash
price will be adjusted to that term by applying the legal interest rate established by
the Central Bank of Ecuador for the corresponding month.3.3.37
    
    PETROECUADOR, through PETROPRODUCCION, will promptly deliver to CONTRACTOR all the
information required by CONTRACTOR regarding prices, quality and sale volumes, as well
as terms and conditions of payment, in order that CONTRACTOR is able to verify all
data concerning the external sales from the Contract Area.3.3.38
    
    CONTRACTOR shall keep confidential all the information supplied to it concerning
the Contract Area under this Contract, and, in turn, PETROPRODUCCION will not reveal
any technological issues involving the Plant and the HTL process.3.3.39
    
    If the International Market Price cannot be determined because PETROPRODUCCION has
had no external sales during the past 60 days, the Parties will select a basket of
Crude Oils produced in the Oriente Basin to establish such price. If the Parties do
not reach an agreement regarding the above-mentioned basket, the Parties may submit
the issue to a Consultant for the determination.3.3.40
    
    Legal Interest Rate: Is the annual interest rate in decimal fraction,
established by the Central Bank of Ecuador and applicable to each month during the
corresponding Fiscal Year.3.3.41
    
    Reference Price. Is the last weighted average price of Crude Oil external
sales made in cash by PETROECUADOR during the past month, (including spot or
long-term sales), to independent buyers, under competitive terms, excluding volumes
for trade, consignment or compensation, in conformity with Article 71 of the
Hydrocarbons Law and the provisions of Clause 9.3 of this Contract. These prices
shall be FOB in a main Ecuadorian port (export terminal) and in Dollars per Barrel.3.3.42
    
    Annual Work Plans and Annual Investment Budgets. Means all the activities
and estimated investments that CONTRACTOR plans to perform in a Fiscal Year.
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3.3.43
    
    Early Production.Are the activities of development and production of
Available Crude Oil that the CONTRACTOR may
perform during the Appraisal Stage and/or the Pilot Stage. Said production will
be ascribed to the permitted production rates as established in the Regulations
of Hydrocarbon Operations, which volumes of production will be recommended in
accordance with the provisions of Clause 8.1.,and for which the CONTRACTOR will
receive payment in accordance with the provisions of Clause 9.2.12.3.3.44
    
    Emergency Situations.Are those circumstances that occur or may
occur in Ecuador or abroad, which require immediate action to avoid actual or
potential damages to CONTRACTORs operations under his Contract or to the
employees/property of any of the Parties hereto, or to the individuals that provide
goods or services to any Party or to the persons/property of third parties, without
prejudice to the provisions of the Hydrocarbons Law and the National Security Act.3.3.45
    
    Maximum Allowed Production Rate.Means the Crude Oil produced per time
unit/well/reservoir/field, as dictated by the Ministry of Mines and Petroleum through
the Dirección Nacional de Hidrocarburos. Such rate is based on technical and
financial criteria, and shall follow the procedures set forth in Clause 8 of this
Contract, and in the document Technical Criteria to Calculate Production Rates,
developed by the Dirección Nacional de Hidrocarburos on November 20, 1995, included
herein as Annex 4.3.3.46
    
    Quarter: Is a three-month period beginning on January 1, April 1, July 1
and October 1 of each Fiscal Year, as established in Clause 9.1.1 of this Contract.
Reference Quarter and Payment Quarter are the quarters defined in sub-clause
9.1.2.1 of this Contract.3.3.47
    
    Production UnitorBarrel: Is the volume unit of Crude Oil,
equivalent to 42 United States gallons, measured at a temperature of 60-degrees
Fahrenheit, and at a pressure of 14,7959 pounds per square inch.3.3.48
    
    Commercially Exploitable Crude Oil Reservoirs. Are those reservoirs that,
according to technical and economic studies, production rates and recoverable
reserves, CONTRACTOR deems adequate due to the technical and financial parameters and
reports, and which the Parties consider as commercially exploitable.3.3.49
    
    Gas Condensate Reservoirs: Are those Gas Reservoirs that, if exploited,
would produce gas and liquids in a ratio not exceeding 100.000 standard cubic feet of
gas per Barrel of liquid hydrocarbons, measured at surface level under standard
conditions of pressure and temperature.3.3.50
    
    Gas Reservoirs: Are the Hydrocarbon reservoirs that at reservoir pressure
and temperature contain hydrocarbons in gaseous state only.
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3.3.51
    
    Crude Oil Reservoirs: Are those reservoirs containing hydrocarbons, in
liquid state, at reservoir conditions.3.3.52
    
    Reference Quarteris the Calendar Quarter immediately preceding the Quarter
in which the Effective Date of this Contract occur.3.4
    
    Other definitions: The terms below, shall be interpreted as follows:3.4.1
    
    When this Contract refers to Crude Oil Producers in Ecuador or if similar
phrases are used, for legal and contractual purposes it shall mean that PETROPRODUCCION
is included as such a producer.3.4.2
    
    When this Contract refers to periods (plazos), they are calculated on a
continuous and calendar basis; while when the reference is to terms (terminos) ,
calculation will be only in working or business days. In all events, when periods
expire on a non-working day, they shall be extended to the next working or business
day.3.4.3
    
    When in this Contract the word Clause begins with capital letter, it shall
refer to the entire Clause; otherwise, its scope shall be limited to the corresponding
sub-clause.3.4.4
    
    As regards to definitions not included in this Contract, the Parties shall
interpret them, in accordance with the generally accepted practices of the international
Petroleum industry and those established in the Hydrocarbon Operation Regulations.
 CLAUSE 4: CONTRACT PURPOSE
 4.1
    
    The purpose of this Contract is the provision of specific services by the CONTRACTOR for the
development, production of crude oil in the Contract Area, utilizing the HTL Technology
(Heavy to Light), patented and owned by Ivanhoe Energy and its Related Companies, to upgrade
the quality of the Crude Oil of the Pungarayacu Field confirm reserves, and implement
complementary exploration activities, at the CONTRACTORs own risk and expense. CONTRACTOR
undertakes to implement activities to confirm reserves, develop and produce Crude Oil in
Block 20, supplying the necessary technology, capital and equipment or other goods and
services necessary for the compliance with the obligations established in this Contract.
PETROPROPRUDUCCION will pay CONTRACTOR a price per barrel produced and fiscalized, in
accordance with the provisions of Clause 9 of this Contract.If upon completing the activities to confirm reserves, CONTRACTOR finds Commercially
Exploitable Light Crude Oil, it shall be its obligation to exploit it, in which event the
Parties hereto will mutually agree on the terms and conditions to develop and exploit such
crude oil, as well as fix the price to be paid, aspects that will be established in a
written document.4.1.1
    
    The above-mentioned obligations shall be fulfilled by CONTRACTOR in Block 20 (which
includes the Pungarayacu Field), whose boundaries are
listed in Annex 1 to this Contract. CONTRACTOR may carry out exploration activities
within the boundaries of Block 20, as well as develop studies and interpretation of
surveys involving such seismic lines and other work, and will deliver such results to
PETROPRODUCCION. Administrative and technical services may be rendered in Ecuador or
abroad, to support the activities performed in the Contract Area.
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CLAUSE 5: OBLIGATIONS AND RIGHTS OF THE PARTIES
 5.1
    
    CONTRACTOR OBLIGATIONS: Without prejudice of any other obligations under this
Contract, CONTRACTOR undertakes to:5.1.1
    
    Comply with the purpose of this Contract, for which the development and production will be
its exclusive responsibility.5.1.2
    
    Register this Contract in the Hydrocarbons Registry within 30 days from its signature.5.1.3
    
    Deliver at the Fiscalization and Delivery Center Fiscalized Production from the Contract
Area that will always be crude that is transportable by oil pipeline.5.1.4
    
    Make the investments and expenditures required to perform this Contract, as established in
Annex 5. In addition, CONTRACTOR shall build all civil works and oil facilities; acquire and
install, at its expense, the necessary equipment ( Fiscalization Meters) referred to in
sub-clause 3.3.6.1, needed perform this Contract, in order to determine volumes, temperature
adjustments, water and sediments content and other measures required to establish the
Fiscalized Production.5.1.5
    
    Carry out all technical and administrative activities required in the evaluation,
development, production and upgrading operations of Commercially Exploitable Crude Oil
reservoirs, observing the provisions of sub-clauses 5.1.14, 5.1.15 and 5.1.16 of this
sub-clause 5.1.5.1.6
    
    All rights, titles or interests involving confidential and proprietary information,
including the HTL Technology, inventions, improvements, tests, processes, discoveries,
commercial secrets or intellectual property developed or having relationship with confidential
and proprietary information, will remain the property of CONTRACTOR, and this Contract does
not grant any interest, license or right over such confidential information, neither
implicitly or in any other manner.5.1.7
    
    Implement the Work Plans and the Annual Investment Budgets approved in accordance with the
legal provisions and regulations in force, and meet the chronogram established by the
Executive Committee in accordance to Clause 15.5.3.5.1.8
    
    Employ qualified personnel and use equipment, machinery, materials and technology in
accordance with the generally accepted standards and practices of the national and
international petroleum industry.
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5.1.9
    
    Keep PETROPRODUCCION informed, through the Executive Committee, regarding development of
all activities carried out during the life of this Contract, as established in the Rules and
Regulations for Hydrocarbon Operations.5.1.10
    
    Deliver to PETROPRODUCCION the originals of all technical, environmental and research data,
with copy to the Ministry, on the activities performed by CONTRACTOR under this Contract, in
accordance with the legal provisions and regulations in force. In addition, upon termination
of this Contract, CONTRACTOR shall deliver to PETROPRODUCCION any documents that are pending
submittal.5.1.11
    
    Deliver to PETROPRODUCCION the Environmental Studies, together with the supporting
documents, as set forth in sub-clause 5.1.23.3 and the supporting documents.5.1.12
    
    Keep accounting records of all activities performed under this Contract, accurately showing
all investments, income, costs and expenses. For such purpose, CONTRACTOR shall follow the
generally accepted accounting principles and procedures of the international petroleum
industry, as well as the accounting regulations contained in 6, which is an integral part of
this Contract.5.1.13
    
    Take all reasonable measures to ensure that its employees, Related Companies,
subcontractors and its employees do not disclose to third parties, without PETROPRODUCCIONs
prior written consent, any information generated or obtained by CONTRACTOR involving this
Contract, as set forth in the provisions of Clause 16.5.1.14
    
    Provide to the officials authorized by the Ministry, PETROPRODUCCION, and the Armed Forces
having to do with security issues and to other public officials authorized by the Ministry,
the information they may need to fulfill their duties concerning this Contract.5.1.15
    
    CONTRACTOR may at its discretion, provide the officials mentioned in clause 5.1.14. from
time to time and on a temporary and occasional basis, as required, camp facilities,
transportation, food and lodging services, similar to those it provides to CONTRACTORs
personnel, without CONTRACTOR assuming liability for any injuries or damages that such
officials may suffer when using the above-mentioned facilities.5.1.16
    
    Save and hold harmless PETROPRODUCCION from damages, legal actions, indemnifications, costs
and expenses of any nature whatsoever, it may suffer or may be required to pay, as a result
of any actions or omissions imputable to the subcontractors or Related Companies of
CONTRACTOR, qualified as such by final award of the Ecuadorian courts. CONTRACTOR shall
notify PETROPRODUCCION regarding any legal action arising out of this Contract, where
CONTRACTOR intervenes or may have to intervene, in order that PETROPRODUCCION takes the
necessary measures to protect its interests. The amounts payable for any award or final
administrative award of competent authority, or settlement and any other expenses arising out
from such award or administrative award shall be at the CONTRACTORs expense.
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5.1.17
    
    Engage, renew and keep in force the required guarantees, and obtain all insurances
established by Law, the Regulations and this Contract.5.1.18
    
    Deliver to PETROPRODUCCION copies of all insurance policies obtained in Ecuador. In the
event of insurance policies obtained abroad, CONTRACTOR shall deliver to PETROPRODUCCION the
coverage certificates duly issued and executed by the insurance companies of all insurance
policies where CONTRACTOR is the co-assured, duly authenticated by the corresponding
Consulate of Ecuador or annotated as established by the Hague Convention.5.1.19
    
    Pay all taxes, fees and duties as required by the Ecuadorian legislation and regulations
effective on the date this Contract is executed, or any taxes, fees and duties that may be
increased in the future. CONTRACTOR shall comply with all legal requirements, especially as
regards to submittal of tax returns, tax withholding, and bookkeeping.Notwithstanding the above, and in accordance with Article 87 of the Hydrocarbons Law,
CONTRACTOR shall enjoy the rights and exemptions established in the above-mentioned
regulations and the Customs Law (Ley Orgánica de Aduanas).5.1.20
    
    Take all necessary measures in order that subcontractors engaged by CONTRACTOR, comply with
all laws, rules, regulations and provisions applicable to this Contract in the Republic of
Ecuador.5.1.21
    
    Submit for approval of the Executive Committee the Work Plans and Annual Investment
Budgets, as required by the Hydrocarbons Law and Annex 3 to this Contract. In addition,
CONTRACTOR will comply with the requirements of the Dirección Nacional de Hidrocarburos and
the Ministry in accordance with the Ecuadorian law.5.1.22
    
    CONTRACTOR shall conduct its operations in accordance with the environmental protection
laws and regulations and the international agreements ratified by Ecuador. The remedial and
mitigation obligations undertaken by CONTRACTOR, are defined in the Environmental Studies and
the Environmental Management Plans, upon prior approval of the Subsecretaría de Protección
Ambiental of the Ministry of Mines and Petroleum.5.1.23
    
    Use technologies internationally accepted in the oil industry, which are compatible with
the environmental requirements of the Ecuadorian Amazon Region, both for its operations,
studies, reports and putting into practice any recommendations.5.1.23.1
    
    Comply with the legal and regulatory provisions applicable to relationships between
CONTRACTOR and the neighboring communities.5.1.23.2
    
    Prior to the operations start-up, PETROPRODUCCION shall carry out the
Social-Environmental Audit of the Field and will submit it for review by the Ministrys
Subsecretaría de Protección Ambiental, establishing the current conditions in which
CONTRACTOR receives the Contract Area. If the environmental audit reveals that there are
environmental damages requiring remediation, it will be liable to take the corrective
actions needed in coordination with the CONTRACTOR.
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5.1.23.3
    
    CONTRACTOR undertakes to carry out the Environmental Studies and to obtain the
Environmental Permits from the Ministrys Subsecretaría de Protección Ambiental for all the
stages included in the Development Plan, in accordance with the Substitute Regulations to the
Reglamento Ambiental para las Operaciones Hidrocarburíferas en el Ecuador and related
legislation in force. If applicable, CONTRACTOR will develop a plan for delivery and/or
abandonment of the area.5.1.23.4
    
    The CONTRACTOR shall be liable to engage Environmental Audits for the Contract Area, as
established in the Substitute Regulations to the Reglamento Ambiental para las Operaciones
Hidrocarburíferas en el Ecuador. Prior to termination of the Contract herein, the CONTRACTOR
shall engage an Integral Environmental Audit for the Contract Area, which shall conclude no
later than six months prior to termination of this Contract. The cost of these audits shall
be borne by CONTRACTOR. These audits are aimed at establishing whether the environmental
management plans approved by the Ministrys Subsecretaría de Protección Ambiental were met,
and its recommendations will be binding.5.1.23.5
    
    Employ skilled personnel and use adequate equipment, machinery, materials, operational
procedures and technologies that meet environmental protection standards and practices of the
international hydrocarbons industry, without prejudice of its liability to comply with the
Ecuadorian rules and regulations currently in force.5.1.23.6
    
    CONTRACTOR undertakes to comply with the Environmental Management Plans and to keep the
oil field in the best social-environmental conditions, as set forth in the Substitute
Regulations to the Reglamento Ambiental para las Operaciones Hidrocarburíferas en el
Ecuador. In the event of Final Abandonment, the CONTRACTOR will recover and rehabilitate
the area in which it operated, by remedying the environmental damages caused by its
operation of the Field.5.1.23.7
    
    Cooperate with Government Entities in charge of sustainable development for the area in
which CONTRACTOR operates, as required by Law. However, CONTRACTOR shall not be liable for
environmental damages caused to the oil fields by area inhabitants, settlers or third
parties.5.1.24
    
    Deliver to PETROPRODUCCION at the date of termination of this Contract, at no charge and
in good conditions, except the normal wear, all wells, goods, facilities, equipment and
infrastructure works that exist in the Contract Area. It is hereby agreed that the specific
services rendered under this Contract do not imply any transfer of technology  know how -
nor the total or partial assignment of the rights inherent to invention patents of the HTL
process, which are exclusively owned by IVANHOE ENERGY ECUADOR INC and its Related Companies.
Therefore, the Ecuadorian Government hereby agrees to abide by such rights, including all
those of the International
and Regional Agreements and the local legislation on intellectual property rights.As of the date in which the delivery referred to in this clause takes place,
PETROPRODUCCION will assume full and total responsibilities over said wells, goods,
facilities, equipment and infrastructure.
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5.1.25
    
    Comply with the Work Plans and Annual Investment Budgets.5.1.26
    
    Give priority to the procurement of goods and services to those produced in Ecuador or
which are supplied by Ecuadorians, provided that such goods and services have equivalent
quality, price and availability, at the time and in the quantities required.5.1.27
    
    Maintain the roads used by CONTRACTOR to reach the Contract Area during the life of this
Contract. PETROPRODUCCION will reimburse the maximum amount for such purpose. Delivery of
this amount will take place, provided that there are works that need to be performed as set
forth in this sub-clause, in which case the amount will not exceed $200,000 Dollars per year.5.1.28
    
    Receive up to five (5) outstanding students or graduates from hydrocarbon industry-related
technical schools, for two months per year in the Contract Area in the offices of the
CONTRACTOR in Ecuador, and will assume the risks and costs for transportation, food and
lodging, and minor health and emergency medical care of such students. For such purpose, the
Internships Act (Ley de Pasantías) will apply. Transportation, food and lodging, and the
medical care previously mentioned shall be provided in equal conditions to those of the
CONTRACTORs personnel in Ecuador. The Executive Committee will determine the duration of
said practices and studies and the number of students, in such way as not to interfere with
the activities performed by CONTRACTOR. It is hereby agreed that there will be no labor
relationship between CONTRACTOR or PETROPRODUCCION and the students; however, students shall
comply with all rules and regulations applicable in the Contract Area, especially as regards
to industrial safety. CONTRACTOR shall not be liable for the students risks, but will
provide accident insurance during the practices, with similar coverage as that of its regular
workers performing similar tasks. In addition, CONTRACTOR will provide students with a
monthly financial aid, in an amount equivalent to the salaries of its regular workers doing
similar jobs. PETROPRODUCCION may not nominate or propose any candidates for the internships
and is expressly prohibited to nominate any relatives of its officials up to second degree by
marriage and fourth degree by blood relation.5.1.29
    
    Deliver all original documents or certified copies of all information arising from
performance of this Contract, including the geological, geophysical, petrophysical and
engineering data, well completion records and reports and any other data created and compiled
by CONTRACTOR during the life of this Contract.5.1.30
    
    During Stage 3 of the Project, CONTRACTOR to deliver crude oil that exceeds 21° API with
viscosity below 200 cts at 60° C, if supported by technical and financial results from oil and reservoir evaluation studies performed in
Stages 1 and 2. In the event the resulting crude oil quality is lower than 21°API the
Executive Committee will define the production conditions most beneficial for the
interests of the Parties, based on prevailing technical and financial conditions.
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5.2
    
    PETROPRODUCCION OBLIGATIONS: In addition to the obligations set forth in this
Contract, PETROPRODUCCION undertakes to:5.2.1
    
    Pay CONTRACTOR for the services rendered, in the amounts set forth in Clause 9 of this
Contract.5.2.2
    
    Satisfy promptly, through the Executive Committee, any requests or requirements of
CONTRACTOR, and, if applicable, issue the corresponding observations and approvals as
established in this Contract, in order that CONTRACTOR may comply within its terms and
conditions. PETROPRODUCCION shall answer all requests, proposals or requirements within the
terms or periods established for each case under this Contract, or within 15 days, in the
event that a term is not specified herein.5.2.3
    
    Process or approve permits, in order that CONTRACTOR obtains the required approvals from
the Ministry, as required by the Executive Committee, in order to comply with the Purpose of
this Contract.5.2.4
    
    Give prior clearance in order that the Ministry of Finance and Public Credit levies from
customs duties and other taxes the import of goods needed to perform this Contract.5.2.5
    
    Provide CONTRACTOR with the information and technical data, as well as with any other
information required by CONTRACTOR, which may serve to support the operations in the Contract
Area. The costs incurred to reproduce such materials will be borne by CONTRACTOR.5.2.6
    
    Notify CONTRACTOR as soon as it receives any claim or legal action that may affect
CONTRACTOR, in order that CONTRACTOR may take measures to protect its interests.5.2.7
    
    Cooperate and coordinate with CONTRACTOR reasonable safety measures to carry out the
operations under this Contract.5.2.8
    
    Provide information, approvals or documentation required for issuance of visas, resident
permits and work permits to foreign personnel of CONTRACTOR and its subcontractors to carry
out activities directly related with the performance of this Contract in Ecuador. However,
CONTRACTOR shall be responsible for the corresponding administrative formalities.5.2.9
    
    Request and obtain from the Ministry, upon prior declaration of public use, the
expropriation of land or real property, or the rights-of-way in benefit of PETROPRODUCCION,
required by CONTRACTOR to perform this Contract.5.2.10
    
    Obtain from public entities assistance and support, required by CONTRACTOR to promptly
processing any licenses and permits,
especially those involving land surface rights, as set forth in Article 91 of the
Hydrocarbons Law for the performance of this Contract.
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5.2.11
    
    Receive the Fiscalized Production.5.2.12
    
    If necessary, and upon request by CONTRACTOR, PETROPRODUCCION, through the Police Force,
will provide reasonable safety conditions to perform the operations under this Contract, for a
reasonable compensation that will be agreed between the Parties. PETROPRODUCCION will include
in the Contractual Payment the costs incurred by CONTRACTOR. This compensation will be made
in accordance with the accounting procedures in force. However, PETROPRODUCCION will not be
liable if despite these safety conditions there are losses and damages to the goods or
individuals involved in this Contract.5.2.13
    
    The CONTRACTOR shall take the necessary actions for the prompt construction a secondary
pipeline for the timely removal the upgraded petroleum to the Fiscalization and Delivery
Center, the cost of such secondary pipeline line will be the exclusive responsibility of the
CONTRACTOR, within the scope of the Contractual Payment.5.2.14
    
    If the capacity of the Main Pipeline is adequate to transport the Crude Oil produced in the
Contract Area, then the Crude Oil shall have access to the Main Pipeline. However, if the
capacity of the Main Pipeline is insufficient, PETROPRODUCCION will ensure a share in the
capacity of said Main Pipeline to move the Crude Oil from the Contract Area, equivalent to the
percentage between the Production of Available Crude Oil and the total production of all areas
served by this Main Pipeline.5.2.15
    
    In the event that there is a secondary pipeline with adequate capacity to transport the
Fiscalizable Production, without need to build a new Main Pipeline, PETROPRODUCCION shall take
the necessary actions, in order that the Fiscalizable Crude Oil has timely access to the
secondary pipeline, upon prior agreement between the interested parties.5.3
    
    CONTRACTORS RIGHTS: CONTRACTOR shall have the following rights:5.3.1
    
    CONTRACTOR shall have the exclusive right to implement and conduct activities, for the
purpose of this Contract in the Contract Area, with the guarantees granted by the Republic of
Ecuador, including the right to do exploration in Block 20.5.3.2
    
    Receive the Contractual Payment, as set forth in Clause 9.5.3.3
    
    Use and have access to all geological, geophysical, drilling and production data, as well
as any other information kept by PETROPRODUCCION involving Block 20, upon prior payment of
the corresponding costs to reproduce such materials.5.3.4
    
    Use the existing roads, communications and transportation means or those built in the
future, as well as use the water and construction materials required by its operations, as
set forth by Law and by the provisions of this Contract.
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5.3.5
    
    Use, at no charge, the Crude Oil and Natural Gas produced in the Contract Area required for
its operations.5.3.6
    
    Arrange, together with PETROPRODUCCION the timely inclusion into national production of
the crude oil produced in the Contract Area.5.3.7
    
    Precretaceous: This Contract does not grant CONTRACTOR any rights over the soil, subsurface
or natural resources existing in the Contract Area, nor on the areas expropriated in benefit
of PETROPRODUCCION under this Contract, or on the facilities constructed in the Contract Area.
However, CONTRACTOR will have the right to conduct exploration drilling in the Precretaceous,
and if the results are positive, the Parties will execute an agreement establishing the
production conditions and payment terms.5.3.8
    
    The CONTRACTOR has the right to receive the monthly Contractual Payment with petroleum owned
by PETROECUADOR as compensation for the amount to which it has the right to payment in money.5.3.9
    
    During the life of the Contract, and with the purpose of increasing crude oil production
for the State, the CONTRACTOR may blend the oil produced from the Contract Area with other
Available Crude Oil from the same Area, notwithstanding the API gravity.5.4
    
    PETROPRODUCCIONS RIGHTS: For supervision and monitoring purposes, PETROPRODUCCION
shall have the following rights:5.4.1
    
    Review and monitor performance of technical, financial and contractual activities
undertaken by CONTRACTOR, in accordance with the timetables and procedures mutually agreed by
the Parties, as set forth in sub-clauses 15.2 and 19.2.5.4.2
    
    Request CONTRACTOR, at any time, the information and reports it may consider appropriate,
for the performance of this Contract, in accordance with the applicable laws and regulations
in force.5.5
    
    JOINT OBLIGATIONS OF THE PARTIES: The Parties hereto shall have the following
joint obligations:5.5.1
    
    Interpret and perform this Specific Services Contract in good faith.5.5.2
    
    Both Parties shall meet their contractual obligations and comply with the provisions of the
Hydrocarbons Law; the Special Law of Empresa Estatal de Petróleos del Ecuador, PETROECUADOR
and its Affiliate companies; Procurement Rules for Works, Specific Goods and Services of
PETROECUADOR and its Affiliate Companies; Substitute Regulations to the Reglamento Ambiental
para las Operaciones Hidrocarburíferas en el Ecuador, and the provisions of the Contract
herein.5.5.3
    
    Subject to the provisions set forth in subparagraphs 5.3.8 and 9.2.7 of this Contract,
PETROECUADOR shall execute with CONTRACTOR or its Related Companies the corresponding Oil
Purchase/Sale agreement, as applicable. The price paid by CONTRACTOR or its Related
Companies shall be the Reference Price, as defined under sub-clause 3.3.41. of this Contract.
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5.6
    
    Representations and Guarantees5.6.1
    
    The Parties represent and warrant that:
 a)
    
    Execution and performance of this Contract is subject to the provisions of the
Hydrocarbons Law, the Special Law for PETROECUADOR and its regulations, related laws,
verdict, court order or award. Therefore, their assets or any other rights derived from
other contracts executed by the Parties will not be affected.b)
    
    Neither Party shall be liable to the other Party for administrative or judicial
claims arising out from actions or omissions incurred prior to execution of this Contract.
 5.7
    
    LIABILITIES5.7.1
    
    Liability from the representations and guarantees delivered by the Parties for any claims
shall remain and continue in force during 5 years for all claims filed within such period and
notified in writing to the other Party, even if said claims have grounds for contingent
damages and at such time no administrative, judicial or arbitration process was filed. In
addition, the Parties shall be liable for the obligations undertaken in this Contract.
CONTRACTOR shall also be liable for the obligations of its Subcontractors and Related
Companies involved in activities performed under this Contract.5.7.2
    
    CONTRACTOR shall be liable for all operations derived from the purpose of this Contract.
In addition, CONTRACTOR shall be liable to deliver production at the Fiscalization and
Delivery Center, in accordance with the terms of this Contract.5.7.3
    
    PETROPRODUCCION shall be liable for the Fiscalized Production upon delivery by CONTRACTOR
at a Fiscalization and Delivery Center, in accordance with the terms of this Contract.5.7.4
    
    FORCE MAJEURE OR ACTS OF GOD.Neither Party shall be liable to the other for
noncompliance, interruption or delayed performance of its obligations under this Contract if
such failure to comply or delay is due to duly proven Force Majeure or Acts of God. In such
events, the Party affected by Force Majeure shall notify the other Party within 15 days of
such occurrence5.7.4.1
    
    Upon notification by either Party of an event of Force Majeure or Acts of God, the other
Party may accept or object it, and will observe the procedure established by the Executive
Committee. The Party giving notice of Force Majeure or Acts of God may refute such
objection, using the resources established in this Contract or the Law. The objection of
Force Majeure will not interfere with the development of the Contract activities.5.7.4.2
    
    The Party alleging Force Majeure or Acts of God shall prove the occurrence of such events.
If PETROPRODUCCION alleges Force Majeure, such Force Majeure must have the approval of its
Vice-President.
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5.7.4.3
    
    If during an event of Force Majeure or Acts of God there is any remaining Fiscalized
Production, CONTRACTOR shall be entitled to receive the Contractual Payment for the
activities already performed, as set forth in Clause 9. The obligations set forth in Clause 9
shall not expire due to occurrence of Force Majeure or Acts of God.5.7.4.4
    
    The occurrence of Force Majeure or Acts of God may require review of the work schedule
proposed by CONTRACTOR according to Annex 5, notwithstanding its right to resume performance
of its obligations as soon as reasonably feasible. The obligations not affected by Force
Majeure or Acts of God shall be fulfilled in accordance with the provisions of this Contract.5.7.4.5
    
    In the event of Force Majeure or Acts of God, CONTRACTOR shall notify PETROPRODUCCION
within 15 days of such occurrence and will make every effort to resume operations as soon as
feasible.5.7.4.6
    
    Upon overcoming the Force Majeure or Acts of God, CONTRACTOR shall justify within 15 days
to PETROPRODUCCION the number of days during which activities were interrupted due to such
events.5.7.4.7
    
    If CONTRACTOR deems that the Force Majeure or Acts of God need immediate action,
CONTRACTOR will take all necessary measures and incur in all the expenses required to protect
its interests and those of PETROPRODUCCION and their respective workers, even if such
expenditures were not included in the Annual Program and Budget for the corresponding Fiscal
Year. The actions taken shall be reported to PETROPRODUCCION for its information within 10
days.The unforeseen expenses referred to in the preceding paragraph shall be deemed as costs
and expenses, as the case may be, as established in the accounting procedures. Such
expenses will be included in the Contractual Payment and will require approval by the
Executive Committee.5.7.4.8
    
    The time of interrupted activities due to Force Majeure or Acts of God shall be excluded
from the term to comply with the Work Plans and Annual Investment Budgets. Consequently, the
timetables established in this Contract shall be extended in a period equal to the duration
of such Force Majeure or Acts of God.If appropriate and at the request of CONTRACTOR, Police support may be requested to
safeguard the personnel that is working at the facilities, as well as the property and
goods of the Affiliate Company and CONTRACTOR, in which case. PETROPRODUCCION will
provide the necessary assistance.
 CLAUSE 6: CONTRACT TERM
 6.1
    
    This Contract will enter into force on the Effective Date established in sub-clause 3.3.19
and will have a duration of 30 years. This term may be extended for two additional periods of
five years each, by mutual agreement of the Parties. In the event of unilateral early
termination,
CONTRACTOR shall have the right to obtain reimbursement of all the investments, costs and
expenses, and to receive payment for the services actually performed that are pending
payment.
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CLAUSE 7: PLANS, WORK PROGRAMS AND ANNUAL INVESTMENT BUDGETS
 7.1
    
    Work Programs and Annual Investment Budgets. CONTRACTOR will submit for
PETROPRODUCCION,s approval, through the Executive Committee, the committed Work Programs and
their respective Annual Investment Budgets, which will include quarterly breakdown estimates
for reference purposes.7.1.1
    
    Contractor will submit to the Executive Committee the Work Programs and Annual Investment
Budgets referred to in the preceding paragraph by September 30 of the Fiscal Year prior to
which the Work Programs and Annual Investment Budgets will be implemented. In addition,
within the first 30 days of the following Fiscal Year, CONTRACTOR will submit to the
Executive Committee a report on the activities performed during the previous Fiscal Year and
the corresponding budget implementation.7.1.2
    
    As regards to the first year of this Contract, the Work Program and Annual Investment Budget
shall be submitted to the Executive Committee for the time that remains until the end of that
Fiscal Year and, if execution of this Contract takes place after October 31, the Work Plan and
Annual Investment Budget shall be added to the next Fiscal Year.7.1.3
    
    CONTRACTOR may amend the current Work Plans and Annual Investment Budgets upon prior
approval of the Executive Committee.
 CLAUSE 8: PRODUCTION RATE
 8.1
    
    Prior to the date an oil reservoir begins production, CONTRACTOR shall submit the proposed
Production Rate to PETROPRODUCCION, through the Executive Committee, in order that
PETROPRODUCCION submits it to the Ministry of Energy and Mines for its approval. The
Production Rate shall use as basis conventional studies or oil reservoir simulations, in
accordance with the provisions of Executive Decree 543, published in Official Register 135
dated March 1, 1985, including the Technical Criteria to Calculate Production Rates, as
established by the Dirección Nacional de Hidrocarburos and the Rules and Regulations for
Hydrocarbon Operations.8.2
    
    Early Production. Early production of Crude Oil that CONTRACTOR may produce and
PETROPRODUCCION will accept and deem as test production to determine the reservoir features
and production rates. PETROPRODUCCION agrees to take the full volume of such Available Crude
Oil under the terms of this Contract. PETROPRODUCCION will accept the income obtained from
the sale of such production to pay CONTRACTOR the Contractual Payment, as set forth in Clause
9 of this Contract. The early production of Crude Oil shall be valued at the Reference Price.
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8.3
    
    Maximum Production Rate Allowed. In accordance with the provisions of Executive
Decree 543 and the Technical Criteria to Calculate Maximum Production Rates, the Ministry shall establish the Maximum Production Rate Allowed. This
rate may be reviewed every Fiscal Year, by following the above-mentioned procedure. Until
the Ministry establishes the Maximum Production Rate Allowed, CONTRACTOR will use the rate
proposed by it, in accordance with the provisions of Article 2 of Executive Decree 543.
The cost and difficulties of developing and producing heavy oil, as well as installation
and utilization of the HTL Technology to upgrade the volume and quality of heavy Crude
Oil require that the production of Crude Oil reservoirs be at the Maximum Efficient Rate,
in order for the project to be profitable and obtain optimum benefits from the unique HTL
Technology.8.4
    
    CONTRACTOR may propose, at any time, to PETROPRODUCCION, through the Executive Committee, to
review the Maximum Allowable Production Rate for each well, reservoir or oil field, due to
unexpected changes in production or reserve updates, based on conventional studies or
reservoir simulation studies. In turn, PETROPRODUCCION will request the Ministry to review
the proposal, in accordance with the procedure set forth in sub-clause 8.1.
 CLAUSE 9: CONTRACTUAL PAYMENT AND PAYMENTS TO CONTRACTOR
 9.1
    
    During the life of this Contract, CONTRACTOR will receive payment every month
(Contractual Payment). Such payment will be calculated taking into account the number
of Fiscalized Production barrels produced in Block 20 during that month. The Contractual
Payment includes Investments, Costs, Expenses and CONTRACTOR Profits.9.1.2
    
    During the life of this Contract, the Contractual Price will be calculated by multiplying
the number of Fiscalized Production barrels for the corresponding month (the Month of Payment)
for an amount per barrel of thirty-seven United States dollars (US$37.00) (theContractual
Price). Such amount will be adjusted quarterly as of the effective date of this Contract.
The formula to adjust the Contractual Payment is detailed in Clause 9.1.2.1 and is based on
the quarterly weighted average changes in a basket of Producers Price Index (PPI), published
by the US Department of Labor, the Labor Statistics Unit, and the Indexes (Adjustment
Indexes) for the calendar quarter immediately preceding the Quarter in which the Effective
Date occurred (Reference Quarter), and the calendar quarter immediately before the
month of payment (Payment Quarter)to be invoiced.9.1.2.1
    
    Payment Formula  Contractual Payment Formula
 Definitions:
 Reference Quarter: Calendar quarter immediately before the month in which the Effective Date of
this Contract occurred
 Payment Quarter: Calendar quarter immediately before the month for which CONTRACTOR will invoice
for the Fiscalized Production
 Payment Month: The calendar month for which the Contractual Payment amount is established
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CPP: Contractual Payment agreed under this Contract
 CPPc: Actual Contractual Payment applicable to the Fiscalized Production invoiced for the
corresponding month
 AI: Adjusting Index  Actual escalation adjustment of the CPP that will make it applicable for the
Payment Month, AI x CPP = CPPc, and to be multiplied by the amount of Fiscalized Production to be
invoiced in that month. The Adjusting Index is equal to the weighted sum of the Delta PPIs for
three commodities.
 PPI: Producers Price Index for commodities, US Department of Labor, Bureau of Labor
 PPI s = Metals & Metal Products, Steel Mill Products  PPI m = Field Machinery & Equipment for the Oil and Gas Industry  PPI r = Petroleum Refineries
 WF s = Weighting Factor for the PPI s  WF m = Weighting Factor for the PPI m  WF r = Weighting Factor for the PPI r
 Where: WFs = 0.45; WF M = 0.35; WF R = 0.20
 Delta PPI I for any of the three commodities ,is the change in PPIs calculated as the ratio of the
current average PPIs for the weighted Quarter prior to the month of the corresponding Fiscalized
Production (Payment Quarter), divided by the average PPIs for the Quarter preceding the month in
which the Contracts Effective Date (Reference Quarter). The PPI indexes for any Quarter will
be the weighter arithmetic average of the PPIs for the three months in that quarter. A Quarter
means a calendar quarter, i.e., January, February & March (first Quarter), April, May and June
(second Quarter), etc.
 Application of Payment Formula to Determine the Contractual Price for the Month of Payment:
 IA = [(WF s ) x (Delta PPI s )] + [(WF m ) x (Delta PPI m )]
+ [(WF r ) x (Delta PPI r )]
 ACTUAL CONTRACTUAL PAYMENT FORMULA
 CPPc = CPP (IA)
 Upon completing the construction of the last HTL plant, and after the CONTRACTOR has recovered its
investment, the adjustment formula will include only the following indices:
 WFs = Weighted Factor for the PPIs  WF M = Weighted Factor for the PPI M
 Where: WFs = 0.50; WF M = 0.50
 Application of the payment formula to determine the Contractual Payment for the Month of Payment:
 IA = [(WF s ) x ( Delta PPIs) + [(WF M ) x ( Delta PPI M )]
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CONTRACTUAL PAYMENT FORMULA
 CPPc = CPP {IA}
 9.1.2.2
    
    The Contractual Price will also be adjusted as established in Clauses 9.2.10 and 9.3.11, and
other provisions of the Contract herein.9.1.3
    
    If during the life of this Contract any of the indexes mentioned in the preceding clause are
no longer published by the United States Department of Labor, the index/indexes no longer
published will be replaced with similar indexes published by the Government of the United
States of America or any renowned organizations of the industry, as references for cost
variations in the United States of America, or which are used by the industry as equivalents
of such.9.1.4
    
    In accordance with the provisions of Article 17, Hydrocarbons Law,
PETROPRODUCCION and the CONTRACTOR agree that the form of payment, will be in money.
Nevertheless, the payment obligation may be satisfied through compensation of the value of
the payment in petroleum.
 PAYMENT PROCEDURE
 9.2
    
    Trust Fund:PETROECUADOR shall create a Trust Fund to pay CONTRACTOR, equivalent to
not less than 35% or a sufficient amount to pay the CONTRACTOR, from the monthly income
arising from sales of crude oil produced in the Contract Area. The Payment to which
CONTRACTOR is entitled under the terms of this clause will be paid with funds from this Trust
Fund, in accordance with the payment schedule established in this clause.9.2.1
    
    If payment takes place with Crude Oil, as set forth in the previous paragraphs the value of
the amount of the corresponding crude oil will be deducted from the Trust Fund.9.2.2
    
    The Trust Fund shall be created through the Central Bank of Ecuador, between PETROECUADOR
and the Ministry of Economy and Finance. Its purpose will be to ensure payment to CONTRACTOR
of all obligations derived from this Contract.9.2.3
    
    Payment to CONTRACTOR from the Trust Fund Account shall take place monthly, upon submittal
of the invoice for the quantity of Fiscalized Production during the applicable month. Invoices
shall be submitted together with the details of the Fiscalized Production, and shall be paid
upon verifying that all data is correct. Invoices will be submitted within the first ten
calendar days of each month for the preceding month. Invoices will be paid within 30 calendar
days following its submittal, and payment will be made through bank transfer to the account
notified by CONTRACTOR, using funds from the Trust Fund created for such purpose. Failure to
pay the invoices within 30 days from their submittal will accrue interests, as fixed by the
Central Bank of Ecuador, until payment is made.
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9.2.4
    
    If in any month during the life of this Contract, the Contractual Payment exceeds the amount
allocated to CONTRACTOR through the Trust Fund for Contractual Payments during that month,
PETROPRODUCCION and/or PETROECUADOR will pay CONTRACTOR the surplus amount with public funds,
in the subsequent month or months, until the full amount is paid.9.2.5
    
    In the event that CONTRACTOR is unable to collect payment for the services rendered under
this Contract, CONTRACTOR will not lose its rights to recovery and may exercise its rights to
claim such payments, even if the Contract herein is terminated for any reason whatsoever.9.2.6
    
    If PETROECUADOR allocates the Production to the domestic market, sales will be valued at the
International Market Price, FOB Balao main port.9.2.7
    
    In case that the value corresponding to the Contractual Payment established in this
Contract, is compensated in crude oil, this will correspond to the sales price that
PETROECUADOR applies to the crude oil of similar characteristics and shall be the Reference
Price FOB port of Balao.In addition, CONTRACTOR shall have the option to buy RTP product, available crude from the
Contract Area and other Crude Oil on equal conditions to those used by PETROECUADOR for
sales to other companies, complying with the then existing legal norms and procedures.9.2.8
    
    All crude oil received by CONTRACTOR as the contractual payment will be valued based on
quality, volume and selling terms, to ensure that CONTRACTOR receives the value it would have
received had the invoices been paid with cash. Payment of interests may also apply in the
event of delivery delays by PETROPRODUCCION, as set forth in Clause 9.2.11.9.2.9
    
    Lifting procedures will include, among other issues, volumes, quantities, crude oil lifting
schedules (including timely notices, tolerance levels for operational reasons and other
delivery conditions, categories, loading hour free of charge, penalties for delayed lifting
and other charges attributable to PETROPRODUCCION).9.2.10
    
    Adjustment: The Contractual Payment to which CONTRACTOR is entitled to will be
adjusted using as basis the adjustment factors set forth in sub-clause 9.1.2.1. Likewise,
CONTRACTOR shall be entitled to adjustments of the Contractual Price in any of the following
events: (i) Tax system changes or modifications, including the VAT, which may have an impact
on CONTRACTOR; (ii) modifications in the labor share effective at the time this Contract is
signed; (iii) modification of the currency system changes, as described in sub-clause 13.4;
(iv) Changes/restrictions established by the National Hydrocarbons Administration in the
production rate, negatively affecting the economics of this Contract; (v) Changes in the
amortization formula established in the Accounting Procedures, in which case any adjustments
will be proportionate to the impact of such events over the economy of this Contract.
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9.2.11
    
    Interests:After 45 days following the date in which payment is due to CONTRACTOR,
PETROPRODUCCION will pay CONTRACTOR interest for the period of delay, calculated at the Legal
Interest Rate effective in
Ecuador on the date of payment. If the Contractual Payment will be compensated with Crude
Oil, interest will accrue from the scheduled lifting date and in accordance with the
lifting agreement, until the date in which the Fiscalized Production received by
PETROPRODUCCION is available to CONTRACTOR, for lifting. Delayed payments will accrue
interests as of the 46th day (inclusive) from submittal of the corresponding invoice and
supporting documents. Interests will not be paid during any periods of Force Majeure or
Acts of God that hinder PETROPRODUCCION from making the payments agreed under this
Contract.If the delayed payment is due to Force Majeure or Acts of God, PETROPRODUCCION shall not be
liable to pay interest for delayed payment.9.2.12
    
    During the life of this Contract, not withstanding the payment of the contractual service,
and the international market price for the crude oil , the State will not receive less than
20% of the gross income generated from the sale of this crude oil.:If the international market conditions improve in the future, the CONTRACTOR will be
entitled to recover the difference of the agreed price for the contracted services, except
for the early production crude which the CONTRACTOR shall not recover the difference in the
contractual payment.9.2.13
    
    Economic EquilibriumPETROPRODUCCION or the CONTRACTOR shall have the right to
propose to the other Party adjustments necessary when due to special circumstances in the
international market, or the prices of goods and services having relationship with the
hydrocarbons industry and emergency situations unforeseen under this Contract, negatively
affect the economic equilibrium of this Contract, for which effect, after reaching an
agreement must sign the corresponding document, with agreed economic adjustments.
 INVOICING
 9.3
    
    Payment Procedure:CONTRACTOR will submit monthly one or more invoices for the
Contractual Payment applicable to the previous month, in accordance with the procedure
established in this clause.9.3.1
    
    Issuance of Invoices:All invoices shall be issued to EMPRESA ESTATAL DE EXPLORACION
Y PRODUCCION DE PETROLEOS DEL ECUADOR, PETROPRODUCCION, as established in Annex 2 to this
Contract9.3.2
    
    Payment Objections:PETROPRODUCCION may object an invoice, only for calculation
errors.9.3.3
    
    CONTRACTOR will cancel the invoice objected to and will immediately issue a new invoice.9.3.4
    
    Objections by PETROPRODUCCION to any invoice shall not prevent CONTRACTOR from submitting
other invoices and receive Contractual Payments to which it is entitled on the terms
established under this Clause.
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9.3.5
    
    PETROPRODUCCION shall pay the full amount of the corresponding invoice within a period of
up to 45 days from its submittal.9.3.6
    
    EMPRESA ESTATAL PETROLEOS DEL ECUADOR, PETROECUADOR, shall be jointly liable with
PETROPRODUCCION for all payments to CONTRACTOR.9.3.7
    
    In the event that an invoice is not paid within the established periods, the provisions of
Clause 9.2.11 shall apply.9.3.8
    
    The interest of the compensation, when this option has been agreed upon as a payment option,
will be paid in accordance to Clause 9.2.11.9.3.9
    
    Gross Income of CONTRACTOR: The revenues obtained by CONTRACTOR through the
Contractual Payment shall represent the gross income of CONTRACTOR. If payment by
PETROPRODUCCION is in kind (with crude oil), the CONTRACTOR will register the invoice amount
in its accounting records and such amount will be the gross income of CONTRACTOR, regardless
of the final value of the goods actually received.For tax payment purposes, reimbursements of costs, expenses and investments will be
deducted from each invoice, in order that the tax base reflects the CONTRACTORs profit.Costs, expenses, payments and investments included in the Contractual Payment shall not be
subject to payment of income tax and may be deducted as provided in Ecuadorian legislation.9.3.10
    
    Reference Price:The reference price shall be the one defined in sub-clause 3.3.41.
In the event that PETROECUADOR did not make external sales during the previous calendar
month, the Reference Price will be established using as basis a basket of international crude
oil with similar features, as agreed by the Parties, and prices will be obtained from renowned
and specialized publications, such as PLATTS or similar publications. The Reference Price will
be FOB Balao Ecuadorian Port (export terminal), in Dollars per Barrel.Procedure: Prices of the crude basket components and the average freight
price, when expressed in FOB terms, Ecuadorian Port, shall be obtained from specialized and
renowned publications, such as PLATTS or similar publications, within two days from its
publication prior to the date of Crude Oil sales, and two days after the date of the Crude
Oil sales. If the sale is on a Sunday or Monday (where there are no publications), the
publication to be used will be that of the two days immediately before and three days after
the date on which the Crude Oil was sold. If the Crude Oil sale takes place on a Saturday
or on a day when there are no publications (except Sunday or Monday), the publications to
use will be those of three days before, and two days after the date of the Crude Oil sale.9.3.11
    
    As established in Article 5 of the Reglamento Sustitutivo del Reglamento Ambiental para las
Operaciones Hidrocarburíferas en el Ecuador, if there are ecologically sensitive or
culturally vulnerable areas that vary the technical and financial conditions of hydrocarbon
operations, PETROPRODUCCION and CONTRACTOR shall explore ways to solve the
situation and reestablish the original terms of this Contract or shall amend it by mutual
agreement. In the event that PETROPRODUCCION and CONTRACTOR are unable to find a solution
acceptable to both parties, the conflict will be solved in accordance with the procedures
set forth in this Contract.
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PENALTIES
 9.4
    
    Delayed compliance or breach of any provisions in this Contract will give PETROPRODUCCION the
right to charge CONTRACTOR a penalty equivalent to 0.01% over the portion not performed in
the development plan approved for the corresponding fiscal year.9.4.1
    
    Prior to applying a penalty for noncompliance ANY OBLIGATIONS under this Contract, the
corresponding Department will notify CONTRACTOR in writing and will attach the Fines Form,
within 5 calendar days from having knowledge of such noncompliance.9.4.2
    
    Upon receipt of notice, CONTRACTOR will have 15 Business Days to justify the noncompliance,
and after that period, the Contract Administrator will apply or cancel the penalty, notifying
the CONTRACTOR in writing within the next 5 days upon completion of the period granted to
justify such noncompliance.9.4.3
    
    However, CONTRACTOR may submit the issue within 15 calendar days to the Executive Committee,
which will take a decision in a period of five calendar days. After completing this
procedure, CONTRACTOR may submit the issue within five calendar days to the Vice-President of
PETROPRODUCCION, who will take a decision in 10 calendar days.9.4.4
    
    Penalties will not apply to events of Force Majeure or Acts of God, or in the event that
PETROPRODUCCION experiences delays in fulfilling its obligations under this Contract and those
foreseen in Ecuadorian Legislation, duly approved by CONTRACTOR and accepted by
PETROPRODUCCION.9.4.5
    
    PETROPRODUCCION may collect the penalties imposed on CONTRACTOR either from: (i) the
invoices payable to CONTRACTOR; (ii) the Performance Bond, in the portion proportional to the
penalties.9.4.6
    
    In the event that the penalties imposed to CONTRACTOR reach 20% of the total value of the
Contract, PETROPRODUCCION will have the right to unilaterally terminate this Contract.The total value of this Contract amount represents the sum of the financial commitments
undertaken and estimated for all stages under this Contract.
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CLAUSE 10: GUARANTEES AND INSURANCE
 10.1
    
    Guarantees: CONTRACTOR shall deliver to PETROPRODUCCION the following guarantees:10.1.1
    
    Joint Guarantee: Prior to execution of this Contract, CONTRACTOR shall submit a
joint guarantee issued by its Parent Company for the activities and investments that
CONTRACTOR undertakes to perform during each Stage. The text of such guarantee will be an
integral part of this Contract and is included herein as Annex 7.10.2
    
    Insurance: From the Effective Date of this Contract, CONTRACTOR will be solely liable
to maintain all the necessary national and international insurance policies. These insurance
policies will abide by Ecuadorian Law and will be based on generally accepted practices in the
international petroleum industry. Assets located within the country shall be insured in the
Ecuadorian Insurance market, except where coverage for specific risks is not offered locally,
in which case insurance may be arranged abroad. PETROECUADOR may assign the coverage of its
current insurance policies by transferring the proportional cost of the applicable insurance
premiums. The CONTRACTOR may accept, at its discretion, all or part of the insurance coverage
offered by PETROECUADOR.10.2.1
    
    CONTRACTOR shall either arrange for PETROPRODUCCION to be an additional insured party or
endorse the insurance policies established by law and this Contract to PETROPRODUCCION.10.2.2
    
    The property and Fixed Assets referred to in this Contract shall be insured until such
property and Fixed Assets are delivered to PETROPRODUCCION.10.2.3
    
    CONTRACTOR agrees to arrange and maintain insurance policies with public liability coverage
for any direct or indirect material damages to third parties, which may arise from performance
of this Contract. The CONTRACTOR undertakes to save and hold harmless PETROPRODUCCION from any
claim involving loss or damage to third parties by CONTRACTOR, during the performance of this
Contract.10.2.4
    
    In the event of loss or damage, the indemnifications paid by the insurance companies shall
be paid to CONTRACTOR and will serve to immediately replace the damaged, destroyed or stolen
property or facilities, as well as to cover any underinsurance, if any.10.2.5
    
    CONTRACTOR shall require all its insurers to include a specific clause in all policies,
waiving their right of subrogation against PETROPRODUCCION.10.2.6
    
    CONTRACTOR shall provide PETROPRODUCCION sufficient proof that the national and
international insurance companies are duly covered by the required reinsurance.10.2.7
    
    CONTRACTOR shall maintain current all the insurance policies, at commercial value updated
annually.10.2.8
    
    Indemnifications and replacement of underinsured property due to damages shall be the
exclusive responsibility of CONTRACTOR, and will be covered as soon as possible by CONTRACTOR.
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10.2.9
    
    CONTRACTOR is required to obtain and maintain valid at least the following insurance
policies:
 
    
    FULL OIL INDUSTRY RISK COVERAGE FOR CONTRACT ACTIVITIES
    
    PUBLIC LIABILITY INSURANCE
    
    FIRE INSURANCE
    
    ELECTRONIC EQUIPMENT INSURANCE
    
    PERSONAL INJURY AND LIFE INSURANCE
 CONTRACTOR is required to obtain Blow Out Insurance, cratering, Well Cost Control and
Drilling Expenses.10.2.10
    
    Environmental Pollution and Damage Insurance: CONTRACTOR shall obtain, at PETROPRODUCCIONs
satisfaction, the Environmental Damage and Pollution Insurances, in accordance with
International petroleum Industry practices, which are included in the public liability
insurance policy of CONTRACTOR.10.2.11
    
    The Parties may agree, in the future, to obtain additional insurance coverage for other
risks involving the execution of this Contract.10.2.12
    
    CONTRACTOR may, at its discretion, obtain the additional insurance coverage it may deem
necessary for its activities10.2.13
    
    Performance Bond- CONTRACTOR will deliver in favor of PETROPRODUCCION for each
year of the first five years of the Contract term, a performance bond for the faithful
performance of the investment commitments for the respective fiscal year, which will be
inconditional, irrevocable and for immediate collection. The performance bond will be issued
by a financial entity established in Ecuador, in an amount equivalent to 5% of the planned
investments for the corresponding fiscal year. The performance bond will be returned to
CONTRACTOR upon completing its obligations for the Fiscal Year, and CONTRACTOR will deliver a
new performance bond for each of the of the subsequent years. This procedure is used in view
that the Contract herein is for an undetermined amount.
 CLAUSE 11: CONTRACT AMENDMENTS
 11.1
    
    This Contract may only be amended by mutual agreement of the Parties, and upon prior approval
of the Contracting Committee. In the event of changes in the applicable legislation, which
may impact the financial terms of this Contract, and without limiting the provisions of the
following bodies of law: Ley Orgánica de Equidad Financiera and its Regulations, Tax Code,
Social Security Law, Municipal System Law, Labor Code, the Parties agree to reflect such
deviations as correction factors, or through an amendment to this Contract.11.2
    
    In case of increases in the costs, expenses and investments the economic model of the
CONTRACTOR (Annex 5), such costs, expenses and investments shall be recovered by the
CONTRACTOR through the signature of a complementary contract.
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CLAUSE 12: TAXES, LIENS, LABOR SHARE AND CONTRIBUTIONS
 12.1
    
    Tax System and Labor Share.CONTRACTOR shall pay income taxes, in accordance with the
provisions of the Ley Orgánica de Régimen Tributario Interno and other applicable rules.
CONTRACTOR may deduct its investments, costs and expenses by following the legal framework
that is currently in force in Ecuador. Therefore, said items will not be subject to payment
of income taxes, in the event that after execution of this Contract, changes occur in the Tax
System whereby the investments, costs and expenses of CONTRACTOR are deductible. CONTRACTOR
will have the right as of that date to automatically include a correction factor in the
payment term, in order to offset the impact of the changes made in the tax regulations.CONTRACTOR shall pay its workers all contributions and the labor share established in the
Codified Labor Code, which is currently equivalent to fifteen (15%) per cent.12.2
    
    The CONTRACTOR will comply with the current rules and regulations for issuance of sales
receipts and tax withholding, as established by the Internal Revenue Service.12.3
    
    Tax on Total Assets:CONTRACTOR shall pay, as applicable, the Municipal tax
equivalent to 1.5 per thousand on total assets, as set forth in Item III of the Ley de
Control Tributario y Financiero.12.4
    
    Contribution to the Superintendencia de Compañías (Companies Examiner Office).CONTRACTOR shall pay, as applicable, the annual contribution of one per thousand on total
assets, as set forth in Article 455 of the Codified Corporations Law in accordance with the
procedure established by the Superintendente de Compañías.12.5
    
    CONTRACTOR shall pay, if applicable, the tax set forth in Law 122, its interpretative law and
amendments.12.6
    
    Notary costs shall be borne by CONTRACTOR, as well as the cost of obtaining 10 certified
copies of this Contract for delivery to PETROPRODUCCION.12.7
    
    Under this Contract, the Income Tax applicable to CONTRACTOR shall be 25% over the disposable
base, with no additional charges.In addition, CONTRACTOR may resort to all tax benefits with financial-economic effect
established in the tax laws and its current or future regulations, including the income tax
reduction due to reinvestment of profits.12.8
    
    CONTRACTOR will issue invoices to PETROPRODUCCION as established in Clause 9, adding the VAT
rate to each invoice.In view that CONTRACTOR sales will be to the public sector and in the name of
PETROPRODUCCION and that CONTRACTOR will not be able to compensate the Value Added Tax paid
in all its purchases or the tax withholdings made, CONTRACTOR shall have the right to
obtain from the Internal Revenue Service reimbursement of the tax credit through the
corresponding credit note, check or payment with other obligations of the State.
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12.9
    
    Tax System Changes. If the tax system is amended, including the VAT, and changes
cannot be deemed as a tax credit or credit for profit sharing on the date this Contract is
executed or its interpretation, and which affect the economics of this Contract, the Party
affected shall have the right to include, by mutual agreement, a correction factor or an
adjustment to the Contractual Payment, in order to absorb the increase/decrease of the
tax/labor burden.12.10
    
    Payment in Kind. When the payment is in a value other than money or legal currency, the
CONTRACTOR, that is to say is paid debt of PETROPRODUCCION the value of such invoice will be
the only amount registered in the accounts of CONTRACTOR, regardless of the value these
payments may reach.
 CLAUSE 13: FOREIGN EXCHANGE CONTROL
 13.1
    
    Foreign currency will be subject to the provisions of the Political Charter, the Monetary
Law and the regulations issued by the Central Bank of Ecuador, by virtue of which CONTRACTOR
will have the right to freely dispose of the foreign currency resulting from the Contract
Payment.13.2
    
    Likewise, CONTRACTOR will have the right to maintain, control and operate bank accounts in
any currency within the country or abroad, have control and use said accounts; and maintain
and use the funds of such accounts abroad, without any limitation whatsoever, in view that all
transactions under this Contract will be in Dollars of the United States of America.13.3
    
    Notwithstanding the above, CONTRACTOR will have the right to freely dispose of, distribute,
send or maintain abroad, with no restriction whatsoever, any and all amounts received by
CONTRACTOR under this Contract, including its annual net profits, after all legal and tax
deductions established in the laws of Ecuador.13.4
    
    The Bank Board regulations of the Central Bank of Ecuador or other government entities may
not alter the obligations and rights of the Parties derived from this Contract. If new
regulations are issued that affect the CONTRACTORS rights or obligations, impose exchange
quotas or otherwise, provided in this Clause, which have an impact on the Contractual Payment,
a correction factor will be included in order to offset the economic or financial burden to
the CONTRACTOR.
 CLAUSE 14: ACCOUNTING
 14.1
    
    The CONTRACTOR must keep accounting records for this Contract, subject to the hierarchy and
priority of the following legal instruments: Ley Orgánica de Equidad Tributaria and its
regulations; this Contract; and the generally accepted accounting practices of the
international petroleum industry; and the Accounting Rules issued by PETROECUADOR and the
Dirección Nacional de Hidrocarburos
For all legal, accounting, tax and financing effects, the CONTRACTOR shall register in its
accounts as a credit in the amount of the payment, only when it is made in a cash payment.
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14.2
    
    The CONTRACTOR will use in its accounting records account codes, systems and accounting
procedures generally accepted in the oil industry. Double entry bookkeeping principles will be
used, based on earnings. The bookkeeping will be in US Dollars. The accounting procedures are
attached to this Contract as Annex VI.
 CLAUSE 15: OPERATIONS
 15.1
    
    The Parties designate the CONTRACTOR, IVANHOE ENERGY ECUADOR INC. as the party responsible to
perform all the operations, directly or indirectly, relating the the operations of
development, production and upgrading, in the Contract Area, which includes the Pungarayacu
Field, from the date this Contract is signed and from the Effective Date, as well as during
the life of this Contract.15.2
    
    CONTRACTOR will perform the stipulated work under its responsibility, in a diligent and
timely manner, and in accordance with the standards and practices accepted in the
international petroleum industry, using sound engineering principles of the international
petroleum industry, and in strict compliance with the terms of this Contract.
PETROPRODUCCION, through its delegates in the Executive Committee, will have the right to make
recommendations to CONTRACTOR regarding the method used to obtain the desired results, but it
is intended that CONTRACTOR will have exclusive and full control and management over ts
operations. CONTRACTOR will take all technical-operational decisions to comply with and
execute the operations approved in the Annual Work Program Plan, without prejudice of the
right it has to make the necessary consultations with the Vice President of PETROPRODUCCION
and with the Executive Committee.15.3
    
    Executive Committee:The Executive Committee will consist of three (3)
representatives of each Party. Each Party will also designate two alternate representatives
who will replace any of the main representatives appointed by the respective Party, in the
absence or incapacity of the main representative. The Executive Committee Coordinator will be
appointed by CONTRACTOR from one of its representatives. The Committee will meet monthly or
hold extraordinary meetings, as requested by any of its members.15.3.1
    
    Notices for Executive Committee meetings, will include the date, hour, place, agenda and
supporting documentation for the issues to be discussed. As regards regular meetings, the
representatives of the Parties will be notified three (3) business days in advance. As regards
to extraordinary meetings, notices will be given at least five (5) business days in advance.
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15.3.2
    
    The Executive Committee Secretary will be a representative of CONTRACTOR, who will keep the
Minutes with the resolutions adopted
during the meetings, which must be discussed, approved and signed by the representatives of
the Parties and certified by the Secretary. The Secretary will be responsible as the
custodian to keep all Executive Committee documents and records, which will be filed at the
facilities of CONTRACTOR, and will deliver PETROPRODUCCION certified copies of said
documentation.15.3.3
    
    Decisions of the Executive Committee will be taken by simple majority vote. However, on
technical issues, especially those involving the HTL Technology or an HTL Plant, the
CONTRACTORs position will prevail. In case the members of the Executive Committee do not
reach agreement, the matters in dispute shall be submitted for consideration to the legal
representatives of the Parties for their resolution but if the discrepancy continues, the
matter will be referred to mediation or arbitration, as established in this Contract.15.3.4
    
    Each Party may consult with the advisors it deems convenient, who may attend the Committee
meetings. A maximum of two advisors per Party and per issue may attend the committee meetings
while the issue in question is been discussed.

The advisors shall only have the right to express their views, without having the right to
vote.15.3.5
    
    Duties of the Executive Committee.  In addition to the duties listed in Annex 3, the
Executive Committee will: (a) approve Annual Work Programs and Annual Investment Budgets,
requests to drill and recondition wells and any other activities contemplated in the
Regulations of Hydrocarbon Operations. (b) review and approve modifications, changes and/or
alternatives submitted by CONTRACTOR regarding Annual Work Programs and Annual Investment
Budgets, (c) review and recommend the maximum allowable production rates for the Pungarayacu
Field before PETROPRODUCCION submits them for Ministry approval. The Executive Committee shall
decide on all requests, proposals or requirements within term of five (5) days from the date a
regular or extraordinary meeting was held to discuss the issues.
 CLAUSE 16: CONFIDENTIAL INFORMATION
 16.1
    
    All data, whether interpreted or not, including but not limited to samples, electric logs,
cores, reports or files, obtained by any Party during the life of this Contract, involving the
operations and reservoirs will be kept strictly confidential, unless the Executive Committee
approves in writing the total or partial disclosure of such data. This excludes data that any
Party will provide without written consent to: a) the executives and employees of the
Parties, provided that they keep the confidentiality established in this Contract. b)
independent consultants, mediators and arbitrators who prior to disclosure of the information
have agreed, in writing, to keep it confidential. c) government entities. including the
regulation of national or public securities, having jurisdiction on any of the Parties hereto
for disclosure of such information.
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CLAUSE 17: INSPECTIONS, CONTROLS AND AUDITS
 17.1
    
    Inspections: During the life of this Contract, PETROPRODUCCION shall have the right
to inspect the operations of the CONTRACTOR and those of the Subcontractors directly related
to this Contract, in order to ensure compliance with CONTRACTORs obligations.Notice of at least fifteen days in advance of the inspections must be given, in order to
make the necessary arrangements for the delegates or inspectors. They shall not interrupt
operations, and the inspection notices shall delimit the areas, issues and other purposes
of such inspections.17.2
    
    PETROPRODUCCION, through officials designated by the Vice- President of this Affiliate, will
have access no more than once a year to the accounting records, documents and technical
records maintained by CONTRACTOR and its Subcontractors (to the extent the Subcontracts allow
it), directly related to this Contract; and upon prior written notice, delivered to CONTRACTOR
or its Subcontractors at least fifteen days in advance, PETROPRODUCCION or the Subcontractors,
as the case may be, may also inspect the operations performed under this Contract.17.3
    
    The authorized representatives of PETROPRODUCCION shall have the right to request the
information mentioned in the preceding paragraph during office hours, provided that prior
written notice is given to CONTRACTOR at least 15 days in advance, indicating the name of such
individuals.17.4
    
    Fiscalization and Audits: The performance of operations under this Contract will be
subject to technical and financial auditing by the Dirección Nacional de Hidrocarburos,
(National Hydrocarbons Bureau), as well as to the control of the Undersecretary for
Environmental Protection of the Ministry of Environment, as regards to social and
environmental management. These tasks will be performed directly or by hiring auditors and
independent experts with proven skills, in accordance with the provisions of Articles 11 and
56 of the Hydrocarbons Law and Executive Decree 1215, published in Official Register 265 of
February 13, 2002, respectively.
 CLAUSE 18: ASSIGNMENT OF RIGHTS
 18
    
    CONTRACTOR may assign or transfer its rights and liabilities under this Contract upon prior
approval by PETROPRODUCCION. Failure to comply with this requirement, any such assignment
shall be null, and CONTRACTOR will be liable for any resulting damages or injuries .
CONTRACTOR, at its own risk and expense, may assign rights to receive amounts payable to
CONTRACTOR under this Contract, to entities that provide financing for operations under this
CONTRACT.
 CLAUSE 19: SUBCONTRACTS
 19.1
    
    CONTRACTOR may subcontract, at its own responsibility and risk, the works or services
required for the performance of this Contract. Said works and services will be performed on
behalf of CONTRACTOR, who
will remain directly liable for all obligations under this Contract and those resulting
from it, and of which CONTRACTOR is not be exonerated by reason of subcontracting.
PETROPRODUCCION will assume no liability for this concept, not even in terms of solidarity.
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19.2
    
    CONTRACTOR undertakes to select its subcontractors among suitable companies, giving
preference to Ecuadorian companies, in order to promote the services of national companies,
provided that such services are equivalent in quality, price and availability and technical
capability.19.3
    
    Selection of subcontractors, negotiation of subcontract terms and conditions and the awarding
thereof shall be the exclusive responsibility of CONTRACTOR, without prejudice to the
provisions of the National Security Act.19.4
    
    CONTRACTOR must stipulate in its subcontracts that the subcontractor be required to abide by
all the current legal provisions and those applicable under this Contract.19.5
    
    Subcontractors in Ecuador will be subject to the laws, judges, courts and administrative and
legal procedures currently in force in Ecuador, especially as to labor relations, social
security, taxation, foreign currency payments and environmental protection, where applicable.19.6
    
    The value of goods, works or services rendered by subcontractors will be in accordance with
current market conditions for such goods and services.19.7
    
    Upon request by PETROPRODUCCION, CONTRACTOR may implement works or provide additional
services in areas located in or outside the Contract Area, under the same conditions and terms
of this Contract. For items where no unit prices are available, the Parties will establish the
value for the additional goods or services. The additional works or services will be
considered as costs and expenses of CONTACTOR in the Contractual Payment.
 CLAUSE 20: GOODS, IMPORTS, DELIVERIES AND DELIVERY/RECEIPT RECORDS
 20.1
    
    Goods:Supply of materials, equipment and additional goods required for the
performance of this Contract, as established in the approved Plans, Programs and Annual
Budgets will be the responsibility of CONTRACTOR.20.2
    
    Imports:Imports of any goods required to perform this Contract will be made in
accordance with the Hydrocarbons Law, the Customs Law, its Regulations and other applicable
legal provisions. Imports made by CONTRACTOR will be on behalf of PETROPRODUCCION and IVANHOE
ENERGY ECUADOR INC, in view that CONTRACTOR will carry out complementary exploration and
exploitation activities. Therefore, the Parties hereby acknowledge the exemptions of Article
87, Hydrocarbons Law, concurrent with Article 27 of the Customs Law as regards to the goods
CONTRACTOR will import, provided that such goods are not available in Ecuador.
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20.3
    
    Any goods to be used temporarily in the performance of this Contract, which belong to
CONTRACTOR or its Subcontractors, may enter and leave Ecuador in compliance with the temporary
import regime or the commercial or industrial deposit regime contemplated in the Hydrocarbons
Law, the Customs Law and its Regulations. CONTRACTOR will make any temporary imports in the
name of PETROPRODUCCION.20.3.1
    
    The CONTRACTOR shall determine which goods the CONTRACTOR or Subcontractors will bring into
Ecuador under the Temporary Import Regime to perform this Contract and will notify
PETROPRODUCCION in advance. The CONTRACTOR or Subcontractor will be responsible for the
paperwork, which will be subject to the Customs Law provisions.20.3.2
    
    The goods brought into Ecuador by CONTRACTOR or Subcontractors under the Temporary Import
Regime will not be subject to the provisions of the last sub-clause of Article 29 of the
Hydrocarbons Law, and may be either re-exported or nationalized upon prior notice to
PETROPRODUCCION, subject to the provisions of the Customs Law, the Hydrocarbons Law, the
Internal Tax System Law and other applicable laws and regulations.20.4
    
    As set forth in sub-clause 5.2.4, and after receiving a favorable report from
PETROPRODUCCION, the Ministry of Economy and Finance, shall grant the corresponding customs
duty exemption for the imported assets required to perform this Contract, in accordance with
the provisions of Article 87 of the Hydrocarbons Law.20.5
    
    Notwithstanding the provisions of this Contract, CONTRACTOR will not transfer, encumber or
remove, during the term of this Contract, any equipment, tools, machinery, facilities, or
other movable or immovable assets acquired to perform this Contract, without the prior
approval of PETROPRODUCCION, except for the financial or business operations that the
CONTRACTOR is required to perform.20.6
    
    Upon termination of this Contract, due to expiration of its term or any other cause set forth
in this Contract, CONTRACTOR shall deliver to PETROPRODUCCION, free of charge and in good
conditions, except for normal wear and tear, the wells currently in production. In addition,
it will deliver to PETROPRODUCCION in good conditions, except for normal wear and tear, all
equipment, tools, machinery, facilities, and other movable or immovable assets acquired to
perform this Contract, which are located in the Contract Area, with the exception of the the
CONTRACTORs patented systems.20.6.1
    
    A committee made up of delegates from PETROPRODUCCION and representatives from the
CONTRACTOR shall be created 180 days prior to termination of this Contract, to deliver/receive
the assets referred to in sub-clause 20.6, of this Contract, in accordance with the
corresponding legal provisions and regulations, and to verify compliance of the contractual
obligations. The Committee will execute the delivery/receipt record, on the date this Contract
terminates. If the inspection reveals deficiencies that are duly proven following the due
process and are imputable to CONTRACTOR, such deficiencies will be recorded in the
delivery/receipt record, and reception will be delayed for the period
granted by PETROPRODUCCION, who will give CONTRACTOR all the instructions to solve the
observed deficiencies.
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20.7
    
    As regards to the goods mentioned in this Clause, and if said goods are vital to keep
operational the Contract Area, (PETROPRODUCCION) may exercise the purchase option in purchase
or leasing agreements celebrated by the CONTRACTOR during the last (5) five years prior to
termination of this Contract. The purchase option shall be duly approved by the Executive
Committee.
 CLAUSE 21: PERSONNEL
 21.1
    
    CONTRACTOR will hire the personnel necessary for the performance of this Contract, in
accordance with the applicable legal provisions, taking into account the provisions of the first
sub-clause, item a), Article 31 of the Hydrocarbons Law.21.1.1
    
    CONTRACTOR undertakes to maximize the use of available Ecuadorian personnel to perform the
activities under this Contract.21.1.2
    
    For national security reasons, CONTRACTOR and its Subcontractors shall submit to the Joint
Command of the Armed Forces, via PETROPRODUCCION, the data cards of all national and foreign
employees.21.1.3
    
    The CONTRACTOR and its Subcontractors may not employ persons objected to by the Joint
Command of the Armed Forces for national security reasons. Such objections may also occur for
the employees already hired, in which case the objected employee will be dismissed, and such
fact will not represent an omission or liability imputable to CONTRACTOR.21.1.4
    
    The CONTRACTOR and its Subcontractors will assume separately the employers liability for
their workers, as established by Law. PETROPRODUCCION will not be deemed an employer, not
even in terms of solidarity. The CONTRACTOR will not be deemed an employer for the workers of
its subcontractors, not even in terms of solidarity.21.2
    
    Training. CONTRACTOR will train its Ecuadorian employees, in accordance with the Work
Programs and Annual Investment Budgets. The CONTRACTORS foreign technical and management
staff will train the CONTRACTORS Ecuadorian employees.The staffing program will be the exclusive responsibility of CONTRACTOR in accordance with
Art. 31 of the Hydrocarbons Law.
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CLAUSE 22: SOLUTION OF DISPUTES
 In the event of controversies arising from performance of this Contract, the Parties hereto will
make every effort to settle such controversies by mutual agreement, within 30 days from occurrence.
 22.1
    
    Industrial property, technical or financial disputes not solved by mutual agreement will be
submitted to an arbitration process in the Court of Arbitration of the International Chamber
of Commerce in Paris (ICC), in accordance with the procedures established in the operating
rules of the above-mentioned arbitration center.In cases involving other issues, the Parties agree that controversies will be solved by a
Court of arbitration and mediation of the Chamber of Commerce of Quito, in accordance with
the Ecuadorian Arbitration Law and the Rules of that Center, as established in Article 50
of the Procurement Regulations for Specific Works, Goods and Services of Empresa Estatal de
Petróleos del Ecuador, PETROECUADOR and its Affiliate Companies.22.2
    
    For the events mentioned in the first and second paragraphs of sub-clause 22.1, the Parties
hereby specify that their domicile for all arbitration summons and notices will be the city of
Paris, France, or Quito, Ecuador, as the case may be; and their addresses shall be those
recorded in sub-clause 24.4.2.To appoint the arbitrators and follow the arbitral procedure before the Chambers of
Commerce of Paris or Quito, as the case may be, the Parties will observe the following:22.3
    
    The Parties may only make counterclaims in relation to the same issue.22.4
    
    The arbitration will be in accordance with legal principles, as set forth in the provisions
of Article 11 of the Attorney Generals Office Organic Law and governed by the provisions in
this Contract, the documents involving the issue submitted to arbitration, and the Ecuadorian
laws currently in force.22.5
    
    Arbitrators shall have the authority to order preventive measures, and request assistance
from public officials for its enforcement.22.6
    
    Filing, notification, summons, and arbitral pleas, preventive measures, changes in the claim
or plea, as well as the call for hearing will be in accordance with the Arbitration
Regulations of the International Chamber of Commerce headquartered in Paris.22.7
    
    If an agreement is not reached during the mediation stage, the Parties shall designate
arbitrators, in accordance with the following procedure.22.8
    
    The Court of Arbitration will consist of three arbitrators.22.9
    
    Within twenty days from receipt of the plea, or of the reply to the counterclaim, or due to
contempt of one of the Parties, if applicable, whichever occurs last , each Party shall
appoint one arbitrator from the list of qualified arbitrators provided by the International
Chamber of Commerce in Paris (ICC), notifying the Chamber, in writing, of such appointments.
If one of the Parties fails to appoint its arbitrator within said term, the other Party may
request the Director of the Arbitration Center of the International Chamber of Commerce in
Paris, to appoint an arbitrator from the list of arbitrators of the above-mentioned Chamber.
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22.10
    
    The two arbitrators will designate a third arbitrator, who will chair the Court of
Arbitration. If within ten days these two arbitrators do not reach an agreement regarding the
third arbitrator, either Party may request to the Director of the Arbitration Center of the
International Chamber of Commerce in Paris appointment of the third arbitrator. The Party
requesting the Director General to appoint the third arbitrator shall attach to its request
the names of two candidates. The other Party will be notified of the issue, and in turn will
suggest two candidates within five days from the date of notice. If the party fails to
suggest candidates within the established term, the Director of the Arbitration Center will
appoint a third arbitrator from the list submitted by the other Party, within five days from
the date the foregoing procedures were fulfilled.22.11
    
    The arbitrators appointed will accept or refuse the nomination within three days after
receiving notice. If no reply is received, it will be understood that they refused the
nomination, and a new designation will be requested from the Party that nominated the
arbitrator, in order to appoint a replacement, or, in the case of the third arbitrator, he/she
will be elected in accordance with the procedures of sub-clause 22.10. When designation has
been accepted, the arbitrators will be summoned by the Director of the ICC and will designate
the Chair of the Court of Arbitration, which will be recorded in the corresponding minutes.22.12
    
    The Designated Chair of the Court shall lead the arbitration process and the Secretary of
the Court will be appointed from the list of Secretaries of the Arbitration Center.22.13
    
    The Arbitration will be held in the city of Paris, France, and its venue will be the Paris
Chamber of Commerce without prejudice that the Court of Arbitration may move to any place it
may require to perform its work.22.14
    
    The Parties shall provide the Court of Arbitration with all information and facilities, as
well as allow them access to the work sites, books and technical and accounting records, as
may be needed to solve the controversy at issue. Likewise, the arbitrators will use procedures
that allow the Parties to submit all the evidences deemed convenient before taking a decision.22.15
    
    Arbitration procedures will not interrupt the activities nor the terms foreseen in this
Contract, and Contract performance shall continue as usual, unless such terms are
significantly affected by the matter under dispute or by the arbitration results, which will
be determined by the Court of Arbitration itself, together with the period of interruption.22.16
    
    The arbitral award will be executed in accordance with the Arbitration Rules of the
International Chamber of Commerce, headquartered in Paris. If necessary, the Court of
Arbitration will specify in its award, the measures to be taken for adequate compliance of the
arbitral award.22.17
    
    If during the arbitration process one of the arbitrators resigns or is unable to continue in
it, the Party that appointed said arbitrator will have the right to designate his/her
replacement. If the person resigning or unable to continue is the Chair of the Court of
Arbitration, the procedure set forth in sub-clause 22.10 shall apply.
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22.18
    
    All decisions taken by the Court of Arbitration will be by majority of votes.22.19
    
    The Party filing the claim will cover the arbitrator fees and operational costs involving
the issue in question, while the costs of experts consulted will be borne by the requesting
Party. Arbitrator fees will be settled in accordance with the tariffs established by the
Arbitration and Mediation Center.22.20
    
    Upon completion of the arbitration process, the Court of Arbitration will notify its
decision at an open hearing, after which the Court will provide the Parties with a copy of the
award. The award shall include detailed explanations regarding the conclusions and other
technical measures involving the arbitral award, as may be necessary.22.21
    
    Any arbitral award requiring payment in cash will be paid in Dollars of the United States of
America. In addition, on any award requiring any of the Parties to make a cash settlement, the
Party shall pay the interests established in the arbitral award, which shall be calculated
from the date of noncompliance or breach of this Contract, and if established by the arbitral
award, interests will accrue until the full amount is settled.22.22
    
    The award will not be subject to appeal, but the Parties may request further details or
clarifications within three days from receipt of notice; or if applicable, an action to
declare void may be presented. The Court will reply to such requests within ten days from
receipt of the request.22.23
    
    If the Parties reach a partial or total agreement during the arbitration process, they will
abide by the provisions of the Arbitration Rules of the ICC or the Chamber of Commerce of
Quito, as the case may be.
 CLAUSE 23: TERMINATION OF CONTRACT
 23.1
    
    This Contract will terminate in the following events:
 a)
    
    Upon full completion of the Contract term;b)
    
    By court decision declaring nullity or termination of this Contract;c)
    
    By mutual agreement of the Parties prior to performance of this Contract;d)
    
    By legally declared bankruptcy of CONTRACTOR;e)
    
    By dissolution of CONTRACTOR as a legal entity;f)
    
    By unilateral decision of PETROPRODUCCION due to one of the grounds set
forth in Article 43 of the Procurement Regulations for Specific Works, Goods and
Services of Empresa Estatal de Petróleos del Ecuador, PETROECUADOR and its Affiliate
Companies.
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23.2
    
    The grounds for unilateral termination of this Contract are:
 1)
    
    Noncompliance by CONTRACTOR;2)
    
    Legally declared bankruptcy of CONTRACTOR;
 3)
    
    Interruption of works, not caused by Force Majeure or Acts of God proven by
CONTRACTOR and accepted by PETROPRODUCCION and PETROECUADOR;4)
    
    Executing this Contract with fraud and violating the express legal
prohibitions or the Procurement Regulations for Specific Works, Goods and Services of
PETROECUADOR;5)
    
    Summons to lawsuit against the legal representative of CONTRACTOR for
criminal offenses having relationship with the performance of this Contract;6)
    
    If the penalties exceed the established minimum percentage of the Contract
amount; and7)
    
    Any other events stipulated in this Contract, according to their nature.
 23.3
    
    Procedure for unilateral termination- Unilateral termination, as
established in items 1, 3, 5, 7 will be in accordance with the provisions of Article
44 of the Regulations for Specific Works, Goods and Services of Empresa Estatal
Petróleos del Ecuador and its Affiliate Companies.
 i)
    
    Prior to the unilateral termination PETROPRODUCCION will notify CONTRACTOR,
in writing, its decision to unilaterally terminate this Contract, and will attach to
such notice the technical and financial reports involving the breach of Contract. The
above-mentioned notice shall specify the noncompliance incurred by Contractor, noting
that if such noncompliance is not remedied or justified in a term of 15 days from
receipt of notice, this Contract will be terminated.If CONTRACTOR fails to justify or remedy the noncompliance within the established
term granted, PETROPRODUCCION will terminate this Contract by resolution of its
highest authority.ii)
    
    Unilateral termination may be grounds foe collection of the performance bond
submitted under this Contract.iii)
    
    The financial and accounting settlement will establish the amounts payable by
each Party, and the issue will be recorded in the register of defaulted contractors
kept by the State Comptrollers Office.iv)
    
    Early or unilateral termination of this Contract by PETROPRODUCCION will not
be allowed if PETROPRODUCCION failed to fulfill its obligations with CONTRACTOR.
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23.4
    
    Early Termination for Technical or Economic ReasonsIf upon completion of the
Evaluation and/or Pilot Stages (Stages 1 and/or 2), the CONTRACTOR advises PETROPRODUCCION
that technically or economically feasible to fully develop the Contract Areas is not
technically or financially feasible, the Parties will make a settlement reflecting the
investments, costs and expenses incurred by CONTRACTOR in the Contract Area during the
period that CONTRACTOR operated . CONTRACTOR will not be entitled to any reimbursement,
for which the termination by mutual agreements that will be carried out in a Agreement,
said Agreement, and prior to its signature, it must obtain the decree of the Attorney
General of the Country, as stipulated in the Ley Orgánica de la Procuraduría General del
Estado (The Attorney General Office Organic Law) The total cost of the work included under
the proposal until this time will be the exclusive responsibility of the CONTRACTOR and as
such will not be included in the settlement.Termination by mutual agreement may also take place during the Exploitation Stage, subject
to the provisions of Article 42 of the Regulations for Specific Works, Goods and
Services of Empresa Estatal Petróleos del Ecuador, PETROECUADOR and its Affiliate
Companies. The above-mentioned Article states that If due to unforeseen technical or
financial conditions or Force Majeure or Acts of God, it is not convenient for the
State to fully or partially execute the contract, the parties may agree to terminate
all or some of the contractual obligations in whatever state they are at the moment,
in which event the corresponding settlement will be made.
 CLAUSE 24: APPLICABLE LAW, DOMICILE, JURISDICTION AND PROCEEDINGS
 24.1
    
    Applicable legislation: This Contract is exclusively governed by Ecuadorian laws and
it is hereby understood that the laws in force at the time of executing this Contract are
included.24.1.1
    
    The CONTRACTOR expressly declares that it is fully aware of Ecuadorian Legislation.24.2
    
    Legal Framework: The legal framework applicable to this Contract includes but is not
limited to the following instruments: One- Hydrocarbons Law, published in Official Register
No. 711, of November 15, 1978 and its amendments. Two- The Special Law of Empresa Estatal
Petróleos del Ecuador (PETROECUADOR) and its Affiliate Companies, published in Official
Register No. 283, dated September 26, 1989 including its amendments and relevant regulations.
Three- Ley Orgánica de Equidad Tributaria, published in Official Register 242, dated
November 29, 2007. Four- Law No. 122, which creates the Development Fund for the Amazon
Region Provinces, published in Official Register 676 of May 3, 1991, including its amendments
and interpretative law. Five- Arbitration and Mediation Law, published in Official Register
No. 145 of September 4, 1997, including its amendments. Six  General Insurance Law and its
amendments. Seven- Customs Law and its regulations. Eight Substitute Regulations for
Hydrocarbon Operations. Nine- Substitute Regulations to the Reglamento Ambiental para las
Operaciones Hidrocaruburíferas en el Ecuador published in Official Register No. 265, dated
February 13, 2001. Ten  Regulations for Procurement of Goods, Works and Services for
PETROECUADOR and other laws in force at the time of execution of this contract, and which are
applicable to hydrocarbon activities. In the event of controversy between the above-mentioned
instruments, the priority will be as follows: this Contract, the Laws, and the Regulations.
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24.3
    
    Domicile, Jurisdiction and Competence: The Parties waive domicile and submit
themselves to Ecuadorian law and expressively agree that all controversies will be settled as
set forth in Clause 22 of this Contract, except as established for International Arbitration.24.4
    
    Communications and Notices.-24.4.1
    
    Any documents submitted by CONTRACTOR by virtue of this Contract to PETROPRODUCCION or the
Ministry under this Contract will be subject to the provisions of Article 82 of the
Hydrocarbons Law.24.4.2
    
    All notices exchanged between the Parties will be in writing, in Spanish and will be
delivered at the following addresses:
 PETROPRODUCCION, Avenida de los Shyris No. 34-382 y Portugal, telephone number
2465758, fax: 2449000, Quito, Ecuador.
 CONTRACTOR: IVANHOE ENERGY ECUADOR INC., Calle del Establo, Lote No. 50, Santa
Lucía Alta, Edificio SITE CENTER, Torre 3, Cumbayá Ecuador, Telephone
09-978-1532.
 24.4.3
    
    The Parties may designate new addresses, by timely notifying in writing the other Party of
such change.
 CLAUSE 25: REGISTRATION AND VALUE OF CONTRACT
 25.1
    
    CONTRACTOR undertakes to register this Contract in the Hydrocarbons Registry of the National
Hydrocarbons Bureau, within 30 days from signature of this instrument.25.2
    
    Undetermined Amount of Contract: Given the nature of this Contract, its value is not
quantifiable on the date of its execution. Therefore, the public record in which it is
recorded, will establish it of undetermined amount.
 CLAUSE 26: TECHNOLOGY TRANSFER, TRAINING AND EDUCATION
 CONTRACTOR undertakes to implement a technology transfer program, based on the following:
 26.1
    
    Technology Transfer Programs:The CONTRACTOR undertakes to implement a
technology transfer program and will contribute 1% of total investments to research and
development of heavy crude oil, to be managed by the Parties.26.2
    
    Training:CONTRACTOR will give seminars/courses on technology improvements to exploit
heavy crude oils. The costs of the instructors, educational materials, facilities, travel
expenses, lodging, etc. required to implement such courses will be at the expense of
CONTRACTOR, upon
prior agreement with PETROPRODUCCION, in an amount not exceeding US$25,000 per year.
  - 47 -




---



##### 



26.3
    
    Lab Facilities.Install a research lab for upgrading and transforming heavy crude
oils, with participation of Universidad Central del Ecuador, for an amount up to $100,000.26.4
    
    Technical Students.Receive from the beginning of the Exploitation Stage, two (2)
students or graduates of technology institutes or universities, with specialization in the
Ecuadorian hydrocarbon industry, per year, to study in the United States or Canada for two
years. PETROPRODUCCION and CONTRACTOR will select the educational institutions by mutual
agreement. Transportation, lodging, food, and medical care will be borne by CONTRACTOR. The
CONTRACTOR will not be liable for the students safety, but will obtain for them an accident
insurance policy. The CONTRACTOR shall give the students a monthly financial aid in a
reasonable amount with a value of up to $100,000 per year.26.5
    
    Internships.Implement an annual internship program for two PETROPRODUCCION
professionals per year in the fields operated by CONTRACTOR, its Affiliates or Subsidiaries in
the country or abroad, during the first five years after the HTL Plant begins to operate. The
names of the candidates will be notified in advance to CONTRACTOR, and CONTRACTOR will have
the right to veto the nominees.26.6
    
    Training and Educational Support:Contribute to the training and research centers of
the Ministry of Mining and Petroleum and PETROECUADOR with an annual amount of up to $20,000
from the beginning of the Development Stage.26.7
    
    Training in Canada and USA.Coordinate training programs with Canadian and United
States universities in order that PETROECUADOR workers or students from Ecuadorian
Universities participate.26.8
    
    Heavy Crude Oil Training.Train CONTRACTORs Ecuadorian personnel in the use of new
heavy crude oil technologies.
 CLAUSE 27: CONTRACT DOCUMENTS
 27.1
    
    Qualifying Documents: This Contract includes the following qualifying documents,
which have been formally recorded: a) certified copies of the appointment and taking-office
minutes of the President of PETROECUADOR and Vice President of PETROPRODUCCION. b) Documents
issued by the Superintendencia de Compañías, and the Registry of Commercial Concerns,
certifying the legal status of CONTRACTOR, its legal representative and domiciliation in
Ecuador. c) PETROECUADORs Procurement Committee Resolution, authorizing the Executive
President of PETROECUADOR and the Vice President of PETROPRODUCCION to award and execute this
Contract.27.2
    
    Annexes.The following annexes are an integral part of the Contract herein Annex:
Annex One.- Delimitation of Block 20 and the Pungarayacu Field.Annex Two- Form of Payment Chart .- Annex Three Executive Committee Manual;Annex Four- Technical Criteria to Calculate Maximum Allowable Production Rates;Annex Five.- Detailed Investments Committed;Annex
Six.- Accounting Rules and Regulations;Annex Seven.- Parent Companys Joint
Guaranty;Annex Eight.-Regulations for the Operation of the International Chamber
of Commerce, headquartered in Paris;Annex Nine:Report of the State Attorney
General:Annex Ten- Report of the State Controller;Annex Eleven-  Clarification of the Report of the State Controller;Annex Twelve- Cronogram of
the Development Plan.
  - 48 -




---



##### 



ANEXO 1
 BLOCK 20 COORDINATES
INCLUDING PUNGARAYACU FIELD
 Coordinates for Block 20
Pungarayacu Field
Napo Department, Ecuador
 East
    
    
    North
    
    
    Longitude
    
    
    LatitudePoint
    
    UTM
    
    
    degrees
    
    
    minutes
    
    
    seconds
    
    
    direction
    
    
    degrees
    
    
    minutes
    
    
    seconds
    
    
    direction1
    
    
    180.225,856
    
    
    
    9'912.499,598
    
    
    
    77
    
    
    
    52
    
    
    
    21.65
    
    
    
    w
    
    
    
    00
    
    
    
    47
    
    
    
    26.28
    
    
    
    s2
    
    
    188.532,316
    
    
    
    9'922.418,184
    
    
    
    77
    
    
    
    47
    
    
    
    53.03
    
    
    
    w
    
    
    
    00
    
    
    
    42
    
    
    
    03.08
    
    
    
    s3
    
    
    200.225,856
    
    
    
    9'923.049,024
    
    
    
    77
    
    
    
    41
    
    
    
    35.13
    
    
    
    w
    
    
    
    00
    
    
    
    41
    
    
    
    43.50
    
    
    
    s4
    
    
    200.225.856
    
    
    
    9'870.436,882
    
    
    
    77
    
    
    
    41
    
    
    
    36.43
    
    
    
    w
    
    
    
    01
    
    
    
    10
    
    
    
    15.17
    
    
    
    s5
    
    
    180.225,856
    
    
    
    9'870.436,882
    
    
    
    77
    
    
    
    52
    
    
    
    22.82
    
    
    
    w
    
    
    
    01
    
    
    
    10
    
    
    
    14.52
    
    
    
    s6
    
    
    180.225,856
    
    
    
    9'880.436,882
    
    
    
    77
    
    
    
    52
    
    
    
    22.50
    
    
    
    w
    
    
    
    01
    
    
    
    04
    
    
    
    49.24
    
    
    
    s7
    
    
    170.225,856
    
    
    
    9'880.436,882
    
    
    
    77
    
    
    
    57
    
    
    
    45.65
    
    
    
    w
    
    
    
    01
    
    
    
    04
    
    
    
    48.92
    
    
    
    s8
    
    
    170.225,856
    
    
    
    9'890.436,882
    
    
    
    77
    
    
    
    57
    
    
    
    45.35
    
    
    
    w
    
    
    
    00
    
    
    
    59
    
    
    
    23.56
    
    
    
    s9
    
    
    180.225,856
    
    
    
    9'890.436,882
    
    
    
    77
    
    
    
    52
    
    
    
    22.21
    
    
    
    w
    
    
    
    00
    
    
    
    59
    
    
    
    23.95
    
    
    
    s
 Point
    
    LONG
    
    
    LAT1
    
    
    -77.872681
    
    
    
    -0.7906332
    
    
    -77.798064
    
    
    
    -0.7008563
    
    
    -77.693092
    
    
    
    -0.6954174
    
    
    -77.693453
    
    
    
    -1.1708815
    
    
    -77.873006
    
    
    
    -1.1707006
    
    
    -77.872917
    
    
    
    -1.0803447
    
    
    -77.962681
    
    
    
    -1.0802568
    
    
    -77.962597
    
    
    
    -0.9898789
    
    
    -77.872836
    
    
    
    -0.989986




---



##### 



ANNEX 1
 BLOQUE
    
    PUNTO
    
    
    EASTING
    
    
    NORTING
    
    
    AREA (Has)20
    
    
    P20-1
    
    
    
    180225,8
    
    
    
    9914643,8
    
    
    
    113538,585P20-2
    
    
    
    200225,8
    
    
    
    9924442,8P20-3
    
    
    
    200225,8
    
    
    
    9870436,8P20-4
    
    
    
    180225,8
    
    
    
    9870436,8P20-5
    
    
    
    180225,8
    
    
    
    9880436,8P20-6
    
    
    
    170225,8
    
    
    
    9880436,8P20-7
    
    
    
    170225,8
    
    
    
    9890436,8P20-8
    
    
    
    180225,8
    
    
    
    9890436,8




---



##### 



ANNEX 1 MAP




---



##### 



1. Production during the month of February 2007Total fiscalized production in the Contract Area (BBL)
    
    x.xxx.xxx,xx2. Contractual Payment (Payment Formula):Definitions,Reference Quarter:Calendar quarter immediately before the month on which the Effective
Date of this Contract occurred.Payment Month:The calendar month for which the Contractual Payment amount is established.Payment QuarterCalendar quarter immediately before the month on which CONTRACTOR estimates
the amount that will be invoiced as the Contractual Payment.CPP = Contractual Paymentagreed under this contract.CPPc = Actual Contractual Paymentapplicable to the Fiscalized Production
invoiced for the corresponding month.IA= Adjusting Indexes Actual escalated adjustment of the CPP that will be adjusted to
the amount of Fiscalized Production to be invoiced in that month.PPI =Producers Price Index, US Department of Labor, Bureau of Labor Statistics:PPIs = Metals & Metal Products, Steel Mill ProductsPPIm = Field Machinery & Equipment for the Oil and Gas IndustryPPIr = Petroleum RefineriesWeighting Factors:Used to calculate each adjusting index. The weighting factors have
relationship with capital expenditures. WFs = 0.45 Weighting Factor for the PPIs WFm= 0.35 Weighting Factor for the PPIm WFr = 0.20 Weighting Factor for the PPIr




---



##### 



Delta PPIis the change in PPIs calculated as the ratio of the current average PPIs for
the weighted Quarter prior to the month of the corresponding Fiscalized Production (Payment
Quarter), divided by the average PPIs for the Quarter of the Contracts Effective Date
(Reference Quarter. The PPI indexes for any Quarter will be the weighted arithmetic
average of the PPIs for the three months in that quarter. A Quarter means a calendar
quarter, i.e., January, February & March (first Quarter), April, May and June (second
Quarter), etc.Where,IA = [(WFs) x (Delta PPIs)] + [(WFm) x (Delta
PPIm)] + [(WFr) x (Delta PPIr)]Then,CPPc= (CPP) X (IA)Where,CPP in US $/fiscalized barrel =
    
    
    37,003. Contractual Payment if Contractual Payment is higher than the fiscalized oil price:Payment month =
    
    February 2007Effective date of Contract =
    
    January 2006Reference Quarter =
    
    First Quarter 2006Payment Quarter =
    
    First Quarter 2007CPP = US $  per barrel of fiscalized oil
    
    
    37,00PPIs and CPIs average for the Reference Quarter(January, February and March 2006):From the US Bureau of Labor Statistics Web site.Average PPIsrq = [(xxx.x + xxx.x + xxx.x) / 3]
= xxx.xAverage PPImrq = [(xxx.x + xxx.x + xxx.x) / 3]
= xxx.xAverage PPIrrq = [(xxx.x + xxx.x + xxx.x) / 3]
= xxx.x




---



##### 



PPI average for the Payment Quarter(January, February and March 2007):From the US Bureau of Labor Statistics Web site.Average PPIspq = [(xxx.x + xxx.x + xxx.x) / 3]
= xxx.xAverage PPImpq = [(xxx.x + xxx.x + xxx.x) / 3]
= xxx.xAverage PPIrpq = [(xxx.x + xxx.x + xxx.x) / 3]
= xxx.xDelta PPIs and CPI,Delta PPIs = [(PPIspq) / (PPIsrq)] =[xxx.x / xxx.x] = x.xxDelta PPIm = [(PPImpq ) / (PPImrq)] =[xxx.x / xxx.x] = x.xxDelta PPIr = [(PPIrpq) / (PPIrrq)] =[xxx.x / xxx.x] = x.xxThen,IA = [(0.45) x (x.xxPPIs)] + [(0.35) x (x.xxPPIm)] + [(0.20) x (x.xxPPIr)] = x.xxIA (index
with two decimal digits = Adjusting Index)CPPc = (37.00) x (x.xxIA) = (Adjusting Index) =Contractual Payment (US $) = US.$.xx.xx/oil barrel multiplied by xx.xxx.xxx,xx oil barrels
= (including the IA)Less,
    
    37,00*x,xx(IA)Costs, Expenses and Planned Investments =Total amount to be paid  basis of liabilities =
    
    xx.xxx.xxx,xxAnd,4.5% for the Amazon Region Provinces Development Fund (Fondo de Desarrollo de las
Provincias de la Amazonía) =
    
    (x.xxx.xxx,xx)TOTAL AMOUNT PAYABLE TO CONTRACTOR =
    
    x.xxx.xxx,xx(x.xxx.xxx,xx)x,xxx.xxx,xx




---



##### 



4. Income sharing if Contractual Payment is equal or lower than the fiscalized oil price:Gross income from sale of fiscalized oil = number of fiscalized oil barrels for the sale
price per barrelNumber of Fiscalized Barrels in February 2007 (BBL)=
    
    x.xxx.xxx,xxWeighted price for the Payment Month (US $/BBL)=
    
    xx.xxGross Income to be Shared (US $)=
    
    xx.xxx.xxx,xxIncome will be divided as follows:Petroproducción = (20% of income) =
    
    x.xxx.xxx,xxContractor = (80% of income) =
    
    x.xxx.xxx,xxFor Contractor, Less,Costs, Expenses and Planned Investments =
    
    (x.xxx.xxx,xx)Total to be paid  basis of liabilities =
    
    x,xxx.xxx,xxAnd,4.5% for the Amazon Region Provinces Development Fund (Fondo de Desarrollo de las
Provincias de la Amazonía) =
    
    (x.xxx.xxx,xx)TOTAL AMOUNT PAYABLE TO CONTRACTOR =
    
    x.xxx.xxx,xx




---



##### 



ANNEX 3
 JOINT WORK PROCEDURE DURING PROJECT EXECUTION
BETWEEN PETROPRODUCCION AND THE CONTRACTOR
      REGARDING THE OPERATIONS COMMITTEE:




---



##### 








---



##### 








---



##### 



ANNEX 5
 Provisional First Five Years of Capital Expenditures
Pungarayacu Field
2008
 Year 1A  US$ 3 million
    
    Approvals PeriodYear 1B  US$ 14 million
    
    Appraisal Period (1st Year) Subject to the successful outcome
of the Approvals PeriodYear 2  US$87 million
    
    Appraisal Period (2nd Year) Subject to
the successful outcome of the previous periodsYear 3  US$273 million
    
    Pilot Period (1st Year) Subject to the
successful outcome of the previous periodYear 4  US$462 million
    
    Pilot Period (2nd Year) Subject to the
successful outcome of the previous periodYear 5  US 22 million
    
    Pilot Period (3rd Year) Subject to the
successful outcome of the previous period
  1.
    
    The five-year capital expenditure schedule will be subject to updating every year
depending on the technical results of the previous periods. The technical results and
analysis for updating the subsequent years of capital expenditures will coincide with the
proposed work plan and budget for the subsequent years as stated in the Contract as per
clause 7.1.1 and 7.1.3.2.
    
    Year 2 includes costs for Front End Engineering and Design (FEED) for both the field
facilities and the first HTLTM plant. The execution of this work will be
subject to technical results from the previous periods.




---



##### 



UNESCALATED CAPITAL COSTS
 Approval
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    FEED
    
    
    WellPeriod
    
    
    2-D
    
    
    3-D
    
    
    Appraisal
    
    
    Steam
    
    
    &
    
    
    Capex &
    
    
    Pipeline
    
    
    HTL
    
    
    Facility
    
    
    TotalCosts
    
    
    Seismic
    
    
    Seismic
    
    
    Wells
    
    
    Pilots
    
    
    Engineering
    
    
    Steam Pilots
    
    
    Capex
    
    
    Capex
    
    
    Capex
    
    
    Capex
    
    
    Sub-TotalsPERIOD
    
    Year
    
    
    M$
    
    
    M$
    
    
    M$
    
    
    M$
    
    
    M$
    
    
    M$
    
    
    M$
    
    
    M$
    
    
    M$
    
    
    M$
    
    
    M$
    
    
    M$APPRAISAL
    
    
    1
    
    
    
    5,100
    
    
    
    10,000
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    8,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,1002
    
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,0003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,000
    
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    42,000
    
    
    
    110,100PILOT
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,000
    
    
    
    33,550
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,5505
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,350
    
    
    
    
    
    
    
    138,105
    
    
    
    54,230
    
    
    
    243,6856
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,000
    
    
    
    
    
    
    
    271,755
    
    
    
    106,500
    
    
    
    439,255
    
    
    
    756,490EXPLOITATION (SECOND HTL PLANT)
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122,152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122,1528
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,7509
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,750
    
    
    
    
    
    
    
    222,750
    
    
    
    87,295
    
    
    
    398,79510
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,700
    
    
    
    
    
    
    
    222,750
    
    
    
    87,295
    
    
    
    395,745
    
    
    
    1,033,443EXPLOITATION (THIRD HTL PLANT)
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,05012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145,70013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91,500
    
    
    
    
    
    
    
    222,750
    
    
    
    87,295
    
    
    
    401,54514
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,300
    
    
    
    
    
    
    
    222,750
    
    
    
    87,295
    
    
    
    389,345
    
    
    
    1,077,64115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,35016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,20017
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,20018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,20019
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,20020
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,20021
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,45022
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,45023
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,35024
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,40025
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,30026
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,35027
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,35028
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,35029
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,25030
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,200
    
    
    
    1,268,8005,100
    
    
    
    10,000
    
    
    
    15,000
    
    
    
    10,000
    
    
    
    
    
    
    
    40,000
    
    
    
    2,325,602
    
    
    
    30,000
    
    
    
    1,300,860
    
    
    
    509,912
    
    
    
    4,246,474
    
    
    
    4,246,474




---



##### 



ANNEX 6
 APPLICABLE NORMS OF ACCOUNTING FOR SPECIFIC SERVICES
CONTRACT IN CRUDE OIL PRODUCTION FOR THE AREA OF THE
CONTRACT
    
 A. GEOSCIENCE
  A.1. SERVICE TARIFFS
 A.2. PERSONNEL EXPENSES
 A. 3. TECHNICAL INSURANCE AND GUARANTEES
 A.4. MAIN OFFICE SERVICES
 A.5. QUITO OFFICE SUPPORT




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##### 



A.6. OTHER UNFORESEEN EXPENSES
 B. DEVELOPMENT AND PRODUCTION INVESTMENTS
  B.1. DEVELOPMENT WELL DRILLING
 B.1.1. Access Roads
 B.1.2
 B.1.3
 B.1.4.
 B.1.5.
 B.2. SURVEY STUDIES, INSTALLATIONS AND EQUIPMENT
 B.2.1.
 B.2.2
 B.2.3




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##### 



B.2.4
 B.2.5
 B.2.6
 B.2.7.
 
 B.3 OTHER INVESTMENTS IN PROPERTY, FACILITIES & EQUIPMENT
 B.3.1
 B.3.2
 B.4. TRANSPORTATION
 B.5. ROAD, EQUIPMENT AND FIELD MAINTENANCE
 B.6. BASE CAMP SERVICES




---



##### 



B.7. TECHNICAL INSURANCES AND GUARANTEES
 B.8. MAIN OFFICE SERVICES
 B.9. QUITO OFFICE SUPPORT
 B.10. SECONDARY RECOVERY
 B.11. FACILITY AND EQUIPMENT RESTITUTION
 B.12. OTHER UNFORESEEN EXPENSES
 C. DEPRECIATIONS AND AMORTIZATIONS
 C.1. DEPRECIATION
 Servicio de Rentas Internas-
 C.2. AMORTIZATION




---



##### 



D. COSTS AND EXPENSES
  D.1. ADMINISTRATIVE COSTS
 D.1.1
 D.1.2
 D.1.3
 D.1.4
 D.1.5
 D.1.6
 D.1.7.
 D.2. OPERATIONAL COSTS.
 D.2.1
 D.2.2




---



##### 



D.2.3
 D.2.4.
 D.2.5.
 D.3
 D.3.1
 D.3.2
 D.3.3
 D.3.4
 D.3.5.
 D.3.6. OTHER EXPENSES




---



##### 



E. GENERAL MANDATORY REGULATIONS
   E.1. OTHER TAXES LEVIES OR PAYMENTS




---



##### 



ANNEX 7
 HEAD OFFICE WARRANTY
 SPECIFIC SERVICES CONTRACT FOR THE DEVELOPMENT AND PRODUCTION OF CRUDE
OIL IN THE AREA OF THE CONTRACT, EMPRESA ESTATAL PETROLEOS DEL ECUADOR,
PETROECUADOR AND ITS AFFILIATE, LA EMPRESA ESTATAL DE EXPLORACION Y PRODUCCION DE PETROLEOS DEL
ECUADOR, PETROPRODUCCION.
  MAIN OFFICE




---



##### 



ANNEX 8
   Article 1
 International Court of Arbitration
       Article 2
 Definitions
    inter alia




---



##### 



Article 3
 Written Notifications or Communications; Time Limits
      Article 4
 Request for Arbitration
   inter alia




---



##### 



Article 5
 Answer to the Request; Counterclaims
 inter alia




---



##### 



Article 6
 Effect of the Arbitration Agreement
 ipso facto
 prima facie




---



##### 



Article 7
 General Provisions
       Article 8
 Number of Arbitrators




---



##### 



Article 9
 Appointment and Confirmation of the Arbitrators




---



##### 



Article 10
 Multiple Parties
   Article 11
 Challenge of Arbitrators




---



##### 



Article 12
 Replacement of Arbitrators
  de jure de facto
     Article 13
 Transmission of the File to the Arbitral Tribunal
  Article 14
 Place of the Arbitration




---



##### 



Article 15
 Rules Governing the Proceedings
   Article 16
 Language of the Arbitration
  Article 17
 Applicable Rules of Law
   amiable compositeur ex aequo et
bono
 Article 18
 Terms of Reference; Procedural Timetable




---



##### 



amiable compositeur ex aequo et bono
    Article 19
 New Claims
  Article 20
 Establishing the Facts of the Case




---



##### 



Article 21
 Hearings
     Article 22
 Closing of the Proceedings




---



##### 



Article 23
 Conservatory and Interim Measures
    Article 24
 Time Limit for the Award
   Article 25
 Making of the Award




---



##### 



Article 26
 Award by Consent
  Article 27
 Scrutiny of the Award by the Court
  Article 28
 Notification, Deposit and Enforceability of the Award




---



##### 



Article 29
 Correction and Interpretation of the Award
    mutatis
mutandis
  Article 30
 Advance to Cover the Costs of the Arbitration




---



##### 



Article 31
 Decision as to the Costs of the Arbitration
     Article 32
 Modified Time Limits
   Article 33
 Waiver




---



##### 



Article 34
 Exclusion of Liability
  Article 35
 General Rule
   Article 1
 Advance on Costs




---



##### 



Article 2
 Costs and Fees




---



##### 



Article 3
 Appointments of Arbitrators




---



##### 



Article 4
 Scales of Administrative Expenses and Arbitrators Fees
    Sum in dispute (in US Dollars)
    
    Administrative expenses (*)up to
    
    50 000
    
    
    
    
    
    $
    2 500from
    
    50 001
    
    to
    
    100 000
    
    
    3.50
    %from
    
    100 001
    
    to
    
    500 000
    
    
    1.70
    %from
    
    500 001
    
    to
    
    1 000 000
    
    
    1.15
    %from
    
    1 000 001
    
    to
    
    2 000 000
    
    
    0.60
    %from
    
    2 000 001
    
    to
    
    5 000 000
    
    
    0.20
    %from
    
    5 000 001
    
    to
    
    10 000 000
    
    
    0.10
    %from
    
    10 000 001
    
    to
    
    50 000 000
    
    
    0.06
    %from
    
    50 000 001
    
    to
    
    80 000 000
    
    
    0.06
    %over
    
    80 000 000
    
    
    
    
    
    $
    75 800
 (*)
    
    For illustrative purposes only, the table on the following page indicates the resulting
administrative expenses in US$ when the proper calculations have been made.  Sum in dispute (in US Dollars)
    
    Fees (**)minimum
    
    
    maximumup to
    
    50 000
    
    
    
    
    
    $
    2500
    
    
    
    17.00
    %from
    
    50 001
    
    to
    
    100 000
    
    
    2.00
    %
    
    
    11.00
    %from
    
    100 001
    
    to
    
    500 000
    
    
    1.00
    %
    
    
    5.50
    %from
    
    500 001
    
    to
    
    1 000 000
    
    
    0.75
    %
    
    
    3.50
    %from
    
    1 000 001
    
    to
    
    2 000 000
    
    
    0.50
    %
    
    
    2.50
    %from
    
    2 000 001
    
    to
    
    5 000 000
    
    
    0.25
    %
    
    
    1.00
    %from
    
    5 000 001
    
    to
    
    10 000 000
    
    
    0.10
    %
    
    
    0.55
    %from
    
    10 000 001
    
    to
    
    50 000 000
    
    
    0.05
    %
    
    
    0.17
    %from
    
    50 000 001
    
    to
    
    80 000 000
    
    
    0.03
    %
    
    
    0.12
    %from
    
    80 000 000
    
    to
    
    100 000 000
    
    
    0.02
    %
    
    
    0.10
    %over
    
    100 000 000
    
    
    
    
    
    
    0.01
    %
    
    
    0.05
    %
 (**)
    
    For illustrative purposes only, the table on the following page indicates the resulting
range of fees when the proper calculations have been made.




---



##### 



DISPUTE A. ADMINISTRATIVESUM IN DISPUTE (in US Dollars)
    
    EXPENSES (in US Dollars) (*)up to
    
    50 000
    
    
    
    
    
    2 500from
    
    50 001
    
    to
    
    100 000
    
    2 500 + 3.50% of amt. over 50 000from
    
    100 001
    
    to
    
    500 000
    
    4 250 + 1.70% of amt. over 100 000from
    
    500 001
    
    to
    
    1 000 000
    
    11 050 + 1.15% of amt. over 500 000from
    
    1 000 001
    
    to
    
    2 000 000
    
    16 800 + 0.60% of amt. over 1 000 000from
    
    2 000 001
    
    to
    
    5 000 000
    
    22 800 + 0.20% of amt. over 2 000 000from
    
    5 000 001
    
    to
    
    10 000 000
    
    28 800 + 0.10% of amt. over 5 000 000from
    
    10 000 001
    
    to
    
    50 000 000
    
    33 800 + 0.06% of amt. over 10 000 000from
    
    50 000 001
    
    to
    
    80 000 000
    
    57 800 + 0.06% of amt. over 50 000 000from
    
    80 000 000
    
    to
    
    100 000 000
    
    75 800over
    
    100 000 000
    
    
    
    
    
    75 800
 (*)
    
    See above




---



##### 



BACKGROUND




---



##### 



1
    1.
 
 1
    
    Contracting Regulations for Specific Works, Goods and
Services of Empresa Estatal Petróleos del Ecuador, PETROECUADOR and its Affiliate Companies.




---



##### 



Undetermined Amount of
Contract:
 ANALYSIS:




---



##### 



UNDETERMINED AMOUNT




---



##### 



Department:
    
    PUBLIC CONTRACTING BUREAUSubject:
    
    Specific services to develop, produce and improve crude oil in Block 20.
  
   BACKGROUND
 1.
    
    On June 5, 2007, the Central University of Ecuador signed a Cooperation Agreement with
IVANHOE ENERGY ECUADOR INC., creating a strategic partnership with said company to obtain oil
projects and, subsequently, upon allocation to the University of the oil blocks (Oil Project
Areas), evaluate, develop and exploit such areas. It was agreed that after the signing of the
agreement, the Parties would negotiate a detailed agreement (Partnership Contract) reflecting
the results of the discussions and consultations, including the creation of a Partnership
Committee.




---



##### 



2.
    
    The Vice-President of PETROPRODUCCION, taking into account:: a)The Cooperation Agreement
between the Central University of Ecuador and IVANHOE ENERGY ECUADOR INC. b)IVANHOE ENERGY
ECUADOR INCs letter dated October 29, 2007, to the Constitutional President of Ecuador,
stating the companys interest to participate in the exploration and development of the
Pungarayacu Oil field, using its patented Heavy-to-Light (HTL) technology to process heavy
oil. c)The formal proposal for the integral economic development of the Pungarayacu Field,
was submitted to PETROECUADOR on December 6, 2007, for analysis by the Ecuadorian Government
and to reach a possible agreement. d)The visit made by a commission appointed by the
Vice-President of PETROPRODUCCION to company facilities in Bakersfield, California, USA, to
study and verify the technical conditions of the Heavy-to-Light (HTL) system proposed by
IVANHOE ENERGY ECUADOR INC. e)PETROECUADORs Executive President indicated that the visit
made to company facilities by PETROPRODUCCIONs committee deemed valuable using the
experience, technology and financial capacity of IVANHOE ENERGY ECUADOR INC., and that the
company would be willing to make immediately an initial investment of US$2,000,000.00 dollars
to begin the development process of the Pungarayacu Field, in accordance with
PETROPRODUCCIONs requirements. f)The company submitted documentation proving that it is the
owner of the patented Heavy-to-Light (HTL) technology, and therefore, it is the unique
supplier and owner of such technology, in accordance with the provisions of letter b), Article
23 of the Contracting Regulations for Specific Works, Goods and Services of Empresa Estatal
Petróleos del Ecuador, PETROECUADOR and its affiliate companies. RESOLVED: 1)qualifying
IVANHOE ENERGY ECUADOR INC. as the unique supplier of the Heavy-to-Light (HTL) technology to
improve heavy oils. 2)Order that the resolution be registered, numbered and notified to all
areas of the Affiliate Company; and, 3)Order the Chief of the Contracts Coordination Unit to
implement the resolution, as established in Resolution No 2008235 dated June 11, 2008.
 3.
    
    The Technical-Financial Final Minutes for Development and Production of the Pungarayacu
Field, Block 20 were signed on July 8, 2008 by the Technical-Financial Negotiations
Committee, appointed by the Vice-President of PETROPRODUCCION, and IVANHOE ENERGY ECUADOR INC
representatives, which included the financial terms and conditions. Such document will be
included in the contract.




---



##### 



4.
    
    PETROPRODUCCIONs Contracting Committee authorized execution of the contract with IVANHOE
ENERGY ECUADOR INC, at its meeting of July 29, 2008, through Resolution 024-CC-PPR-2008-07-29
dated July 29, 2008 as follows: ...1.PETROECUADORS EXECUTIVE
PRESIDENT AND PETROPRODUCCIONS VICE-PRESIDENT VOTED IN FAVOR OF AWARDING AND AUTHORIZING
EXECUTION OF THE CONTRACT WITH IVANHOE ENERGY ECUADOR INC. THE CONTRACT IS TO PROVIDE
SPECIFIC SERVICES FOR DEVELOPMENT AND PRODUCTION OF CRUDE OIL IN THE PUNGARAYACU FIELD,
BLOCK 20, BY CONTRIBUTING WITH TECHNOLOGY, CAPITAL AND MACHINERY OR EQUIPMENT AND OTHER
GOODS AND SERVICES NEEDED TO COMPLY WITH ITS OBLIGATIONS. THE COMPANY WILL USE ITS PATENTED
HTL (HEAVY-TO-LIGHT) TECHNOLOGY TO IMPROVE CRUDE OIL QUALITY, CONFIRM RESERVES AND CARRY
OUT COMPLEMENTARY EXPLORATION ACTIVITIES IN THE PRE-CRETACEOUS OF THE PUNGARAYACU FIELD, AT
ITS OWN RISK AND EXPENSE AND DURING A TERM OF 30 YEARS. MR. JORGE LUIS GONZALEZ, DELEGATE
OF PETROECUADORS BOARD OF DIRECTORS REFRAINED FROM VOTING AND EXPLAINED THAT SINCE HE WAS
NEW IN PETROPRODUCCIONS CONTRACTING COMMITTEE HE WAS NOT FULLY KNOWLEDGABLE OF THE
BACKGROUND OR TECHNICAL/FINANCIAL ANALYSIS THAT SERVED AS BASIS TO AWARD THE CONTRACT. THE
CONTRACT WAS AWARDED WITH THE FOLLOWING RECOMMENDATIONS: THE CONTRACT MUST INCLUDE AS
QUALIFYING DOCUMENT THE MINUTES SIGNED ON JUNE 10, 2008. CLAUSE TWO OF THE CONTRACT,
BACKGROUND, MUST STATE ALL THE ANNEXES, NEGOTIATION MINUTES AND DOCUMENTS THAT SERVED AS
BASIS DURING THE NEGOTIATIONS PROCESS. 2.AUTHORIZE THE EXECUTIVE PRESIDENT OF
PETROECUADOR AND THE EXECUTIVE VICE-PRESIDENT OF PETROPRODUCCION TO EXECUTE THE CONTRACT
WITH IVANHOE ENERGY ECUADOR INC..., UPON ISSUANCE OF THE REPORTS BY THE STATE COMPTROLLERS
OFFICE AND THE NATIONS ATTORNEY GENERAL OFFICE.  THIS RESOLUTION IS FOR IMMEDIATE
IMPLEMENTATION.
 5.
    
    Article 2, letters b) and c) of the Substitute Regulations for Delegation of Signatures in
official documents of the State Comptrollers Office, issued through Agreement No 016-CG,
published in Supplement of Official Register No 395 of August 4, 2008, establish that the
Deputy Comptroller General will sign all reports involving public sector draft contracts, in
the amounts set forth in the Call for Bid and the Competitive Bidding Process, as established
by Law.
 6.
    
    Transitory Provision 5 of the General Regulations for the Public Contracting National System,
issued through Supplement to Official Register 399 of August 8, 2008, establishes that
Contracting processes which begun before the above-referenced Law entered in force, involving
entities that were not subject to the Public Contracting Law, will abide by the regulations
that were applicable to them at the time the process begun. The top authority of the entity
involved will be fully responsible for it.




---



##### 



LEGAL BASIS
  HYDROCARBONS LAW
 Art. 2  (Replaced by Law 101, O.R. 306, 13-08-1982; paragraph 1 replaced, paragraphs 2 and 3 added
by Article 1 of Law 44, O.R. 326, 29-11-1993; par. 3 amended and par. 4 added by Law 49, O.R. 346,
28-12-1993; par. 6 amended by Art. 24 of Law 45, O.R. 283, 26-09-1989).
    a)
    
    The highest amount to be invested in the area,b)
    
    Minimum production assured, orc)
    
    Production costs.




---



##### 



Art. 17  Replaced by Art 5, Law 101, O.R. 306, 13-08-1982) price and payments terms
 Note  Reference in this article to paragraph two, Art. 2 actually applies to paragraph 5, Art. 2
of the Law.
 Art. ...  (Added by Art. 6, Law 44, O.R. 326, 29-11-1993)
 Art. 23  (Replaced by Art. 9, Law 44, O.R. 326, 29-11-1993)
 In all contracts, the crude oil exploitation period may last up to twenty (20) years,
extendable by PETROECUADOR in accordance with the development plan for the area, if it is
convenient to the States interests




---



##### 



Art. 81  Hydrocarbon exploration and exploitation contracts shall be subject to review by the Joint Command of the Armed Forces, in order that
it issues its opinion, as required by the National Security Law
 Art. 93  Replaced by Art. 24, Law 45, O.R. 283, 26-09-1989
 Contracting Regulations for specific works, goods and services of Empresa Estatal Petróleos del
Ecuador, PETROECUADOR and its Affiliate Companies.
 Art. 7  Entities and officers responsible of awarding and executing contracts in PETROECUADOR and
its Affiliate Companies 
 a)
    
    The Contracting Committee, comprised by one delegate from PETROECUADORs Board of
Directors, PETROECUADORs Executive President and the Vice-President of the corresponding
Affiliate Company will award contracts that exceed 1% of PETROECUADORs consolidated
budget. In contracts executed by PETROECUADOR and depending on the contract purpose, the
committee will also include the Manager of the Area that will be using such goods or services;
....
 Art. 19  Execution 
 Art. 23  Direct Contracting 
 b)
    
    Contracting of goods or services unique in the marketplace and with a unique supplier or
which involve the use of patents or trademarks, as well as purchases made abroad with the
manufacturer and the maintenance and repair at the manufacturer authorized workshops,
qualified in advance by the Executive President of PETROECUADOR or the vice-presidents of the
Affiliate Companies.




---



##### 



Codification of the Contracting Manual for specific works, goods and services of Empresa Estatal
Petróleos del Ecuador, PETROECUADOR, and its Affiliate Companies.
 Art. 7  Officials Responsible to Award and Sign Contracts
 1.
    
    The Contracting Committee of PETROECUADOR comprises one delegate from PETROECUADORs Board of
Directors, PETROECUADORs Executive President and the manager of the area that will use the
goods or services, depending on the contract purpose. This committee awards contracts not
exceeding 1% of PETROECUADORs consolidated annual budget and authorizes the Executive
President to execute the contract.
 2.
    
    The Contracting Committee of the Affiliate Companies comprises one delegate from
PETROECUADORs Board of Directors, PETROECUADORs Executive President and the Vice-President
of the corresponding Affiliate Company. This committee awards contracts not exceeding 1% of
PETROECUADORs consolidated annual budget and authorizes the Vice-President of the
corresponding Affiliate Company to execute the contract.
 3.
    
    PETROECUADORs Executive President awards and celebrates contracts with amounts ranging
between 0,05 and 1% of PETROECUADORs consolidated annual budget, as well as corporate
contracts of any amount and which involve activities of PETROECUADOR with one or several of
its Affiliate Companies.
  4.
    
    The vice-presidents of the corresponding Affiliate Companies and the managers or top
authorities of the actual units created or to be created on a temporary basis, award and
celebrate contracts with values ranging between 0,05% and 1% of PETROECUADORs consolidated
annual budget.
 5.
    
    The executives that follow in rank to the President of PETROECUADOR and the Vice-Presidents
of the Affiliate Companies and the managers or top authorities of the actual units created or
to be created on a temporary basis, award and celebrate contracts if the contract amount
reaches 0,0075% and is lower than 0,05% of PETROECUADORs consolidated annual budget.
 6.
    
    The officials following in rank the level established in the preceding paragraph, as dictated
by the structure of each Affiliate or Temporary Unit, will award and sign contracts abiding by
the amounts and procedures set forth in Annex 1, which is an integral part of this manual,. The contract
amount may not exceed 0,0075% of PETROECUADORs consolidated annual budget (cc Art 7 r).




---



##### 



As regards to contracts with undetermined amounts, the proposed contract and contract award
will be under the responsibility of the Executive President of PETROECUADOR, the Vice-Presidents of
the Affiliate Companies or the Managers/top authorities of the actual units created or to be
created on a temporary basis, as applicable
 Art. 33  Situations that justify a direct Contracting
     a)
    
    The user area shall justify the need from a technical and financial point of view.
 b)
    
    If a foreign company will provide professional services, such company must be domiciled in
Ecuador and/or designate a representative, as applicable.
 c)
    
    Foreign individuals residing in the country shall comply with all the legal requirements
applicable in Ecuador to provide professional services.




---



##### 



ANALYSIS
 1.
    
    The Board of Directors Secretary, at interim, through memo No 113-SDD-2008 of June 13, 2008,
notified the Vice-President of PETROPRODUCCION regarding Resolution 44-DIR-2008, adopted
during the meeting held on Monday, May 19, 2008, ratified on June 10, 2008. Such resolution
states as follows: ...In view that the specific services contract with IVANHOE had to be
signed by March 2008 to develop and produce heavy oil in the Pungarayacu Field, using IVANHOEs state-of-the-art patented technology; and, taking into account that
contracts shall include a price per barrel produced, which include costs, expenses,
investments and reasonable profits, the Board resolved to ask IVANHOE to submit its offer
within 30 days. In the event that IVANHOE does not submit its offer as required,
PETROPRODUCCION will prepare the terms and conditions for a competitive bidding process.
  2.
    
    As regards to the legal basis used in the various documents attached to the paperwork, it is
observed that PETROECUADOR and its Affiliate PETROPRODUCCION did not observe:
 
    
    The provisions of Article 17, Hydrocarbons Law, which establishes that the
price and payment terms will be agreed by the parties. The contract is for an
undetermined amount.
 
    
    The provisions of paragraph 2, Article 23 of the Hydrocarbons Law, contract
term. The contract establishes a term of 30 years, while the legal provision
establishes a maximum term of 20 years, extendable by mutual agreement.
 
    
    The provisions of Article 81 of the above-referenced Law, which establishes
that hydrocarbon exploration and exploitation contracts shall be reviewed by the Joint
Command of the Armed Forces, in order that it issues its opinion, as required by the
National Security Law.
 3.
    
    As established in letter a), Article 7 of the Contracting Regulations for Specific Works,
Goods and Services of Empresa Estatal Petróleos del Ecuador, PETROECUADOR and its Affiliate
Companies, participation of the various entities will depend on the contract price.




---



##### 



4.
    
    Clause 12, Solution of Disputes, sub-clause 22.1, first paragraph, involving arbitration,
does not observe the provisions of Article 14, Political Constitution, which establishes that
contracts entered in Ecuador by Government entities with foreign individuals or companies,
are not subject to foreign jurisdiction.
 OPINION
 the price exceeds the base amount established for a competitive
bidding process,
   Upon reviewing the paperwork submitted, the State Comptrollers Office abstains from issuing the
report required by Law regarding the draft contract sent for review.




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ANNEX 11
   Department:
    
    PUBLIC CONTRACTING BUREAUSubject:
    
    Services to develop, produce and improve crude oil.




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ANNEX 12




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NOBOA, PEÑA, LARREA & TORRES, LOGO
  Mr. Oscar Blake
Legal Counsel
IVANHOE ENERGY (USA) INC
Av. Suite 400
Bakersfield, California
U.S.A.
 Dear Sir:
 The Specific Services Contract
for Development, Production and Upgrading of Crude Oil in Block 20 (Pungarayacu Oil Fiel) in the
Ecuadorian Amazon Region
 a.
    
    That the English translation to THE CONTRACT is accurate in form and content and do notviolate any Ecuadorean Law.