petro8k100307ex10-2.htm


    
      

      

    

    


    COMMERCIAL
      AGREEMENT FOR THE TALORA BLOCK BETWEEN PETROLEUM EQUIPTMENT INTERNATIONAL PEI
      AND DAVID CRAVEN

    
 

    This
      Talora Commercial Agreement, effective October 24, 2006 (“Effective
      Date”), is executed between PETROLEUM EQUIPMENT INTERNATIONAL
      LTDA (hereinafter “PEI”), a Colombian limited company,
      duty incorporated under the laws of the Republic of Colombia, and DAVID
      CRAVEN passport number 705138540, (hereinafter THE
      INVESTOR), PEI and THE INVESTOR are
      hereinafter referred to individually as “Party” or collectively as
“Parties”.

    


    WHEREAS,
      the Parties entered into a Confidentiality Agreement dated November 16, 2006
      whereby PEI provided geological, geophysical and engineering
      data to THE INVESTOR concerning its oil and gas exploration and
      exploitation Contract Talora with Agencia Nacional de Hidrocarburos
      (ANH).

    


    WHEREAS,
      THE INVESTOR made a formal offer to PEI for
      their participation in the exploration and development of prospects in the
      Talora Contract and has formally expressed an interest in entering the
      project.

    


    WHEREAS,
      based on discussions that have taken place between the PEI
      representative and THE INVESTOR the Parties agree that it would
      be mutually beneficial to enter into an agreement for the purpose of exploring
      and developing prospects in the Talora Contract; and

    


    WHEREAS,
      the purpose of this Talora Commercial Agreement is to set forth the
      framework for entering into a binding Joint Operating
      Agreement for the participation of THE INVESTOR
      in the acquisition of the TWENTY PERCENT (20%) which consist of
      43,841 hectares of the participation corresponding to PEI on
      the TALORA BLOCK.

    


     

     

     

     

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    WHEREAS,
      THE INVESTOR’S commit to incorporate a company and branch in
      Colombia, that will hold the TWENTY PERCENT (20%) of the
      participation in the Talora Block in the future.

    


    WHEREAS,
      PEI commit to begin the drilling of the first exploration well
      the 14 of December of 2006.  PEI have already initiate the activities
      required to begin the drilling of the well, such us civil works and the
      environmental licenses.

    


    NOW
      THEREFORE, the Parties agree as follows:

    


    AGREEMENT
      TO PARTICIPATE:

    


    I.            
       AREA OF INTEREST

    


    The
      area
      of interest covered by this Talora Commercial Agreement is the area
      covered by the Talora Exploration and Exploitation Contract entered into by
      and
      between ANH and ARGOSY dated September 16,
      2004 and located in the Tolima and Cundinamarca Provinces of the middle
      Magdalena River valley.

    


    II.       
          INTENTION OF THE PARTIES

    


    THE
      INVESTOR proposes to contribute with the sum of US$2,000,000.00 to earn
TWENTY PERCENT (20%) of the participation of
PEI in the TALORA BLOCK.

    THE
      INVESTOR will commit to pay in advance $US 1,500,000 30 days after the
      signing of the Agreement.

    


    This
      TWENTY PERCENT(20%) participation covers all
      the works and expenses, until the drilling, and production testing are done
      in
      the Laura 1 well, which coordinates are: X: 934.519 and Y:
      993.287.  The Laura 1 well is going to be drill to a depth sufficient
      to test the cretaceous formation, such depth estimated to be approximately
      3,000
      vertical feet.

    


     

     

     

    
 

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    For
      all
      the expenses that are cause after the drilling procedure PEI
      will send a cash call to THE INVESTOR for the TWENTY
      PERCENT (20%) of their participation.

    To
      execute this operation, PEI agrees to prepare and
–AFE- and send it with a letter the THE
      INVESTOR requesting for the contribution of the TWENTY PERCENT
      (20%) in order to initiate further activities.

    


    III.           SCHEDULE
      FOR JOINT OPERATING AGREEMENT

    


    The
      Commercial Agreement will define the rights and obligations of the Parties
      and
      include a Joint Operating Agreement (JOA) to establish rules for future
      operation of the TALORA BLOCK.

    


    PEI
      agrees to prepare and present the Joint Operating Agreement to
THE INVESTOR within ten (10) working days from the Effective
      Date of this Talora Commercial Agreement.

    Upon
      receipt of the draft agreement, THE INVESTOR will have five (5)
      working days to make comments and execute the Joint Operating
      Agreement.  In conjunction with the execution of the Commercial
      Agreement, the Parties shall execute a binding JOA to govern the operation
      of
      the Contract.

    


    IV.           EXCHANGE
      OF INFORMATION

    


    PEI
      agrees to provide all reasonably and necessary information for the Area of
      Interest including:  reprocessed seismic data, new seismic data and
      existent well information.  THE INVESTOR shall
      provide to PEI with current financial statements and
      appropriate bank and financial institution references customary in the course
      of
      business.

    


     

     

     

    
 

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    V.          
        FORMAL AGREEMENT

    


    The
      parties are under the obligation to continue with the
TaloraCommercial Agreement.  Therefore, they agree
      to enter into a JOA once PEI and THE INVESTOR
      formally approve and execute the Talora Commercial
      Agreement.

    


    VI.           OPERATORSHIP
      AND ASSIGNMENT

    


    PEI
      will
      be the operator during the development of the contract with ANH.

    


    VII.          CHOICE
      OF LAW

    


    The
      Parties agree that the laws of the Republic of Colombia shall govern the
      interpretation and execution of this Talora Commercial Agreement.

    


    VIII.        MISCELLANEOUS

    


    
      	
              A.

            	
              The
                Parties heretofore agree that this Talora Commercial Agreement
                and Exhibits hereto, supersede any other negotiations, understandings
                and
                agreements between the parties regarding the TALORA
                BLOCK.

            


    

    


    
      	
              B.

            	
              This
                Talora Commercial Agreement shall not create any partnership,
                corporation, company or entity and the Parties shall maintain their
                independent entity status.

            


    

    


     

     

     

    
 

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    
      	
              C.

            	
              This
                Talora Commercial Agreement shall not be modified, changed or
                altered unless such modification is expressed in writing and signed
                by an
                authorized representative of each
                Party.

            


    

    


    
      	
              D.

            	
              This
                Talora Commercial Agreement encompasses the complete agreement
                between the Parties and replaces all previous oral or written
                considerations, agreements, communications, and representations concerning
                the matters herein addressed.

            


    

    


    
      	
              E.

            	
              The
                parties agrees to follow the binding arbitration and procedures set
                forth
                in the Joint Operating Agreement for any disputes arising out of
                or in any
                way related to this Talora Commercial
                Agreement.

            


    

    


    
      	
              F.

            	
              PEI
                recognizes that PETROLATINA is in the process or establishing its
                Colombian Branch office and as a result of such process may need
                to change
                its name or assign its rights hereunder to another firm or any wholly
                owned subsidiary at any time.  PETROLATINA shall timely advise
                of such change of name and/or assignment and PEI agrees to accept
                the new
                name or the assignee.

            


    

    


    
      	
              G.

            	
              Any
                notice required or permitted to be given under this Talora Commercial
                Agreement shall be delivered by fax or hand delivered by messenger to
                the addresses set forth below:

            


    

    


     

     

     

     

    
 

    


    PETROLEUM
      EQUIPTMENT INTERNATIONAL - PEI -

     

     

     

     

    Calle
      114# 9 - 01. Torre A, Teleport.

    Oficina
      711