Document:

Exhibit 10.24

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.

 

 

 

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 HTLTM Plant to
process heavy oil, will commence at the beginning of the Pilot Stage and will end when the HTLTM
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 HTLTM 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 HTLTM 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 RTPTM 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 HTLTM Plant begins
production, and thereafter, for operational reasons, the Fiscalizable Production may
consist of only Available Crude Oil or pure RTPTM Product or a blend of both.

	 
	3.3.5	 	Fiscalized Production is the Available Crude Oil and/or RTPTM 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 Company is 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 Parties PETROECUADOR, 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 Majeure or acts 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 (HTLTM) Technology means the patented RTPTM process
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. The HTLTM Plant is
a technical construction that uses the HTLTM Technology to process Available
Crude Oil and create produces the RTPTM Product. The RTPTM Product is the
product that results from processing the Available Crude Oil in an HTLTM 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	 	Domestic Market: 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 RTPTM 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 Oil is the Crude Oil produced after deducting
quantities used in operations or unavoidably lost.

	 
	3.3.34	 	RTPTM Product. Is the product that results from upgrading Available Crude
Oil in an HTLTM Plant, with a higher API grade, reduced levels of viscosity, metals and
sulphur, by using the HTLTM 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 HTLTM 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 Unit or Barrel: 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 Quarter is 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 HTLTM 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 HTLTM 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 HTLTM
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 Guarantees

	 
	5.6.1	 	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	 	LIABILITIES

	 
	5.7.1	 	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 occurrence

	 
	5.7.4.1	 	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 HTLTM 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 HTLTM
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) (the Contractual
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

PPIs = Metals & Metal Products, Steel Mill Products

PPIm = Field Machinery & Equipment for the Oil and Gas Industry

PPIr = Petroleum Refineries

WFs = Weighting Factor for the PPIs

WFm= Weighting Factor for the PPIm

WFr = Weighting Factor for the PPIr

Where: WFs = 0.45; WFM = 0.35; WFR = 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 = [(WFs) x (Delta PPIs)] + [(WFm) x (Delta PPIm)]
+ [(WFr) x (Delta PPIr)]

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

WFM = Weighted Factor for the PPIM

Where: WFs = 0.50; WFM = 0.50

Application of the payment formula to determine the Contractual Payment for the Month of Payment:

IA = [(WFs) x ( Delta PPIs) + [(WFM) x ( Delta PPIM)]

 

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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 Equilibrium PETROPRODUCCION 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
Contract

	 
	9.3.2	 	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 activities

	 
	10.2.13	 	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 HTLTM Technology or an HTLTM 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; and

	 
	 	7)	 	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 Reasons If 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.

 

- 46 -

 

	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 HTLTM 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	 	 	Latitude	 
	Point	 	UTM	 	 	degrees	 	 	minutes	 	 	seconds	 	 	direction	 	 	degrees	 	 	minutes	 	 	seconds	 	 	direction	 
	1
	 	 	180.225,856	 	 	 	9'912.499,598	 	 	 	77	 	 	 	52	 	 	 	21.65	 	 	 	w	 	 	 	00	 	 	 	47	 	 	 	26.28	 	 	 	s	 
	2
	 	 	188.532,316	 	 	 	9'922.418,184	 	 	 	77	 	 	 	47	 	 	 	53.03	 	 	 	w	 	 	 	00	 	 	 	42	 	 	 	03.08	 	 	 	s	 
	3
	 	 	200.225,856	 	 	 	9'923.049,024	 	 	 	77	 	 	 	41	 	 	 	35.13	 	 	 	w	 	 	 	00	 	 	 	41	 	 	 	43.50	 	 	 	s	 
	4
	 	 	200.225.856	 	 	 	9'870.436,882	 	 	 	77	 	 	 	41	 	 	 	36.43	 	 	 	w	 	 	 	01	 	 	 	10	 	 	 	15.17	 	 	 	s	 
	5
	 	 	180.225,856	 	 	 	9'870.436,882	 	 	 	77	 	 	 	52	 	 	 	22.82	 	 	 	w	 	 	 	01	 	 	 	10	 	 	 	14.52	 	 	 	s	 
	6
	 	 	180.225,856	 	 	 	9'880.436,882	 	 	 	77	 	 	 	52	 	 	 	22.50	 	 	 	w	 	 	 	01	 	 	 	04	 	 	 	49.24	 	 	 	s	 
	7
	 	 	170.225,856	 	 	 	9'880.436,882	 	 	 	77	 	 	 	57	 	 	 	45.65	 	 	 	w	 	 	 	01	 	 	 	04	 	 	 	48.92	 	 	 	s	 
	8
	 	 	170.225,856	 	 	 	9'890.436,882	 	 	 	77	 	 	 	57	 	 	 	45.35	 	 	 	w	 	 	 	00	 	 	 	59	 	 	 	23.56	 	 	 	s	 
	9
	 	 	180.225,856	 	 	 	9'890.436,882	 	 	 	77	 	 	 	52	 	 	 	22.21	 	 	 	w	 	 	 	00	 	 	 	59	 	 	 	23.95	 	 	 	s	 

	 	 	 	 	 	 	 	 	 
	Point	 	LONG	 	 	LAT	 
	1
	 	 	-77.872681	 	 	 	-0.790633	 
	2
	 	 	-77.798064	 	 	 	-0.700856	 
	3
	 	 	-77.693092	 	 	 	-0.695417	 
	4
	 	 	-77.693453	 	 	 	-1.170881	 
	5
	 	 	-77.873006	 	 	 	-1.170700	 
	6
	 	 	-77.872917	 	 	 	-1.080344	 
	7
	 	 	-77.962681	 	 	 	-1.080256	 
	8
	 	 	-77.962597	 	 	 	-0.989878	 
	9
	 	 	-77.872836	 	 	 	-0.989986	 

 

 

 

ANNEX 1

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

 

 

 

ANNEX 1 MAP

(Map of Coordinates for Block 20)

 

 

 

ANNEX 2

PAYMENT FORMULA

CALCULATION TABLE

PUNGARAYACU OIL FIELD

(February 2007 – Example of Contractual Payment)

	 	 	 	 	 
	1. Production during the month of February 2007
	 	 	 	 
	Total fiscalized production in the Contract Area (BBL)
	 	x.xxx.xxx,xx
	 
	 	 	 
	 
	 	 	 	 
	2. 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 Quarter Calendar quarter immediately before the month on which CONTRACTOR estimates
the amount that will be invoiced as the Contractual Payment.
	 	 	 	 
	 
	 	 	 	 
	CPP = Contractual Payment agreed under this contract.
	 	 	 	 
	 
	 	 	 	 
	CPPc = Actual Contractual Payment applicable 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 Products
	 	 	 	 
	PPIm = Field Machinery & Equipment for the Oil and Gas Industry
	 	 	 	 
	PPIr = Petroleum Refineries
	 	 	 	 
	 
	 	 	 	 
	Weighting 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 PPI 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 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 =
	 	 	37,00	 
	 
	 	 	 	 
	3. Contractual Payment if Contractual Payment is higher than the fiscalized oil price:
	 	 	 	 
	 
	 	 	 	 
	Payment month =
	 	February 2007
	 
	 	 	 	 
	Effective date of Contract =
	 	January 2006
	 
	 	 	 	 
	Reference Quarter =
	 	First Quarter 2006
	 
	 	 	 	 
	Payment Quarter =
	 	First Quarter 2007
	 
	 	 	 	 
	CPP = US $  per barrel of fiscalized oil
	 	 	37,00	 
	 
	 	 	 	 
	PPIs 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.x
	 	 	 	 
	Average PPImrq = [(xxx.x + xxx.x + xxx.x) / 3]
= xxx.x
	 	 	 	 
	Average 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.x
	 	 	 	 
	Average PPImpq = [(xxx.x + xxx.x + xxx.x) / 3]
= xxx.x
	 	 	 	 
	Average PPIrpq = [(xxx.x + xxx.x + xxx.x) / 3]
= xxx.x
	 	 	 	 
	 
	 	 	 	 
	Delta PPIs and CPI,
	 	 	 	 
	 
	 	 	 	 
	Delta PPIs = [(PPIspq) / (PPIsrq)] =[xxx.x / xxx.x] = x.xx
	 	 	 	 
	Delta PPIm = [(PPImpq ) / (PPImrq)] =[xxx.x / xxx.x] = x.xx
	 	 	 	 
	Delta PPIr = [(PPIrpq) / (PPIrrq)] =[xxx.x / xxx.x] = x.xx
	 	 	 	 
	 
	 	 	 	 
	Then,
	 	 	 	 
	 
	 	 	 	 
	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,xx
	 
	 	 	 	 
	And,
	 	 	 	 
	 
	 	 	 	 
	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 barrel
	 	 	 	 
	 
	 	 	 	 
	Number of Fiscalized Barrels in February 2007 (BBL)=
	 	x.xxx.xxx,xx
	 
	 	 	 	 
	Weighted price for the Payment Month (US $/BBL)=
	 	xx.xx
	 
	 	 	 	 
	Gross Income to be Shared (US $)=
	 	xx.xxx.xxx,xx
	 
	 	 	 	 
	Income will be divided as follows:
	 	 	 	 
	 
	 	 	 	 
	Petroproducción = (20% of income) =
	 	x.xxx.xxx,xx
	Contractor = (80% of income) =
	 	x.xxx.xxx,xx
	 
	 	 	 	 
	For Contractor, Less,
	 
	 
	 	 	 	 
	Costs, Expenses and Planned Investments =
	 	(x.xxx.xxx,xx)
	 
	 	 
	 
	 	 	 	 
	Total to be paid – basis of liabilities =
	 	x,xxx.xxx,xx
	 
	 	 	 	 
	And,
	 	 	 	 
	 
	 	 	 	 
	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

This is a Specific Services Rendering Contract for the production of Heavy Crude Oil in the Area of
the Contract. The contractor commits itself, at its own risk and responsibility, with
PETROPRODUCCION, to confirm reserves and complementary exploration, while providing the necessary
technology, capital, and equipment or machinery for the fulfillment of the obligations established
in this contract.

Meaning the organizational structure should allow for widespread technological transference on site
and a capacity building training program for field personnel and office staff.

The joint administration of the project will be regulated under the following policy:

All of the staff from Petroproducción, involved in the project, will be subject to the established
Norms and Regulations. The Contractors personnel will be subject to the norms established by it,
according to pertaining clauses of the present written document.

The following are the definitions and functions of the Operations Committee, which shall be in
accordance with the contract subscribed between the parties.

REGARDING THE OPERATIONS COMMITTEE:

The Operations Committee will be composed by three (3) members from PETROPRODUCCION and three (3)
members from the Contractors side. These shall be independently nominated and their functions shall
last three years, and may be re elected. The members of the Committee shall come from the following
areas: Operations, Exploration and Development, Finance and Legal.

The functions of the Operations Committee are:

a) Asses and recommend the Plans, Activity Programs and Annual Investment Budgets and drilling
proposals, well reconditioning and any other activity contemplated in the Hydrocarbon Operations
Regulation.

b) To learn of and act on modifications, changes and/or alternatives presented by the CONTRACTOR
regarding Plans, Activity Programs and Annual Investment Budgets.

c) To learn of and recommend the Maximum Allowable Production Rates for Pungarayacu Field before
PETROPRODUCCION submits these to the approval of the corresponding Ministry.

 

 

 

d) Asses general project advancement, control the fulfillment of contracts, and establish the
general policies for the fulfillment of project objectives, resolve controversies and solve
operational, financial, administrative, legal and contractual problems, which may have not been
resolved by lower instances.

e) Specific technical, economic, administrative or legal issues regarding projects, may be advised
by specialists on the matter and may recommend appropriate measures.

In general, it shall be responsible for directing, administrating, appraising, and adopting all
measures necessary for the correct operation and execution of the project.

 

 

 

ANNEX 4

Technical Criteria to Calculate Maximum Permitted Production Rates

To be provided by the National Hydrocarbon Directorate

 

 

 

ANNEX 5

Provisional First Five Years of Capital Expenditures

Pungarayacu Field

2008

	 	 	 
	Year 1A – US$ 3 million

	 	Approvals Period

	 
	 	 
	Year 1B – US$ 14 million

	 	Appraisal Period (1st Year) Subject to the successful outcome
of the Approvals Period
	 
	 	 
	Year 2 – US$87 million

	 	Appraisal Period (2nd Year) Subject to
the successful outcome of the previous periods
	 
	 	 
	Year 3 – US$273 million

	 	Pilot Period (1st Year) Subject to the
successful outcome of the previous period
	 
	 	 
	Year 4 – US$462 million

	 	Pilot Period (2nd Year) Subject to the
successful outcome of the previous period
	 
	 	 
	Year 5 – US 22 million

	 	Pilot Period (3rd Year) Subject to the
successful outcome of the previous period

NOTES:

	 	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.

These are approximate investments. They will only be finalized when they are approved by the
Executive Committee

 

 

 

ANEXO 5

MODELO ECONOMICO

UNESCALATED CAPITAL COSTS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Approval	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	FEED	 	 	Well	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Period	 	 	2-D	 	 	3-D	 	 	Appraisal	 	 	Steam	 	 	&	 	 	Capex &	 	 	Pipeline	 	 	HTL	 	 	Facility	 	 	Total	 	 	 	 
	 	 	 	 	 	 	Costs	 	 	Seismic	 	 	Seismic	 	 	Wells	 	 	Pilots	 	 	Engineering	 	 	Steam Pilots	 	 	Capex	 	 	Capex	 	 	Capex	 	 	Capex	 	 	Sub-Totals	 
	PERIOD	 	Year	 	 	M$	 	 	M$	 	 	M$	 	 	M$	 	 	M$	 	 	M$	 	 	M$	 	 	M$	 	 	M$	 	 	M$	 	 	M$	 	 	M$	 
	 
	APPRAISAL
	 	 	1	 	 	 	5,100	 	 	 	10,000	 	 	 	—	 	 	 	5,000	 	 	 	—	 	 	 	—	 	 	 	8,000	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	28,100	 	 	 	 	 
	 
	 	 	2	 	 	 	—	 	 	 	—	 	 	 	15,000	 	 	 	5,000	 	 	 	—	 	 	 	 	 	 	 	20,000	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	40,000	 	 	 	 	 
	 
	 	 	3	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	 	 	 	 	12,000	 	 	 	30,000	 	 	 	 	 	 	 	 	 	 	 	42,000	 	 	 	110,100	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	PILOT
	 	 	4	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	40,000	 	 	 	33,550	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	73,550	 	 	 	 	 
	 
	 	 	5	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	51,350	 	 	 	—	 	 	 	138,105	 	 	 	54,230	 	 	 	243,685	 	 	 	 	 
	 
	 	 	6	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	61,000	 	 	 	—	 	 	 	271,755	 	 	 	106,500	 	 	 	439,255	 	 	 	756,490	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	EXPLOITATION (SECOND HTL PLANT)	 	 	7	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	122,152	 	 	 	—	 	 	 	 	 	 	 	 	 	 	 	122,152	 	 	 	 	 
	 
	 	 	8	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	116,750	 	 	 	—	 	 	 	 	 	 	 	 	 	 	 	116,750	 	 	 	 	 
	 
	 	 	9	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	88,750	 	 	 	—	 	 	 	222,750	 	 	 	87,295	 	 	 	398,795	 	 	 	 	 
	 
	 	 	10	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	85,700	 	 	 	—	 	 	 	222,750	 	 	 	87,295	 	 	 	395,745	 	 	 	1,033,443	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	EXPLOITATION (THIRD HTL PLANT)	 	 	11	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	141,050	 	 	 	—	 	 	 	 	 	 	 	 	 	 	 	141,050	 	 	 	 	 
	 
	 	 	12	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	145,700	 	 	 	—	 	 	 	 	 	 	 	 	 	 	 	145,700	 	 	 	 	 
	 
	 	 	13	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	91,500	 	 	 	—	 	 	 	222,750	 	 	 	87,295	 	 	 	401,545	 	 	 	 	 
	 
	 	 	14	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	79,300	 	 	 	—	 	 	 	222,750	 	 	 	87,295	 	 	 	389,345	 	 	 	1,077,641	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	15	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	82,350	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	82,350	 	 	 	 	 
	 
	 	 	16	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	73,200	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	73,200	 	 	 	 	 
	 
	 	 	17	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	73,200	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	73,200	 	 	 	 	 
	 
	 	 	18	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	73,200	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	73,200	 	 	 	 	 
	 
	 	 	19	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	73,200	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	73,200	 	 	 	 	 
	 
	 	 	20	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	73,200	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	73,200	 	 	 	 	 
	 
	 	 	21	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	88,450	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	88,450	 	 	 	 	 
	 
	 	 	22	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	88,450	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	88,450	 	 	 	 	 
	 
	 	 	23	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	82,350	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	82,350	 	 	 	 	 
	 
	 	 	24	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	85,400	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	85,400	 	 	 	 	 
	 
	 	 	25	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	79,300	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	79,300	 	 	 	 	 
	 
	 	 	26	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	82,350	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	82,350	 	 	 	 	 
	 
	 	 	27	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	82,350	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	82,350	 	 	 	 	 
	 
	 	 	28	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	82,350	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	82,350	 	 	 	 	 
	 
	 	 	29	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	76,250	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	76,250	 	 	 	 	 
	 
	 	 	30	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	73,200	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	73,200	 	 	 	1,268,800	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	5,100	 	 	 	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

These Norms of Accounting are prepared in conformity with Clause 9 of this contract, which are
developed according to the generally applied accounting principles for the hydrocarbon industry
internationally.

The CONTRACTOR will, in addition, to able to receive all incentives and tributary benefits with
economic – financial effect established by the tributary laws and its regulations, present or
future, including the reduction of the income tax due to the reinvestment of the profits.

The expenses made by the CONTRACTOR shall be grouped under the following categories:

Geosciences

Development and Production Investments

Depreciations and amortizations

Costs and Expenses

Warehouse Stocks

A. GEOSCIENCE

Includes the following entries:

A.1. SERVICE TARIFFS for topography, aerophotogrametry, geology, seismics, magnetometry,
gravimetry, processing, reprocessing and any other geological and geophysical research method
including technical services, materials and personnel that correspond to this entry.

A.2. PERSONNEL EXPENSES for direction, supervision and support lent to the Geosciences unit,
including services, supplies, and general expenses related to this entry.

A. 3. TECHNICAL INSURANCE AND GUARANTEES.- Insurance Policy costs, contracted to cover
installations, equipment, vehicles and technical personnel.

A.4. MAIN OFFICE SERVICES.- Direct or indirect services for the Head Office and related companies,
corresponding to Geoscience activities, including specific service rendering and general support.

A.5. QUITO OFFICE SUPPORT.- Technical and administrative expenses related to the functional
operation of the CONTRACTOR’S main office in Ecuador, applicable to geosciences activities,
including among others, staff expenses, office rent, utilities
(telephone, electric, water, postal services) supplies, professional wages, hired services,
general insurances and other specific and general expenses corresponding to this entry.

 

 

 

A.6. OTHER UNFORESEEN EXPENSES.- These correspond to other unforeseen expenses not mentioned in the
previous entries, including expenses for environmental impact assessments, indemnifications for
communities, etc.

B. DEVELOPMENT AND PRODUCTION INVESTMENTS

Includes the following entries:

B.1. DEVELOPMENT WELL DRILLING.- Which include the following subentries:

B.1.1. Access Roads; expenses corresponding to road construction, including technical services,
staff and materials inherent to this subentry.

B.1.2. Construction site preparation entails all expenses related to well pad site preparation
including technical services, staff and materials inherent to this subentry.

B.1.3. Well drilling, which include among others, mobilization, assembly, rental, disassembly and
relocation of drilling equipment, pipelines, and all other related materials and services, as well
as staffing expenses inherent to this subentry.

B.1.4. Well Completion.- Which correspond among others: completion equipment rental costs, services
and associated materials, (Down Hole Equipment), bottom hole sensor gages and registries, well
tests, laboratory services, etc.: including, technical services, pipes, materials and staff
inherent to this subentry.

B.1.5. Dry wells.- the cost derived from dry wells drilled will not be capitalized and the
corresponding value will be directly assigned to production expenses during that time period.

B.2. SURVEY STUDIES, INSTALLATIONS AND EQUIPMENT.- Which will include the following subentries:

B.2.1. Land survey studies for civil works execution, which correspond to the technical studies
necessary for the execution of Development and Production activities.

B.2.2. Well surface equipment corresponds to surface equipment installation (artificial lift
equipment), including technical services, staff and materials inherent to this subentry.

B.2.3. Christmas Tree Assembly equipment.- These expenses correspond to flow line assembly
installation, manifold, scraper unit, and flow meters, including casing and pipelines, associated
materials, technical services and staff inherent to this subentry.

 

 

 

B.2.4. Separation Equipment.- corresponding to atmospheric separators, cleanout tanks, transference
pumps, including materials, technical services and staff inherent to this subentry.

B.2.5. Storage (Tank Farm), which corresponds to crude storage and other consumable fuel tanks,
including materials, technical services and staff inherent to this subentry.

B.2.6. Production Facilities, which correspond to the acquisition of office equipment and furniture
necessary for the fulfillment of production and development activities. This subentry shall include
all assets with a cost over five hundred dollars and a life cycle of over one year.

B.2.7. Crude Upgrading Cost.

B.2.7.1. Engineering, Design, Construction & Installation of Upgrade Facility.

B.2.7.2. Facility Operation & Maintenance.

B.2.7.3. Facility Parts Importation.

B.2.7.4. Administrative, Management & Labor Costs.

 B.2.7.5. Spare Parts & Repairs.

B.3. OTHER INVESTMENTS IN PROPERTY, FACILITIES & EQUIPMENT.- which will include the following
subentries:

B.3.1. Furniture and equipment.- include the acquisition of furniture and office equipment
necessary for the fulfillment of Development and Production activities. This subentry shall include
all assets with a cost over five hundred dollars and a life cycle of over one year.

B.3.2. Vehicles.- includes the acquisition of necessary vehicles to be used during Development
Investment.

B.4. TRANSPORTATION.- Air, land and river transportation costs for personnel, materials and
equipment necessary for the execution of the Development and Production activities.

B.5. ROAD, EQUIPMENT AND FIELD MAINTENANCE.- These would include the maintenance costs for roads,
facilities, equipment and fields, (except Base Camp) during the execution of Development and
Production Investments, including technical services, staff, materials and spare parts
corresponding to this entry.

B.6. BASE CAMP SERVICES.- Base Camp services and maintenance costs, including technical services,
medical services, communication, staffing and materials necessary for its operation during the
execution of Developing and Production Investments.

 

 

 

B.7. TECHNICAL INSURANCES AND GUARANTEES.- Insurance Policy costs, contracted to cover
installations, equipment, vehicles and technical personnel, during
Development and Production Investments, as well as the contractual warrantee costs corresponding to
that investment period.

B.8. MAIN OFFICE SERVICES.- Direct and indirect services for the Main Office and related companies,
corresponding to Development and Production Investment activities, including specific services and
general support.

B.9. QUITO OFFICE SUPPORT.- Technical and administrative expenses related to the functional
operation of the CONTRACTOR’S main office in Ecuador, applicable to Development and Production
Investment activities, including among others, staff expenses, office rent, utilities (telephone,
electric, water, postal services) supplies, professional wages, hired services, general insurances
and other specific and general expenses corresponding to this entry.

B.10. SECONDARY RECOVERY.- Secondary recovery installation costs, including technical services,
materials and staff corresponding to this entry.

B.11. FACILITY AND EQUIPMENT RESTITUTION.- Restitution costs that increase the value of facilities
and equipment.

B.12. OTHER UNFORESEEN EXPENSES.- These correspond to other unforeseen expenses not mentioned in
the previous entries, necessary during the execution of Development and Production Investment
including expenses for environmental impact assessments, indemnifications for communities, etc.

C. DEPRECIATIONS AND AMORTIZATIONS

C.1. DEPRECIATION

The Support and Facilities equipment depreciation property of the CONTRACTOR will be calculated
according to -Servicio de Rentas Internas- Internal Revenue Service standards, except for the last
fiscal year of the contract when the total value of the CONTRACTOR’S assets must be amortized
before they are reverted to the State.

C.2. AMORTIZATION

The CONTRACTOR’S amortization of the investment will take place in five years, taxable in equal
percentages, considering that they are development investments, whereas for the maintenance
investments its amortization will be by production units, that is up to twenty years, or for the
life of the contrac6. As it is stated in the investment flows where it was determined the sole
payment for the CONTRACTOR by Petroproduccion.

 

 

 

D. COSTS AND EXPENSES

All expenses made by the Contractor beginning the effective date shall be considered as Costs and
Expenses.

D.1. ADMINISTRATIVE COSTS.- Which will include the following subentries:

D.1.1. General Expenses.- Correspond to the general functional expenses of the Contractor’s Main
Office, directly related to this contract, including among those, office rent, utilities
(telephone, electricity, water, postal services) supplies, general contracted services, general
insurance, food services and other specific and general expenses inherent to this entry.

D.1.2. Costs related to Administrative Staff and their benefits.

D.1.3. Contributions to the Superintendence of Companies and other government and professional
organisms.

D.1.4. Administrative insurance expenses corresponding to personnel and administrative assets
insurance premium.

D.1.5. Administrative personnel transportation expenses, including foreign personnel and shipping
and moving costs.

D.1.6. Main Office Administrative Services, correspond to direct and indirect services for the
Main Office and related companies in Costs and Expenses administrative activities, including
rendering of specific services and general support.

D.1.7. Professional Fees that correspond to expenses for professional service fees hired by the
Contractor.

D.2. OPERATIONAL COSTS.- Which will include the following subentries:

D.2.1. Operational staff costs that correspond to technical personnel expenses linked to reservoir
maintenance and production operations, including field superintendent, production manager,
reservoir engineers, operators, mechanical, electrical, instrumentation, and materials maintenance
personnel, and technical equipment for personal use, personnel and material transportation, etc,
inherent to this entry, except senior staff and support personnel from the Operator’s main office,
mentioned in D.3.1.

D.2.2. Consumable materials and transportation, corresponding to materials and supply expenses used
in crude oil exploitation, its transportation to the operations area including, chemicals, fuels,
lubricants and spare parts inherent to this subentry.

 

 

 

D.2.3. Production technical services correspond to contracted technical service costs inherent to
reservoir exploitation, including wire lines, chemical treatments, stimulation, coiled tubing unit
and other surface and corrosion treatments.

D.2.4. Maintenance, that corresponds to access road, facility, equipment, vehicle, and camp
maintenance, including technical services tools, materials, staff and transportation inherent to
this subentry.

D.2.5. Indemnities, costs corresponding to third party indemnity payments.

D.3. OTHER EXPENSES.- Which will include other non specified expenses from prior entries, necessary
for the activities and which will be classified in the following subentries:

D.3.1. Personnel costs, corresponding to Senior Staff and Technical Support personnel from the
Contractor’s Main Office’s expenses, including obligations with the state.

D.3.2. Technical insurance, related to exploitation activities, corresponding to reservoir,
facilities, equipment and non-administrative staff technical insurance premiums.

D.3.3. Training Program, corresponds to Contractor’s staff training expenses.

D.3.4. Environmental protection, corresponds to environmental assessment studies and other tasks
related to environmental protection, including technical services, materials and supplies for
personnel expenses for those involved in the activities of this subentry.

D.3.5. Main Office technical services, correspond to direct and indirect services for the main
office and related companies in cost and expense technical activities, including the rendering of
specific services and general support.

D.3.6. OTHER EXPENSES.- Which will include other non specified expenses from prior entries, such as
financial expenses necessary for contract development activities.

 

 

 

E. GENERAL MANDATORY REGULATIONS

The CONTRACTOR, to carry out its sales to the public sector and in Petroproduccion’s name with 0%
tariff in the Value Added Tax (IVA), without it being able to be compensated in all its
acquisitions, purchases or withholdings that take place, has the right that this un-used tax
credit, it be returned or reimbursed through the respective credit note, check, or other form of
payment, by the internal revenue service (SRI) or compensate with other obligations with the state.

The CONTRACTOR will be able to import under Petroproduccion’s name the goods that it may need for
the fulfillment of the contract, in conformity with art. 109 of the Reformed Law of Tributary
Equity in Ecuador, since said goods will be the property of the state.

E.1. OTHER TAXES LEVIES OR PAYMENTS

All the unforeseen factors that the CONTRACTOR may face in order to meet the object of this
contract, and that are not specified, since they have not been considered in the economic part of
the contract, in which a return to the investment was assured using the internal rate of return,
with its only fee or payment, the CONTRACTOR will be able to request the reintegration or
compensation to cover said taxes, levies, payments or unforeseen withdrawals to Petroproduccion.

 

 

 

ANNEX 7

HEAD OFFICE WARRANTY

IVANHOE ENERGY LATIN AMERICA INC., (Ivanhoe) a duly constituted and established company, under the
laws of the Province of British Columbia, Canada, whose Main Office is located at Suite 654 — 999
Canada Place, Vancouver, British Columbia, V6C3E1, Canada, a company which from hereon forth shall
be simply denominated as MAIN OFFICE, through this written document confirms to warrant due and
integral compliance of all the obligations established in the Contract and shall provide all the
technical, economic assistance and support necessary to its subsidiary IVANHOE ENERGY ECUADOR Inc,
Ecuador Branch Office, a duly constituted and established branch office, under the laws of the
Republic of Ecuador, as evidenced by Public Dead celebrated before the Notary Public, Dr. Remigio
Poveda Vargas, Chief Officer of the Notary Number Seventeen, on February 18, 2008 and inscribed in
the Mercantile Registry on March 11, 2008 and in the National Hydrocarbon Directorate on March 14,
2008, so that said branch office may fulfill all the investment obligations it acquires as a
result of subscribing the SPECIFIC SERVICES CONTRACT FOR THE DEVELOPMENT AND PRODUCTION OF CRUDE
OIL IN THE AREA OF THE CONTRACT, to be celebrated with, EMPRESA ESTATAL PETROLEOS DEL ECUADOR,
PETROECUADOR AND ITS AFFILIATE, LA EMPRESA ESTATAL DE EXPLORACION Y PRODUCCION DE PETROLEOS DEL
ECUADOR, PETROPRODUCCION.

The present warrantee shall be interpreted as such and in due compliance with Canadian law,
excluding any other rule of law from any other jurisdiction, to which the present warrantee is
subject to.

The MAIN OFFICE irrevocably commits to submit to the exclusive jurisdiction and competence of the
judges and courts of the province of British Columbia — Canada, to resolve any controversy or claim
associated or related to the present written document, including but not limited to the validity
and compliance of the same.

Submitted to the exclusive competence and jurisdiction of the judges and courts of the Province of
British Columbia — Canada, does in no way constitute a limitation to the right of the parties to
initiate legal action whatsoever for the execution and fulfillment of any ruling or decision of
said judges or courts.

IVANHOE ENERGY LATIN AMERICA INC.

Suite 654 – 999 Canada Place,

Vancouver, British Columbia,

V6C3E1, Canada

 

 

 

ANNEX 8

Rules of Arbitration of the International Chamber of Commerce (1998)

INTRODUCTORY PROVISIONS

Article 1

International Court of Arbitration

1. The International Court of Arbitration (the “Court”) of the International Chamber of Commerce
(the “ICC”) is the arbitration body attached to the ICC. The statutes of the Court are set forth in
Appendix I. Members of the Court are appointed by the World Council of the ICC. The function of the
Court is to provide for the settlement by arbitration of business disputes of an international
character in accordance with the Rules of Arbitration of the International Chamber of Commerce (the
“Rules”).

If so empowered by an arbitration agreement, the Court shall also provide for the settlement by
arbitration in accordance with these Rules of business disputes not of an international character.

2. The Court does not itself settle disputes. It has the function of ensuring the application of
these Rules. It draws up its own Internal Rules (Appendix II).

3. The Chairman of the Court or, in the Chairman’s absence or otherwise at his request, one of its
Vice-Chairmen shall have the power to take urgent decisions on behalf of the Court, provided that
any such decision is reported to the Court at its next session.

4. As provided for in its Internal Rules, the Court may delegate to one or more committees composed
of its members the power to take certain decisions, provided that any such decision is reported to
the Court at its next session.

5. The Secretariat of the Court (the “Secretariat”) under the direction of its Secretary General
(the “Secretary General”) shall have its seat at the headquarters of the ICC.

Article 2

Definitions

In these Rules:

(i) “Arbitral Tribunal” includes one or more arbitrators.

(ii) “Claimant” includes one or more claimants and “Respondent” includes one or more respondents.

(iii) “Award” includes, inter alia, an interim, partial or final Award.

 

 

 

Article 3

Written Notifications or Communications; Time Limits

1. All pleadings and other written communications submitted by any party, as well as all documents
annexed thereto, shall be supplied in a number of copies sufficient to provide one copy for each
party, plus one for each arbitrator, and one for the Secretariat. A copy of any communication from
the Arbitral Tribunal to the parties shall be sent to the Secretariat.

2. All notifications or communications from the Secretariat and the Arbitral Tribunal shall be made
to the last address of the party or its representative for whom the same are intended, as notified
either by the party in question or by the other party. Such notification or communication may be
made by delivery against receipt, registered post, courier, facsimile transmission, telex, telegram
or any other means of telecommunication that provides a record of the sending thereof.

3. A notification or communication shall be deemed to have been made on the day it was received by
the party itself or by its representative, or would have been received if made in accordance with
the preceding paragraph.

4. Periods of time specified in or fixed under the present Rules shall start to run on the day
following the date a notification or communication is deemed to have been made in accordance with
the preceding paragraph. When the day next following such date is an official holiday, or a
non-business day in the country where the notification or communication is deemed to have been
made, the period of time shall commence on the first following business day. Official holidays and
non-business days are included in the calculation of the period of time. If the last day of the
relevant period of time granted is an official holiday or a non-business day in the country where
the notification or communication is deemed to have been made, the period of time shall expire at
the end of the first following business day.

COMMENCING THE ARBITRATION

Article 4

Request for Arbitration

1. A party wishing to have recourse to arbitration under these Rules shall submit its Request for
Arbitration (the “Request”) to the Secretariat, which shall notify the Claimant and Respondent of
the receipt of the Request and the date of such receipt.

2. The date on which the Request is received by the Secretariat shall, for all purposes, be deemed
to be the date of the commencement of the arbitral proceedings.

3. The Request shall, inter alia, contain the following information:

a) the name in full, description and address of each of the parties;

b) a description of the nature and circumstances of the dispute giving rise to the claim(s);

c) a statement of the relief sought, including, to the extent possible, an indication of any
amount(s) claimed;

 

 

 

d) the relevant agreements and, in particular, the arbitration agreement;

e) all relevant particulars concerning the number of arbitrators and their choice in accordance
with the provisions of Articles 8, 9 and 10, and any nomination of an arbitrator required thereby;
and f) any comments as to the place of arbitration, the applicable rules of law and the language of
the arbitration.

4. Together with the Request, the Claimant shall submit the number of copies thereof required by
Article 3(1) and shall make the advance payment on administrative expenses required by Appendix III
(“Arbitration Costs and Fees”) in force on the date the Request is submitted. In the event that the
Claimant fails to comply with either of these requirements, the Secretariat may fix a time limit
within which the Claimant must comply, failing which the file shall be closed without prejudice to
the right of the Claimant to submit the same claims at a later date in another Request.

5. The Secretariat shall send a copy of the Request and the documents annexed thereto to the
Respondent for its Answer to the Request once the Secretariat has sufficient copies of the Request
and the required advance payment.

6. When a party submits a Request in connection with a legal relationship in respect of which
arbitration proceedings between the same parties are already pending under these Rules, the Court
may, at the request of a party, decide to include the claims contained in the Request in the
pending proceedings provided that the Terms of Reference have not been signed or approved by the
Court. Once the Terms of Reference have been signed or approved by the Court, claims may only be
included in the pending proceedings subject to the provisions of Article 19.

Article 5

Answer to the Request; Counterclaims

1. Within 30 days from the receipt of the Request from the Secretariat, the Respondent shall file
an Answer (the “Answer”) which shall, inter alia, contain the following information:

a) its name in full, description and address;

b) its comments as to the nature and circumstances of the dispute giving rise to the claim(s);

c) its response to the relief sought;

d) any comments concerning the number of arbitrators and their choice in light of the Claimant’s
proposals and in accordance with the provisions of Articles 8, 9 and 10, and any nomination of an
arbitrator required thereby; and

e) any comments as to the place of arbitration, the applicable rules of law and the language of the
arbitration.

 

 

 

2. The Secretariat may grant the Respondent an extension of the time for filing the Answer,
provided the application for such an extension contains the Respondent’s comments concerning the
number of arbitrators and their choice and, where required by Articles 8, 9 and 10, the nomination
of an arbitrator. If the Respondent fails to do so, the Court shall proceed in accordance with
these Rules.

3. The Answer shall be supplied to the Secretariat in the number of copies specified by Article
3(1).

4. A copy of the Answer and the documents annexed thereto shall be communicated by the Secretariat
to the Claimant.

5. Any counterclaim(s) made by the Respondent shall be filed with its Answer and shall provide:

a) a description of the nature and circumstances of the dispute giving rise to the counterclaim(s);
and

b) a statement of the relief sought, including, to the extent possible, an indication of any
amount(s) counterclaimed.

6. The Claimant shall file a Reply to any counterclaim within 30 days from the date of receipt of
the counterclaim(s) communicated by the Secretariat. The Secretariat may grant the Claimant an
extension of time for filing the Reply.

Article 6

Effect of the Arbitration Agreement

1. Where the parties have agreed to submit to arbitration under the Rules, they shall be deemed to
have submitted ipso facto to the Rules in effect on the date of commencement of the arbitration
proceedings, unless they have agreed to submit to the Rules in effect on the date of their
arbitration agreement.

2. If the Respondent does not file an Answer, as provided by Article 5, or if any party raises one
or more pleas concerning the existence, validity or scope of the arbitration agreement, the Court
may decide, without prejudice to the admissibility or merits of the plea or pleas, that the
arbitration shall proceed if it is prima facie satisfied that an arbitration agreement under the
Rules may exist. In such a case, any decision as to the jurisdiction of the Arbitral Tribunal shall
be taken by the Arbitral Tribunal itself. If the Court is not so satisfied, the parties shall be
notified that the arbitration cannot proceed. In such a case, any party retains the right to ask
any court having jurisdiction whether or not there is a binding arbitration agreement.

3. If any of the parties refuses or fails to take part in the arbitration or any stage thereof, the
arbitration shall proceed notwithstanding such refusal or failure.

4. Unless otherwise agreed, the Arbitral Tribunal shall not cease to have jurisdiction by reason of
any claim that the contract is null and void or allegation that it is non-existent, provided that
the Arbitral Tribunal upholds the validity of the arbitration agreement.
The Arbitral Tribunal shall continue to have jurisdiction to determine the respective rights of the
parties and to adjudicate their claims and pleas even though the contract itself may be
non-existent or null and void.

 

 

 

THE ARBITRAL TRIBUNAL

Article 7

General Provisions

1. Every arbitrator must be and remain independent of the parties involved in the arbitration.

2. Before appointment or confirmation, a prospective arbitrator shall sign a statement of
independence and disclose in writing to the Secretariat any facts or circumstances which might be
of such a nature as to call into question the arbitrator’s independence in the eyes of the parties.
The Secretariat shall provide such information to the parties in writing and fix a time limit for
any comments from them.

3. An arbitrator shall immediately disclose in writing to the Secretariat and to the parties any
facts or circumstances of a similar nature which may arise during the arbitration.

4. The decisions of the Court as to the appointment, confirmation, challenge or replacement of an
arbitrator shall be final and the reasons for such decisions shall not be communicated.

5. By accepting to serve, every arbitrator undertakes to carry out his responsibilities in
accordance with these Rules.

6. Insofar as the parties have not provided otherwise, the Arbitral Tribunal shall be constituted
in accordance with the provisions of Articles 8, 9 and 10.

Article 8

Number of Arbitrators

1. The disputes shall be decided by a sole arbitrator or by three arbitrators.

2. Where the parties have not agreed upon the number of arbitrators, the Court shall appoint a sole
arbitrator, save where it appears to the Court that the dispute is such as to warrant the
appointment of three arbitrators. In such case, the Claimant shall nominate an arbitrator within a
period of 15 days from the receipt of the notification of the decision of the Court, and the
Respondent shall nominate an arbitrator within a period of 15 days from the receipt of the
notification of the nomination made by the Claimant.

3. Where the parties have agreed that the dispute shall be settled by a sole arbitrator, they may,
by agreement, nominate the sole arbitrator for confirmation. If the parties fail to nominate a sole
arbitrator within 30 days from the date when the Claimant’s Request for Arbitration has been
received by the other party, or within such additional time as may be allowed by the Secretariat,
the sole arbitrator shall be appointed by the Court.

 

 

 

4. Where the dispute is to be referred to three arbitrators, each party shall nominate in the
Request and the Answer, respectively, one arbitrator for confirmation. If a party fails to nominate
an arbitrator, the appointment shall be made by the Court. The third arbitrator, who will act as
chairman of the Arbitral Tribunal, shall be appointed by the Court, unless the parties have agreed
upon another procedure for such appointment, in which case the nomination will be subject to
confirmation pursuant to Article 9. Should such procedure not result in a nomination within the
time limit fixed by the parties or the Court, the third arbitrator shall be appointed by the Court.

Article 9

Appointment and Confirmation of the Arbitrators

1. In confirming or appointing arbitrators, the Court shall consider the prospective arbitrator’s
nationality, residence and other relationships with the countries of which the parties or the other
arbitrators are nationals and the prospective arbitrator’s availability and ability to conduct the
arbitration in accordance with these Rules. The same shall apply where the Secretary General
confirms arbitrators pursuant to Article 9(2).

2. The Secretary General may confirm as co-arbitrators, sole arbitrators and chairmen of Arbitral
Tribunals persons nominated by the parties or pursuant to their particular agreements, provided
they have filed a statement of independence without qualification or a qualified statement of
independence has not given rise to objections. Such confirmation shall be reported to the Court at
its next session. If the Secretary General considers that a co-arbitrator, sole arbitrator or
chairman of an Arbitral Tribunal should not be confirmed, the matter shall be submitted to the
Court.

3. Where the Court is to appoint a sole arbitrator or the chairman of an Arbitral Tribunal, it
shall make the appointment upon a proposal of a National Committee of the ICC that it considers to
be appropriate. If the Court does not accept the proposal made, or if the National Committee fails
to make the proposal requested within the time limit fixed by the Court, the Court may repeat its
request or may request a proposal from another National Committee that it considers to be
appropriate.

4. Where the Court considers that the circumstances so demand, it may choose the sole arbitrator or
the chairman of the Arbitral Tribunal from a country where there is no National Committee, provided
that neither of the parties objects within the time limit fixed by the Court.

5. The sole arbitrator or the chairman of the Arbitral Tribunal shall be of a nationality other
than those of the parties.

However, in suitable circumstances and provided that neither of the parties objects within the time
limit fixed by the Court, the sole arbitrator or the chairman of the Arbitral Tribunal may be
chosen from a country of which any of the parties is a national.

6. Where the Court is to appoint an arbitrator on behalf of a party which has failed to nominate
one, it shall make the appointment upon a proposal of the National Committee of the country of
which that party is a national. If the Court does not accept the proposal
made, or if the National Committee fails to make the proposal requested within the time limit fixed
by the Court, or if the country of which the said party is a national has no National Committee,
the Court shall be at liberty to choose any person whom it regards as suitable. The Secretariat
shall inform the National Committee, if one exists, of the country of which such person is a
national.

 

 

 

Article 10

Multiple Parties

1. Where there are multiple parties, whether as Claimant or as Respondent, and where the dispute is
to be referred to three arbitrators, the multiple Claimants, jointly, and the multiple Respondents,
jointly, shall nominate an arbitrator for confirmation pursuant to Article 9.

2. In the absence of such a joint nomination and where all parties are unable to agree to a method
for the constitution of the Arbitral Tribunal, the Court may appoint each member of the Arbitral
Tribunal and shall designate one of them to act as chairman. In such case, the Court shall be at
liberty to choose any person it regards as suitable to act as arbitrator, applying Article 9 when
it considers this appropriate.

Article 11

Challenge of Arbitrators

1. A challenge of an arbitrator, whether for an alleged lack of independence or otherwise, shall be
made by the submission to the Secretariat of a written statement specifying the facts and
circumstances on which the challenge is based.

2. For a challenge to be admissible, it must be sent by a party either within 30 days from receipt
by that party of the notification of the appointment or confirmation of the arbitrator, or within
30 days from the date when the party making the challenge was informed of the facts and
circumstances on which the challenge is based if such date is subsequent to the receipt of such
notification.

3. The Court shall decide on the admissibility and, at the same time, if necessary, on the merits
of a challenge after the Secretariat has afforded an opportunity for the arbitrator concerned, the
other party or parties and any other members of the Arbitral Tribunal to comment in writing within
a suitable period of time. Such comments shall be communicated to the parties and to the
arbitrators.

 

 

 

Article 12

Replacement of Arbitrators

1. An arbitrator shall be replaced upon his death, upon the acceptance by the Court of the
arbitrator’s resignation, upon acceptance by the Court of a challenge, or upon the request of all
the parties.

2. An arbitrator shall also be replaced on the Court’s own initiative when it decides that he is
prevented de jure or de facto from fulfilling his functions, or that he is not fulfilling his
functions in accordance with the Rules or within the prescribed time limits.

3. When, on the basis of information that has come to its attention, the Court considers applying
Article 12(2), it shall decide on the matter after the arbitrator concerned, the parties and any
other members of the Arbitral Tribunal have had an opportunity to comment in writing within a
suitable period of time. Such comments shall be communicated to the parties and to the arbitrators.

4. When an arbitrator is to be replaced, the Court has discretion to decide whether or not to
follow the original nominating process. Once reconstituted, and after having invited the parties to
comment, the Arbitral Tribunal shall determine if and to what extent prior proceedings shall be
repeated before the reconstituted Arbitral Tribunal.

5. Subsequent to the closing of the proceedings, instead of replacing an arbitrator who has died or
been removed by the Court pursuant to Articles 12(1) and 12(2), the Court may decide, when it
considers it appropriate, that the remaining arbitrators shall continue the arbitration. In making
such determination, the Court shall take into account the views of the remaining arbitrators and of
the parties and such other matters that it considers appropriate in the circumstances.

THE ARBITRAL PROCEEDINGS

Article 13

Transmission of the File to the Arbitral Tribunal

The Secretariat shall transmit the file to the Arbitral Tribunal as soon as it has been
constituted, provided the advance on costs requested by the Secretariat at this stage has been
paid.

Article 14

Place of the Arbitration

1. The place of the arbitration shall be fixed by the Court unless agreed upon by the parties.

2. The Arbitral Tribunal may, after consultation with the parties, conduct hearings and meetings at
any location it considers appropriate unless otherwise agreed by the parties.

3. The Arbitral Tribunal may deliberate at any location it considers appropriate.

 

 

 

Article 15

Rules Governing the Proceedings

1. The proceedings before the Arbitral Tribunal shall be governed by these Rules and, where these
Rules are silent, by any rules which the parties or, failing them, the Arbitral
Tribunal may settle on, whether or not reference is thereby made to the rules of procedure of a
national law to be applied to the arbitration.

2. In all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party
has a reasonable opportunity to present its case.

Article 16

Language of the Arbitration

In the absence of an agreement by the parties, the Arbitral Tribunal shall determine the language
or languages of the arbitration, due regard being given to all relevant circumstances, including
the language of the contract.

Article 17

Applicable Rules of Law

1. The parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal
to the merits of the dispute. In the absence of any such agreement, the Arbitral Tribunal shall
apply the rules of law which it determines to be appropriate.

2. In all cases the Arbitral Tribunal shall take account of the provisions of the contract and the
relevant trade usages.

3. The Arbitral Tribunal shall assume the powers of an amiable compositeur or decide ex aequo et
bono only if the parties have agreed to give it such powers.

Article 18

Terms of Reference; Procedural Timetable

1. As soon as it has received the file from the Secretariat, the Arbitral Tribunal shall draw up,
on the basis of documents or in the presence of the parties and in the light of their most recent
submissions, a document defining its Terms of Reference. This document shall include the following
particulars:

a) the full names and descriptions of the parties;

b) the addresses of the parties to which notifications and communications arising in the course of
the arbitration may be made;

c) a summary of the parties’ respective claims and of the relief sought by each party, with an
indication to the extent possible of the amounts claimed or counterclaimed;

d) unless the Arbitral Tribunal considers it inappropriate, a list of issues to be determined;

e) the full names, descriptions and addresses of the arbitrators;

 

 

 

f) the place of the arbitration; and

g) particulars of the applicable procedural rules and, if such is the case, reference to the power
conferred upon the Arbitral Tribunal to act as amiable compositeur or to decide ex aequo et bono.

2. The Terms of Reference shall be signed by the parties and the Arbitral Tribunal. Within two
months of the date on which the file has been transmitted to it, the Arbitral Tribunal shall
transmit to the Court the Terms of Reference signed by it and by the parties. The Court may extend
this time limit pursuant to a reasoned request from the Arbitral Tribunal or on its own initiative
if it decides it is necessary to do so.

3. If any of the parties refuses to take part in the drawing up of the Terms of Reference or to
sign the same, they shall be submitted to the Court for approval. When the Terms of Reference have
been signed in accordance with Article 18(2) or approved by the Court, the arbitration shall
proceed.

4. When drawing up the Terms of Reference, or as soon as possible thereafter, the Arbitral
Tribunal, after having consulted the parties, shall establish in a separate document a provisional
timetable that it intends to follow for the conduct of the arbitration and shall communicate it to
the Court and the parties. Any subsequent modifications of the provisional timetable shall be
communicated to the Court and the parties.

Article 19

New Claims

After the Terms of Reference have been signed or approved by the Court, no party shall make new
claims or counterclaims which fall outside the limits of the Terms of Reference unless it has been
authorized to do so by the Arbitral Tribunal, which shall consider the nature of such new claims or
counterclaims, the stage of the arbitration and other relevant circumstances.

Article 20

Establishing the Facts of the Case

1. The Arbitral Tribunal shall proceed within as short a time as possible to establish the facts of
the case by all appropriate means.

2. After studying the written submissions of the parties and all documents relied upon, the
Arbitral Tribunal shall hear the parties together in person if any of them so requests or, failing
such a request, it may of its own motion decide to hear them.

3. The Arbitral Tribunal may decide to hear witnesses, experts appointed by the parties or any
other person, in the presence of the parties, or in their absence provided they have been duly
summoned.

 

 

 

4. The Arbitral Tribunal, after having consulted the parties, may appoint one or more experts,
define their terms of reference and receive their reports. At the request of a party, the parties
shall be given the opportunity to question at a hearing any such expert appointed by the Tribunal.

5. At any time during the proceedings, the Arbitral Tribunal may summon any party to provide
additional evidence.

6. The Arbitral Tribunal may decide the case solely on the documents submitted by the parties
unless any of the parties requests a hearing.

7. The Arbitral Tribunal may take measures for protecting trade secrets and confidential
information.

Article 21

Hearings

1. When a hearing is to be held, the Arbitral Tribunal, giving reasonable notice, shall summon the
parties to appear before it on the day and at the place fixed by it.

2. If any of the parties, although duly summoned, fails to appear without valid excuse, the
Arbitral Tribunal shall have the power to proceed with the hearing.

3. The Arbitral Tribunal shall be in full charge of the hearings, at which all the parties shall be
entitled to be present. Save with the approval of the Arbitral Tribunal and the parties, persons
not involved in the proceedings shall not be admitted.

4. The parties may appear in person or through duly authorized representatives. In addition, they
may be assisted by advisers.

Article 22

Closing of the Proceedings

1. When it is satisfied that the parties have had a reasonable opportunity to present their cases,
the Arbitral Tribunal shall declare the proceedings closed. Thereafter, no further submission or
argument may be made, or evidence produced, unless requested or authorized by the Arbitral
Tribunal.

2. When the Arbitral Tribunal has declared the proceedings closed, it shall indicate to the
Secretariat an approximate date by which the draft Award will be submitted to the Court for
approval pursuant to Article 27. Any postponement of that date shall be communicated to the
Secretariat by the Arbitral Tribunal.

 

 

 

Article 23

Conservatory and Interim Measures

1. Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the
Arbitral Tribunal may, at the request of a party, order any interim or conservatory measure it
deems appropriate. The Arbitral Tribunal may make the granting of any such measure subject to
appropriate security being furnished by the requesting party. Any such measure shall take the form
of an order, giving reasons, or of an Award, as the Arbitral Tribunal considers appropriate.

2. Before the file is transmitted to the Arbitral Tribunal, and in appropriate circumstances even
thereafter, the parties may apply to any competent judicial authority for interim or conservatory
measures. The application of a party to a judicial authority for such measures or for the
implementation of any such measures ordered by an Arbitral Tribunal shall not be deemed to be an
infringement or a waiver of the arbitration agreement and shall not affect the relevant powers
reserved to the Arbitral Tribunal. Any such application and any measures taken by the judicial
authority must be notified without delay to the Secretariat. The Secretariat shall inform the
Arbitral Tribunal thereof.

AWARDS

Article 24

Time Limit for the Award

1. The time limit within which the Arbitral Tribunal must render its final Award is six months.
Such time limit shall start to run from the date of the last signature by the Arbitral Tribunal or
by the parties of the Terms of Reference or, in the case of application of Article 18(3), the date
of the notification to the Arbitral Tribunal by the Secretariat of the approval of the Terms of
Reference by the Court.

2. The Court may extend this time limit pursuant to a reasoned request from the Arbitral Tribunal
or on its own initiative if it decides it is necessary to do so.

Article 25

Making of the Award

1. When the Arbitral Tribunal is composed of more than one arbitrator, an Award is given by a
majority decision. If there be no majority, the Award shall be made by the chairman of the Arbitral
Tribunal alone.

2. The Award shall state the reasons upon which it is based.

3. The Award shall be deemed to be made at the place of the arbitration and on the date stated
therein.

 

 

 

Article 26

Award by Consent

If the parties reach a settlement after the file has been transmitted to the Arbitral Tribunal in
accordance with Article 13, the settlement shall be recorded in the form of an Award made by
consent of the parties if so requested by the parties and if the Arbitral Tribunal agrees to do so.

Article 27

Scrutiny of the Award by the Court

Before signing any Award, the Arbitral Tribunal shall submit it in draft form to the Court. The
Court may lay down modifications as to the form of the Award and, without affecting the Arbitral
Tribunal’s liberty of decision, may also draw its attention to points of substance. No Award shall
be rendered by the Arbitral Tribunal until it has been approved by the Court as to its form.

Article 28

Notification, Deposit and Enforceability of the Award

1. Once an Award has been made, the Secretariat shall notify to the parties the text signed by the
Arbitral Tribunal, provided always that the costs of the arbitration have been fully paid to the
ICC by the parties or by one of them.

2. Additional copies certified true by the Secretary General shall be made available on request and
at any time to the parties, but to no one else.

3. By virtue of the notification made in accordance with Paragraph 1 of this Article, the parties
waive any other form of notification or deposit on the part of the Arbitral Tribunal.

4. An original of each Award made in accordance with the present Rules shall be deposited with the
Secretariat.

5. The Arbitral Tribunal and the Secretariat shall assist the parties in complying with whatever
further formalities may be necessary.

6. Every Award shall be binding on the parties. By submitting the dispute to arbitration under
these Rules, the parties undertake to carry out any Award without delay and shall be deemed to have
waived their right to any form of recourse insofar as such waiver can validly be made.

 

 

 

Article 29

Correction and Interpretation of the Award

1. On its own initiative, the Arbitral Tribunal may correct a clerical, computational or
typographical error, or any errors of similar nature contained in an Award, provided
such correction is submitted for approval to the Court within 30 days of the date of such Award.

2. Any application of a party for the correction of an error of the kind referred to in Article
29(1), or for the interpretation of an Award, must be made to the Secretariat within 30 days of the receipt of the
Award by such party, in a number of copies as stated in Article 3(1).

After transmittal of the application to the Arbitral Tribunal, the latter shall grant the other
party a short time limit, normally not exceeding 30 days, from the receipt of the application by
that party, to submit any comments thereon. If the Arbitral Tribunal decides to correct or
interpret the Award, it shall submit its decision in draft form to the Court not later than 30 days
following the expiration of the time limit for the receipt of any comments from the other party or
within such other period as the Court may decide.

3. The decision to correct or to interpret the Award shall take the form of an addendum and shall
constitute part of the Award. The provisions of Articles 25, 27 and 28 shall apply mutatis
mutandis.

COSTS

Article 30

Advance to Cover the Costs of the Arbitration

1. After receipt of the Request, the Secretary General may request the Claimant to pay a
provisional advance in an amount intended to cover the costs of arbitration until the Terms of
Reference have been drawn up.

2. As soon as practicable, the Court shall fix the advance on costs in an amount likely to cover
the fees and expenses of the arbitrators and the ICC administrative costs for the claims and
counterclaims which have been referred to it by the parties. This amount may be subject to
readjustment at any time during the arbitration. Where, apart from the claims, counterclaims are
submitted, the Court may fix separate advances on costs for the claims and the counterclaims.

3. The advance on costs fixed by the Court shall be payable in equal shares by the Claimant and the
Respondent. Any provisional advance paid on the basis of Article 30(1) will be considered as a
partial payment thereof. However, any party shall be free to pay the whole of the advance on costs
in respect of the principal claim or the counterclaim should the other party fail to pay its share.
When the Court has set separate advances on costs in accordance with Article 30(2), each of the
parties shall pay the advance on costs corresponding to its claims.

 

 

 

4. When a request for an advance on costs has not been complied with, and after consultation with
the Arbitral Tribunal, the Secretary General may direct the Arbitral Tribunal to suspend its work
and set a time limit, which must be not less than 15 days, on the expiry of which the relevant
claims, or counterclaims, shall be considered as withdrawn. Should the party in question wish to
object to this measure, it must make a request within the aforementioned period for the matter to be decided by the Court. Such party
shall not be prevented, on the ground of such withdrawal, from reintroducing the same claims or
counterclaims at a later date in another proceeding.

5. If one of the parties claims a right to a set-off with regard to either claims or counterclaims,
such set-off shall be taken into account in determining the advance to cover the costs of
arbitration in the same way as a separate claim insofar as it may require the Arbitral Tribunal to
consider additional matters.

Article 31

Decision as to the Costs of the Arbitration

1. The costs of the arbitration shall include the fees and expenses of the arbitrators and the ICC
administrative expenses fixed by the Court, in accordance with the scale in force at the time of
the commencement of the arbitral proceedings, as well as the fees and expenses of any experts
appointed by the Arbitral Tribunal and the reasonable legal and other costs incurred by the parties
for the arbitration.

2. The Court may fix the fees of the arbitrators at a figure higher or lower than that which would
result from the application of the relevant scale should this be deemed necessary due to the
exceptional circumstances of the case. Decisions on costs other than those fixed by the Court may
be taken by the Arbitral Tribunal at any time during the proceedings.

3. The final Award shall fix the costs of the arbitration and decide which of the parties shall
bear them or in what proportion they shall be borne by the parties.

MISCELLANEOUS

Article 32

Modified Time Limits

1. The parties may agree to shorten the various time limits set out in these Rules. Any such
agreement entered into subsequent to the constitution of an Arbitral Tribunal shall become
effective only upon the approval of the Arbitral Tribunal.

2. The Court, on its own initiative, may extend any time limit which has been modified pursuant to
Article 32(1) if it decides that it is necessary to do so in order that the Arbitral Tribunal or
the Court may fulfil their responsibilities in accordance with these Rules.

Article 33

Waiver

A party which proceeds with the arbitration without raising its objection to a failure to comply
with any provision of these Rules, or of any other rules applicable to the proceedings, any
direction given by the Arbitral Tribunal, or any requirement under the
arbitration agreement relating to the constitution of the Arbitral Tribunal, or to the conduct of
the proceedings, shall be deemed to have waived its right to object.

 

 

 

Article 34

Exclusion of Liability

Neither the arbitrators, nor the Court and its members, nor the ICC and its employees, nor the ICC
National Committees shall be liable to any person for any act or omission in connection with the
arbitration.

Article 35

General Rule

In all matters not expressly provided for in these Rules, the Court and the Arbitral Tribunal shall
act in the spirit of these Rules and shall make every effort to make sure that the Award is
enforceable at law.

ARBITRATION COSTS AND FEES

Article 1

Advance on Costs

1. Each request to commence an arbitration pursuant to the Rules must be accompanied by an advance
payment of US$ 2,500 on the administrative expenses. Such payment is non-refundable, and shall be
credited to the Claimant’s portion of the advance on costs.

2. The provisional advance fixed by the Secretary General according to Article 30(1) of the Rules
shall normally not exceed the amount obtained by adding together the administrative expenses, the
minimum of the fees (as set out in the scale hereinafter) based upon the amount of the claim and
the expected reimbursable expenses of the Arbitral Tribunal incurred with respect to the drafting
of the Terms of Reference. If such amount is not quantified, the provisional advance shall be fixed
at the discretion of the Secretary General. Payment by the Claimant shall be credited to its share
of the advance on costs fixed by the Court.

3. In general, after the Terms of Reference have been signed or approved by the Court and the
provisional timetable has been established, the Arbitral Tribunal shall, in accordance with Article
30(4) of the Rules, proceed only with respect to those claims or counterclaims in regard to which
the whole of the advance on costs has been paid.

4. The advance on costs fixed by the Court according to Article 30(2) of the Rules comprises the
fees of the arbitrator or arbitrators (hereinafter referred to as “arbitrator”), any arbitration-related
expenses of the arbitrator and the administrative expenses.

 

 

 

5. Each party shall pay in cash its share of the total advance on costs. However, if its share
exceeds an amount fixed from time to time by the Court, a party may post a bank guarantee for this
additional amount.

6. A party that has already paid in full its share of the advance on costs fixed by the Court may,
in accordance with Article 30(3) of the Rules, pay the unpaid portion of the advance owed by the
defaulting party by posting a bank guarantee.

7. When the Court has fixed separate advances on costs pursuant to Article 30(2) of the Rules, the
Secretariat shall invite each party to pay the amount of the advance corresponding to its
respective claim(s).

8. When, as a result of the fixing of separate advances on costs, the separate advance fixed for
the claim of either party exceeds one half of such global advance as was previously fixed (in
respect of the same claims and counterclaims that are the subject of separate advances), a bank
guarantee may be posted to cover any such excess amount. In the event that the amount of the
separate advance is subsequently increased, at least one half of the increase shall be paid in
cash.

9. The Secretariat shall establish the terms governing all bank guarantees which the parties may
post pursuant to the above provisions.

10. As provided in Article 30(2) of the Rules, the advance on costs may be subject to readjustment
at any time during the arbitration, in particular to take into account fluctuations in the amount
in dispute, changes in the amount of the estimated expenses of the arbitrator, or the evolving
difficulty or complexity of arbitration proceedings.

11. Before any expertise ordered by the Arbitral Tribunal can be commenced, the parties, or one of
them, shall pay an advance on costs fixed by the Arbitral Tribunal sufficient to cover the expected
fees and expenses of the expert as determined by the Arbitral Tribunal. The Arbitral Tribunal shall
be responsible for ensuring the payment by the parties of such fees and expenses.

Article 2

Costs and Fees

1. Subject to Article 31(2) of the Rules, the Court shall fix the fees of the arbitrator in
accordance with the scale hereinafter set out or, where the sum in dispute is not stated, at its
discretion.

2. In setting the arbitrator’s fees, the Court shall take into consideration the diligence of the
arbitrator, the time spent, the rapidity of the proceedings, and the complexity of the dispute, so
as to arrive at a figure within the limits specified or, in exceptional circumstances (Article
31(2) of the Rules), at a figure higher or lower than those limits.

3. When a case is submitted to more than one arbitrator, the Court, at its discretion, shall have
the right to increase the total fees up to a maximum which shall normally not exceed three times
the fees of one arbitrator.

 

 

 

4. The arbitrator’s fees and expenses shall be fixed exclusively by the Court as required by the
Rules. Separate fee arrangements between the parties and the arbitrator are contrary to the Rules.

5. The Court shall fix the administrative expenses of each arbitration in accordance with the scale
hereinafter set out or, where the sum in dispute is not stated, at its discretion. In exceptional
circumstances, the Court may fix the administrative expenses at a lower or higher figure than that
which would result from the application of such scale, provided that such expenses shall normally
not exceed the maximum amount of the scale. Further, the Court may require the payment of
administrative expenses in addition to those provided in the scale of administrative expenses as a
condition to holding an arbitration in abeyance at the request of the parties or of one of them
with the acquiescence of the other.

6. If an arbitration terminates before the rendering of a final Award, the Court shall fix the
costs of the arbitration at its discretion, taking into account the stage attained by the arbitral
proceedings and any other relevant circumstances.

7. In the case of an application under Article 29(2) of the Rules, the Court may fix an advance to
cover additional fees and expenses of the Arbitral Tribunal and may make the transmission of such
application to the Arbitral Tribunal subject to the prior cash payment in full to the ICC of such
advance. The Court shall fix at its discretion any possible fees of the arbitrator when approving
the decision of the Arbitral Tribunal.

8. When an arbitration is preceded by an attempt at amicable resolution pursuant to the ICC ADR
Rules, one half of the administrative expenses paid for such ADR proceedings shall be credited to
the administrative expenses of the arbitration.

9. Amounts paid to the arbitrator do not include any possible value added taxes (VAT) or other
taxes or charges and imposts applicable to the arbitrator’s fees. Parties have a duty to pay any
such taxes or charges; however, the recovery of any such charges or taxes is a matter solely
between the arbitrator and the parties.

Article 3

Appointments of Arbitrators

1. A registration fee normally not exceeding US$ 2,500 is payable by the requesting party in
respect of each request made to the ICC to appoint an arbitrator for any arbitration not conducted
under the Rules. No request for appointment of an arbitrator will be considered unless accompanied
by the said fee, which is not recoverable and becomes the property of the ICC.

2. The said fee shall cover any additional services rendered by the ICC regarding the appointment,
such as decisions on a challenge of an arbitrator and the appointment of a substitute arbitrator.

 

 

 

Article 4

Scales of Administrative Expenses and Arbitrator’s Fees

1. The Scales of Administrative Expenses and Arbitrator’s Fees set forth below shall be effective
as of 1 January 1998 in respect of all arbitrations commenced on or after such date, irrespective
of the version of the Rules applying to such arbitrations.

2. To calculate the administrative expenses and the arbitrator’s fees, the amounts calculated for
each successive slice of the sum in dispute must be added together, except that where the sum in
dispute is over US$ 80 million, a flat amount of US$ 75,800 shall constitute the entirety of the
administrative expenses.

A. ADMINISTRATIVE EXPENSES

	 	 	 	 	 	 	 	 	 	 	 
	Sum in dispute (in US Dollars)	 	Administrative expenses (*)	 
	up to
	 	50 000	 	 	 	 	 	$	2 500	 
	from
	 	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.

B. ARBITRATOR’S FEES

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

	 	 	 
	(*)	 	See above

 

 

 

ANNEX 9

(Translation of the State Attorney General’s Official Letter)

Official Letter No. 03161

Quito, September 9, 2008

Captain Camilo Delgado Montenegro

VICE-PRESIDENT

PETROPRODUCCION

Quito

Dear Sir:

This is with reference to your letter 7120-PPR-LEG-2008 of August 21, 2008, received in this
Control Entity with record No 08566. The above-referenced letter requests a legal opinion on the
draft contract for specific services to develop and produce crude oil in the Pungarayacu Field, in
Block 20. The contractor IVANHOE ENERGY ECUADOR INC will contribute with technology, capital,
equipment and other goods and services required to fulfill its contractual obligations using the
HTL technology owned by IVANHOE ENERGY ECUADOR INC, to improve crude quality, confirm reserves and
perform complementary drilling activities in the pre-cretaceous of the Pungarayacu field, in a term
of 30 years.

BACKGROUND

The Contracting Committee, through Resolution 794-CEL-2008 dated February 1, 2008, “RESOLVED TO
CANCEL RESOLUTION CEL No 653-CEL-2003 of August 3, 2003, WHICH AUTHORIZED INITIATION OF THE
COMPETITIVE BIDDING PROCESSES FOR BLOCKS 20 AND 29 IN THE AMAZON REGION”.

Through Official Letter 176-SJ461/DM-2006 dated April 11, 2008, the temporary Minister of Mines and
Petroleum, informed the Executive President of PETROECUADOR: “... that the legal basis that would
apply in celebrating the contract with IVANHOE to Develop and Exploit Heavy Oil in the Pungarayacu
Field of the Ecuadorian Amazon Region will be that of a Contract for Specific Works, Goods and
Services, established in Article 17, Hydrocarbons Law, and in the Contracting Regulations for
Goods, Works and Services of PETROECUADOR and its Affiliate Companies, issued through Executive
Decree No 552 and published in Official Register 194 of October 19, 2007...”

 

 

 

PETROECUADOR’s Executive President, through letter 392-PEP-2008 of June 9, 2008, appointed a
Committee to review IVANHOE ENERGY ECUADOR INC’s proposal. On June 10, 2008t, this Committee
submitted the “CONCLUSIVE FINAL MINUTES INVOLVING IVANHOE ENERGY ECUADOR INC’s proposal. On June 11, 2008, the
Committee submitted “AN ADDENDUM TO THE NEGOTIATING MINUTES REGARDING THE DRAFT CONTRACT TO BE
ENTERED BETWEEN PETROECUADOR, PETROPRODUCCION AND IVANHOE ENERGY ECUADOR INC FOR SPECIFIC SERVICES
TO DEVELOP AND EXPLOIT CRUDE OIL IN BLOCK 20, PUNGARAYACU FIELD, IN THE AMAZON REGION”. The Legal
Committee stated that “among the direct Contracting procedures, Art 23, letter b) of the
above-mentioned Regulations1, establishes that this method may be used for unique
suppliers when the use of patents or trademarks are involved, which would be the case of Ivanhoe
Energy Ecuador Inc.”. The Committee recommended “the Vice-President of PETROPRODUCCION to ask the
Contracting Committee to award and authorize celebration of the contract, as provided in Art 7 of
the Contracting Regulations”. In addition, it establishes that “In accordance with Art 19 of the
Contracting Regulations, the Executive President and the Vice-President will be responsible of
implementing the contract award resolution”.

By Letter 2465-VPR-PPR-2008 of June 16, 2008, the Vice-President of PETROPRODUCCION sent the
Executive President of PETROECUADOR, for review and decision of PETROPRODUCCION Contracting
Committee, the following documents: Conclusive Final Minutes, Addendum to the Negotiating Minutes,
and the Draft Contract to be signed by PETROECUADOR, PETROPRODUCCION and IVANHOE ENERGY ECUADOR INC
for Specific Services to Develop, Produce and Improve Crude Oil in Block 20, which involves the
Pungarayacu Field in the Ecuadorian Amazon Region. The contract is for an undetermined amount.

The Vice-President of PETROPRODUCCION, through Resolution 2008235-VPR-PPR-2008 dated June 17, 2008,
Resolved: “To qualify IVANHOE ENERGY ECUADOR INC as the UNIQUE SUPPLIER for using patents of the
Heavy-to-Light (HTL) technology, for heavy oil improvement”.

On July 8, 2008, the Technical-Financial Negotiating Committee submitted its Financial-Technical
Conclusive Minutes for Development and Production of the Pungarayacu Field, Block 20, which
included a technical-financial analysis of the negotiated contract terms. Through letter
3051-PPR-ACUM-2008 of July 22, 2008, the Committee sent to the Executive President of PETROECUADOR
the supporting documents, for review and approval by PETROPRODUCCION’S Contracting Committee.

Resolution 024-CC-PPR-2008-07-29, dated July 29, 2008 of PETROPRODUCCION’s Contracting Committee:
1. With the affirmative votes of PETROECUADOR’S EXECUTIVE PRESIDENT AND PETROPRODUCCION’S
VICE-PRESIDENT RESOLVED TO AWARD AND AUTHORIZE CELEBRATION OF THE CONTRACT WITH IVANHOE ENERGY
ECUADOR INC TO PROVIDE SPECIFIC SERVICES FOR DEVELOPMENT AND PRODUCTION OF CRUDE OIL IN THE
PUNGARAYACU FIELD, BLOCK 20, BY CONTRIBUTING WITH TECHNOLOGY, CAPITAL AND
MACHINERY/EQUIPMENT AND OTHER GOODS AND SERVICES NEEDED TO COMPLY WITH ITS OBLIGATIONS. THE COMPANY
WILL USE ITS PATENTED HTLTM (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...”

 

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

 

 

 

Resolution No 024-CC-PPR-2008-07-29 of July 29, 2008 does not indicate the contract price.

Draft Contract:

Clause 2: BACKGROUND, item 2.5 reads: “PETROECUADOR’s Contracting Committee, in accordance with
the provisions of Article 7 of the Contracting Rules and Regulations for Specific Works, Goods and
Services of Empresa Estatal Petróleos del Ecuador, PETROECUADOR and its Affiliate Companies,
authorized the Executive President of PETROECUADOR and the Vice-President of PETROPRODUCCION to
sign this Contract”.

Clause 9: CONTRACTUAL PAYMENT AND PAYMENTS TO CONTRACTOR, item 9.1 establishes that: 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.

Clause 15: Registrations and Value of Contract, item 25.2 — Undetermined Amount of
Contract: Given the nature of this Contract, its value is not quantifiable on the date of
its execution. Therefore...it is of undetermined amount.

ANALYSIS:

The documents attached to the request made by PETROECUADOR and PETROPRODUCCION to this Control
Entity for issuance of a report indicate that given de nature of the Contract to be celebrated, it
is of undetermined amount. Therefore, it does not establish submittal by contractor of a
Performance Bond.

PETROECUADOR indicates that it is a Direct Contracting, as established in Art 17 of the
Hydrocarbons Law, as set forth in Articles 23 and 24 of the Contracting Regulations for Specific
Works, Goods and Services of Empresa Estatal Petróleos del Ecuador, PETROECUADOR and its Affiliate
Companies. In addition, it indicates that in accordance with Art 33 of its Manual, IVANHOE ENERGY
ECUADOR is the unique supplier of the “Heavy-to-Light” (HTLTM) technology, owned and patented by
IVANHOE ENERGY ECUADOR and its Related Companies. The company has been qualified in PETROECUADOR
and financing will be at the contractor’s expense.

 

 

 

Based on the above, please be informed as follows:

Art. 18 of the Contracting Regulations for Specific Works, Goods and Services of Empresa Estatal
Petróleos del Ecuador, PETROECUADOR and its Affiliate Companies establishes that depending on the
contract value and prior to celebrating the contract, the companies must have a report from the
Nation’s Attorney General. In addition, Article 47 of its Manual establishes that all types of
contracts will require a report from the Nation’s Attorney General if the contract value exceeds
the base amount established for Competitive Bidding.

The Organic Law for the Office of the Nation’s Attorney General establishes that the Nation’s
Attorney General will issue reports on any contracts celebrated by the Government Entities included
in Article 18 of the Political Constitution, as well as on those involving private companies which
use public resources, if the contract value exceeds the amount established fro Competitive Bidding.

In view of the above and since PETROECUADOR and PETROPRODUCCION established that the Contract is of
UNDETERMINED AMOUNT, the contract does not meet the facts set forth in the Nation’s Attorney Office
Organic Law, nor the provisions of the Contracting Regulations and Manual involving Specific Works,
Goods and Services of Empresa Estatal Petróleos del Ecuador and its Affiliate Companies and does
not require a report from the Control Entity. Therefore, I abstain from issuing such report.

Notwithstanding the above, the Executive President of PETROECUADOR, the Vice-President of
PETROPRODUCCION and the members of the Direct Contracting Negotiating Committee and other officials
who participated in the process will be responsible to determine if the scope of the works and the
technical-financial conditions apply to the Contracting of specific works, goods and services for
development, production or complementary exploitation of oil fields/areas with proven reserves
reverted to the State or discovered with government resources, or fields exploited by
PETROPRODUCCION where the Contracting Regulations for Specific Works, Goods and Services of Empresa
Estatal Petróleos del Ecuador and its Affiliate Companies apply, and do not involve service
contracts for hydrocarbon exploration and exploitation. . They will also be liable for the
technical and financial issues agreed, as dictated by the Ecuadorian Legislation on any contractual
provision, and will abide by the legal, regulatory and administrative provisions involving Direct
Contracting, contract award, price, payment terms, term, legalization and implementation, as
established in Article 54 of the Nation’s Attorney General Organic Law and the Contracting
regulations of PETROECUADOR and its Affiliate Companies.

By the Nation’s Attorney General

Sincerely yours,

Dr. Gustavo Ramos Puertas

NATION’S DEPUTY ATTORNEY GENERAL, AT INTERIM

cc: State Comptroller’s Office

 

 

 

ANNEX 10

(Translation of the State Comptroller’s Office Official Letter)

Official Letter No. 024563 DCP

	 	 	 
	Department:

	 	PUBLIC CONTRACTING BUREAU
	 
	 	 
	Subject:

	 	Specific services to develop, produce and improve crude oil in Block 20.

Quito, September 29, 2008

Captain Camilo Delgado Montenegro

Vice-President

PETROPRODUCCION

Ave. de los Shyris No. 34-382 y Portugal

Fax: 2449-000

Quito

Dear Sir:

This is in response to your Official Letters 7119-PPR-LEG-2008 and 7727-PPR-LEG-2008, dated August
21 and September 5, 2008, respectively; the latter received in our office on September 8. The
above-mentioned letters request the report required by Law for the specific services draft contract
for crude oil development, production and improvement in Block 20, which includes the Pungarayacu
Field in the Ecuadorian Amazon Region, which will be signed with IVANHOE ENERGY ECUADOR INC. The
contract is for an undetermined amount and the term is 30 years from the date of contract
execution.

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.

Based on this Agreement, the University would obtain rights to develop, operate and
exploit the oil projects prospecting areas, in partnership with PETROECUADOR, as
established in the Hydrocarbons Law and its regulations. The University would take the
necessary steps to obtain all the technical data for the project areas covered by the
Agreement. On the other hand, IVANHOE would be responsible to prepare and
implement a technical plan to evaluate, develop and exploit the first project areas
selected by the Parties. The parties also agreed that they would jointly develop and
negotiate all contracts and/or operation agreements for oil projects signed with the
Ecuadorian Government.

 

 

 

	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

Upon reviewing the documentation submitted, we have established that the review process carried out
by the support committees and the officials from the Ministry of Mines and Petroleum and
PETROPRODUCCION, the Contracting process used as reference the following rules of procedure:

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). The State will explore and
exploit the reservoirs mentioned in the preceding article, directly through PETROECUADOR.
PETROECUADOR may perform such activities either directly or through partnership agreements, sharing
agreements, service contracts for hydrocarbon exploration and exploitation, or other contractual
systems established in the Ecuadorian legislation. It may also create semipublic companies with
national and international enterprises legally establish in Ecuador.

Contracts for exploration and exploitation of marginal oil fields are those executed by the State
trough PETROECUADOR. Subject to the provisions of paragraph 1, Article 46 of the Political
Constitution of Ecuador, such contracts authorize contractors to explore and exploit marginal
production oil fields currently exploited by PETROPRODUCCION, by making all the investments
required by the additional exploration and exploitation activities.

Marginal oil fields are those qualified by the Ministry of Mines and Petroleum as fields with low
operational or financial priority because they are not close to PETROECUADOR’s infrastructure,
contain heavy oil or require very expensive recovery techniques. The additional exploitation and
exploration activities, however, must represent greater technical and financial efficiency in
benefit of the State’s interests. These fields may not exceed 1% of the national production rate
and will be subject to the international standards for oil reserves conservation. These contracts
are awarded through a competitive bidding process organized by the Special Committee, as
established in Article 19, and shall give priority to national companies in the hydrocarbons
sector, either by themselves or in partnership.

Awarding of these contracts shall try to take into account:

	a)	 	The highest amount to be invested in the area,

	 
	b)	 	Minimum production assured, or

	 
	c)	 	Production costs.

 

 

 

PETROECUADOR may procure itself the specific goods or services required or may celebrate contracts
for Contracting of specific goods or services, giving priority to national companies, on equal
terms. For such purpose, PETROECUADOR will announce on a timely and continuous basis the works and
services it may require.

When PETROECUADOR participates in any of the petroleum industry stages, through its Affiliate
Companies or celebrates contracts of any nature whatsoever, PETROECUADOR financial system
established in its Special Law shall apply.

The President of Ecuador will allocate from the net income obtained from service contracts to
explore and exploit hydrocarbons, the resources required in order to create a permanent investment
fund to seek new hydrocarbon reserves. PETROECUADOR will manage this fund, under supervision by
the State Comptroller’s Office.

Art. 17 — (Replaced by Art 5, Law 101, O.R. 306, 13-08-1982) — The specific goods and services
contracts referred to in paragraph two, Article 2, are those by which a company undertakes to
implement specific works or services for PETROECUADOR, contributing with technology, capital and
equipment required to comply with the contractual obligations, in exchange for a price or cash
compensation. The parties will agree on the price and payments terms, as established by
Law.

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) — In addition to the contractual methods
established in article 3, PETROECUADOR, if convenient to the State’s interests, may also execute
operating contracts for construction, operation of main oil pipelines, fuel pipelines and gas
pipelines, terminals and hydrocarbon processing plants with national or foreign companies well
reputed and legally incorporated in Ecuador. Such companies may create their own partnerships.
Contractors may operate the fuel pipelines, gas pipelines, terminals and processing plants. Upon
termination of the construction and operation contract, the provisions of Article 29, paragraph 2
shall apply.

Art. 23 — (Replaced by Art. 9, Law 44, O.R. 326, 29-11-1993) — The exploration period in all crude
oil exploration and exploitation contracts, will be of up to four (4) years, extendable for two (2)
additional years, upon prior justification by contractor and authorization by PETROECUADOR.
Operations shall begin in the area within the first six (6) months from the date the contract is
registered at the Hydrocarbons Registry. The registration shall take place within thirty (30) days
 from execution of the corresponding contract.

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, as well as the routes for the
oil and gas pipelines, location of refineries and hydrocarbon or petrochemical industrial
facilities 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) — All works, services, Contracting of
equipment and other goods, or the purchase/sale of hydrocarbons engaged by PETROECUADOR and its
Affiliate Companies in compliance with this Law, shall be implemented and monitored in accordance
with the procedures of this Special Law and its regulations.

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 — The officers responsible to award and celebrate contracts are as follows:

	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 —  PETROECUADOR’s Executive President and the Vice-President of the
corresponding Affiliate Company will be the liable to execute the award resolution and to make all
technical, financial, legal and administrative decisions for implementation of the contract.

Art. 23 — Direct Contracting — This exception process will apply in the following events:

	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.

In all direct Contracting processes, PETROECUADOR’s Executive President or the vice-presidents of
each Affiliate Company may appoint an official or a committee to develop the corresponding process,
in order that they prepare a report to support the corresponding direct contract award.

 

 

 

These Contracting processes do not require previous registration of individuals or companies.

In the event that a direct Contracting process is not completed, the responsible officer will
prepare the corresponding report before closing the process. 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.

Corporate contracts are those whose purpose involve PETROECUADOR with one or several
activities 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

Direct Contracting will only apply in the events foreseen in Art 23 of the Contracting regulations,
upon prior issuance of the corresponding resolution that qualifies using such method...

In the event of a unique supplier, national or foreign, which is unique in the marketplace or in
cases involving the use of patents, the offer or shall justify such condition by submitting the
supporting documents. In the event of standardization of trademarks, a reasoned resolution is
required. Qualification of exceptions will be the responsibility of the executive president, the
vice-presidents of the Affiliate Companies, the Managers/top authorities of the actual units
created or to be created on a temporary basis, as applicable.

Contractings foreseen in letter d), Art 23 of the Contracting regulations, notwithstanding the
contract amount, legal, technical and financial conditions, and observing the scope of their
authority, will require approval by PETROECUADOR’s Executive President, the Affiliate Companies’
vice-presidents, managers/top authorities of the actual units created or to be created on a
temporary basis.

Hiring of professional services, national or foreign, shall meet the following requirements:

	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.

Direct Contracting may include a screening and competencies process among bidders, in order to
obtain optimum Contracting conditions for PETROECUADOR and its Affiliate Companies.

 

 

 

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”.

Upon reviewing the above Resolution, we observe that the Board of Directors thought at a
time in implementing a competitive bidding process at national and international level.

	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.

The contract is for an undetermined amount and the provisions of the last paragraph,
Article 7, of the Contracting Manual’s Codification for specific works, goods and services
of PETROECUADOR and its Affiliate Companies were applicable. Therefore, PETROECUADOR’s
Executive President, the Affiliate Companies’ vice-presidents or the managers/top
authorities of the actual units created or to be created on a temporary basis had capacity
to award the contract, as applicable.

 

 

 

	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

Article 18 of the Contracting Regulations for Specific Works, Goods and Services of Empresa Estatal
Petróleos del Ecuador, PETROECUADOR and its Affiliate Companies sets forth that PETROECUADOR or its
Affiliates, prior to signing the contract shall have the opinion of the Nation’s Attorney General
and the State Comptroller’s Office, if required due to the contract price. Article 47,
Contracting Manual Codification for Specific Works, Goods and Services of Empresa Estatal Petróleos
del Ecuador and its Affiliate Companies provides that contractual methods foreseen in Chapter V of
the Contracting Regulations, if the price exceeds the base amount established for a competitive
bidding process, will require simultaneous opinion by the Nation’ Attorney General and the
State Comptroller’s Office.

Item 16, Article 31 of the State Comptroller’s Office Organic Law establishes that the legal
opinions requested by Government entities are issued when the contract price is equal or higher
than the price established by Law for Competitive Bidding.

It is observed that the above provisions condition the opinion of Top Control Entities to the
existence of a minimum amount. Therefore, in view that the contract is for an undetermined amount,
as established in clauses 9 and 15, the contract does not meet the feasibility budgets for issuance
of a report.

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.

In accordance with the provisions of Article 120, Political Constitution, the officials of
PETROECUADOR and its Affiliate Company PETROCOMERCIAL that participate in the Contracting process
and any decisions taken by them will not be exempt of liability for their actions or omissions in
performing their duties.

Sincerely,

By the State’s Comptroller

Dr. Eduardo Muñoz Vega

Deputy State’s Comptroller, at interim

 

 

 

ANNEX 11

(Translation of the State Comptroller’s Office Official Letter)

Official Letter No. 025181 DCP

	 	 	 
	Department:

	 	PUBLIC CONTRACTING BUREAU
	 
	 	 
	Subject:

	 	Services to develop, produce and improve crude oil.

Quito, October 2, 2008

Captain Camilo Delgado Montenegro

Vice-President

PETROPRODUCCION

Quito

Dear Sir:

This is with reference to Official Letter 8629 PPR-LEG-2008 dated October 2, 2008, with
observations regarding Official Letter 024563 DCP of September 29, 2008, by which this entity
abstained from issuing an opinion on the draft contract for specific services to develop, produce
and improve crude oil in Block 20, which includes the Pungarayacu Field in the Ecuadorian Amazon
Region. The contract is to be signed with IVANHOE ENERGY ECUADOR INC for an undetermined amount and
has a term of 30 years from execution of the contract.

Please note that the observations contained in the abstention report are for referential purposes.
Therefore, since such observations are not an integral part of the report required by Law, as
established in the State Comptroller’s Office Organic Law, they are not binding. Consequently, your
entity could celebrate the contract if it is beneficial to public interests.

Sincerely yours,

By the State’s Comptroller

Dr. Eduardo Muñoz Vega

Deputy State’s Comptroller, at interim

 

 

 

ANNEX 12

(Pungarayacu Field Development)

 

 

 

NOBOA, PEÑA, LARREA & TORRES, LOGO

October 14, 2008

Mr. Oscar Blake

Legal Counsel

IVANHOE ENERGY (USA) INC

Av. Suite 400

Bakersfield, California

U.S.A.

Dear Sir:

Having revised and compared the Spanish and English translation of “The Specific Services Contract
for Development, Production and Upgrading of Crude Oil in Block 20 (Pungarayacu Oil Fiel) in the
Ecuadorian Amazon Region” (THE CONTRACT), I hereby certify the following:

	 	a.	 	That the English translation to THE CONTRACT is accurate in form and content and do not violate any Ecuadorean Law.

Kind Regards,

/s/ Mario Larrea

Mario Larrea

Attorney at LawExhibit 10.25

Exhibit 10.25

CONTRACT MODIFICATIONS TO THE SPECIFIC SERVICES CONTRACT TO

DEVELOP, PRODUCE, AND UPGRADE CRUDE OIL IN BLOCK 20, INVOLVING THE

PUNGARAYACU FIELD IN THE ECUADORIAN AMAZON REGION.

SIGNED BETWEEN:

THE ECUADORIAN STATE PETROLEUM COMPANY, PETROECUADOR, AND ITS

SUBSIDIARY, THE ECUADORIAN STATE COMPANY FOR PETROLEUM

EXPLORTATION AND PRODUCTION, PETROPRODUCCION, AND THE COMPANY

IVANHOE ENERGY ECUADOR INC.

(February 11, 2009)

1. First: Appearing Parties:

The following parties appear to sign these contract modifications: firstly, the Ecuadorian State
Petroleum Company, PETROECUADOR, and its Subsidiary, the Ecuadorian State Petroleum Company for
Exploration and Production, PETROPRODUCCION, represented by Rear Admiral Luis Aurelio Jaramillo
Arias and Ship Captain E.M.C., Camilo Delgado Montenegro, as Executive President and Vice
President, respectively, both duly authorized by the Contracting Committee of PETROPRODUCCION, as
shown through the attached documents, herein PETROECUADOR AND PETROPRODUCCION; and, secondly, the
company IVANHOE ENERGY ECUADOR INC., represented by its General Proxy in Ecuador, and therefore its
Legal Representative in Ecuador, Carlos Espinoza, as verified by the documents added hereto, herein
the CONTRACTOR, and duly authorized by the Head Office.

2. Second: Background:

Two Point One (2.1) On October 9, 2008, a specific services contract was signed for the
development, production, and upgrading of crude oil in Block 20, involving the Pungarayacu Field in
the Ecuadorian Amazon Region, between: The Ecuadorian State Petroleum Company, PETROECUADOR and its
Subsidiary, the Ecuadorian State Company for Exploration and Production of Petroleum,
PETROPRODUCCION, and the company IVANHOE ENERGY ECUADOR INC.

Two Point Two (2.2) The parties freely, spontaneously, and voluntarily, free from any
deficiency or pressure, have mutually agreed to clarify certain formal issues and interpretation of
the specific services contract for the development, production, and upgrading of crude oil in Block
20, involving the Pungarayacu Field (herein the main contract) because it is in the best interest
of the Ecuadorian State.

Two Point Three (2.3) Article 3 of the Contracting Regulation for Specific Goods and
Services of the State Petroleum Company PETROECUADOR and its subsidiary
companies establish that “PETROECUADOR and its subsidiaries may sign, according to the scope of
this regulation, any type of contract, agreement, or deal of any nature whatsoever, as long as they
are necessary to comply with their purposes as permitted by the Law.”

 

 

 

Two Point Four (2.4) The Eleventh Clause of the main contract deals with contract
modification and the procedures to be followed in such an event.

Two Point Five (2.5) Sub-clause Eleven Point One, in the pertinent section, establishes that
“This Contract may only be modified by mutual agreement between the Parties and following
authorization from the Contracting Committee...”

Two Point Six (2.6) That through Resolution No. 001-CC-VPR -2009, from January 21, 2009,
the PETROPRODUCCION Contracting Committee has authorized signing these contractual modifications to
the main contract for specific services with IVANHOE ENERGY ECUADOR INC.

Two Point Seven (2.7) That Through Resolution No. 002-CC.VPR.2009-02-05, from February 5,
2009, the PETROPRODUCCION Contracting Commitittee has authorized signing the contractual
modification to the main contract for specific services with IVANHOE ENERGY ECUADOR INC.

3. Modification:

Three Point One (3.1) In the clause Twelve Point One, “Tax Administration and Profit
Sharing,” first paragraph, after the phrase, “to include a factor,” eliminate the word “automatic,”
and at the end of this paragraph, include the phrase, “any readjustments will be made according to
clauses 9.1.2 and 12.9,” leaving the clause to read in the following way:

“The CONTRACTOR will pay income tax according to the regulations found in the Organic Law for the
Domestic Tax System, and all other regulations applicable to the subject matter. The CONTRACTOR
may deduct any investments, costs, and expenses made according to the legal framework valid in
Ecuador, and therefore, such amounts would not be subject to income tax payment. If, at some time
after the contract is signed, the tax system is modified in such a way that investments, costs, and
expenses may be deducted by the CONTRACTOR, the CONTRACTOR will have the right, from that day
forward, to include a correction factor in the form of a Contractual Payment that compensates the
economic effects any modifications to the tax regulations. Any readjustment of this kind will be done according to
clauses 9.1.2 and 12.9.”

 

 

 

Three Point Two (3.2) In clause Eighteen “Regarding Assignment of Rights,” following the
phrase on obligations derived from this Contract, eliminate the phrase, “with the authorization of
PETROPRODUCCION. If this requirement is not fulfilled, such assignment will be null and void, and
the CONTRACTOR will be responsible for any damages caused. The CONTRACTOR, under its exclusive
responsibility, may assign rights to receive amounts payable to the CONTRACTOR under this Contract
to agencies that grant financing for the operations of this Contract,” and substitute it with the
following: “according to the first and second paragraphs of Article 48 of the Hiring Regulations
for Specific Goods and Services of the State Petroleum Company PETROECUADOR and its Subsidiary
companies.” The clause would, therefore, read in the following way:

“The CONTRACTOR may assign or transfer its rights and obligations derived from this Contract
according to the first and second paragraphs of Article 48 of the Hiring Regulations for Specific
Goods and Services of the State Petroleum Company PETROECUADOR and its Subsidiary companies.”

Three Point Three (3.3) In the sub-clause Nineteen Point One, in the phrase, “to execute
this contract,” insert the word “objective” after the word this, and in the next line, add the
phrase, “observing the laws and regulations written on that subject matter, when applicable.” The
sub-clause would, therefore, read in the following way:

“The CONTRACTOR may subcontract, under its own responsibility and risk, the work or services
necessary to execute the objective of this Contract, observing the laws and regulations written on
that subject matter, when applicable. Such work and services will be executed in the CONTRACTOR’S
name, and the CONTRACTOR will maintain direct responsibility over all of the obligations
established in this Contract and derived from it, which may not be waived on the grounds of
subcontracting. PETROPRODUCCION will not assume any responsibility for this concept, even for
reasons of solidarity.”

Three Point Four (3.4) In sub-clause “Twenty four Point Two, Legal Frame of Reference,” at
the end, eliminate the phrase: “If there is any opposition from among the indicated documents, the
order or priority among them will be the following: this Contract, Laws, and Regulations,” and
replace it with the following: “Interpretation will follow clause 3 of this contract.”

 

 

 

“The legal frame of reference that is applicable to this Contract includes but is not limited to
the instruments listed below: One — Law of Hydrocarbons, enacted through Official Record No. 711,
from November 15, 1978, and its reforms. Two — Special Law for the State Petroleum Company of
Ecuador (PETROECUADOR) and its Subsidiary Companies, enacted through the Official Record No. 283,
from September 26, 1989, and its pertinent reforms and regulations. Three — the Organic Law of Tax
Equality, enacted through Official Record No. 242 from December 29, 2007. Four — Law No. 122,
which creates the Development Fund for the Provinces in the Amazon Region, which was published in
the Official Record No. 676 from May 3, 1991, and its reforms and interpretative law. Five — the
Law of Arbitration and Mediation, which was published in the Official Record No. 145 from September
, 1997, and its reforms. Six — the General Insurance Law and its reforms. Seven — the Organic
Law for Customs and its Regulations. Eight — the Substitute Regulation for Hydrocarbon Operations.
Nine — the Substitute Regulation to the Environmental Regulation for Hydrocarbon Operations in
Ecuador, which was published in the Official Record No. 265, from February 13, 2001. Ten — the
Regulations for Contracting Goods, Work, and Services for PETROECUADOR and other laws that are
valid upon signing the Contract and that were applicable to Hydrocarbon activities. Its
interpretation will be according to clause 3 of this Contract.”

4. Ratification:

All of the other clauses and appendices from the main contract No. 2008-065 that have not been
modified through this instrument will remain valid and have their full effect on the parties.

 

 

 

5. Appendices:

The documents named in the first clause of this contract will be an intrinsic part of this
contract, along with the appointments of the legal representatives of PETROECUADOR,
PETROPRODUCCION, and IVANHOE ENERGY ECUADOR INC.

	 	 	 
	CALM. Luís JARAMILLO Arias

EXECUTIVE PRESIDENT 

OF PETROECUADOR
	 	CPNV-EMC Camilo DELGADO Montenegro

VICEPRESIDENT

OF PETROPRODUCCIÓN

Mr. Carlos Espinoza

GENERAL PROXY

FOR IVANHOE ENERGY ECUADOR INC.

 

 

 

March 12, 2009

Mr. Oscar Blake

Legal Counsel

IVANHOE ENERGY (USA)INC

Av. Suite 400

Bakersfield, California

U.S.A.

Dear Sir:

Having revised and compared the Spanish and English translation of the contract modification “To
the Specific Services Contract To Develop, Produce, and Upgrade Crude Oil in Block 20, (Pungarayacu
Oil Field) in the Ecuadorean Amazon Region”, (THE CONTRACT MODIFICATION), I hereby certify the
following:

	 	a.	 	That the English translation to the CONTRACT MODIFICATION is accurate in form and
content and do not violate any Ecuadorean Law.

Kind Regards,

Mario Larrea

Senior Partner

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