Document:

Exhibit 10.5

    
      

    

    

      EXHIBIT
        10.9

      

      

      CONCESSION
        AGREEMENT FOR PETROLEUM

      

      EXPLORATION
        AND EXPLOITATION

      

      BETWEEN

      

      THE
        ARAB REPUBLIC OF EGYPT

      

      AND

      

      THE
        EGYPTIAN GENERAL PETROLEUM CORPORATION

      

      AND

      

      DOVER
        INVESTMENTS LIMITED

      

      IN

      

      

       

      EAST
        WADI
        ARABA AREA

       

      

       

      GULF
        OF SUEZ

       

      

      A.R.E.

      
        
          
          

        

        
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      This
        Agreement made and entered on this    day of     ,
        2001, by
        and between the ARAB REPUBLIC OF EGYPT (hereinafter referred to variously
        as
        "A.R.E." or as the "GOVERNMENT"), the EGYPTIAN GENERAL PETROLEUM CORPORATION,
        a
        legal entity created by Law No. 167 of 1958 as amended (hereinafter referred
        to
        variously as "EGPC") and Dover Investments Limited , a company organized
        and
        existing under the laws of Ontario,Canda (hereinafter referred to variously
        as
        "DOVER" or as "CONTRACTOR").

      

      WITNESSETH

      

      WHEREAS,
        all minerals including petroleum, existing in mines and quarries in A.R.E.,
        including the territorial waters, and in the seabed subject to its jurisdiction
        and extending beyond the territorial waters, are the property of the State;
        and

      

      WHEREAS,
        EGPC has applied for an exclusive concession for the exploration and
        exploitation of petroleum in and throughout the area referred to in Article
        II,
        and described in Annex "A" and shown approximately on Annex "B", which are
        attached hereto and made part hereof (hereinafter referred to as the "Area");
        and 

       

       

      WHEREAS,
        DOVER agree to undertake its obligations provided hereinafter as a CONTRACTOR
        with respect to the Exploration, development and production of petroleum
        in EAST
        WADI ARABA Area; and

      

      WHEREAS,
        the GOVERNMENT desires hereby to grant such Concession; and 

      

      WHEREAS,
        the Minister of Petroleum pursuant to the provisions of Law No. 86 of 1956,
        may
        enter into a concession agreement with EGPC, and with DOVER as a CONTRACTOR
        in
        the said Area.

      

      NOW,
        THEREFORE, the parties hereto agree as follows:

      
        
          
          

        

        
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      ARTICLE
        I

      

      DEFINITIONS

       

      
        	
                (a)

              	
                "Exploration"
                  shall include such geological, geophysical, aerial and other surveys
                  as
                  may be contained in the approved Work Programs and Budgets, and
                  the
                  drilling of such shot holes, core holes, stratigraphic tests, holes
                  for
                  the discovery of Petroleum or the appraisal of Petroleum discoveries
                  and
                  other related holes and wells, and the purchase or acquisition
                  of such
                  supplies, materials, services and equipment therefor, all as may
                  be
                  contained in the approved Work Programs and Budgets. The verb "explore"
                  means the act of conducting
                  Exploration.

              

      

      

      
        	
                (b)

              	
                "Development"
                  shall include, but not be limited to, all the operations and activities
                  pursuant to approved Work Programs and Budgets under this Agreement
                  with
                  respect to:

              

      

      

      
        	 	
                (i)

              	
                the
                  drilling, plugging, deepening, side tracking, re-drilling, completing,
                  equipping of development wells, the changing of the status of a
                  well,
                  and

              

      

      

      
        	 	
                (ii)

              	
                design,
                  engineering, construction, installation, servicing and maintenance
                  of
                  equipment, lines, systems facilities, plants and related operations
                  to
                  produce and operate said development wells, taking, saving, treating,
                  handling, storing, transporting and delivering petroleum, re-pressuring,
                  recycling and other secondary recovery projects,
                  and

              

      

      

      
        	 	
                (iii)

              	
                transportation,
                  storage and any other work or activities necessary or ancillary
                  to the
                  activities specified in (i) and
                  (ii).

              

      

      

      
        	
                (c)

              	
                "Petroleum"
                  means liquid crude oil of various densities, asphalt, gas, casinghead
                  gas
                  and all other hydrocarbon substances that may be found in, and
                  produced,
                  or otherwise obtained and saved from the Area under this Agreement,
                  and
                  all substances that may be extracted
                  therefrom.

              

      

      

      
        	
                (d)

              	
                "Liquid
                  Crude Oil" or "Crude Oil" or "Oil" means any hydrocarbon produced
                  from the
                  Area which is in a liquid state at the wellhead or lease separators
                  or
                  which is extracted from the gas or casinghead gas in a plant. Such
                  liquid
                  state shall exist at sixty degrees Fahrenheit (60OF)
                  and atmospheric pressure of 14.65 PSIA. Such term includes distillate
                  and
                  condensate.

              

      

      

      
        	
                (e)

              	
                "Gas"
                  means natural gas both associated and non-associated, and all of
                  its
                  constituent elements produced from any well in the Area (other
                  than Liquid
                  Crude Oil) and all non-hydrocarbon substances therein. Said term
                  shall
                  include residual gas, that Gas remaining after removal of
                  LPG.

              

      

      

      
        	
                (f)

              	
                "LPG"
                  means liquefied petroleum gas, which is a mixture principally of
                  butane
                  and propane liquefied by pressure and
                  temperature.

              

      

      

      
        	
                (g)

              	
                A
                  "Barrel" shall consist of forty-two (42) United States gallons,
                  liquid
                  measure, corrected to a temperature of sixty degrees Fahrenheit
                  (60OF)
                  at atmospheric pressure of 14.65
                  PSIA.

              

      

      
        
          
          

        

        
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                (h)  (1)

              	
                "Commercial
                  Oil Well" means the first well on any geological feature which
                  after
                  testing for a period of not more than thirty (30) consecutive days
                  where
                  practical, but in any event in accordance with sound and accepted
                  industry
                  production practices, and verified by EGPC, is found to be capable
                  of
                  producing at the average rate of not less than two thousand (2000)
                  Barrels
                  of oil per day (BOPD). The date of discovery of a "Commercial Oil
                  Well" is
                  the date on which such well is tested and completed according to
                  the
                  above.

              

      

       

      
        	 	
                (2)

              	
                "Commercial
                  Gas Well" means the first well on any geological feature which
                  after
                  testing for a period of not more than thirty (30) consecutive days
                  where
                  practical, but in any event in accordance with sound and accepted
                  industry
                  production practices and verified by EGPC, is found to be capable
                  of
                  producing at the average rate of not less than fifteen million
                  (15,000,000) standard cubic feet of Gas per day (MMSCFD). The date
                  of
                  discovery of a "Commercial Gas Well" is the date on which such
                  well is
                  tested and completed according to the
                  above.

              

      

      

      
        	
                (i)

              	
                "A.R.E."
                  means ARAB REPUBLIC OF EGYPT.

              

      

      

      
        	
                (j)

              	
                "Effective
                  Date" means the date on which the text of this Agreement is signed
                  by the
                  GOVERNMENT, EGPC and CONTRACTOR, after the relevant Law is
                  issued.

              

      

      

      
        	
                (k)  
                  (1)

              	
                "Year"
                  means a period of twelve (12) months according to the Gregorian
                  Calendar.

              

      

      

      
        	 	
                (2)

              	
                "Calendar
                  Year" means a period of twelve (12) months according to the Gregorian
                  Calendar being 1st January to 31st
                  December.

              

      

      

      
        	
                (l)

              	
                "Financial
                  Year" means the GOVERNMENT's financial year according to the laws
                  and
                  regulations of the A.R.E.

              

      

       

      
        	
                (m)

              	
                "Tax
                  Year" means the period of twelve (12) months according to the laws
                  and
                  regulations of the A.R.E.

              

      

      

      
        	
                (n)

              	
                An
                  "Affiliated Company" means a
                  company:

              

      

      
        
          
          

        

        
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                (i)

              	
                of
                  which the share capital, conferring a majority of votes at stockholders'
                  meetings of such company, is owned directly or indirectly by a
                  party
                  hereto; or

              

      

       

      

      
        	 	
                (ii)

              	
                which
                  is the owner directly or indirectly of share capital conferring
                  a majority
                  of votes at stockholders' meetings of a party hereto; or
                  

              

      

      

      
        	 	
                (iii)

              	
                of
                  which the share capital conferring a majority of votes at stockholder's
                  meetings of such company and the share capital conferring a majority
                  of
                  votes at stockholders' meetings of a party hereto are owned directly
                  or
                  indirectly by the same company.

              

      

      

      
        	
                (o)

              	
                "Exploration
                  Block" shall mean an area, the corner points of which have to be
                  coincident with three (3) minutes by three (3) minutes latitude
                  and
                  longitude divisions, according to the International Grid System
                  where
                  possible or with the existing boundaries of the Area covered by
                  this
                  Concession Agreement as set out in Annex
                  "A".

              

      

      

      
        	
                (p)

              	
                "Development
                  Block" shall mean an area, the corner points of which have to be
                  coincident with one (1) minute by one (1) minute latitude and longitude
                  divisions, according to the International Grid System where possible
                  or
                  with the existing boundaries of the Area covered by this Concession
                  Agreement as set out in Annex "A".

              

      

      

      
        	
                (q)

              	
                "Development
                  Lease(s)" shall mean the Development Block or Blocks covering the
                  geological structure capable of production, the corner points of
                  which
                  have to be coincident with one (1) minute by one (1) minute latitude
                  and
                  longitude divisions according to the International Grid System
                  where
                  possible or with the existing boundaries of the Area covered by
                  this
                  Concession Agreement as set out in Annex
                  "A".

              

      

      

      
        	
                (r)

              	
                "Agreement"
                  shall mean this Concession Agreement and its
                  Annexes.

              

      

      

      
        	
                (s)

              	
                "Gas
                  Sales Agreement" shall mean a written agreement between EGPC and
                  CONTRACTOR (as sellers) and EGPC (as buyer), which contains the
                  terms and
                  conditions for Gas sales from a Development Lease entered into
                  pursuant to
                  Article VII (e).

              

      

      

      
        	
                (t)

              	
                "Standard
                  Cubic Foot" (SCF) is the amount of Gas necessary to fill one (1)
                  cubic
                  foot of space at atmospheric pressure of 14.65 PSIA at a base temperature
                  of sixty degrees Fahrenheit (60o
                  F).

              

      

      
        
          
          

        

        
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      ARTICLE
        II

      

      ANNEXES
        TO THE AGREEMENT

      

      Annex
        "A"
        is a description of the area covered and affected by this Agreement, hereinafter
        referred to as the "Area".

       

      Annex
        "B"
        is a provisional illustrative map on the scale of approximately 1 : 500,000
        indicating the Area covered and affected by this Agreement and described
        in
        Annex "A".

      

      Annex
        "C"
        is the form of a Letter of Guaranty to be submitted by DOVER INVESTMENT LIMITED
        to EGPC one (1) day before the time of signature by the Minister of Petroleum
        of
        this Agreement, for guaranteeing the execution of CONTRCATOR’s minimum
        Exploration obligations hereunder for the initial three (3) year Exploration
        period by paying and/or transferring a quantity of crude oil sufficient in
        value
        to cover the shortfall between the sum of three million and five hundred
        thousand (3,500,000 )U.S. Dollars and the amount of money spent by CONTRACTOR
        and approved by EGPC . In case CONTRACTOR extends the initial Exploration
        Period
        for Two (2) additional periods each of two (2) years respectively, each in
        accordance with Article III (b) of the Agreement, a similar Letter of Guaranty
        shall be issued and be submitted by CONTRACTOR on the day the CONTRACTOR
        exercises its option to extend. The first such letter of Guaranty shall be
        for
        guaranteeing the payment and/or transfer of a quantity of crude oil sufficient
        in value to cover the shortfall between the sum of four million U.S. Dollars
        ($4,000,000) and the amount of money spent by CONTRACTOR and approved by
        EGPC
        and the second such Letter of Guaranty shall be guaranteeing the payment
        and/or
        transfer of a quantity of crude oil sufficient in value to cover the shortfall
        between the sum of four million and five hundred thousand U.S.Dollars
        ($4,500,000) and the amount of money spent by CONTRACTOR and approved by
        EGPC
        less in both instances any excess expenditures of the preceding Exploration
        period permitted for carry forward in accordance with Article IV (b) third
        paragraph of this Agreement. Each of the three Letters of Guaranty shall
        remain
        effective for six (6) months after the end of the relevant Exploration period.
        

       

      It
        is
        understood that EGPC at any time has the right to give notice to CONTRACTOR
        to
        submit a bank letter of guarantee, in case the letter of guarantee by production
        is not sufficient to cover his financial obligations for the current period
        (s).

       

      Annex
        "D"
        is the form of a Charter of the Operating Company to be formed as provided
        for
        in Article VI hereof.

      

      Annex
        "E"
        is the Accounting Procedure.

      

      Annex
        "F"
        is a current map of the National Gas Pipeline Grid System established by
        the
        Government. The point of delivery for gas shall be agreed upon by EGPC and
        CONTRACTOR under a Gas Sales Agreement, which point of delivery shall be
        located
        at the flange connecting the development lease pipeline to the nearest point
        on
        the National Gas pipeline Grid System as depicted in Annex "F" or as otherwise
        agreed by EGPC and CONTRACTOR .

      
        
          
          

        

        
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      Annexes
        "A", "B", "C", "D","E" and "F" to this Agreement are hereby made part hereof,
        and they shall be considered as having equal force and effect with the
        provisions of this Agreement.

      

      

      ARTICLE
        III

      

      GRANT
        OF
        RIGHTS AND TERM

      

      

      The
        GOVERNMENT hereby grants EGPC and CONTRACTOR subject to the terms, covenants
        and
        conditions set out in this Agreement, which insofar as they are contrary
        to or
        inconsistent with any provisions of Law No. 66 of 1953, as amended, shall
        have
        the force of Law, an exclusive concession in and to the Area described in
        Annexes "A" and "B".

      

      
        	
                (a)

              	
                The
                  GOVERNMENT shall own and be entitled, as hereinafter provided to
                  a royalty
                  in cash or in kind of ten percent (10%) of the total quantity of
                  Petroleum
                  produced and saved from the Area during the development period
                  including
                  renewal. Said royalty shall be borne and paid by EGPC and shall
                  not be the
                  obligation of CONTRACTOR. The payment of royalties by EGPC shall
                  not be
                  deemed to result in income attributable to the
                  CONTRACTOR.

              

      

      

      
        	
                (b)

              	
                An
                  initial Exploration period of three (3) years shall start from
                  the
                  Effective Date. Two (2) successive extensions to the initial Exploration
                  period, each of two (2) years respectively, shall be granted to
                  CONTRACTOR
                  at its option, upon not less than thirty (30) days prior written
                  notice to
                  EGPC, such notice to be given not later than the end of the then
                  current
                  period, as may be extended pursuant to the provisions of Article
                  V (a),
                  and subject only to its having fulfilled its obligations hereunder
                  for
                  that period. This Agreement shall be terminated if neither a Commercial
                  Oil Discovery nor a Commercial Gas Discovery is established by
                  the end of
                  the seventh (7th) year of the Exploration period, as may be extended
                  pursuant to Article V (a). The election by EGPC to undertake a
                  sole risk
                  venture under paragraph (c) shall not extend the Exploration period
                  nor
                  affect the termination of this Agreement as to
                  CONTRACTOR.

              

      

      
 

      
        	
                (c)

              	
                Commercial
                  Discovery:

              

      

      

      
        	 	
                (i)

              	
                A
                  Commercial Discovery - whether of Oil or Gas - may consist of one
                  producing reservoir or a group of producing reservoirs, which is
                  worthy of
                  being developed commercially. After discovery of a Commercial Oil
                  or Gas
                  Well CONTRACTOR shall, unless otherwise agreed upon with EGPC,
                  undertake
                  as part of its Exploration program the appraisal of the discovery
                  by
                  drilling one or more appraisal wells, to determine whether such
                  discovery
                  is worthy of being developed commercially, taking into consideration
                  the
                  recoverable reserves, production, pipeline and terminal facilities
                  required, estimated Petroleum prices, and all other relevant technical
                  and
                  economic factors.

              

      

      
        
          
          

        

        
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                (ii)

              	
                The
                  provisions laid down herein postulate the unity and indivisibility
                  of the
                  concepts of Commercial Discovery and Development Lease. They shall
                  apply
                  uniformly to Oil and Gas unless otherwise
                  specified.

              

      

      

      
        	 	
                (iii)

              	
                CONTRACTOR
                  shall give notice of a Commercial Discovery to EGPC immediately
                  after the
                  discovery is considered by CONTRACTOR to be worthy of commercial
                  development but in any event with respect to a Commercial Oil Well
                  not
                  later than thirty (30) days following the completion of the second
                  appraisal well or twelve (12) months following the date of the
                  discovery
                  of the Commercial Oil Well, whichever is earlier or with respect
                  to a
                  Commercial Gas Well not later than twenty four (24) months following
                  the
                  date of the discovery of the Commercial Gas Well (unless EGPC agrees
                  that
                  such period may be extended) except that CONTRACTOR shall also
                  have the
                  right to give such notice of Commercial Discovery with respect
                  to any
                  reservoir or reservoirs even if the well or wells thereon are not
                  "Commercial" within the definition of "Commercial Well" if, in
                  its
                  opinion, a reservoir or a group of reservoirs, considered collectively,
                  could be worthy of commercial
                  development.

              

      

       

      CONTRACTOR
        may also give a notice of a Commercial Oil Discovery in the event it wishes
        to
        undertake a Gas Recycling Project.

       

      A
        notice
        of Commercial Gas Discovery shall contain all detailed particulars of the
        discovery and especially the area of Gas reserves, the estimated production
        potential and profile and field life.

       

      Within
        sixty (60) days following receipt of a notice of a Commercial Oil or Gas
        Discovery, EGPC and CONTRACTOR shall meet and review all appropriate data
        with a
        view to mutually agreeing upon the existence of a Commercial Discovery. The
        date
        of Commercial Discovery shall be the date EGPC and CONTRACTOR jointly agree
        in
        writing that a Commercial Discovery exists.

       

      
        	
                (iv)

              	
                If
                  Crude Oil is discovered but is not deemed by CONTRACTOR to be a
                  Commercial
                  Oil Discovery under the above provisions of this paragraph (c),
                  EGPC shall
                  one (1) month after the expiration of the period specified above
                  within
                  which CONTRACTOR can give notice of a Commercial Oil Discovery,
                  or
                  thirteen (13) months after the completion of a well not considered
                  to be a
                  "Commercial Oil Well", have the right, following sixty (60) days
                  notice in
                  writing to CONTRACTOR, at its sole cost, risk and expense, to develop,
                  produce and dispose of all Crude Oil from the geological feature
                  on which
                  the well has been drilled. Said notice shall state the specific
                  area
                  covering said geological feature to be developed, the wells to
                  be drilled,
                  the production facilities to be installed and EGPC's estimated
                  cost
                  thereof. Within thirty (30) days after receipt of said notice CONTRACTOR
                  may, in writing, elect to develop such area as provided for in
                  the case of
                  Commercial Discovery hereunder. In such event all terms of this
                  Agreement
                  shall continue to apply to the specified
                  area.

              

      

      
        
          
          

        

        
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      If
        CONTRACTOR elects not to develop such area, the specific area covering said
        geological feature shall be set aside for sole risk operations by EGPC, such
        area to be mutually agreed upon by EGPC and CONTRACTOR on the basis of good
        petroleum industry practice. EGPC shall be entitled to perform or in the
        event
        Operating Company has come into existence, to have Operating Company perform
        such operations for the account of EGPC and at EGPC's sole cost, risk and
        expense. When EGPC has recovered from the Crude Oil produced from such specific
        area a quantity of Crude Oil equal in value to three hundred percent (300%)
        of
        the cost it has incurred in carrying out the sole risk operations, CONTRACTOR
        shall have the option, only in the event there has been a separate Commercial
        Oil Discovery, elsewhere within the Area, to share in further development
        and
        production of that specific area upon paying EGPC one hundred percent (100%)
        of
        such costs incurred by EGPC.

      

      

      Such
        one
        hundred percent (100%) payment shall not be recovered by CONTRACTOR. Immediately
        following such payment the specific area shall either (i) revert to the status
        of an ordinary Development Lease under this Agreement and thereafter shall
        be
        operated in accordance with the terms hereof; or (ii) alternatively, in the
        event that at such time EGPC or its Affiliated Company is conducting Development
        operations in the area at its sole expense and EGPC elects to continue
        operating, the area shall remain set aside and CONTRACTOR shall only be entitled
        to its production sharing percentages of the Crude Oil as specified in Article
        VII (b). The sole risk Crude Oil shall be valued in the manner provided in
        Article VII (c). In the event of any termination of this Agreement under
        the
        provisions of Article III (b), this Agreement shall, however, continue to
        apply
        to EGPC's operation of any sole risk venture hereunder, although such Agreement
        shall have been terminated with respect to CONTRACTOR pursuant to the provisions
        of Article III (b) .

      

      
        	
                (d)

              	
                Conversion
                  to a Development Lease:

              

      

      

      
        	 	
                (i)

              	
                Following
                  a Commercial Oil Discovery or a Commercial Gas Discovery the extent
                  of the
                  whole area capable of production to be covered by a Development
                  Lease
                  shall be mutually agreed upon by EGPC and CONTRACTOR and be subject
                  to the
                  approval of the Minister of Petroleum. Such area shall be converted
                  automatically into a Development Lease without the issue of any
                  additional
                  legal instrument or permission.

              

      

      
        
          
          

        

        
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                (ii)

              	
                Following
                  the conversion of an area to a Development Lease based on a Commercial
                  Gas
                  Discovery (or upon the discovery of Gas in a Development Lease
                  granted
                  following a Commercial Oil Discovery), EGPC shall endeavor with
                  diligence
                  to find adequate local markets capable of absorbing the production
                  of Gas
                  and shall advise CONTRACTOR of the potential outlets for such Gas,
                  and the
                  expected annual schedule of demand. Thereafter, EGPC and CONTRACTOR
                  shall
                  meet with a view to assessing whether the outlets for such Gas
                  and other
                  relevant factors warrant the development and production of the
                  Gas and in
                  case of agreement the Gas thus made available shall be disposed
                  of to EGPC
                  under a long-term Gas Sales Agreement in accordance with and subject
                  to
                  the conditions set forth in Article VII
                  .

              

      

      

      
        	 	
                (iii)

              	
                The
                  Development period of each Development Lease shall be as
                  follows:

              

      

       

      
        	 	
                (aa)

              	
                In
                  respect of a Commercial Oil Discovery, twenty (20) years from the
                  date of
                  such Commercial Discovery plus the Optional Extension Period (as
                  defined
                  below) provided that, in the event that, subsequent to the conversion
                  of a
                  Commercial Oil Discovery into a Development Lease, Gas is discovered
                  in
                  the same Development Lease and is used or is capable of being used
                  locally
                  or for export hereunder, the period of the Development Lease shall
                  be
                  extended only with respect to such Gas, LPG extracted from such
                  Gas and
                  Crude Oil in the form of condensate produced with such Gas for
                  twenty (20)
                  years from the date of first deliveries of Gas locally or for export
                  plus
                  the Optional Extension Period (as defined below) provided that
                  the
                  duration of such Development Lease based on a Commercial Oil Discovery
                  may
                  not be extended beyond thirty-five (35) years from the date of
                  such
                  Commercial Oil Discovery, unless otherwise agreed upon between
                  EGPC and
                  CONTRACTOR and subject to the approval of the Minister of
                  Petroleum.

              

      

      

      
        	 	 	
                CONTRACTOR
                  shall immediately notify EGPC of any Gas Discovery but shall not
                  be
                  required to apply for a new Development Lease in respect of such
                  Gas.

              

      

       

      
        	 	
                (bb)

              	
                In
                  respect of a Commercial Gas Discovery, twenty (20) years from the
                  date of
                  first deliveries of Gas locally or for export plus the Optional
                  Extension
                  Period (as defined below) provided that, if subsequent to the conversion
                  of a Commercial Gas Discovery into a Development Lease, Crude Oil
                  is
                  discovered in the same Development Lease, CONTRACTOR's share of
                  such Crude
                  Oil from the Development Lease (except LPG extracted from Gas or
                  Crude Oil
                  in the form of condensate produced with Gas) and Gas associated
                  with such
                  Crude Oil shall revert entirely to EGPC upon the lapse of twenty
                  (20)
                  years from the date of such Crude Oil Discovery plus the Optional
                  Extension Period (as defined
                  below).

              

      

      
        
          
          

        

        
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                Notwithstanding,
                  anything to the contrary under this Agreement, the duration of
                  a
                  Development Lease based on a Commercial Gas Discovery shall in
                  no case
                  exceed thirty-five (35) years from the date of such Commercial
                  Gas
                  Discovery, unless otherwise agreed upon between EGPC and CONTRACTOR
                  and
                  subject to the approval of the Minister of Petroleum.
                  

              

      

      

      
        	 	 	
                CONTRACTOR
                  shall immediately notify EGPC of any Oil Discovery but shall not
                  be
                  required to apply for a new Development Lease in respect of such
                  Crude
                  Oil.

              

      

      

      
        	 	 	
                The
                  "Optional Extension Period" shall mean a period of five (5) years
                  which
                  may be elected by CONTRACTOR upon six (6) months written notice
                  to EGPC
                  prior to the expiry of the relevant twenty (20) year
                  period.

              

      

      

      
        	
                (e)

              	
                Development
                  operations shall upon the issuance of a Development Lease granted
                  following a Commercial Oil Discovery, be started promptly by Operating
                  Company and be conducted in accordance with good oil field practices
                  and
                  accepted petroleum engineering principles, until the field is considered
                  to be fully developed, it being understood that if associated gas
                  is not
                  utilized, EGPC and CONTRACTOR shall negotiate in good faith on
                  the best
                  way to avoid impairing the production in the interests of the
                  parties.

              

      

      

      In
        the
        event no Commercial Production of Oil in regular shipments is established
        in any
        Development Block within four (4) years from the date of the Commercial Oil
        Discovery, such Development Block shall immediately be relinquished, unless
        there is a Commercial Gas discovery on the Development Lease. Each Development
        Block in a Development Lease being partly within the radius of drainage of
        any
        producing well in such Development Lease shall be considered as participating
        in
        the Commercial Production referred to above.

      

      Development
        operations in respect of Gas and Crude Oil in the form of condensate or LPG
        to
        be produced with or extracted from such Gas shall, upon the signature of
        a Gas
        Sales Agreement or commencement of a scheme to dispose of the Gas, whether
        for
        export as referred to in Article VII or otherwise, be started promptly by
        Operating Company and be conducted in accordance with good gas field practices
        and accepted petroleum engineering principles and the provisions of such
        Agreement or scheme. In the event no Commercial Production of Gas is established
        in accordance with such Gas Sales Agreement or scheme, the Development Lease
        relating to such Gas shall be relinquished, unless otherwise agreed upon
        by
        EGPC.

       

      If,
        upon
        application by CONTRACTOR it is recognized by EGPC that Crude Oil or Gas
        is
        being drained from an Exploration block under this Agreement into a Development
        Block on an adjoining concession area held by CONTRACTOR, the Block being
        drained shall be considered as participating in the Commercial Production
        of the
        Development Block in question and the Block being drained shall be converted
        into a Development Lease with the ensuing allocation of costs and production
        (calculated from the Effective Date or the date such drainage occurs, whichever
        is later) between the two Concession Areas. The allocation of such costs
        and
        production under each Concession Agreement shall be in the same portion that
        the
        recoverable reserves in the drained geological structure underlying each
        Concession Area bears to the total recoverable reserves of such structure
        underlying both Concession Areas. The production allocated to a concession
        area
        shall be priced according to the concession agreement covering that concession
        area.

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      
        	
                (f)

              	
                CONTRACTOR
                  shall bear and pay all the costs and expenses required in carrying
                  out all
                  the operations under this Agreement but such costs and expenses
                  shall not
                  include any interest on investment. CONTRACTOR shall look only
                  to the
                  Petroleum to which it is entitled under this Agreement to recover
                  such
                  costs and expenses. Such costs and expenses shall be recoverable
                  as
                  provided in Article VII. During the term of this Agreement and
                  its
                  renewal, the total production achieved in the conduct of such operations
                  shall be divided between EGPC and CONTRACTOR in accordance with
                  the
                  provisions of Article VII.

              

      

      

      
        	
                (g)

              	
                (1)
                  Unless otherwise provided, CONTRACTOR shall be subject to Egyptian
                  income
                  tax laws and shall comply with the requirements of such laws with
                  respect
                  to the filing of returns, the assessment of tax, and keeping and
                  showing
                  of books and records.

              

      

      

      
        	 	
                (2)

              	
                CONTRACTOR's
                  annual income for Egyptian income tax purposes under this Agreement
                  shall
                  be an amount calculated as follows:

              

      

      

      The
        total
        of the sums received by CONTRACTOR from the sale or other disposition of
        all
        Petroleum acquired by CONTRACTOR pursuant to Article VII (a) and Article
        VII
        (b);

       

      Reduced
        by:

      

      
        	 	
                (i)

              	
                The
                  costs and expenses of CONTRACTOR; 

              

      

      

      
        	 	
                (ii)

              	
                The
                  value as determined according to Article VII (c), of EGPC's share
                  of the
                  Excess Cost Recovery Petroleum repaid to EGPC in cash or in kind,
                  if
                  any,

              

      

      

      Plus:

      

      An
        amount
        equal to CONTRACTOR's Egyptian income taxes grossed up in the manner shown
        in
        Article VI of Annex "E" .

      

      For
        purposes of above tax deductions in any Tax Year, Article VII (a) shall apply
        only in respect of classification of costs and expenses and rates of
        amortization, without regard to the percentage limitation referred to in
        the
        first paragraph of Article VII (a) (1). All costs and expenses of CONTRACTOR
        in
        conducting the operations under this Agreement which are not controlled by
        Article VII (a) as above qualified shall be deductible in accordance with
        the
        provisions of the Egyptian Income Tax Law.

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      
        	
                (3)

              	
                EGPC
                  shall assume, pay and discharge, in the name and on behalf of CONTRACTOR,
                  CONTRACTOR's Egyptian income tax out of EGPC's share of the Petroleum
                  produced and saved and not used in operations under Article VII.
                  All taxes
                  paid by EGPC in the name and on behalf of CONTRACTOR shall be considered
                  income to CONTRACTOR.

              

      

      

      
        	
                (4)

              	
                EGPC
                  shall furnish to CONTRACTOR the proper official receipts evidencing
                  the
                  payment of CONTRACTOR's Egyptian income tax for each Tax Year within
                  ninety (90) days following the receipt by EGPC of CONTRACTOR's
                  tax
                  declaration for the preceding Tax Year. Such receipts shall be
                  issued by
                  the proper Tax Authorities and shall state the amount and other
                  particulars customary for such
                  receipts.

              

      

      

      
        	
                (5)

              	
                As
                  used herein, Egyptian Income Tax shall be inclusive of all income
                  taxes
                  payable in the A.R.E. (including tax on tax) such as the tax on
                  income
                  from movable capital and the tax on profits from commerce and industry
                  and
                  inclusive of taxes based on income or profits including all dividends,
                  withholding with respect to shareholders and other taxes imposed
                  by the
                  GOVERNMENT of A.R.E. on the distribution of income or profits by
                  CONTRACTOR.

              

      

      

      
        	
                (6)

              	
                In
                  calculating its A.R.E. income taxes, EGPC shall be entitled to
                  deduct all
                  royalties paid by EGPC to the GOVERNMENT and CONTRACTOR's Egyptian
                  income
                  taxes paid by EGPC on CONTRACTOR's
                  behalf.

              

      

      

      

      ARTICLE
        IV

      

      WORK
        PROGRAM AND EXPENDITURES

      

      DURING
        EXPLORATION PERIOD

      

      

      
        	
                (a)

              	
                CONTRACTOR
                  shall commence Exploration operations hereunder not later than
                  six (6)
                  months after the Effective Date. Not later than the end of the
                  Twelfth
                  (12th
                  )
                  month after the Effective Date, CONTRACTOR shall start Exploratory
                  drilling operations in the Area during the initial Exploration
                  period with
                  a commitment of drilling two (2) well(s). EGPC shall make available
                  for
                  CONTRACTOR's use all seismic, wells and other Exploration data
                  in EGPC's
                  possession with respect to the Area as EGPC is entitled to so
                  do.

              

      

      

        
          
            
            

          

          
            13

            
              

            

          

          
            
            

          

        

      

       

      
        	
                (b)

              	
                The
                  initial Exploration period shall be three (3) years. CONTRACTOR
                  may extend
                  this Exploration period for two(2) successive extension periods
                  each of
                  two (2 ) years respectively in accordance with Article III (b),
                  each of
                  which upon at least thirty (30) days prior written notice to EGPC,
                  subject
                  to its expenditure of its minimum Exploration obligations and of
                  its
                  fulfillment of the drilling obligations hereunder, for the then
                  current
                  period.

              

      

      

      CONTRACTOR
        shall spend a minimum of three million and five hundred thousand ($3,500,000)
        U.S. Dollars on Exploration operations and activities related thereto during
        the
        initial three (3) year Exploration period; provided that CONTRACTOR shall
        drill
        two (2) well(s). For the first two (2) year extension period that CONTRACTOR
        elects to extend beyond the initial Exploration period, CONTRACTOR shall
        spend a
        minimum of four million ($4,000,000 ) U.S. Dollars and for the second two
        (2)
        year extension period that CONTRACTOR elects to extend beyond the two ( 2
        ) year
        first extension period, CONTRACTOR shall also spend a minimum of four million
        and five hundred thousand ($4,500,000) U.S. Dollars. During each of the first
        and second extension periods that CONTRACTOR elects to extend beyond the
        initial
        Exploration period, CONTRACTOR shall drill two (2) well(s) .

      

      Should
        CONTRACTOR spend more than the minimum amount required to be expended or
        drill
        more wells than the minimum required to be drilled during the initial three
        (3)
        year Exploration period, or during any period thereafter, the excess may
        be
        subtracted from the minimum amount of money required to be expended by
        CONTRACTOR or minimum number of wells required to be drilled during any
        succeeding Exploration period(s) , as the case may be.

      

      In
        case
        CONTRACTOR surrenders its Exploration rights under this Agreement as set
        forth
        above before or at the end of the three(3) years of the initial Exploration
        period, having expended less than the total sum of three million and five
        hundred thousand ($3,500,000) U.S. Dollars, on Exploration or in the event
        at
        the end of the three (3) years, CONTRACTOR has expended less than said sum
        in
        the Area, an amount equal to the difference between the said three million
        and
        five hundred thousand ($3,500,000) U.S. Dollars and the amount actually spent
        on
        Exploration shall be paid by CONTRACTOR to EGPC at the time of surrendering
        or
        within six (6) months from the end of the three (3) year of the initial
        Exploration period, as the case may be. Any expenditure deficiency by CONTRACTOR
        at the end of any additional period for the reasons above noted shall similarly
        result in a payment by CONTRACTOR to EGPC of such deficiency. Provided this
        Agreement is still in force as to CONTRACTOR, CONTRACTOR shall be entitled
        to
        recover any such payments as Exploration expenditure in the manner provided
        for
        under Article VII in the event of Commercial Production.

      

      Without
        prejudice to Article III (b), in case no Commercial Oil Discovery is established
        or no notice of Commercial Gas Discovery is given by the end of the seventh
        (7th) year, as may be extended pursuant to Article V (a) or in case CONTRACTOR
        surrenders the Area under this Agreement prior to such time, EGPC shall not
        bear
        any of the aforesaid expenses spent by CONTRACTOR.

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      
        	
                (c)

              	
                At
                  least four (4) months prior to the beginning of each Financial
                  Year or at
                  such other times as may mutually be agreed to by EGPC and CONTRACTOR,
                  CONTRACTOR shall prepare an Exploration Work Program and Budget
                  for the
                  Area setting forth the Exploration operations which CONTRACTOR
                  proposes to
                  carry out during the ensuing Year.

              

      

      

      The
        Exploration Work Program and Budget shall be reviewed by a joint committee
        to be
        established by EGPC and CONTRACTOR after the Effective Date of this Agreement.
        This Committee, hereinafter referred to as the "Exploration Advisory Committee",
        shall consist of six (6) members, three (3) of whom shall be appointed by
        EGPC
        and three (3) by CONTRACTOR. The Chairman of the Exploration Advisory Committee
        shall be designated by EGPC from among the members appointed by it. The
        Exploration Advisory Committee shall review and give such advice as it deems
        appropriate with respect to the proposed Work Program and Budget. Following
        review by the Exploration Advisory Committee, CONTRACTOR shall make such
        revisions as CONTRACTOR deems appropriate and submit the Exploration Work
        Program and Budget to EGPC for its approval.

      

      Following
        such approval, it is further agreed that:

      

      
        	 	
                (i)

              	
                CONTRACTOR
                  shall not substantially revise or modify said Work Program and
                  Budget nor
                  reduce the approved budgeted expenditure without the approval of
                  EGPC;

              

      

      

      
        	 	
                (ii)

              	
                In
                  the event of emergencies involving danger of loss of lives or property,
                  CONTRACTOR may expend such additional unbudgeted amounts as may
                  be
                  required to alleviate such danger. Such expenditure shall be considered
                  in
                  all aspects as Exploration expenditure and shall be recovered pursuant
                  to
                  the provisions of Article VII
                  hereof.

              

      

      

      

      
        	
                (d)

              	
                CONTRACTOR
                  shall advance all necessary funds for all materials, equipment,
                  supplies,
                  personnel administration and operations pursuant to the Exploration
                  Work
                  Program and Budget and EGPC shall not be responsible to bear or
                  repay any
                  of the aforesaid costs.

              

      

      

      
        	
                (e)

              	
                CONTRACTOR
                  shall be responsible for the preparation and performance of the
                  Exploration Work Program which shall be implemented in a workmanlike
                  manner and consistent with good industry practices.
                  

              

      

      

      Except
        as
        is appropriate for the processing of data, specialized laboratory engineering
        and development studies thereon, to be made in specialized centers outside
        A.R.E., all geological and geophysical studies as well as any other studies
        related to the performance of this Agreement, shall be made in the
        A.R.E.

      

        
          
            
            

          

          
            15

            
              

            

          

          
            
            

          

        

      

       

      CONTRACTOR
        shall entrust the management of Exploration operations in the A.R.E. to its
        technically competent General Manager and Deputy General Manager. The names
        of
        such Manager and Deputy General Manager shall, upon appointment, be forthwith
        notified to the GOVERNMENT and to EGPC. The General Manager and, in his absence,
        the Deputy General Manager shall be entrusted by CONTRACTOR with sufficient
        powers to carry out immediately all lawful written directions given to them
        by
        the GOVERNMENT or its representative under the terms of this Agreement. All
        lawful regulations issued or hereafter to be issued which are applicable
        hereunder and not in conflict with this Agreement shall apply to
        CONTRACTOR.

       

      
        	
                (f)

              	
                CONTRACTOR
                  shall supply EGPC, within thirty (30) days from the end of each
                  calendar
                  quarter, with a Statement of Exploration activity showing costs
                  incurred
                  by CONTRACTOR during such quarter. CONTRACTOR's records and necessary
                  supporting documents shall be available for inspection by EGPC
                  at any time
                  during regular working hours for three (3) months from the date
                  of
                  receiving each statement.

              

      

      

      Within
        the three (3) months from the date of receiving such Statement, EGPC shall
        advise CONTRACTOR in writing if it considers:

       

      
        	 	
                (1)

              	
                that
                  the record of costs is not correct;

              

      

      

      
        	 	
                (2)

              	
                that
                  the costs of goods or services supplied are not in line with the
                  international market prices for goods or services of similar quality
                  supplied on similar terms prevailing at the time such goods or
                  services
                  were supplied, provided however, that purchases made and services
                  performed within the A.R.E. shall be subject to Article
                  XXVI;

              

      

      

      
        	 	
                (3)

              	
                that
                  the condition of the materials furnished by CONTRACTOR does not
                  tally with
                  their prices; or

              

      

      

      
        	 	
                (4)

              	
                that
                  the costs incurred are not reasonably required for
                  operations.

              

      

      

      CONTRACTOR
        shall confer with EGPC in connection with the problem thus presented, and
        the
        parties shall attempt to reach a settlement, which is mutually
        satisfactory.

       

      Any
        reimbursement due to EGPC out of the Cost Recovery Petroleum as a result
        of
        reaching agreement or of an arbitral award shall be promptly made in cash
        to
        EGPC, plus simple interest at LIBOR plus two and half percent (2.5 %) per
        annum
        from the date on which the disputed amount(s) would have been paid to EGPC
        according to Article VII (a) (2) and Annex "E" of this Agreement (i.e., the
        date
        of rendition of the relevant Cost Recovery Statement) to the date of payment.
        The LIBOR rate applicable shall be the average of the figure or figures
        published by the Financial Times representing the mid-point of the rates
        (bid
        and ask) applicable to one month U.S. Dollars deposits in the London Interbank
        Eurocurrency Market on each fifteenth (15th) day of each month occurring
        between
        the date on which the disputed amount(s) would have been paid to EGPC and
        the
        date on which it is settled.

       

      
        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

      

      

      If
        the
        LIBOR rate is available on any fifteenth (15th) day but is not published
        in the
        Financial Times in respect of such day for any reason, the LIBOR rate chosen
        shall be that offered by Citibank N.A. to other leading banks in the London
        Interbank Eurocurrency Market for one month U.S. Dollar deposits.

      

      If
        such
        fifteenth (15th) day is not a day on which LIBOR rates are quoted in the
        London
        Interbank Eurocurrency Market, the LIBOR rate to be used shall be that quoted
        on
        the next following day on which such rates are quoted.

       

      If
        within
        the time limit of the three (3) month period provided for in this paragraph,
        EGPC has not advised CONTRACTOR of its objection to any Statement, such
        Statement shall be considered as approved.

      

      
        	
                (g)

              	
                CONTRACTOR
                  shall supply all funds necessary for its operations in the A.R.E.
                  under
                  this Agreement in freely convertible currency from abroad. CONTRACTOR
                  shall have the right to freely purchase Egyptian currency in the
                  amounts
                  necessary for its operations in the A.R.E. from any bank or entity
                  authorized by the GOVERNMENT to conduct foreign currency
                  exchanges.

              

      

      

      
        	
                (h)

              	
                EGPC
                  is authorized to advance to CONTRACTOR the Egyptian currency required
                  for
                  the operations under this Agreement against receiving from CONTRACTOR
                  an
                  equivalent amount of U.S. Dollars at the official A.R.E. rate of
                  exchange,
                  such amount in U.S. Dollars shall be deposited in an EGPC account
                  abroad
                  with a correspondent bank of the National Bank of Egypt, Cairo.
                  Withdrawals from said account shall be used for financing EGPC's
                  and its
                  Affiliated Companies' foreign currency requirements subject to
                  the
                  approval of the Minister of
                  Petroleum.

              

      

      

        
          
            
            

          

          
            17

            
              

            

          

          
            
            

          

        

ARTICLE
        V

      

      

      MANDATORY
        AND VOLUNTARY RELINQUISHMENTS

      

      
        	
                (a)

              	
                MANDATORY:

              

      

      

      At
        the
        end of the third (3rd) year after the Effective Date hereof, CONTRACTOR shall
        relinquish to the GOVERNMENT a total of twenty five percent ( 25%) of the
        original Area on the Effective date not then converted to a Development Lease
        or
        Lease(s). Such relinquishment shall be in a single unit of whole Exploration
        Blocks not converted to Development Leases so as to enable the relinquishment
        requirements to be precisely fulfilled.

      

      At
        the
        end of the fifth (5th) year after the Effective Date hereof, CONTRACTOR shall
        relinquish to the GOVERNMENT an additional twenty five percent ( 25% ) of
        the
        original Area on the Effective date not then converted to a Development Lease
        or
        Lease(s). Such relinquishment shall be in a single unit of whole Exploration
        Blocks not converted to Development Leases so as to enable the relinquishment
        requirements to be precisely fulfilled.

      

      Without
        prejudice to Articles III and XXIII and the last three paragraphs of this
        Article V (a), at the end of the seventh (7th) year of the Exploration period,
        CONTRACTOR shall relinquish the remainder of the Area not then converted
        to a
        Development Lease(s).

      

      It
        is
        understood that at the time of any relinquishment the areas to be converted
        into
        Development Leases and which are submitted to the Minister of Petroleum for
        his
        approval according to Article III (d) shall, subject to such approval, be
        deemed
        converted to Development Leases.

      

      CONTRACTOR
        shall not be required to relinquish any Exploration Block or Blocks on which
        a
        Commercial Oil or Gas Well is discovered before the period of time referred
        to
        in Article III (c) given to CONTRACTOR to determine whether such Well is
        a
        Commercial Discovery worthy of Development or to relinquish an Exploration
        Block
        in respect of which a notice of Commercial Gas Discovery has been given to
        EGPC
        subject to EGPC's right to agree on the existence of a Commercial Discovery
        pursuant to Article III (c), and without prejudice to the requirements of
        Article III (e).

       

      In
        the
        event at the end of the initial Exploration period or either of the two
        successive extensions of the initial Exploration period, a well is actually
        drilling or testing, CONTRACTOR shall be allowed up to six (6) months to
        enable
        it to discover a Commercial Oil or Gas Well or to establish a Commercial
        Discovery, as the case may be. However, any such extension of up to six (6)
        months shall reduce the length of the next succeeding Exploration Period,
        as
        applicable, by that amount.

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      
        	
                (b)

              	
                VOLUNTARY:

              

      

      

      CONTRACTOR
        may, voluntarily, during any period relinquish all or any part of the Area
        in
        whole Exploration Blocks or parts of Exploration Blocks provided that at
        the
        time of such voluntary relinquishment its Exploration obligations under Article
        IV (b) have been satisfied for such period.

      

      Any
        relinquishments hereunder shall be credited toward the mandatory provisions
        of
        Article V (a) .

      

      Following
        Commercial Discovery, EGPC and CONTRACTOR shall mutually agree upon any area
        to
        be relinquished thereafter, except for the relinquishment provided for above
        at
        the end of the total Exploration period.

      

      

      ARTICLE
        VI

      

      OPERATIONS
        AFTER COMMERCIAL DISCOVERY

      

      

      
        	
                (a)

              	
                On
                  Commercial Discovery, EGPC and CONTRACTOR shall form in the A.R.E.
                  an
                  operating company pursuant to Article VI (b) and Annex (D) (hereinafter
                  referred to as "Operating Company") which company shall be named
                  by mutual
                  agreement between EGPC and CONTRACTOR and such name shall be subject
                  to
                  the approval of the Minister of Petroleum. Said company shall be
                  a private
                  sector company. Operating Company shall be subject to the laws
                  and
                  regulations in force in the A.R.E. to the extent that such laws
                  and
                  regulations are not inconsistent with the provisions of this Agreement
                  or
                  the Charter of Operating Company.

              

      

      

      However,
        Operating Company and CONTRACTOR shall, for the purpose of this Agreement,
        be
        exempted from the following laws and regulations as now or hereafter amended
        or
        substituted:

      

      
        	 	
                -

              	
                Law
                  No. 48 of 1978, on the employee regulations of public sector
                  companies;

              

      

      

      
        	 	
                -

              	
                Law
                  No. 159 of 1981, promulgating the law on joint stock
                  companies;

              

      

      

      
        	 	
                -

              	
                Law
                  No. 97 of 1983 promulgating the law concerning public sector organizations
                  and companies; 

              

      

      

      
        	 	
                -

              	
                Law
                  No. 203 of 1991 promulgating the law on public business sector
                  companies;
                  and

              

      

      

      
        	 	
                -

              	
                Law
                  No. 38 of 1994, organizing dealings in foreign
                  currencies.

              

      

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      
        	
                (b)

              	
                The
                  Charter of Operating Company is hereto attached as Annex "D". Within
                  thirty (30) days after the date of Commercial Oil Discovery or
                  within
                  thirty (30) days after signature of a Gas Sales Agreement or commencement
                  of a scheme to dispose of Gas (unless otherwise agreed upon by
                  EGPC and
                  CONTRACTOR), the Charter shall take effect and Operating Company
                  shall
                  automatically come into existence without any further procedures.
                  The
                  Exploration Advisory Committee shall be dissolved forthwith upon
                  the
                  coming into existence of the Operating
                  Company.

              

      

      

      
        	
                (c)

              	
                Ninety
                  (90) days after the date Operating Company comes into existence
                  in
                  accordance with paragraph (b) above, it shall prepare a Work Program
                  and
                  Budget for further Exploration and Development for the remainder
                  of the
                  year in which the Commercial Discovery is made; and not later than
                  four
                  (4) months before the end of the current Financial Year (or such
                  other
                  date as may be agreed upon by EGPC and CONTRACTOR) and four (4)
                  months
                  preceding the commencement of each succeeding Financial Year thereafter
                  (or such other date as may be agreed upon by EGPC and CONTRACTOR),
                  Operating Company shall prepare an annual Production Schedule,
                  Work
                  Program and Budget for further Exploration and Development for
                  the
                  succeeding Financial Year. The Production Schedule, Work Program
                  and
                  Budget shall be submitted to the Board of Directors for
                  approval.

              

      

      

      
        	
                (d)

              	
                Not
                  later than the twentieth (20th) day of each month, Operating Company
                  shall
                  furnish to CONTRACTOR a written estimate of its total cash requirements
                  for expenditure for the first half and the second half of the succeeding
                  month expressed in U.S. Dollars having regard to the approved Budget.
                  Such
                  estimate shall take into consideration any cash expected to be
                  on hand at
                  month end.

              

      

       

      Payment
        for the appropriate period of such month shall be made to the correspondent
        bank
        designated in paragraph (e) below on the first (1st) day and fifteenth (15th)
        day respectively, or the next following business day, if such day is not
        a
        business day.

       

      
        	
                (e)

              	
                Operating
                  Company is authorized to keep at its own disposal abroad in an
                  account
                  opened with a correspondent bank of the National Bank of Egypt,
                  Cairo, the
                  foreign funds advanced by CONTRACTOR. Withdrawals from said account
                  shall
                  be used for payment for goods and services acquired abroad and
                  for
                  transferring to a local bank in the A.R.E. the required amount
                  to meet the
                  expenditures in Egyptian Pounds for Operating Company in connection
                  with
                  its activities under this
                  Agreement.

              

      

      

      Within
        sixty (60) days after the end of each Financial Year, Operating Company shall
        submit to the appropriate exchange control authorities in the A.R.E. a
        statement, duly certified by a recognized firm of auditors, showing the funds
        credited to that account, the disbursements made out of that account and
        the
        balance outstanding at the end of the Year.

       

      
        
          
            
            

          

          
            20

            
              

            

          

          
            
            

          

        

      

      

      
        	
                (f)

              	
                If
                  and for as long during the period of production operations there
                  exists an
                  excess capacity in facilities which can not during the period of
                  such
                  excess be used by the Operating Company, EGPC and CONTRACTOR will
                  consult
                  together to find a mutually agreed formula whereby EGPC may use
                  the excess
                  capacity if it so desires without any unreasonable financial or
                  unreasonable operational disadvantage to the
                  CONTRACTOR.

              

      

      

      

      ARTICLE
        VII

      

      RECOVERY
        OF COSTS AND EXPENSES AND

      

      PRODUCTION
        SHARING

      

      

      
        	
                (a)    (1)

              	
                Cost
                  Recovery Petroleum:

              

      

       

      Subject
        to the auditing provisions under this Agreement, CONTRACTOR shall recover
        quarterly all costs, expenses and expenditures in respect of all the
        Exploration, Development and related operations under this Agreement to the
        extent and out of thirty percent (30%) of all Petroleum produced and saved
        from
        all Development Leases within the Area hereunder and not used in Petroleum
        operations. Such Petroleum is hereinafter referred to as "Cost Recovery
        Petroleum".

       

      For
        the
        purpose of determining the classification of all costs, expenses and
        expenditures for their recovery, the following terms shall apply:

       

      
        	 	
                1.

              	
                "Exploration
                  Expenditures" shall mean all costs and expenses for Exploration
                  and the
                  related portion of indirect expenses and
                  overheads.

              

      

      

      
        	 	
                2.

              	
                "Development
                  Expenditures" shall mean all costs and expenses for Development
                  (with the
                  exception of Operating Expenses) and the related portion of indirect
                  expenses and overheads.

              

      

      

      
        	 	
                3.

              	
                "Operating
                  Expenses" shall mean all costs, expenses and expenditures made
                  after
                  initial Commercial Production, which costs, expenses and expenditures
                  are
                  not normally depreciable.

              

      

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      However,
        Operating Expenses shall include workover, repair and maintenance of assets
        but
        shall not include any of the following: sidetracking, redrilling and changing
        of
        the status of a well, replacement of assets or part of an asset, additions,
        improvements, renewals or major overhauling that extend the life of the
        asset.

       

      Exploration
        Expenditures, Development Expenditures and Operating Expenses shall be recovered
        from Cost Recovery Petroleum in the following manner:-

      

      
        	 	
                (i)

              	
                Exploration
                  Expenditures, including those accumulated prior to the commencement
                  of
                  initial Commercial Production, which for the purposes of this Agreement
                  shall mean the date on which the first regular shipment of Crude
                  Oil or
                  the first deliveries of Gas are made, shall be recoverable at the
                  rate of
                  twenty five percent (25%) per annum starting either in the Tax
                  Year in
                  which such expenditures are incurred and paid or the Tax Year in
                  which
                  initial Commercial Production commences, whichever is the later
                  date.

              

      

      

      
        	 	
                (ii)

              	
                Development
                  Expenditures, including those accumulated prior to the commencement
                  of
                  initial Commercial Production which for the purposes of this Agreement
                  shall mean the date on which the first regular shipment of Crude
                  Oil or
                  the first deliveries of Gas are made, shall be recoverable at the
                  rate of
                  twenty five percent (25 %) per annum starting either in the Tax
                  Year in
                  which such expenditures are incurred and paid or the Tax Year in
                  which
                  initial Commercial Production commences, whichever is the later
                  date.

              

      

      

      
        	 	
                (iii)

              	
                Operating
                  Expenses, incurred and paid after the date of initial Commercial
                  Production, which for the purposes of this Agreement shall mean
                  the date
                  on which the first regular shipment of Crude Oil or the first deliveries
                  of Gas are made, shall be recoverable either in the Tax Year in
                  which such
                  costs and expenses are incurred and paid or the Tax Year in which
                  initial
                  Commercial Production occurs, whichever is the later
                  date.

              

      

      

      
        	 	
                (iv)

              	
                To
                  the extent that, in a Tax Year, costs, expenses or expenditures
                  recoverable per paragraphs (i), (ii) and (iii) preceding, exceed
                  the value
                  of all Cost Recovery Petroleum for such Tax Year, the excess shall
                  be
                  carried forward for recovery in the next succeeding Tax Year(s)
                  until
                  fully recovered, but in no case after the termination of this Agreement,
                  as to CONTRACTOR.

              

      

      

      
        	 	
                (v)

              	
                The
                  recovery of costs and expenses, based upon the rates referred to
                  above,
                  shall be allocated to each quarter proportionately (one fourth
                  to each
                  quarter). However, any recoverable costs and expenses not recovered
                  in one
                  quarter as thus allocated, shall be carried forward for recovery
                  in the
                  next quarter.

              

      

      

      
        	
                (2)

              	
                Except
                  as provided in Article VII (a) (3) and Article VII (e) (1), CONTRACTOR
                  shall each quarter be entitled to take and own all Cost Recovery
                  Petroleum, which shall be taken and disposed of in the manner determined
                  pursuant to Article VII (e). To the extent that the value of all
                  Cost
                  Recovery Petroleum [as determined in Article VII (c)] exceeds the
                  actual
                  recoverable costs and expenditures, including any carry forward
                  under
                  Article VII (a) (1) (iv), to be recovered in that quarter, then
                  the value
                  of such Excess Cost Recovery Petroleum shall be split between EGPC
                  and
                  CONTRACTOR in accordance with the percentages specified in Article
                  VII (b)
                  1 below and EGPC 's shares shall be paid by CONTRACTOR to EGPC
                  either (i)
                  in cash in the manner set forth in Article IV of the Accounting
                  Procedure
                  contained in Annex "E" or (ii) in kind in accordance with Article
                  VII(a)
                  (3).

              

      

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      
        	
                (3)

              	
                Ninety
                  (90) days prior to the commencement of each Calendar Year EGPC
                  shall be
                  entitled to elect by notice in writing to CONTRACTOR to require
                  payment of
                  up to one hundred percent (100%) of EGPC's share of Excess Cost
                  Recovery
                  Petroleum in kind. Such payment will be in Crude Oil from the Area
                  F.O.B.
                  export terminal or other agreed delivery point provided that the
                  amount of
                  Crude Oil taken by EGPC in kind in a quarter shall not exceed the
                  value of
                  Cost Recovery Crude Oil actually taken and separately disposed
                  of by
                  CONTRACTOR from the Area during the previous quarter. If EGPC's
                  entitlement to receive payment of its share of Excess Cost Recovery
                  Petroleum in kind is limited by the foregoing provision, the balance
                  of
                  such entitlement shall be paid in
                  cash.

              

      

      

      

      
        	
                (b)

              	
                Production
                  Sharing

              

      

      

      
        	 	
                (1)

              	
                The
                  remaining seventy percent (70%) of the Petroleum shall be divided
                  between
                  EGPC and the CONTRACTOR according to the following shares: Such
                  shares
                  shall be taken and disposed of pursuant to Article VII
                  (e):

              

      

       

      Crude
        Oil

      

      
        	
                Crude
                  Oil produced and 

                saved
                  under this Agreement

                and
                  not used in Petroleum

                operations.
                  Barrels oil per day

                (BOPD)
                  (quarterly average).

              	
                EGPC

                SHARE

              	
                CONTRACTOR

                SHARE

              
	 	 	 
	
                That
                  portion or increment

                up
                  to 25,000 BOPD.

              	
                (Seventy
                  Five percent)

                (75
                  %)

              	
                (Twenty
                  Five percent)

                (25
                  %)

              
	 	 	 
	
                That
                  portion or increment

                exceeding
                  25,000 BOPD

              	
                (Eighty
                  percent)

                (80
                  %)

              	
                (Twenty
                  percent)

                (
                  20%)

              

      

      

      
        	 	
                (ii)

              	
                Gas
                  and LPG

              

      

      

      it
        is
        understood and agreed upon that the aforementioned production segment shall
        apply to all Gas and LPG after converting to equivalent Barrels of crude
        oil.

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      
        	 	
                (2)

              	
                After
                  the end of each contractual year during the term of any Gas Sales
                  Agreement entered into pursuant to Article VII (e), EGPC and CONTRACTOR
                  (as sellers) shall render to EGPC (as buyer) a statement for an
                  amount of
                  Gas, if any, equal to the amount by which the quantity of Gas of
                  which
                  EGPC (as buyer) has taken delivery falls below seventy five percent
                  (75%)
                  of the Contract quantities of Gas as established by the applicable
                  Gas
                  Sales Agreement (the "Shortfall"), provided the Gas is available.
                  Within
                  sixty (60) days of receipt of the statement, EGPC (as buyer) shall
                  pay
                  EGPC and CONTRACTOR (as sellers) for the amount of the Shortfall,
                  if any.
                  The Shortfall shall be included in EGPC's and CONTRACTOR's entitlement
                  to
                  Gas pursuant to Article VII (a) and Article VII (b) in the fourth
                  (4th)
                  quarter of such contractual year.

              

      

       

      Quantities
        of Gas not taken but to be paid for shall be recorded in a separate Take-or-Pay
        Account. Quantities of Gas ("Make Up Gas") which are delivered in subsequent
        years in excess of seventy five percent (75%) of the contract quantities
        of Gas
        as established by the applicable Gas Sales Agreement, shall be set against
        and
        reduce quantities of Gas in the Take-or-Pay account to the extent thereof
        and,
        to that extent, no payment shall be due in respect of such Gas. Such Make
        Up Gas
        shall not be included in CONTRACTOR's entitlement to Gas pursuant to Article
        VII
        (a) and Article VII (b). CONTRACTOR shall have no rights to such Make Up
        Gas.

      

      The
        percentages set forth in Article VII (a) and this Article VII (b) in respect
        of
        LPG produced from a plant constructed and operated by or on behalf of EGPC
        and
        CONTRACTOR shall apply to all LPG available for delivery.

       

      
        	
                (c)

              	
                Valuation
                  of Petroleum:

              

      

      

      
        	 	
                (1)

              	
                Crude
                  Oil:

              

      

      

      
        	 	
                (i)

              	
                The
                  Cost Recovery Crude Oil to which CONTRACTOR is entitled hereunder
                  shall be
                  valued by EGPC and CONTRACTOR at "Market Price" for each calendar
                  quarter.

              

      

      

      
        	 	
                (ii)

              	
                "Market
                  Price" shall mean the weighted average prices realized from sales
                  by EGPC
                  or CONTRACTOR during the quarter, whichever is higher, provided
                  that the
                  sales to be used in arriving at the weighted average(s) shall be
                  sales of
                  comparable quantities on comparable credit terms in freely convertible
                  currency from F.O.B. point of export sales to non-affiliated companies
                  at
                  arm's length under all Crude Oil sales contracts then in effect,
                  but
                  excluding Crude Oil sales contracts involving barter
                  and,

              

      

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (1)

              	
                Sales,
                  whether direct or indirect, through brokers or otherwise, of EGPC
                  or
                  CONTRACTOR to any Affiliated
                  Company.

              

      

      

      
        	 	
                (2)

              	
                Sales
                  involving a quid pro quo other than payment in a freely convertible
                  currency or motivated in whole or in part by considerations other
                  than the
                  usual economic incentives for commercial arm's length crude oil
                  sales.

              

      

      

      
        	 	
                (iii)

              	
                It
                  is understood that in the case of C.I.F. sales, appropriate deductions
                  shall be made for transport and insurance charges to calculate
                  the F.O.B.
                  point of export price; and always taking into account the appropriate
                  adjustment for quality of Crude Oil, freight advantage or disadvantage
                  of
                  port of loading and other appropriate adjustments. Market Price
                  shall be
                  determined separately for each Crude Oil or Crude Oil mix, and
                  for each
                  port of loading.

              

      

      

      
        	 	
                (iv)

              	
                If
                  during any calendar quarter, there are no such sales by EGPC and/or
                  CONTRACTOR under the Crude Oil sales contracts in effect, EGPC
                  and
                  CONTRACTOR shall mutually agree upon the Market Price of the barrel
                  of
                  Crude Oil to be used for such quarter, and shall be guided by all
                  relevant
                  and available evidence including current prices in freely convertible
                  currency of leading crude oils produced by major oil producing
                  countries
                  (in the Arabian Gulf or the Mediterranean Area), which are regularly
                  sold
                  in the open market according to actual sales contracts terms but
                  excluding
                  paper sales and sales promises where no crude oil is delivered,
                  to the
                  extent that such sales are effected under such terms and conditions
                  (excluding the price) not significantly different from those under
                  which
                  the crude oil to be valued, was sold, and always taking into consideration
                  appropriate adjustments for crude oil quality, freight advantage
                  or
                  disadvantage of port of loading and other appropriate adjustments,
                  as the
                  case may be, for differences in gravity, sulphur, and other factors
                  generally recognized by sellers and purchasers, as reflected in
                  crude
                  prices, transportation ninety (90) days insurance premiums, unusual
                  fees
                  borne by the seller, and for credit terms in excess of sixty (60)
                  days,
                  and the cost of loans or guarantees granted for the benefit of
                  the sellers
                  at prevailing interest rates.

              

      

      

      It
        is the
        intent of the Parties that the value of the Cost Recovery Crude Oil shall
        reflect the prevailing market price for such Crude Oil.

      

      
        	 	
                (v)

              	
                If
                  either EGPC or CONTRACTOR considers that the Market Price as determined
                  under sub-paragraph (ii) above does not reflect the prevailing
                  Market
                  Price or in the event EGPC and CONTRACTOR fail to agree on Market
                  Price
                  for any Crude Oil produced under this Agreement for any quarter
                  within
                  fifteen (15) days after the end thereof, any party may elect at
                  any time
                  thereafter to submit to a single arbitrator the question, what
                  single
                  price per barrel, in the arbitrator's judgment, best represents
                  for the
                  pertinent quarter the Market Price for the Crude Oil in question.
                  The
                  arbitrator shall make his determination as soon as possible following
                  the
                  quarter in question. His determination shall be final and binding
                  upon all
                  the parties. The arbitrator shall be selected in the manner described
                  below.

              

      

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      In
        the
        event EGPC and CONTRACTOR fail to agree on the arbitrator within thirty (30)
        days from the date any party notifies the other that it has decided to submit
        the determination of the Market Price to an arbitrator, such arbitrator shall
        be
        chosen by the appointing authority designated in accordance with Article
        XXIV
        (e), or such other appointing authority with access to such expertise as
        may be
        agreed to between EGPC and CONTRACTOR, with regard to the qualifications
        for
        arbitrators set forth below, upon written application of one or both of EGPC
        and
        CONTRACTOR. Copies of such application by one of them shall be promptly sent
        to
        the other.

      

      The
        arbitrator shall be as nearly as possible a person with an established
        reputation in the international petroleum industry as an expert in pricing
        and
        marketing crude oil in international commerce. The arbitrator shall not be
        a
        citizen of a country which does not have diplomatic relations with the A.R.E.,
        and Canada. He may not be, at the time of selection, employed by, or an
        arbitrator or consultant on a continuing or frequent basis to, the American
        Petroleum Institute, the Organization of the Petroleum Exporting Countries
        or
        the Organization of Arab Petroleum Exporting Countries, or a consultant on
        a
        continuing basis to EGPC, CONTRACTOR or an Affiliated Company of either,
        but
        past occasional consultation with such companies, with other petroleum
        companies, governmental agencies or organizations shall not be a ground for
        disqualification. He may not have been, at any time during the two (2) years
        before selection, an employee of any petroleum company or of any governmental
        agency or organization.

      

      Should
        a
        selected person decline or be unable to serve as arbitrator or should the
        position of arbitrator fall vacant prior to the decision called for, another
        person shall be chosen in the same manner provided in this paragraph. EGPC
        and
        CONTRACTOR shall share equally the expenses of the arbitrator.

      

      The
        arbitrator shall make his determination in accordance with the provisions
        of
        this paragraph, based on the best evidence available to him. He will review
        oil
        sales contracts as well as other sales data and information but shall be
        free to
        evaluate the extent to which any contracts, data or information is substantiated
        or pertinent. Representatives of EGPC and CONTRACTOR shall have the right
        to
        consult with the arbitrator and furnish him written materials provided the
        arbitrator may impose reasonable limitations on this right. EGPC and CONTRACTOR
        each shall cooperate with the arbitrator to the fullest extent and each shall
        insure such cooperation of its trading companies. The arbitrator shall be
        provided access to crude oil sales contracts and related data and information
        which EGPC and CONTRACTOR or their trading companies are able to make available
        and which in the judgment of the arbitrator might aid the arbitrator in making
        a
        valid determination.

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

      
        	 	
                (vi)

              	
                Pending
                  Market Price agreement by EGPC and CONTRACTOR or determination
                  by the
                  arbitrator, as applicable, the Market Price agreed for the quarter
                  preceding the quarter in question shall remain temporarily in effect.
                  In
                  the event either EGPC or CONTRACTOR should incur a loss by virtue
                  of the
                  temporary continuation of the Market Price of the previous quarter,
                  it
                  shall promptly be reimbursed such loss by the other party plus
                  simple
                  interest at the LIBOR plus two and one - half percent (2.5%) per
                  annum
                  rate provided for in Article IV (f) from the date on which the
                  disputed
                  amount(s) should have been paid to the date of
                  payment.

              

      

      

      

      
        	
                (2)

              	
                Gas
                  and LPG

              

      

      

      
        	 	
                (i)

              	
                The
                  Cost Recovery and Production Shares of Gas subject to a Gas Sales
                  Agreement between EGPC and CONTRACTOR (as sellers) and EGPC (as
                  buyer)
                  entered into pursuant to Article VII (e) shall be valued, delivered
                  to and
                  purchased by EGPC at a price determined monthly according to the
                  following
                  formula :

              

      

      

      PG=
        F x
        H

      Where
        :

      

      PG
        = the
        value of the Gas in U.S. Dollars per thousand cubic feet

      (MCF).

       

      H
        = the
        number of British Thermal Units (BTU’s) per thousand cubic 

      feet
        (MCF) of Gas.

      

      F
        = a
        value in U.S. Dollars per million British Thermal Units (mmbtu)

      determined
        monthly set as follows :

      

      The
        price
        of Gas produced from EAST WADI ARABA Concession Agreement will be based on
        the
        Concession Agreement formula and defining the Gulf of Suez Blend price per
        barrel as equal to Brent crude price per barrel minus US$ 2.00 (two United
        States Dollars) with minimum (floor) and maximum (ceiling) price according
        to
        the following table :

      

      
        	
                Price
                  of Brent ( US$ / barrel )

              	
                F
                  (
                  US$ / mmbtu )

              
	
                Less
                  than or equal to 12

              	
                1.50

              
	
                Greater
                  than or equal to 24

              	
                2.50

              

      

      

        
          
            
            

          

          
            27

            
              

            

          

          
            
            

          

        

Between
        the minimum and maximum Gas Price , following formula shall be applied
        :

      

      PG
        =
        0.0233 x B (6.33 - { 0.07725 X B } ) x D

      

      Where
        :

       

      PG
        = The
        same definition of PG above 

      

      B
        =
        Barrel Brent price in U.S. Dollars 

      

      
        	
              	D	
                =
                  The number in Millions British Thermal Units

              

      

      
        	 	
                (MMBTU’s)
                  per thousand cubic feet of Gas

              

      

      
        	 	
                (
                  The number of British Thermal Units per

              

      

      
        	 	
                1000
                  standard cubic feet)

              

      

      

      Where
        Brent is the monthly average price expressed in US Dollars per barrel for
        BRENT
        (DTD) quoted in “Platt’s Oilgram Price Report” for “Spot Crude Price Assessment
        - International” for the month in question.

      

      In
        the
        event that the value of F cannot be determined because Platt’s Oilgram Price
        Report is not published at all during a month, the Parties shall meet and
        agree
        the value of Brent by reference to other published sources. In the event
        that
        there are no such published sources or if the value of Brent cannot be
        determined pursuant to the foregoing for any other reason, the Parties shall
        meet and agree a value of Brent.

       

      
        	 	
                (ii)

              	
                The
                  Cost Recovery and Production Shares of LPG produced from a plant
                  constructed and operated by or on behalf of EGPC and CONTRACTOR
                  shall be
                  separately valued for Propane and Butane at the outlet of such
                  LPG plant
                  according to the following formula (unless otherwise agreed between
                  EGPC
                  and CONTRACTOR): 

              

      

      

      PLPG
        = 0.95
        PR -
        (J X 0.85 X     F   
         )

                                                              
        6

                                            
        42.96
        X
        10

      

      

      Where

      

      PLPG
        =
        LPG price (separately determined for Propane and Butane) in U.S. Dollars
        per
        metric ton.

      

      PR
        = The
        average over a period of a month of the figures representing the mid-point
        between the high and low prices in U.S. Dollars per metric ton quoted in
        "Platt's LPGaswire" during such month for Propane and Butane FOB Ex-Ref/Stor.
        West Mediterranean.

      

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      J
        = BTU's
        removed from the Gas stream by the LPG plant per metric ton of LPG
        produced.

      

      F
        = a
        value in U.S. Dollars per metric ton of the crude oil of Gulf of Suez Blend
“FOB
        Ras Shukheir” A.R.E. calculated by referring to “Platt’s Oilgram Price Report”
during a month under the heading “Spot Crude Price Assessment for Suez Blend”.
        This value reflects the total averages of the published low and high values
        for
        a Barrel during such month divided the number of days in such month for which
        such values were quoted. The value per metric ton shall be calculated on
        the
        basis of a conversion factor to be agreed upon annually between EGPC and
        CONTRACTOR. 

      

      In
        the
        event that Platt’s LPGaswire is issued on certain days during a month but not on
        other, the value of PR shall be calculated using only those issues which
        are
        published during such month. In the event that the value of PR can not be
        determined because Platt’s LPGaswire is not published at all during a month,
        EGPC and CONTRACTOR shall meet and agree to the value of PR by reference
        to
        other published sources. In the event that there are no such other published
        sources or if the value of PR cannot be determined pursuant to the foregoing
        for
        any other reason, EGPC and CONTRACTOR shall meet and agree the value of PR
        by
        reference to the value of LPG (Propane and Butane) delivered FOB from the
        Mediterranean Area.

       

      Such
        valuation of LPG is based upon delivery at the delivery point specified in
        Article VII (e) (2) (iii).

      

      
        	 	
                (iii)

              	
                The
                  prices of Gas and LPG so calculated shall apply during the same
                  month.

              

      

      

      
        	 	
                (iv)

              	
                The
                  Cost Recovery and Production Shares of Gas and LPG disposed of
                  by EGPC and
                  CONTRACTOR other than to EGPC pursuant to Article VII (e) shall
                  be valued
                  at their actual realized price.

              

      

      

      
        	
                (d)

              	
                Forecasts:

              

      

      

      Operating
        Company shall prepare (not less than ninety (90) days prior to the beginning
        of
        each calendar semester following first regular production) and furnish in
        writing to CONTRACTOR and EGPC a forecast setting out a total quantity of
        Petroleum that Operating Company estimates can be produced, saved and
        transported hereunder during such calendar semester in accordance with good
        oil
        and gas industry practices.

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      Operating
        Company shall endeavor to produce each calendar semester the forecast quantity.
        The Crude Oil shall be run to storage tanks or offshore loading facilities
        constructed, maintained and operated according to Government Regulations,
        by
        Operating Company in which said Crude Oil shall be metered or otherwise measured
        for royalty, and other purposes required by this Agreement. Gas shall be
        handled
        by Operating Company in accordance with the provisions of Article VII (e)
        .

      

      
        	
                (e)

              	
                Disposition
                  of Petroleum:

              

      

      

      
        	 	
                (1)

              	
                EGPC
                  and CONTRACTOR shall have the right and the obligation to separately
                  take
                  and freely export or otherwise dispose of, currently all of the
                  Crude Oil
                  to which each is entitled under Article VII (a) and Article VII
                  (b).
                  Subject to payment of sums due to EGPC under Article VII (a) (2)
                  and
                  Article IX, CONTRACTOR shall have the right to remit and retain
                  abroad all
                  funds acquired by it including the proceeds from the sale of its
                  share of
                  Petroleum.

              

      

      

      Notwithstanding
        anything to the contrary under this Agreement priority shall be given to
        meet
        the requirements of the A.R.E. market from CONTRACTOR's share under Article
        VII
        (b) of the Crude Oil produced from the Area and EGPC shall have the preferential
        right to purchase such Crude Oil at a price to be determined pursuant to
        Article
        VII (c). The amount of Crude Oil so purchased shall be a portion of CONTRACTOR's
        share under Article VII (b). Such amount shall be proportional to CONTRACTOR's
        share of the total production of crude oil from the concession areas in the
        A.R.E. that are also subject to EGPC's preferential right to purchase. The
        payment for such purchased amount shall be made by EGPC in U.S. Dollars or
        in
        any other freely convertible currency remittable by CONTRACTOR
        abroad.

      

      It
        is
        agreed upon that EGPC shall notify CONTRACTOR, at least forty-five (45) days
        prior to the beginning of the Calendar Semester, of the amount to be purchased
        during such semester under this Article VII (e) (1).

      

      
        	 	
                (2)

              	
                With
                  respect to Gas and LPG produced from the
                  Area:

              

      

       

      
        	 	
                (i)

              	
                Priority
                  shall be given to meet the requirements of the local market as
                  determined
                  by EGPC.

              

      

      

      
        	
              	(ii)	
                In
                  the event that EGPC is to be the buyer of Gas, the disposition
                  of Gas to
                  the local markets as indicated above shall be by virtue of long
                  term Gas
                  Sales Agreements to be entered into between EGPC and CONTRACTOR
                  (as
                  sellers) and EGPC (as buyer).

              

      

      

      EGPC
        and
        CONTRACTOR (as sellers) shall have the obligation to deliver Gas to the
        following point where such Gas shall be metered for sales, royalty, and other
        purposes required by this Agreement:

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      
        	 	
                (a)

              	
                In
                  the event no LPG plant is constructed to process such Gas, the
                  delivery
                  point shall be at the flange connecting the Lease pipeline to the
                  nearest
                  point on the National Gas Pipeline Grid System as depicted in Annex
                  "F"
                  hereto, or as otherwise agreed by EGPC and
                  CONTRACTOR.

              

      

      

      
        	 	
                (b)

              	
                In
                  the event an LPG plant is constructed to process such Gas, such
                  Gas shall,
                  for the purposes of valuation and sales, be metered at the inlet
                  to such
                  LPG Plant. However, notwithstanding the fact that the metering
                  shall take
                  place at the LPG Plant inlet, CONTRACTOR shall through the Operating
                  Company build a pipeline suitable for transport of the processed
                  Gas from
                  the LPG Plant outlet to the nearest point on the National Gas Pipeline
                  Grid System as depicted in Annex "F" hereto, or otherwise agreed
                  by EGPC
                  and CONTRACTOR. Such pipeline shall be owned in accordance with
                  Article
                  VIII (a) by EGPC, and its cost shall be financed and recovered
                  by
                  CONTRACTOR as Development Expenditures pursuant to Article
                  VII.

              

      

      

      
        	 	
                (iii)

              	
                EGPC
                  and CONTRACTOR shall consult together to determine whether to build
                  an LPG
                  plant for recovering LPG from any Gas produced hereunder. In the
                  event
                  EGPC and CONTRACTOR decide to build such a plant, the plant shall,
                  as is
                  appropriate, be in the vicinity of the point of delivery as determined
                  in
                  Article II and Article VII(e)2(ii). The delivery of LPG for, royalty
                  and
                  other purposes required by this Agreement shall be at the outlet
                  of the
                  LPG plant. The costs of any such LPG plant shall be recoverable
                  in
                  accordance with the provisions of this Agreement unless the Minister
                  of
                  Petroleum agrees to accelerated
                  recovery.

              

      

      

      
        	 	
                (iv)

              	
                EGPC
                  (as buyer) shall have the option to elect, by ninety (90) days
                  prior
                  written notice to EGPC and CONTRACTOR (as sellers), whether payment
                  for
                  the Gas which is subject to a Gas Sales Agreement between EGPC
                  and
                  CONTRACTOR (as sellers) and EGPC (as buyer) and LPG produced from
                  a plant
                  constructed and operated by or on behalf of EGPC and CONTRACTOR,
                  as valued
                  in accordance with Article VII (c), and to which CONTRACTOR is
                  entitled
                  under the Cost Recovery and Production Sharing provisions of Article
                  VII,
                  of this Agreement, shall be made 1) in cash or 2) in
                  kind.

              

      

      

      Payments
        in cash shall be made by EGPC (as buyer) at intervals provided for in the
        relevant Gas Sales Agreement in U.S. Dollars, remittable by CONTRACTOR
        abroad.

      

      Payments
        in kind shall be calculated by converting the value of Gas and LPG to which
        CONTRACTOR is entitled into equivalent barrels of Crude Oil to be taken
        concurrently by CONTRACTOR from the Area, or to the extent that such Crude
        Oil
        is insufficient, Crude Oil from CONTRACTOR's other concession areas or such
        other areas as may be agreed. Such Crude Oil shall be added to the Crude
        Oil
        that CONTRACTOR is otherwise entitled to lift under this Agreement. Such
        equivalent barrels shall be calculated on the basis of the provisions of
        Article
        VII (c) relating to the valuation of Cost Recovery Crude Oil.

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

      Provided
        that:

      

      
        	 	
                (aa)

              	
                Payment
                  of the value of Gas and LPG shall always be made in cash in U.S.
                  Dollars
                  remittable by CONTRACTOR abroad to the extent that there is insufficient
                  Crude Oil available for conversion as provided for
                  above;

              

      

       

      
        	 	
                (bb)

              	
                Payment
                  of the value of Gas and LPG shall always be made in kind as provided
                  for
                  above to the extent that payments in cash are not made by
                  EGPC.

              

      

      

      Payments
        to CONTRACTOR (whether in cash or kind), when related to CONTRACTOR's Cost
        Recovery Petroleum, shall be included in CONTRACTOR's Statement of Recovery
        of
        Costs and of Cost Recovery Petroleum referred to in Article IV of Annex "E"
        of
        this Agreement.

      

      
        	 	
                (v)

              	
                Should
                  EGPC (as buyer) fail to enter into a long-term Gas Sales Agreement
                  with
                  EGPC and CONTRACTOR (as sellers) within five (5) years (unless
                  otherwise
                  agreed) from a notice of Commercial Gas Discovery pursuant to Article
                  III,
                  EGPC and CONTRACTOR shall have the right to take and freely dispose
                  of the
                  quantity of Gas and LPG in respect of which the notice of Commercial
                  Discovery is given by exporting such Gas and
                  LPG.

              

      

      

      
        	 	
                (vi)

              	
                The
                  proceeds of sale of CONTRACTOR's share of Gas and LPG disposed
                  of pursuant
                  to the above sub-paragraph (v) may be freely remitted or retained
                  abroad
                  by CONTRACTOR.

              

      

      

      
        	 	
                (vii)

              	
                In
                  the event EGPC and CONTRACTOR agree to accept new Gas and LPG producers
                  to
                  join in an ongoing export project, such producers shall have to
                  contribute
                  a fair and equitable share of the investment
                  made.

              

      

      

      
        	 	
                (viii)   (aa)     
                  

              	
                Upon
                  the expiration of the five (5) year period referred to in Article
                  VII (e)
                  (2) (v), CONTRACTOR shall have the obligation to exert its reasonable
                  efforts to find an export market for Gas
                  reserves.

              

      

      

      
        	 	
                (bb)

              	
                In
                  the event at the end of the five (5) year period referred to under
                  Article
                  VII (e) (2) (v), CONTRACTOR and EGPC have not entered into a Gas
                  Sales
                  Agreement, CONTRACTOR shall retain its rights to such Gas reserves
                  for a
                  further period of up to seven (7) years, subject to Article VII
                  (e) (2),
                  during which period EGPC shall attempt to find a market for Gas
                  reserves.

              

      

       

      
        	 	
                (cc)

              	
                In
                  the event that CONTRACTOR is not exporting the Gas and CONTRACTOR
                  has not
                  entered into a Gas Sales Agreement pursuant to Article VII (e)
                  (2) prior
                  to the expiry of twelve (12) years from CONTRACTOR's notice of
                  Commercial
                  Gas Discovery, CONTRACTOR shall surrender the Gas reserves in respect
                  of
                  which such notice has been given. It being understood that CONTRACTOR
                  shall, at any time prior to the expiry of such twelve (12) year
                  period,
                  surrender the Gas reserves, if CONTRACTOR is not exporting the
                  Gas and
                  CONTRACTOR does not accept an offer of a Gas Sales Agreement from
                  EGPC
                  within six (6) months from the date such offer is made provided
                  that the
                  Gas Sales Agreement offered to CONTRACTOR shall take into consideration
                  the relevant technical and economic factors to enable a commercial
                  contract including :

              

      

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

      
        	 	
                -

              	
                A
                  sufficient delivery rate.

              

      

      

      
        	 	
                -

              	
                Delivery
                  pressure to enter the National Gas Pipeline Grid System at the
                  point of
                  delivery. 

              

      

      

      
        	 	
                -

              	
                Delivered
                  Gas quality specifications not more stringent than those imposed
                  or
                  required for the National Gas Pipeline Grid
                  System.

              

      

      

      
        	 	
                -

              	
                The
                  Gas prices as specified in this Agreement
                  .

              

      

      

      
        	 	
                (dd)

              	
                In
                  the event that CONTRACTOR has not entered into a Gas Sales Agreement
                  pursuant to Article VII (e) (2) or otherwise found an acceptable
                  scheme
                  for commercial disposal of such Gas , at the time of the expiration
                  of
                  twelve (12) years from CONTRACTOR’s notice of Commercial Discovery of Gas
                  or failing agreement with EGPC on gas disposal at the expiration
                  of twelve
                  (12) years , CONTRACTOR shall surrender to EGPC such Development
                  Lease (s)
                  in which Gas discovery is made.

              

      

      

      

      
        	 	
                (ix)

              	
                CONTRACTOR
                  shall not be obligated to surrender a Development Lease based on
                  a
                  Commercial Gas Discovery, if Crude Oil has been discovered in commercial
                  quantities in the same Development
                  Lease.

              

      

      

      
        	
                (f)

              	
                Operations:

              

      

      

      If
        following the reversion to EGPC of any rights to Crude Oil hereunder, CONTRACTOR
        retains rights to Gas in the same Development Lease, or if, following surrender
        of rights to Gas hereunder, CONTRACTOR retains rights to Crude Oil in the
        same
        Development Lease, operations to explore for or exploit the Petroleum, the
        rights to which have reverted or been surrendered (Oil or Gas as the case
        may
        be) may only be carried out by Operating Company which shall act on behalf
        of
        EGPC alone, unless CONTRACTOR and EGPC agree otherwise.

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

      
        	
                g)

              	
                Tanker
                  Scheduling:

              

      

      

      At
        a
        reasonable time prior to the commencement of Commercial Production EGPC and
        CONTRACTOR shall meet and agree upon a procedure for scheduling tanker liftings
        from the agreed upon point of export.

      

      

      ARTICLE
        VIII

      

      TITLE
        TO
        ASSETS

      

      

      
        	
                (a)

              	
                EGPC
                  shall become the owner of all CONTRACTOR acquired and owned assets
                  which
                  assets were charged to Cost Recovery by CONTRACTOR in connection
                  with the
                  operations carried out by CONTRACTOR or Operating Company in accordance
                  with the following:

              

      

      

      
        	 	
                (1)

              	
                Land
                  shall become the property of EGPC as soon as it is
                  purchased.

              

      

      

      
        	 	
                (2)

              	
                Title
                  to fixed and movable assets shall be transferred automatically
                  and
                  gradually from CONTRACTOR to EGPC as they become subject to recovery
                  in
                  accordance with the provisions of Article VII; however the full
                  title to
                  fixed and movable assets shall be transferred automatically from
                  CONTRACTOR to EGPC when its total cost has been recovered by CONTRACTOR
                  in
                  accordance with the provisions of Article VII or at the time of
                  termination of this Agreement with respect to all assets chargeable
                  to the
                  operations whether recovered or not, whichever first
                  occurs.

              

      

      

      The
        book
        value of the assets created during each calendar quarter shall be communicated
        by CONTRACTOR to EGPC or by Operating Company to EGPC and CONTRACTOR within
        thirty (30) days of the end of each quarter.

      

      
        	
                (b)

              	
                During
                  the term of this Agreement and the renewal period EGPC, CONTRACTOR
                  and
                  Operating Company are entitled to the full use and enjoyment of
                  all fixed
                  and movable assets referred to above in connection with operations
                  hereunder or under any other Petroleum concession agreement entered
                  into
                  by the Parties. Proper accounting adjustment shall be made. CONTRACTOR
                  and
                  EGPC shall not dispose of the same except with agreement of the
                  other.

              

      

      

      

      
        	
                (3)

              	
                CONTRACTOR
                  and Operating Company may freely import into the A.R.E., use therein
                  and
                  freely export at the end of such use, machinery and equipment which
                  they
                  either rent or lease in accordance with good industry practices,
                  including
                  but not limited to the lease of computer hardware and
                  software.

              

      

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

      ARTICLE
        IX

      

      BONUSES

      

      

      
        	
                (a)

              	
                CONTRACTOR
                  shall pay to EGPC as a signature bonus the sum of three hundred
                  thousand
                  ($300,000) U.S.Dollars on the Effective Date.

              

      

      

      
        	
                (b)

              	
                CONTRACTOR
                  shall pay to EGPC the sum of two million ($2,000,000) U.S. Dollars
                  as a
                  production bonus when the total average daily production from the
                  Area
                  first reaches the rate of twenty five (25,000) Barrels per day
                  for a
                  period of thirty (30) consecutive producing days. Payment will
                  be made
                  within fifteen (15) days
                  thereafter.

              

      

      

      
        	
                (c)

              	
                CONTRACTOR
                  shall also pay to EGPC the additional sum of four million ($4,000,000)
                  U.S. Dollars as a production bonus when the total average daily
                  production
                  from the Area first reaches the rate of fifty thousand (50,000)
                  Barrels
                  per day for a period of thirty (30) consecutive producing days.
                  Payment
                  will be made within fifteen (15) days
                  thereafter.

              

      

      

      
        	
                (d)

              	
                All
                  the above mentioned bonuses shall in no event be recovered by
                  CONTRACTOR.

              

      

      

      
        	
                (e)

              	
                In
                  the event that EGPC elects to develop any part of the Area pursuant
                  to the
                  sole risk provisions of Article III (c) (iv), production from such
                  sole
                  risk area shall be considered for the purposes of this Article
                  IX only if
                  CONTRACTOR exercises its option to share in such production, and
                  only from
                  the initial date of sharing.

              

      

      

      
        	
                (f)

              	
                Gas
                  shall be taken into account for purposes of determining the total
                  average
                  daily production from the Area under Article IX (b-c) by converting
                  daily
                  Gas delivered into equivalent barrels of daily Crude Oil production
                  in
                  accordance with the following
                  formula:

              

      

      

      

      
        	 	
                MSCF
                  x H x 0.136 = equivalent barrels of Crude
                  Oil

              

      

      

      where

      

      
        	 	
                MSCF
                  = one thousand Standard Cubic Feet of
                  Gas.

              

      

      

      
        	 	
                H
                  =
                  the number of million British Thermal Units (BTU's per MSCF).
                  

              

      

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

      

      ARTICLE
        X

      

      OFFICE
        AND SERVICE OF NOTICES

      

      

      CONTRACTOR
        shall maintain an office in A.R.E. at which notices shall be validly
        served.

       

      

      The
        General Manager and Deputy General Manager shall be entrusted by CONTRACTOR
        with
        sufficient power to carry out immediately all local written directions given
        to
        them by the Government or its representatives under the terms of this Agreement.
        All lawful regulations issued or hereafter to be issued which are applicable
        hereunder and not in conflict with this Agreement shall apply to the duties
        and
        activities of the General Manager and Deputy General Manager.

      

      All
        matters and notices shall be deemed to be validly served which are delivered
        to
        the office of the General Manager or which are sent to him by registered
        mail to
        CONTRACTOR's office in the A.R.E.

       

       

      All
        matters and notices shall be deemed to be validly served which are delivered
        to
        the office of the Chairman of EGPC or which are sent to him by registered
        mail
        at EGPC's main office in Cairo.

      

      

      ARTICLE
        XI

      

      SAVING
        OF
        PETROLEUM AND PREVENTION OF LOSS

      

      
        	
                (a)

              	
                Operating
                  Company shall take all proper measures, according to generally
                  accepted
                  methods in use in the oil and gas industry to prevent loss or waste
                  of
                  Petroleum above or under the ground in any form during drilling,
                  producing, gathering, and distributing or storage operations. The
                  GOVERNMENT has the right to prevent any operation on any well that
                  it
                  might reasonably expect would result in loss or damage to the well
                  or the
                  Oil or Gas field.

              

      

      

      
        	
                (b)

              	
                Upon
                  completion of the drilling of a productive well, Operating Company
                  shall
                  inform the GOVERNMENT or its representative of the time when the
                  well will
                  be tested and the production rate
                  ascertained.

              

      

      

      
        	
                (c)

              	
                Except
                  in instances where multiple producing formations in the same well
                  can only
                  be produced economically through a single tubing string, Petroleum
                  shall
                  not be produced from multiple oil bearing zones through one string
                  of
                  tubing at the same time, except with the prior approval of the
                  GOVERNMENT
                  or its representative, which shall not be unreasonably
                  withheld.

              

      

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

      
        	
                (d)

              	
                Operating
                  Company shall record data regarding the quantities of Petroleum
                  and water
                  produced monthly from each Development Lease. Such data shall be
                  sent to
                  the GOVERNMENT or its representative on the special forms provided
                  for
                  that purpose within thirty (30) days after the data are obtained.
                  Daily or
                  weekly statistics regarding the production from the Area shall
                  be
                  available at all reasonable times for examination by authorized
                  representatives of the GOVERNMENT.

              

      

      

      
        	
                (e)

              	
                Daily
                  drilling records and the graphic logs of wells must show the quantity
                  and
                  type of cement and the amount of any other materials used in the
                  well for
                  the purpose of protecting Petroleum, gas bearing or fresh water
                  strata.
                  

              

      

      

      
        	
                (f)

              	
                Any
                  substantial change of mechanical conditions of the well after its
                  completion shall be subject to the approval of the representative
                  of the
                  GOVERNMENT.

              

      

      

      

      ARTICLE
        XII

       

      CUSTOMS
        EXEMPTIONS

      

      
        	
                (a)

              	
                EGPC,
                  CONTRACTOR, and Operating Company shall be permitted to import
                  and shall
                  be exempted from customs duties, any taxes, levies or fees (including
                  fees
                  imposed by Ministerial Decision No. 254 of 1993 issued by the Minister
                  of
                  Finance, as now or hereafter amended or substituted) of any nature
                  (except
                  where an actual service has been rendered to CONTRACTOR by a competent
                  authority), and from the importation rules with respect to the
                  importation
                  of machinery, equipment, appliances, materials, items, means of
                  transport
                  and transportation (the exemption from taxes and duties for cars
                  shall
                  only apply to cars to be used in operations), electric appliances,
                  air
                  conditioners for offices, field housing and facilities, electronic
                  appliances, computer hardware and software, as well as spare parts
                  required for any of the imported items, all subject to a duly approved
                  certificate issued by the responsible representative nominated
                  by EGPC for
                  such purpose, which states that the imported items are required
                  for
                  conducting the operations pursuant to this Agreement . Such certificate
                  shall be final and binding and shall automatically result in the
                  importation and the exemption without any further approval, delay
                  or
                  procedure.

              

      

      

      
        	
                (b)

              	
                Machinery,
                  equipment, appliances and means of transport and transportation
                  imported
                  by EGPC's, CONTRACTOR's and Operating Company's contractors and
                  sub-contractors temporarily engaged in any activity pursuant to
                  the
                  operations which are the subject of this Agreement, shall be cleared
                  under
                  the "Temporary Release System" without payment of customs duties,
                  any
                  taxes, levies or fees (including fees imposed by Ministerial Decision
                  No.
                  254 of 1993 issued by the Minister of Finance, as now or hereafter
                  amended
                  or substituted) of any nature (except where an actual service has
                  been
                  rendered to CONTRACTOR by a competent authority), upon presentation
                  of a
                  duly approved certificate issued by an EGPC responsible representative
                  nominated by EGPC for such purpose which states, that the imported
                  items
                  are required for conducting the operations pursuant to this Agreement.
                  Items (excluding cars not to be used in operations) set out in
                  Article XII
                  (a) imported by EGPC's, CONTRACTOR's and Operating Company's contractors
                  and sub-contractors for the aforesaid operations, in order to be
                  installed
                  or used permanently or consumed shall meet the conditions for exemption
                  set forth in Article XII (a) after being duly certified by an EGPC
                  responsible representative to be used for conducting operations
                  pursuant
                  to this Agreement.

              

      

      
        
          
          

        

        
          37

          
            

          

        

        
          
          

        

      

      
        	
                (c)

              	
                The
                  expatriate employees of CONTRACTOR, Operating Company and their
                  contractors and sub-contractors shall not be entitled to any exemptions
                  from customs duties and other ancillary taxes and charges except
                  within
                  the limits of the provisions of the laws and regulations applicable
                  in the
                  A.R.E. However, personal household goods and furniture (including
                  one (1)
                  car) for each expatriate employee of CONTRACTOR and/or Operating
                  company
                  shall be cleared under the "Temporary Release System" (without
                  payment of
                  any customs duties and other ancillary taxes) upon presentation
                  of a
                  letter to the appropriate customs authorities by CONTRACTOR or
                  Operating
                  Company approved by an EGPC responsible representative that the
                  imported
                  items are imported for the sole use of the expatriate employee
                  and his
                  family, and that such imported items shall be re-exported outside
                  the
                  A.R.E. upon the repatriation of the concerned expatriate
                  employee.

              

      

      

      
        	(d)	
                Items
                  imported into the A.R.E. whether exempt or not exempt from customs
                  duties
                  and other ancillary taxes and charges hereunder, may be exported
                  by the
                  importing party at any time after obtaining EGPC's approval, which
                  approval shall not be unreasonably withheld, without any export
                  duties,
                  taxes or charges or any taxes or charges from which such items
                  have been
                  already exempt, being applicable. Such items may be sold within
                  the A.R.E.
                  after obtaining the approval of EGPC which approval shall not be
                  unreasonably withheld. In this event, the purchaser of such items
                  shall
                  pay all applicable customs duties and other ancillary taxes and
                  charges
                  according to the condition and value of such items and the tariff
                  applicable on the date of sale, unless such items have already
                  been sold
                  to an Affiliated Company of CONTRACTOR, if any, or EGPC, having
                  the same
                  exemption, or unless title to such items (excluding cars not used
                  in
                  operations) has passed to EGPC. 

              

      

      

      In
        the
        event of any such sale under this paragraph (d), the proceeds from such sale
        shall be divided in the following manner:

      

      CONTRACTOR
        shall be entitled to reimbursement of its unrecovered cost, if any, in such
        items and the excess, if any, shall be paid to EGPC.

      

      
        	
                (e)

              	
                The
                  exemption provided for in Article XII (a) shall not apply to any
                  imported
                  items when items of the same or substantially the same kind and
                  quality
                  are manufactured locally meeting CONTRACTOR's and/or Operating
                  Company's
                  specifications for quality and safety and are available for timely
                  purchase and delivery in the A.R.E. at a price not higher than
                  ten percent
                  (10%) of the cost of the imported item, before customs duties but
                  after
                  freight and insurance costs if any have been
                  added.

              

      

      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

      

      
        	
                (f)

              	
                CONTRACTOR,
                  EGPC and their respective buyers shall have the right to freely
                  export the
                  Petroleum produced from the Area pursuant to this Agreement; no
                  license
                  shall be required, and such petroleum shall be exempted from any
                  customs
                  duties, any taxes, levies or any other imposts in respect of the
                  export of
                  Petroleum hereunder.

              

      

      

      

      ARTICLE
        XIII

      

      BOOKS
        OF
        ACCOUNT: ACCOUNTING AND PAYMENTS

      

      
        	
                (a)

              	
                EGPC,
                  CONTRACTOR and Operating Company shall each maintain at their business
                  offices in the A.R.E. books of account, in accordance with the
                  Accounting
                  Procedure in Annex "E" and accepted accounting practices generally
                  used in
                  the petroleum industry, and such other books and records as may
                  be
                  necessary to show the work performed under this Agreement, including
                  the
                  amount and value of all Petroleum produced and saved hereunder.
                  CONTRACTOR
                  and Operating Company shall keep their books of account and accounting
                  records in United States Dollars.

              

      

      

      Operating
        Company shall furnish to the GOVERNMENT or its representatives monthly returns
        showing the amount of Petroleum produced and saved hereunder. Such returns
        shall
        be prepared in the form required by the GOVERNMENT, or its representative
        and
        shall be signed by the General Manager or by the Deputy General Manager or
        a
        duly designated deputy and delivered to the GOVERNMENT or its representative
        within thirty (30) days after the end of the month covered in the
        return.

      

      
        	
                (b)

              	
                The
                  aforesaid books of account and other books and records referred
                  to above
                  shall be available at all reasonable times for inspection by duly
                  authorized representatives of the
                  GOVERNMENT.

              

      

      

      
        	
                (c)

              	
                CONTRACTOR
                  shall submit to EGPC a Profit and Loss Statement of its Tax Year
                  not later
                  than four (4) months after the commencement of the following Tax
                  Year to
                  show its net profit or loss from the Petroleum operations under
                  this
                  Agreement for such Tax Year.

              

      

      

      CONTRACTOR
        shall at the same time submit a year-end Balance Sheet for the same Tax Year
        to
        EGPC. The Balance Sheet and financial statements shall be certified by an
        Egyptian certified accounting firm.

      
        
          
          

        

        
          39

          
            

          

        

        
          
          

        

      

      ARTICLE
        XIV

      

      

      RECORDS,
        REPORTS AND INSPECTION

      

      
        	
                (a)

              	
                CONTRACTOR
                  and/or Operating Company shall prepare and, at all times while
                  this
                  Agreement is in force, maintain accurate and current records of
                  its
                  operations in the Area. CONTRACTOR and/or Operating Company shall
                  furnish
                  the GOVERNMENT or its representative, in conformity with applicable
                  regulations or as the GOVERNMENT or its representative may reasonably
                  require information and data concerning its operations under this
                  Agreement. Operating Company will perform the functions indicated
                  in this
                  Article XIV in accordance with its role as specified in Article
                  VI.

              

      

      

      
        	
                (b)

              	
                CONTRACTOR
                  and/or Operating Company shall save and keep for a reasonable period
                  of
                  time a representative portion of each sample of cores and cuttings
                  taken
                  from drilling wells, to be disposed of, or forwarded to the GOVERNMENT
                  or
                  its representative in the manner directed by the GOVERNMENT. All
                  samples
                  acquired by CONTRACTOR and/or Operating Company for their own purposes
                  shall be considered available for inspection at any reasonable
                  time by the
                  GOVERNMENT or its representatives.

              

      

      

      
        	
                (c)

              	
                Unless
                  otherwise agreed to by EGPC, in case of exporting any rock samples
                  outside
                  A.R.E., samples equivalent in size and quality shall, before such
                  exportation, be delivered to EGPC as representative of the
                  GOVERNMENT.

              

      

      

      

      
        	
                (d)

              	
                Originals
                  of records can only be exported with the permission of EGPC; provided,
                  however, that magnetic tapes and any other data which must be processed
                  or
                  analyzed outside the A.R.E. may be exported if a monitor or a comparable
                  record, if available, is maintained in the A.R.E. and provided
                  that such
                  exports shall be repatriated to A.R.E. promptly following such
                  processing
                  or analysis on the understanding that they belong to
                  EGPC.

              

      

      

      

      
        	
                (e)

              	
                During
                  the period CONTRACTOR is conducting the Exploration operations,
                  EGPC's
                  duly authorized representatives or employees shall have the right
                  to full
                  and complete access to the Area at all reasonable times with the
                  right to
                  observe the operations being conducted and to inspect all assets,
                  records
                  and data kept by CONTRACTOR. EGPC's representative, in exercising
                  its
                  rights under the preceding sentence of this paragraph (e), shall
                  not
                  interfere with CONTRACTOR's operations. CONTRACTOR shall provide
                  EGPC with
                  copies of any and all data (including, but not limited to, geological
                  and
                  geophysical reports, logs and well surveys) information and interpretation
                  of such data, and other information in CONTRACTOR's
                  possession.

              

      

      
        
          
          

        

        
          40

          
            

          

        

        
          
          

        

      

       

      For
        the
        purpose of obtaining new offers, the GOVERNMENT and/or EGPC may, after the
        seventh (7th) year of the Exploration period or the date of
        termination of this Agreement, whichever is the earlier, show any other party
        uninterpreted basic geophysical and geological data (such data to be not
        less
        than one (1) year old unless CONTRACTOR agrees to a shorter period, which
        agreement shall not be unreasonably withheld) with respect to the Area, provided
        that the GOVERNMENT and/or EGPC may at any time show another party such data
        directly obtained over or acquired from those parts of the Area which CONTRACTOR
        has relinquished as long as such data is at least one (1) year old.

      

      

      ARTICLE
        XV

      

      RESPONSIBILITY
        FOR DAMAGES

      

      CONTRACTOR
        shall entirely and solely be responsible in law toward third parties for
        any
        damage caused by CONTRACTOR's Exploration operations and shall indemnify
        the
        GOVERNMENT and/or EGPC against all damages for which
        they may be held liable on account of any such operations.

       

      

      

      ARTICLE
        XVI

      

      PRIVILEGES
        OF GOVERNMENT REPRESENTATIVES

      

      Duly
        authorized representatives of the GOVERNMENT shall have access to the Area
        covered by this Agreement and to the Operations conducted thereon. Such
        representatives may examine the books, registers and records of EGPC, CONTRACTOR
        and Operating Company and make a reasonable number of surveys, drawings and
        tests for the purpose of enforcing this Agreement. They shall, for this purpose,
        be entitled to make reasonable use of the machinery and instruments of
        CONTRACTOR or Operating Company on the condition that no danger or impediment
        to
        the operations hereunder shall arise directly or indirectly from such use.
        Such
        representatives shall be given reasonable assistance by the agents and employees
        of CONTRACTOR or Operating Company so that none of the activities shall endanger
        or hinder the safety or efficiency of the operations. CONTRACTOR or Operating
        Company shall offer such representatives all privileges and facilities accorded
        to its own employees in the field and shall provide them, free of charge,
        the
        use of reasonable office space and of adequately furnished housing while
        they
        are in the field for the purpose of facilitating the objectives of this Article.
        Without prejudice to Article XIV (e) any and all information obtained by
        the
        GOVERNMENT or its representatives under this Article XVI shall be kept
        confidential with respect to the Area.

       

      
        
          
            
            

          

          
            41

            
              

            

          

          
            
            

          

        

      

      
ARTICLE
        XVII

      

      EMPLOYMENT
        RIGHTS AND TRAINING OF

      

      ARAB
        REPUBLIC OF EGYPT PERSONNEL

      

      
        	
                (a)

              	
                It
                  is the desire of EGPC and CONTRACTOR that operations hereunder
                  be
                  conducted in a business-like and efficient
                  manner.

              

      

       

      
        	 	
                (1)

              	
                The
                  expatriate administrative, professional and technical personnel
                  employed
                  by CONTRACTOR or Operating Company and the personnel of its contractors
                  for the conduct of the operations hereunder, shall be granted a
                  residence
                  as provided for in Law No. 89 of 1960 as amended and Ministerial
                  Order No.
                  280 of 1981 as amended, and CONTRACTOR agrees that all immigration,
                  passport, visa and employment regulations of the A.R.E., shall
                  be
                  applicable to all alien employees of CONTRACTOR working in the
                  A.R.E.

              

      

      

      
        	 	
                (2)

              	
                A
                  minimum of twenty-five percent (25%) of the combined salaries and
                  wages of
                  each of the expatriate administrative, professional and technical
                  personnel employed by CONTRACTOR or Operating Company shall be
                  paid
                  monthly in Egyptian Currency.

              

      

      

      
        	
                (b)

              	
                CONTRACTOR
                  and Operating Company shall each select its employees and determine
                  the
                  number thereof, to be used for operations
                  hereunder.

              

      

      
        
          
          

        

        
          42

          
            

          

        

        
          
          

        

      

      
        	
                (c)

              	
                CONTRACTOR,
                  shall after consultation with EGPC, prepare and carry out specialized
                  training programs for all its A.R.E. employees engaged in operations
                  hereunder with respect to applicable aspects of the petroleum industry.
                  CONTRACTOR and Operating Company undertake to replace gradually
                  their
                  non-executive expatriate staff by qualified nationals as they are
                  available.

              

      

      

      
        	
                (d)

              	
                During
                  any of the Exploration phases, CONTRACTOR shall give mutually agreed
                  numbers of EGPC employees an opportunity to attend and participate
                  in
                  CONTRACTOR's and CONTRACTOR's Affiliated Companies training programs
                  relating to Exploration and Development operations. In the event
                  that the
                  total cost of such programs is less than fifty thousand (50,000)
                  United
                  States Dollars in any Financial Year during such period, CONTRACTOR
                  shall
                  pay EGPC the amount of the shortfall within thirty (30) days following
                  the
                  end of such Financial Year. However, EGPC shall have the right
                  that said
                  amount (U.S.$50,000) allocated for training, be paid directly to
                  EGPC for
                  such purpose.

              

      

      

      

      ARTICLE
        XVIII

      

      LAWS
        AND
        REGULATIONS

      

      
        	
                (a)

              	
                CONTRACTOR
                  and Operating Company shall be subject to Law No. 66 of 1953 (excluding
                  Article 37 thereof) as amended by Law No. 86 of 1956 and the regulations
                  issued for the implementation thereof, including the regulations
                  for the
                  safe and efficient performance of operations carried out for the
                  execution
                  of this Agreement and for the conservation of the petroleum resources
                  of
                  the A.R.E. provided that no regulations, or modification or interpretation
                  thereof, shall be contrary to or inconsistent with the provisions
                  of this
                  Agreement.

              

      

      

      
        	
                (b)

              	
                CONTRACTOR
                  and Operating Company shall be subject to the provisions of the
                  Law No. 4
                  of 1994 concerning the environment and its executive regulation
                  as may be
                  amended , as well as any laws or regulations may be issued , concerning
                  the protection of the environment 

              

      

       

      
        	
                (c)

              	
                Except
                  as provided in Article III (g) for Income Taxes, EGPC, CONTRACTOR
                  and
                  Operating Company shall be exempted from all taxes and duties,
                  whether
                  imposed by the GOVERNMENT or municipalities including among others,
                  Sales
                  Tax, Value Added Tax and Taxes on the Exploration, Development,
                  extracting, producing, exporting or transporting of Petroleum and
                  LPG as
                  well as any and all withholding taxes that might otherwise be imposed
                  on
                  dividends, interest, technical service fees, patent and trademark
                  royalties, and similar items. CONTRACTOR shall also be exempted
                  from any
                  tax on the liquidation of CONTRACTOR, or distributions of any income
                  to
                  the shareholders of CONTRACTOR, and from any tax on capital.
                  

              

      

       

      
        	
                (d)

              	
                The
                  rights and obligations of EGPC and CONTRACTOR under, and for the
                  effective
                  term of this Agreement shall be governed by and in accordance with
                  the
                  provisions of this Agreement and can only be altered or amended
                  by the
                  written mutual agreement of the said contracting
                  parties.

              

      

      
        
          
          

        

        
          43

          
            

          

        

        
          
          

        

      

      
        	
                (e)

              	
                The
                  contractors and sub-contractors of CONTRACTOR and Operating Company
                  shall
                  be subject to the provisions of this Agreement which affect them.
                  Insofar
                  as all regulations which are duly issued by the GOVERNMENT apply
                  from time
                  to time and are not in accord with the provisions of this Agreement,
                  such
                  regulations shall not apply to CONTRACTOR, Operating Company and
                  their
                  respective contractors and sub-contractors, as the case may
                  be.

              

      

      

      
        	
                (f)

              	
                EGPC,
                  CONTRACTOR, Operating Company and their respective contractors
                  and
                  sub-contractors shall for the purposes of this Agreement be exempted
                  from
                  all professional stamp duties, imposts and levies imposed by syndical
                  laws
                  with respect to their documents and activities
                  hereunder.

              

      

      

      
        	
                (g)

              	
                All
                  the exemptions from the application of the A.R.E. laws or regulations
                  granted to EGPC, CONTRACTOR, the Operating Company, their contractors
                  and
                  sub-contractors under this Agreement shall include such laws and
                  regulations as presently in effect or hereafter amended or
                  substituted.

              

      

      

      ARTICLE
        XIX

      

      STABILIZATION

      

      In
        case
        of changes in existing legislation or regulations applicable to the conduct
        of
        Exploration, Development and production of Petroleum, which take place after
        the
        Effective Date, and which significantly affect the economic interest of this
        Agreement to the detriment of CONTRACTOR or which imposes on CONTRACTOR an
        obligation to remit to the A.R.E. the proceeds from sales of CONTRACTOR's
        Petroleum, CONTRACTOR shall notify EGPC of the subject legislative or regulatory
        measure. In such case, the Parties shall negotiate possible modifications
        to
        this Agreement designed to restore the economic balance thereof which existed
        on
        the Effective Date.

      

      The
        Parties shall use their best efforts to agree on amendments to this Agreement
        within ninety (90) days from aforesaid notice.

      

      These
        amendments to this Agreement shall not in any event diminish or increase
        the
        rights and obligations of CONTRACTOR as these were agreed on the Effective
        Date.

      

      Failing
        agreement between the Parties during the period referred to above in this
        Article XIX , the dispute may be submitted to arbitration, as provided in
        Article XXIV of this Agreement.

      
        
          
          

        

        
          44

          
            

          

        

        
          
          

        

      

      ARTICLE
        XX

       

      RIGHT
        OF
        REQUISITION

      

      
        	
                (a)

              	
                In
                  case of national emergency due to war or imminent expectation of
                  war or
                  internal causes, the GOVERNMENT may requisition all or part of
                  the
                  production from the Area obtained hereunder and require Operating
                  Company
                  to increase such production to the utmost possible maximum. The
                  GOVERNMENT
                  may also requisition the Oil and/or Gas field itself and, if necessary,
                  related facilities.

              

      

      

      
        	
                (b)

              	
                In
                  any such case, such requisition shall not be effected except after
                  inviting EGPC and CONTRACTOR or their representative by registered
                  letter,
                  with acknowledgement of receipt, to express their views with respect
                  to
                  such requisition.

              

      

      

      
        	
                (c)

              	
                The
                  requisition of production shall be effected by Ministerial Order.
                  Any
                  requisition of an Oil and/or Gas field, or any related facilities
                  shall be
                  effectedby a Presidential Decree duly notified to EGPC and
                  CONTRACTOR.

              

      

      

      
        	
                (d)

              	
                In
                  the event of any requisition as provided above, the GOVERNMENT
                  shall
                  indemnify in full EGPC and CONTRACTOR for the period during which
                  the
                  requisition is maintained,
                  including:

              

      

      

      
        	 	
                (1)

              	
                All
                  damages which result from such requisition;
                  and

              

      

      

      
        	
              	(2)	
                Full
                  repayment each month for all Petroleum extracted by the GOVERNMENT
                  less
                  the royalty share of such
                  production.

              

      

      

      However,
        any damage resulting from enemy attack is not within the meaning of this
        paragraph (d). Payment hereunder shall be made to CONTRACTOR in U.S. Dollars
        remittable abroad. The price paid to CONTRACTOR for Petroleum taken shall
        be
        calculated in accordance with Article VII (c).

       

       

      ARTICLE
        XXI

      

      ASSIGNMENT

      

      
        	
                (a)

              	
                Neither
                  EGPC nor CONTRACTOR may assign to a person, firm or corporation,
                  in whole
                  or in part, any of its rights, privileges, duties or obligations
                  under
                  this Agreement without the written consent of the
                  GOVERNMENT.

              

      

      

      
        	
                (b)

              	
                To
                  enable consideration to be given to any request for such consent,
                  the
                  following conditions must be
                  fulfilled:

              

      

      
        
          
          

        

        
          45

          
            

          

        

        
          
          

        

      

      
        	 	
                (1)

              	
                The
                  obligations of the assignor deriving from this Agreement must have
                  been
                  duly fulfilled as of the date such request is
                  made.

              

      

      

      
        	 	
                (2)

              	
                The
                  instrument of assignment must include provisions stating precisely
                  that
                  the assignee is bound by all covenants contained in this Agreement
                  and any
                  modifications or additions in writing that up to such time may
                  have been
                  made. A draft of such instrument of assignment shall be submitted
                  to EGPC
                  for review and approval before being formally
                  executed.

              

      

      

      

      
        	
                (c)

              	
                Any
                  assignment, sale, transfer or other such conveyance made pursuant
                  to the
                  provisions of this Article XXI shall be free of any transfer, capital
                  gains taxes or related taxes, charges or fees including without
                  limitation, all Income Tax, Sales Tax, Value Added Tax, Stamp Duty,
                  or
                  other Taxes or similar payments.

              

      

      

      
        	
                (d)

              	
                As
                  long as the assignor shall hold any interest under this Agreement,
                  the
                  assignor together with the assignee shall be jointly and severally
                  liable
                  for all duties and obligations of CONTRACTOR under this
                  Agreement.

              

      

      

      

      ARTICLE
        XXII

      

      

      BREACH
        OF
        AGREEMENT AND POWER TO CANCEL

      

      
        	
                (a)

              	
                The
                  GOVERNMENT shall have the right to cancel this Agreement by Order
                  or
                  Presidential Decree, with respect to CONTRACTOR, in the following
                  instances:

              

      

      

      

      
        	 	
                (1)

              	
                If
                  it knowingly has submitted any false statements to the GOVERNMENT
                  which
                  were of a material consideration for the execution of this
                  Agreement;

              

      

      

      
        	 	
                (2)

              	
                If
                  it assigns any interest hereunder contrary to the provisions of
                  Article
                  XXI;

              

      

       

      
        	 	
                (3)

              	
                If
                  it is adjudicated bankrupt by a court of competent
                  jurisdiction;

              

      

      

      
        	 	
                (4)

              	
                If
                  it does not comply with any final decision reached as the result
                  of court
                  proceedings conducted under Article
                  XXIV(a);

              

      

      

      
        	 	
                (5)

              	
                If
                  it intentionally extracts any mineral other than Petroleum not
                  authorized
                  by this Agreement or without the authority of the GOVERNMENT, except
                  such
                  extractions as may be unavoidable as the result of the operations
                  conducted hereunder in accordance with accepted petroleum industry
                  practice and which shall be notified to the GOVERNMENT or its
                  representative as soon as possible;
                  and

              

      

      
        
          
          

        

        
          46

          
            

          

        

        
          
          

        

      

      
        	 	
                (6)

              	
                If
                  it commits any material breach of this Agreement or of the provisions
                  of
                  Law No. 66 of 1953, as amended by Law No. 86 of 1956, which are
                  not
                  contradicted by the provisions of this
                  Agreement.

              

      

      

      Such
        cancellation shall take place without prejudice to any rights which may have
        accrued to the GOVERNMENT against CONTRACTOR in accordance with the provisions
        of this Agreement, and, in the event of such cancellation, CONTRACTOR, shall
        have the right to remove from the Area all its personal property.

      

      
        	
                (b)

              	
                If
                  the GOVERNMENT deems that one of the aforesaid causes (other than
                  a force
                  majeure cause referred to in Article XXIII) exists to cancel this
                  Agreement, the GOVERNMENT shall give CONTRACTOR ninety (90) days
                  written
                  notice personally served on CONTRACTOR's General Manager in the
                  legally
                  official manner and receipt of which is acknowledged by him or
                  by his
                  legal agents, to remedy and remove such cause; but if for any reason
                  such
                  service is impossible due to unnotified change of address, publication
                  in
                  the Official Journal of the GOVERNMENT of such notice shall be
                  considered
                  as valid service upon CONTRACTOR. If at the end of the said ninety
                  (90)
                  day notice period such cause has not been remedied and removed,
                  this
                  Agreement may be canceled forthwith by Order or Presidential Decree
                  as
                  aforesaid; provided however, that if such cause, or the failure
                  to remedy
                  or remove such cause, results from any act or omission of one party,
                  cancellation of this Agreement shall be effective only against
                  that party
                  and not as against any other party
                  hereto.

              

      

      

      

      ARTICLE
        XXIII

      

      FORCE
        MAJEURE

      

      
        	
                (a)

              	
                The
                  non-performance or delay in performance by EGPC and CONTRACTOR,
                  or either
                  of them of any obligation under this Agreement shall be excused
                  if, and to
                  the extent that, such non-performance or delay is caused by force
                  majeure.
                  The period of any such non-performance or delay, together with
                  such period
                  as may be necessary for the restoration of any damage done during
                  such
                  delay, shall be added to the time given in this Agreement for the
                  performance of such obligation and for the performance of any obligation
                  dependent thereon and consequently, to the term of this Agreement,
                  but
                  only with respect to the block or blocks
                  affected.

              

      

      

      
        	
                (b)

              	
                "Force
                  Majeure" within the meaning of this Article XXIII, shall be any
                  order,
                  regulation or direction of the GOVERNMENT of the ARAB REPUBLIC
                  OF EGYPT,
                  whether promulgated in the form of a law or otherwise or any act
                  of God,
                  insurrection, riot, war, strike, and other labor disturbance, fires,
                  floods or any cause not due to the fault or negligence of EGPC
                  and
                  CONTRACTOR or either of them, whether or not similar to the foregoing,
                  provided that any such cause is beyond the reasonable control of
                  EGPC and
                  CONTRACTOR, or either of them.

              

      

      
        
          
          

        

        
          47

          
            

          

        

        
          
          

        

      

      
        	
                (c)

              	
                Without
                  prejudice to the above and except as may be otherwise provided
                  herein, the
                  GOVERNMENT shall incur no responsibility whatsoever to EGPC and
                  CONTRACTOR, or either of them for any damages, restrictions or
                  loss
                  arising in consequence of such case of force majeure except a force
                  majeure caused by the order, regulations or direction of the GOVERNMENT
                  of
                  the ARAB REPUBLIC OF EGYPT.

              

      

      

      
        	
                (d)

              	
                If
                  the force majeure event occurs during the initial Exploration period
                  or
                  any extension thereof and continues in effect for a period of six
                  (6)
                  months CONTRACTOR shall have the option upon ninety (90) days prior
                  written notice to EGPC to terminate its obligations hereunder without
                  further liability of any kind.

              

      

      

      

      ARTICLE
        XXIV

      

      DISPUTES
        AND ARBITRATION

      

      
        	
                (a)

              	
                Any
                  dispute, controversy or claim arising out of or relating to this
                  Agreement
                  or the breach, termination or invalidity thereof, between the GOVERNMENT
                  and the parties shall be referred to the jurisdiction of the appropriate
                  A.R.E. Courts and shall be finally settled by such
                  Courts.

              

      

      

      
        	
                (b)

              	
                Any
                  dispute, controversy or claim arising out of or relating to this
                  Agreement, or breach, termination or invalidity thereof between
                  EGPC and
                  CONTRACTOR shall be settled by arbitration in accordance with the
                  Arbitration Rules of the Cairo Regional Center for International
                  Commercial Arbitration (the Center) in effect on the date of this
                  Agreement. The award of the arbitrators shall be final and binding
                  on the
                  parties.

              

      

      

      
        	
                (c)

              	
                The
                  number of arbitrators shall be three
                  (3).

              

      

      

      
        	
                (d)

              	
                Each
                  party shall appoint one arbitrator. If, within thirty (30) days
                  after
                  receipt of the claimant's notification of the appointment of an
                  arbitrator
                  the respondent has not notified the claimant in writing of the
                  name of the
                  arbitrator he appoints, the claimant may request the Center to
                  appoint the
                  second arbitrator.

              

      

      

      

      
        	
                (e)

              	
                The
                  two arbitrators thus appointed shall choose the third arbitrator
                  who will
                  act as the presiding arbitrator of the tribunal. If within thirty
                  (30)
                  days after the appointment of the second arbitrator, the two arbitrators
                  have not agreed upon the choice of the presiding arbitrator, then
                  either
                  party may request the Secretary General of the Permanent Court
                  of
                  Arbitration at the Hague to designate the appointing authority.
                  Such
                  appointing authority shall appoint the presiding arbitrator in
                  the same
                  way as a sole arbitrator would be appointed under Article 6.3 of
                  the
                  UNCITRAL Arbitration Rules. Such presiding arbitrator shall be
                  a person of
                  a nationality other than the A.R.E. or CANADA and of a country
                  which has
                  diplomatic relations with A.R.E., and CANADA and who shall have
                  no
                  economic interest in the Petroleum business of the signatories
                  hereto.

              

      

      
        
          
          

        

        
          48

          
            

          

        

        
          
          

        

      

      
        	
                (f)

              	
                Unless
                  otherwise agreed by the parties to the arbitration, the arbitration,
                  including the making of the award, shall take place in Cairo,
                  A.R.E.

              

      

      

      
        	
                (g)

              	
                The
                  decision of a majority of the arbitrators shall be final and binding
                  upon
                  the Parties and the arbitral award rendered shall be final and
                  conclusive.
                  Judgment on the arbitral award rendered, may be entered in any
                  court
                  having Jurisdiction or application may be made in such court for
                  a
                  judicial acceptance of the award and for enforcement, as the case
                  may
                  be.

              

      

      

      

      
        	
                (h)

              	
                Egyptian
                  Law shall apply to the dispute except that in the event of any
                  conflict
                  between Egyptian Laws and this Agreement the provisions of this
                  Agreement
                  (including the arbitration provision) shall prevail. The arbitration
                  shall
                  be conducted in both English and Arabic
                  language.

              

      

      

      

      
        	
                (i)

              	
                EGPC
                  and CONTRACTOR agree that if, for whatever reason, arbitration
                  in
                  accordance with the above procedure cannot take place, or is likely
                  to
                  take place under circumstances for CONTRACTOR which could prejudice
                  CONTRACTOR's right to fair arbitration, all disputes, controversies
                  or
                  claims arising out of or relating to this Agreement or the breach,
                  termination or invalidity thereof shall be settled by ad hoc arbitration
                  in accordance with the UNCITRAL Rules in effect on the Effective
                  Date.

              

      

      

      ARTICLE
        XXV

      

      STATUS
        OF
        PARTIES

      

      
        	
                (a)

              	
                The
                  rights, duties, obligations and liabilities in respect of EGPC
                  and
                  CONTRACTOR hereunder shall be several and not joint or collective,
                  it
                  being understood that this Agreement shall not be construed as
                  constituting an association or corporation or
                  partnership.

              

      

      
        
          
          

        

        
          49

          
            

          

        

        
          
          

        

      

      
        	
                (b)

              	
                CONTRACTOR
                  shall be subject to the laws of the place where it is incorporated
                  regarding its legal status or creation, organization, charter and
                  by-laws,
                  shareholding, and ownership. 

              

      

      

      CONTRACTOR's
        shares of capital which are entirely held abroad shall not be negotiable
        in the
        A.R.E. and shall not be offered for public subscription nor shall be subject
        to
        the stamp tax on capital shares nor any tax or duty in the A.R.E. 

      

      CONTRACTOR
        shall be exempted from the application of Law No. 159 of 1981 as
        amended.

      

      

      
        	
                (c)

              	
                All
                  CONTRACTOR Members shall be jointly and severally liable for the
                  performance of the obligations of CONTRACTOR under this
                  Agreement.

              

      

      
 

      ARTICLE
        XXVI

      

      LOCAL
        CONTRACTORS AND

      LOCALLY
        MANUFACTURED MATERIAL

      

      

      CONTRACTOR
        or Operating Company, as the case may be, and their contractors
        shall:

      

      
        	
                (a)

              	
                Give
                  priority to local contractors and sub-contractors, including EGPC's
                  Affiliated Companies as long as their performance is comparable
                  with
                  international performance and the prices of their services are
                  not higher
                  than the prices of other contractors and sub-contractors by more
                  than ten
                  percent (10%).

              

      

      

      
        	
                (b)

              	
                Give
                  preference to locally manufactured material, equipment, machinery
                  and
                  consumables so long as their quality and time of delivery are comparable
                  to internationally available material, equipment, machinery and
                  consumables. However, such material, equipment, machinery and consumables
                  may be imported for operations conducted hereunder if the local
                  price of
                  such items at CONTRACTOR's or Operating Company's operating base
                  in A.R.E.
                  is more than ten percent (10%) higher than the price of such imported
                  items before customs duties, but after transportation and insurance
                  costs
                  have been added.

              

      

      
        
          
          

        

        
          50

          
            

          

        

        
          
          

        

      

      ARTICLE
        XXVII

      

      ARABIC
        TEXT

      

      The
        Arabic version of this Agreement shall, before the courts of A.R.E. be referred
        to in construing or interpreting this Agreement; provided however, that in
        any
        arbitration pursuant to Article XXIV herein above between EGPC and CONTRACTOR
        the English and Arabic versions shall both be referred to as having equal
        force
        in construing or interpreting the Agreement.

      

      

      ARTICLE
        XXVIII

      

      GENERAL

      

      The
        headings or titles to each of the Articles to this Agreement are solely for
        the
        convenience of the parties hereto and shall not be used with respect to the
        interpretation of said Articles.

       

      

      

      ARTICLE
        XXIX

      

      APPROVAL
        OF THE GOVERNMENT

      

      This
        Agreement shall not be binding upon any of the parties hereto unless and
        until a
        law is issued by the competent authorities of the A.R.E. authorizing the
        Minister of Petroleum to sign this Agreement and giving this Agreement full
        force and effect of law notwithstanding any countervailing Governmental
        enactment, and the Agreement is signed by the GOVERNMENT, EGPC, and
        CONTRACTOR.

       

      

      
        	
                DOVER
                  INVESTMENTS LIMITED

              	 
	 	 	 
	
                BY:

              	
                 

              	 
	 	 	 
	
                EGYPTIAN
                  GENERAL PETROLEUM CORPORATION

              	 
	 	 	 
	
                BY:

              	
                 

              	 
	 	 	 
	 	 	 
	
                ARAB
                  REPUBLIC OF EGYPT

              	 
	 	 	 
	
                BY:

              	
                 

              	 
	 	 	 
	
                DATE
                  :

              	
                 

              	 

      

      

      
        
          
            
            

          

          
            51

            
              

            

          

          
            
            

          

        

      

       

      ANNEX
        "A"

       

      

      CONCESSION
        AGREEMENT

      

      BETWEEN

      

      THE
        ARAB REPUBLIC OF EGYPT

      

      AND

      

      EGYPTIAN
        GENERAL PETROLEUM CORPORATION.

      

      AND

      

      

      DOVER
        INVESTMENTS LIMITED

      

      IN

      

      EAST
        WADI ARABA AREA

      

      GULF
        OF SUEZ

      

      A.R.E.

      
        
          
          

        

        
          52

          
            

          

        

        
          
          

        

      

      BOUNDARY
        DESCRIPTION OF THE CONCESSION AREA

       

      Annex
        "B"
        is a provisional illustrative map at an approximate scale of 

       

      (1:
        500,000) showing the Area covered and affected by this Agreement.

       

       

      
        	 	
                -

              	
                The
                  Area measure approximately three hundred ninety three square kilometers
                  (393 km2) of surface Area. It is composed of all or part of Exploration
                  Blocks, the whole Blocks are defined on a three (3) minutes latitude
                  by
                  three (3) minutes longitude grid.

              

      

      

       

      
        	 	
                -

              	
                It
                  is to be noted that the delineation lines of the Area in Annex
                  "B" are
                  intended to be only illustrative and provisional and may not show
                  accurately their true position in relation to existing monuments
                  and
                  geographical features.

              

      

      

      

      Coordinates
        of the corner points of the Area are given in the following table which forms
        an
        integral part of Annex "A":-

      
        
          
          

        

        
          53

          
            

          

        

        
          
          

        

      

      BOUNDARY
        COORDINATES

      

      OF

       

      EAST
        WADI ARABA

       

      GULF
        OF SUEZ 

       

      AREA

      

      
        	
                POINT

              	
                LONGITIUDE

              	
                LATITUDE

              	
                REMARKS

              
	
                No.

              	 	 	 
	 	 	 	 
	
                1

              	
                32°
                  40’ 30.00”

              	
                29°
                  17’ 00.00”

              	 
	 	 	 	 
	
                2

              	
                32
                  ° 40’ 30.00”

              	
                29°
                  15’ 00.00”

              	 
	 	 	 	 
	
                3

              	
                32°
                  41’ 30.00”

              	
                29°
                  15’ 00.00”

              	 
	 	 	 	 
	
                4

              	
                32°
                  41’ 30.00”

              	
                29°
                  14’ 00.00”

              	 
	 	 	 	 
	
                5

              	
                32°
                  41’ 00.00”

              	
                29°
                  14’ 00.00”

              	 
	 	 	 	 
	
                6

              	
                32°
                  41’ 00.00”

              	
                29°
                  13’ 00.00”

              	 
	 	 	 	 
	
                7

              	
                32°
                  40’ 00.00”

              	
                29°
                  13’ 00.00”

              	 
	 	 	 	 
	
                8

              	
                32°
                  40’ 00.00”

              	
                29°
                  09’ 00.00”

              	 
	 	 	 	 
	
                9

              	
                32°
                  44’ 30.00”

              	
                29°
                  09’ 00.00”

              	 
	 	 	 	 
	
                10

              	
                32°
                  44’ 30.00”

              	
                29°
                  08’ 00.00”

              	 
	 	 	 	 
	
                11

              	
                32°
                  48’ 00.00”

              	
                29°
                  08’ 00.00”

              	 
	 	 	 	 
	
                12

              	
                32°
                  48’ 00.00”

              	
                29°
                  03’ 00.00”

              	 
	 	 	 	 
	
                13

              	
                32°
                  44’ 00.00”

              	
                29°
                  03’ 00.00”

              	 
	 	 	 	 
	
                14

              	
                32°
                  44’ 00.00”

              	
                Intersection
                  of long. 

                32°
                  44’ 00.00” 

                with
                  shore line

              	 
	 	 	 	 
	
                15

              	
                Intersection
                  of Lat. 

                29°
                  17’ 00.00” 

                with
                  shore line

              	
                29°
                  17’ 00.00”

              	
              

      

      

        
          
            
            

          

          
            54

            
              

            

          

          
            
            

          

        

      

       

      ANNEX
        “B”

      

      Map
        of
        Concession Agreement

      
        
          
          

        

        
          55

          
            

          

        

        
          
          

        

      

      ANNEX
        "C"

       

      LETTER
        OF
        GUARANTY 

      EGYPTIAN
        GENERAL PETROLEUM CORPORATION

      

      Gentlemen,

      

      Reference
        is made to the Concession Agreement for Petroleum Exploration and Exploitation
        in East Wadi Araba issued by law No of 2001 ( the “Concession Agreement “ ) by
        and between the Arab Republic of Egypt (A.R.E.) , The Egyptian General Petroleum
        Corporation (EGPC) and Dover Investments Limited hereinafter referred to
        as
        CONTRACTOR .

      

      Dover
        Investments Limited as guarantor hereby undertakes that, if CONTRACTOR spends
        less than the minimum amount of three million and five hundred thousand
        (3.500.000) U.S. Dollars, during the initial Exploration period of three
        (3)
        years specified in the Concession Agreement (the difference being hereinafter
        described as Shortfall ) EGPC shall notify the CONTRACTOR in writing of the
        amount of the Shortfall . Within fifteen (15) days of receipt of such notice,
        Dover Investments Limited shall pay and/ or transfer to EGPC a quantity of
        crude
        oil sufficient in value to cover the Shortfall .

      

      In
        Such
        case said crude oil shall be transferred out of the share of crude oil
        production of Dover Investments Limited from Ras El Ush development lease
        pursuant to the terms of the Concession Agreement for Petroleum Exploration
        and
        Exploitation by and between the Arab Republic of Egypt, EGPC and Marathon
        Petroleum Egypt , LTD. (Now Dover Investments Limited) issued by law No.
        18 of
        1992
        ,as amended and said crude oil shall be valued at the time of the transfer
        to
        EGPC in accordance with the provisions of Article VII ( C ) of the Concession
        Agreement in Gabel El Zeit onshore and offshore Area.

       

      Dover
        Investments Limited may
        at
        any time between the date hereof and the date on which this letter of Guarantee
        shall expire submit to EGPC a bank guarantee for the Shortfall in a form
        satisfactory to EGPC , in which event the provisions of this letter shall
        automatically lapse and be of no effect .

      

      This
        Letter of Guarantee shall expire and become null and void on the date six
        (6)
        months after the end of the initial Exploration period of the Concession
        Agreement of East Wadi Araba Area or on the date upon CONTRACTOR’s fulfill of
        its obligations hereunder subject to EGPC approval, whichever first occur.
        

      

      
        	
                DOVER
                  INVESTMENTS LIMITED 

              	 
	 	 	 
	
                 

              	 
	 	 	 
	
                DATE

              	
                 

              	 

      

      
        
          
          

        

        
          56

          
            

          

        

        
          
          

        

      

      ANNEX
        "D"

       

      CHARTER
        OF OPERATING COMPANY

       

      ARTICLE
        I

      

      A
        joint
        stock company having the nationality of the ARAB REPUBLIC OF EGYPT shall
        be
        formed with the authorization of the GOVERNMENT in accordance with the
        provisions of this Agreement referred to below and of this Charter.

      

      The
        Company shall be subject to all laws and regulations in force in the A.R.E.
        to
        the extent that such laws and regulations are not inconsistent with the
        provisions of this Charter and the Agreement referred to below.

      

      

      ARTICLE
        II

      

      The
        name
        of the Operating Company shall be mutually agreed upon between EGPC and
        CONTRACTOR on the date of the Commercial Discovery and shall be subject to
        the
        approval of the Minister of Petroleum.

       

       

      ARTICLE
        III

      

      The
        Head
        Office of Operating Company shall be in the A.R.E. in Cairo.

       

      ARTICLE
        IV

      

      The
        object of Operating Company is to act as the agency through which EGPC and
        CONTRACTOR, carry out and conduct the Development operations required in
        accordance with the provisions of the Agreement signed on the ------ day
        of
        --------------- by and between the ARAB REPUBLIC OF EGYPT, THE EGYPTIAN GENERAL
        PETROLEUM CORPORATION and CONTRACTOR covering Petroleum operations in East
        Wadi
        Araba Area described therein.

      
        
          
            
            

          

          
            57

            
              

            

          

          
            
            

          

        

      

       

      Operating
        Company shall be the agency to carry out and conduct Exploration operations
        after the date of Commercial Discovery pursuant to Work Programs and Budgets
        approved in accordance with the Agreement.

       

      Operating
        Company shall keep account of all costs, expenses and expenditures for such
        operations under the terms of the Agreement and Annex "E" thereto. 

      

      Operating
        Company shall not engage in any business or undertake any activity beyond
        the
        performance of said operations unless otherwise agreed upon by EGPC and
        CONTRACTOR.

       

      ARTICLE
        V

      

      The
        authorized capital of Operating Company is twenty thousand Egyptian Pounds
        divided into five thousand shares of common stock with a value of four Egyptian
        Pounds per share having equal voting rights, fully paid and
        non-assessable.

       

      EGPC
        and
        CONTRACTOR shall each pay for, hold and own, throughout the life of Operating
        Company, one half (1/2) of the capital stock of Operating Company provided
        that
        only in the event that either party should transfer or assign the whole or
        any
        percentage of its ownership interest in the entirety of the Agreement, may
        such
        transferring or assigning party transfer or assign any of the capital stock
        of
        Operating Company and, in that event, such transferring or assigning party
        (and
        its successors and assignees) must transfer and assign a stock interest in
        Operating Company equal to the transferred or assigned whole or percentage
        of
        its ownership interest in the entirety of the said Agreement.

      
        
          
            
            

          

          
            58

            
              

            

          

          
            
            

          

        

      

       

      ARTICLE
        VI

      

      Operating
        Company shall not own any right, title, interest or estate in or under the
        Agreement or any Development Lease created thereunder or in any of the Petroleum
        produced from any Exploration Block or Development Lease thereunder or in
        any of
        the assets, equipment or other property obtained or used in connection
        therewith, and shall not be obligated as a principal for the financing or
        performance of any of the duties or obligations of either EGPC or CONTRACTOR
        under the Agreement. Operating Company shall not make any profit from any
        source
        whatsoever.

      

      

      ARTICLE
        VII

      

      Operating
        Company shall be no more than an agent for EGPC and CONTRACTOR. Whenever
        it is
        indicated herein that Operating Company shall decide, take action or make
        a
        proposal and the like, it is understood that such decision or judgment is
        the
        result of the decision or judgment of EGPC, CONTRACTOR or EGPC and CONTRACTOR,
        as may be required by the Agreement.

      

      

      ARTICLE
        VIII

       

      Operating
        Company shall have a Board of Directors consisting of eight (8) members,
        four
        (4) of whom shall be designated by EGPC and the other four (4) by CONTRACTOR.
        The Chairman shall be designated by EGPC and shall also be a Managing Director.
        CONTRACTOR shall designate the General Manager who shall also be a Managing
        Director.

       

      

      ARTICLE
        IX

      

      Meetings
        of the Board of Directors shall be valid if a majority of the Directors are
        present and any decision taken at such meetings must have the affirmative
        vote
        of five (5) or more of the Directors; provided, however, that any Director
        may
        be represented and vote by proxy held by another Director.

       

      
        
          
            
            

          

          
            59

            
              

            

          

          
            
            

          

        

      

      

      ARTICLE
        X

      

      General
        meetings of the Shareholders shall be valid if a majority of the capital
        stock
        of Operating Company is represented thereat. Any decision taken at such meetings
        must have the affirmative vote of Shareholders owning or representing a majority
        of the capital stock.

       

       

      ARTICLE
        XI

      

      The
        Board
        of Directors shall approve the regulations covering the terms and conditions
        of
        employment of the personnel of Operating Company employed directly by Operating
        Company and not assigned thereto by CONTRACTOR and EGPC.

       

      The
        Board
        shall, in due course, draw up the By-Laws of Operating Company, and such
        By-Laws
        shall be effective upon being approved by a General Meeting of the Shareholders,
        in accordance with the provisions of Article X hereof.

      
 

      ARTICLE
        XII

      

      Operating
        Company shall come into existence within thirty (30) days after the date
        of
        Commercial Oil Discovery or within thirty (30) days after signature of a
        Gas
        Sales Agreement or commencement of a scheme to dispose of Gas, as provided
        for
        in the Agreement (unless otherwise agreed by EGPC and CONTRACTOR).

       

      
        
          
            
            

          

          
            60

            
              

            

          

          
            
            

          

        

      

      

      The
        duration of Operating Company shall be for a period equal to the duration
        of the
        said Agreement, including any renewal thereof.

       

      The
        Operating Company shall be wound up if the Agreement referred to above is
        terminated for any reason as provided for therein.

       

      
        	
                DOVER
                  INVESTMENTS LIMITED

              	 
	 	 	 
	
                By
                  : 

              	
                 

              	 
	 	 	 
	 	 	 
	 	 	 
	
                EGYPTIAN
                  GENERAL PETROLEUM CORPORATION

              	 
	 	 	 
	
                By
                  :

              	
                 

              	 

      

      

        
          
            
            

          

          
            61

            
              

            

          

          
            
            

          

        

      

       

      ANNEX
        "E"

      

      ACCOUNTING
        PROCEDURE

      
 

      ARTICLE
        I

      

      GENERAL
        PROVISIONS

      

      
        	
                (a)

              	
                Definitions:

              

      

      

      The
        definitions contained in Article I of the Agreement shall apply to this
        Accounting Procedure and have the same meanings.

      

      
        	
                (b)

              	
                Statements
                  of activity:

              

      

      

      
        	 	
                (1)

              	
                CONTRACTOR
                  shall, pursuant to Article IV of this Agreement, and until the
                  coming into
                  existence of the Operating Company - in accordance with Article
                  VI of the
                  Agreement - render to EGPC within thirty (30) days of the end of
                  each
                  calendar quarter a Statement of Exploration Activity reflecting
                  all
                  charges and credits related to the Exploration operations for that
                  quarter
                  summarized by appropriate classifications indicative of the nature
                  thereof.

              

      

      

      
        	 	
                (2)

              	
                Following
                  its coming into existence, Operating Company shall render to EGPC
                  and
                  CONTRACTOR within fifteen (15) days of the end of each calendar
                  quarter a
                  Statement of Development and Exploration Activity reflecting all
                  charges
                  and credits related to the Development and Exploration operations
                  for that
                  quarter summarized by appropriate classifications indicative of
                  the nature
                  thereof, except that items of controllable material and unusual
                  charges
                  and credits shall be detailed.

              

      

      
        
          
          

        

        
          62

          
            

          

        

        
          
          

        

      

      
        	
                (c)

              	
                Adjustments
                  and Audits:

              

      

      

      
        	 	
                (1)

              	
                Each
                  quarterly Statement of Exploration Activity pursuant to Article
                  I (b) (1)
                  of this Annex shall conclusively be presumed to be true and correct
                  after
                  three (3) months following the receipt of each Statement by EGPC
                  unless
                  within the said three (3) months EGPC takes written exception thereto
                  pursuant to Article IV (f) of the Agreement. During the said three
                  (3)
                  month period supporting documents will be available for inspection
                  by EGPC
                  during all working hours. 

              

      

      

      
        	 	 	
                CONTRACTOR
                  will have the same audit rights on Operating Company Statements
                  as EGPC
                  under this sub-paragraph.

              

      

      

      
        	 	
                (2)

              	
                All
                  Statements of Development and Exploration Activity for any calendar
                  quarter pursuant to Article I (b) (2) of this Annex, shall conclusively
                  be
                  presumed to be true and correct three (3) months following the
                  receipt of
                  such Statement, unless within the said three (3) months period
                  EGPC or
                  CONTRACTOR takes written exception thereto. Pending expiration
                  of said
                  three (3) months EGPC or CONTRACTOR or both of them shall have
                  the right
                  to audit Operating Company accounts, records and supporting documents
                  for
                  such quarter in the same manner as provided in Article IV (f) of
                  the
                  Agreement.

              

      

      

      
        	
                (d)

              	
                Currency
                  Exchange:

              

      

      

      CONTRACTOR's
        books for Exploration and Operating Company's books for Development and
        Exploration, if any, shall be kept in the A.R.E. in U.S. Dollars. All U.S.
        Dollar expenditures shall be charged in the amount expended. All Egyptian
        Pounds
        expenditures shall be converted to U.S. Dollars at the applicable rate of
        exchange issued by the Central Bank of Egypt on the first day of the month
        in
        which expenditures are recorded, and all other non-U.S. Dollar expenditures
        shall be translated to U.S. Dollars at the buying rate of exchange for such
        currency as quoted by National Westminster Bank Limited, London at 10.30
        a.m.
        G.M.T., on the first day of the month in which expenditures are recorded.
        A
        record shall be kept of the exchange rates used in translating Egyptian Pounds
        or other non-U.S Dollar expenditures to U.S. Dollars.

      

      
        	
                (e)

              	
                Precedence
                  of Documents:

              

      

      

      In
        the
        event of any inconsistency or conflict between the provisions of this Accounting
        Procedure and the provisions of the Agreement treating the same subject
        differently, then the provisions of the Agreement shall prevail.

      

      
        	
                (f)

              	
                Revision
                  of Accounting Procedure:

              

      

      

      By
        mutual
        agreement between EGPC and CONTRACTOR, this Accounting Procedure may be revised
        in writing from time to time in the light of future
        arrangements.

      
        
          
          

        

        
          63

          
            

          

        

        
          
          

        

      

       

      
        	
                (g)

              	
                No
                  Charge for Interest on Investment:

              

      

      

      Interest
        on investment or any bank fees, charges or commissions related to any bank
        guarantees shall not at any time be charged as recoverable costs under the
        Agreement.

      

      

      ARTICLE
        II

      

      COSTS,
        EXPENSES AND EXPENDITURES

       

      Subject
        to the provisions of the Agreement, CONTRACTOR shall alone bear and, directly
        or
        through Operating Company, pay the following costs and expenses, which costs
        and
        expenses shall be classified and allocated to the activities according to
        sound
        and generally accepted accounting principles and treated and recovered in
        accordance with Article VII of this Agreement:

       

       

      
        	
                (a)

              	
                Surface
                  Rights:

              

      

      

      All
        direct cost attributable to the acquisition, renewal or relinquishment of
        surface rights acquired and maintained in force for the Area.

      

      
        	
                (b)

              	
                Labor
                  and Related Costs:

              

      

      

      
        	 	
                (1)
                  

              	
                Salaries
                  and Wages of CONTRACTOR's or Operating Company's employees, as
                  the case
                  may be, directly engaged in the various activities under the Agreement
                  including salaries and wages paid to geologists and other employees
                  who
                  are temporarily assigned to and employed in such activities. Such
                  salaries
                  and wages to be certified by a certified public accounting
                  firm.

              

      

      

      Reasonable
        revisions of such salaries and wages shall be effected to take into account
        changes in CONTRACTOR's policies and amendments of laws applicable to salaries.
        For the purpose of this Article II (b) and Article II (c), salaries and wages
        shall mean the assessable amounts for A.R.E. Income Taxes, including the
        salaries during vacations and sick leaves, but excluding all the amounts
        of the
        other items covered by the percentage fixed under (2) below.

      

      
        	 	
                (2)

              	
                For
                  expatriate employees permanently assigned to
                  Egypt:

              

      

      
        
          
          

        

        
          64

          
            

          

        

        
          
          

        

      

      
        	 	
                1.

              	
                All
                  allowances applicable to salaries and
                  wages;

              

      

      

      
        	 	
                2.

              	
                Cost
                  of established plans; and

              

      

      

      
        	 	
                3.

              	
                All
                  travel and relocation costs of such expatriate employees and their
                  families to and from the employee's country or point of origin
                  at the time
                  of employment, at the time of separation, or as a result of transfer
                  from
                  one location to another and for vacation (transportation costs
                  for
                  employees and their families transferring from the A.R.E. to another
                  location other than their country of origin shall not be charged
                  to A.R.E.
                  Operations).

              

      

      

      Costs
        under this Article II (b) (2) shall be deemed to be equal to seventy percent
        (70%) for expatriate personnel married and accompanied by their spouses and
        fifty two percent (52%) for expatriate personnel either single or not
        accompanied by their spouses to Egypt. These percentages refer to basic salaries
        and wages paid for such expatriate personnel including those paid during
        vacations and sick leaves as established in CONTRACTOR's international policies,
        chargeable under Article II (b) (1), Article II (i), Article II (k) (1) and
        Article II (k)(3) of this Annex.

      

      However,
        salaries and wages during vacations, sick leaves and disability are covered
        by
        the foregoing percentage. The percentage outlined above shall be deemed to
        reflect CONTRACTOR's actual costs as of the Effective Date with regard to
        the
        following benefits, allowances and costs:-

       

      

      
        	
                1.

              	
                Housing
                  and Utilities Allowance.

              
	
                2.

              	
                Commodities
                  and Services Allowance.

              
	
                3.

              	
                Special
                  Rental Allowance .

              
	
                4.

              	
                Vacation
                  Transportation Allowance.

              
	
                5.

              	
                Vacation
                  Travel Expense Allowance.

              
	
                6.

              	
                Vacation
                  Excess Baggage Allowance.

              
	
                7.

              	
                Education
                  Allowances (Children of Expatriate Employees).

              
	
                8.

              	
                Hypothetical
                  U.S.Tax Offset (which results in a reduction of the chargeable
                  percentage).

              
	
                9.

              	
                Storage
                  of Personal Effects.

              
	
                10.

              	
                Housing
                  Refurbishment Expense.

              
	
                11.

              	
                Property
                  Management Service Fees.

              
	
                12.

              	
                Recreation
                  Allowance.

              
	
                13.

              	
                Retirement
                  Plan.

              
	
                14.

              	
                Group
                  Life Insurance.

              
	
                15.

              	
                Group
                  Medical Insurance.

              
	
                16.

              	
                Sickness
                  and Disability.

              

      

      
        
          
          

        

        
          65

          
            

          

        

        
          
          

        

      

       

      
        	
                17.

              	
                Vacation
                  Plans Paid (excluding Allowable Vacation Travel
                  Expenses).

              
	
                18.

              	
                Savings
                  Plan.

              
	
                19.

              	
                Educational
                  Assistance.

              
	
                20.

              	
                Military
                  Service Allowance.

              
	
                21.

              	
                F.I.C.A.

              
	
                22.

              	
                Workman's
                  Compensation.

              
	
                23.

              	
                Federal
                  and State Unemployment Insurance.

              
	
                24.

              	
                Personnel
                  Transfer Expense.

              
	
                25.

              	
                National
                  Insurance.

              
	
                26.

              	
                Any
                  other Costs, Allowances and Benefits of a like nature as established
                  in
                  CONTRACTOR's International
                  Policies.

              

      

      

      The
        percentages outlined above shall be reviewed at intervals of three (3) years
        from the Effective Date and at such time CONTRACTOR and EGPC will agree on
        new
        percentages to be used under this paragraph.

      

      Revisions
        of the percentages will take into consideration variances in costs and changes
        in CONTRACTOR's international policies, which change or exclude any of the
        above
        allowances and benefits.

       

      The
        revised percentages will reflect as nearly as possible CONTRACTOR's actual
        costs
        of all its established allowances and benefits and of personnel
        transfers.

      

      
        	 	
                (3)

              	
                For
                  expatriate employees temporarily assigned to Egypt all allowances,
                  costs
                  of established plans and all travel relocation costs for such expatriates
                  as paid in accordance with CONTRACTOR's international policies.
                  Such costs
                  shall not include any administrative overhead other than what is
                  mentioned
                  in Article II (k) (2) of this
                  Annex.

              

      

      

      
        	 	
                (4)

              	
                Costs
                  of expenditure or contributions made pursuant to law or assessment
                  imposed
                  by Governmental authority which are applicable to labor cost of
                  salaries
                  and wages as provided under Article II (b) (1), Article II (b)
                  (2),
                  Article II (i), Article II (k) (l) and Article II (k) (3) of this
                  Annex.

              

      

      

      
        	 	
                (c)

              	
                Benefits,
                  allowances and related costs of national employees bonuses, overtime,
                  customary allowances and benefits on a basis similar to that prevailing
                  for oil companies operating in the A.R.E., all as chargeable under
                  Article
                  II (b) (1), Article II (i), Article II (k) (1) and Article II (k)
                  (3) of
                  this Annex. Severance pay will be charged at a fixed rate applied
                  to
                  payrolls which will equal an amount equivalent to the maximum liability
                  for severance payment as required under the A.R.E. Labor
                  Law.

              

      

       

      
        
          
          

        

        
          66

          
            

          

        

        
          
          

        

      

      

      
        	
              	
                (d)

              	
                Material

              

      

      

      Material,
        equipment and supplies purchased or furnished as such by CONTRACTOR or Operating
        Company.

      

      
        	 	
                (1)

              	
                Purchases:

              

      

      

      Material,
        equipment and supplies purchased shall be at the price paid by CONTRACTOR
        or
        Operating Company plus any related cost and after deduction of all discounts
        actually received.

      

       

      
        	 	
                (2)

              	
                Material
                  Furnished by CONTRACTOR:

              

      

      

      Material
        required for operations shall be purchased directly whenever practicable,
        except
        that CONTRACTOR may furnish such material from CONTRACTOR's or CONTRACTOR's
        Affiliated Companies stocks outside the A.R.E. under the following
        conditions:

      
 

      
        	
              	1.	
                New
                  Material (Condition "A")

              

      

       

      New
        Material transferred from CONTRACTOR's or CONTRACTOR's Affiliated Companies
        warehouse or other properties shall be priced at cost, provided that the
        cost of
        material supplied is not higher than international prices for material of
        similar quality supplied on similar terms, prevailing at the time such material
        was supplied.

      

      
        	
              	2.	
                Used
                  Material (Conditions "B" and "C")

              

      

      

        
          	 	
                  a)

                	
                  Material
                    which is in sound and serviceable condition and is suitable for
                    reuse
                    without reconditioning shall be classed as Condition "B" and
                    priced at
                    seventy - five percent (75%) of the price of new
                    material.

                

        

        

        
          	 	
                  b)

                	
                  Material
                    which cannot be classified as Condition "B" but which is serviceable
                    for
                    original function but substantially not suitable for reconditioning,
                    shall
                    be classed as Condition "C" and priced at fifty percent (50%)
                    of the price
                    of new material.

                

        

        

        
          	 	
                  c)

                	
                  Material
                    which cannot be classified as Condition "B" or Condition "C"
                    shall be
                    priced at a value commensurate with its
                    use.

                

        

        
          
            
            

          

          
            67

            
              

            

          

          
            
            

          

        

        
          	 	
                  d)

                	
                  Tanks,
                    buildings and other equipment involving erection costs shall
                    be charged at
                    applicable percentage of knocked - down new
                    price.

                

        

        

        
          	
                  (3)

                	
                  Warranty
                    of Materials Furnished by
                    CONTRACTOR

                

        

        

        CONTRACTOR
          does not warrant the material furnished beyond or back of the dealer's
          or
          manufacturer's guaranty; and in case of defective material, credit shall
          not be
          recorded until adjustment has been received by CONTRACTOR from manufacturers
          or
          their agents.

         

        
          	
                  (e)

                	
                  Transportation
                    and Employee Relocation Costs:

                

        

        

        
          	 	
                  (1)

                	
                  Transportation
                    of equipment, materials and supplies necessary for the conduct
                    of
                    CONTRACTOR's or Operating Company's
                    activities.

                

        

        

        
          	 	
                  (2)

                	
                  Business
                    travel and transportation expenses to the extent covered by established
                    policies of CONTRACTOR or with regard to expatriate and national
                    employees, as incurred and paid by, or for, employees in the
                    conduct of
                    CONTRACTOR's or Operating Company's
                    business.

                

        

        

        
          	 	
                  (3
                    )

                	
                  Employees
                    transportation and relocation costs for national employees to
                    the extent
                    covered by established policies.

                

        

        

        
          	
                  (f)

                	
                  Services:

                

        

        

        
          	 	
                  (1)

                	
                  Outside
                    services. The costs of contracts for consultants, services and
                    utilities
                    procured from third parties.

                

        

        

        
          	 	
                  (2)

                	
                  Cost
                    of services performed by EGPC or by CONTRACTOR, or their Affiliated
                    Companies in facilities inside or outside the A.R.E. Regular,
                    recurring,
                    routine services, such as interpreting magnetic tapes and/or
                    other
                    analyses, shall be performed and charged by EGPC and/or CONTRACTOR
                    or
                    their Affiliated Companies at an agreed contracted price. Major
                    projects
                    involving engineering and design services shall be performed
                    by EGPC
                    and/or CONTRACTOR or their Affiliated Companies at a negotiated
                    contract
                    amount.

                

        

        

        
          	 	
                  (3)

                	
                  Use
                    of EGPC's, CONTRACTOR's or their Affiliated Companies' wholly
                    owned
                    equipment shall be charged at a rental rate commensurate with
                    the cost of
                    ownership and operation, but not in excess of competitive rates
                    currently
                    prevailing in the A.R.E.

                

        

        

        
          	 	
                  (4)

                	
                  CONTRACTOR's
                    and CONTRACTOR's Affiliated Companies' rates shall not include
                    any
                    administrative or overhead costs other than what is mentioned
                    in Article
                    II (k) (2).

                

        

        
          
            
            

          

          
            68

            
              

            

          

          
            
            

          

        

         

        
          	
                  (g)

                	
                  Damages
                    and Losses:

                

        

        

        All
          costs
          or expenses, necessary to replace or repair damages or losses incurred
          by fire,
          flood, storm, theft, accident or any other cause not controllable by CONTRACTOR
          or Operating Company through the exercise of reasonable diligence. CONTRACTOR
          or
          Operating Company shall furnish EGPC and CONTRACTOR written notice of damages
          or
          losses incurred in excess of ten thousand ($10,000) U.S. Dollars per occurrence,
          as soon as practicable after report of the same has been received by CONTRACTOR
          or Operating Company.

        

        
          	
                  (h)

                	
                  Insurance
                    and Claims:

                

        

        

        The
          cost
          of any public liability, property damage and other insurance against liabilities
          of CONTRACTOR, Operating Company and/or the parties or any of them to their
          employees and/or outsiders as may be required by the laws, rules and regulations
          of the GOVERNMENT or as the parties may agree upon. The proceeds of any
          such
          insurance or claim collected, less the actual cost of making a claim, shall
          be
          credited against operations.

        

        If
          no
          insurance is carried for a particular risk, in accordance with good
          international oil field practices, all related actual expenditures incurred
          and
          paid by CONTRACTOR or Operating Company in settlement of any and all losses,
          claims, damages, judgments and any other expenses, including legal
          services.

        

        
          	
                  (i)

                	
                  Indirect
                    Expenses:

                

        

        

        Camp
          overhead and facilities such as shore base, warehouses, water systems,
          road
          systems, salaries and expenses of field supervisory personnel, field clerks,
          assistants, and other general employees indirectly serving the
          Area.

        

        
          	
                  (j)

                	
                  Legal
                    Expenses:

                

        

        

        All
          costs
          and expenses of litigation, or legal services otherwise necessary or expedient
          for the protection of the Area, including attorney's fees and expenses
          as
          hereinafter provided, together with all judgments obtained against the
          parties
          or any of them on account of the operations under the Agreement, and actual
          expenses incurred by any party or parties hereto in securing evidence for
          the
          purpose of defending against any action or claim prosecuted or urged against
          the
          operations or the subject matter of the Agreement. In the event actions
          or
          claims affecting the interests hereunder shall be handled by the legal
          staff of
          one or more of the parties hereto, a charge commensurate with cost of providing
          and furnishing such services may be made to operations.

        

          
            
              
              

            

            
              69

              
                

              

            

            
              
              

            

          

        

         

        
          	 	
                  (
                    1)

                	
                  While
                    CONTRACTOR is conducting Exploration operations, the cost of
                    staffing and
                    maintaining CONTRACTOR's head office in the A.R.E. and/or other
                    offices
                    established in the A.R.E. as appropriate other than field offices
                    which
                    will be charged as provided in Article II (i), and excepting
                    salaries of
                    employees of CONTRACTOR who are temporarily assigned to and directly
                    serving on the Area, which will be charged as provided in Article
                    II (b)
                    of this Annex. 

                

        

        

        
          	 	
                  (2)

                	
                  CONTRACTOR's
                    administrative overhead outside the A.R.E. applicable to Exploration
                    operations in the A.R.E. shall be charged each month at the rate
                    of five
                    percent (5%) of total Exploration expenditures, provided that
                    no
                    administrative overhead of CONTRACTOR outside the A.R.E. applicable
                    to
                    A.R.E. Exploration operations will be charged for Exploration
                    operations
                    conducted by Operating Company. No other direct charges as such
                    for
                    CONTRACTOR's administrative overhead outside the A.R.E. will
                    be applied
                    against the Exploration obligations. Examples of the type of
                    costs
                    CONTRACTOR is incurring and charging hereunder due to activities
                    under
                    this Agreement and covered by said percentage are:
                    

                

        

        

        
          	
                	1.	
                  Executive
                    - Time of executive officers.

                

        

        
          	
                	2.	
                  Treasury
                    - Financial and exchange problems.

                

        

        
          	
                	3.	
                  Purchasing
                    - Procuring materials, equipment and
                    supplies.

                

        

        
          	
                	4.	
                  Exploration
                    and Production-Directing, advising and controlling the entire
                    project.

                

        

        
          	 	
                  5.

                	
                  Other
                    departments such as legal, comptroller and engineering which
                    contribute
                    time, knowledge and experience to the
                    operations.

                

        

         

        The
          foregoing does not preclude charging for direct service under Article II
          (f) (2)
          of this Annex.

        

        
          	 	
                  (3)
                    

                	
                  While
                    Operating Company is conducting operations, Operating Company's
                    personnel
                    engaged in general clerical and office work, supervisors and
                    officers
                    whose time is generally spent in the main office and not the
                    field, and
                    all employees generally considered as general and administrative
                    and not
                    charged to other types of expense will be charged to operations.
                    Such
                    expenses shall be allocated each month between Exploration and
                    Development
                    operations according to sound and practicable accounting
                    methods.

                

        

        

        
          	(l)	
                  Taxes:

                

        

        

        All
          taxes, duties or levies paid in the A.R.E. by CONTRACTOR or Operating Company
          with respect to this Agreement other than those covered by Article III
          (g) (1)
          of the Agreement.

        

        
          	(m)	
                  Continuing
                    CONTRACTOR Costs:

                

        

        

        Costs
          of
          CONTRACTOR activities required under the Agreement and incurred exclusively
          in
          the A.R.E. after Operating Company is formed. No sales expenses incurred
          outside
          or inside the A.R.E. may be recovered as a cost.

        
          
            
            

          

          
            70

            
              

            

          

          
            
            

          

        

        
          	
                  (n)

                	
                  Other
                    Expenditures:

                

        

        

        Any
          costs, expenses or expenditures, other than those which are covered and
          dealt
          with by the foregoing provisions of this Article II, incurred by CONTRACTOR
          or
          Operating Company under approved Work Programs and Budgets.

         

         

        ARTICLE
          III

        

        INVENTORIES

        

        
          	
                  (a)

                	
                  Periodic
                    Inventories, Notice and
                    Representation:

                

        

        

        At
          reasonable intervals as agreed upon by EGPC and CONTRACTOR inventories
          shall be
          taken by Operating Company of the operations materials, which shall include
          all
          such materials, physical assets and construction projects. Written notice
          of
          intention to take inventory shall be given by Operating Company to EGPC
          and
          CONTRACTOR at least thirty (30) days before any inventory is to begin so
          that
          EGPC and CONTRACTOR may be represented when any inventory is taken. Failure
          of
          EGPC and/or CONTRACTOR to be represented at an inventory shall bind them
          to
          accept the inventory taken by Operating Company, who shall in that event
          furnish
          the party not represented with a copy thereof.

         

        

        
          	
                  (b)

                	
                  Reconciliation
                    and Adjustment of Inventories:

                

        

        

        Reconciliation
          of inventory shall be made by CONTRACTOR and EGPC, and a list of overages
          and
          shortages shall be jointly determined by Operating Company and CONTRACTOR
          and
          EGPC, and the inventory adjusted by Operating Company.

        
          
            
            

          

          
            71

            
              

            

          

          
            
            

          

        

        ARTICLE
          IV

        

        COST
          RECOVERY

        

        
          	(a)	
                  Statements
                    of Recovery of Costs and of Cost Recovery Petroleum:
                    

                

        

        

        CONTRACTOR
          shall, pursuant to Article VII of the Agreement, render to EGPC as promptly
          as
          practicable but not later than fifteen (15) days after receipt from Operating
          Company of the Statements for Development and Exploration Activity for
          the
          calendar quarter a Statement for that quarter showing:

        

        
          	 	
                  1.

                	
                  Recoverable
                    costs carried forward from the previous quarter, if
                    any.

                

        

        
          	 	
                  2.

                	
                  Recoverable
                    costs incurred and paid during the
                    quarter.

                

        

        
          	 	
                  3.

                	
                  Total
                    recoverable costs for the quarter (1) +
                    (2).

                

        

        
          	 	
                  4.

                	
                  Value
                    of Cost Recovery Petroleum taken and separately disposed of by
                    CONTRACTOR
                    for the quarter.

                

        

        
          	 	
                  5.

                	
                  Amount
                    of costs recovered for the quarter.

                

        

        
          	 	
                  6.

                	
                  Amount
                    of recoverable costs carried into the succeeding quarter, if
                    any.

                

        

        
          	 	
                  7.

                	
                  Excess,
                    if any, of the value of Cost Recovery Petroleum taken and separately
                    disposed of by CONTRACTOR over costs recovered for the
                    quarter.

                

        

        

        
          	
                  (b)

                	
                  Payments:

                

        

        

        If
          such
          Statement shows an amount due EGPC, payment of that amount shall be made
          in U.S.
          Dollars by CONTRACTOR with the rendition of such Statement. If CONTRACTOR
          fails
          to make any such payment to EGPC on the date when such payment is due,
          then
          CONTRACTOR shall pay interest of two and one half percent (2.5%) per annum
          higher than the London Interbank Borrowing Offered Rate (LIBOR) for three
          (3)
          months U.S. Dollars deposits prevailing on the date such interest is calculated.
          Such interest payment shall not be recoverable.

         

        
          	
                  (c)

                	
                  Settlement
                    of Excess Cost Recovery Petroleum:

                

        

        

        EGPC
          has
          the right to take its entitlement of Excess Cost Recovery Petroleum under
          Article VII (a) (2) of the Agreement in kind during the said quarter .
          A
          settlement shall be required with the rendition of such Statements in case
          CONTRACTOR has taken more than its own entitlement of such Excess Cost
          Recovery
          Petroleum.

        

        
          
            
              
              

            

            
              72

              
                

              

            

            
              
              

            

          

        

         

        
          	(d)	
                  Audit
                    Right:

                

        

        

        EGPC
          shall have a period of twelve (12) months from receipt of any Statement
          under
          this Article IV in which to audit and raise objection to any such Statement.
          EGPC and CONTRACTOR shall agree on any required adjustments. Supporting
          documents and accounts will be available to EGPC during said twelve (12)
          month
          period.

         

         

        ARTICLE
          V

        

        CONTROL
          AND MAJOR ACCOUNTS

        

        
          	
                  (a)

                	
                  Exploration
                    Obligation Control Accounts:

                

        

         

        CONTRACTOR
          will establish an Exploration Obligation Control Account and an offsetting
          contra account to control therein the total amount of Exploration expenditures
          reported on Statements of activity prepared per Article I (b) (1) of this
          Annex,
          less any reductions agreed to by EGPC and CONTRACTOR following written
          exceptions taken by a non-operator pursuant to Article I (c) (1) of this
          Annex,
          in order to determine when minimum Exploration obligations have been
          met.

         

        
          	
                  (b)

                	
                  Cost
                    Recovery Control Account:

                

        

        

        CONTRACTOR
          will establish a Cost Recovery Control Account and an off-setting contra
          account
          to control therein the amount of cost remaining to be recovered, if any,
          the
          amount of cost recovered and the value of Excess Cost Recovery Petroleum,
          if
          any.

         

        
          	
                  (c)

                	
                  Major
                    Accounts:

                

        

        
          
            
            

          

          
            73

            
              

            

          

          
            
            

          

        

         

        For
          the
          purpose of classifying costs, expenses and expenditures for Cost Recovery
          as
          well as for the purpose of establishing when the minimum Exploration obligations
          have been met, costs, expenses and expenditures shall be recorded in major
          accounts including the following:

         

        
          	 	
                  -

                	
                  Exploration
                    Expenditures;

                

        

        

        
          	 	
                  -

                	
                  Development
                    Expenditures other than Operating Expenses;

                

        

        

        
          	 	
                  -

                	
                  Operating
                    Expenses;

                

        

        

        Necessary
          sub-accounts shall be used.

        

        Revenue
          accounts shall be maintained by CONTRACTOR to the extent necessary for
          the
          control of recovery of costs and the treatment of Cost Recovery
          Petroleum.

        

         

        ARTICLE
          VI

        

        TAX
          IMPLEMENTATION PROVISIONS

        

        It
          is
          understood that CONTRACTOR shall be subject to Egyptian Income Tax Laws
          except
          as otherwise provided in the Agreement, that any A.R.E. Income Taxes paid
          by
          EGPC on CONTRACTOR's behalf constitute additional income to CONTRACTOR,
          and this
          additional income is also subject to A.R.E. income tax, that is "grossed
          up".

        

        CONTRACTOR's
          annual income, as determined in Article III (g) (2) of this Agreement,
          less the
          amount equal to CONTRACTOR's grossed-up Egyptian income tax liability,
          shall be
          CONTRACTOR's "Provisional Income".

         

        

        The
          "gross-up value" is an amount added to Provisional Income to give "Taxable
          Income", such that the grossed-up value is equivalent to the A.R.E. Income
          Taxes.

         

        
          
            
            

          

          
            74

            
              

            

          

          
            
            

          

        

        

        

        THEREFORE:

        

        Taxable
          Income = Provisional Income plus Grossed-up Value

        and

        Grossed-up
          Value = A.R.E. Income Tax on Taxable Income.

        

        If
          the
          "A.R.E. Income Tax rate", which means the effective or composite tax rate
          due to
          the various A.R.E. taxes levied on income or profits, is constant and not
          dependent on the level of income, then:

        

         

        Grossed-up
          Value = A.R.E. income tax rate TIMES Taxable Income.

         

        

        Combining
          the first and last equations above

        

        Grossed-up
          Value=  Provisional
          income X Tax Rate

                                                                             
          1 - Tax Rate

        

        where
          the
          tax rate is expressed as a decimal.

        

        The
          above
          computations are illustrated by the following numerical example. Assuming
          that
          the Provisional Income is $10 and the A.R.E. Income Tax rate is forty percent
          (40%), then the Grossed-up Value is equal to:

        

        $
          10 X
          0.4
          = $ 6.67

                                                                                           
          1
          -
          0.4

        

        Therefore:

        

        
          	
                  Provisional
                    income

                	 	
                  $

                	
                  10.00

                	 
	
                  Plus
                    Grossed-up Value

                	 	 	
                  6.67

                	 
	
                  Taxable
                    Income

                	 	
                  $

                	
                  16.67

                	 
	
                  Less:
                    A.R.E. Income Taxes at 40%

                	 	 	
                  
                  

                  6.67

                	 
	
                  CONTRACTOR's
                    Income after taxes

                	 	
                  
                  

                  $

                	
                  10.00

                	 

        

      

    

     

     

     75Exhibit 10.10

    
      

    

    

      EXHIBIT
        10.10

      

      EAST
        WADI ARABA CONCESSION - GULF OF SUEZ, EGYPT

      

      AMENDING
        AGREEMENT

      

      This
        Agreement made as of the 13th day of April, 2006 between DOVER INVESTMENTS
        LIMITED (“Dover”),
        TRANSPACIFIC PETROLEUM CORP. (“TransPacific”),
        MOGUL
        ENERGY LTD. (“Mogul”),
        DR.
        GHAREEB AWAD (“Awad”),
        MOGUL
        ENERGY INTERNATIONAL, INC. (“MEII”)
        and
        SEA DRAGON ENERGY INC. (“Sea
        Dragon”).

      

      WHEREAS
        Dover has entered into a concession agreement with the Egyptian General
        Petroleum Corporation (“EGPC”)
        and
        the Arab Republic of Egypt (“ARE”)
        for
        the concession known as East Wadi Araba (the “EWA
        Concession”)
        effective as of July 18, 2002 (the “Concession
        Agreement”).

      

      WHEREAS
        Dover, TransPacific, Mogul and Awad are parties to an agreement dated August
        6,
        2005 (the “Dover
        Farm-Out Agreement”)
        pursuant to which, among other things, Mogul agreed to cause a major bank
        in
        Egypt to issue a letter of guarantee in the amount of USD$2,000,000.00 (the
        “Letter
        of Guarantee”),
        to
        secure Mogul’s obligations under the Dover Farm-Out Agreement and to be used in
        the drilling of two wells in the EWA Concession as more particularly provided
        for in the Dover Farm-Out Agreement.

      

      WHEREAS
        Mogul has requested relief from the obligation under the Dover Farm-Out
        Agreement to have the Letter of Guarantee issued and has offered instead
        to have
        USD$2,000,000.00 deposited by Sea Dragon (USD$1,333,334.00) and MEII
        (USD$666,666.00) with an escrow agent and disbursed by the escrow agent towards
        satisfying Mogul’s obligations under the Dover Farm-Out Agreement including
        those intended to have been secured by the Letter of Guarantee.

      

      WHEREAS
        the law firm Hughes, Dorsch, Garland, Coles LLP, Dover’s Ontario lawyers, has
        been requested by the parties to serve as escrow agent (the “Escrow
        Agent”)
        for
        the purpose of receiving and dealing with the sum of USD$2,000,000.00 (the
        “Trust
        Funds”)
        pending payment thereof to the Trust Account (as defined below).

      

      WHEREAS
        the parties wish to amend the Dover Farm-Out Agreement to reflect and
        accommodate the foregoing and to provide for, among other things, the manner
        in
        which the Trust Funds are to be provided to and dealt with by the Escrow
        Agent.

      

      NOW
        THEREFORE the parties agree as follows:

      

      
        	
                1.

              	
                The
                  date by which the Letter of Guarantee is to have been provided
                  pursuant to
                  the Dover Farm-Out Agreement is hereby confirmed as having been
                  extended
                  to April 21, 2006. Any extension beyond April 21, 2006 will require
                  an
                  advance payment of USD$100,000.00 to Dover so as to permit immediate
                  commencement of the activities described below in paragraph
                  6.

              

      

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

      
        	
                2.

              	
                MEII
                  and Sea Dragon shall cause the Trust Funds to be deposited with
                  the Escrow
                  Agent and the Escrow Agent to have acknowledged receipt of the
                  Trust Funds
                  and to have agreed to be bound by the provisions of this Agreement
                  relating to the Trust Funds, by no later than April 21, 2006. Such
                  acknowledgment and agreement by the Escrow Agent shall be given
                  by the
                  Escrow Agent signing where indicated
                  below.

              

      

      

      
        	
                3.

              	
                Upon
                  the Escrow Agent so acknowledging and agreeing, and the Escrow
                  Funds
                  deposited therein, the obligation under the Dover Farm-Out Agreement
                  to
                  provide the Letter of Guarantee shall be deemed to have been satisfied
                  for
                  all purposes under the Dover Farm-Out Agreement. All other obligations
                  of
                  Mogul to Dover under the Dover Farm-Out Agreement, to the extent
                  not
                  already satisfied, shall continue and shall be the joint and several
                  obligations of MEII, Sea Dragon and TransPacific and such parties
                  shall
                  indemnify and hold Dover harmless from and against any losses,
                  damages or
                  costs it may suffer or incur resulting from or arising out of any
                  failure
                  to satisfy such obligations or otherwise relating to unpaid bills
                  or
                  claims of any kind against the EWA Concession. Solely as among
                  MEII, Sea
                  Dragon and TransPacific, however, such obligations shall be the
                  joint and
                  several obligations of MEII and Sea
                  Dragon.

              

      

      

      
        	
                4.

              	
                Within
                  one (1) week of the Escrow Agent so acknowledging and agreeing
                  and Dover
                  being provided with a copy of this Agreement duly signed by the
                  Escrow
                  Agent, Dover will forthwith apply for the consents of ARE and EGPC
                  to the
                  designation of TransPacific as operator for the EWA Concession
                  and to the
                  assignment to TransPacific, MEII and Sea Dragon of interests in
                  the EWA
                  Concession such that registered ownership of the EWA Concession
                  shall be
                  as follows:

              

      

      

      
        	 	
                TransPacific
                  

              	 	
                25%

              	 	
                (Carried
                  (as among TransPacific, MEII and Sea Dragon only)

              
	 	 	 	 	 	
                Working
                  Interest)

              
	 	
                MEII

              	 	
                20%

              	 	
                (Working
                  Interest)

              
	 	
                Sea
                  Dragon

              	 	
                40%

              	 	
                (Working
                  Interest)

              
	 	
                Dover

              	 	
                15%

              	 	
                (Carried
                  Working Interest)

              
	 	 	 	
                100%

              	 	 

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      

      Such
        application by Dover (the “Dover
        Consent Application”)
        shall
        be deemed to satisfy all of Dover’s assignment obligations under the Dover
        Farm-Out Agreement and MEII, Sea Dragon and TransPacific jointly and severally
        agree to meet all of the requirements of EGPC and ARE to complete such
        designation and assignments. Subject only to approval thereof by EGPC, the
        assignments shall be deemed to have been completed for all purposes in
        connection with the Dover Farm-Out Agreement. The parties expressly acknowledge
        and agree that nothing in the Dover Farm-Out Agreement or this Agreement
        shall
        be construed as an assignment of, or an attempt to assign, any interest in
        the
        EWA Concession without any and all approvals of EGPC and ARE required under
        the
        Concession Agreement or otherwise under laws applicable to the EWA Concession.
        The parties further expressly acknowledge and agree that notwithstanding
        any
        other provision of this Agreement or any actions by Dover as a required
        signatory for payments out of the Trust Account (as defined below) or as
        Operator (as defined below) pending the approval of TransPacific as operator,
        Dover will not be responsible for paying any of the expenses and costs howsoever
        incurred related to the EWA Concession except for its proportionate share
        (i.e.,
        15%) of
        all costs incurred by any operating company formed under the Concession
        Agreement on a commercial discovery being made and only after commercial
        production is achieved. For greater certainty Dover will also not be obligated
        to financially support any third or subsequent exploration phases of the
        EWA
        Concession but will nonetheless continue to be entitled to its ongoing 15%
        carried working interest.

      

      
        	
                5.

              	
                The
                  following are the terms and conditions applicable to the Escrow
                  Agent and
                  to the Trust Funds while held by the Escrow
                  Agent:

              

      

      

      
        	 	
                a.

              	
                The
                  Trust Funds shall be held by the Escrow Agent in trust and shall
                  be dealt
                  with by the Escrow Agent in accordance herewith. The Trust Funds
                  shall be
                  invested and reinvested by the Escrow Agent in a daily interest
                  deposit
                  account or guaranteed investment certificates with the principal
                  Canadian
                  chartered bank at which the Escrow Agent maintains its trust accounts
                  as
                  required by The Law Society of Upper Canada. All interest earned
                  shall be
                  paid and for income tax purposes allocated to MEII and Sea Dragon
                  in
                  proportion to their respective initial contributions of the Trust
                  Funds.
                  In no event shall the Escrow Agent use all or any portion of the
                  Trust
                  Funds to offset or satisfy any amounts that may be owed to the
                  Escrow
                  Agent by the parties to this Agreement or by their respective associates
                  or affiliates.

              

      

       

      
        
          	
                  b.

                	
                  A
                    copy of the Dover Consent Application shall be provided by Dover
                    to MEII,
                    Sea Dragon, TransPacific and the Escrow Agent contemporaneously
                    or
                    immediately following submission thereof to ARE and EGPC. Immediately
                    upon
                    receipt of a copy of the Dover Consent Application and receipt
                    of wire
                    transfer instructions for the Trust Account (as defined below),
                    the Escrow
                    Agent shall wire transfer for direct deposit to the Trust Account
                    the
                    amount of USD$2,000,000.00 from the Trust
                    Funds.

                

        

        

          
            
              
              

            

            
              3

              
                

              

            

            
              
              

            

          

        

      

       

      
        
          	
                  c.

                	
                  The
                    fees, disbursements and out-of-pocket expenses of the Escrow
                    Agent in
                    acting as set out in this Agreement, and in preparing this Agreement
                    in
                    its capacity as lawyers for Dover, shall be paid by Sea Dragon
                    and MEII in
                    proportion to their respective initial contributions of the Trust
                    Funds.
                    

                

        

         

      

      
        	 	
                d.

              	
                The
                  Escrow Agent acts hereunder as a depositary only and is not responsible
                  or
                  liable in any manner whatsoever for the sufficiency, correctness,
                  genuineness or validity of any instrument deposited with it, or
                  for the
                  form or execution of such instrument, or for the identity or authority
                  or
                  right of any party hereto executing or depositing it. Its duties
                  are
                  administrative in nature and the Escrow Agent shall not incur any
                  liability whatsoever hereunder.

              

      

       

      
        
          	
                  e.

                	
                  The
                    Escrow Agent shall not be liable for any error of judgment, or
                    for any act
                    done or step taken or omitted by it in good faith, or for any
                    mistake of
                    fact or law, or for anything which it may do or refrain from
                    doing in
                    connection herewith, except for its own gross negligence or willful
                    misconduct.

                

        

         

      

      f.   MEII,
        Sea
        Dragon, TransPacific and Dover jointly and severally undertake to indemnify
        and
        hold harmless the Escrow Agent and its partners, associates, employees and
        other
        representatives for any claims, losses, damages, costs and expenses, including
        fees, disbursements and out-of-pocket expenses of any agent and legal counsel,
        related to the execution of his or her obligations, and to pay the fees,
        disbursements and out-of-pocket expenses of the Escrow Agent in acting as
        set
        out in this Agreement and preparing the Agreement in its capacity as lawyers
        for
        Dover. This indemnity shall survive the resignation or removal of the Escrow
        Agent or the termination of this Agreement. Any amount due under this section
        and unpaid 30 days after request for such payment, will bear interest from
        the
        expiration of such 30 days at a rate per annum equal to the then current
        rate
        charged by the Escrow Agent from time to time, payable on
        demand.

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      

        
          	
                  g.

                	
                  Any
                    release of Trust Funds scheduled on a day which is not a Business
                    Day
                    shall be scheduled for the next Business Day following such day.
                    Notwithstanding the foregoing and any other provision of this
                    Agreement,
                    any deliveries of the Trust Funds to be made under this Agreement
                    shall be
                    made as soon as practicable following the scheduled release of
                    the
                    applicable Trust Funds. “Business Day”
                    means a day on which commercial banks are generally open for
                    business in
                    Toronto, Ontario other than a Saturday, Sunday or a day observed
                    as a
                    holiday in Toronto, Ontario under the laws of the Province of
                    Ontario or
                    the federal laws of Canada. As among MEII, Sea Dragon, TransPacific
                    and
                    Dover, the fees and disbursements and out-of-pocket expenses
                    of the Escrow
                    Agent shall be paid by Sea Dragon and MEII in proportion to their
                    respective initial contributions of the Trust
                    Funds.

                

        

         

        
          	
                  h.

                	
                  Any
                    notice, direction, consent, designation or other instrument to
                    be given
                    pursuant to this Agreement shall be sufficient if given by an
                    officer or
                    director of the respective party. The Escrow Agent shall have
                    no
                    responsibility to inquire into the genuineness or validity of
                    any
                    documents delivered to it and reasonably believed by it to have
                    been
                    signed by a proper person or persons and shall be entitled to
                    rely thereon
                    and shall not be liable or responsible for any action taken or
                    omitted in
                    good faith in accordance with the provisions thereof and
                    hereof.

                

        

        

          
            
              
              

            

            
              5

              
                

              

            

            
              
              

            

          

        

      

       

      i.   The
        Escrow Agent shall have the right to resign from its duties and obligations
        hereunder upon giving to Dover, TransPacific, MEII and Sea Dragon not less
        than
        thirty (30) days prior notice in writing or such shorter notice as they accept
        as sufficient. In the event of the Escrow Agent resigning as aforesaid, the
        Parties together shall have the obligation to appoint a new escrow agent,
        upon
        which the retiring Escrow Agent shall transfer all funds, agreements and
        other
        documents then in its possession to an escrow agent satisfactory to Dover,
        TransPacific, MEII and Sea Dragon, provided that the retiring Escrow Agent
        shall
        have received payment in full of all fees and expenses owing to it thereunder.
        Any new escrow agent appointed under any provision of this section shall
        be a
        corporation authorized to carry on the business of an escrow agent in the
        Province of Ontario and shall be subject to removal as aforesaid. On any
        such
        appointment, the new escrow agent shall be vested with the same powers, right,
        duties and responsibilities as if it had been originally named herein as
        the
        Escrow Agent, without any further assurance, conveyance, act or deed; but
        there
        shall be immediately executed, at the expense of TransPacific, MEII and Sea
        Dragon, all such conveyances or other instruments as may, in the opinion
        of
        counsel, be necessary or advisable for the purpose of assuring the new escrow
        agent possession of the Trust Funds. Should Dover, TransPacific, MEII and
        Sea
        Dragon together fail to appoint a new escrow agent as outlined above, then
        the
        retiring Escrow Agent shall cease its functions at the expiration of the
        period
        of notice and may retain all and any property in its possession hereunder
        on a
        merely safekeeping basis, at a fee to be determined solely by the Escrow
        Agent.

      

      j.   None
        of
        the provisions contained in this Agreement shall require the Escrow Agent
        to
        expend or risk its own funds or otherwise to incur financial liability in
        the
        performance of any of its duties or in the exercise of any of its rights
        or
        powers unless indemnified.

      

      k.   The
        Escrow Agent shall retain the right not to act and shall not be held liable
        for
        refusing to act unless it has received clear documentation which complies
        with
        the terms of this Agreement. Such documentation must not require the exercise
        of
        any discretion or independent judgment by the Escrow Agent.

      

      l.   The
        Escrow Agent is not a party to, and is not bound by, any agreement which
        may be
        evidenced by or referenced herein, or arising out of the instructions herein
        contained, other than as expressly set forth herein.

      

      m.   In
        the
        event of any disagreement arising regarding the terms of this Agreement,
        the
        Parties and the Escrow Agent hereby acknowledge that the Escrow Agent shall
        be
        entitled at its option to refuse to comply with any or all demands whatsoever
        until the dispute is settled either by written agreement amongst the various
        parties or by a court of competent jurisdiction. In addition, the Escrow
        Agent
        shall be entitled, in the event of any such disagreement, to apply to a court
        of
        competent jurisdiction in order to have the dispute settled.

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      

      n.   The
        Escrow Agent is hereby expressly authorized to comply with and obey orders,
        judgments or decrees of any court of law, notwithstanding any notices, warnings
        or other communications from any party or other person to the contrary. In
        case
        the Escrow Agent obeys or complies with any such order, judgment or decree
        of
        any court, the Escrow Agent shall not be liable to any of the parties hereto
        or
        to any other person by reason of such compliance, notwithstanding any such
        order, judgment or decree being subsequently reversed, modified, annulled,
        set
        aside, vacated or found to have been entered without jurisdiction.

      

      o.   The
        Escrow Agent shall be required to disburse monies hereunder only to the extent
        that monies (including any interest thereon) have been deposited with it.
        

       

      
        
          	
                  p.

                	
                  As
                    to the Escrow Agent only, this Agreement constitutes the whole
                    and entire
                    agreement among the parties hereto with respect to the subject
                    hereof and
                    cancels and supersedes any prior agreement, offers, acceptances,
                    undertakings, representations or declarations, whether verbal
                    or in
                    writing, in respect of the subject matter of this
                    Agreement.

                

        

         

      

      q.   A
        release
        from escrow of all of the Trust Funds in accordance with the provisions of
        this
        Agreement shall terminate all obligations of the Escrow Agent under this
        Agreement.

       

      6.   TransPacific
        shall immediately establish a bank account with a major bank in Egypt acceptable
        to Dover and designate such account, to the fullest extent possible under
        the
        laws of Egypt, as a trust account or such other account designation as is
        available under the laws of Egypt to acknowledge the interest of parties
        other
        than or in addition to the named account holder in amounts from time to time
        deposited into or disbursed from the account (the “Trust
        Account”).
        Full
        particulars of the Trust Account (including wire transfer instructions) shall
        be
        provided by TransPacific to Dover and the Escrow Agent by written notification
        no later than April 27, 2006. Should TransPacific fail to establish the Trust
        Account or fail to provide particulars thereof to the Escrow Agent as aforesaid,
        then Dover shall do so upon the same terms and conditions as soon as reasonably
        possible thereafter. The following are the terms and conditions applicable
        to
        the Trust Account and to the Trust Funds in the Trust Account:

      

      
        	 	
                a.

              	
                The
                  beneficial owner of the Trust Account shall be the operator from
                  time to
                  time of the EWA Concession as approved by ARE (the “Operator”)
                  and use of the Trust Funds shall be restricted as provided below.
                  If
                  TransPacific is not approved by ARE as the Operator all parties
                  to this
                  agreement agree that Sea Dragon shall be designated as Operator
                  subject to
                  ARE approval. If Sea Dragon is not approved by ARE as the Operator
                  all the
                  parties to this agreement agree that MEII shall be designated as
                  Operator
                  subject to ARE approval. Dover shall be Operator until such time
                  as either
                  TransPacific, Sea Dragon or MEII are approved as Operator and shall
                  remain
                  Operator if neither TransPacific, Sea Dragon or MEII are approved
                  as
                  Operator by ARE. 

              

      

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      

      
        	 	
                b.

              	
                Signing
                  authority for any and all cheques and other negotiable instruments
                  drawn
                  on the Trust Account and any and all disbursements or withdrawals
                  therefrom until the EWA #4 well is drilled shall, at all times
                  except as
                  may be otherwise expressly provided in subsection 6e hereof, require
                  two
                  signatories, one a nominee of TransPacific and the other a nominee
                  of
                  Dover. The nominees shall be Dr. Ghareeb Awad or Mr. Husam Awad
                  for
                  TransPacific and Mr. Dale Amerine or George Kozma for Dover, unless
                  and
                  until TransPacific and Dover, as applicable, otherwise notify the
                  other of
                  a replacement nominee in writing.

              

      

      

      
        	 	
                c.

              	
                USD
                  $250,000.00 of the Trust Funds to be wire transferred to the Trust
                  Account
                  by the Escrow Agent will be used to establish an operating office
                  for the
                  Operator and other related expenses in Cairo, the remainder will
                  be used
                  to drill the EWA#4 well. If TransPacific is not approved as Operator
                  by
                  ARE the $250,000 will remain in the Trust Account and will be used
                  to
                  satisfy the Second Phase Obligations.

              

      

      

      d.   Liabilities
        and expenses in accordance with requirements of EGPC and the Concession
        Agreement will be incurred by or on behalf of the Operator to satisfy the
        drilling obligations of MEII, Sea Dragon and TransPacific under the Dover
        Farm-Out Agreement as amended by this Agreement. At the discretion of the
        Operator the contracts for these liabilities and expenses must be approved
        and
        accepted by EGPC either through tender or other means acceptable to EGPC,
        and
        copies of EGPC approval letters for such contracts shall be provided by
        TransPacific to Dover prior to the payment of invoices thereunder from the
        Trust
        Account. TransPacific shall keep MEII, Sea Dragon and Dover fully informed
        on
        all aspects of both the exploration of and drilling in the EWA Concession.
        Without limiting the generality of the foregoing, TransPacific will provide
        activity reports by email to MEII, Sea Dragon and Dover weekly during the
        period
        of exploration and daily during the period of active drilling. MEII, Sea
        Dragon
        and TransPacific acknowledge and agree to and with Dover that any services
        rendered by Gebel El Zeit Petroleum Company (“Petrozeit”)
        relative to the EWA Concession shall be subject to the provisions of any
        Master
        Services Agreement then applicable to Petrozeit providing services in respect
        of
        the EWA Concession and that payment of any and all invoices for such services
        in
        excess of any remaining amount of the Trust Funds shall be the joint and
        several
        obligations of Sea Dragon, MEII and TransPacific provided that nothing herein
        shall oblige Dover to make any such services of Petrozeit available. Dover,
        TransPacific, Sea Dragon or MEII, as the case may be,
        shall
        obtain prior approval of Sea Dragon, MEII, TransPacific and Dover as to the
        content and form of any press release, in coordination with EGPC and the
        Ministry of Petroleum (in the case of announcing a discovery) such approval
        not
        to be unreasonably withheld or delayed. All parties agree not to publicly
        disclose results of the drilling operations until the agreed upon press release
        has been approved.

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      
        
          	
                  e.

                	
                  Should
                    the drilling obligations under the Dover Farm-Out Agreement for
                    the second
                    phase exploration period (the “Second
                    Phase Obligations”)
                    not be satisfied for any reason by May 17, 2007, as evidenced
                    by written
                    notification from EGPC to any of MEII, Sea Dragon, TransPacific
                    or Dover
                    to that effect and provided such notice is first provided by
                    the receiving
                    party to all non receiving parties, any balance remaining of the Trust
                    Funds shall forthwith paid from the Trust Account to Dover, if
                    so
                    requested by Dover by notice in writing to MEII, Sea Dragon and
                    TransPacific, whereupon Dover shall use its reasonable best efforts
                    to
                    complete the Second Phase Obligations by July 17, 2007 but without
                    any
                    obligation under this Agreement, or otherwise, to incur additional
                    liabilities or expenses in excess of the amount of the Trust
                    Funds it has
                    been paid. Alternatively, signing authority for the Trust Account
                    will be
                    changed to thereafter permit Dover’s nominee to have sole signing
                    authority. Any balance remaining of the Trust Funds after completion
                    of
                    the Second Phase Obligations shall be held in the Trust Account
                    or by
                    Dover, as applicable, and applied towards satisfying subsequent
                    drilling
                    obligations under the Dover Farm-Out Agreement. Should Dover
                    receive the
                    Trust Funds, Dover shall provide MEII, Sea Dragon and TransPacific
                    with a
                    detailed accounting of expenditures and ensure that the expenses
                    are to be
                    pursuant to contracts approved by
                    EGPC.

                

        

        

          
            
              
              

            

            
              9

              
                

              

            

            
              
              

            

          

        

      

       

      
        	
                7.

              	
                All
                  notices authorized or required between the parties and the Escrow
                  Agent by
                  any of the provisions of this Agreement shall be in writing (in
                  English)
                  and delivered in person or by courier service or by any electronic
                  means
                  of transmitting written communications which provides written confirmation
                  of complete transmission, and properly addressed to the other party.
                  Verbal communication does not constitute notice for purposes of
                  this
                  Agreement, and e-mail addresses and telephone numbers for the parties
                  and
                  the Escrow Agent are listed below as a matter of convenience only.
                  A
                  notice given under any provision of this Agreement shall be deemed
                  delivered only when received by the party to whom such notice is
                  directed,
                  and the time for such party to deliver any notice in response to
                  such
                  originating notice shall run from the date the originating notice
                  is
                  received. “Received”
                  for purposes of this Article shall mean actual delivery of the
                  notice to
                  the address of the party specified
                  hereunder.

              

      

      

      
        	 	
                Name:

              	 	
                Dover
                  Investments Limited

              	 
	 	
                Address:

              	 	
                10225
                  Yonge Street

              	 
	 	 	 	
                Richmond
                  Hill, Ontario

              	 
	 	 	 	
                L4C
                  3B2

              	 
	 	 	 	
                Canada

              	 
	 	
                Attention:

              	 	
                Robert
                  Salna

              	 
	 	
                Facsimile:

              	 	
                905-884-5178

              	 
	 	
                Email:

              	 	
                petrozeit@hotmail.com

              	 
	 	
                Telephone:

              	 	
                905-884-3988

              	 
	 	 	 	 	 
	 	
                Name:
                  

              	 	
                Mogul
                  Energy Ltd.

              	 
	 	
                Address:

              	 	
                1111-207
                  West Hastings Street

              	 
	 	 	 	
                Vancouver,
                  British Columbia, Canada, V6B 1H7

              	 
	 	
                Attention:

              	 	
                Mr.
                  Parvez Tyab

              	 
	 	
                Facsimile:

              	 	
                (604)
                  669-6318

              	 
	 	
                Email:

              	 	
                parveztyab@shaw.ca

              	 
	 	
                Telephone:

              	 	
                (604)
                  669-6317

              	 
	 	 	 	 	 
	 	
                Name:

              	 	
                TransPacific
                  Petroleum Corp.

              	 
	 	
                Address:

              	 	
                3486
                  Semlin Drive

              	 
	 	 	 	
                Richmond,
                  British Columbia, Canada, V7C 5V7

              	 
	 	
                Attention:

              	 	
                Dr.
                  Ghareeb Awad

              	 
	 	
                Facsimile:

              	 	
                (604)
                  270-3263

              	 
	 	
                Email:

              	 	
                garyawad@hotmail.com

              	 
	 	
                Telephone:

              	 	
                (604)
                  270-3220

              	 
	 	 	 	 	 
	 	
                Name:

              	 	
                Mogul
                  Energy International, Inc.

              	 
	 	
                Address:

              	 	
                520
                  Pike Tower, Suite 2210

              	 
	 	 	 	
                Seattle,
                  Washington, USA, 98101

              	 
	 	
                Attention:

              	 	
                Mr.
                  Naeem Tyab

              	 
	 	
                Facsimile:

              	 	
                (206)
                  357-4220

              	 
	 	
                Email:

              	 	
                naeem@mogulenergy.com

              	 
	 	
                Telephone:

              	 	
                (206)
                  357-4211

              	 

      

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      

      
        	 	
                Name:

              	 	
                Dr.
                  Ghareeb M. Awad

              	 
	 	
                Address:

              	 	
                3486
                  Semlin Drive

              	 
	 	 	 	
                Richmond,
                  British Columbia, Canada, V7L 5V7

              	 
	 	
                Attention:

              	 	
                Dr.
                  Ghareeb M Awad 

              	 
	 	
                Facsimile:

              	 	
                (604)
                  270-3263

              	 
	 	
                Email:

              	 	
                garyawad@hotmail.com

              	 
	 	
                Telephone:

              	 	
                (604)
                  270-3220

              	 
	 	 	 	 	 
	 	
                Name:

              	 	
                Sea
                  Dragon Energy Inc.

              	 
	 	
                Address:

              	 	
                1112-207
                  West Hastings Street

              	 
	 	 	 	
                Vancouver,
                  British Columbia, Canada, V6B 1H7

              	 
	 	
                Attention:

              	 	
                Mr.
                  David Thompson

              	 
	 	
                Facsimile:

              	 	
                (604)
                  669-6318

              	 
	 	
                Email:

              	 	
                dmt@seadragon.ca

              	 
	 	
                Telephone:

              	 	
                (604)
                  669-6317

              	 
	 	 	 	 	 
	 	
                Name:

              	 	
                Hughes,
                  Dorsch, Garland, Coles LLP

              	 
	 	
                Address:

              	 	
                365
                  Bay Street

              	 
	 	 	 	
                Suite
                  400

              	 
	 	 	 	
                Toronto,
                  Ontario, Canada M5H 2V1

              	 
	 	
                Attention:

              	 	
                Richard
                  E. Coles

              	 
	 	
                Facsimile:

              	 	
                416-861-1147

              	 
	 	
                Email:

              	 	
                coleslaw@hdgc.on.ca

              	 
	 	
                Telephone:

              	 	
                416-868-1300

              	 

      

      

      
        	
                8.

              	
                Each
                  of the parties hereto shall from time to time execute and deliver
                  all such
                  further documents and instruments and do all acts and things as
                  the other
                  parties hereto may reasonably require to effectively carry out
                  or better
                  evidence or perfect the full intent and meaning of this
                  Agreement.

              

      

       

      
        	
                9.

              	
                This
                  Agreement may be amended, modified or supplemented only by a written
                  instrument signed by each party. No waiver of any breach of any
                  provision
                  of this Agreement shall be effective or binding unless made in
                  writing and
                  signed by the party purporting to give the same and, unless otherwise
                  provided in the written waiver, shall be limited to the specific
                  breach
                  waived.

              

      

       

      
        	
                10.

              	
                The
                  Dover Farm-Out Agreement is and remains in full force and effect
                  subject
                  only as amended by this Agreement.

              

      

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      

      
        	
                11.

              	
                This
                  Agreement as it relates to the Trust Funds and the Escrow Agent
                  shall be
                  governed by and construed in accordance with the laws of the Province
                  of
                  Ontario and the federal laws of Canada applicable therein and shall
                  be
                  treated, in all such respects, as an Ontario contract. Each of
                  the parties
                  agrees that any action or proceeding relating to the Trust Funds
                  and the
                  Escrow Agent may be brought in any court of competent jurisdiction
                  in the
                  Province of Ontario and for that purpose now irrevocably and
                  unconditionally attorns and submits to the jurisdiction of such
                  Ontario
                  court. This Agreement as it relates to everything other than the
                  Trust
                  Funds and the Escrow Agent, consistent with the Dover Farm-Out
                  Agreement,
                  shall be governed by and construed in accordance with the law of
                  the
                  Province of Alberta and the federal laws of Canada applicable therein,
                  and
                  shall be treated, in all such respects, as an Alberta contract.
                  Any action
                  or proceeding otherwise relating to this Agreement may be brought
                  in any
                  court of competent jurisdiction in the Province of Alberta and
                  for that
                  purpose each of the parties now irrevocably and unconditionally
                  attorns
                  and submits to the jurisdiction of such Alberta
                  court.

              

      

      

      12. The
        invalidity or unenforceability of any particular provision of this Agreement
        shall not affect or limit the validity or enforceability of the remaining
        provisions of this Agreement.

      

      
        	
                13.

              	
                This
                  Agreement shall enure to the benefit of and be binding on the parties
                  to
                  this Agreement and each of their respective heirs, executors,
                  administrators, successors and
                  assigns.

              

      

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      
        	
                14.

              	
                This
                  Agreement may be executed in several parts in the same form and
                  by
                  facsimile and the parts as so executed shall together form one
                  original
                  agreement, and the parts, if more than one, shall be read together
                  and
                  construed as if all the signing parties hereto had executed one
                  original
                  copy of this Agreement.

              

      

      

      IN
        WITNESS WHEREOF
        the
        parties hereto have executed and delivered this Agreement as of the date
        first
        above-mentioned.

      

      
        	
                DOVER
                  INVESTMENTS LIMITED

              	 	 	 	
                Dated
                  April 13, 2006

              
	 	 	 	 	 	 
	
                By:

              	
                /s/
                  Robert P. Salna

              	 	 	 	 
	 	
                Robert
                  P. Salna, President

              	 	 	 	 
	 	 	 	 	 	 
	
                MOGUL
                  ENERGY LTD.

              	 	 	 	
                Dated
                  April 13, 2006

              
	 	 	 	 	 	 
	
                By:

              	
                /s/
                  Parvez Tyab

              	 	 	 	 
	 	
                Parvez
                  Tyab, President

              	 	 	 	 
	 	 	 	 	 	 
	
                TRANSPACIFIC
                  PETROLEUM CORP.

              	 	 	 	
                Dated
                  April 13, 2006

              
	 	 	 	 	 	 
	
                By:

              	
                /s/
                  Ghareeb M. Awad

              	 	 	 	 
	 	
                Dr.
                  Ghareeb M. Awad, President

              	 	 	 	 
	 	 	 	 	 	 
	
                MOGUL
                  ENERGY INTERNATIONAL, INC.

              	 	 	 	
                Dated
                  April 13, 2006

              
	 	 	 	 	 	 
	
                By:

              	
                /s/
                  Naeem Tyab

              	 	 	 	 
	 	
                Naeem
                  Tyab, President

              	 	 	 	 
	 	 	 	 	 	 
	
                SEA
                  DRAGON ENERGY INC.

              	 	 	 	 
	 	 	 	 	 	 
	
                /s/Parvez
                  Tyab

              	 	 	 	 
	
                Parvez
                  Tyab, Director

              	 	 	 	 
	 	 	 	 	 	 
	
                Signed,
                  sealed and delivered by

              	 	
                )

              	 	 
	
                Dr.
                  Ghareeb M. Awad in the presence of:

              	 	
                )

              	 	 
	 	 	 	
                )

              	 	 
	 	 	 	
                )

              	 	 
	
                /s/
                  Parvez Tyab

              	 	
                )

              	 	 

      

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      

      
        	
                Name

              	 	
                )

              	 	 
	 	 	
                )

              	 	
                /s/
                  Ghareeb M. Awad

              
	
                Dated
                  April 13, 2006

              	 	
                )

              	 	
                Dr.
                  Ghareeb M. Awad

              

      

       

       

      By
        signing below, Hughes, Dorsch, Garland, Coles LLP hereby acknowledges receipt
        of
        the aggregate sum of USD$2,000,000.00 representing the Trust Funds within
        the
        meaning of the foregoing Amending Agreement and agrees to and with each of
        the
        parties thereto to be bound by the provisions thereof relating to the Trust
        Funds as Escrow Agent thereunder.

      

      HUGHES,
        DORSCH, GARLAND, COLES LLP

      

      

      
        	
                /s/
                  Rick Coles

              	 	
                Dated:
                  Dated: April 21, 2006

              
	
                Richard
                  E. Coles, Partner

              

      

       

       

    

    
      14

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}]]