Document:

Exhibit 10.1

 

 

 

0n .............../....................2021

 

     

     

    

 

 

THIS PETROLEUM AGREEMENT is made and entered
between

 

THE GOVERNMENT OF THE REPUBLIC OF NAMIBIA

 

MINISTRY OF MINES AND ENERGY

 

(Herein represent by The Honorable Tom Alweendo
in his capacity as the Minister of the Ministry of Mines and Energy),

 

(Hereinafter referred to as the “Government”)

 

And

 

Niikela Exploration (PTY) LTD

 

(Hereinafter represented by Ms. Mbute Rusa Andreas,
as duly authorized by the Board of Directors of ...Niikela Exploration. (PTY) LTD in terms of the resolution passed on this 7th
day of September 2020. (Hereinafter referred to as “Niikela”)

 

And

 

Elephant Oil LTD

 

(Hereinafter represented by ...Mr. Matthew
B. Lofgran, as duly authorized by the Board of Directors of Elephant Oil LTD in terms of the resolution passed on this 15th
day of January 2013. (Hereinafter referred to as “Elephant”)

 

And

 

NAMCOR E&P EXPLORATION AND PRODUCTION
(PTY) LTD

 

(Hereinafter represented by Mr. Immanuel Mulunga,
as duly authorized by the Board of Directors of ... NAMCOR EXPLORATION AND PRODUCTION (PTY) LTD in terms NAMCOR E&P’s Schedule
of Authority (Hereinafter referred to as “NAMCOR E&P”)

 

(Hereinafter collectively referred to as the “Company”)

 

PREAMBLE

 

WHEREAS all rights in relation to the exploration
for, the production and disposal of, and the control over, Petroleum in or upon any Land in Namibia vest in the State;

 

AND WHEREAS the Petroleum (Exploration
and Production) Act, 1991, provides for the exploration for, and the production and disposal of, Petroleum under a licence issued in terms
of that Act;

 

AND WHEREAS Niikela, Elephant and NAMCOR
E&P have applied for an Exploration Licence and intends, in the event of a Discovery of Petroleum of a commercial interest made by
it, to apply for a Production Licence and to carry on Production Operations and to sell or otherwise dispose of Petroleum recovered;

 

    1

    

    

 

AND WHEREAS the Minister of Mines and Energy
is empowered to grant and issue Exploration Licences and Production Licences, subject to such terms and conditions as may, in addition
to the terms and conditions set out in section 14 of the said Act, be agreed upon in terms of section 13 thereof;

 

AND WHEREAS the Minister is prepared to
grant such application on certain terms and conditions;

 

NOW THEREFORE it is hereby agreed at WINDHOEK
on this ....... day of ....................... 2021 between:

 

THE GOVERNMENT OF NAMIBIA (“Government”)

(Herein represented by its Minister of Mines and
Energy)

-and-

 

Niikela Exploration (PTY) LTD

 

And

 

Elephant Oil LTD

 

And

 

NAMCOR EXPLORATION AND PRODUCTION (PTY) LTD

 

THAT the Minister of Mines and Energy shall
cause-

 

(a) an Exploration Licence to be issued in accordance
with the provisions of section 34 of the said Petroleum (Exploration and Production) Act, 1991, as amended, to the Company upon signature
of this Agreement and delivery by the said Company to the Minister of Mines and Energy of the Bank guarantee and the performance guarantee
referred to in clauses 4 and 30 of the Agreement; and

 

(b) in the event that a Discovery of a
commercial interest is made in the area in respect of which such Exploration Licence has been issued and a Petroleum Field is
declared under section 42 of the said Petroleum (Exploration and Production) Act, 1991, pursuant to such Discovery, upon an
application made in terms of section 46 of that Act a Production Licence to be issued in accordance with the provisions of section
47(1)(a) of that Act to the said Company.

 

THAT the aforesaid Exploration Licence
and, when issued, Production Licence shall, in addition to the terms and conditions contained in the said Petroleum (Exploration and Production)
Act, 1991, and the Petroleum (Taxation) Act, 1991, be subject to the terms and conditions set out in the Schedule hereto.

 

    2

    

    

 

SCHEDULE

 

ARRANGEMENT OF CLAUSES

 

Clause

 

1. Definitions

2. Address and other particulars of Company

3. Duration of Exploration Licence

4. Minimum exploration work programme

5. Technical Advisory Committee

6. Work programme and budget

7. Relinquishment

8. Discovery and development of Petroleum

9. Application for Production Licence

10. Sole risk

11. Environmental protection

12. Work practices and carrying out of operations

13. Royalty and annual charges

14. Taxation

14A. Optional Clause on Participation

15. Valuation of Namibian Crude Oil

16. Natural Gas

17. Insurance and assets

18. Measurement of Petroleum

19. Accounts and audits

20. Records, reports and ownership of data

21. Confidentiality of data

22. Employment and training

23. Namibian goods and services

24. Domestic supply obligation

25. Unit development

26. Termination

27. Vis major

28. Assignation

29. Arbitration

30. Performance guarantee

31. Entire agreement and amendments

32. Waiver

33. Applicable law

34. Notices

 

ANNEXURE 1: Description of Licence Area

ANNEXURE 2: Map of Licence Area

ANNEXURE 3: Bank guarantee

ANNEXURE 4: Accounting procedure

ANNEXURE 5: Performance guarantee

ANNEXURE 6: Principles governing the training
scheme of the Ministry of Mines and Energy

ANNEXURE 7: Principles governing the use of funds
paid to NAMCOR E&P for environmental studies.

 

.............................................................................................................................................................................................................................

 

    3

    

    

 

 

Clause 1

 

Definitions

 

		1.1	In this Agreement, unless the context indicates otherwise:

 

		(a)	“Affiliate”, in relation to the Company, means any company holding directly or indirectly a
majority of shares in the Company or any company which is controlled directly or indirectly by such first-mentioned company;

 

		(b)	“Appraisal Well” means any Well drilled after a Discovery of Petroleum has been made in the
Licence Area for purposes of determining the quantity of Petroleum in the Petroleum Reservoir to which such Discovery relates;

 

		(c)	“Associated Natural Gas” means Natural Gas produced from any Well in the Licence Area from which
Crude Oil is predominantly produced and which is separated from Crude Oil in accordance with Good Oilfield Practices, including the free
gas cap, but shall exclude any liquid hydrocarbons extracted from such gas;

 

		(d)	“Barrel” means 42 United States gallons liquid measure, corrected to a temperature of 60 degrees
Fahrenheit;

 

		(e)	“Block” means a Block, as defined in section 1(1) of the Petroleum Act;

 

		(f)	“Calendar Month” means any of the 12 months of the Calendar Year;

 

		(g)	“Calendar Year” means a period of a year commencing on the first day of January in every year;

 

		(h)	“Commissioner” means the Commissioner defined in section 1(1) of the Petroleum Act;

 

		(i)	“Company” means the Company, which is a Party or, in the case of a joint venture, the Companies
which are parties to this Agreement, and includes any other company to which the Company has assigned its interest or any part thereof
in relation to its Exploration Licence or in its Production Licence;

 

		(j)	“Companies Act” means the Companies Act, 1971 (Act No. 61 of 1971);

 

		(k)	“Crude Oil” means any Petroleum which is in a liquid state at the wellhead or gas-oil separator
or which is extracted from Natural Gas in a plant, including distillate and condensate, and which has been produced from the Licence Area;
provided however, that in clause 24 and where the context so admits, in clause 15, a reference to crude oil does not necessarily imply
that it has been produced from the Licence Area;

 

		(l)	“Crude Oil Produced and Saved” means Crude Oil produced by the Company under a Production Licence,
but shall not include any such Crude Oil which has been unavoidably lost or lawfully used in connection with operations for the recovery
of Petroleum;

 

		(m)	“Crystalline Basement”, for purposes of clause 4, means any igneous or metamorphic rock excluding
sills, dykes and similar subsurface intrusions or any stratum in and below which the geological structure or physical characteristics
of the rock sequence do not have the properties necessary for the accumulation of Petroleum in commercial quantities and which reflects
the maximum depth at which any such accumulation can be reasonably expected;

 

		(n)	“Decommissioning Plan” means the package of measures proposed by the Company pursuant to s.46(2)(viA)
of the Petroleum Act to be taken after cessation of production operations to remove or otherwise deal with all installations, equipment,
pipelines and other facilities, whether on shore or off shore, erected or used for purposes of such operations and to rehabilitate land
disturbed by way of such operations, reviewed pursuant to s.68 A(1) and either approved or revised by the Minister pursuant to s.68A(2)
or 68A(3) of the Petroleum Act.

 

    4

    

    

 

		(o)	“Development Operations” means Development Operations, as defined in section 1 of the Taxation
Act;

 

		(p)	“Development Plan” means the proposed programme of production and of processing of Petroleum
submitted in terms of section 46(2) of the Petroleum Act;

 

		(q)	“Discovery” means a Discovery as defined in section 1 of the Petroleum Act;

 

		(r)	“Environmental Damage” includes any damage or injury to, or destruction of, air or soil or
water or any plant or animal life, whether in the sea or in any other water or on, in or under Land;

 

		(s)	“Exploration Area” means an Exploration Area as defined in section 1(1) of the Petroleum Act;

 

		(t)	“Exploration Licence” means an Exploration Licence as defined in section 1(1) of the Petroleum
Act;

 

		(u)	“Exploration Operations” means Exploration Operations as defined in section 1(1) of the Petroleum
Act;

 

		(v)	“Exploration Period” means the Initial Exploration Period, the First Renewal Exploration Period
or the Second Renewal Exploration Period;

 

		(w)	“Exploration Well” means a Well drilled in the course of Exploration Operations, but shall not
include an Appraisal Well;

 

		(x)	“First Renewal Exploration Period” means the period for which the Exploration Licence issued
to the Company has been renewed for the first time under section 34 of the Petroleum Act;

 

		(y)	“Good Oilfield Practices” has the meaning assigned to it in section 1(i) of the Petroleum Act;

 

		(z)	“Immovable Asset” means property which can be touched but which cannot be moved, and includes
buildings, fixtures or improvements in or over Land and the right of occupation thereof;

 

		(aa)	“Inflation Factor” means the figure, expressed to the fourth place of decimals, obtained by
dividing the Price Index as reported for the first time in the monthly publication “International Financial Statistics” of the
International Monetary Fund in the section “Prices, Production, Employment” for the month in which this Agreement has been signed
by the Price Index first so reported for the month in which the expenditure in question has been so incurred or, for purposes of clause
22.4, the month for which the annual adjustment is to be made;

 

		(ab)	“Initial Exploration Period” means the period commencing on the date of signature of this Agreement
and ending on a date not later than four years as from such first mentioned date or such shorter period as may be determined in clause
3;

 

		(ac)	“Land” means Land as defined in section 1 (1) of the Petroleum Act;

 

		(ad)	“Licence Area” means a Licence Area as defined in section 1 of the Taxation Act to which the
licence of the Company relates and which is described in Annexure 1 and shown on the map contained in Annexure 2;

 

		(ae)	“Minister” means the Minister as defined in section 1(1) of the Petroleum Act;

 

		(af)	“Natural Gas” means Natural Gas, whether Associated or Non-Associated, and all its constituent
elements produced from any Well in the Licence Area and all non hydrocarbon substances therein;

 

		(ag)	“Natural Gas Produced and Saved” means Natural Gas produced by the Company under a Production
Licence, but shall not include any such Natural Gas which has been unavoidably lost or lawfully used in connection with operations for
the recovery of Petroleum;

 

    5

    

    

 

		(ah)	“Non-Associated Natural Gas” means Natural Gas other than Associated Natural Gas;

 

		(ai)	“Party” means the Government or the Company, as the case may be;

 

		(aj)	“Petroleum” means Petroleum as defined in section 1(1) of the Petroleum Act;

 

		(ak)	“Petroleum Act” means the Petroleum (Exploration and Production) Act, 1991;

 

		(al)	“Petroleum Data” has the meaning assigned to it clause 20.3 of this Agreement;

 

		(am)	“Petroleum Field” means a Petroleum Field as defined in section 1(1) of the Petroleum Act;

 

		(an)	“Petroleum Operations” means Exploration Operations and Production Operations carried out in
or in connection with a Licence Area;

 

		(ao)	“Petroleum Produced and Saved” means Crude Oil and Natural Gas Produced and Saved.

 

		(ap)	“Petroleum Reservoir” means a Petroleum Reservoir as defined in section 1(1) of the Petroleum
Act;

 

		(aq)	“Price Index” means the value of the United States Industrial Goods Producer Price Index reported
for the first time for the year or, for purposes of clauses 4.7 and 22.5, the month in question in the monthly publication of the International
Monetary Fund known as the “International Financial Statistics” in the section titled “Prices, Production, Employment”;

 

		(ar)	“Production Area” means a Production Area as defined in section 1(1) of the Petroleum Act;

 

		(as)	“Production Licence” means a Production Licence as defined in section 1(1) of the Petroleum
Act;

 

		(at)	“Production Operations” means Production Operations as defined in section 1(1) of the Petroleum
Act;

 

		(au)	“Quarter” means a period of three consecutive Calendar Months commencing on the first day of
January, April, July or October of each Calendar Year;

 

		(av)	“Second Renewal Exploration Period” means the period for which the Exploration Licence issued
to the Company has been renewed for the second time under section 34 of the Petroleum Act;

 

		(aw)	“Site Restoration” means all activities required to return a site to its natural state or to
render a site compatible with its intended after use after cessation of Petroleum Operations in relation thereto, and shall include removal
of equipment, offshore and onshore structures and debris, establishment of compatible contours and drainage, replacement of top soil,
re-vegetation, slope stabilization or infilling of excavations;

 

    6

    

    

 

		(ax)	“Taxation Act” means the Petroleum (Taxation) Act, 1991;

 

		(ay)	“Trust Fund” means the trust fund referred to in s.68(B) of the Petroleum Act.

 

		(az)	“Well” means a Well as defined in section 1(1) of the Petroleum Act.

 

		1.2	For the purposes of the definition of “Affiliate”-

 

		(a)	a Company is directly controlled by any other company or companies if such company or companies hold shares
in such first-mentioned Company carrying in the aggregate the majority of votes exercisable at the Company’s general meetings;

 

		(b)	a particular Company is indirectly controlled by a company or companies (hereinafter referred to as the
parent company or companies) if a series of companies can be specified, beginning with the parent company, so related that each company
of the series, except the parent company or companies, is directly controlled by one or more of the companies earlier in the series.

 

		1.3	The headings to the respective clauses of this Agreement are used merely for convenience and shall not
form part of this Agreement.

 

		1.4	Unless the contrary intention appears, words importing the masculine gender include females and words
in the singular number include the plural, and words in the plural number include the singular.

 

    7

    

    

 

Clause 2

 

Address and other particulars of Company

 

		2.1	The Company’s Registration

 

		2.1.1	Niikela is duly registered and incorporated as a company in accordance with the provisions of the Companies
Act in respect of which incorporation a certificate of incorporation No. .2020/0564.. dated ..07 September 2020.. has been issued.

 

		2.1.2	Elephant is duly registered and incorporated as a company in accordance with the provisions of the Companies
Act in respect of which incorporation a certificate of incorporation No. 083.59.224. dated 14 January 2013 has been issued.

 

		2.1.3	NAMCOR E&P is duly registered and incorporated as a company in accordance with the provisions of the
Companies Act in respect of which incorporation a certificate of incorporation No. .2000/170.

 

(In the case of a joint venture, amend
clause to include relevant particulars of each participating company)

 

		2.2	The Company’s Share Capital

 

		2.2.1	The share capital of the Niikela is 4000 ordinary par value shares of one (1.00) Namibian Dollar/cent
each.

 

		2.2.2	The share capital of the Elephant is 23,218,183 ordinary par value shares of £0.0002 (GBP) per share.

 

		2.2.3	The share capital of NAMCOR E&P is 10,000,000 (ten million) shares of one (1.00) Namibian dollar each.

 

		2.3	The Company’s Registered address

 

		2.3.1	The registered address of Niikela is .ERF: 5180 Siegfried Tjitmisa Street, Katutura Central, Windhoek,
Namibia.

 

		2.3.2	The registered address of Elephant is 6th Floor, 60 Gracechurch Street, London, EC3V 0HR, UK.

 

		2.3.3	The registered address of NAMCOR E&P is 1 Aviation Road, Petroleum House, Windhoek, Namibia.

 

(In the case of a joint venture, amend
clause to include relevant particulars of each participating company)

 

		2.4	The Company’s Beneficial owners

 

		2.4.1	Niikela hereby declares that the following persons are the beneficial owners of more than five per cent
of the shares issued by it:-

 

Full Names: Percentage held:

 

	 	1.	Mbute Rusa Andreas.................. 	1. 100%...................

 

		2.4.2	Elephant hereby declares that the following persons are the beneficial owners of more than five (5%) per
cent of the shares issued by it:-

 

Full Names: Percentage held:

 

	 	1.	M Lofgran	1. 28.8%
	 	2.	Hot Rocks Investments PLC	2. 8.5%
	 	3.	G Burnell	3. 8.4%
	 	4.	Woodland Capital Limited	4. 6.0%

 

		2.4.3	NAMCOR E&P hereby declares that the following persons are the beneficial owners of more than five
per cent of the shares issued by it:-

 

Full Names: Percentage held:

 

	 	1.	Government of the Republic of Namibia	1. 100%

 

(In the case of a joint venture, amend
clause to include relevant particulars of each participating company and add percentage of participating interest of each company in such
joint venture)

 

The respective Participation Interest
of Niikela, Elephant and NAMCOR E&P in and under the Exploration Licence will be as follows:

 

	 	Niikela	20%
	 	Elephant	70%
	 	NAMCOR E&P	10%

 

    8

    

    

 

Clause 3

 

Duration of Exploration Licence

 

	3.1	Subject to the provisions of the Petroleum Act, the Exploration Licence
granted to the Company shall be for an initial period of four (4) years commencing from the date of signature of this Agreement by all
the parties thereto.

 

	3.2	Subject to the provisions of the Petroleum Act, the Exploration Licence
referred to in clause 3.1 may be renewed for such further period, not exceeding two years, as may be determined by the Minister at the
time of the renewal of such licence as from the date on which such licence would have expired if an application for its renewal had not
been made or on the date on which the application for such renewal is granted, whichever date is the later date: Provided that such licence
shall not be renewed on more than two occasions.

 

Clause 4

 

Minimum exploration work programme

 

		4.1	Subject to clause 4.5, the Company shall, during each of
the periods referred to in paragraphs (a), (b) and (c) below into which its exploration work programme is divided for purposes of this
Agreement, carry out the work specified in such Articles 4.1 (a,b,c) and Article 4.2 as related to such work.

 

(a) Initial Exploration Period – Phase
1 – Year 1 through Year 3 

 

(1a) Minimum exploration work

 

		a)	Purchase all available Potential Field Data from the Geological Survey of Namibia

 

		b)	Undertake a surface geochemical soil gas sampling survey

 

		c)	Undertake passive seismic survey consisting of a minimum of 60 stations

 

		d)	Undertake field study, basin modeling and prospectivity study over the block

 

Initial Exploration Period (continued) –
Phase 2 – Year 4

 

(1b) Minimum exploration work

 

		-	Acquire between 200 km and 250 km of 2D seismic

 

Minimum exploration expenditure
Years 1 – 4

 

$500,000 USD (estimated)

 

(b) First Renewal Exploration Period –
two (2) years

 

(i) Minimum exploration work

 

Drill one (1) exploration well at a
depth to be agreed by the Technical Committee

 

(ii) Minimum exploration expenditure

 

$5,000,000 USD (estimated)

 

(c) Second Renewal Exploration Period –
two (2) years 

 

(i) Minimum exploration work

 

Drill one (1) exploration and either
undertake 250 km of 2D seismic or drill one exploration well . The depth of the exploration well(s) shall be agreed by the Technical Committee.

 

(ii) Minimum exploration expenditure

 

$5,000,000 USD (estimated)

 

    9

    

    

 

		4.2	The minimum exploration work and expenditure amounts referred to in clause 4.1 for each Exploration Period
shall be deemed satisfied upon completion of the minimum work as set out above. Satisfaction of the minimum work is deemed satisfied,
if properly execute using best oil field practices in undertaking the minimum work regardless of the specified expenditure amount. The
concept of completion of the minimum work takes precedent over the expenditure amount assigned to the work. A detailed summary of the
exploration work and actual expenditure amounts shall be provided to the Ministry on a regular basis. Notwithstanding the following, work
undertaken during each exploration Period that exceeds the minimum work obligation and expenditure that exceeds either the minimum work
or expenditure amounts shall be carried over into subsequent renewal periods by given the Ministry notice of the work and expenditures
concluded during the term in question. The work specified in clause 4.1 for the above relevant periods equals or exceeds the sums mentioned
in clause 4.1, provided that for this purpose all such actual attributable expenditures shall be adjusted for inflation, commencing from
the Calendar Month in which this Agreement is signed by multiplying each such expenditure by the Inflation Factor.

 

	4.3	If the Price Index ceases to be published, the Price Index contemplated in clause 4.2 shall for the purposes
of this Agreement be such price index as may be determined by mutual agreement between the Parties to this Agreement.
	 	 

	4.4	Any expenditure incurred by the Company in respect of an appraisal programme referred to in clause 8 of
this Agreement shall not be regarded to be expenditure incurred for purposes of clause 4.1.

 

	4.5	With reference to Article 4.1, if the Company has during any period referred to above, spent more than
the amount specified therein in respect of the period in question, the amount so overspent may, subject to adjustment in terms of Article
4.2, be carried over and credited against the minimum amount so specified in respect of the next ensuing period: Provided that this sub
clause shall not be construed as detracting or modifying any obligation of the Company to drill Exploration Wells or to conduct seismic
surveys in terms of this clause. For purposes of this Article, both goods and services incurred by the Company bought into the Country
to fulfill the minimum work obligations of a given Period will be credited to the amounts of the minimum work obligation.

 

		4.6	No Exploration Well drilled by the Company shall be regarded as discharging the Company from its obligation
to drill such Well, unless

 

		(a)	such Well has been drilled to a depth or stratigraphic level specified in clause 4.1; or

 

		(b)	such Well has been drilled to such depth as may be necessary for evaluation of the geological formation
established by the available geophysical data as the deepest objective in the feature chosen for drilling; or

 

		(c)	before reaching the depth referred to in subparagraphs (a) and (b), the Crystalline Basement is encountered;
or

 

		(d)	before reaching such Crystalline Basement, insurmountable technical problems are encountered which will
make further drilling impractical, provided that if the said Well is abandoned owing to the said problems before reaching the said Basement,
the Company shall drill a substitute Exploration Well in the Licence Area to the depth aforesaid.

 

	4.7	The Company shall on the date on which this Agreement is signed and on the first day on which the First
Renewal Exploration Period and the Second Renewal Exploration Period commence provide, in a form similar to the form set out in Annexure
3, a bank guarantee in respect of the minimum expenditure referred to in clause 4.1 in respect of the Exploration Period in question.

 

		(a)	The amount of any such bank guarantee shall be reduced at the end of every Quarter by an amount equal
to the actual expenditure incurred by the Company during such Quarter in discharge of its obligations under clause 4.1.

 

		(b)	If at the end of the Initial Exploration Period, the First Renewal Exploration Period or Second Renewal
Exploration Period, as the case may be, the work and expenditure incurred by the Company during any such period, as adjusted in accordance
with clause 4.4, and with due regard to any amount carried over in terms of clause 4.5 does not equal or exceed the minimum work obligation
under Article 4.1, the Minister may invoke the said bank guarantee for the amount of work required under the respective Period that was
not fulfilled by Company. The expenditure referred to in clause 4.1 for such period, the said bank guarantee shall be invoked for purposes
of payment to the Minister of the full amount of the shortfall, as adjusted by multiplying such shortfall by a figure, expressed to the
fourth place of decimals, obtained by dividing the Price Index, as reported for the first time in the monthly publication “International
Financial Statistics” of the International Monetary Fund in the section “Prices, Production, Employment”, for the Calendar
Month immediately preceding the day of receipt of written demand for payment of such shortfall, by such Price Index as so reported for
the Calendar Month in which this Agreement has been signed. Notwithstanding the above, the minimum work obligation is deemed satisfied,
if properly execute using best oil field practices in undertaking the minimum work regardless of the specified expenditure amount. The
concept of completion of the minimum work takes precedent over the expenditure amount assigned to the work. A detailed summary of the
exploration work and actual expenditure amounts shall be provided to the Ministry on a regular basis.

 

		4.8	The Company shall submit to the Commissioner annually a work programme and a budget reviewed in accordance
with the terms of clause 5.4 setting forth the work to be carried out and showing an estimate of the amounts to be spent thereon.

 

    10

    

    

 

Clause 5

 

Technical Advisory Committee

 

	5.1	The Minister and the Company shall as soon as possible after the date on which this Agreement is signed
establish a committee to be known as the Technical Advisory Committee which shall consist of-

 

		(a)	a chairman and three other persons appointed by the Minister; and
	 	 	 

		(b)	four other persons appointed by the Company.

 

	5.2	The Minister and the Company may, with due regard to the terms of clause 5.1, appoint by notice in writing,
whether by telex, telefax or otherwise, any person to act in the place of any member of the Technical Advisory Committee during his absence
or incapacity to act as a member of the Committee.

 

	5.3	When an alternate member acts in the place of any member he/she shall have the powers and perform the
duties of such member.

 

	5.4	Without prejudice to the rights and obligations of the Company in relation to the management of its operations
the functions of the Technical Advisory Committee shall be-

 

		(a)	to oversee and monitor all Petroleum Operations carried out by the Company;

 

		(b)	to review any proposed exploration work programme and budgets to be submitted by the Company to the Commissioner
in terms of clauses 4.8 and 6 and to monitor the implementation of any appraisal programmes submitted by the Company to the Minister in
terms of clause 8;

 

		(c)	to review and recommend to the Commissioner for approval, at any date after the date on which application
is made by the Company for a Production Licence in respect of any part of the Licence Area and for as long as Petroleum is produced in
such area, any proposed exploration work programme and budgets and any proposed amendment to be submitted to the Commissioner in terms
of clauses 4.8 and 6;

 

		(d)	to review any appraisal programmes submitted by the Company to the Minister in terms of clause 8 and any
Development Plan which the Company proposes to submit in connection with an application for a Production Licence in terms of clause 9;

 

		(e)	to ensure that the accounting of expenditure and the maintenance of operating records and reports kept
in connection with the Petroleum Operations are made in accordance with this Agreement and the accounting principles and procedures generally
accepted in the international petroleum industry.

 

    11

    

    

 

	5.5	All meetings of the Technical Advisory Committee shall be held at such places, whether within or, with
the prior approval in writing of the Minister, outside Namibia, and at such times, but not less than one meeting during each half of the
Calendar Year during the term of the Exploration Licence and thereafter not less than one meeting during each Quarter, as may be determined
unanimously by its members.

 

	5.6	Five members of the Technical Advisory Committee shall form a quorum for a meeting of the Committee.

 

	5.7	The Minister or the Company shall have the right to call any expert to any meeting of the Technical Advisory
Committee to advise the Committee on any matter of a technical nature requiring expert advice.

 

	5.8	A unanimous vote of all the members of the Technical Advisory Committee present at a meeting thereof on
any matter requiring a decision of the Committee as set out in clause 5.4 shall be a decision of the Committee and shall be binding upon
the Parties to this Agreement. The committee shall not make any decision which shall unreasonably or negatively impede the Company’s
ability to fulfill its obligations under this Agreement.

 

	5.9	If a decision cannot be taken as contemplated in clause 5.8

 

		(a)	in the case of a proposal of the Company in relation to a matter referred to in paragraph (a), (b) or
(d) of clause 5.4, the proposal of the Company shall prevail, provided (i) that such proposal is not inconsistent with any term of this
Agreement; and (ii) that, in the case of the review of a Development Plan, such proposal contains the particulars contemplated in section
46(2)(e) to (k) of the Petroleum Act;

 

		(b)	in the case of any dispute in respect of a matter contemplated in paragraph

 

		(c)	of clause 5.4, such dispute between the Minister and the Company shall be referred, within 90 days
as from the date of the meeting on which no decision could have so been taken, to a sole expert appointed in accordance with the terms
of clause 29.6.

 

Clause 6

 

Work programme and budget

 

		6.1	During the currency of an Exploration Licence the Company shall prepare and submit in each Calendar
                                                           Year, not less than three months prior to the last day of each Calendar Year to the Commissioner a work programme and budget
                                                           referred to in paragraph (b) or (c) of clause 5.4 for review or for review and recommendation by the Technical Advisory Committee in
                                                           accordance with the terms of those paragraphs, setting forth the Exploration Operations which the Company proposes to carry out
                                                           during the period of 12 months immediately following such last day and the estimated cost thereof.

 

		6.2	Any work programme and budget submitted in terms of sub clause 6.1 for review or review and recommendation
by the Technical Advisory Committee to the Commissioner and any revision or amendment thereof shall be consistent with the requirements
set out in clause 4 relating to the minimum exploration work and minimum exploration expenditure for any of the periods so set out within
which the work programme and budget will fall.

 

		6.3	The Company may by notice in writing to the Minister amend any work programme or budget submitted to the
Technical Advisory Committee, provided that the work programme or budget is not required to be submitted to that Committee for review
and recommendation to the Commissioner under the terms of paragraph (c) of clause 5.4 and such amendment is consistent with the Company’s
obligations under clause 4.

 

		6.4	A notice referred to in clause 6.3 shall state the reasons for which the amendment is necessary or desirable.

 

    12

    

    

 

Clause 7

 

Relinquishment

 

		7.1	Subject to the provisions of the Petroleum Act, the Company shall by notice in writing addressed and delivered
to the Commissioner relinquish-

 

		(a)	not later than 30 days before the end of the fourth year of the currency of the Exploration Licence, at
least 50 per cent of the Exploration Area as described in Annexure 1 to which such licence relates and identified in such notice;

 

		(b)	not later than 30 days before the end of the sixth year of such currency, at least a further 25 per cent
of such Exploration Area as described in Annexure 1 and so identified,

  

Whereupon any part of the Exploration Area so
identified shall cease to be part of such Exploration Area as from a date90 days  after the date of such notice: Provided that-

 

		(i)	if such licence is cancelled in terms of section 19(3) of the Petroleum Act in relation to any area of
Land in any Calendar Year of the currency of such licence, such area of Land shall be deemed to have been relinquished for the purposes
of the determination of the relinquishment next required to be made by the Company under paragraph (a) or (b);

 

		(ii)	any area of Land relinquished under clause 7.2, shall be deemed to have been relinquished for the purposes
of the determination of the relinquishment next required to be made by the Company under paragraph (a) or (b);

 

		(iii)	the Company shall relinquish such Land in such a manner so as to ensure that the Exploration Area is,
after such relinquishment, a single area consisting, in so far as it is possible, of rectangular blocks bounded by lines running either
due North and South or due East and West and having sides, each of at least 30 seconds of longitude or latitude, as the case may be;

 

		(iv)	the Company shall not be required to relinquish any Land in the Exploration Area which is subject to an
application for a Production Licence or situated within a Petroleum Field or subject to an application for the declaration of a Petroleum
Field.

 

		7.2	The Company may, subject to the terms of sub-paragraph (iii) of the proviso to clause 7.1, by notice
                                                           in writing addressed and delivered to the Commissioner relinquish any area of Land to which its Exploration Licence relates from a
                                                           date not less than six months from the date on which such notice was delivered to the Commissioner.

 

		7.3	Any relinquishment in terms of clause 7.2 shall be without prejudice to any obligation incurred by the
Company in respect of the area relinquished prior to the date of relinquishment and such relinquishment shall not affect the obligations
of the Company under clause 4.

 

    13

    

    

 

Clause 8

 

Discovery and development of Petroleum

 

		8.1	When a Discovery is made in an Exploration Area, the Company shall

 

		(a)	forthwith inform the Commissioner by notice in writing of the fact that such Discovery has been made;

 

		(b)	forthwith cause tests to be made in connection with such Discovery in order to determine the commercial
interest of such Discovery;

 

		(c)	within a period of 60 days after such notice, furnish the Commissioner in writing with particulars of
the steps which it proposes to take to satisfy the requirements of paragraph (e) of this clause;

 

		(d)	within a period of 60 days after such notice, furnish the Commissioner in writing with particulars relating
to the Block or Blocks where such Discovery has been made, the nature of such Discovery and such other particulars as the Commissioner
may require;

 

		(e)	within a period of 60 days after having completed such tests, furnish the Commissioner with a report containing
an evaluated result of such tests and an evaluation of the potential commercial interest of such Discovery.

 

		8.2	If the report referred to in paragraph (e) of clause 8.1 indicates that in the Company's judgment, utilizing
Good Oilfield Practices, a Discovery may be of commercial interest, the Company

 

		(a)	shall within 90 days of the delivery of such report address and deliver to the Commissioner an appraisal
programme which is commensurate with the size and nature of the Discovery for the Commissioner's approval which shall include particulars
relating to the drilling of Appraisal Wells;

 

		(b)	shall upon approval forthwith take all such steps as may be reasonable in the circumstances in order to
appraise the Discovery and determine the quantity of Petroleum to which the Discovery relates in so far as it occurs within the Exploration
Area;

 

		(c)	may apply, pursuant to section 42 of the Petroleum Act, for the declaration of a Petroleum Field over
the relevant area;

  

    14

    

    

 

	8.3	The Commissioner
shall by notice in writing addressed and delivered to the Company within 30 days of delivery of the appraisal programme indicate whether
or not he approves thereof.

 

	8.4	Where the appraisal programme is not approved by the Commissioner, the Technical Advisory Committee shall,
within a period of 30 days from the date on which the notice referred to in clause 8.3 was delivered to the Company, meet to discuss
and agree on revisions to the appraisal programme.

 

	8.5	If the members of the Technical Advisory Committee are unable to agree on revisions to the appraisal programme,
the provisions of clause 5.9 shall apply mutatis mutandis, enabling the Company to proceed with the implementation of its appraisal programme,
with such revisions, if any, as it deems fit. The Company’s appraisal programme shall be deemed to have been approved by the Commissioner
on the date on which the Commissioner receives notification from the Technical Advisory Committee on the outcome of its deliberations.

 

	8.6	The Company shall, within two years from the date on which the Commissioner approved of the
                                 appraisal programme or such longer period as the Commissioner on good cause shown may allow, address and deliver to the
                                 Commissioner-

 

		(a)	a full report containing particulars of the results of the appraisal programme, including particulars
relating to

 

		(i)	the location and depth of Petroleum or hydrocarbon bearing structures;

 

		(ii)	the composition of Petroleum or hydrocarbons;

 

		(iii)	the estimated recoverable reserves of Petroleum or hydrocarbons;

 

		(iv)	the estimated daily production potential of Petroleum or hydrocarbons;

 

		(b)	a preliminary estimate of the cost of Development Operations and Production Operations relating to the
Discovery, including the cost of transportation of Petroleum or hydrocarbons, based upon an outline design for the development of the
Discovery.

 

	8.7	The Company shall, in so far as it is able to do so from results obtained from an appraisal
                                 programme, within 13 months after the date on which the Commissioner approved of such programme, issue an interim report containing
                                 the particulars and preliminary estimates contemplated in clause 8.6.

 

	8.8	The Commissioner may, at any time after delivery of the report and estimates
referred to in clause 8.6, request the Company to supply such further particulars relating to such report as he deems necessary and the
Company shall comply in writing with such request within 30 days from the date of delivery of such request.

 

	8.9	The Commissioner and the Company shall, within three months of the delivery
of the report and estimates referred to in clause 8.6 or such longer period as the Commissioner on good cause shown may allow, discuss
the report and estimates to determine whether the Discovery is of commercial interest.

 

    15

    

    

 

	8.10	If the Company decides that the Discovery is not of present commercial interest and the Commissioner does
not agree with such determination, the Commissioner may cause an independent evaluation of the Discovery to be carried out. If the independent
evaluation establishes that the Discovery is of commercial interest, the provisions of clause 8.11 shall apply.

 

	8.11	If the conclusion of the evaluation referred to in clause 8.10 is that the Discovery is of commercial
interest the Minister may, subject to the terms of clause 8.12, by notice in writing addressed and delivered to the Company, direct that
with effect from a date specified in such notice the Licence in question shall cease to be of any force and effect in relation to the
Discovery Block in question and any adjoining Land required for purposes of obtaining access to that Block.

 

	8.12	The Minister shall not exercise his powers under clause 8.11, unless he-

 

		(a)	has submitted the evaluation referred
to in clause 8.10 to the Company for consideration and afforded the Company a period of three months  from the date of delivery of the
said evaluation to review its position regarding the commercial interest of the Discovery and to notify the Minister in writing of its
intention to develop the Discovery and the Company has failed or refused to so notify the Minister or has notified the Minister that

it does not intend
to develop the Discovery;

 

		(b)	has by notice in writing addressed and delivered to the Company informed the Company of his intention
to exercise such powers;

 

		(c)	has requested the Company to make representations to the Minister in relation to the matter on or before
a date specified in such notice;

 

		(d)	is, having regard to information available to him and after having considered any representations made
to him by virtue of the notice referred to in paragraph (a), satisfied that the Discovery is of commercial interest.

 

	8.13	In the event of the Company notifying the Minister of its intention to develop the Discovery as contemplated
in paragraph (a) of clause 8.12, the Company shall reimburse the Government the cost of the independent evaluation referred to in clause
8.10.

 

	8.14	If the Minister has given a direction to the Company that the Company’s Exploration Licence shall cease
to be of any force and effect in relation to the Discovery Block in question and any adjoining Land required for purposes of obtaining
access to that Block in terms of clause 8.11, the Company may apply to the Minister to reinstate the rights it previously had in respect
of the relevant area: Provided that-

 

		(a)	the rights so reinstated shall not subsist beyond the date on which they would have expired, if the Minister
had not made the direction under the said clause 8.11;

 

		(b)	no such rights shall be exercised by the Company if the Minister has, subsequent to the said direction,
granted any rights to any other person in relation to the area in question which are inconsistent with the rights so

reinstated by the
Minister;

 

		(c)	the Company pays to the Government an amount equal to-

 

		(i)	the cost of the independent evaluation referred to in clause 8.10, if any;

 

		(ii)	any expenditure incurred by the Government in relation to Exploration Operations, appraisal operations
and any other work done in or connected with such area after the date on which the said direction of the Minister under clause 8.11 was
delivered to the Company; and

 

		(iii)	500 per cent of all such expenditure referred to in subparagraphs (i) and(ii), which amount shall not
be allowable as a deduction under the Taxation Act.

 

    16

    

    

 

	8.15	Notwithstanding the other provisions of this clause 8, if after having carried out an appraisal programme
pursuant to section 39 (2) of the Petroleum Act, that a Discovery of Crude Oil is not of present commercial interest but may become of
commercial interest then, if the Commissioner agrees with such determination, the Minister hereby agrees to allow the Company to retain
the Discovery Block for the duration of the Company’s Exploration Licence and any renewal thereof, provided that:

 

		(a)	The determination of potential commerciality shall be based on relevant economic criteria, including but
not limited to, potential Crude Oil production rates, Crude Oil prices, development costs, operating costs as well as any other relevant
criteria;

 

		(b)	The Company shall reassess the commerciality
of the Discovery twelve months after the Discovery has been notified to the Commissioner and thereafter every two years,  based on the
same economic criteria as set forth in (a) above;

 

		(c)	The Company shall within 30 days after the completion of each reassessment inform the Minister whether it determines the Discovery still to be of potential
commercial interest. A copy of any reassessment study shall be given to the Commissioner;

 

		(d)	If as a result of the Company’s reassessment under clause 8.15(b) the Company determines that the Discovery
has become of commercial interest the provisions of clause 8.2 to 8.14 shall apply;

 

		(e)	If as a result of the Company’s reassessment under clause 18.5(b) the Company determines that the Discovery
remains only of potential commercial interest, but the Commissioner considers that it is of present commercial interest, the provisions
of clause 8.10 shall apply; and
	 	 	 
		(f)	If as a result of the Company’s reassessment under clause 8.15(b), the Company determines that the Discovery
is no longer of potential commercial interest, the Minister may require the Company to relinquish the Discovery Block.

 

Clause 9

 

Application for Production Licence

 

	9.1	If the Company intends to apply for a Production Licence in respect of the Discovery Block in question
as contemplated in section 43(1) of the Petroleum Act, the Company shall arrange a meeting with the Commissioner to identify, after having
had due regard to all the relevant particulars, the Discovery Block or Blocks to which such licence should relate.

 

	9.2	Where a part of a Petroleum Reservoir in respect of which the Company intends to make an application for
a Production Licence is contained in a Block or Blocks outside the Licence Area, such Block or Blocks may be included at the Minister’s
discretion in the area in relation to which application for a Production Licence is made, provided that such Block or Blocks are not subject
to an Exploration or Production Licence granted to any other person.

 

	9.3	The Company shall, in making an application for a Production Licence as contemplated in section 43(1)
of the Petroleum Act, comply with the provisions of section 46(2) of the Petroleum Act and any other provisions relating to such

applications.

 

	9.4	The proposed programme of Production Operations and processing of Petroleum referred to in section 46(2)(i)
of the Petroleum Act shall-

 

		(a)	relate exclusively to the Block or Blocks within the area to which the Licence relates and which, on a
reasonable interpretation of the available particulars, contain a Petroleum Reservoir or part thereof;

 

		(b)	be designed to ensure the most efficient, beneficial and timely use of the Petroleum resources in the
area to which the Production Licence relates; and
	 	 	 

		(c)	be compiled in accordance with sound engineering, economic, safety and environmental principles recognized
in the international petroleum industry.

 

    17

    

    

 

	9.5	The Minister shall, subject to the provisions of section 47 of the Petroleum
Act and after approval of the Development Plan, within six months after delivery of the application for a Production Licence referred
to in clause 9.3, grant such application and issue such licence for a period of 25 years.

 

	9.6	If, within a period of 60 days after submission of the Development
Plan, the Minister has failed or refused to approve such Development Plan, the Minister shall arrange a meeting with the Company to be
held within a period of 14 days after the expiry of the aforesaid period.

 

	9.7	If the Minister and the Company are unable to agree at the meeting referred to in clause 9.6 on whether
such Development Plan meets the requirements set forth in clause 9.4, the Minister or the Company may request the appointment of the expert
contemplated in clause 29.6, if necessary, and submit the dispute for determination.

 

	9.8	In the event of the expert referred to in clause 9.7 determining that such Development Plan does not meet
the requirements of clause 9.4, the said expert shall determine which modifications to such Development Plan are necessary to comply with
the requirements of clause 9.4 and the Company shall modify such Development Plan accordingly.

 

	9.9	The decision of the expert referred to in clause 9.8 shall be final and binding on the Minister and the
Company, provided that in the event of the Company being dissatisfied with the decision of the said expert, it may, within 60 days
after the date on which the decision was conveyed
to it, notify the Minister that it withdraws the application for a Production Licence referred to in clause 9.3, in which event such notice
shall be deemed to be a report by the Company contemplated in section 39(1) of the Petroleum Act.

 

Clause 10

 

Sole risk

 

	10.1	Subject to the terms of clause 10.5, the Minister may during any Exploration Period require the Company
by notice in writing-

 

		(a)	to test any additional horizons within the agreed Well depth; or
	 	 	 

		(b)	to penetrate and test any horizons deeper than such depth; or
	 	 	 

		(c)	to continue drilling and test any such additional horizons.

 

	10.2	A notice referred to in clause 10.1 shall be given as early as possible prior to or during the drilling
of the Well, but in any case not after the Company has notified the Minister of the detailed completion or abandonment plan for the Well.
Upon receipt of such notice the Company shall,
subject to the terms of clause 10.5, cause such tests, penetration and drilling to be carried out at the sole cost and risk of the Government.
At any time before such tests, penetration or drilling is carried out the Company may elect to include such tests, penetration or drilling
in its Exploration Operations.

 

	10.3	Subject to the terms of clause 10.5, the Minister may-

 

		(a)	during any Exploration Period recommend that the Company include certain Exploration Wells in its exploration
work programme;

 

		(b)	if any dispute arises in relation to any recommendation made in terms of paragraph (a), require by
                                                               at least six months notice in writing to the Company, which notice shall contain the proposed location of the Well, the geological
                                                               objective and other details of the Well to be drilled and the schedule of financing, the Company to drill within the Exploration
                                                               Area and at the sole cost and risk of the Government, a maximum of two such Exploration Wells per Calendar Year, provided that
                                                               suitable rigs are available for use in the Exploration Area, and such operations will not unreasonably interfere with Petroleum
                                                               Operations required to be carried out under this agreement. The Company may, at any time before such Exploration Wells are drilled,
                                                               elect to include such Exploration Wells in its Exploration Operations.

 

    18

    

    

 

	10.4	If a Discovery is made in consequence of any activities carried out in terms of clauses 10.1 and 10.3
the Minister may cause at the sole cost, risk and benefit of the Government the Discovery to be appraised and any Petroleum discovered
to be developed and produced. The Company may before such appraisal, development or production, as the case may be, inform the Minister
by notice in writing that it wishes to take over such appraisal or development under the terms of its Licence. In such event the Company
shall pay to the Government

 

		(a)	within 30 days from the date of dispatch of its notice to the Minister,
an amount equivalent to the expenditures incurred by the Minister in connection with such appraisal, development or production; and

 

		(b)	if the Company so informs the Minister before such appraisal commences, an additional amount equal to 200
per cent of the expenditure referred to in paragraph (a) or, if the Company so informs the Minister after such appraisal has commenced,
but before such development commences, an additional amount equal to 600 per cent of the expenditure referred to in paragraph (a), which
expenditure and additional amount shall not be allowable as a deduction under the Taxation Act.

 

	10.5	The Company shall by virtue of a notice given in terms of clauses 10.1, 10.3 and 10.4 not be required-

 

		(a)	to test any additional horizons or to penetrate and test any deeper horizons or to drill any additional
Exploration Wells if, employing Good Oilfield Practices, such operations are not technically feasible and cannot be conducted in a safe
and prudent manner or such operations will have a detrimental effect on the proper performance of the Company’s work programme;

 

		(b)	to penetrate and test horizons deeper than the agreed Well depth, if the Well in question has encountered
productive horizons;
	 	 	 

		(c)	to drill Exploration Wells in a Petroleum Field or a Production Area or a Discovery Block retained pursuant
to clause 16.12;

 

		(d)	to carry out any operations referred to in such notice during any Calendar Month, unless the Government
advances, subject to such conditions of accounting as the Minister may determine, before the commencement of such Calendar Month, to the
Company an amount to finance the expenditure to be incurred in connection therewith.

 

	10.6	The Minister shall not engage any third party to carry out any activities
contemplated in clause 10.4, unless he has first offered by notice in writing the Company the right to carry out such activities on the
Government’s behalf, on the same terms agreed to by such third party and the Company has refused the offer or has failed to accept
such offer within a period of 60 days as from the date on which the offer was made and unless such activities will not interfere with
Petroleum Operations to be carried out pursuant to this Agreement.

 

    19

    

    

 

Clause 11

 

Environmental protection

 

	11.1	The Minister and the Company concede that Petroleum Operations will cause some impact on the environment
in the Licence Area.

 

	11.2	The Company shall-

 

		(a)	conduct its Petroleum Operations in a manner likely to conserve the natural resources of Namibia and protect
the environment;

 

		(b)	employ the best available techniques in accordance with Good Oilfield Practices for the prevention of
Environmental Damage to which its Petroleum Operations might contribute and for the minimization of the effect of such operations on adjoining
or neighboring Lands; and

 

		(c)	implement the proposals contained in its Development Plan regarding the prevention of pollution, the treatment
of wastes, the safeguarding of natural resources and the progressive reclamation and rehabilitation of Lands disturbed by Petroleum Operations.

 

	11.3	The Company undertakes for purposes of this Agreement to take all reasonable, necessary and adequate steps
in accordance with Good Oilfield Practices to minimize Environmental Damage to the Licence Area and adjoining or neighboring Lands.

 

	11.4	If the Company fails to comply with the terms of clause 11.3 or contravenes any law on the prevention
of Environmental Damage and such failure or contravention results in any Environmental Damage, the Company shall take all necessary and
reasonable measures to remedy such failure or contravention and the effects thereof.

 

	11.5	If the Minister has reason to believe that any works or installations erected by the Company or any operations
carried out by the Company are endangering or may endanger persons or any property of any other person or is causing pollution or is harming
wildlife or the environment to a degree which the Minister deems unacceptable, the Minister may require the Company to take reasonable
remedial measures within such reasonable period as may be determined by the Minister and to take reasonable and appropriate steps to repair
any damage to the environment. If the Minister deems it necessary, he may require the Company to discontinue Petroleum Operations in whole
or in part until the Company has taken such remedial measures or has repaired any damage.

 

	11.6	The measures and methods to be used by the Company for purposes of complying with the terms of clause
11.3 shall be determined in timely consultation with the Minister upon the commencement of Petroleum Operations or whenever there is a
significant change in the scope or method of carrying out Petroleum Operations, and the Company shall take into account the international
standards applicable in similar circumstances and the relevant environmental impact assessment studies carried out in accordance with
clause

 

	11.7.	The Company shall notify the Minister in writing of the nature of the measures and methods finally determined
by the Company and shall cause such measures and methods to be reviewed from time to time in view of prevailing circumstances.

 

    20

    

    

 

	11.7	The Company shall cause a person or persons, approved by the Minister on account of their special knowledge
of environmental matters, to carry out two environmental impact assessment studies, in order

 

		(a)	to determine the prevailing situation relating to the environment, human beings, wildlife or marine life
in the Licence Area and in the adjoining or neighboring areas at the time of the studies; and (b) to establish what the effect will be
on the environment, human beings, wildlife or marine life in the Licence Area in consequence of the Petroleum Operations to be made under
this Agreement, and to submit for consideration by the Parties measures and methods contemplated in clause

 

	11.6	for minimizing Environmental Damage and carrying out Site Restoration in the Licence
Area.

 

	11.8	The first of the two studies referred to in clause 11.7 shall be carried out in two parts. The first part
of the first study shall be a baseline study of existing information on the environment, human beings, wildlife or marine life in the
Licence Area. The company shall conclude such baseline study prior to undertaking any fieldwork for a seismographic survey. The second
part of the first study shall be an environmental impact assessment study of the effects of drilling on the environment. This environmental
impact assessment study is to be concluded sufficiently in advance of the commencement of drilling to enable the results of this environmental
impact assessment study to be taken into account in preparing all relevant drilling management, waste management and contingency plans
relating to the exploration drilling stage. A minimum of 12 copies of the reports on the baseline and environmental impact assessment
studies shall be submitted to the Government.

 

	11.9	The second of the two studies referred to in clause 11.7 shall be an environmental impact assessment study
of the effects of production on the environment and shall be concluded sufficiently in advance of the commencement of Production Operations
to enable the results of this environmental impact assessment study to be taken into account in preparing all relevant production management,
waste management and contingency plans relating to Production Operations and shall be submitted by the Company as part of its Development
Plan. A minimum of 12 copies of the report on the environmental impact assessment study shall be submitted to the Government.

 

	11.10	The studies mentioned in clause 11.7 shall contain proposed
environmental guidelines to be followed in order to minimize Environmental Damage and shall include, but not be limited to-

 

		(a)	access cutting;

		 	 

		(b)	clearing and timber salvage;

		 	 

		(c)	wildlife and habitat protection;

		 	 

		(d)	marine resource protection;

		 	 

		(e)	fuel storage and handling;

		 	 

		(f)	use of explosives;

		 	 

		(g)	camps and staging areas;

 

    21

    

    

 

		(h)	liquid and solid waste disposal;

		 	 

		(i)	cultural and archaeological sites;

		 	 

		(j)	selection of drilling sites;

		 	 

		(k)	terrain stabilization;

		 	 

		(l)	protection of freshwater horizons;

		 	 

		(m)	blowout prevention plan;

		 	 

		(n)	combating oil spills;

		 	 

		(o)	flaring during completion and testing of gas and oil wells;

		 	 

		(p)	Well abandonment;

		 	 

		(q)	rig dismantling and site completion;

		 	 

		(r)	reclamation for abandonment; and

		 	 

		(s)	noise control.

 

	11.11	The Company shall ensure-

 

		(a)	that Petroleum Operations are carried out in an environmentally acceptable and safe manner consistent
with Good Oilfield Practices and that such operations are properly monitored;

 

		(b)	that the pertinent completed environmental impact assessment studies are made available to its employees
and to its contractors to develop adequate and proper awareness of the measures and methods of environmental protection to be used in
carrying out its Petroleum Operations; and

 

		(c)	that any agreement entered into between the Company and its contractors relating to its Petroleum Operations
shall include the terms set out in this Agreement and any established measures and methods for the implementation of the Company’s obligations
in relation to the environment under this Agreement.

 

	11.12	The Company shall, before carrying out any drilling, prepare
and submit for review by the Minister an oil spill and fire contingency plan designed to achieve rapid and effective emergency response
in the event of an oil spill or fire.

 

	11.13	In the event of-

 

		(a)	an emergency or accident arising from Petroleum Operations affecting the environment, the Company shall
forthwith notify the Minister accordingly;

 

    22

    

    

 

		(b)	any fire or oil spill, the Company shall promptly implement the relevant contingency plan;

 

		(c)	any other emergency or accident arising from the Petroleum Operations affecting the environment, the Company
shall take such action as may be prudent and necessary in accordance with Good Oilfield Practices in such circumstances.

 

	11.14	If the Company fails to comply with any terms contained in clause
11 within a period determined by the Minister under any such term, the Minister may, after giving the Company reasonable notice, take
any action which may be necessary to ensure compliance with such term, and recover, immediately after having taken such action, all expenditure
incurred in connection with such action from the Company together with such interest as may be determined in accordance with paragraph
6.2 of Annexure 4 to this Agreement.

 

	11.15	If the Company or the operator for the Company has already completed
and submitted to the Government reports on the studies referred to in clause 11.8 for a previous Exploration Licence held in Namibia
in the 5-year period preceding the application for this Exploration Licence and those studies either

 

		(a)	are sufficiently broad ranging to encompass clearly the present Licence Area, or

 

		(b)	do not encompass the present Licence Area but a baseline study and environmental impact assessment study
have been submitted by the holder of an Exploration Licence covering an area near the present Licence Area the Company may in a case falling
within (a) above, submit the reports on the studies for such previous Licence in fulfillment of the requirements of clauses 11.7 and 11.8
relating to exploration drilling and, in a case falling within (b) above submit such environmental impact assessment submitted by the
said holder of an Exploration Licence, with any modifications which the Company wishes to make; provided that:

 

		(i)	In response to a written request from the Company, the Minister approves in writing the course of action
selected from (a) or (b) above;
	 	 	 

		(ii)	In response to a written request from the Company directed through the Ministry of Mines and Energy, The
Ministry of Fisheries and Marine Resources, the Ministry of Environment and Tourism, the Ministry of Works, Transport and Communication
and the Ministry of Health and Social Services also approve in writing the course of action selected from (a) or (b) above;
	 	 	 

		(iii)	The company that carried out the baseline study and environmental impact assessment study which are to
be submitted in terms of (b) above agrees to this course of action;

 

    23

    

    

 

		(iv)	The baseline study and the environmental impact assessment study submitted in terms of (b) above encompass
the present Licence Area;

 

		(v)	Fluids, muds and chemicals to be used during drilling are the same as those used in the Exploration Licence
covered by the environmental impact assessment study submitted;

 

		(vi)	Oil spill drift simulation studies and any other special studies relevant to an environmental impact assessment
of the effect of drilling on the environment in the present Licence Area as may be required by the Minister are carried out and the results
thereof together with plans for mitigating actions be submitted in the form of reports to the Government. A minimum of 12 copies of these
reports are to be submitted;

 

		(vii)	The results of the resubmitted environmental impact assessment study as well as the studies conducted
under (v) above are taken into account in preparing all relevant drilling management, waste management and contingency plans relating
to the exploration drilling stage;

 

		(viii)	An amount equal to half the average cost of the three most recent baseline and environmental impact assessment
studies complying with the requirements of the first of the studies in clause 11.7 for offshore oil exploration in Namibia or such other
amount as may be agreed between the Parties is paid to the National Petroleum Corporation of Namibia (NAMCOR E&P). This money shall
be used by NAMCOR E&P in accordance with the principles laid out in Annexure 7 in order to collect offshore environmental data relevant
to oil exploration and production in Namibia. Projects to be undertaken by NAMCOR E&P in this connection shall be decided upon in
consultation with the oil exploration companies operating in Namibia and with the Ministries of Fisheries and Marine Resources and the
Environment and Tourism.

 

	11.16	The Company shall on the expiration or termination of this Agreement
or on relinquishment of part of the Licence Area-

 

		(a)	subject to clause 17, remove or otherwise deal with, as directed by the Minister in consultation with
the Minister or Ministers responsible for environment, fisheries and finance, all equipment and installations from such Licence Area or
relinquished area to the extent and in the manner agreed with the Minister in terms of the Decommissioning Plan approved by the Minister
pursuant to s.68A(2) of the Petroleum Act;

 

		(b)	subject to clause 17, remove, or otherwise deal with, as directed by the Minister in consultation with
the Minister or Ministers responsible for environment, fisheries and finance, all installations, equipment, pipelines and other facilities
erected or used outside the Licence Area for the petroleum operations; and

 

		(c)	perform all necessary Site Restoration activities in accordance with Good Oilfield Practices and shall
take all other action necessary to prevent hazards to human life or to the property of others or the environment.

 

	11.17	The Company shall on the date referred to in s.68B(1) of the
Petroleum Act establish a Trust Fund in accordance with the provisions of s.68(B) of the said Act for the purpose of decommissioning
facilities on cessation of production operations.

 

    24

    

    

 

Clause 12

 

Work practices and carrying out of operations

 

	12.1	The Company shall conduct Petroleum Operations in the Licence Area

 

		(a)	subject to the provisions of the Petroleum Act;

 

		(b)	in accordance with Good Oilfield Practices;

 

		(c)	diligently, expeditiously, efficiently and in a proper, safe and workmanlike manner;

 

		(d)	in accordance with work programmes reviewed or approved in terms of the Petroleum Act and this Agreement.

 

	12.2	The Company shall ensure that all equipment, materials, supplies, plant and installations used by the
Company, its contractors and subcontractors comply with generally accepted standards in the international petroleum industry and are of
proper construction and kept in good working order.

 

	12.3	The Company shall, within 90 days after the date on which this Agreement
was signed, appoint

 

		(a)	a General Manager to manage the Petroleum Operations in the Licence Area and who shall be authorised to
take such steps as may be necessary in accordance with the provisions of the Act and the terms and conditions of this Agreement to carry
out the Petroleum Operations on behalf of the Company; and

 

		(b)	a Deputy General Manager to manage such operations in the absence of the General Manager, who shall be
resident in Namibia, and shall be technically competent and sufficiently experienced to manage such operations.

 

	12.4	The Company shall, within 30 days after the appointment of the General
Manager or Deputy General Manager referred to in clause 12.3, notify the Commissioner in writing of their identity and respective addresses.

 

	12.5	Where the Company consists of more than one Company-

 

		(a)	all the terms and obligations of this Agreement shall apply to each one of such companies jointly and
severally;

 

		(b)	Elephant Oil LTD shall be deemed to be the operator and Company who shall carry on the Petroleum Operations
of the Company under this Agreement, unless the Commissioner pursuant to an application in writing addressed and delivered to him approves
a change of operator, in which event the other operator so approved of shall be deemed to be the operator from the date of such approval;

 

		(c)	any operating or other agreement relating
to the Petroleum Operations entered into by or between such companies shall be consistent with the provisions of this Agreement and shall
be in writing and a copy of each such agreement shall be submitted to the Commissioner not later than ten days after the date of signature
thereof.

 

	12.6	All individual services to be performed or materials and equipment
to be purchased for or in connection with the Petroleum Operations which cost in excess of US $250,000 (or the equivalent thereof as expressed
in Namibian Dollars) shall be contracted for by the Company only after competitive quotations have been called for and on the basis thereof.

 

	12.7	The Company shall ensure adequate compensation for injury to persons or damage to property caused by its
Petroleum Operations under this Agreement.

 

    25

    

    

 

Clause 13

 

Royalty and annual charges

 

		13.1	Subject to the provisions of the Petroleum Act, the Company shall pay

 

		(a)	Quarterly on or before the last day of each Calendar Month following each Quarter, for the benefit of
the State Revenue Fund, a royalty of 5 per cent on the market value of Petroleum Produced and Saved in the Production Area during each
Quarter, determined-

 

		(i)	in the case of Crude Oil, in accordance with the terms of clause 15; and

 

		(ii)	in the case of Natural Gas, in accordance with the terms of clause 16.7;

 

		(b)	on the date of the issue of the Exploration Licence or Production Licence, and thereafter annually on
or before the last day of the Calendar Month during which every period of 12 months of the currency of such Licence expires, for the benefit
of the State Revenue Fund, an annual charge, equal to the figure expressed in Namibian Dollars, calculated by multiplying the number of
square kilometers included in the Block or Blocks to which the Licence relates

 

(i)        in
the case of an Exploration Licence

 

		(a)	by 60 during the period of the licence determined or extended in terms of paragraph (a) of subsection
(1) or paragraph (a) of subsection (2A) of section 30 of the Petroleum Act;

 

		(b)	by 90 during the period of the licence determined or extended in terms of paragraph (b) of subsection
(1) or paragraph (b) of subsection (2A) of section 30 of the Act in respect of the first renewal of the licence;

 

		(c)	by 120 during the period or periods of the licence determined or extended in terms of paragraph (b) of
subsection (1) or paragraph (b) of subsection (2A) of section 30 of the Act in respect of the second renewal of the licence;

 

		(d)	by 150 during the subsequent period or periods of the licence determined or extended in terms of paragraph
(b) of subsection (1), read with paragraph (b) of subsection (2) or paragraph (b) or subsection (2A) of section 30 of the Act in respect
of the third renewal of the licence.

 

(ii)        in
the case of a Production Licence, by 1500.

 

		13.2	The Company shall, no later than one Calendar Month after the end of each Quarter, submit to the Minister
and to the Permanent Secretary: Finance in such form as may be specified by the Minister, a statement containing particulars of-

 

		(a)	the quantity of Crude Oil and Natural Gas Produced and Saved from each Production Area during such Quarter;

 

		(b)	the market value F.O.B. Namibia of the Crude Oil and the market value of the Natural Gas on which royalty
is payable;

 

		(c)	the amount of royalty payable for that Quarter;

 

		(d)	the calculation of such amount; and

 

		(e)	any other matters which the Minister or the Permanent Secretary: Finance may from time to time require.

 

    26

    

    

 

Clause 14

 

Taxation

 

		14.1	The Company shall pay annually, for the benefit of the State Revenue Fund, a petroleum income tax referred
to in section 5 of the Taxation Act and an additional profits tax referred to in section 19 of that Act to be determined in accordance
with the provisions of that Act and the terms of clause 14.2 and clause 14.3 of this Agreement.

 

		14.2	The rate at which additional profits tax shall be levied on the Company under section 21(b)(ii) of the
Taxation Act in relation to the second accumulated net cash position shall be four (4%) per cent.

 

		14.3	The rate at which additional profits tax shall be levied on the Company under section 21 (c)(ii) of the
Taxation Act in relation to the third accumulated net cash position shall be six (6%) per cent.

 

		14.4	Subject to the terms of clauses 13 and 14.1, the provisions of the Taxation Act and the provisions of
sections 11 and 15 of the Petroleum Act, no other tax, duty, fee or levy shall be imposed on the Company or its Affiliates in respect
of income derived from Petroleum Operations in terms of this Agreement or in respect of any property held, money received, or thing done
for any purpose authorized or contemplated in terms of this Agreement other than

 

		(a)	customs duties prescribed from time to time in or under the Customs and Excise Act, 1988 (Act 91 of 1988)
to the extent applicable;

 

		(b)	general sales tax prescribed from time to time in or under the Value Added Tax Act, 2000 (Act 10 of 2000)
to the extent applicable;

 

		(c)	taxes, duties, fees or levies for specific services rendered on request or to the public or commercial
enterprises generally;

 

		(d)	rates, taxes or levies, not in excess of those generally applicable in Namibia, payable to any municipality
or other local government in terms of or under the relevant legislation; and

 

		(d)	stamp duties, transfer fees and licence fees, not in excess of those generally applicable in Namibia,
payable to the Government or any body established by or under any law.

 

Clause 14A

 

NAMCOR E&P Participation

 

		14A.1	NAMCOR E&P shall have as of the date of this Agreement a ten (10) percent interest
in this Agreement.

 

		14A.2	The participation of NAMCOR E&P in Petroleum Operations and in and under the
Block or Blocks, Exploration Licence and any Production Licence granted pursuant hereto and all other legal relationships of the Company
inter se are and shall in all respects be governed by the terms and conditions of an agreement termed “Joint Operating Agreement”
(“JOA”), to be entered into by the members of the Company  , and such JOA shall provide for the conduct of the Petroleum
Operations and the rights, obligations and liabilities of the Company with respect thereto.

 

		14A.3	NAMCOR E&P’s ten (10) percent interest share of
costs, expenses and amounts due in respect of Petroleum Operations conducted pursuant to this Agreement shall, subject to and in accordance
with the terms and conditions contained in the JOA, be carried up to the first oil/gas only i.e. up to the date on which Crude Oil/Gas
starts to be produced on a regular basis for sale.

 

NIIKELA Participation

 

		14.B.1	Niikela shall have as of the
date of this Agreement a twenty (20%) percent interest in this Agreement.

 

		14.B.2	The participation of Niikela
in Petroleum Operations and in and under the Block or Blocks, Exploration Licence and any Production Licence granted pursuant hereto
and all other legal relationships of the Company inter se are and shall in all respects be governed by the terms and conditions of an
agreement termed “Joint Operating Agreement” (“JOA”), to be entered into by the members of the Company , and such
JOA shall provide for the conduct of the Petroleum Operations and the rights, obligations and liabilities of the Company with respect
thereto.

 

		14.B.3	Niikela’s twenty (20%)
percent interest share of costs, expenses and amounts due in respect of Petroleum Operations conducted pursuant to this Agreement shall,
subject to and in accordance with the terms and conditions contained in the JOA, shall be carried through the drilling of the first well
on Block 1919.

 

    27

    

    

 

Clause 15

 

Valuation of Namibian Crude Oil

 

		15.1	The Parties hereby agree that Namibian Crude Oil Produced and Saved from the Licence Area shall be sold
or otherwise disposed of at competitive international market prices.

 

		15.2	The market value of Namibian Crude Oil sold or otherwise disposed of in any Quarter shall, for the purposes
of this Agreement and section 7(5) of the Taxation Act, be determined as follows:-

 

		(a)	No later than 15 days after the end of each Quarter in which Crude Oil has been Produced and Saved from
any Production Area, an average price (expressed in United States Dollars per Barrel, adjusted to the Company’s actual loading points
for export from Namibia) for each separate volume of Crude Oil of the same gravity, sulphur and metal content, pour point, product yield
and other relevant characteristics (“quality”) shall be determined in respect of production during that Quarter. It is understood
that production from different Production Areas may be of differing quality and that separate average prices may accordingly be appropriate
for any Quarter in respect of production from each Production Area, in which event the overall price applicable to production from the
Licence Area shall be determined by taking the arithmetic weighted average (weighted by volume) of all such prices separately determined.

 

		(b)	The prices aforesaid shall be determined on the basis of international fair market value as follows-

 

		(i)	In the event of 50 per cent or more of the total volume of sales made by the Company during the Quarter
of Namibian Crude Oil of a given quality Produced and Saved being by third party arms length sales transacted in foreign exchange (hereinafter
referred to as third party sales), the fair market valuation for all Crude Oil of that quality will be taken to be the simple arithmetic
average price, calculated by dividing the total receipts from all such third party sales by the total number of Barrels of Crude Oil sold
in such sales, actually realised in such third party sales.

 

		(ii)	Subject to paragraph (c) of this clause, in the event of less than 50 per cent of the total volume of
sales made by the Company during the Quarter of Namibian Crude Oil of a given quality Produced and Saved being by third party sales, the
fair market valuation for all Crude Oil of that quality will be determined by the arithmetic weighted average of-

 

		(a)	the simple arithmetic average price actually realised in such third-party sales during the Quarter of
such Crude Oil Produced and Saved, if any, calculated by dividing the total receipts from all such sales by the total number of Barrels
of Crude Oil in such sales; and

 

		(b)	the simple arithmetic average price, adjusted for differences in quality, quantity, transportation costs,
delivery time, payment and other contract terms, at which a selection, determined in accordance with the terms of clause 15.3 by mutual
agreement between the Parties, of major competitive crude oils of generally similar quality to that of Namibian Crude Oil Produced and
Saved were sold in international markets during the same period.

 

The arithmetic weighted average aforesaid
will be determined by the percentage volume of sales of Namibian Crude Oil by the Company referred to in subparagraph (a) which are third
party sales during the Quarter in question and such sales referred to in subparagraph (b) which are not third-party sales during the Quarter
in question.

 

		(iii)	All prices aforesaid shall be adjusted to the Company’s actual loading point for export from Namibia.

 

		(iv)	For purposes of this clause 15 third party sales of Namibian Crude Oil made by the Company shall exclude

 

		(a)	sales, whether direct or indirect through brokers or otherwise,
of any seller to any Affiliate of such seller;

 

		(b)	crude oil exchanges, barter deals or restricted or distress transactions and generally any crude oil transaction
which is motivated in whole or in part by considerations other than the usual economic incentives for commercial arms length crude oil
sales; and

 

		(c)	government to government sales.

 

		(c)	In the event of-

 

		(i)	less than 50 per cent of the total volume of sales by the Company during the Quarter of Namibian Crude
Oil of a given quality Produced and Saved being third party sales, the Minister may elect to accept determination of the fair market valuation
of all Crude Oil of that quality based on third party arms length sales during that Quarter calculated in accordance with the terms of
paragraph (b)(i) of clause 15.2;

 

		(ii)	the percentage volume of sales being less than 50 per cent as aforesaid, the Company shall promptly notify
the Minister and, provided the Minister does not notify the Company of his election within seven days of receipt of notification from
the Company, the fair market valuation of the aforesaid Crude Oil shall be determined in terms of paragraph (b)(ii) of clause 15.2. 15.3
The selection of crude oils referred to in paragraph (b)(ii)(b) of clause 15.2 will be determined by mutual agreement between the Company
and the Minister in advance for each Calendar Year and, in making the selection, preference will be given to those crude oils of similar
quality to Namibian Crude Oil which are produced in Africa, South America or the Middle East and are regularly sold in the same markets
as Namibian Crude Oil is normally sold.

 

    28

    

    

 

		15.4	The Company shall-

 

		(a)	be responsible for establishing the relevant average prices for Namibian Crude Oil in accordance with
this clause 15 and such prices shall be subject to agreement by the Minister before they shall be deemed to have been finally determined;

 

		(b)	provide the Minister with all relevant information in order that he can satisfy himself that the average
price determined by the Company is fair. If the Parties fail to agree on the average price for any Quarter within 30 days following the
end of such Quarter the calculation of the relevant average price shall be referred to a sole expert appointed in terms of clause 29.6
for determination in accordance with this clause 15 whose determination shall be final and binding, and until such determination the last
applied price shall be used.

 

		15.5	During the first Calendar Year in which Crude Oil or Crude Oil as well as Natural Gas are Produced and
Saved from the Licence Area and delivered under a Development Plan, the Parties shall meet in order to establish a provisional selection
of the major competitive crude oils and an appropriate mechanism for the purposes of giving effect to paragraph (b)(ii) of clause 15.2.
The selection of crude oils will be reviewed annually and modified if necessary.

 

		15.6	In the event of any dispute between the Company and the Minister concerning the selection of the crude
oils or generally about the manner in which the prices are determined according to the terms of this clause 15 any matter in dispute shall
finally be resolved by a sole expert appointed in terms of clause 29.6.

 

 

Clause
16

 

Natural
gas

 

		16.1	Notwithstanding
                                            the provisions of clause 8 of this Agreement, the following provisions shall apply to any
                                            Discovery of Natural Gas within the Licence Area.

 

		16.2	(a) 	If in the course of its Exploration Operations the Company
makes a Discovery of Non-Associated Natural Gas, it shall promptly inform the Minister by notice in writing of the Discovery. The Minister
and the Company shall meet as soon as possible thereafter to discuss the commercial potential of such Discovery, including but not limited
to, the terms and conditions on which such Gas might be developed, produced, processed and sold.

 

		(b)	If
as a result of the discussions and evaluation of test results the Company determines that the Discovery is of potential commercial interest,
then the Company shall promptly undertake a market feasibility study, which shall be based on relevant economic criteria, including but
not limited to, potential gas markets, gas prices, long-term gas contracts, capital costs, operating costs as well as any other relevant
criteria. In connection with such study the Company shall use its best efforts to locate all potential commercial markets for such Gas.
Upon completion of the study the Company shall inform the Commissioner of the results thereof and furnish him with a copy of the study
within 30 days  of the said completion.

 

		(c)	Subject
                                            to the other provisions of this clause 16, the Minister hereby agrees to allow the Company
                                            to retain a Discovery Block of potential commercial interest for the duration of the Exploration
                                            Licence and any renewals thereof.

 

		(d)	At
any time after completion of the market feasibility study the Company may determine that an appraisal programme for the Discovery is
warranted. In such case the Company shall propose for approval an appraisal programme to the Commissioner within a reasonable period
of time thereafter, which shall not exceed three months, unless the Commissioner on good cause shown by the Company, allows a further
period. If the Company and the Commissioner cannot agree on the appraisal programme, clause 5.9 shall apply mutatis mutandis. Within
three months of receiving approval from the Commissioner the Company shall proceed to carry out such appraisal programme in accordance
with Good Oilfield Practices.

 

		(e)	If
based on the market feasibility study the Company determines that an appraisal programme is not warranted the Company shall promptly
inform the Commissioner of such determination. Such notice to the Commissioner shall be regarded as an application to the Minister, pursuant
to section 39(3) of the Petroleum Act, for an exemption from the provisions of section 39(2) of the Act. If the Commissioner disagrees
with such determination the Commissioner may cause an independent evaluation to be carried out. Such evaluation shall determine whether
an appraisal programme is warranted. If the evaluation determines that appraisal of the Discovery is warranted then the Commissioner
shall promptly notify the Company of such determination. Such notification shall be regarded as a decision by the Minister not to grant
the Company exemption under section 39(3) of the Petroleum Act. The Company shall have 90 days from the date of receipt of such notification
to decide whether to proceed with an appraisal programme in accordance with the provisions of clause 16.2(d). If the Company decides
not to proceed with such appraisal programme the provisions of clause 8.11 shall apply mutatis mutandis. If the Commissioner does not
decide within 90 days of the notification by the Company to cause an independent evaluation to be carried out, the Minister hereby agrees
pursuant to section 39(3) of the Petroleum Act to grant the Company an exemption, subject to the terms of clause 16.3, from the provisions
of section 39(2) of the said Act.

 

    29

    

    

 

		16.3	The
Company shall reassess the commerciality of the Discovery twelve months after the Discovery and thereafter every two years, based on
the same economic criteria as set forth in clause 16.2(b). The Company shall within 30 days after the completion of each re-assessment
inform the Minister whether it determines the Discovery still to be of potential commercial interest. A copy of any reassessment study
shall be given to the Commissioner. If as a result of the Company’s reassessment under clause 16.3 the Company determines that
an appraisal programme for the Discovery is warranted the Company shall propose an appraisal programme in accordance with the provisions
of clause 16.2(d).

 

		16.4	If
                                            as a result of any reassessment in accordance with clause 16.3, the Company determines that
                                            an appraisal programme is not warranted the Company shall promptly inform the Commissioner
                                            of such determination. If the Commissioner does not agree with such determination, the Commissioner
                                            may cause an independent evaluation to be carried out. The provisions of clause 16.2(e) regarding
                                            such evaluation and appraisal shall apply mutatis mutandis.

 

		16.5	If
                                            as a result of the Company’s market feasibility study under clause 16.2(b), reassessment
                                            under clause 16.3 or appraisal programme conducted pursuant to clause 16.2(d), the Company
                                            determines that the Discovery is not of potential commercial interest the provisions of clause
                                            8.11 shall apply mutatis mutandis.

 

		16.6	If
                                            having carried out an appraisal programme pursuant to clause 16.2(d), the Company determines
                                            that the Discovery is not of present commercial interest but may become of commercial interest
                                            then, if the Commissioner agrees with such determination, the Minister hereby agrees to allow
                                            the Company to retain the Discovery Block for the duration of the Company’s Exploration Licence
                                            and any renewal thereof. If the Commissioner does not agree with such determination, the
                                            Commissioner may cause an independent evaluation to be carried out. Such evaluation shall
                                            determine whether the Discovery is of commercial interest. If the evaluation determines that
                                            the Discovery is of commercial interest then the provisions of clause 8.11 shall apply mutatis
                                            mutandis.

 

		16.7	For
                                            purposes of clause 16.2(a) the Company and the Minister shall undertake to negotiate in good
                                            faith in order to reach an agreement on a method of valuing such gas for purposes of royalty
                                            payable in terms of section 62 of the Petroleum Act and of tax payable in terms of the Taxation
                                            Act.

 

    30

    

    

 

		16.8	The
                                            Company shall have the right to use Natural Gas for Petroleum Operations, including, but
                                            not limited to, pressure maintenance in the oilfields in the Licence Area.

 

		16.9	Subject
                                            to the terms of clauses 16.8, 16.10 and 16.11, the Minister shall be entitled to take at
                                            the downstream flange of the separator on the production platform or, if no such separator
                                            exists, at a point of delivery mutually agreed upon at the collecting and inlet system, and
                                            utilise without any payment to the Company any Associated Natural Gas which is in excess
                                            of the quantity of Natural Gas required for Petroleum Operations. The cost of taking and
                                            utilizing such Associated Natural Gas by the Minister shall be borne solely by the Government.

 

		16.10	Subject
to clause 16.11, and to the Company’s requirements regarding such short term flaring as may be necessary for testing or other operational
reasons, Associated Natural Gas produced from the Licence Area shall be re-injected in accordance with Good Oilfield Practices. Such
Associated Natural Gas which cannot for technical reasons be re-injected may be flared only with approval in writing of the Minister
previously obtained in every particular case, which approval shall not be unreasonably withheld.

 

	16.11	If
there are reasonable grounds for believing that Natural Gas associated with Crude Oil is in such quantities as to enable its commercial
exploitation without detriment to the efficient and effective recovery of Crude Oil from the Petroleum Reservoir, the Company shall promptly
inform the Minister by written notice of the existence of such grounds and shall undertake a market feasibility study to determine the
commercial viability of such exploitation. If such study reveals that exploitation may be commercially viable the Minister and the Company
shall meet as soon as possible after completion of such study to decide whether in view of the available data the development, production,
processing and sale of such Gas by the Company is possible and, if so, on what terms and conditions such Gas may be processed and sold.
For such purposes the provisions of clause 16.7 shall apply mutatis mutandis.
	 	 
	16.12	For
                                            the avoidance of doubt, notwithstanding the provisions of clause 7.1, the Company shall not
                                            be obliged to relinquish the Discovery Block retained by the Company pursuant to the provisions
                                            of this clause 16 for so long as it holds an Exploration Licence hereunder.

 

Clause
17

 

Insurance
and assets

 

		17.1	Except
                                            to the extent insurance covering the same risk is provided by its contractors or subcontractors,
                                            the Company shall effect and, at all times during the term of this Agreement, obtain and
                                            maintain for and in relation to Petroleum Operations insurance covering the following –

 

		(a)	loss
                                            or damage to any or all of its assets being used in connection with Petroleum Operations;

 

    31

    

    

 

		(b)	loss
                                            or damage for which the Company may be liable caused by pollution in the course of or as
                                            a result of Petroleum Operations;

 

		(c)	loss
                                            of property or damage suffered or bodily injury suffered by any third party in the course
                                            of or as a result of Petroleum Operations for which the Company may be liable;

 

		(d)	any
                                            claim for which the Government may be liable relating to the loss of property or damage suffered
                                            or bodily injury suffered by any third party in the course of or as a result of Petroleum
                                            Operations in so far as the Company is liable to indemnify the Government;

 

		(e)	the
                                            cost of removing wrecks and cleaning up operations pursuant to an accident in the course
                                            of or as a result of Petroleum Operations;

 

		(f)	the
                                            Company’s liability to its employees engaged in its Petroleum Operations;

 

		(f)	any
                                            other risk of whatever nature as is customary to insure against in the international petroleum
                                            industry in accordance with Good Oilfield Practices.

 

		17.2	The
                                            Company shall require its contractors to obtain and maintain insurance against the risks
                                            referred to in paragraphs (a) to (g) of clause 17.1 relating mutatis mutandis to such contractors.

 

		17.3	The
                                            amount insured against, the type of insurance referred to in clause 17.1 and clause 17.2
                                            and the terms of such insurance shall be determined in accordance with Good Oilfield Practices.

 

		17.4	The
Company shall not within two years before the end of the term of this Agreement remove from the Licence Area or sell any Immovable Assets
without the approval in writing of the Minister previously obtained in every particular case.

 

		17.5	Subject
                                            to any right the Company may have to occupy any Land in terms of any other petroleum agreement
                                            and the terms of this clause, the Company shall at the end of the term of this Agreement
                                            or on the date of any earlier termination thereof or the earlier relinquishment or surrender
                                            of the Licence Area or any part thereof, if by notice in writing requested to do so by the
                                            Minister, deliver to the Government any plant, pipelines, pumps, machinery of an immovable
                                            nature and any other Immovable Assets owned and used by the Company in or in connection with
                                            the Licence Area.

 

		17.6	The
                                            Company shall, if so requested by the Minister by notice in writing, sell to the Minister
                                            at a price determined by mutual agreement, any moveable assets of the Company used in or
                                            in connection with the Licence Area. In determining the aforesaid price due regard shall
                                            be had to

 

		(a)	the
condition of the asset concerned;

 

		(b)	the
                                            deductions already allowed under the Taxation Act to the Company at the time of such determination.

 

	17.7	The
                                            terms of clause 17.6 shall not apply to any assets which are required by the Company for
                                            use by the Company in respect of Petroleum Operations in terms of any other Exploration or
                                            Production Licence.

 

	17.8	If
                                            the Minister decides to make the request referred to in clause 17.5 or 17.6, he shall give
                                            notice referred to in clauses 17.5 and 17.6 to the Company

 

		(a)	in
the event of this Agreement being terminated by an effluxion of time, not less than 180 days before such termination; or

 

		(b)	in
the event of this Agreement being terminated before such effluxion or any earlier relinquishment or surrender of the Licence Area or
any part thereof, not later than 90 days from the date of such termination, relinquishment or surrender, as the case may be.

 

    32

    

    

 

Clause
18

 

Measurement
of petroleum

 

		18.1	The
                                            Company shall measure or weigh all Petroleum Produced and Saved from each Licence Area by
                                            a method or methods customarily used in Good Oilfield Practices and from time to time approved
                                            by the Minister.

 

		18.2	The
                                            Company shall not make any alteration in the method or methods of measurement or weighing
                                            used by it or any appliances used for that purpose without the consent in writing of the
                                            Minister, and the Minister may in any case require that no alteration shall be made save
                                            in the presence of a person authorized by the Minister.

 

		18.3	The
                                            Minister may from time to time direct that any weighing or measuring appliance be tested
                                            or examined in such manner on such occasions or at such intervals and by such means as may
                                            be specified in such direction.

 

Clause
19

 

Accounts
and audits

 

		19.1	The
                                            Company shall be responsible for maintaining at an address within Namibia accounting records
                                            of all expenditure and receipts of its Petroleum Operations under the Agreement in accordance
                                            with the accounting procedure set out in Annexure 4 to this Agreement.

 

		19.2	The
Minister shall have the right to appoint from time to time an auditor who shall have the right to audit for purposes of the application
of the Taxation Act or any other law and this Agreement the books and accounts of the Company in respect of any year (not being a year,
except in exceptional circumstances, which ended more than two years before the year in which the audit is to be carried out).

 

		19.3	An
                                            auditor referred to in clause 19.2 shall have the right to audit the Company’s records in
                                            accordance with the terms of the said Annexure 4.

 

		19.4	For
                                            purposes of any audit referred to in the said clause 19.2, the Company shall make available
                                            to the auditor all such books, records, accounts and other documents and information as may
                                            be reasonably required from the Company by him.

 

		19.5	Nothing
                                            in this clause contained shall be construed as prohibiting or limiting the Minister or any
                                            officer in the public service to audit or cause to be audited the books of the Company by
                                            virtue of any power conferred upon the Minister or such officer by or under any law.

 

Clause
20

 

Records
and reports and ownership of data

 

		20.1	The
                                            Company shall in accordance with the provisions of the Petroleum Act at all times while this
                                            Agreement is in force, maintain accurate and current records of its Petroleum Operations
                                            in its Licence Area.

 

		20.2	The
Company shall save and keep for the duration of its Petroleum Operations in Namibia a representative portion of each sample of cores
and cuttings taken from drilling Wells to be disposed of or forwarded to the Minister in a manner directed by the Minister. All samples
acquired by the Company for its own purpose shall be considered available for inspection at any reasonable time by the Minister. Any
such samples which the Company has kept for a period of 12 months, without receipt of instruction to forward such samples to the Minister,
may be disposed of by the Company at its discretion, after not less than 30 days notice to the Minister.

 

		20.3	Well
                                            logs, maps, magnetic tapes, cuts of core and cutting samples and all other geological and
                                            geophysical information obtained by the Company in the course of carrying out Petroleum Operations
                                            (hereinafter referred to as Petroleum Data) are the property of the Government, and shall
                                            be submitted to the Minister as soon as they are acquired or prepared and, except as provided
                                            in clause 20.4, may not be published, reproduced or otherwise dealt with without the consent
                                            of the Minister.

 

    33

    

    

 

		20.4	The
Company may-

 

		(a)	retain
                                            for use in Petroleum Operations copies of material constituting Petroleum Data;

 

		(b)	with
                                            the approval of the Minister, retain for use in Petroleum Operations original material constituting
                                            Petroleum Data, provided that where such material is capable of reproduction, copies have
                                            been supplied to the Minister;

 

		(c)	subject
                                            to the right conferred upon the Minister or any other person in the Petroleum Act to inspect
                                            any samples or other original materials constituting Petroleum Data, export such Petroleum
                                            Data for processing or laboratory examination or analysis, provided that representative samples
                                            equivalent in quality or, where such material is capable of reproduction, copies of equivalent
                                            quality have first been delivered to the Minister.

 

		20.5	The
                                            Company shall keep the Minister currently advised of all major developments taking place
                                            during the course of Petroleum Operations and shall furnish the Minister with Petroleum Data
                                            and other available information, reports, assessments, assessment studies and interpretations
                                            relating to the Petroleum Operations as the Minister may require.

 

		20.6	The
                                            Minister shall through his duly appointed representatives be entitled to observe the Petroleum
                                            Operations carried out by the Company and at all times to inspect all assets, records and
                                            data kept by the Company relating to such operations.

 

		20.7	Nothing
                                            in this clause contained shall be construed as requiring the Company to disclose any of its
                                            proprietary technology or that of its Affiliates.

 

Clause
21

 

Confidentiality
of data

 

		21.1	All
                                            Petroleum Data, information and reports obtained or prepared by the Company in terms of this
                                            Agreement shall, subject to clause 21.2 and so long as they relate to any part of the Licence
                                            Area, be treated as confidential and each of the Parties undertakes not to disclose such
                                            Data, information and reports or the contents thereof to any other person without the consent
                                            in writing of the other Party, provided that this clause shall not-

 

		(a)	prevent
                                            disclosure by the Company for the purpose of its Petroleum Operations to:-

 

		(i)	an
Affiliate;

 

    34

    

    

 

		(ii)	any
bona fide intending assignee;

 

		(iii)	any
                                            professional adviser who needs to have access to such Petroleum Data, information and reports
                                            for the effective performance of his obligations under his contract with the Company;

 

		(iv)	any
                                            bank or financial institution from which the Company is seeking or obtaining finance or which
                                            is advising the Company in connection with any issue of securities or the admission of any
                                            securities to listing on any stock exchange;

 

		(v)	a
                                            contractor of the Company;

 

		(vi)	any
                                            stock exchange in order to comply with any securities law of any country;

 

		(vii)	any
                                            court of competent jurisdiction to comply with any order or decree of such court.

 

		(b)	prevent
                                            disclosure by the Company for the purpose of trading data with third parties in accordance
                                            with normal petroleum industry practice provided the Minister’s consent (which shall not
                                            be unreasonably withheld) has been previously applied for and obtained.

 

		(c)	prevent
                                            the disclosure by the Minister or any officer in his Ministry to the National Petroleum Corporation
                                            of Namibia (Proprietary) Ltd. in terms of section 8 of the Petroleum Act; and to Professional
                                            advisers of the Ministry or the National Petroleum Corporation of Namibia (Proprietary) Ltd.;
                                            or

 

		(d)	be
                                            construed as imposing on any Party any obligation in relation to any Petroleum Data, information
                                            or reports which are, without disclosure by such Party, generally known to the public.

 

		21.2	Any
                                            Petroleum Data, information or reports disclosed by the Company to any other person in terms
                                            of clause 21.1 shall be disclosed on terms which will ensure that such Petroleum Data, information
                                            or reports are treated as confidential by the recipient.

 

    35

    

    

 

		21.3	Any
                                            Petroleum Data, information and reports relating to the Licence Area which, in the opinion
                                            of the Minister, might have significance in connection with an exploration programme to be
                                            conducted by a third party in another area may be disclosed by the Minister to such third
                                            party provided the Minister has previously obtained approval to do so from the Company. Such
                                            disclosure shall be subject to conditions agreed upon between the Minister and the Company.

 

		21.4	Any
                                            Petroleum Data, information and reports, including interpretations and assessments, assessment
                                            studies, relating to any area which ceases to be part of the Licence Area, whether as a result
                                            of relinquishment, surrender or termination of a licence shall be treated as confidential
                                            by the Company, provided however that this clause shall not:

 

		(a)	Prevent
                                            disclosure by the Company for purpose of its Petroleum Operations to:

 

		(i)	an
Affiliate;

 

		(ii)	any
bona fide intending assignee;

 

		(iii)	any
                                            professional adviser who needs to have access to such Petroleum Data, information and reports
                                            for the effective performance of his obligations under his contract with the Company;

 

		(iv)	any
                                            bank or financial institution from which the Company is seeking or obtaining finance or which
                                            is advising the Company in connection with any issue of securities or the admission of any
                                            securities to listing on any stock exchange;

 

		(v)	a
                                            contractor of the Company;

 

		(vi)	any
                                            stock exchange in order to comply with any securities law of any country;

 

		(vii)	any
                                            court of competent jurisdiction to comply with any order or decree of such court.

 

		(b)	prevent
                                            disclosure by the Company for the purpose of trading data with third parties in accordance
                                            with normal petroleum industry practice provided the Minister’s consent (which shall not
                                            be unreasonably withheld) has been previously applied for and obtained.

 

		(c)	be
                                            construed as imposing on any party any obligation in relation to any Petroleum Data, information
                                            or reports which are, without disclosure by such party, generally known to the public.

 

    36

    

    

 

		21.5	Any
                                            Petroleum Data, information and reports, including all interpretations and assessments, assessment
                                            studies based on such Petroleum Data, information and reports relating to any area which
                                            ceases to be part of the Licence Area whether as a result of relinquishment, surrender or
                                            termination of a licence shall cease to be treated by the Minister as confidential from the
                                            date on which such area ceases to be part of the Licence Area.

 

		21.6	Notwithstanding
                                            the fact that Petroleum Data, information and reports relate to an area held by the Company
                                            under Licence the Minister may, using Petroleum Data,

information
and reports supplied by the Company:

 

		(a)	publish,
                                            on completion of any Well by the Company in the Licence Area, the following summary information:

 

		-	location
of the Well (co-ordinates of the Well, Block number and the name of the sedimentary basin);

 

		-	total
depth of the Well in metres;

 

		-	stratigraphic
total depth of the Well identified by the Epoch (Jurassic, Cretaceous etc.);

 

		-	Discovery
of hydrocarbons, oil and/or gas or not (in case of Discovery neither the depth nor the stratigraphy of the producing formation will be
given);

 

		-	number
of tests performed including type of tests;

 

		-	maximum
flow rate during testing, including size of choke;

 

		-	hydrocarbon
types tested including gas oil ratio;

 

		-	water
depth;

 

		-	general
comments on further exploration in the basin etc.

 

		(b)	five
years after the completion of any survey or any Well in the Licence Area by the Company, release to any person or persons any survey
data and all Well logs and all operational, technical and geological reports relating to such survey or well provided, however, that
no information of an interpretive nature shall be released.

 

		21.7	Subject
                                            to the other provisions of this clause 21, the Minister may, during the currency of an Exploration
                                            or Production Licence held by the Company, request the consent of the Company to the disclosure
                                            to a third party of Petroleum Data, information and reports other than those referred to
                                            in clause 21.6 for a purpose determined by the Minister and communicated to the Company and
                                            such consent shall not be unreasonably withheld.

 

    37

    

    

 

Clause
22

 

Employment
and training

 

		22.1	In
                                            carrying out Petroleum Operations the Company shall, to the maximum extent possible, employ
                                            Namibian citizens having appropriate qualifications.

 

		22.2	The
                                            Company may employ a person who is not a Namibian citizen in a post only if the skills required
                                            in such post are not obtainable by recruitment of a Namibian citizen and the Company may
                                            at any time be called upon by the Minister to give satisfactory reasons for the continued
                                            employment of a non-citizen in any post.

 

	22.3	(a)	During each year
of the Exploration Licence or any renewal thereof, the Company shall spend a sum which is not less than a sum equal to $70,000 United
States Dollars for the purpose of the training and education of Namibians.

 

		(b)	Of the said sum, 70 per cent shall be paid on the date of signature and thereafter on each anniversary
of such date into the Petroleum Training and Education Fund. The principles governing the operation of the training fund shall be as set
out in Annexure 6.

 

		(c)	Of the said sum, 30 per cent shall be expended by the Company on attachments and in-house training of
Namibian citizens in the field of natural science, engineering, technology, accounting, economics and law as related to oil and gas exploration
and production to expose them to petroleum industry practice and operations. The said 30 per cent shall be expended in accordance with
the principles set out in Annexure 6.

 

		22.4	The sum referred to in clause 22.3 shall be adjusted annually by dividing such sum by the Inflation Factor.

 

		22.5	If the Price Index ceases to be published the Price Index contemplated in clause

 

		22.4	shall for the purposes of this Agreement be such price index as may be determined by mutual agreement
between the parties to this Agreement.

 

		22.6	Not later than six months after the grant of a Production Licence, the Company shall, after consultation
with the Minister or his duly authorized representative, prepare and implement a programme for training and employment of Namibian citizens
in each phase and level of Petroleum Operations and for the transfer of management and technical skills for the safe and efficient conduct
of Petroleum Operations.

 

    38

    

    

 

Clause
23

 

Namibian
goods and services

 

		23.1	The
Company shall-

 

		(a)	use
                                            and purchase goods supplied, produced and manufactured in Namibia whenever such goods can
                                            be obtained at prices in Namibia which are competitive in international terms and are, in
                                            all substantive respects, of a quality comparable with the quality of goods from outside
                                            Namibia. The Company shall give preference to such supplier, producer or manufacturer, unless
                                            it is able to show good cause to the satisfaction of the Minister why such preference should
                                            not be given;

 

		(b)	make
                                            maximum use of contractors in Namibia where services of comparable standards with those obtained
                                            elsewhere are available from such contractors at competitive prices and on competitive terms;

 

		(c)	when
                                            it is necessary to import vehicles, machinery, plant or equipment and any such vehicles,
                                            machinery, plant or equipment are not purchased directly from a manufacturer, effect the
                                            purchase of the items through traders operating in Namibia at competitive prices;

 

		(d)	co-operate
                                            with companies in Namibia to enable them to develop skills and technology to service the
                                            petroleum industry.

 

		23.2	The
                                            Company shall ensure that a term similar to this clause is contained in its contracts with
                                            contractors.

 

Clause
24

 

Domestic
supply obligation

 

		24.1	The
Company may, at the Minister’s choice, be required to sell Crude Oil in Namibia in order to satisfy Namibia’s domestic market
requirements on a pro rata basis with other producers in Namibia according to the quantity of Crude Oil produced by each producer. The
Minister shall give the Company at least six months notice in advance of the said requirement, and the terms of the supply in consequence
of such requirement shall be on an annual basis.

 

		24.2	The
                                            price for Crude Oil sold in terms of clause 24.1 shall be the price for that oil determined
                                            in accordance with clause 15.

 

Clause
25

 

Unit
development

 

		25.1	If
                                            a Petroleum Reservoir is partly situated in the Production Area of the Company and partly
                                            in the Production Area of any other holder of a Production Licence, the Minister may, for
                                            purposes of securing the more effective recovery of Petroleum from such Petroleum Reservoir,
                                            by notice in writing addressed and delivered to the Company, direct the Company to enter
                                            into an agreement in writing with such holder within such period as may be specified in such
                                            notice in relation to the joint development and operation of such Petroleum Reservoir and
                                            to submit

 

		(a)	such
                                            agreement forthwith to the Minister for approval; and

 

		(b)	if
                                            it is approved, a plan for the joint development and operation of the Petroleum Reservoir
                                            in question.

 

		25.2	If
                                            no plan is submitted within the period specified in the notice or within such further period
                                            as the Minister may allow or, if such plan submitted is not acceptable to the Minister, the
                                            Minister may cause to be prepared in accordance with generally accepted practices in the
                                            international petroleum industry and at the expense of the Company and the other holder concerned
                                            a plan for such joint development and operation. In the preparation of such plan the Minister
                                            shall take into consideration any presentations made by the Company and such other holder.

 

		25.3	If
the Company does not agree with the proposed plan then either the Company or the Minister may refer the matter for expert determination
to an expert appointed in terms of clause 29.6 which determination shall be final except that the Company may within 60 days of such
determination notify the Minister that it elects to surrender its rights in the Discovery in lieu of participation in the joint development.

 

    39

    

    

 

Clause
26

 

Termination

 

		26.1	This
                                            Agreement shall continue to be of full force and effect for such period as the Company continues
                                            to hold an Exploration Licence or a Production Licence to which this Agreement relates and
                                            shall, subject to the terms of clause 8.14, be deemed to have been terminated, if for any
                                            reason the Company ceases to hold such Exploration Licence or such Production Licence.

 

		26.2	The Minister may by notice in writing addressed and delivered to the Company terminate this Agreement
if

 

		(a)	the Company or the company which has given a performance guarantee in a form corresponding with the form
contained in Annexure 5 is liquidated by an order of a competent court;

 

		(b)	a resolution is passed by the Company to apply to a competent court for the liquidation of the Company;

 

		(c)	a resolution is passed by the company which has given the said performance guarantee to apply to a competent
court for the liquidation of that Company;

 

		(d)	the Company fails to comply with any final award made pursuant to arbitration proceedings conducted in
terms of clause 29, unless such liquidation is ordered or such resolution is passed for the purpose of amalgamation or reconstruction
and the Company has, by notice in writing addressed and delivered to the Minister, given the Minister at least 90 days notice of such
intended amalgamation and reconstruction and the Minister has by notice in writing addressed and delivered to the Company approved of
such amalgamation or reconstruction.

 

		26.3	Notwithstanding
                                            the termination of this Agreement any rights and obligations of the parties respectively
                                            expressed to arise under this Agreement on the termination thereof or any liability of any
                                            Party arising out of an earlier failure to comply with any obligation in terms of this Agreement
                                            which must be complied with by such Party shall be enforceable.

 

Clause
27

 

Vis
major

 

		27.1	Any
                                            failure by the Company to comply with any terms and conditions of this Agreement shall not
                                            be regarded as a breach of this Agreement in so far as the failure arises from vis major
                                            and if, as a result of vis major, the compliance by the Company with any of the terms and
                                            conditions of this Agreement is delayed beyond the period fixed or allowed for its compliance
                                            the period of the delay shall be added to the period so fixed or allowed.

 

		27.2	When
                                            the Company wishes to invoke the terms of clause 27.1 it shall promptly notify the Minister
                                            in writing of the occurrence of conditions of vis major and shall take all reasonable steps
                                            to remove the cause thereof and to mitigate the consequences. The Company shall promptly
                                            notify the Minister as soon as conditions of vis major no longer prevent the Company from
                                            carrying out its obligations and following such notice shall resume Petroleum Operations
                                            as soon as reasonably practicable.

 

		27.3	In
                                            this clause the expression “vis major” means any hostility, insurrections, riots,
                                            civil commotions, strikes, lockouts, labour disturbances, embargoes, blockages, health pandemics,
                                            acts of God including fires and floods, unavoidable accidents, war and acts of war, including
                                            acts of terrorism, declared or undeclared beyond the control of the Company.

 

Clause
28

 

Assignation

 

		28.1	The
                                            Company may not assign to any person, firm, company or corporation which is not a party to
                                            this Agreement any of its rights, privileges, duties or obligations under this Agreement
                                            without the approval of the Minister previously obtained in every particular case.

 

		28.2	The
                                            Company shall not be debarred from assigning in writing its rights, privileges, duties or
                                            obligations under this Agreement to an Affiliate, provided that no such assignation shall
                                            in any way relieve the Company of any of its obligations under this Agreement.

 

    40

    

    

 

Clause
29

 

Arbitration

 

		29.1	Any
                                            dispute arising between the parties relating to the construction, meaning or effect of this
                                            Agreement or the rights or liabilities of the parties in terms of this Agreement shall be
                                            resolved amicably by negotiations.

 

		29.2	If
                                            the Minister and the Company fail to resolve by way of negotiation a dispute referred to
                                            in clause 29.1, the Minister and the Company hereby agree to submit such dispute to arbitration
                                            for final settlement in accordance with the terms of clause 29.3.

 

		29.3	Any
                                            unresolved dispute referred to in clause 29.2 shall be finally settled by arbitration in
                                            accordance with the Arbitration Rules of the United Nations Commission on International Trade
                                            Law in force on the date on which this Agreement is signed. Such arbitration, unless the
                                            parties otherwise agree, shall take place in London, England. As far as practicable the Minister
                                            and the Company shall continue to implement this Agreement during the period while the arbitration
                                            is pending and during the arbitration.

 

		29.4	An
                                            arbitration referred to in clause 29.3 shall be undertaken by three arbitrators of whom-

 

		(a)	one
                                            each shall be appointed by the Minister and the Company; and

 

		(b)	one
                                            shall be appointed by the two arbitrators appointed under paragraph (a).

 

If the Minister and the Company fail
to appoint an arbitrator within 30 days after receipt of a written request to do so, such arbitrators shall at the request of the other
Party, if the Parties do not otherwise agree, be appointed in accordance with the aforesaid Arbitration Rules. If the first two arbitrators,
appointed as aforesaid, fail to agree on a third arbitrator within 30 days following the appointment of the second arbitrator, the third
arbitrator shall, if the Parties do not otherwise agree, be appointed at the request of either Party in accordance with the aforesaid
Arbitration Rules. If an arbitrator fails or is unable to act, his successor will be appointed in the same manner as the arbitrator whom
he succeeds.

 

		29.5	A
                                            decision of a majority of the arbitrators shall be final and binding upon the Parties and
                                            the award rendered shall be final and conclusive. The arbitrators shall state in writing
                                            the reasons on which their decision was based. Judgment on the 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.

 

		29.6	Any
matter in dispute between the parties under clauses 5.9, 9.7, 15.6, 16 and 25.3 shall be referred for determination by a sole expert
to be appointed by agreement between the parties hereto and failing such agreement by the President of the British Institute of Petroleum.

 

Clause
30

 

Performance
guarantee

 

		30.1	The
                                            Company shall secure from its holding company or any Affiliate which the Minister has by
                                            notice in writing accepted an unconditional guarantee in terms whereof that company guarantees,
                                            in a form corresponding with the form contained in Annexure 5, the due performance by the
                                            Company of all its obligations under the Petroleum Act and the Taxation Act and in terms
                                            of this Agreement and the licenses to which it relates.

 

		30.2	The
                                            guarantee referred to in clause 30.1 shall be executed before the signature of this Agreement
                                            and shall be delivered to the Minister on such signature.

 

Clause
31

 

Entire
agreement and amendments

 

		31.1	This
                                            Agreement embodies the entire agreement and understanding between the Company and the Minister
                                            relative to the subject matter hereof and supersedes and replaces any provisions on the same
                                            subject in any other agreement between the parties, whether written or oral, prior to the
                                            date of this Agreement.

 

		31.2	This
                                            Agreement may not be amended, modified, varied or supplemented, except by an instrument in
                                            writing signed by the Company and the Minister.

 

    41

    

    

 

Clause
32

 

Waiver

 

		32.1	The
                                            performance of any condition or obligation to be performed under this Agreement shall not
                                            be deemed to have been waived or postponed, except by an instrument in writing signed by
                                            the Party which is claimed to have granted such waiver or postponement.

 

		32.2	No
                                            waiver by any Party of any one or more obligations or defaults by any other party in the
                                            performance of this Agreement shall operate or be construed as a waiver of any other obligations
                                            or defaults whether of a like or a different character.

 

Clause
33

 

Applicable
law

 

This
Agreement, the interpretation thereof and any dispute arising thereunder or associated therewith shall be governed by and determined
in accordance with the laws of the Republic of Namibia.

 

Clause
34

 

Notices

 

		34.1	Any
                                            document, notice or other communication required to be given or delivered to the Company
                                            by the Minister or any officer authorized thereto shall be deemed to have been so given or
                                            delivered-

 

		(a)	if
                                            delivered to the General Manager or Deputy General Manager referred to in clause 12.4 or
                                            to the public officer of the Company or operator referred to in paragraph (b) of clause 12.5;
                                            or

 

		(b)	if
                                            left with some adult person apparently residing at or occupying or employed at the registered
                                            address of the Company or such operator; or

 

		(c)	if
                                            dispatched by registered post addressed to-

 

		(i)	the
Company or operator at the following address:

 

Elephant
Oil Limited

6th
Floor

60
Gracechurch Street

London,
England EC3V 0HR

 

(insert
postal address of the Company or operator); or

 

		(ii)	the
                                            General Manager or Deputy General Manager referred to in clause 12.4 to the address referred
                                            to in clause 12.4; or

 

		(iii)	the
                                            public officer at its or his last known address; or

 

		(d)	if
                                            transmitted by means of a facsimile transmission to the person concerned at the registered
                                            office of the Company.

 

    42

    

    

 

		34.2	Any
                                            document, notice or other communication referred to in clause 34.1 which has been given or
                                            delivered in the manner contemplated in paragraph (c) of that clause shall, unless the contrary
                                            is proved, be deemed to have been received by the person to whom it was addressed at the
                                            time when it would, in the ordinary course of post have arrived at the place to which it
                                            was addressed.

 

		34.3	Any
                                            document, notice or other communication required to be given or delivered to

 

		(a)	the
                                            Minister by the Company shall be deemed to have been so given or delivered if dispatched
                                            by registered post addressed to the Minister at the following address:

 

Ministry
of Mines and Energy

Private
Bag 13297

Windhoek,
Namibia

 

		(b)	the
                                            authorized officer by the Company shall be deemed to have been so given or delivered if dispatched
                                            by registered post addressed to the officer at the following address:

 

Ministry
of Mines and Energy

Private
Bag 13297

Windhoek,
Namibia

 

		(c)	the
                                            Minister of Finance by the Company shall be deemed to have been so given or delivered if
                                            dispatched by registered post addressed to the Minister of Finance at the following address:

 

Ministry
of Finance

Private
Bag 13295

Windhoek,
Namibia

 

*******************

 

		34.4	Notwithstanding
the above, for purposes of giving notice shall mean actual delivery of the notice to the address of the Minister or the Company to the
most current address specified under Clause 43; provided that any notice sent by facsimile or email after 5:00 p.m. on a Business Day
or on a weekend or holiday at the location of the receiving Party shall be deemed given on the next following Business Day of the receiving
Party.

 

    43

    

    

 

Clause
35

 

Customs
Exemptions

 

		35.1	Imports by Company. Company and its subcontractors shall be permitted to import all items required by
Company in respect of Petroleum Operations, and all of such items and Company and its subcontractors shall be exempt from customs duties
prescribed from time to time in or under the Customs and Excise Act, 1998 (Act 20 of 1998) in respect of such importation. Without limiting
the foregoing, it is agreed and understood that such exemption applies to all materials, equipment, supplies, and other items including
machinery, vehicles, spare parts, tires, aircraft, boats, chemicals, foodstuffs and other movable and/or consumable items for Petroleum
Operations.

 

		35.2	Imports by Employees. Each expatriate employee of Company and its subcontractors shall be permitted to
import and shall be exempt from all customs duties with respect to the importation of household goods and other personal items, including
one automobile every three (3) years; provided, however, that such items are imported for the sole use of the employee and the employee’s
family; and provided, further, that no such item imported by the employee shall be resold by such employee in a member country of the
Southern Africa Customs Union except in accordance with any applicable laws.

 

		35.3	Disposal
                                            of Imported Items. Any item imported by Company, or its subcontractors may be sold in Namibia
                                            upon payment of applicable customs duties, if any, on the price of the item at the time of
                                            such sale or may be exported pursuant to clause 35.4. Items imported by Company or its subcontractors,
                                            which are sold or saleable only for scrap value may be sold as such, or otherwise be properly
                                            disposed of, with payment of customs duties. In the event of a sale by Company or its subcontractors
                                            under this clause 35.4, Company or its subcontractor shall be entitled to retain and repatriate
                                            in a convertible currency the proceeds therefrom as provided in this Agreement.

 

		35.4	Exports.

 

		(a)	Any
                                            of the items imported into Namibia by Company, its subcontractors or their employees, which
                                            has not become the property of the Government pursuant to the provisions hereof may be exported
                                            by the importing party at any time without payment of any customs duties or other charges.

 

		(b)	Company
                                            shall be free to export any and all Petroleum to which it is entitled pursuant to this Agreement
                                            and all Petroleum exported by Company shall be exempt from all charges in respect of exports
                                            of Petroleum.

 

Clause
36

 

Exchange
Rights

 

		36.1	Registration.
                                            Funds transferred into Namibia for local expenditures, funds utilized abroad to purchase
                                            goods and services for Petroleum Operations, charges for services performed by Company or
                                            its subcontractors outside Namibia as part of Petroleum Operations and all other expenditures
                                            and investments made pursuant to this Agreement shall be filed by Company’s Namibian
                                            bankers with the Bank of Namibia which shall issue appropriate written confirmation to Company.

 

		36.2	Funds
                                            for Local Expenditures. Funds required by Company and foreign subcontractors to meet local
                                            expenditures shall be imported into Namibia in freely convertible currencies, transferred
                                            to local banks and converted to Namibia currency. If it or they so desire, Company and/or
                                            its foreign subcontractors may borrow Namibia currency from local banks in order to meet
                                            local expenditures.

 

		36.3	Foreign
                                            Exchange. Purchase or sale of foreign exchange shall be affected at the exchange rate most
                                            favorable to Company, as quoted by the Bank of Namibia.

 

		36.4	Foreign
                                            Bank Accounts. Company is hereby authorized to open, maintain, control and operate accounts
                                            in any currency in foreign banks outside Namibia, to have full and complete control of such
                                            accounts, and to retain abroad and freely dispose of any funds in such accounts. Among other
                                            reasons, withdrawals may be made for payments for goods and services acquired abroad, for
                                            payments to subcontractors engaged in Petroleum Operations, and for transferring funds to
                                            local banks in Namibia to meet local expenditures, all in connection with Company’s
                                            activities under this Agreement.

 

		36.5	Exchange
                                            Rights. Company is hereby granted the following exchange rights:

 

		(a)	To
                                            provide in freely convertible foreign currencies all funds needed to conduct Petroleum Operations;

 

		(b)	To
                                            hold such funds abroad with no obligation to transfer funds or assets to Namibia except such
                                            funds as are necessary to meet Company’s need for Namibia currency, in the case that
                                            Company does not borrow such funds from local banks;

 

		(c)	To
                                            freely dispose of any funds held outside Namibia;

 

		(d)	To
                                            export any and all Petroleum to which it is entitled pursuant to this Agreement;

 

		(e)	To
                                            retain abroad and freely dispose of all proceeds received outside from the export, sale or
                                            exchange of Petroleum with no obligation to remit such export proceeds except as may be needed
                                            to meet Company’s expenses in Namibia, in the case that Company does not borrow funds
                                            from local banks for that purpose;

 

    44

    

    

 

		(f)	To
                                            remit and/or repatriate abroad and freely dispose of all (i) proceeds received within Namibia
                                            from the sale or exchange of Petroleum within Namibia, (ii) proceeds received from other
                                            operations and activities within Namibia, and (iii) any other funds accruing to Company within
                                            Namibia, including, without limiting the generality of the foregoing, all profits and or
                                            dividends; such remittance and/or repatriation to be accomplished in accordance with procedures
                                            of any exchange control Laws which may be in force, but which shall in no event prevent or
                                            delay such remittance and/or repatriation;

 

		(g)	To
                                            pay its subcontractors and employees in foreign currencies, either inside or outside of Namibia.
                                            Expatriate employees shall be required to bring into Namibia through local banks and convert
                                            into Namibia currency only such foreign exchange as is required to meet their personal living
                                            expenses. Such employees shall be authorized to remit and/or repatriate any personal funds
                                            or proceeds received in Namibia from the sale of personal belongings; and

 

		(h)	To
                                            maintain a special account or accounts for non-Namibian funds in a local bank or banks chosen
                                            by Company from which funds can be disbursed for the purpose of making any payments required
                                            in conducting Petroleum Operations, or making payments to, or for the benefit of, Company’s
                                            employees, whether local or expatriate.

 

		36.6	Payments
                                            under this Agreement. Any payments made by any Party to another Party shall be made in U.S.
                                            Dollars unless the Parties mutually agree upon another currency.

 

		36.7	Subcontractors.
                                            Company’s subcontractors and their employees shall have the same rights as Company
                                            and its employees under this clause 36.

 

		36.8	Implementation.
                                            The Company acknowledges that the provisions of this clause 36 are granted in accordance
                                            with and subject to the Exchange Control Laws applicable in Namibia and shall only be implemented
                                            by the parties in accordance with such laws. The Company shall comply with the prescribed
                                            formalities and procedures and engage the services of an authorized dealer in foreign
                                            exchange to assist it in facilitating and implementing the provisions of this clause 36.

 

    45

    

    

 

IN
WITNESS whereof this Agreement has been duly signed at WINDHOEK on this .......day of .............
2021..., by and between the GOVERNMENT OF THE REPUBLIC OF NAMIBIA, as represented by The Honorable Tom Alweendo, the Minister
of Mines and Energy, and Elephant Oil LTD as represented by Matthew B. Lofgran,; and Niikela Oil (Pty) LTD represented
by Ms.Mbute Rusa Andreas; and the National Petroleum Corporation of Namibia (PTY) LTD (NAMCOR E&P) represented by Mr. Immanuel
Mulunga.

 

-----------------------------------------------

 

For
the Government of the Republic of Namibia, The Honorable Tom Alweendo, 

MINISTER
OF MINES AND ENERGY

 

Witnesses:

 

1.
-------------------------

 

 

2.
-------------------------

 

-----------------------------------------------

 

For
Elephant Oil LTD 

Matthew
B. Lofgran, Chief Executive Officer 

 

Witnesses:

 

1.
------------------------

 

2.
------------------------

________________________________

 

For
Niikela Exploration (Pty) LTD 

Ms.
Mbute Rusa Andreas, representative 

 

Witnesses:

 

1.
------------------------

 

2.
------------------------

 

___________________________________

 

For
NAMCOR EXPLORATION AND PRODUCTION (Pty) LTD

Mr.
Immanuel Mulunga, representative

 

Witnesses:

 

1.
------------------------

 

2.
------------------------

 

    46

    

    

 

ANNEXURE 1

 

DESCRIPTION OF LICENCE AREA

 

(Onshore Block 1919 Coordinates)

 

Block 1919 Coordinates

 

	Corner	 	 	X east	 	Y south
	 	1	 	 	19°	 	-19°
	 	2	 	 	20°	 	-19°
	 	3	 	 	20°	 	-20°
	 	4	 	 	19°	 	-20°

 

Block 1919 Area – 11,675 square kilometers

 

    47

    

    

 

ANNEXURE 2

 

MAP OF LICENCE AREA – ONSHORE BLOCK 1919

 

 

    48

    

    

 

ANNEXURE 3

 

BANK GUARANTEE

 

in respect of

 

INITIAL EXPLORATION PERIOD

 

(Clause 4.7)

 

WHEREAS the Company is, under the Petroleum
Agreement dated the ........ day of ...................... 2021.... (hereinafter referred to as “the Agreement”) entered into
by and between the Government of Namibia (hereinafter referred to as “the Government”) and the Niikeal Exploration (Pty) LTD.
(hereinafter referred to as “the Company”) required-

 

	I.	to perform before the expiration of the Initial Exploration
Period defined in Clause 4.1(a) and Clause 4.2 of the Agreement certain minimum exploration work and expenditure obligations (hereinafter
referred to as “the minimum initial exploration work obligation”);

 

	II.	to incur in the performance of the minimum initial exploration
work obligation, minimum exploration expenditure in an amount of US$ 500,000 estimated .................. in constant 2021 price terms
(Insert amount which corresponds with the amount of the minimum exploration expenditure specified in paragraph 4.1.(a)(ii) of the Agreement)
(hereinafter referred to as “minimum initial exploration expenditure”);

 

NOW, THEREFORE we,
..........................NedBank of Namibia . (insert principal place of business of Bank), hereby guarantee, subject to the
provisos set out below, that on the first business day following the thirtieth day after receipt from the Government of a written
demand signed by the Minister of Mines and Energy made in accordance with the terms hereof and stating that the Company has-

 

		A.	failed to incur the minimum work and expenditure obligations
in respect of the initial exploration work obligations in accordance with Article 4.1(a) and Article 4.2;

 

		B.	actually incurred expenditure on the initial exploration work obligation which amounts to an amount (to
be specified in constant 2021 price terms in constant 2021...... price terms in such written demand) which is less than the minimum initial
exploration expenditure;

 

		C.	consequently, become liable to pay a shortfall of expenditure expressed in constant 2021......... price
terms equal to the difference between the amount referred to in paragraph A above and the amount specified in paragraph B above; and

 

		D.	failed to pay the Minister of Mines and Energy an amount equal to the shortfall referred to in paragraph
C above, as adjusted by multiplying such amount by a figure obtained by dividing the Price Index, as reported for the first time in the
monthly publication “International Financial Statistics” of the International Monetary Fund in the section “Prices, Production,
Employment”, for the Calendar Month immediately preceding the day of receipt of the aforesaid written demand, by such Price Index
as so reported for the Calendar Month in which the Agreement has been signed,

 

we shall pay to the Minister of Mines
and Energy the amount referred to in paragraph D above.

 

    49

    

    

 

PROVIDED THAT-

 

		1.	our liability hereunder shall be limited to paying an amount not exceeding US $50,000 United States Dollars
(insert an amount numerically greater than the minimum initial exploration expenditure, based on an estimated inflation element for the
Initial Exploration Period) in respect of the initial exploration work obligation;

 

		2.	our liability referred to in paragraph 1 shall be reduced at the end of every Quarter by the amount of
the actual expenditure incurred by the Company and stated in a certificate signed by the Company and the Minister of Mines and Energy,
which reduction shall take effect as from the date of receipt of such certificate by us;

 

		3.	this guarantee shall come into effect as from the date of our receipt of a certificate signed by the Company
and the Minister of Mines and Energy stating that the Agreement has been signed by all the parties thereto;

 

		4.	this guarantee may not be ceded, assigned or transferred to any other person;

 

		5.	this guarantee shall expire on the date of-

 

		(1)	the payment by us of all the amounts guaranteed hereunder; or

 

		(2)	the receipt by us of a certificate in accordance with paragraph 2 above, whereby expenditure actually
incurred in performance of the initial exploration work obligation when added to the aggregate amount of expenditure actually incurred
in performance of the initial exploration work obligation, all such expenditures being adjusted to constant 199..... price terms, and
stated in such certificate previously received by us shall equal or exceed the minimum initial exploration expenditure;

 

		(3)	the one hundred and twentieth day after the end of the Initial Exploration Period as defined in clause
1 of the Agreement, whichever is the earliest date, whereafter we shall be under no liability whatsoever under this guarantee;

 

		6.	any certificate required to be provided by the Company pursuant to paragraphs 2 and 3 above must be signed
by a duly authorised representative of the Company;

 

		7.	any demand, certificate and notification must be sent to us at the above address.

 

SIGNED at ......................... on this ..........................
day of ..................... 2021..

 

---------------------------

NedBank of Namibia 

 

ooOoo

 

    50

    

    

 

BANK GUARANTEE

in respect of

FIRST RENEWAL EXPLORATION PERIOD

(Clause 4.7)

 

 

WHEREAS the Company is, under the Petroleum
Agreement dated the ........ day of ...................... 20... (hereinafter referred to as “the Agreement”) entered into by
and between the Government of Namibia (hereinafter referred to as “the Government”) and the Elephant Oil LTD . (hereinafter
referred to as “the Company”) required-

 

		I.	to perform before the expiration of the First Renewal Exploration Period defined in Clause 4.1(b) and
Clause 4.2 of the Agreement certain minimum exploration work and expenditure obligations (hereinafter referred to as “the minimum
first renewal exploration work obligation”);

 

		II.	to incur in the performance of the minimum first renewal exploration work obligation, minimum exploration
expenditure in an amount of US$ 5,000,000 in constant 2021 price terms (Insert amount which corresponds with the amount of the minimum
exploration expenditure specified in paragraph 4.1.(b)(ii) of the Agreement) (hereinafter referred to as “minimum first renewal exploration
expenditure”);

 

NOW, THEREFORE we, NedBank of Namibia (insert
principal place of business of Bank), hereby guarantee, subject to the provisos set out below, that on the first business day following
the thirtieth day after receipt from the Government of a written demand signed by the Minister of Mines and Energy made in accordance
with the terms hereof and stating that the Company has-

 

		A.	failed to incur the minimum work and expenditure obligations in respect of the first renewal exploration
work obligation in accordance with Clause 4.1.(b) and Clause 4.2;

 

		B.	actually incurred expenditure on the first renewal exploration work obligation which amounts to an amount
(to be specified in constant 2021 price terms in such written demand) which is less than the minimum first renewal exploration expenditure;

 

		C.	consequently, become liable to pay a shortfall of expenditure expressed in constant 2021 price terms equal
to the difference between the amount referred to in paragraph A above and the amount specified in paragraph B above; and

 

		D.	failed to pay the Minister of Mines and Energy an amount equal to the shortfall referred to in paragraph
C above, as adjusted by multiplying such amount by a figure obtained by dividing the Price Index, as reported for the first time in the
monthly publication “International Financial Statistics” of the International Monetary Fund in the section “Prices, Production,
Employment”, for the Calendar Month immediately preceding the day of receipt of the aforesaid written demand, by such Price Index
as so reported for the Calendar Month in which the Agreement has been signed, we shall pay to the Minister of Mines and Energy the amount
referred to in paragraph D above.

 

    51

    

    

 

PROVIDED THAT –

 

		1.	our liability hereunder shall be limited to paying an amount not exceeding .............................
United States Dollars (insert an amount numerically greater than the minimum first renewal exploration expenditure, based on inflation
during the Initial Exploration Period and an estimated inflation element for the First Renewal Exploration Period) in respect of the first
renewal exploration work obligation;

 

		2.	our liability referred to in paragraph 1 shall be reduced at the end of every Quarter by the amount of
the actual expenditure incurred by the Company and stated in a certificate signed by the Company and the Minister of Mines and Energy,
which reduction shall take effect as from the date of receipt of such certificate by us;

 

		3.	this guarantee shall come into effect as from the date of our receipt of a certificate signed by the Company
and the Minister of Mines and Energy stating that the Minister has granted the Company’s application for the first renewal of the licence
issued under the Agreement;

 

		4.	this guarantee may not be ceded, assigned or transferred to any other person;

 

		5.	this guarantee shall expire on the date of-

 

		(1)	the payment by us of all the amounts guaranteed hereunder; or

 

		(2)	the receipt by us of a certificate in accordance with paragraph 2 above, whereby the expenditure actually
incurred in performance of the first renewal exploration work obligation and stated therein, when added to the aggregate of –

 

		(a)	the sum by which expenditure actually incurred in performance of the initial exploration work obligation,
which exceeded the minimum initial exploration expenditure, and which was carried over to the First Renewal Period as contemplated in
clause 4.5 of the Agreement and stated as such in a certificate signed by the Company and the Minister of Mines and Energy; and

 

		(b)	the expenditure actually incurred in performance of the first renewal exploration work obligation and
stated in such certificate previously received by us, all such expenditures being adjusted to constant 2021 price terms, shall equal or
exceed the minimum first renewal exploration expenditure;

 

		(3)	the one hundred and twentieth day after the end of the First Renewal Exploration Period as defined in
clause 1 of the Agreement, whichever is the earliest date, whereafter we shall be under no liability whatsoever under this guarantee;

 

		6.	any certificate required to be provided by the Company pursuant
to paragraphs 2, 3 and 5(2)(a) above must be signed by a duly authorised representative of the Company;

 

		7.	any demand, certificate and notification must be sent to us at the above address.

 

SIGNED at ..............on this........day of
.............. 20..

 

------------------

NedBank of Namibia XYZ BANK

OoOoo

 

    52

    

    

 

BANK GUARANTEE

in respect of

SECOND RENEWAL EXPLORATION PERIOD

(Clause 4.7)

 

 

WHEREAS the Company is, under the Petroleum
Agreement dated the ........ day of ...................... 20... (hereinafter referred to as “the Agreement”) entered into by
and between the Government of Namibia (hereinafter referred to as “the Government”) and Elephant Oil LTD (hereinafter referred
to as “the Company”) required-

 

		I.	to perform before the expiration of the Second Renewal Exploration Period defined in Article 4.1 (c) and
Clause 4.2 of the Agreement certain minimum exploration work and expenditure obligations (hereinafter referred to as “the minimum
first renewal exploration work obligation”);

 

		II.	to incur in the performance of the minimum second renewal exploration work obligation, minimum exploration
expenditure in an amount of US$ 5,000.000 in constant 2021 price terms (Insert amount which corresponds with the amount of the minimum
exploration expenditure specified in paragraph 4.1.(b)(ii) of the Agreement) (hereinafter referred to as “minimum second renewal
exploration expenditure”);

 

NOW, THEREFORE we, NedBank of Namibia (insert
principal place of business of Bank), hereby guarantee, subject to the provisos set out below, that on the first business day following
the thirtieth day after receipt from the Government of a written demand signed by the Minister of Mines and Energy made in accordance
with the terms hereof and stating that the Company has-

 

		A.	failed to incur the minimum second renewal exploration work and expenditure obligation in respect of the
second renewal exploration work obligations in accordance Clause 4.1 (c) and Clause 4.2;

 

		B.	actually incurred expenditure on the second renewal exploration work obligation which amounts to an amount
(to be specified in constant 2021 price terms in such written demand) which is less than the minimum second renewal exploration expenditure;

 

		C.	consequently, become liable to pay a shortfall of expenditure expressed in constant 2021 price terms equal
to the difference between the amount referred to in paragraph A above and the amount specified in paragraph B above; and

 

		D.	failed to pay the Minister of Mines and Energy an amount equal to the shortfall referred to in paragraph
C above, as adjusted by multiplying such amount by a figure obtained by dividing the Price Index, as reported for the first time in the
monthly publication “International Financial Statistics” of the International Monetary Fund in the section “Prices, Production,
Employment”, for the Calendar Month immediately preceding the day of receipt of the aforesaid written demand, by such Price Index
as so reported for the Calendar Month in which the Agreement has been signed, we shall pay to the Minister of Mines and Energy the amount
referred to in paragraph D above.

 

    53

    

    

 

PROVIDED THAT –

 

		1.	our liability hereunder shall be limited to paying an amount not exceeding .............................
United States Dollars (insert an amount numerically greater than the minimum Second Renewal exploration expenditure, based on inflation
during the Initial Exploration Period and an estimated inflation element for the Second Renewal Exploration Period) in respect of the
Second Renewal exploration work obligation;

 

		2.	our liability referred to in paragraph 1 shall be reduced at the end of every Quarter by the amount of
the actual expenditure incurred by the Company and stated in a certificate signed by the Company and the Minister of Mines and Energy,
which reduction shall take effect as from the date of receipt of such certificate by us;

 

		3.	this guarantee shall come into effect as from the date of our receipt of a certificate signed by the Company
and the Minister of Mines and Energy stating that the Minister has granted the Company’s application for the first renewal of the licence
issued under the Agreement;

 

		4.	this guarantee may not be ceded, assigned or transferred to any other person;

 

		5.	this guarantee shall expire on the date of-

 

		(1)	the payment by us of all the amounts guaranteed hereunder; or

 

		(2)	the receipt by us of a certificate in accordance with paragraph 2 above, whereby the expenditure actually
incurred in performance of the first renewal exploration work obligation and stated therein, when added to the aggregate of –

 

		(a)	the sum by which expenditure actually incurred in performance of the initial exploration work obligation,
which exceeded the minimum initial exploration expenditure and which was carried over to the First Renewal Period as contemplated in clause
4.5 of the Agreement and stated as such in a certificate signed by the Company and the Minister of Mines and Energy; and

 

		(b)	the expenditure actually incurred in performance of the Second Renewal Exploration work obligation and
stated in such certificate previously received by us, all such expenditures being adjusted to constant 2021 ....... price terms, shall
equal or exceed the minimum first renewal exploration expenditure;

 

		(3)	the one hundred and twentieth day after the end of the First Renewal Exploration Period as defined in
clause 1 of the Agreement, whichever is the earliest date, whereafter we shall be under no liability whatsoever under this guarantee;

 

		6.	any certificate required to be provided by the Company pursuant to paragraphs 2, 3 and 5(2)(a) above must
be signed by a duly authorised representative of the Company;

 

		7.	any demand, certificate and notification must be sent to us at the above address.

 

SIGNED at ..............on this........day of
.............. 20.. .

 

------------------

NedBank of Namibia

 

    54

    

    

 

ANNEXURE 4

 

ACCOUNTING PROCEDURE

 

(Clause 19)

 

1. Definitions

 

In
this Annexure, unless the context indicates otherwise any word or expression to which a meaning has been assigned in the Petroleum Agreement
dated the ...... day of ...................... 2021.. (hereinafter referred to as “the Agreement”) entered into between the
Government of Namibia (hereinafter referred to as “the Government”) and Niikela Exploration (PTY) LTD,
Elephant Oil LTD and NAMCOR EXPLORATION AND PRODUCTION (PTY) LTD (hereinafter
referred to as “the Company”) and in the Taxation Act shall have that meaning.

 

2. Purpose of accounting procedure

 

The purpose of the Accounting Procedure
contained in this Annexure is to establish principles and procedures of accounting which will enable the Minister of Finance to monitor
the Company’s expenditures, production and receipts so that the Government’s entitlement to petroleum income tax and additional profits
tax under the Taxation Act and to royalty under section 62, or annual charges under section 67, of the Petroleum Act can be accurately
determined.

 

3. Responsibility for maintaining accounts

 

		3.1	Each of the entities constituting the Company shall be responsible for maintaining their own accounting
records in order to comply fully with all legal requirements and to support all fiscal returns or any other accounting reports required
by any governmental authority in relation to the Petroleum Operations.

 

		3.1	The operator for and on behalf of all entities constituting the Company shall maintain the accounts of
the Petroleum Operations under the Agreement in such a manner so as to permit each such entity to fulfill the obligations under this Agreement.

 

4. Documentation required to be submitted by
the Company

 

		4.1	Within 90 days of the date on which the Agreement has been signed the Minister shall submit, to discuss
and agree with the Company, a proposed outline of charts of accounts, operating records and reports, which outline shall reflect each
of the categories and sub-categories of expenditures specified in paragraph 8 and shall be in accordance with generally accepted and recognised
accounting systems and consistent with normal practice for joint venture operations of the international petroleum industry.

 

		4.2	Within 180 days after the date on which the Agreement has been signed the Company shall provide the Minister
with a detailed description of the accounting systems and procedures which it will develop and maintain for use under the Agreement. The
Company shall inform the Minister subsequently of any significant changes it makes to such systems and procedures.

 

		4.3	Notwithstanding the generality of the foregoing, the Company shall submit the following statements to
the Minister -

 

		(a)	a production statement referred to in paragraph 11 of this Annexure;

 

		(b)	a value of production and pricing statement referred to in paragraph 12 of this Annexure.

 

		(c)	a statement of expenditure and receipts referred to in paragraph 13 of this Annexure;

 

		(d)	an additional profits tax statement referred to in paragraph 14 of this Annexure;

 

		(e)	an end-of-year statement referred to in paragraph 15 of this Annexure;

 

		(f)	a budget statement referred to in paragraph 16 of this Annexure;

 

		(g)	a local procurement statement referred to in paragraph 17 of this Annexure.

 

		(h)	a decommissioning statement referred to in paragraph 18 of this Annexure

 

		4.4	All reports and statements shall be prepared in accordance with the Agreement, the laws of Namibia and,
where there are no relevant provisions in either of these, in accordance with normal practice of the international petroleum industry.

 

    55

    

    

 

5. Units, of account language and exchange
rates

 

		5.1	Accounts shall be maintained in Namibian Dollars. Metric units and Barrels shall be employed for measurements
required under the Agreement and this Annexure. The language employed shall be English. When necessary for clarification the Company shall
also maintain accounts and records in other languages, units of measurement and currencies.

 

		5.2	It is the intention of the parties that neither the Government nor the Company should experience an exchange
gain or loss at the expense of or to the benefit of the other. However, should there be any gain or loss from exchange of currency, it
will be credited or charged to the accounts.

 

		5.3	Amounts received and expenditures made in Namibian Dollars or in United States Dollars shall be converted
from Namibian Dollars into United States Dollars or from United States Dollars into Namibian Dollars on the basis of the monthly average
of the mean of the daily official buying and selling exchange rates between the currencies in question as published by the Bank of Namibia
for the Calendar Month in which the relevant transaction occurred. Company shall be entitled to hold both US Dollar and Namibian Dollar
accounts in the designated Namibian bank of Company’s choosing.

 

		5.4	Amounts received and expenditures made in currencies other
than United States Dollars and Namibian Dollars shall be converted into United States Dollars or Namibian Dollars on the basis of the
monthly average of the mean of the dailyb uying and selling exchange rates between the currencies in question as published by the Bank
of Namibia or, failing such publication, as published in the Financial Times (London edition) for the Calendar Month in which the relevant
transaction occurred.

 

		5.5	The average monthly exchange rates used in accordance with paragraphs 5.3 and

 

		5.4	shall be identified in the relevant statements required under paragraph 4.3.

 

    56

    

    

 

6. Payments

 

		6.1	Unless otherwise specified all sums due under the Agreement shall be paid within 30 days following the
end of the month in which the obligation to make such payment occurs and shall be paid through a bank designated by each Party.

 

		6.2	All sums due by one Party to the other under the Agreement during any Quarter shall for each day during
which such sums are overdue during such Quarter, bear interest compounded daily at an annual rate equal to 15%.

 

7. Audit and inspection rights of Government

 

		7.1	The Government shall have the right

 

		(a)	to carry out an audit in accordance with clause 19.2 of the Agreement;

 

		(b)	to appoint an auditor to undertake or assist with the audit.

 

The expenditure incurred in respect
of such audit shall be borne by the Company as a general and administrative expenditure. Notice of any exception to the Company’s accounts
for any Calendar Year shall be submitted to the Company within six months of the receipt by the Minister of the report of its auditors.
The Minister shall ensure that such report is submitted to it within a reasonable time after completion of the audit field work. For purposes
of auditing, the Minister may examine and verify at reasonable times all charges and credits relating to the Company’s activities under
the Agreement and all books of account, accounting entries, material records and inventories, vouchers, payrolls, invoices and any other
documents, correspondence and records considered by the Minister to be necessary to audit and verify the charges and credits. Furthermore,
the auditors shall have the right in connection with such audit to visit and inspect at reasonable times all sites, plants, facilities,
warehouses and offices of the Company directly or indirectly serving its activities under the Agreement and to visit personnel associated
with those activities.

 

		7.2	The Company shall answer any notice of exception under paragraph 7.1 within six months of the receipt
of such notice. Where the Company has after the said six month period failed to answer a notice of exception made by the Minister, the
Minister’s exception shall prevail, until such time as the Minister’s exception is resolved.

 

		7.3	Without prejudice to the finality of matters as described in Clause 19 and this paragraph all documents
referred to in paragraph 7.1 shall be maintained and made available for inspection by the Minister for seven (7) years following their
date of issue.

 

    57

    

    

 

8. Classification and allocation of expenditure

 

		8.1	All expenditures relating to Petroleum Operations and qualifying in terms of the Taxation Act, Petroleum
Act and paragraph 9 to be taken into account in the calculation of petroleum income tax and additional profits tax payable under the Taxation
Act shall be classified, defined and allocated, as follows-

 

		(1)	exploration expenditure, being expenditure actually incurred, whether directly or indirectly, in or in
connection with the carrying out of Exploration Operations in or in connection with such Licence Area, including expenditure actually
incurred in respect of-

 

		(a)	the acquisition of machinery, implements, utensils and other articles employed for purposes of such operations,
including pipes, well-head equipment, subsurface equipment and onshore and offshore drilling;

 

		(b)	labour, fuel, haulage, supplies, materials and repairs in connection with a survey or study, excluding
drilling for appraisal purposes, referred to in paragraphs (a) and (b) of the definition of “Exploration Operations” in section
1 of the Petroleum Act;

 

		(c)	contributions to a fund or scheme, approved by the Permanent Secretary: Finance, in respect of any person
employed in or in connection with Exploration Operations;

 

		(d)	the advancement of training and education of Namibian citizens at institutions approved by the Permanent
Secretary: Finance and the provision of educational and scientific materials and equipment by virtue of any term and condition of an Exploration
Licence issued in respect of such Licence Area;

 

		(e)	charges, fees or rent for, or in respect, of Land or buildings occupied for purposes of carrying out Exploration
Operations;

 

		(f)	subject to the provisions of section 14(2) of the Taxation Act, the general administration and management
directly connected with Exploration Operations;

 

		(g)	the restoration of such Licence Area, or any part thereof, after cessation of Exploration Operations in
such area to the extent to which such expenditure has been incurred by virtue of any term and condition of an Exploration Licence issued
in respect of such Licence Area relating to safety or the prevention of pollution;

 

		(h)	customs duty in respect of the importation for use in or in connection with Exploration Operations in
such Licence Area of plant, machinery, equipment, spare parts, materials, supplies or consumable items used in or in connection with such
Exploration Operations;

 

    58

    

    

 

		(2)	development expenditure, being expenditure actually incurred, whether directly or indirectly, in or in
connection with the carrying out of Development Operations in or in connection with a Licence Area, including expenditure actually incurred
in respect of

 

		(a)	the acquisition of-

 

		(i)	machinery, implements, utensils and other articles used for purposes of such operations, including pipes,
units for purposes of production, treatment and processing, wellhead equipment, subsurface equipment, enhanced recovery systems, onshore
and offshore drilling and production platforms and petroleum storage facilities;

 

		(ii)	furniture, tools and equipment used in offices and accommodation
referred to in paragraph (e)(ii) of the definition of “Development Operations” in section 1 of the Taxation Act and in warehouses,
export terminals, harbours, piers, marine vessels, vehicles, motorised rolling equipment, aircraft, fire and security stations, water
and sewage plants and power plants;

 

		(b)	labour, fuel, haulage, supplies, materials and repairs in connection with the drilling, laying, installation
and construction referred to in paragraphs (a), (b), (c), (d) and (e)(i) of the definition of “Development Operations” in section
1 of the Taxation Act;

 

		(c)	contributions to a fund or scheme, approved by the Permanent Secretary: Finance, in respect of any person
employed in or in connection with Development Operations;

 

		(d)	the advancement of training and education of Namibian citizens at institutions approved by the Permanent
Secretary: Finance and the provision of educational and scientific materials and equipment by virtue of any term and condition of a licence
issued in respect of such Licence Area;

 

		(e)	charges, fees or rent for, or in respect of, Land or buildings occupied for purposes of carrying out Development
Operations;

 

		(f)	subject to the provisions of section 14(2) of the Taxation Act, the general administration and management
directly connected with Development Operations; (g) the restoration of such Licence Area, or any part thereof, after cessation of Development
Operations in such Licence Area to the extent to which such expenditure has been incurred by virtue of any term and condition of the licence
issued in respect of such Licence Area relating to safety or the prevention of pollution;

 

		(h)	customs duty in respect of the importation for use in or in connection with Development Operations in
such Licence Area of plant, machinery, equipment, spare parts, materials, supplies or consumable items used in or in connection with such
Development Operations;

 

		(3)	production expenditure, being expenditure of an operational nature incurred in Production Operations and
which, subject to section 13 of the Taxation Act and paragraph 9 of this Annexure, is allowed as a general deduction in the determination
of taxable income in terms of section 8 of the Taxation Act;

 

    59

    

    

 

		(4)	general and administrative expenditure which-

 

		(a)	being the expenditure incurred on general administration and management primarily and principally related
to Petroleum Operations in or in connection with the Licence Area, comprises and is limited to –

 

		(i)	office, field office and general administrative expenditure in Namibia, including supervisory, accounting
and employee relations services (excluding commissions paid to intermediaries by the Company);

 

		(ii)	an annual overhead charge for services rendered outside Namibia and not otherwise charged under this accounting
procedure, for managing Petroleum Operations and for staff advice and assistance including financial, legal, accounting and employee relations
services, provided that –

 

		(a)	for the period from the date on which the Agreement was signed
until the date on which the first Production Licence under the Agreement is granted by the Minister, this annual charge shall be the
Company’s verifiable expenditure, but shall in no event be greater than one per cent of the total expenditure incurred during the Calendar
Year in or in connection with the Licence Area and qualifying for deduction in the computation of petroleum income tax under the Taxation
Act;

 

		(b)	for the period from the date on which the Production Licence
has been granted, the charge shall be at an amount or rate to be agreed on between the parties and stated in the Development Plan approved
with the grant of the Production Licence;

 

		(c)	such annual overhead charge shall be separately shown in all relevant reports to the Minister;

 

		(b)	shall be allocated to and form part of exploration expenditure, development expenditure and production
expenditure and shall be separately shown under each of these expenditure categories in all relevant reports and statements to the Minister;

 

		(c)	shall be allocated to exploration expenditure, development
expenditure and production expenditure incurred in each year in proportion to the amount of exploration expenditure, development expenditure
and production expenditure incurred in such year, or in such other equitable and consistent manner otherwise agreed upon between the
Company and the Minister.

 

    60

    

    

 

9. Expenditures, miscellaneous income and credits
of the Company

 

		9.1	Expenditure deductible without further approval of the Government Subject to the terms of the Agreement,
the Company shall bear and pay the following expenditure in respect of its Petroleum Operations. These expenditures shall be classified
under the headings referred to in paragraph 8. It is hereby agreed that, subject to the provisions of sections 8, 9 and 10 of the Taxation
Act and paragraph 8, such expenditures are to be allowable deductions under the Taxation Act.

 

		(1)	Surface rights

 

This covers all direct expenditure attributable
to the acquisition, renewal or relinquishment of surface rights acquired and maintained in force for the Licence Area.

 

		(2)	Labour and related expenditure

 

		(a)	Gross salaries and wages, including bonuses, of the Company’s employees directly and necessarily engaged
in the Petroleum Operations, irrespective of the location of such employees, it being understood that in the case of those employees,
only a portion of whose time is wholly dedicated to Petroleum Operations, only that pro rata portion of applicable salaries and wages
will be charged.

 

		(b)	Cost to the Company of established plans for employees’ group life insurance, hospitalization, company
pension, retirement and other benefits of a like nature customarily granted to the Company’s employees and the Company’s expenditure regarding
holiday, vacation, sickness and disability payments applicable to the salaries and wages chargeable under subparagraph (a) above shall
be allowed at actual cost, provided however that such total expenditure shall not exceed thirty-five per cent of the Company’s total labour
expenditure under subparagraph (a) above.

 

		(c)	Expenditure or contributions made pursuant to assessments or obligations imposed under the laws of Namibia
which are applicable to the Company’s expenditure on salaries and wages chargeable under subparagraph (a) above.

 

		(d)	Reasonable travel and personal expenditure of employees of the Company, including those made for travel
and relocation of the expatriate employees assigned to Namibia all of which shall be in accordance with the Company’s normal practice.

 

		(3)	Transportation

 

The expenditure incurred in respect
of transportation of employees, equipment, materials and supplies necessary for the conduct of Petroleum Operations.

 

    61

    

    

 

		(4)	Chargtes for services

 

		(a)	Third party contracts

 

The actual expenditure incurred under
contracts for technical and other services entered into by the Company for its Petroleum Operations, made with third parties other than
Affiliated companies of the Company, are deductible, provided that the prices paid by the Company are no higher than those generally charged
by other international or domestic suppliers for comparable work and services.

 

		(b)	Affiliates of the Company In the case of services rendered to the Petroleum Operations by an Affiliate
of the Company the charges shall be based on actual expenditure without profits and shall be competitive. The charges shall be no higher
than the most favourable prices charged by the Affiliate to third parties for comparable services under similar terms and conditions elsewhere.
The Company shall, if requested by the Minister, specify the amount of the charges which constitutes an allocated proportion of the expenditure
in respect of general management and technical services and the amount which is the direct cost incurred in respect of providing specific
services. If necessary, certified evidence regarding the basis of prices charged may be obtained from the auditors of the Affiliate.

 

		(c)	In the event that the prices and charges referred to in subparagraph

 

		(4)	(a) and (b) above are shown to be uncompetitive then the Permanent
Secretary: Finance shall have the right to disallow as a deduction under the Taxation Act such portion as he deems fit.

 

		(5)	Exclusively owned property for services rendered to the Petroleum
Operations through the use of property exclusively owned by the Company, the accounts shall be charged at rates not exceeding those prevailing
in the region which reflect the cost of ownership and operation of such property or at rates to be agreed.

 

		(6)	Material and equipment

 

		(a)	General

 

So far as is practicable and consistent
with efficient and economical operation, only such material shall be purchased or furnished by the Company for use in the Petroleum Operations
as may be required for use in the reasonably foreseeable future and the accumulation of surplus stocks shall be avoided. Material and
equipment held in inventory shall only be charged to the accounts when such material is removed from inventory and used in Petroleum Operations.

 

    62

    

    

 

		(b)	Warranty of material The Company does not warrant material
beyond the supplier’s or manufacturer’s guarantee and, in the case of defective material or equipment, any adjustment received by the
Company from the suppliers or manufacturers or their agents will be credited to the accounts under the Agreement.

 

		(c)	Value of material charged to the accounts under the Agreement

 

		(i)	Except as otherwise provided in subparagraph (ii) below, material purchased by the Company for use in
the Petroleum Operations shall be valued to include invoice price less trade and cash discounts, if any, purchase and procurement fees
plus freight and forwarding charges between point of supply and point of shipment, freight to port of destination, insurance, taxes, custom
duties, consular fees, other items chargeable against imported material and, where applicable, handling and transportation costs from
point of importation to warehouse or operating site, and its costs shall not exceed those currently prevailing in normal arms length transactions
on the open market.

 

		(ii)	Material purchased from or sold to Affiliated companies of the Company or transferred to or from activities
of the Company other than Petroleum Operations under the Agreement-

 

		(a)	in the case of new material (hereinafter referred to as condition
A), shall be valued at the current international price which shall not exceed the price prevailing in normal arms length transactions
on the open market;

 

		(b)	in the case of used material which is in sound and serviceable
condition and is suitable for re-use without reconditioning (hereinafter referred to as condition B), shall be priced at not more than
seventy-five per cent of the current price of the abovementioned new materials;

 

		(c)	in the case of used material which cannot be classified as
condition B, but which, after reconditioning, will be further serviceable for original function as good secondhand condition B material
or is serviceable for original function, but substantially not suitable for reconditioning (hereinafter referred to as condition C),
shall be priced at not more than fifty per cent of the current price of the new material referred to above as condition A.

 

The cost of reconditioning shall be
charged to the reconditioned material, provided that the condition C material value plus the cost of reconditioning does not exceed the
value of condition B material. Material which cannot be classified as condition B or condition C shall be priced at a value commensurate
with its use.

 

Material involving erection expenditure
shall be charged at the applicable condition percentage of the current knocked down price of new material referred to above as condition
A.

 

When the use of material is temporary
and its service to the Petroleum Operations does not justify the reduction in price in relation to materials referred to above as conditions
B and C, such material shall be priced on a basis that will result in a net charge to the accounts under the Agreement consistent with
the value of the service rendered.

 

    63

    

    

 

		(7)	Insurance and losses

 

Insurance premiums and expenditure incurred
for insurance pursuant to clause 17 of the Agreement are deductible, provided that if such insurance is wholly or partly placed with an
Affiliated company of the Company such premiums and expenditure shall be deductible only to the extent generally charged by competitive
insurance companies other than an Affiliated company of the Company. Expenditure and losses incurred as a consequence of events which
are, and in so far as, not made good by insurance are deductible, unless such expenditure has resulted solely from an act of willful misconduct
or negligence of the Company.

 

		(8)	Training expenditure

 

All expenditure incurred by the Company
in training of its Namibian employees engaged in the Petroleum Operations and such other training as is required under clause 22 of the
Agreement is deductible.

 

		(9)	General and administrative expenditure

 

The expenditure described
in paragraph 8.1(4) is deductible.

 

		9.2	Expenditure not deductible under the Agreement

 

The following expenditure shall not
be deductible in the computation of petroleum income tax and additional profits tax:-

 

		(a)	All expenditure incurred before the date on which the Agreement was signed.

 

		(b)	Interest and any other finance charges or fees incurred on loans raised by the Company, except as is provided
under section 8(a)(iv) of the Taxation Act.

 

		(c)	Petroleum marketing or transportation expenditure of Petroleum beyond the actual loading point of the
Company for export from Namibia in the case of Crude Oil and in the case of Natural Gas the geographical point of sale.

 

    64

    

    

 

		(d)	The cost of obtaining and maintaining the bank guarantee and the performance guarantee required under
the Agreement (and any other amounts spent on indemnities with regard to non-fulfilment of contractual obligations).

 

		(e)	Donations and charitable contributions.

 

		(f)	Unless otherwise agreed to by the Parties, Expenditures incurred in relation to arbitration and the sole
expert in respect of any dispute under the Agreement.

 

		(g)	Fines and penalties imposed by courts of law in Namibia.

 

		(h)	The premium of 500 per cent and the additional amounts of 200 per cent and 600 per cent payable to the
Government under clauses 8.14(c) and 10.4 of the Agreement.

 

		(i)	The interest payable to the Government in terms of clause 11.14 of the Agreement.

 

		(j)	Expenditure incurred as a result of willful misconduct or negligence of the Company.

 

		(k)	Any expenditure which by reference to general oil industry practices can be shown to be excessive.

 

		9.3	Other expenditure

 

Other expenditure not covered or dealt
with in the provisions of this paragraph 9 and which is incurred by the Company for the necessary and proper conduct of the Petroleum
Operations is only deductible with the prior approval in writing of the Permanent Secretary: Finance.

 

		9.4	Miscellaneous income and credits under the Agreement

 

The proceeds received from or in connection
with Petroleum Operations shall be credited to the accounts under the Agreement and shall be treated as miscellaneous gross income chargeable
to both petroleum income tax and additional profits tax pursuant to the Taxation Act. Such proceeds include but are not limited to the
following:-

 

		(a)	The net proceeds of any insurance or claim in connection with the Petroleum Operations or any assets charged
to the accounts under the Agreement when such operations or assets were insured and the premiums charged to the accounts under the Agreement.

 

    65

    

    

 

		(b)	Revenue received from third parties or Affiliated companies for the use of property or assets charged
to the accounts under the Agreement.

 

		(c)	Any adjustment received by the Company from the suppliers or manufacturers or their agents in connection
with defective material the expenditure of which was previously charged by the Company to the

accounts under the
Agreement.

 

		(d)	Rentals, refunds or other credits received by the Company which apply to any charge which has been made
to the accounts under the Agreement, but excluding any award granted to the Company under arbitration or sole expert proceedings referred
to in paragraph 9.2(f) above.

 

		(e)	The prices originally charged to the accounts under the Agreement for materials subsequently exported
from Namibia without being used in the Petroleum Operations.

 

		(f)	The proceeds from the sale or exchange by the Company of plant or facilities from the Licence Area or
plant or facilities the acquisition expenditure of which have been charged to the accounts under the Agreement.

 

		(g)	The proceeds from the sale or exchange by the Company of any Petroleum rights being an interest in its
Licence Area.

 

		(h)	The proceeds from the sale of any Petroleum information which relates to the Licence Area provided that
the expenditure incurred in respect of the acquisition of such information has been charged to the accounts under the Agreement.

 

		(i)	The proceeds derived from the sale or licence of any intellectual property the development costs of which
were incurred under the Agreement.

 

		9.5	Duplication of charges and credits

 

Notwithstanding any term to the contrary
in this Annexure, it is agreed that there shall be no duplication of charges or credits to the accounts under the Agreement.

 

    66

    

    

 

10. Records and valuation of assets

 

		10.1	The Company shall keep and maintain detailed records of assets in use for or in connection with Petroleum
Operations in accordance with normal accounting practices in exploration and production activities of the international petroleum industry.

 

		10.2	The Company shall furnish particulars to the Minister by notice in writing addressed and delivered to
the Minister at six monthly intervals of all assets acquired by the Company to be used for or in connection with Petroleum Operations
during the period immediately preceding the delivery of such notice.

 

10.3    The
Company shall-

 

		(a)	not lesst than once every twelve months with respect to movable assets; and

 

		(b)	not less than once every four years with respect to Immovable Assets, take an inventory of the assets
used for or in connection with Petroleum Operations in terms of the Agreement and address and deliver such inventory to the Minister together
with a written statement of the principles upon which valuation of the assets mentioned in such inventory has been based.

 

		10.4	The Company shall give the Minister at least 30 days notice in writing addressed and delivered to the
Minister of its intention to take the inventory referred to in paragraph 10.3 and the Minister shall have the right to be represented
when such inventory is taken.

 

		10.5	When an assignation of rights under the Agreement takes place a special inventory shall be taken by the
Company at the request of the assignee provided that the cost of such inventory is borne by the assignee and paid to the Company.

 

		10.6	In order to give effect to clauses 17.5 and 17.6 of the Agreement the Company shall provide the Government
with a comprehensive list of all relevant assets when requested by the Minister to do so.

 

    67

    

    

 

11. Production statement

 

		11.1	The Company shall, not later than seven days after the end of the first Calendar Month during which Petroleum
is produced from the Licence Area, and thereafter not later than seven days after the end of every succeeding Calendar Month, prepare
and submit to the Minister a production statement containing the following particulars in each respect of each Production Area in the
Licence Area and for the Licence Area:

 

		(a)	The quantity, grades and gravity of Crude Oil Produced and Saved;

 

		(b)	the quantity and composition of Natural Gas Produced and Saved;

 

		(c)	the quantities of Crude Oil and Natural Gas used for purposes of carrying on drilling and Production Operations
and pumping to field storage, as well as quantities injected into the formations, each such use to be separately identified;

 

		(d)	the quantity of Petroleum unavoidably lost;

 

		(e)	the quantity of Natural Gas flared;

 

		(f)	the size of Petroleum stocks held at the beginning of the Calendar Month in question;

 

		(g)	the size of Petroleum stocks held at the end of the Calendar Month in question;

 

		(h)	the number of days in the Calendar Month during which Petroleum was produced from each Production Area
in the Licence Area.

 

		11.2	The Minister may by notice in writing addressed and delivered to the Company direct that any other particulars
relating to Petroleum Operations be included in the production statement referred to in paragraph 11.1 and the Company shall comply promptly
with such request.

 

		11.3	The Company shall, not later than seven days after the end of each Quarter address and deliver to
                                                            the Commissioner aggregated statements containing the particulars referred to in items (a) to (h) of paragraph 11.1 in respect of
                                                            the three months comprising that Quarter.

 

    68

    

    

 

12. Value of production and pricing statement

 

		12.1	The Company shall, for purposes of clause 15 of the Agreement, prepare a statement providing calculations
of the value of each quality of Namibian Crude Oil Produced and Saved from the Licence Area during each Quarter which shall contain the
following information:

 

		(a)	The quantities of Namibian Crude Oil sold at arms length during the Quarter in question by the Company,
the prices realized and receipts obtained for such sales;

 

		(b)	the quantities of Namibian Crude Oil sold other than to third parties during the Quarter in question by
the Company, the prices realised and receipts obtained for such sales;

 

		(c)	the quantities of Crude Oil appropriated by the Company to refining or other processing without being
otherwise disposed of in the form of Crude Oil;

 

		(d)	the quantity and value of stocks of Crude Oil held at the beginning of the Quarter in question;

 

		(e)	the quantity and value of stocks of Crude Oil held at the end of the Quarter in question;

 

		(f)	the percentage volume of total sales of Namibian Crude Oil made by the Company during the Quarter that
are arms length sales to third parties other than sales made pursuant to clause 24 of the Agreement;

 

		(g)	the percentage volume of total sales of Namibian Crude Oil made by the Company during the Quarter that
are arms length sales to third parties pursuant to clause 24 of the Agreement;

 

		(h)	the Company’s estimate, pursuant to clause 15 of the Agreement, of the market price of Namibian Crude
Oil Produced and Saved for the Quarter;

 

		(i)	all other information available to the Company, if relevant for the purposes of clause 15 of the Agreement,
concerning the prices of the selection of major competitive crude oils, including contract prices, discounts and premiums, and prices obtained
on the spot markets.

 

		12.2	At the time of the development of the first Discovery of Natural Gas, the Minister and the Company shall
agree on an appropriate format for reporting the value of Natural Gas sold or disposed of.

 

		12.3	The value of production and pricing statement for each Quarter shall be submitted to the Commissioner
not later than 15 days after the end of the Quarter to which such value of production and pricing statement relate.

 

    69

    

    

 

13. Expenditure and receipts statement

 

		13.1	The Company shall prepare in respect of each Calendar Month a statement of expenditure and receipts under
the Agreement. The statement will distinguish between exploration expenditure, development expenditure and production expenditure and
shall separately identify major items of expenditure within those categories. The statement of receipts shall distinguish between income
from the sale of Petroleum and miscellaneous income of the sort itemised in paragraph 9.4 of this Annexure. If the Minister is not satisfied
with the degree of disaggregation within the said categories, he may request a more detailed disaggregation and the Company shall comply
promptly with such request. The statement will show the following:-

 

		(a)	Actual expenditure and receipts for the Calendar Month in question.

 

		(b)	Cumulative expenditure and receipts for the budget year in question.

 

		(c)	Latest forecast of cumulative expenditure and receipts at the Calendar Year end.

 

		(d)	Variations between budget forecast and latest forecast, with explanations thereof.

 

		13.2	At the end of each Quarter aggregated statements in respect of the three months comprising that Quarter
shall be submitted for each of the items (a) to (d) in paragraph 13.1 above.

 

		13.3	The statement of expenditure and receipts for each Calendar Month or Quarter shall be submitted to the
Minister no later than 15 days after the end of such Calendar Month or Quarter.

 

14. Additional profits tax statement 

 

		14.1	The Company shall prepare with respect to each Calendar Year an additional profits tax statement containing
the following information:

 

		(a)	The value of net cash receipts for the Calendar Year, identifying separately each of the categories of
gross income and allowable deductions provided in the Taxation Act.

 

		(b)	The appropriate value of the Price Index for the Calendar Year.

 

		(c)	The value of the first accumulated net cash position, second accumulated net cash position and the third
accumulated net cash position for the tax year.

 

		(d)	The value of the first accumulated net cash position, the second accumulated net cash position and the
third accumulated net cash position at the end of the preceding tax year.

 

		(e)	The amount of additional profits tax payable with respect to the first accumulated net cash position,
the second accumulated net cash position and the third accumulated net cash position for the tax year.

 

		(f)	The total amount of additional profits tax payable for the tax year.

 

    70

    

    

 

		14.2	The information required in terms of paragraph 14.1 shall be presented in sufficient detail so as to enable
the Minister to verify the timing and amount of additional profits tax payments.

 

		14.3	The Government reserves the right to call for additional profits tax statements more frequently than annually
in order to satisfy the objective set out in paragraph 14.2 above.

		14.4	The additional profits tax statement for each tax year shall be submitted to the Minister no later than
60 days after the end of such Calendar Year.

 

		15.	End-of-year statement

 

		15.1	The Company shall prepare a definitive end-of-year statement. The statement shall contain aggregated information
for the Calendar Year in the same format as required in the production statement, the value of production and pricing statement, and the
expenditure and receipts statement, but will be based on actual quantities of Petroleum produced, income received and expenditure incurred.

 

		15.2	The end-of-year statement for each Calendar Year shall, except in the case of the production statement,
be submitted to the Minister within 60 days of the end of such Calendar Year. The end-of-year production statement shall be submitted
within 14 days of the end of each Year.

 

		16.	Budget statement

 

		16.1	The Company shall prepare an annual budget statement. This statement shall distinguish between exploration
expenditure, development expenditure, and production expenditure and shall show the following:

 

		(a)	Forecast expenditure and receipts for the Calendar Year under the Agreement.

 

		(b)	Cumulative expenditure and receipts to the end of the said Calendar Year.

 

		(c)	A schedule showing the most important and individual items of expenditure for the said Calendar Year.

 

		(d)	A schedule indicating the planned expenditure on the purchase of Namibian goods and services pursuant
to clause 23 of the Agreement.

 

		16.2	The budget statement shall be submitted to the Minister with respect to each budget year no less than
90 days before the start of the Calendar Year except in the case of the Calendar Year in which the date on which the Agreement has been
signed falls, when the budget statement shall be submitted within 30 days of the date on which the Agreement has been signed.

 

    71

    

    

 

		17.	Local procurement statement

 

		17.1	In furtherance of the obligation in clause 23 of the Agreement for the Company to purchase Namibian goods
and services the Company shall prepare in respect of each Calendar Year a local procurement statement, containing the following information:

 

		(a)	The amount of expenditure incurred by the Company directly, or indirectly through its sub-contractors,
on goods supplied, produced or manufactured in Namibia;

 

		(b)	the amount of expenditure incurred by the Company directly, or indirectly through its sub-contractors,
on services provided by Namibian entities;

 

		(c)	the respective percentages that the expenditures recorded under items (a) and (b) above represent of the
Company’s total expenditures;

 

		(d)	a detailed description of the procedures adopted during the Year to identify and purchase goods and services
from Namibian suppliers; and

 

		(e)	a detailed exposition of how the local purchases for the Year as recorded under items (a) and (b) above
compared with the projected purchases included in the budget statement for that Year (pursuant to item (d) of subparagraph 16.1 of this
Annexure), with explanations for any significant variations;

 

		17.2	The local procurement statement shall be submitted to the Minister within 60 days after the end of each
Calendar Year.

 

    72

    

    

 

18. Decommissioning statement

 

		18.1	In furtherance of its obligation to decommission facilities used in Petroleum Operations in accordance
with the Decommissioning Plan, the Company shall prepare in respect of each Calendar Year after the grant of a Production Licence a decommissioning
statement, containing the following information valid as at the end of the Year:

 

		(a)	where applicable, total cumulative production of Petroleum from the Production Area;

 

		(b)	estimated total recoverable reserves of Petroleum from the Production Area;

 

		(c)	the estimated date by which 50% of the estimated total recoverable reserves of Petroleum from the Production
Area will have been produced;

 

		(d)	the estimated future total cost of decommissioning the facilities in the Production Area, and of any facilities
outside the Production Area;

 

		(e)	where applicable, the amount to be deposited by the Company into any relevant Trust Fund in respect of
the Year, setting out how the amount has been calculated;

 

		(f)	where applicable, the amount actually paid into the Trust Fund by the Company in respect of the Year;

 

		(g)	where applicable, the amount of expenditure incurred by the Company on actually decommissioning the facilities
in the Year; and

 

		(h)	where applicable, the amount of any money received by the Company in the Year from the Trust Fund.

 

		18.2	The decommissioning statement for each relevant Calendar Year shall be submitted by the Company to the
Commissioner not later than 30 days after the end of the Year.

 

		19.	Revision of accounting procedure

 

The terms of this Annexure may be
amended by agreement between the Company and the Government. The amendments shall be made in writing and shall state the date upon
which the amendments shall become effective.

 

		20.	Conflict with Agreement

 

In the event of any conflict between
the terms of the Taxation Act, this Annexure and the Agreement the terms of the Agreement and the Taxation Act shall prevail.

 

    73

    

    

 

NOT APPLICABLE 

 

ANNEXURE 5

 

PERFORMANCE GUARANTEE

 

(Clause 30)

 

WHEREAS the Company, a Company duly incorporated
and registered in .............. having its registered office at ................, (hereinafter referred to as “the Guarantor”)
is the owner of 100% of the share capital of the ABC Company Ltd. (hereinafter referred to as “the Company”) and its parent
company; and

 

WHEREAS the Company is a Party to the Petroleum
Agreement dated the ...... day of ...................... 20.., (hereinafter referred to as “the Agreement”) entered into with
the Government of Namibia (hereinafter referred to as “the Government”); and

 

WHEREAS the Company wishes to guarantee
the performance of the Company or its Affiliated assignee under the Agreement;

 

NOW, THEREFORE the Guarantor hereby-

 

		(a)	unconditionally and irrevocably guarantees to the Government that it will make available or cause to be
made available to the Company or any other directly or indirectly owned subsidiary or Affiliate of the Guarantor to which any part or
all of the Company’s rights or interest under the Agreement may subsequently be assigned (“Affiliated assignee”), resources
required to ensure that the Company or an Affiliated assignee can carry out its obligations as set forth in the Agreement;

 

		(b)	unconditionally and irrevocably guarantees to the Government the due and punctual compliance by the Company
(or Affiliated assignee) with any obligations of the Company (or Affiliated assignee) under the Agreement;

 

		(c)	undertakes to the Government that if the Company (or any Affiliated assignee) defaults on any of its obligations
under the Agreement, then the Guarantor will fulfill or cause to be fulfilled the said obligations in place of the Company (or any Affiliated
assignee);

 

		(d)	declares that this guarantee shall expire on termination of the Agreement and any claims arising out of
events during the period of validity of this guarantee must be submitted to the undersigned not later than 30 months subsequent to the
date the claim arose.

 

SIGNED at .......... on this ........ day of .............20..

 

...........................................................................

Company Ltd.

 

    74

    

    

 

ANNEXURE 6

 

PRINCIPLES GOVERNING THE TRAINING SCHEME

OF THE MINISTRY OF MINES AND ENERGY (“MME”)

 

		1.	The total amount of training support offered by the applicant in terms of the requirements of section
14(b) of the Petroleum (Exploration and Production) Act, 1991, as amended by the Petroleum (Exploration and Production) Amendment Act,
1993, will be subdivided into two parts, to be allocated to:

 

		1.1	Attachments and in-house training - 30 per cent,

 

		1.2	Institution building, scholarships, and science, engineering and technology promotion - 70 per cent.

 

The allocations for 1.2 (70 per cent of
the gross sum) shall be made payable to the Trust Fund known as the Petroleum Education and Training Fund (PETROFUND). The allocation
of these funds to beneficiaries shall be decided upon by the Board of Trustees of PETROFUND. The Board of Trustees of PETROFUND shall
consist of five representatives from MME and NAMCOR E&P, one from the Ministry of Education and three from the operating oil companies.
The allocation for 1.1 (30 per cent of the gross sum) shall be expended directly by each individual Company in accordance with the following
principles.

 

		2.	ATTACHMENTS AND IN-HOUSE TRAINING

 

		Objectives:	To train Namibian citizens in thte field of natural science, engineering and technology as related to oil
and gas exploration antd production, by exposing them to company practice and operation.

 

		2.1	Recommended Fields of attachments and in-house training

 

Geology and geophysics related to oil
exploration and production Construction and reservoir engineering Drilling practice and technology Oil production practice and technology
Economics of oil exploration and production

 

		2.2	Recruitment of candidates

 

It will be the responsibility of the
licensee to recruit suitable candidates through the local public media or through direct nominations by MME and to appoint such candidates
in consultation with the MME.

 

		2.3	Reporting on training activities

 

The licensee shall report to the MME
on an annual basis the details of the number, kind and cost of attachments or training positions created, filled and maintained through
the immediate past year and the performance of the incumbents. If the total expenditure on these activities comes to less than 30 percent
of the gross sum voted for training in terms of section 14(b) of the Petroleum Act, the outstanding amount shall be paid into the Training
Fund.

 

    75

    

    

 

		3.	INSTITUTION BUILDING

 

		Objective:	To strengthen Namibian research, education and training institutions by providing infrastructure to enhance
the quality of such research education and training.

 

		3.1	Nomination of institutions

 

The MME shall nominate
institutions where support is needed, and give details of the kind of support and cost involved. It is envisaged that the typical
beneficiaries will be tertiary institutions at which science, engineering and technology are being taught and research institutions
where advanced research in oil and gas-related disciplines are being done. Such support may be applied to equipment, the temporary
provision of teaching staff, and in cases of severe need only, to the erection of buildings.

 

		3.2	Allocation of funds

 

The Board of Trustees of PETROFUND shall
select from the nominated institutions the projects that show the most merit in terms of the general development in Namibia of natural
science engineering and technology, on the one hand, and the oil and gas exploration and production industry, on the other hand. In the
allocation of funds, the Board of Trustees of PETROFUND shall also keep in mind the longer term needs of the country beyond the sphere
of petroleum, non-petroleum minerals and mining.

 

		3.3	Reporting by beneficiaries

 

It will be expected from the beneficiaries
to report in detail how the financial support was expended and how the new facility was integrated in the activities of the relevant institutions.

 

		4.	SCHOLARSHIPS

 

		Objective:	To enhance education and training in natural science, mathematics, engineering, and technology in Namibia
by improvement of the quality and quantity of teaching staff in these subjects in secondary schools as well as in post-school institutions.
To strengthen the core of Namibians engaged in the professions of natural science, engineering and technology outside teaching.

 

		4.1	Recruitment

 

The candidates for graduate and post-graduate
studies and research at tertiary institutions both within and outside Namibia shall be recruited through the local public media by the
Board of Trustees of PETROFUND.

 

		4.2	The Board of Trustees of PETROFUND shall select the candidates on merit with due regard to the medium-
and short-term requirements of the country so as to create a balanced supply of natural scientists, engineers and technologists to the
industry and natural science, mathematics, engineering and technical teachers to the teaching institutions.

 

		5.	NATURAL SCIENCE, ENGINEERING AND TECHNOLOGY PROMOTION

 

		Objective:	To foster awareness of and promote knowledge of natural science, mathematics, engineering and technology
over a broad spectrum of the population by exposing them to selected promotional activities in the relevant fields.

 

		5.1	The Board of Trustees of PETROFUND shall be responsible for an ongoing programme of promotion of natural
science, engineering and technology through the organization of lectures, conferences, workshops, short courses, Olympiads, competitions
etc. The target group of the population should range from primary schools right through to qualified professionals.

 

		6.	EMPHASIS FOR THE MEDIUM TERM

 

The emphasis in this document is strongly
biased to natural science, engineering and technology because these are the fields in which Namibia seems to lack adequate manpower. Should,
however, the future needs change, the aims and objectives as well as target groups of the population as proposed here shall be reviewed
by the Board of Trustees of PETROFUND to suit the circumstances.

 

    76

    

    

 

ANNEXURE 7

 

PRINCIPLES GOVERNING THE USE OF FUNDS PAID
TO NAMCOR E&P FOR ENVIRONMENTAL STUDIES

 

		1.	The amounts paid under clause 11.15 of this agreement to NAMCOR E&P will be fully accounted for by
NAMCOR E&P and will be fully audited by NAMCOR E&P’s auditors. The allocation and utilisation of these funds will be decided upon
by NAMCOR E&P in consultation with all oil exploration/production licensees and representatives from the Ministry of Fisheries and
Marine Resources and the Ministry of the Environment and Tourism. Funds will be used, amongst other purposes, for:

 

		(a)	collecting weather and drifter buoy data needed for reliable oil spill drift modelling and for effective
oil spill contingency planning;

 

		(b)	long-term collecting of wave and current data;

 

		(c)	long-term collecting of marine and weather data that will be needed for design of offshore installations;

 

		(d)	periodic monitoring of levels of pollution during production drilling and production using internationally
accepted methods of monitoring;

 

		(e)	any other environment-related studies that the government ministries or the licensees feel are needed
and relevant.

 

 

77Exhibit 10.2

 

PRODUCTION SHARING
AGREEMENT FOR OIL

EXPLORATION AND EXPLOITATION

 

Between

 

THE GOVERNMENT
OF THE REPUBLIC OF BENIN

 

And

 

THE
COMPANY: ELEPHANT OIL LTD

 

CONCERNING 

 

BLOC
B

 

    

    

    

 

TABLE OF CONTENTS

 

	PREAMBLE	3
	ARTICLE 1:	DEFINITIONS	4
	ARTICLE 2:	SUBJECT-MATTER OF THE CONTRACT	9
	ARTICLE 3:	CONTRACT VALIDITY PERIOD	10
	ARTICLE 5:	SURFACE AREA RETROCESSIONS	13
	ARTICLE 7:	TECHNICAL AND BUDGETARY MANAGEMENT COMMITTEE	14
	ARTICLE 8:	ANNUAL WORK PROGRAMME, BUDGETS AND REPORTS	15
	ARTICLE 9:	DECLARATION OF COMMERCIAL DISCOVERY AND DESIGNATION
    OF THE DEVELOPMENT ZONE	18
	ARTICLE 10:	EXCLUSIVE RISKY OPERATIONS	20
	ARTICLE 11:	GOVERNMENT PARTICIPATION	21
	ARTICLE 12:	ROYALTIES, COST RECOVERY & PRODUCTION SHARING	21
	ARTICLE 13:	MEETING THE NATIONAL CONSUMPTION NEEDS	22
	ARTICLE 14:	APPLICABLE TAX SYSTEM	23
	ARTICLE 15:	MEASUREMENT, PROVISION, EVALUATION AND SALE OF HYDROCARBONS	25
	ARTICLE 16:	NATURAL GAS	27
	ARTICLE 17:	DAMAGES, ABANDONMENT, ENVIRONMENTAL PROTECTION AND SECURITY	29
	ARTICLE 18:	FOREIGN EXCHANGE ARRANGEMENTS	32
	ARTICLE 19:	LOCAL CONTENT, SOCIAL PROGRAMMES AND SIGNING BONUS	33
	ARTICLE 21:	CONFIDENTIAL NATURE OF THE DATA	35
	ARTICLE 22:	ASSIGNMENT OF RIGHTS	36
	ARTICLE 23:	FORCE MAJEURE	37
	ARTICLE 24:	ARBITRATION AND EXPERTISE	38
	ARTICLE 25:	CANCELLATION	39
	ARTICLE 27:	NOTIFICATION	41
	ARTICLE 28:	APPLICABLE LEGISLATION, STABILISATION AND COMPENSATION	42
	ARTICLE 30:	GUARANTEES FROM PARENT COMPANIES	44
	ARTICLE 31:	FINAL PROVISIONS	45

 

    Page 2 of 77

    

    

 

PREAMBLE

 

WHEREAS: 

 

In accordance with
Law No. 2006-18 of 17 October 2006 constituting the Oil Code of the Republic of Benin, the exploration, research, exploitation, holding,
transport, transit and trade of Hydrocarbons on the territory and in the territorial waters of the Republic of Benin and the continental
shelf adjacent thereto shall be subject to the provisions of the aforesaid law, which furthermore stipulates that deposits of liquid
and gaseous Hydrocarbons belong to the State and constitute transferable minerals.

 

In accordance with
Article 15, the Government may undertake any oil operation alone or in association with private capitals. It may undertake any prospecting
operation without the authorization set out in article 5 of this Oil Code.

 

It may issue to
any public service or enterprise enjoying legal entity status, an oil title or a provisional authorization to exploit or prospect as
set out in articles 5, 6, 7 and 8 of the Oil Code.

 

In accordance with
Article 20, no person may acquire the hydrocarbons research permit or permit H if they do not show the necessary technical capacities
and financial base to undertake the research activities and if they do not subscribe to the commitment to allocate a minimum appropriate
financial effort to research during the validity period of the permit.

 

A minimum works
programme, a training programme for national employees, the income tax system and the financial effort agreed upon should be defined
in the oil contract.

 

In accordance with
Article 11, Elephant Oil Ltd must establish a subsidiary domiciled at its headquarters in the Republic of Benin, which, from its date
of registration, shall replace Elephant Oil Ltd in its rights and obligations for the conduct of Oil Operations without any other authorisation
being necessary.

 

In accordance with
the Oil Code in effect in the Republic of Benin, the parties wish to enter into this Contract, under the form of a production-sharing
agreement for oil exploration and exploitation.

 

The Government
of the Republic of Benin has decided to enter into this contract with the company:

 

ELEPHANT OIL LTD

 

The undersigned
parties, represented by:

 

on the one hand,
Mr. Barthélémy Dahoga KASSA,

 

The Minister of
Energy, Oil and Mining Research, Water and Development of Sustainable Energy.

 

And

 

on the other hand
by Mr. Matthew LOFGRAN,

 

President of ELEPHANT
OIL LTD

 

Hereby agree to
the following:

 

 

    Page 3 of 77

    

    

 

ARTICLE 1:
DEFINITIONS

 

The following terms
appearing in the Contract shall be defined as follows unless otherwise expressly indicated or unless otherwise agreed upon by both parties.
The definitions shall be the same whether the terms are used in the singular or plural form.

 

		1.1	“Affiliate”
                                            or “Affiliated Company” shall mean a company or any other enterprise
                                            that controls one or several enterprises that comprise the Contractor, or that is controlled
                                            by one or several enterprises that comprise the Contractor, or that is controlled by an enterprise
                                            that controls the Contractor. Controlling shall mean to directly or indirectly hold more
                                            than fifty percent (50%) of the shares comprising the capital of the controlled company,
                                            thus conferring to the enterprise holding the control, the majority of the voting rights
                                            in the controlled company.

 

		1.2	“Calendar
                                            Year” shall mean a period of twelve (12) consecutive months starting on the first
                                            of January and ending the thirty-first of the following December.

 

		1.3	“Contract
                                            Year” shall mean a period of twelve (12) consecutive months from the Effective
                                            Date of the Contract or the anniversary date of its signature.

 

		1.4	“Appendix”
                                            shall mean an appendix attached to the Contract and forming an integral part of the Contract.
                                            In case of non-conformity or a conflict between the Contract and one of its appendixes, the
                                            provisions of the Contract shall prevail.

 

		1.5	“Accounting
                                            Appendix” shall mean the accounting procedures and formalities set out in Appendix
                                            “D”.

 

		1.6	“Article”
                                            shall mean any numbered provision of the Contract, including all its sub-clauses, unless
                                            it is expressly indicated that it is an article of the Code.

 

		1.7	“Barrel”
                                            shall mean a US Barrel, a quantity or unit of Oil measurement equivalent to 158.5556 litres.

 

		1.8	“BLOC”
                                            is defined as the area defined by the geographic coordinates and map found in Appendix B.
                                            

 

		1.9	“Available
                                            Crude” shall mean the remaining quantity of the Total Production of the Crude extracted
                                            in the Contract Region after deducting losses related to Oil Operations and the Tax on Oil
                                            Production in accordance with Article 12.1 of this Contract.

 

		1.10	“Crude
                                            Profit” or “Oil Profit” shall mean the remaining Crude Oil every year
                                            after deducting the Oil Cost.

 

		1.11	“Budget”
                                            shall mean the financial estimate of all oil activities in an Annual Works Programme.

 

    Page 4 of 77

    

    

 

		1.12	“Code”
                                            shall mean the law No. 2006-18 of 17 October 2006 relating to the Oil Code in the Republic
                                            of Benin.

 

		1.13	“Contractor”
                                            shall mean Elephant Oil Ltd and its subsidiary, which will be created pursuant to Article
                                            11 of the Oil Code, as well as its successors and/or any transferee enjoying any of its rights
                                            in accordance with the Contract, the transfer of which shall be in conformity with Article
                                            22.

 

		1.14	“Contract”
                                            shall mean this document in its original version, duly signed including its Appendixes and
                                            any amendment that the Parties may sign subsequently.

 

		1.15	“Production
                                            Costs” shall mean the costs and fees caused by the Production Operations not including
                                            the new investments made during this phase. These costs also include the exportation costs
                                            of Hydrocarbons as well as the maintenance and abandonment costs of the oil installations.

 

		1.16	“Oil
                                            Costs” shall mean all costs and fees related to Oil Operations in accordance with
                                            the Contract and set out in the Accounting Appendix.

 

		1.17	“Exploration
                                            Costs” shall mean the costs and fees related to Exploration operations.

 

		1.18	“Development
                                            Costs” shall mean the costs and fees related to the Development Operations.

 

		1.19	“Cost-Stop”
                                            shall mean the Crude intended for the recovery of the Oil Costs.

 

		1.20	“Starting
                                            Date of the Commercial Production” shall mean the date of first delivery of Hydrocarbons
                                            in commercial quantities to the delivery point in Benin.

 

		1.21	“Effective
                                            Date” shall mean the date on which this Contract is signed by the duly authorized
                                            representatives of both Parties.

 

		1.22	“Discovery”
                                            shall mean the detection of Hydrocarbons from a reservoir or geological structure where such
                                            Hydrocarbons were not previously identified, leading to Oil Operations in accordance with
                                            the Contract, and when these Hydrocarbons are made recoverable on the surface through conventional
                                            methods used in the international oil industry.

 

		1.23	“Commercial
                                            Discovery” shall mean a Hydrocarbon Discovery reserves following Exploration Operations
                                            that is deemed commercial in accordance with the provisions of Article 9.

 

		1.24	“Foreign
                                            currency” shall mean any foreign currency that may be exchanged freely and generally
                                            accepted by the international banking system.

 

		1.25	“Dollars”
                                            shall mean the official currency of the United States of America.

 

		1.26	“F
                                            CFA” is the official currency in the Republic of Benin.

 

		1.27	“Data”
                                            shall mean any document, report and information of a technical, economic or scientific nature
                                            concerning the Contract Region.

 

		1.28	“Expatriate
                                            Employee” shall mean an employee of the Contractor or of a sub-contractor who has
                                            been recruited as such and assigned to the Oil Operations in Benin.

 

		1.29	“State”
                                            shall mean the Republic of Benin, its Government, its administrative structures and all political
                                            subdivisions and institutions.

 

    Page 5 of 77

    

    

 

		1.30	“Exploration”
                                            shall mean the planning, implementation and evaluation of any type of geological, geophysical,
                                            geochemical studies and others as well as drilling Exploration Wells for the purpose of a
                                            Hydrocarbon Discovery.

 

		1.31	“Exploitation’’
                                            shall mean the operation consisting of extracting Hydrocarbon substances for disposal for
                                            utilitarian purposes.

 

		1.32	“Associated
                                            Gas” shall mean the Gas extracted from a well along with Crude Oil.

 

		1.33	“Natural
                                            Gas” shall mean Hydrocarbons in their gaseous state in normal conditions of atmospheric
                                            pressure and temperature, including, without any limitation, wet gas, dry gas, casing head
                                            gas and any gaseous hydrocarbon, including residual gas after liquid condensation or extraction,
                                            but does not include the said extracted condensates or liquids.

 

		1.34	“Non-Associated
                                            Gas” shall mean the Natural Gas that is exploited in parallel with the Crude Oil
                                            or that exists in parallel with Crude Oil that cannot be produced commercially whereas the
                                            said Natural Gas is produced commercially.

 

		1.35	“Gas
                                            Deposit” shall mean one or several Natural Gas accumulations superposed vertically
                                            in the Contract Region and having an established commercial value in accordance with Best
                                            Practices.

 

		1.36	“Oil
                                            Deposit” shall mean an accumulation of Crude Oil, or multiple vertically superposed
                                            accumulations of Crude Oil in the Contract Region and having an established commercial value
                                            in accordance with Best Practices.

 

		1.37	“Government”
                                            shall mean the organ grouping together all the Ministers of the State. In this Contract,
                                            it shall mean the Government of the Republic of Benin, its representatives or proxies.

 

		1.38	“Hydrocarbons”
                                            shall mean Crude Oil and/or Natural Gas.

 

		1.39	“Working
                                            Day” shall mean all working days from Monday to Friday except for days declared
                                            totally or partially non-working days in Cotonou, Benin by the appropriate governmental authorities.

 

		1.40	“Minister”
                                            shall mean the Minister in charge of Hydrocarbons in the Republic of Benin.

 

		1.41	“Exploration
                                            Operations” shall mean operations undertaken in accordance with the Contract to
                                            discover Hydrocarbon accumulations and to evaluate the extent and volume of these accumulations,
                                            the characteristics of the Reservoirs and their probable behaviour during production. The
                                            Exploration Operations shall include geological, geophysical and geochemical research, studies,
                                            drilling, deepening, abandonment or conditioning of wells and their evaluation as well as
                                            any related operations.

 

		1.42	“Development
                                            Operations” shall mean all operations undertaken in accordance with the General
                                            Development Programme in order to exploit
                                            Hydrocarbon accumulations in the sub-soil of the Development Zones. These operations shall
                                            include:

 

		●	Drilling,
                                            conditioning and sampling of development wells, drilling and conditioning of wells to inject
                                            gas or water; 

 

		●	The
                                            installation of gathering pipelines, separators, reservoirs, pumps, artificial loaders and
                                            other production and injection facilities required to produce, treat and transport the Hydrocarbons
                                            up to the earth-based or offshore Hydrocarbon storage facilities or gas treatment facilities;
                                            and

 

    Page 6 of 77

    

    

 

		●	The
                                            installation of pipes inside or outside the Contract Region to the storage or delivery points,
                                            the construction of these facilities to stock Crude Oil or treat the Gas and all related
                                            operations that are not explicitly mentioned in this document but that are needed for the
                                            development and production of these Hydrocarbon accumulations and for the delivery of Crude
                                            Oil and/or gas to the Delivery Point, in accordance with Best Practices.

 

		1.43	“Oil
                                            Operations” shall mean all operations authorized by the Contract and that are related
                                            to exploration, development, production, separation and treatment, storage, transportation
                                            and selling or transferring of Hydrocarbons up to the exportation point or to the Delivery
                                            Point agreed upon in Benin or to the delivery point in a refinery in Benin in accordance
                                            with the Contract; they shall cover the treatment operations of the Natural Gas but shall
                                            not include refining operations of the Crude Oil.

 

		1.44	“Production
                                            Operations” shall mean operations undertaken to produce Hydrocarbons in the Contract
                                            Region such as extraction, injection, stimulation, treatment, storage, transportation to
                                            the delivery point(s), loading, including exportation of those Hydrocarbons, as well as the
                                            maintenance and abandonment of the required facilities.

 

		1.45	“Parties”
                                            shall mean the Government and the Contractor.

 

		1.46	“Crude
                                            Oil” shall mean the crude mineral oil, asphalt, ozokerite and all other types of
                                            Hydrocarbons and bitumen, solid or liquid, in the natural state or obtained from the Natural
                                            Gas by condensation, separation or extraction.

 

		1.47	“Delivery
                                            Point” shall mean the Terminal Point of the Pipelines downstream from the storage
                                            facilities from which the Oil or the Gas is delivered to be exported. The location of the
                                            Delivery Point shall be agreed upon by both Parties.

 

		1.48	“Commercial
                                            Production” shall mean the quantity of Crude Oil or Natural Gas or both, likely
                                            to be delivered to the Delivery Point in accordance with a regular production and sales programme.

 

		1.49	“Total
                                            Crude Oil Production” shall mean the quantity of Crude extracted from the Contract
                                            Region after extracting the water, foreign substances and after deducting the quantities
                                            used for Oil Operations.

 

		1.50	“Work
                                            Programme” shall mean all plans developed every year to carry out the Oil Operations.

 

		1.51	“General
                                            Development Programme” shall mean a plan established for the development of an
                                            Oil Deposit or a Gas Deposit agreed upon by the Parties.

 

		1.52	“Appraisal
                                            Well” shall mean a well, different from an exploration well, drilled to assess
                                            the commercial viability of a geological trap where Hydrocarbons have been discovered.

 

		1.53	“Exploration
                                            Wells” shall mean any well drilled as part of the Exploration Operations including
                                            dried wells and discovery wells.

 

		1.54	“Development
                                            Wells” shall mean a well drilled in order to produce Hydrocarbons from a known
                                            Reservoir assessed and tested, to maintain and increase production, or to speed up the extraction,
                                            including production and injection wells.

 

		1.55	“Contract
                                            Region” shall mean the entire geographical area defined by the perimeter, the coordinates
                                            of which appear in Appendix “A” and that are represented on the map in Appendix
                                            “B”, except any part for which the Contractor has, from time to time, abandoned
                                            or renounced its rights in accordance with the Contract. In case of non-compliance or conflict
                                            between Appendix “A” and Appendix “B”, Appendix “A” shall
                                            prevail.

 

    Page 7 of 77

    

    

 

		1.56	“Best
                                            Practices” shall mean all good, healthy, economic and efficient practices generally
                                            accepted in the international oil industry.

 

		1.57	“Reservoir”
                                            shall mean the subsoil rock containing Hydrocarbon in its voidages and having a common pressure
                                            system in its dimensions.

 

		1.58	“SOBEH”
                                            is a national company with the mission of holding, managing and investing in any way whatsoever
                                            on behalf of the Government or on its own behalf directly or indirectly in all activities
                                            associated with the research, exploitation, commercialisation of crude oil, refining operations
                                            and all activities directly related to the activities indicated above;

 

		1.59	“Basement”
                                            shall mean eruptive, metamorphic or other rocks that, based on their nature and according
                                            to widely accepted knowledge in the international oil industry, cannot contain Hydrocarbon
                                            deposits on the one hand, and on the other hand, impenetrable rock substances such as salt
                                            and clay domes as well as any other rock rendering the continuation of drilling activities
                                            impracticable or economically unjustifiable using modern drilling technology normally used
                                            in the international oil industry.

 

		1.60	“Sub-Contractor”
                                            shall mean any individual or legal entity the Contractor uses to provide services pursuant
                                            to the Contract.

 

		1.61	“London
                                            Inter-Bank Offered Rate (LIBOR)” shall mean the closing interest rate for deposits
                                            in dollars at six (6) months on the London Interbank market and published by the London branch
                                            of “The Bank of America” or by any other bank agreed upon by the Parties, the
                                            day in question or the immediate preceding bank day if the day in question is not a working
                                            bank day in London.

 

		1.62	“Interest
                                            rate of the Contract” shall mean the “LIBOR rate” plus one percent.

 

		1.63	“Oil
                                            Production Tax” shall mean the Royalty (proportional mining royalty) as defined
                                            in the Code and shall not be less than 8 % of the Total Crude Oil Production.

 

		1.64	“Test”
                                            refers to any operation intended to evaluate the capacity of a zone to produce Hydrocarbons
                                            using MDT and/or DST tools.

 

		1.65	“Quarter”
                                            shall mean a period of three (3) consecutive months to be counted respectively from 1 January
                                            , 1 April , 1 July and 1 October of each Calendar Year.

 

		1.66	“Sales
                                            to Third Parties” shall mean sales of Hydrocarbon products in the Contract Region
                                            and meeting the following requirements:

 

		(a)	The
                                            price agreed upon shall be the only consideration for the sale;

 

		(b)	The
                                            sales conditions shall not be subject to any commercial relationship other than the one created
                                            by the Sales Agreement itself between the seller and the buyer or any of their Affiliates;

 

		(c)	Neither
                                            the seller nor any of its Affiliates shall have a direct or indirect interest in the sale
                                            or future transfer of the Hydrocarbons or in any derivative product;

 

		(d)	These
                                            sales shall not entail any processing agreement or barter or exchange agreement.

 

    Page 8 of 77

    

    

 

		1.67	“Development
                                            Zone” shall mean the portion of the Contract Region that, according to the available
                                            seismic information and data on the wells, is reasonably qualified to cover the horizontal
                                            span of Hydrocarbon accumulation constituting a Commercial Discovery and designated as such
                                            in an approved Global Development Programme. The Development Zone shall comprise the depth
                                            corresponding to the assessed and tested reservoirs between the surface and the basement.

 

ARTICLE 2:
SUBJECT-MATTER OF THE CONTRACT

 

		2.1	By this
                                            Contract, the Government shall give to the Contractor the exclusive right to undertake Oil
                                            Operations in the Contract Region in order to exploit, develop and produce Hydrocarbons in
                                            that region, in accordance with the provisions of the Oil Code and the Contract, in compliance
                                            with the laws and regulations in force in the Republic of Benin. The Government shall implement
                                            all necessary administrative procedures so as to allow the Contractor to enjoy its rights
                                            and to perform its duties.

 

		2.2	In accordance
                                            with article 20 of the Oil Code, the Contractor declares that it possesses the necessary
                                            technical and financial capacities and agrees to undertake all of the Oil Operations in accordance
                                            with this Contract and Best Practices.

 

		2.3	With
                                            regard to the Bloc, once a General Development Programme concerning a Hydrocarbons Discovery
                                            is approved in the shortest deadlines, in accordance with the terms of the Contract, the
                                            Contractor shall enjoy the full rights to conduct the Development and Production Operations
                                            and shall hold the benefit of these economic activities in usufruct provided that the obligations
                                            of the Contract and the Code are respected.

 

		2.4	The
                                            Contractor shall be bound to supply all necessary technical, financial, human and economic
                                            resources for the Oil Operations. Subject to the proportional interest of the Government,
                                            which the Contractor accepts under a portage arrangement, all costs and outlays incurred
                                            through the Oil Operations shall be the responsibility of the Contractor who shall support
                                            them exclusively. Moreover, the Contractor shall act as the technical, financial and economic
                                            manager of the Oil Operations during the exploratory period.

 

		2.5	The
                                            Minister in charge of Hydrocarbons in his capacity as the Representative of the Government,
                                            shall be in charge of supervising the Oil Operations to ensure that the Contractor is performing
                                            his duties in accordance with the Contract. The Minister shall carry out this duty at any
                                            moment through its technical services, which include the General Directorate of Hydrocarbons
                                            and other Fossil Fuels. The Contractor is required to facilitate the access of the representatives
                                            of the Minister to its data and facilities to allow them to accomplish their missions through
                                            the operational fund set up by the Companies.

 

    Page 9 of 77

    

    

 

ARTICLE 3:
CONTRACT VALIDITY PERIOD

 

		3.1	Effective
                                            Date

 

The Contract
shall be effective from its date of signing by the Minister in charge of Hydrocarbons and shall end at the expiry date indicated below,
subject to the provisions of Article 25 relating to termination.

 

		3.2	Validity
                                            Period 

 

		3.2.1	The
                                            duration of the Contract shall be divided into two periods: an exploration period and an
                                            exploitation period.

 

		3.2.2	The
                                            exploration period shall comprise an initial phase of three (03) years, with two (02) possible
                                            extension phases of three (03) years each. These extensions shall be granted provided that
                                            the Contractor has fully respected its working, retrocession and expense obligations and
                                            other significant obligations related to the preceding phase.

 

		3.2.3	Subject
                                            to fulfilling all of the obligations related to the ongoing phase, the Contractor may request
                                            in writing to the Minister to move on to the next phase (first or second extension phase)
                                            at least sixty (60) calendar days before the end of the said phase. If this request is not
                                            made on time and if a Commercial Discovery has not been made, the Contract shall end at the
                                            end of the phase in question of the exploration period.

 

		3.2.4	Subject
                                            to the provisions relating to termination and in case no Hydrocarbon Discovery has been made
                                            during the exploration period, the Contract shall expire at the end of that period.

 

If
at least one (1) Commercial Discovery has been made before the end of the exploration period, the Contract shall remain in force with
regard to the corresponding Development Zones.

 

		3.2.5	In
                                            case of Commercial Hydrocarbon Discovery, the Government shall automatically grant to the
                                            Contractor at its request an exploitation permit covering the Development Zone, the perimeter
                                            of which has been approved in the context of a General Development Programme in accordance
                                            with the provisions of Article 9. The duration of the exploitation permit during which the
                                            Contractor shall be authorized to ensure the production of each discovered Oil Deposit or
                                            Gas Deposit shall be fixed at twenty five (25) years from the date the discovery is declared
                                            to be a Commercial Discovery in accordance with the provisions of Article 9 of the Contract.

 

Over
the duration of the Contract, the Contractor may retrocede one or several Development Zones, object of an exploitation permit subject
to the approval of the Minister.

 

		3.2.6	If
                                            after the expiration of the exploitation period defined above, commercial exploitation is
                                            still possible, the Contractor may be authorized at its request, to continue the exploitation
                                            for an additional period of ten (10) years, if it has fulfilled all the contractual obligations
                                            during the preceding exploitation period.

 

    Page 10 of 77

    

    

 

		3.2.7	When
                                            the last exploitation permit given to the Contractor expires, the rights and obligations
                                            defined in this Contract shall be null and void.

 

		3.2.8	To
                                            be granted an exploitation authorization, the Contractor shall submit to the Government a
                                            precise delimitation of the required perimeter in such a way that it covers the entire presumed
                                            surface area of the discovered Deposit.

 

		3.2.9	If,
                                            during the works subsequent to the discovery it appears that the deposit has a greater surface
                                            area than initially planned in accordance with the previous paragraph, the Government shall
                                            grant to the Contractor in the context of the exploitation authorization already given, the
                                            additional surface area in such a way that all the deposits are covered, on condition that
                                            the above-mentioned extension be an integral part of the Contract Region as it is defined
                                            during the said modification. If the said additional surface area is outside the Contract
                                            Region, the Government shall give to the Contractor this additional surface area if it is
                                            not the object of mining rights already given to a third party or a request for such rights.

 

ARTICLE
4: OWNERSHIP OF ASSETS, DATA AND HYDROCARBONS

 

		4.1	Ownership
                                            of assets

 

		4.1.1	The
                                            land shall become Government property as soon as they are acquired by the Contractor. The
                                            Minister must cooperate in taking all the steps in favour of the Contractor and at the written
                                            request of the latter, to obtain licenses, permits, surface rights, utilities, rights to
                                            have access and leave the Contract Region freely, utilisation of waters and any other type
                                            of utilities on any land or water body of public or private utility, to allow the Contractor
                                            to achieve the Oil Operations on the Benin territory, in accordance with the laws in force
                                            in the country.

 

		4.1.2	Without
                                            prejudice to the above-mentioned provisions, the ownership of the moveable and non-moveable
                                            assets acquired by the Contractor and belonging to it/her for the Oil Operations, shall be
                                            automatically transferred from the Contractor to the Government as soon as their cost has
                                            been totally depreciated by the Contractor, who continues to use it for production needs
                                            or, otherwise, at the end of the Contract. When the Contract expires, the Contractor shall
                                            be required to give back to the Benin Government, through the Minister and exempt of any
                                            tax, the ownership of lands, buildings, installations, accessories and permanent equipments
                                            that it has acquired to undertake the Oil Operations. After that, the Contractor shall be
                                            free of any obligation, including obligations stemming from abandonment procedures and rehabilitation
                                            of the environment with regard to the said assets if the activities of the field were to
                                            continue. During the validity period of the Contract, the Contractor shall be bound to conserve
                                            and preserve in good state the moveable and non-moveable assets acquired to conduct the Operations.

 

    Page 11 of 77

    

    

 

		4.1.3	The
                                            ownership of rented assets or leased moveable assets and the intellectual property belonging
                                            to sub-contractors or Affiliates and the intellectual property of belonging to other third
                                            parties shall be kept by the said sub-contractors, affiliates or third parties.

 

		4.1.4	Over
                                            the duration of the Contract, the Contractor shall be authorized to use and enjoy all moveable
                                            and non-moveable assets acquired for the Oil Operations in accordance with the Contract.
                                            The Contractor shall be authorized to hand over or sell the said assets if they are no longer
                                            necessary for Oil Operations. Profits made from selling these assets shall be allocated as
                                            follows:

 

		●	If
                                            the ownership of the said assets has been transferred to the Government, the product must
                                            be paid to the latter;

 

		●	The
                                            Contractor shall keep these revenues if the assets have not been depreciated; 

 

		●	In
                                            case of partial depreciation, the revenue corresponding to the proportion of the depreciation
                                            shall be paid to the Government. 

 

The disposal or
transfer of moveable or non-moveable assets during the period of validity of the Contract must be authorised in advanced by the Minister.

 

		4.2	Ownership
                                            of the Data 

 

The
Government shall be the owner of all geological, geophysical and geochemical information and data related to drilling, engineering, registrations
and production and of all other data, samples, logs, cores, bands, maps, interpretations, reports and any other support or information
obtained during the Oil Operations. However, the Contractor shall be authorized to keep this information, free of charge and use it for
Oil Operations subject to obligations related to its confidential nature.

 

The
Government shall give the Contractor access to all existing technical, operational, accounting and financial information, among others,
from the Effective Date of the Contract. It is understood that the Contractor shall treat this data and information confidentially in
accordance with Article 21 of this Contract.

 

		4.3	Ownership
                                            of the Hydrocarbons 

 

All
Hydrocarbons contained in the Reservoirs of the sub-soil of the Contract Region or produced in the Contract Region shall be the property
of the Government, in accordance with the Code and the Constitution of the Republic of Benin. The Contract shall not give to the Contractor
any ownership rights over the Crude Oil and/or Gas extracted from the Contract Region, which will continue to be the property of the
Government until they are measured at the Delivery Point. The rights of ownership of the Contractor over the Crude Oil and/or Gas in
accordance with the provisions of the Contract shall be given to it at the appropriate Delivery Point.

 

    Page 12 of 77

    

    

 

ARTICLE
5: SURFACE AREA RETROCESSIONS

 

		5.1	At the
                                            end of each phase of the exploration period and provided that the Contractor has met all
                                            the obligations related to that phase, if the latter decides to continue the Oil Operations
                                            in the Contract Region, it shall be bound to retrocede 25% of the Region covered by the phase
                                            upon each renewal.

 

		5.2	The
                                            Regions retroceded by the Contractor shall be one block and of simple geometric form in order
                                            to allow the execution of Oil Operations by other entities. The Contractor must notify the
                                            Minister of the Region(s) that it wishes to give up in writing within no more than sixty
                                            (60) days before the end of the considered period by including a map showing the geographical
                                            location and giving the coordinates of the connection point of the boundary lines. In the
                                            thirty (30) days following the date of notification, the Minister must let the Contractor
                                            know his decision who must abide by it.

 

		5.3	From
                                            the expiry date of the Contract, the Contractor is considered to have given up all the Contract
                                            Region to the Government, which retrocedes it to SOBEH.

 

		5.4	Two
                                            months after each retrocession, the Contractor must submit a report to the Minister on the
                                            surface areas given back and give him all documents and files concerning them and the installations
                                            that are there, with the possibility of making copies of the said documents and files subject
                                            to respecting the clauses of confidentiality.

 

ARTICLE
6: OBLIGATIONS RELATED TO EXPLORATION WORKS

 

		6.1	Minimum
                                            work obligations

 

		6.1.1	The Contractor shall start the
Oil Operations from the Effective Date of this Contract. To this effect, it shall notify to the Minister the nominal composition of the
team in charge of conducting and implementing the Contract in Benin as well as the major terms of its agreement with its partner(s).

 

		6.1.2	During
                                            the initial phase of the exploration period of three (03) years maximum, the Contractor agrees
                                            to implement the following minimum work programme:

 

 v Year 1 

 

		-	Retreatment
                                            and reinterpretation of all existing seismic lines on the bloc as well as all other exploration
                                            works;

 

		-	Retreatment
                                            and reinterpretation of the aerial geophysical data of FUGRO;

 

 

 v Years 2 & 3

 

		-	Acquisition,
                                            treatment and interpretation of at least 250km of seismic 2D lines or the equivalent in 3D
                                            seismic lines and 50km2 of 3D seismic lines;

 

The investments of this phase will amount
to up to two million (2,000,000) US dollars.

 

		6.1.3	During
                                            the first extension phase of three (03) years, the Contractor must at least
                                            complete the following works:

 

Year 1: Additional geophysical
work and;

 

Years
2 and 3: Development of the programme; drilling of at least two (02) exploratory wells and assessments of the drilled wills.

 

		6.1.4	During
                                            the first extension phase of three (03) years,
                                            the Contractor should at least complete the following works:

 

Year 1: Additional
geophysical work;

 

Years
2 and 3: Development of the programme and drilling of at least two (02) exploratory wells; assessments of the drilled wills and development
programme, as necessary.

 

    Page 13 of 77

    

    

 

		6.2	Minimum
                                            well depth

 

		6.2.1.	Each
                                            of the aforesaid Exploration Wells must be drilled to the minimum depth or a lesser depth
                                            if the Minister so authorises in accordance with this Article or if drilling is justifiably
                                            interrupted for one of the following reasons:

 

		(a)	the
                                            economic base is reached at a lesser depth than the stipulated minimum contractual depth;

 

		(b)	it
                                            would be clearly dangerous to continue drilling due to abnormal pressure in the formation;

 

		(c)	hard
                                            rocky formations are reached which render it impossible to continue drilling with the appropriate
                                            equipment; or

 

		(d)	formations
                                            containing Hydrocarbons are discovered, which require the installation of protective casings,
                                            excluding the possibility of reaching the minimum contractual depth.

 

		6.2.2.	For
                                            the purposes of Article 6.2.1, the term economic base refers to any layer in
                                            which and below which the geological structure or the physical characteristics of the rock
                                            sequences does not have the properties necessary for the accumulation of Hydrocarbons in
                                            commercial quantities, which also corresponds to the maximum depth at which any accumulation
                                            of this type may be reasonably expected to be found.

 

		6.2	Cessation
                                            of Drilling 

 

Except
in situations in which a prudent operator would immediately cease all drilling operations, the Contractor must obtain approval from the
Minister in charge of Hydrocarbons before beginning, interrupting or ceasing all drilling. The Minister shall respond within seventy-two
hours of this request. This authorisation may not be refused or delayed without justification, provided that the Minister has been provided
the necessary information to allow him to make a decision with full knowledge of the case.

 

		6.3	Replacement
                                            Wells

 

If a
mandatory Exploration well is abandoned due to insurmountable technical problems such as those described in Articles 6.2.1(b), (c) and
(d) and if at the time of this abandonment, the Exploration Costs associated with this Well are greater than or equal to the amount of
the mandatory exploration well, the Contractor shall be considered to have fulfilled its minimum work obligations in this case with regard
to this Well for the period concerned.

 

If a
mandatory Exploration Well is abandoned due to insurmountable technical problems and if at the time of this abandonment, the Exploration
Costs corresponding to this Well are less than the amount of the mandatory exploration well, the Contractor shall then have the option
to either:

 

		(a)	drill
                                            a replacement Exploration Well in the same location or another location to be established
                                            by mutual agreement with the Minister in charge of Hydrocarbons;

 

		(b)	or
                                            to pay the Minister an amount equal to the difference between the amount allocated for the
                                            drilling of the exploration well and the amount of Exploration Costs actually incurred with
                                            regard to this Exploration Well.

 

ARTICLE
7: TECHNICAL AND BUDGETARY MANAGEMENT COMMITTEE

 

		7.1	Within
                                            ninety (90) days of the date of signing of the Contract, the Parties shall establish a joint
                                            committee for technical and budgetary management comprised of representatives of the Minister
                                            in charge of Hydrocarbons and the contracting Parties. The number of representatives of each
                                            party is established by mutual agreement. A representative of the Minister will chair the
                                            Management Committee. A representative of the oil company will act as its secretary. It will
                                            include a sub-committee:

 

The
technical management sub-committee shall meet twice per year: in May and in November.

 

The duties
of this sub-committee shall include the assessment of the technical works to be performed by the contracting Parties. The tasks of this
sub-committee shall be in preparation for those of the budget committee. The various topics addressed by the technical management sub-committee
shall include the important events recorded since the last session, the production and behaviour of the fields, activities performed
and the programme of works.

 

		7.2	Once
                                            per year, the contracting Parties shall meet to make a technical presentation of the Operations,
                                            examine the budget and validate the previous budget.

 

    Page 14 of 77

    

    

 

ARTICLE
8: ANNUAL WORK PROGRAMME, BUDGETS AND REPORTS

 

		8.1	Presentation
                                            of the Annual Work Programme and Budgets

 

Within
ninety (90) days following the Effective Date of the Contract, the Contractor must prepare the first Work Programme and its budget. If
the Effective Date of the Contract falls on the first day of the month of July or before, the first Programme and its budget shall be
prepared for the rest of the corresponding calendar year. If the Effective Date of the Contract falls after the first of July, this first
Programme and its budget shall be prepared for the ongoing calendar year and for the next calendar year. The Contractor must submit the
Work Programme and its budget for the Minister’s approval.

 

Subject
to the provisions above, at the latest on the 30th of October of each calendar year, the Contractor must prepare a Work Programme and
a budget for the next calendar year and must submit them for the Minister’s approval.

 

The Work
Programme submitted for the Calendar Year during which a Commercial Discovery is made must be modified by the Contractor within sixty
(60) days following the date of approval of the General Development Programme in order to comply with the latter.

 

		8.2	Form
                                            and approval of the Annual Work Programme and Budgets

 

This
Annual Work Programme and corresponding Budget shall present the various Exploration, Development and Production Operations separately,
as applicable.

 

Each
Annual Work Programme shall at least include the work to be performed during the period in question to execute the minimum work programme,
the Development Programme or the Production Programme.

 

The Annual
Work Programme and the corresponding Budgets are submitted for the approval of the Minister in charge of Hydrocarbons. This approval
must be provided within the month of December.

 

The sections
of the Annual Work Programme and Budgets regarding which the Minister in charge of Hydrocarbons does not request any amendment or modification
shall be considered approved and must be executed by the Contractor within the indicated period, provided that they can be performed
separately.

 

As for
the sections of the Annual Work Programme and Budgets regarding which the Minister in charge of Hydrocarbons proposes an amendment or
modification, the approval date of the Annual Work Programme or corresponding Annual Budget shall be the date on which the Minister in
charge of Hydrocarbons and the Contractor reach the aforesaid reciprocal agreement.

 

If the
Minister and the Contractor do not reach an agreement regarding the amendments and modifications proposed by the Minister before the
end of the Calendar Year during which the Annual Work Plan and corresponding Annual Budget were submitted, the Contractor shall continue
its operations in accordance with the last Annual Work Plan and corresponding Budget approved by the Minister in charge of Hydrocarbons
until a reciprocal agreement is reached or a decision is made by an expert, if either Party decides to submit the dispute for an expert
opinion in accordance with the provisions of Article 24.2.

 

    Page 15 of 77

    

    

 

The exploration
and exploitation periods or as applicable the additional production period shall not include any time spent requesting an expert opinion,
including the time-frame associated with this procedure.

 

		8.3.	Execution
                                            of the Oil Operations

 

		8.3.1	For
                                            the duration of the Contract, the Contractor shall directly perform the exploration and exploitation
                                            activities in the Contract Region. To better carry out these activities, it shall be authorized
                                            to use specialized Sub-contractors. However, the Contractor shall keep the monitoring and
                                            the general accountability of the operations or activities undertaken.

 

		8.3.2	The
                                            Contractor must speedily carry out the Oil Operations in accordance with Best Practices,
                                            while taking into account the local conditions as well as other special conditions in the
                                            Contract Region.

 

		8.3.1	The
                                            Contractor must inform the Minister in advance of all significant and planned Oil Operations
                                            such as geological or geophysical research and the start up of well drilling activities.
                                            The Contractor must also inform the Minister in writing about any drilling suspension or
                                            abandonment of wells within twenty four (24) hours.

 

		8.4	Budget
                                            Overruns

 

		8.4.1	The
                                            Minister in charge of Hydrocarbons and the Contractor acknowledge that the technical results
                                            obtained as work progresses or certain unforeseen situational changes which may occur may
                                            justify modifications to an approved Annual Work Programme and corresponding Budget. As necessary,
                                            the Contractor shall inform the Minister in charge of Hydrocarbons of the planned modifications
                                            as soon as possible. These modifications shall be submitted for the review and approval of
                                            the Minister within sixty (60) days following receipt of such notification. If the Minister
                                            in charge of Hydrocarbons neither approves or rejects these planned modifications within
                                            this sixty (60)-day period, this failure to act shall be understood as approval of the aforesaid
                                            modifications.

 

		8.4.3	If
                                            the Contractor reasonably believes that the Annual Budget has been exceeded, the Contractor
                                            must notify the Minister in charge of Hydrocarbons in a timely manner and provide the latter
                                            with a detailed and justified description of such overages.

 

		8.4.4	The
                                            limits established in Article 8.4 shall not prejudice the right of the Contractor to incur
                                            expenses in case of emergency requiring immediate intervention pursuant to Article 8.5.

 

		8.4.5	Except
                                            as indicated otherwise in Article 8.5, if the Contractor incurs an expense for which the
                                            programme and budget have not been approved in the context of an Annual Work Programme and
                                            a corresponding Annual Budget or any amendment thereto approved by the Minister in charge
                                            of Hydrocarbons, this expense shall not be recoverable by the Contractor as Oil Costs.

 

		8.5.	Emergency
                                            or Accident

 

		8.5.1	In
                                            case of emergency or accident requiring immediate intervention, the Contractor shall take
                                            all prudent and necessary measures in accordance with best practices in the oil industry
                                            to protect its interests and those of the Government as well as the property, life and health
                                            of other Persons, the environment and the safety of the Oil Operations. The Contractor shall
                                            inform the Minister in charge of Hydrocarbons of this emergency or this accident as quickly
                                            as possible.

 

		8.5.2.1	All
                                            costs incurred by the Contractor as a result of emergencies shall be recoverable as Oil Costs
                                            in accordance with this Contract. Notwithstanding the foregoing, none of the costs incurred
                                            by the Contractor which result from the gross negligence or wilful misconduct of the Contractor,
                                            its subcontractors or any Person acting on their behalf shall not be recovery as Oil Costs.

 

    Page 16 of 77

    

    

 

		8.6	Reports 

 

		8.6.1	In
                                            the context of this Contract, the Contractor shall prepare and update all the registers related
                                            to the Oil Operations in the Contract Region.

 

		8.6.2	Subject
                                            to its general rights and obligations, the Contractor shall:

 

		a.	Record
                                            in original version or reproducible of good quality, or if any, on magnetic recording medium
                                            and/or electronic medium, any geological, geophysical, geochemical or well information and
                                            any data related to the Contract Region and acquired by the Contractor.

 

		b.	Keep
                                            all files containing the details related to the following aspects:

 

		i.	Drilling:
                                            the work per se, deepening, production tests, closing up or abandonment of wells;

 

		ii.	The
                                            geological formations the wells went through;

 

		iii.	Well
                                            casings and any modification of the said casings;

 

		iv.	All
                                            Hydrocarbons, water and other minerals of economic interest or dangerous substances encountered;

 

		v.	The
                                            zones in which geological or geophysical activities were undertaken.

 

		8.6.3	The
                                            well logs, maps, magnetic or electronic bands, cores and samples and other geological, geophysical
                                            and geochemical information obtained by the Contractor during the Oil Operations shall be
                                            the property of the Government and shall be turned over to the Government as soon as they
                                            are obtained or prepared, although the Contractor shall be entitled to retain copies of the
                                            aforesaid documents and files, subject to compliance with the confidentiality clauses.

 

		8.6.4	In
                                            performing its contractual obligations, unless otherwise agreed upon by the Parties, the
                                            Contractor may:

 

		1.	Keep
                                            copies of the material that comprise the Data over the duration of the Contract;

 

		2.	Keep
                                            for the necessary duration of the Oil Operations, with the approval of the Government, the
                                            original Data, provided that the said Data is reproducible and that copies have been submitted
                                            to the Minister in charge of Hydrocarbons;

 

		3.	Export
                                            for laboratory treatment, examinations or analyses and for one year duration, samples and
                                            any materials comprising the oil data, on condition that samples of equivalent size and quality
                                            or, when such Data may be reproduced, copies of equivalent quality are submitted to the Minister.

 

		8.6.5	The
                                            Contractor should regularly inform the Minister about the major developments in the context
                                            of the Oil Operations and give him the available information (data, reports, evaluations
                                            and interpretations) related to the Oil Operations.

 

Moreover,
the Contractor must:

 

		a)	Establish
                                            daily drilling and exploitation reports as part of its activities;

 

    Page 17 of 77

    

    

 

		b)	Prepare
                                            and submit to the Minister a monthly production report within a deadline of thirty (30) days
                                            following the end of the month concerned and that shall include a description of the activities
                                            covered during the said month;

 

		c)	Prepare
                                            and submit to the Minister a quarterly report during the exploration and exploitation period
                                            within a deadline of thirty (30) days following the end of each Calendar Quarter, and that
                                            shall include a description of the activities covered during the said quarter along with
                                            the plans and maps showing the sites where the described works have been undertaken.
	 	 	 

		d)	Prepare
                                            and submit to the Minister an annual report within two (2) months of the end of each Calendar
                                            Year, which integrates and develops the revised quarterly reports if necessary for the Calendar
                                            Year in question.
	 	 	 

		e)	All
                                            monthly, quarterly and annual exploration and exploitation reports produced by the Contractor
                                            shall be written in French and addressed to the Minister in charge of Hydrocarbons.
	 	 	 

		f)	Failure
                                            to product two quarterly activity reports shall be considered a breach of the Contract.

 

		g)	Failure
                                            to produce quarterly activity reports for one year shall be considered as serious misconduct
                                            stemming from deliberate negligence.

 

		h)	At the
                                            end of each year, the Contractor shall have sixty (60) days to submit its annual activities
                                            and budget report. If at the end of this period, no report has been received by the Government,
                                            notification shall be sent to the Contractor, who shall have sixty (60) days to make the
                                            necessary corrections. After this period, if no positive reaction on the part of the Contractor
                                            is noted, the Contract shall be considered terminated and notice shall be given to the Contractor.

 

ARTICLE
9: DECLARATION OF COMMERCIAL DISCOVERY AND DESIGNATION OF THE DEVELOPMENT ZONE

 

		9.1	As soon
                                            as a Hydrocarbon Discovery is made in the Contract Region, the Contractor must immediately
                                            inform the Minister and the provisions of this Article shall be applied. After the Hydrocarbon
                                            Discovery and within the thirty (30) days following the said Discovery, the Contractor shall
                                            submit to the Minister an initial Discovery report.

 

At the
latest in the two (2) months following the Discovery, the Contractor shall submit to the Minister a detailed report on the Discovery,
indicating, if necessary, whether or not this discovery has been evaluated. If the Contractor deems that the Discovery is worth evaluating,
the report must include an evaluation programme and a schedule of activities in order to implement an adequate and effective evaluation.
The Contractor must properly complete the evaluation programme submitted to the Minister during the exploration period in accordance
with the evaluation programme and the approved schedule of activities. Notwithstanding all of the provisions of Article 9, provided that
the Contractor has fulfilled its obligation to drill exploration wells as indicated in Article 6, it shall be entitled to receive a Development
Zone which includes the predefined Development Zone.

 

		9.2	At the
                                            latest ninety (90) days following the end of the evaluation programme, the Contractor must
                                            submit for the assessment of the Minister a detailed evaluation report justifying the commercial
                                            viability of the proposed Development Zone. This report must include:

 

		-	The description
                                            of the Development Zone, namely the structural configuration, the physical properties and
                                            the span of the reservoir rocks, the surface areas, the layer and the depth of the productive
                                            zones;
	 	 	 

		-	An estimation
                                            of the initial oil reserves and gas that can be recovered, the characteristics of the recuperation,
                                            the expected yield of production per reservoir;

 

		-	An estimate
                                            of the number of necessary wells for an efficient drainage of the reserves, the characteristics
                                            of the fluids present, in the case of the Crude Oil its density, the sulphur, sediment and
                                            water content, as well as the yield characteristics of the product;
	 	 	 

		-	The expected
                                            economic projections and cash flow.

 

    Page 18 of 77

    

    

 

		9.3	The
                                            Contractor should declare in the report if it deems that the Discovery is commercially viable,
                                            and in this case it shall have the right to develop it and produce the Hydrocarbons in accordance
                                            with the provisions of this Contract. However, the Minister shall support as much as possible
                                            the establishment of non-existent facilities for the production and testing of all early
                                            production wells. This Government support shall include, if possible, assistance to obtain
                                            and access existing installations or obtain the necessary onshore land in the immediate vicinity
                                            of the pipeline.

 

		9.4	In the
                                            thirty (30) days following the presentation of the report in which the Contractor shall communicate
                                            to the Minister its opinion that its Discovery is commercially viable, the latter shall notify
                                            in writing the Contractor of his approval and the date of approval of the Minister shall
                                            be the “Commercial Discovery Date”. If at the end of this deadline of thirty
                                            (30) days, the Minister does not notify in writing the approval mentioned, the Commercial
                                            Discovery Date shall be the date following the deadline of the thirty (30) days mentioned
                                            above. The Minister shall then grant the Contractor the exploitation permit if it applies
                                            for it.

 

		9.5	If the
                                            Contractor deems that the Discovery is not commercially viable, it should communicate to
                                            the Minister the reasons for its decision. If the Minister questions the basis of the technical
                                            or economic analysis of the Contractor on the non commercial character of the Discovery,
                                            or if for any other reason he deems that the Discovery could be developed economically by
                                            the Contractor in accordance with the clauses and conditions of the Contract, then the Minister
                                            should, in the sixty (60) days if he wishes, submit the question of the commercial viability
                                            to an expert in compliance with the Contract. If the Expert confirms that the Discovery is
                                            a commercial one, the Contractor may, in the thirty (30) days following the date of receipt
                                            of the decision of the Expert, declare that the Discovery is a Commercial Discovery in accordance
                                            with the provisions of the Contract and the date of declaration shall become the Commercial
                                            Discovery Date. In this case, the Minister shall have the right to develop the Discovery
                                            Zone and produce Hydrocarbons in accordance with the provisions related to exclusive-risk
                                            operations. The Contract shall remain valid for the remaining part of the Contract Region.

 

		9.6	In the
                                            ninety (90) days following the Commercial Discovery Date, the Contractor should submit to
                                            the Minister a General Development Programme indicating:

 

		(a)	The
                                            proposed Development Zone;

 

		(b)	The
                                            Development operations to be undertaken, including any additional delineation of the Development
                                            Zone and the method to develop the Associated Gas, if any;

 

		(c)	The
                                            plans of the Contractor concerning well drilling and conditioning, the new production, storage,
                                            transportation and deliver installations required for Hydrocarbon production. The plans must
                                            include the following information:

 

		(i)	The
                                            expected number of Development wells and their positioning;

 

		(ii)	Precisions
                                            about the production equipment and storage infrastructures;

 

		(iii)	The
                                            delivery points of the Crude Oil and Natural Gas; and

 

		(iv)	The
                                            details of any other technical equipment necessary for the Oil Operations.

 

		(v)	The
                                            production projections of Crude Oil and Natural Gas from estimated Oil or Gas deposits, and
                                            the estimated commercial life of the said deposits;

 

		(d)	The
                                            estimations of the costs of equipment and current expenditures;

 

		(e)	The
                                            economic feasibility studies done by the Contractor and possibly the other methods mapped
                                            out for the development of the Discovery by taking into account:

 

		(i)	Its
                                            location;

 

		(ii)	Any
                                            relevant meteorological condition;

 

		(iii)	The
                                            expected investment costs and current expenditures; and

 

		(iv)	Any
                                            other necessary information for its evaluation.

 

		(f)	The
                                            security measures to be adopted during the Development and Production Operations, including
                                            emergency procedures;

 

		(g)	Measures
                                            to be adopted for environmental protection;

 

		(h)	The
                                            unforeseen events that may affect the capacity of the Contractor in implementing the General
                                            Development Programme.

 

		9.7	The
                                            General Development Programme proposed by the Contractor shall be prepared in compliance
                                            with engineering principles, economy principles and Best Practices. It must also be designed
                                            with a view to ensuring the optimal recuperation of Hydrocarbons in the Development Zone
                                            and to prevent wasting them.

 

		9.8	The
                                            General Development Programme of the Contractor may be revised by the Minister who shall
                                            give his approval if he deems that it has been prepared in compliance with the provisions
                                            above. If the Minister deems that the General Development Programme presented by the Contractor
                                            was not prepared in accordance with those provisions, he shall propose amendments and the
                                            Contractor may, in response, modify it. If within the ninety (90) days following the date
                                            of presentation of the Programme, the Minister and the Contractor do not reach an agreement
                                            with regard to the said Programme, the matters on which they disagree must be submitted to
                                            an expert who shall take a decision. In case of disagreement and resorting to an expert,
                                            the exploitation period of twenty-five (25) years shall not include the time used to call
                                            for an expert (including the time for the appeal procedure).

 

    Page 19 of 77

    

    

 

		9.9	During the Development and Production Operations, the Contractor may propose additions or revisions to the General Development Programme. It must then submit them to the Minister for consideration and approval, in accordance with the procedures contained in clause 9.8 if within ninety (90) days of the date of submission of the additions or revisions to the General Development Programme, the Minister and the Contractor do not reach an agreement with regard to the aforesaid additions and revisions, the matter or matters on which they disagree must be submitted to an expert, pursuant to the procedure specified in clause 9.8, and the twenty-five (25) year exploitation period shall not take into account the period of this procedure.

                                                                                 

		9.10	If
                                            the Contractor wishes to finance the Development Operations with funds coming from banks
                                            or other funding sources, the Minister shall support the Contractor by supplying all information
                                            that the banks or funding sources may reasonably require, provided that the Minister does
                                            not assume any additional obligations of any kind to that effect, financial or otherwise.

 

ARTICLE
10: EXCLUSIVE RISKY OPERATIONS

 

		10.1	In
                                            case the Minister, during the exploitation period, wishes to test additional reservoirs of
                                            a well at the agreed level, or deepen the well and test the reservoirs that are deeper than
                                            that final level, the Government shall have the right, subject to the stipulations provided
                                            in Clause 10.4, to ask by notification to the Contractor to test some additional reservoirs
                                            or to continue drilling and to test some new reservoirs, at the exclusive risks of the Government.
                                            The Government shall notify the Contractor as soon as possible before or during drilling,
                                            but in no case after the Contractor has started the completion or abandonment activities
                                            of the well.

 

		10.2	If
                                            during the exploration period, the Parties do not agree on the Government recommendation
                                            to drill additional exploitation wells, the Minister shall have the right, after the initial
                                            period, to ask the Contractor to drill in the Contract Region at the exclusive risks and
                                            cost of the Government one (1) exploitation well provided that this Operation does not delay,
                                            hamper or disturb the exploitation and evaluation activities of the Contractor. In that case,
                                            the Minister shall have a maximum deadline of six (6) months to submit to the Contractor
                                            a report on establishing the said well specifying the drilling details as well as the financial
                                            plan of the operation he is pre-financing.

 

		10.3	If
                                            the operations described in clauses 9.3, 10.1 or 10.2 lead to a Discovery or a Commercial
                                            Discovery, the Government shall have the right, at its exclusive expenses, risks and benefits,
                                            to appreciate the said Discovery and/or to develop and produce oil from the reservoir corresponding
                                            to that Discovery. The Contractor shall notify in writing to the Minister, before starting
                                            the commercial production of the oil reservoir discovered in the context of the said exclusive-risk
                                            operations, if it wishes to support future operations for the development and/or production
                                            of the said oil reservoir, in compliance with the terms of this Contract. In that case, the
                                            Contractor shall pay in cash or in kind to the Government in addition to hundred percent
                                            (100%) of the exploitation costs and, if any, capital exploitation costs incurred by the
                                            Government in the context of the exclusive-risk operations and corresponding to the discovered
                                            oil reservoir, an additional amount equalling three hundred percent (300%) of the said exploitation
                                            and capital costs.

 

		10.4	The
                                            conditions to undertake exclusive-risk operations shall be the following:

 

		(a)	The
                                            production tests of additional layers or the penetration and the production tests of deeper
                                            layers or drilling additional exploration wells, must be technically feasible;

 

		(b)	Deepening
                                            a well as part of exclusive-risk operations may not take place when the well has already
                                            gone through producing reservoirs;

 

		(c)	No
                                            exclusive-risk exploration well shall be drilled in an exploitation zone, nor on the site
                                            of a Commercial Discovery;

 

		(d)	The
                                            Minister may hire a third party to undertake the exclusive-risk operations referred to above.
                                            However, the Minister shall not recruit a third party to these ends without having previously
                                            offered to the Contractor the right of pre-emption for the execution in its name the said
                                            exclusive-risk operations in conditions similar to those which should be acceptable to that
                                            third party. In case the Contractor does not accept to undertake those operations notified
                                            by the Minister, the latter shall have the liberty to hire the third party provided that
                                            this third party respects the conditionality clauses related to the reports, data and information
                                            kept or prepared by the Contractor and received by that third party as part of this article
                                            or Article 9 and in accordance with Article 21.

 

    Page 20 of 77

    

    

 

ARTICLE
11: GOVERNMENT PARTICIPATION

 

		11.1	The
                                            Government has the option to acquire a maximum interest of 10% in the rights and obligations
                                            of the Contractor regarding a commercial discovery.

 

		11.2	The
                                            Government must exercise its participation option by written notification to the Contractor
                                            within the ninety (90) days following the date of commercial declaration by the Contractor.
                                            For lack of submitting a written notification during this deadline of ninety (90) days, the
                                            option shall be considered as denied.

 

		11.3	If the
                                            Government exercises its option of participation in accordance with Article 11.1, the Contractor
                                            shall give up to the Government the share claimed. To this effect, the Contractor shall propose
                                            a draft convention to the Minister in charge of Hydrocarbons for consideration. This convention
                                            shall specify the terms of the Government’s participation.

 

		11.4	The
                                            Government participation shall be effective from the date of receipt by the Contractor of
                                            the written notification set out in article 11.2.

 

		11.5	If
                                            the Government exercises its participation option, the Minister shall enter into an operational
                                            agreement with the Contractor in accordance with the standards of International Oil Operations,
                                            which shall govern the rights and obligations of the Parties.

 

ARTICLE
12: ROYALTIES, COST RECOVERY & PRODUCTION SHARING

 

ROYALTIES

 

		12.1	The
                                            Contractor shall pay royalties to the Government at a rate of 12.5% of the total available
                                            production excluding losses regarding the Oil Operations for oil starting with the first
                                            barrels produced. The remaining quantity of the crude oil shall be referred to as ‘‘Available
                                            Crude’’. This rate is negotiable for the condensate In case of discovery of gas,
                                            both Parties shall come together to define the royalties as well as the sharing proportion
                                            for the gas.

 

RECOVERY OF OIL COSTS

 

		12.2	After
                                            deducting the Royalties, the exploiting Contractor shall be entitled to a maximum of seventy
                                            percent (70%) of the remaining Total Available Production of Crude Oil for the oil every
                                            Calendar Year as the recovery of Oil Costs (Oil Costs Recovery Share).

 

		12.3	Subject
                                            to the provisions related to participation, the Contractor shall assume and pay all Oil Costs
                                            incurred in executing the Oil Operations and shall recover the said costs according to the
                                            modalities defined in the Accounting Appendix D.

 

		12.4	The
                                            costs directly attributable to the development and production of non-associated Gas shall
                                            be the subject matter of a specific agreement in accordance with the provisions of this Contract.

 

The costs
shall be recovered as follows:

 

		(a)	All
                                            Production Costs shall be recovered totally in the Year in which they were incurred;

 

		(b)	The
                                            Exploitation Costs shall be recovered from the Year the first commercial production started
                                            in the Contract Region;

 

		(c)	The
                                            development investments shall be depreciated over five (5) years from the Year the first
                                            production started;

 

		(d)	Investments
                                            related to the exploitation phase shall be depreciated over five (5) Years from the date
                                            they were undertaken;

 

		(e)	However,
                                            when the total production reaches the profitable limit as defined in clause 12.7 below, the
                                            Parties shall consult each other to agree on a decision. This consultation shall take place
                                            in the thirty (30) days from the date the Minister in charge of Hydrocarbons receives the
                                            written notification of the Contractor.

 

		12.5	When
                                            the recoverable Oil Costs of a given Year exceed the value of the Crude Cost Recovery (“Cost–Oil”)
                                            available that year, the recovery of the surplus shall be carried forward to the following
                                            Years.

 

    Page 21 of 77

    

    

SHARING OF OIL
PROFITS

 

		12.6	Every
                                            Year, the remaining Available Crude after deducting the recoverable Oil Costs called hereinafter
                                            ‘‘Oil Profit’’ or ‘‘Crude-Profit’’ shall
                                            be shared between the Government and the Contractor according to the percentages below:

 

		a)	For
                                            oil 

 

	
    Share of Daily Production

    
	 	
     Share of the State
	 	Share of the Contractor 
	Regardless of the production level	 	50%	 	50%

 

After
recovery of the oil costs, the Parties shall come together to define a new sharing formula

 

		b)	For
                                            the condensate (to be negotiated in case of discovery)

 

		12.7	The
                                            Parties shall agree that if the Profitable Limit of a deposit is going to be reached, (that
                                            is if the Oil Costs incurred by the Contractor exceed the oil monetary flow received from
                                            selling the production in such a way that it leads to stopping prematurely the production
                                            of this deposit), they shall consult each other and examine the amendments to be made to
                                            the provisions of this Contract, namely cost recovery and production-sharing in order to
                                            extend the life of the deposit.

 

ARTICLE
13: MEETING THE NATIONAL CONSUMPTION NEEDS

 

		13.1	Following
                                            the start-up of the Production Operations, the Government shall have the right to purchase
                                            and the Contractor the obligation to sell, in a determined Delivery Point, an equivalent
                                            volume of Hydrocarbons in the form of Crude or refined products or equivalent gas as agreed
                                            upon between the Parties, equivalent to a maximum of fifty percent (50%) of the share of
                                            the Oil Profit accruing to the Contractor in order to meet Benin’s internal demand.
                                            The transfer of the Oil shall be done in this context in accordance with the provisions of
                                            clause 15.5.

 

		13.2	If
                                            in a deadline that shall not exceed sixty (60) days from the Hydrocarbons delivery date,
                                            the Government does not pay the bill, the Contractor may request to be paid by deduction
                                            from the Oil Profit of the Government.

 

		13.3	With
                                            regard to the Crude Oil, the obligation for the Contractor to sell shall be based on the
                                            principle according to which all Crude Oil producers or exporters in Benin, including the
                                            Government, shall bring at any moment and proportionally a portion of their production to
                                            meet the national consumption needs. To take advantage of his acquisition rights, the Minister
                                            should give a written notice of six (06) months to the Contractor, indicating the volume
                                            of the Crude Oil of the Oil Profit of the Contractor that shall be acquired during the six
                                            (06) calendar months following the above-mentioned notice. The monthly variation of that
                                            volume shall not exceed a margin of more or less than ten percent (10%).

 

		13.4	If
                                            in case of Force Majeure, other contractors or the Government are not able to contribute
                                            proportionally to meeting the national needs, and if as a consequence the volume of participation
                                            of the Contractor and other contractors to the national market demand must be increased,
                                            the Contractor shall sell the required additional quantities in accordance with the above-mentioned
                                            clauses and conditions until the case of force majeure is resolved and until the contribution
                                            meant to cover proportionally the national market demand is re-established. This additional
                                            obligation shall not include the volumes of production that are already the subject-matter
                                            of an exportation contract, the loading period of which is fixed within the forty (40) working
                                            days following the date on which the Contractor receives the notification of the Minister
                                            related to the case of force majeure.

 

		13.5	With
                                            regard to the Natural Gas, the obligation of the Contractor to sell must be established by
                                            taking into account the criteria used to meet the national market demand stipulated above
                                            and by taking into account a Natural Gas price determined in accordance with this Contract.

 

		13.6	All
                                            payments made as part of the Contractor’s Hydrocarbons sales to the Government in accordance
                                            with the provisions of this Article must be in dollars and through bank transfer in favour
                                            of the bank account designated by the Contractor outside Benin in a deadline of thirty (30)
                                            days from the date of delivery to the Delivery Point of the Hydrocarbons purchased by the
                                            Government.

 

    Page 22 of 77

    

    

 

ARTICLE
14: APPLICABLE TAX SYSTEM

 

		14.1	Over
                                            the life of the Contract and in accordance with the legislation in force in the Republic
                                            of Benin, the Contractor shall be subject to the tax system commonly applied to enterprises
                                            in general and to oil activities in particular.

 

		14.2	The
                                            Contractor shall be bound to pay in accordance with the Benin Tax Code all of the taxes and
                                            dues to which he shall be subject namely the Income Tax, which shall not exceed 45%
                                            of the taxable profit.

 

		14.3	It
                                            shall be understood that pursuant to Article 14.2, the Minister shall ask to deduct from
                                            the Oil Profit of the Government under article 12.6, an amount corresponding to the Income
                                            Tax and to the Export Tax provided for in the Oil Code. He shall request that to this effect
                                            the said tax be paid on behalf of the Contractor and issue to him the related receipts. The
                                            same shall apply to the Export Tax. In that case, the portion of the Oil Profit belonging
                                            to the Contractor as set out in article 12.6 shall be considered net of tax and shall not
                                            be subject to any tax whatsoever. In other words, the Contractor shall be free of all tax
                                            obligations that are, by definition, included in the Oil Profit received by the Government
                                            and in the Tax on Oil Production also received by the Government.

 

The
Minister shall send the receipts by official correspondence justifying the payment of the taxes, duties and dues to which the Contractor
is subject.

 

		14.4	The
                                            Contractor, its sub-contractors and service providers shall be exempt from the charges and
                                            customs duties, including Road Tax, on the capital equipment, products, exploitation and
                                            exploration materials and drilling machines and equipment (including the Rig or the drillship
                                            and all similar equipment), the platforms and production installations and spare parts imported
                                            in the context of the Oil Operations.

 

However,
the goods, products, equipment, exploration and exploitation materials and all drilling machines and equipments (including the Rig or
the drillship and all similar equipment), the platforms and production installations and spare parts likely to be re-exported at the
end of their use shall be subject to the exceptional temporary admission system in accordance with current the provisions governing this
matter.

 

    Page 23 of 77

    

    

 

		14.5	The
                                            Contractor, its subcontractors and its service providers are also exempt from taxes, duties
                                            and indirect dues, including the Value-Added Tax (VAT) with regard to the oil exploration
                                            and exploitation activities and all other related activities.

 

The
Contractor, its subcontractors and its non-resident service providers are also exempt, with regard to the oil exploration and exploitation
activities and all other related activities, from:

 

		a.	The
                                            License during the entire exploratory period and for five (5) years of oil exploitation;

 

		b.	the
                                            Employer’s Contribution on Salaries (E.C.S.);

 

		c.	Superficiary
                                            royalties provided in the Code.

 

		14.6	Expatriate
                                            personnel employed by the Contractor, its subcontractors and service providers benefit from:

 

		-	Exemption
                                            from the Progressive Tax on Salaries and Wages (PTSW);

 

		-	During
                                            the first six (06) months of settlement of their settlement in Benin, an exemption of customs
                                            duties and taxes and Road Tax on personal effects being used.

 

One
vehicle per household may also be imported in temporary admission.

 

		14.7	The
                                            Government shall be ready to consider any amendment to the tax clauses that the Contractor
                                            may ask at any time, provided that:

 

		(a)	Such
                                            modifications do not have a negative incidence on the overall economic gains and other benefits
                                            that the Government shall draw from the Operations; and

 

		(b)	The
                                            only reason for proposing such modifications shall be to allow any person making the Contractor
                                            or to any other Affiliated Company to obtain in another country a tax credit related to the
                                            paid taxes in the Republic of Benin.

 

		14.8	The
                                            Contractor shall be bound to pay to the Government the revenues as part of duties and taxes
                                            provided in this Contract through a national structure. The designation of the national structure
                                            in question shall take place within the one hundred and eighty (180) days following the Effective
                                            Date.

 

		14.9	The
                                            Government shall issue within the thirty (30) days following the payment date a receipt in
                                            the name of the Contractor relating to the said payment.

 

    Page 24 of 77

    

    

 

ARTICLE
15: MEASUREMENT, PROVISION, EVALUATION AND SALE OF HYDROCARBONS

 

		15.1	The
                                            Contractor must measure all Crude Oil and Natural Gas produced in the Contract Region in
                                            accordance with Best Practices. The Contractor must keep complete and precise registers of
                                            all measurements of the Hydrocarbons produced in the Contract Region after extracting the
                                            water and its foreign bodies, then all tradable Hydrocarbons; that shall allow calculating
                                            the difference to determine the quantities used for the Operations and the unavoidable losses.
                                            The representatives of the Minister must have access to these registers and measures.

 

		15.2	The
                                            Minister shall have the right to test all measures, measuring equipment, the graphs and any
                                            other measuring or testing and information material.

 

		15.3	If,
                                            following an examination or a test, it appears that the measuring equipment is not functioning,
                                            that they are damaged or incorrectly set, the Contractor must fix them or do the necessary
                                            adjustments immediately and meet the costs.

 

		15.4	If
                                            within a reasonable deadline that shall not exceed thirty (30) days the Contractor does not
                                            assume that obligation, the Minister may take the appropriate measures to make the said equipment
                                            operational or adjusted and may bill the Contractor for the cost of that operation at the
                                            interest rate of the Contract plus 1%. If, according to the Minister, the error caused by
                                            the bad adjustment or any other fault of measuring equipment seems to be the reason of big
                                            difference in measuring the production, the Parties shall consult each other to take the
                                            appropriate measures. In case of disagreement, the question may be submitted to an expert
                                            who shall determine if it is appropriate to do a retroactive adjustment of the production
                                            figures. If the Contractor considers that it is necessary to replace some measuring devices
                                            or instruments, it must inform the Minister for approval and give to the representatives
                                            of the Minister the chance to be present during the operation and to take part in it.

 

		15.5	In
                                            the context of this Contract, the price of the Crude Oil for each quarter shall be the weighted
                                            average FOB prices received by the Contractor for selling to third parties different from
                                            the Parties during the corresponding quarter.

 

    Page 25 of 77

    

    

 

		15.6	If
                                            in a given quarter the Contractor does not sell at least forty percent (40%) of the total
                                            Crude Oil production of the Contract Region to third parties different from the Parties,
                                            the price of the Crude Oil for that quarter shall be the weighted average of FOB prices fixed
                                            in comparison with the price of the Crude Oil on the international market in view of the
                                            quality, density and transport differentials.

 

		15.7	In
                                            case of lack of an agreement between the parties within the fifteen (15) days following the
                                            end of the Quarter involved, awaiting the opinion of an expert, the agreed selling price
                                            for the preceding Quarter shall apply provisionally subject to the retroactive adjustments
                                            that could be necessary after the expertise. Resorting to an expert provided in this article
                                            shall apply in a deadline that shall not exceed thirty (30) days after the end of the Quarter
                                            involved.

 

		15.8	In
                                            the context of this Contract, the price of the Natural Gas sold in the Benin national market
                                            shall be the price received by the Contractor for selling to third parties. Taking into account
                                            the fact that in Benin the gas market is not highly developed, the Government should assist
                                            the Contractor if possible to find possible gas consumers and to negotiate reasonable selling
                                            prices. The price of Natural Gas applicable to the gas sold to a Benin public enterprise
                                            or to an organization which social capital and voting right is the direct or indirect property
                                            of the Government, shall be agreed upon by the Parties, since this price should reflect the
                                            commercial value of the source of energy that the sold gas is supposed to replace, in accordance
                                            with the modern technology generally used and by taking into account the cost of the produced
                                            gas. The price applicable to Natural Gas exportation shall be the price received by the Contractor
                                            in the context of selling to third parties, subject to the same conditions governing normally
                                            selling Crude Oil.

 

		15.9	The
                                            Contractor shall have the right to possess, load, transport and export freely the Hydrocarbons
                                            that belong to it by virtue of the Contract. The Minister may ask the Contractor to sell
                                            all or part of the oil belonging to the Government in accordance with article 12 and in the
                                            market conditions set out in Article 15.5, provided that the Parties have agreed on the provisions
                                            relating to commercialization.

 

		15.10	At
                                            the latest sixty (60) days before the Commercial Production starts in each Development Zone,
                                            and afterwards at the beginning of each Quarter, the Contractor must prepare and submit to
                                            the Minister a prevision indicating the total quantity of Hydrocarbons that, according to
                                            it, will be produced during the next four (4) Quarters in the corresponding Development Zone,
                                            from a production rate determined by mutual agreement to optimise the recuperation of the
                                            Hydrocarbons in the Development Zone in accordance with Best Practices. Each Quarter, the
                                            Contractor must make reasonable efforts to produce the quantity of Hydrocarbons it has planned
                                            to produce. The Contractor shall be authorized to use, free of charge, the quantities of
                                            Hydrocarbons produced in the Contract Region, at the natural state or treated, necessary
                                            to undertake the Oil Operations (including Operations to load the Gas) in accordance with
                                            Best Practices. Regardless of the quantity of Hydrocarbons used for this purpose, they shall
                                            not be considered part of the Commercial Production.

 

    Page 26 of 77

    

    

 

ARTICLE
16: NATURAL GAS

 

		16.1	The
                                            Benin national market enjoys a preferential acquisition right of the Natural Gas produced
                                            in any Development Zone and not used for Oil Operations in accordance with this Article,
                                            provided that the commercial proposals offered are not less favourable than those in which
                                            the gas in question may be exported. Natural Gas not sold on the national market may be exported.

 

		16.2	In
                                            case of a discovery of a commercial gas accumulation, a gas purchase contract (a “Take
                                            or Pay” Contract) should be discussed between the Government and the Contractor in
                                            the shortest deadline. In case the direct generation of energy seems to be more profitable
                                            for both Parties, they shall meet to fix the conditions.

 

Associated Natural
Gas

 

		16.3	In
                                            case of a Crude Oil Discovery that the Contractor deems commercially viable in accordance
                                            with this Contract and that the Discovery contains Associated Gas, the Contractor should
                                            indicate in its evaluation report if it considers that the estimated production of Associated
                                            Gas will exceed the quantities of Associated Gas required for the additional Production Operations
                                            and if the declared surplus Associated Gas can be produced in commercial quantities. If the
                                            Contractor declares that this Associated Gas does exist and can be produced in commercial
                                            quantities, it shall indicate in the General Development Programme prepared for the Hydrocarbon
                                            Discovery, the details related to the collection, treatment, compression and transportation
                                            installations required to exploit the surplus Associated Gas for commercialization as well
                                            as the related costs.

 

		16.4	Within
                                            ninety (90) days following the date of presentation of the General Development Programme,
                                            the Minister may notify to the Contractor that either he or any other Benin public enterprise
                                            designated by him would like to have the surplus Associated Gas on the national market.

 

		16.5	If
                                            the Contractor decides to participate in accordance with the above-mentioned provisions:

 

		(a)	it
                                            shall build collection, treatment, compression, transport and storage facilities required
                                            for the production and delivery to the Delivery Point of the surplus Associated Gas in accordance
                                            with the specifications of the General Development Programme;

 

		(b)	The
                                            price of the Associated Natural Gas shall be the price of the Natural Gas determined in accordance
                                            with this Contract.

 

		16.6	If
                                            the Contractor decides not to participate, it must deliver to the Minister, or to the Benin
                                            public enterprise designated to that effect by the Minister, in a delivery point designated
                                            as an “exit port”, and at its own expense, which shall be considered as recoverable
                                            costs, all produced surplus quantities of Associated Gas produced.

 

    Page 27 of 77

    

    

 

		16.7	Subject
                                            to the provisions related to environmental protection, the Contractor may burn all unused
                                            surplus Associated Gas.

 

Non-Associated
Gas

 

		16.8	In
                                            case of a Discovery of Non-Associated Gas in the Contract Region, the Contractor must present
                                            a report in accordance with the prescriptions of this Contract. If the Contractor considers
                                            that the Discovery is worth evaluating, it must evaluate, with an estimation of the reserves,
                                            the production potential, as well as the economic viability. In that report, the Contractor
                                            should also declare if the Discovery is commercially viable. If the Contractor considers
                                            that the Discovery of the Non-Associated Gas is not worth evaluating, the provisions related
                                            to the Crude Oil shall be applied mutatis mutandis.

 

		16.9	If
                                            the Contractor considers that the Discovery can be commercially viable, the Minister shall
                                            assist it in evaluating the demand for gas on the national market as well as in the transformation
                                            and commercialisation activities required to distribute it to end-users of the said market.
                                            At the same time, the Contractor shall be free to assess the viability of the exportation
                                            of the Gas. Within the Calendar Year that follows the date of presentation of the detailed
                                            evaluation report of the Contractor, the parties should meet to decide if the outlets and
                                            the other factors justify its development and production for the national market and/or if
                                            it is considered that this market is not sufficiently big and that the Gas should be exported.

 

		16.10	If
                                            the Contractor considers that the development of the Non-Associated Gas Discovery is justified,
                                            it must present to the Minister a General Development Programme of the said Discovery and
                                            the provisions related to the commercial discovery and those to the Government participation
                                            shall be applicable to the development and production of the said Gas as in the case of Crude
                                            Oil. If the Contractor considers that the Discovery of Non-Associated Gas is not justified,
                                            then the provisions related to Crude Oil shall be applied mutatis mutandis to the development
                                            and production of the said Gas.

 

		16.11	If
                                            it is determined that the Discovery of the Non-Associated Gas cannot be used on the national
                                            market while the Contractor considers that the Discovery of the Non-Associated Gas could
                                            be commercially viable for exportation, the Contractor shall have all the liberty to develop
                                            the Gas Deposit provided it presents to the Minister a General Development Programme. If
                                            the Contractor starts the Development Operations for exportation, the Minister shall take
                                            all necessary provisions to ease the construction of the appropriate facilities. Provisions
                                            related to the Commercial Discovery and to the Government participation shall be applicable
                                            mutatis mutandis to the development and production of the said Non-Associated Gas as in the
                                            case of Crude Oil. Once the Contractor has started the Development Operations for exportation,
                                            the right given to the Contractor to export by virtue of this Article shall remain in force
                                            during the whole period.

 

		16.12	In
                                            the context of this Contract, the price of the Non-Associated Gas produced by a Gas Deposit
                                            meant to be used in Benin shall correspond to the price of the Natural Gas determined in
                                            accordance with the provisions of this Contract.

 

		16.13	In
                                            accordance with security norms and environmental protection, the Contractor shall have the
                                            right, after approval by the Minister, to build gas separation facilities in order to produce
                                            liquid gas and condensate.

 

    Page 28 of 77

    

    

 

ARTICLE
17: DAMAGES, ABANDONMENT, ENVIRONMENTAL PROTECTION AND SECURITY

 

		17.1	The
                                            Contractor shall be responsible for all damages and prejudices that its operations may cause
                                            to particular people or to the Government. The Contractor shall be bound to protect the Government
                                            against any damage for which it may be responsible through its activities undertaken by virtue
                                            of this Contract or through any related operation or activity. To that end, the responsibility
                                            against any claim and obligation stemming from death, accidents or damages caused by its
                                            activities, including those undertaken by virtue of this Contract, or the non-compliance
                                            of the Contractor with the rules and regulations in force in Benin. This Contract shall have
                                            no effect on the rights that third parties may claim against the Contractor by virtue of
                                            the laws in force in Benin.

 

		17.2	The
                                            Parties recognize that by their nature, the Oil Operations may produce an ecological imbalance
                                            in the Contract Region because of environmental pollution. Therefore, by implementing the
                                            Contract, the Contractor must adopt the necessary measures to prevent or minimize soil, atmosphere
                                            and water pollution, and take care so that the pollution will not harm the flora or the fauna
                                            and, in general, prevent any thing that could materially damage the environment. If the Contractor
                                            cannot prevent environmental pollution in accordance with the Constitution and Environmental
                                            Framework Act of Benin, it should take the appropriate measures to minimize its effects in
                                            accordance with the international norms. These measures must be communicated to the Minister
                                            for approval.

 

		17.3	To
                                            minimize or eliminate pollution, the Contractor must use appropriate technical measures approved
                                            by the Minister.

 

		17.4	The
                                            Contractor shall be responsible for damages caused to third parties following the environmental
                                            pollution provoked by its Oil Operations.

 

		17.5	The
                                            Contractor shall commit himself/herself to call for specialists in the field to study the
                                            possible incidence of Oil Operations on the environment. That study should be on:

 

		(a)	The
                                            state of the environment and the existing pollution level in the Contract Region and the
                                            neighbouring regions before the Oil Operations;

 

		(b)	The
                                            incidence that the Oil Operations may have on that environment.

 

The
study mentioned in paragraph (a) must be carried out in two phases:

 

		(1)	A
                                            preliminary study submitted by the Contractor to the Minister before the seismic survey of
                                            the Contract Region and

 

		(2)	The
                                            definitive study applicable to all the exploration period and that should be presented to
                                            the Minister before drilling the first well. The study mentioned in paragraph (b) must be
                                            carried out and submitted to the Minister at least ninety (90) days before drilling the said
                                            wells.

 

		17.6	The
                                            above-mentioned studies should include the measures used to eliminate or minimize, among
                                            others, the hereunder mentioned wastes as well as the way to neutralize them:

 

		(a)	Drilling
                                            mud and Hydrocarbons from the tests, completion, conditioning and abandonment of wells;

 

		(b)	Solvents,
                                            lubricants and other products used during the operations;

 

		(c)	Organic
                                            waste, rubbish and unusable products in the workplaces and camps.

 

    Page 29 of 77

    

    

 

		17.7	The
                                            Contractor must conceive and build its facilities and endeavour to minimize the environmental
                                            pollution and adopt, among others, the following measures on the drilling and exploitation
                                            equipment sites:

 

		(a)	Drainage
                                            systems/recuperation of overflowing Crude Oil and other derivatives and polluted waters;

 

		(b)	Waste
                                            management system.

 

		17.8	The
                                            Contractor shall commit himself/herself to include the provisions of this Article in all
                                            contracts negotiated with third parties and related to the Oil Operations.

 

		17.9	If
                                            the Contractor does not comply with the provisions of this Article and the Crude Oil or any
                                            other product overflows into the soil, the sea floor or into the sea, or if the activities
                                            of the Contractor cause another form of pollution or, in any other way, contaminate water
                                            supply points or plant or animal life, the Contractor should immediately take all appropriate
                                            measures consistent with Best Practices to control the pollution, clean all overflowing Crude
                                            Oil or any other product, or fix as completely as possible any damage caused.

 

		17.10	If,
                                            as a direct consequence of gross or deliberate negligence of the Contractor, there is an
                                            overflowing or a pollution, the cost of the activities to control, clean and repair shall
                                            be supported by the Contractor and shall not be considered as Oil Costs in accordance with
                                            this Contract.

 

		17.11	In
                                            case of a danger likely to affect the environment, the Contractor should immediately notify
                                            it to the Minister and take the measures set out in the emergency measures adopted by the
                                            Parties in compliance with Best Practices.

 

		17.12	At
                                            any time, the Contractor may return or abandon any part of the Contractual Zone or any Well
                                            not included in a Field, subject to prior notice of three (3) months to the Minister in charge
                                            of Hydrocarbons, provided that the Contractor has fulfilled all of its obligations pursuant
                                            to this Contract and has provided the Minister with detailed information on the status of
                                            any Deposit and the facilities and equipment located in this zone, in addition to any plan
                                            for the removal or dismantling of these facilities and equipment, including all technical
                                            and financial information. All abandonment operations must be carried out in accordance with
                                            the Law on Hydrocarbons.

 

		17.13	The
                                            abandonment of a Field by the Contractor and the corresponding abandonment plant shall require
                                            the prior approval of the Minister in charge of Hydrocarbons in accordance with the Law on
                                            Hydrocarbons. The Contractor shall prepare and submit to the Minister an abandonment plan
                                            for all Wells, facilities and equipment, the restoration of the land and the continuation
                                            of the Oil Operations, as applicable, in accordance with the Law on Hydrocarbons.

 

		17.14	Unless
                                            the Minister in charge of Hydrocarbons decides to retain the facilities and equipment in
                                            order to continue the Oil Operations in accordance with Article 17.17, the Contractor shall
                                            be obligated to fully abandon all of the Fields of the Contractual Zone before the end of
                                            the Exploration Period or any Extension Period, as applicable.

 

		17.15	Upon
                                            receipt by the Minister of the notification indicated in Article 17.12 or the abandonment
                                            of any Field, the Minister shall be entitled to resume any Discovery or any Field which the
                                            Contractor intends to abandon. If the Minister does not communicate its intention to resume
                                            the Oil Operations within three (3) months following receipt of the relevant notification,
                                            he shall be considered to have decided not to do so.

 

    Page 30 of 77

    

    

 

		17.16	In
                                            order to proceed with the abandonment of a Field, the Contractor shall contribute amounts
                                            to a Reserve Fund consistent with the estimated costs of the abandonment in accordance with
                                            the approved abandonment plan. The implementation period as well as the method of payment
                                            of the Reserve Fund shall be defined by mutual agreement between the Minister and the Contractor.

 

		17.17	If
                                            the Minister chooses to retain the facilities and equipment to continue the Oil Operations
                                            after the departure of the Contractor, the Reserve Fund thus established and the interests
                                            associated therewith shall be provided to the Minister to cover the subsequent abandonment.
                                            The Contractor shall be released for any other abandonment obligation regarding these facilities
                                            and equipment.

 

		17.18	The
                                            Contractor must take the necessary measures in accordance with Best Practices to properly
                                            and safely carry out the activities provided for in the Contract and must comply with the
                                            legal and regulatory provisions of Benin, including regulations concerning labour, environmental
                                            protection, health and safety. The Contractor must refrain from any action that endangers
                                            the health or safety of persons.

 

		17.19	The
                                            Minister shall have the right to inspect all sites, buildings and installations in the Contract
                                            Region. To have access to the sites, the Minister must inform the Contractor in advance.

 

		17.20	The
                                            Contractor should see to the safe and effective treatment of the water and residual oil and
                                            to the plugging of the wells before abandoning them.

 

		17.21	The
                                            Contractor should cement and abandon all production wells in accordance with common oil practices,
                                            when they stop producing within the Bloc.

 

		17.22	The
                                            Contractor should dismantle and remove in accordance with the procedure of abandonment in
                                            the Appendix all the platforms it may have installed in the Contract Region.

 

		17.23	The
                                            Contractor should rehabilitate the site in agreement with the Government at the end of the
                                            Contract or when the production of the Bloc stops (see provisional budget for site rehabilitation
                                            and consideration of the environmental factor). Dismantling, removing or abandoning the installations
                                            put up by the Contractor shall be done in compliance with the norms of the oil industry commonly
                                            respected in the Gulf of Mexico. On the contrary, the submarine installations or others should
                                            be in such a state as to ensure that they shall not be an obstacle to navigation.

 

		17.24	The
                                            Contractor shall leave all pipelines and installations free of oil at the end of the Contract
                                            in accordance with common oil practices.

 

		17.25	The
                                            Government shall explicitly agree that the Contractor shall not have any responsibility for
                                            abandonment or environmental rehabilitation other than the one explicitly stipulated in this
                                            Contract.

 

		17.26	Any
                                            amendment to this agreement on abandonment shall be agreed upon by both Parties.

 

		17.27	In
                                            case some laws or regulations in force related to the environment on the date of signature
                                            of the Contract change in such a way that they modify noticeably the economic balance of
                                            the Contract, the Parties shall refer to the provisions of Article 27.2.

 

    Page 31 of 77

    

    

 

 

ARTICLE
18: FOREIGN EXCHANGE ARRANGEMENTS

 

In the context
of the regulations in force in Benin, the Minister shall guarantee that during the life of the Contract, the Contractor and non-Beninese
sub-contractors shall be authorized to:

 

		(a)	Pay
                                            in foreign currency, totally or partially, salaries, reimbursements and other compensations;

 

		(b)	Open,
                                            keep and use bank accounts in foreign currency in the Republic of Benin and abroad and accounts
                                            in local currency in the Republic of Benin;

 

		(c)	Pay
                                            directly abroad, in foreign currency, foreign sub-contractors for the acquisition of capital
                                            goods and services related to the Oil Operations;

 

		(d)	Receive,
                                            transfer and keep abroad and posses freely all funds including, among others, all payments
                                            received for the exportation of Hydrocarbons and all payments received from the Government;

 

		(e)	Obtain
                                            from abroad all loans necessary for the Oil Operations;

 

		(f)	Purchase
                                            the local currencies necessary for the Oil Operations and convert into foreign currency all
                                            local currencies exceeding immediate local needs in the certified banks or exchange offices;

 

		(g)	Transfer
                                            abroad all foreign currencies exceeding the local needs of the Contractor. The rights given
                                            to the Contractor and to the Sub-contractors in this Article shall also be applicable to
                                            their foreign employees.

 

    Page 32 of 77

    

    

 

ARTICLE
19: LOCAL CONTENT, SOCIAL PROGRAMMES AND SIGNING BONUS

 

PRIORITY GIVEN
TO BENINESE COMPANIES

 

		19.1	With
                                            regard to selecting Sub-contractors to carry out the Oil Operations, the Contractor must
                                            give preference to Beninese Sub-contractors to the extent that they are competitive as far
                                            as quality, cost and technical capacity to carry out the activities within the established
                                            activity schedules.

 

EMPLOYMENT AND
TRAINING

 

		19.2	Starting
                                            from the effective date, the Contractor shall give hiring priority to Beninese personnel
                                            possessing the adequate qualifications at all levels of its organisation in accordance with
                                            Labour Legislation in the Republic of Benin.

 

		19.3	According
                                            to the employees’ skills, the contractor shall train or contribute to the training
                                            of said personnel to enable them to acquire the necessary qualifications for any position
                                            related to the Oil Operations. Using expatriate personnel is subject to prior authorisation
                                            of the Minister in charge of Hydrocarbons.

 

		19.4	Within
                                            three (3) months following the Effective Date of the Contract, the Contractor must notify
                                            the Minister of the allocation of an annual amount equal to one hundred thousand US Dollars
                                            ($100,000), which must be spent by the Contractor during the Exploration Phase for the
                                            training of the Minister’s oil sector officials.

 

		19.5	The
                                            aforesaid costs shall be recoverable as Oil Costs in accordance with the provisions of this
                                            Contract.

 

		19.6	The
                                            unused training funds shall be paid to the Government upon termination or expiration of the
                                            Contract.

 

SUPPORT FUND
FOR THE PROMOTION OF THE HYDROCARBON SECTOR

 

		19.7	The
                                            Government shall define and implement the oil activities promotion policy through the support
                                            fund for the Hydrocarbon sector.

 

		19.8	The Contractor agrees to contribute to this fund with an annual donation of one hundred thousand US
Dollars ($100,000). However, it may directly finance a promotion activity selected by the Minister in charge of Hydrocarbons using
this fund.

 

COMMUNITY DEVELOPMENT
FUND

 

		19.9	The Contractor shall be willing to contribute to the development of Benin communities through funding
community development projects that the Government shall submit to it. For this purpose, it must provide annual notification of its annual
donation of one hundred thousand US Dollars ($100,000) for the exploratory phase.

  

		19.10	The
                                            unused portion of the community development fund shall be paid to the Government upon termination
                                            or expiration of the Contract.

 

		19.11	The
                                            three funds will be renegotiated for the production phase.

 

    Page 33 of 77

    

    

 

SIGNING BONUS

 

		19.12	The
                                            company ELEPHANT OIL LTD has endorsed the airborne radiometric, magnetic and gravimetric
                                            surveys performed by FUGRO for an amount of two million, five hundred eighteen thousand,
                                            two hundred fifty ($2,518,250) US dollars. This contribution shall be paid in two instalments:

 

 

		●	The
                                            first instalment of five hundred eighteen thousand, two hundred fifty US dollars ($518,250)
                                            paid 30 days after signing the Contract;

 

		●	The
                                            second instalment of an amount of two million ($2,000,000) US dollars paid 30 days after
                                            payment of the first instalment.

 

The contribution of the company ELEPHANT
OIL LTD to the airborne radiometric, magnetic and gravimetric surveys does not constitute a recoverable cost.

 

ARTICLE
20: ACCOUNTING

 

		20.1	The
                                            Contractor must keep accounting records, as well as all financial information, books and
                                            records concerning the Oil Operations in national currency in the form required by the applicable
                                            Beninese Legislation.

 

		20.2	Accounting
                                            procedures to be applied by the Contractor shall be those set out in the Accounting Appendix
                                            D.

 

		20.3	The
                                            audited accounts of the Contractor must be submitted to the Minister for approval at the
                                            latest three (3) months following the end of the Calendar Year.

 

		20.4	The
                                            Minister may, by giving a notice to the Contractor, at the latest six (6) months following
                                            the submission date of the financial accounts, submit all the financial accounts of the Contractor
                                            relating to the Calendar Year in question to be audited by an international firm of chartered
                                            accountants designated by both parties. The Government shall bear the costs of that audit.

 

		20.5	Unless
                                            the Parties reach a mutual agreement, the Minister may submit all objections related to the
                                            accounts of the Contractor to an expert decision. Before deciding on an objection submitted,
                                            the expert must take into consideration the results of the financial audits carried out in
                                            accordance with the provisions of this Article. If the objection of the Minister is not submitted
                                            to an expert within the twelve (12) months following his receipt of the accounts, the objection
                                            in question shall be null and void. If the objection of the Minister is validated by the
                                            expert, the Contractor must rectify the accounts in question and meet the costs related to
                                            the audit and expertise irrespective of the provisions above.

 

    Page 34 of 77

    

    

 

ARTICLE
21: CONFIDENTIAL NATURE OF THE DATA

 

		21.1	All
                                            reports, data and information obtained or prepared by the Contractor, inasmuch as they relate
                                            to all or part of the Contract Region, shall be the entire property of the Beninese Government
                                            and shall be treated confidentially. Each party shall promise not to disclose them without
                                            first informing the other Party to:

 

		(a)	An
                                            affiliated company or a Sub-contractor of the Contractor;

 

		(b)	A
                                            financial institution for the purposes of a loan, a broker, or a legal or financial adviser;

 

		(c)	A
                                            stock market;

 

		(d)	Any
                                            potential transferee pursuant to Article 22 below.

 

		21.2	This
                                            clause shall not prevent the Minister from communicating certain information to any governmental
                                            entity and to credible persons interested in acquiring exploration and exploitation rights
                                            of Hydrocarbons in Benin.

 

		21.3	All
                                            reports, data and information communicated by the Minister or the Contractor to a third party
                                            in accordance with the provisions above, shall be in compliance with agreements, the terms
                                            of which shall guarantee that such data, information or reports shall be treated as strictly
                                            confidential by the receiver.

 

		21.4	The
                                            reports, data and information related to the Contract Region, and considered as important
                                            by the Minister for the implementation of an exploration programme by a third party in a
                                            neighbouring zone, may be communicated to it by the Minister. In return, the Contractor may
                                            have access to the data, information and reports obtained by the said third party concerning
                                            an adjoining zone of comparable exploratory interest. The confidentiality clauses shall apply
                                            to that third party.

 

		21.5	All
                                            reports, data and information, including interpretations and evaluations related to any surface
                                            area that is no longer part of the Contract Region following retrocession of surface or expiration
                                            of this Contract, shall be treated by the Contractor in strict confidentiality for a period
                                            of five (5) years following the date when the said area stopped being an integral part of
                                            the Contract Region or from the expiry date of this Contract.

 

		21.6	Any
                                            violation of the Confidentiality Clauses under this Article shall be punished according to
                                            the regulations in force in Benin regarding disclosure of professional secrets.

 

		21.7	Any
                                            news publication initiated by the Contractor and relating to the results of the operations
                                            undertaken in the frame of this Contract shall be subject to prior authorization from the
                                            Minister.

 

    Page 35 of 77

    

    

 

ARTICLE
22: ASSIGNMENT OF RIGHTS

 

		22.1	The
                                            Parties may assign all or part of their rights and obligations arising from this Contract.
                                            If the Contractor intends to assign or transfer its rights in whole or in part in accordance
                                            with the Contract, it must immediately submit a written request for authorisation to the
                                            Minister, unless the transfer shall be made to an Affiliate, in which case it must notify
                                            the Minister in writing of its intention to transfer sixty (60) days before the effective
                                            date or at a later date agreed upon with the Minister, after which the transfer shall become
                                            effective without the need for authorisation from the Minister. Any request should specify
                                            the name, address and any appropriate information about the technical and financial capacities
                                            of the assignee. Within thirty days (30) following the receipt of the request, the Minister
                                            must decide whether or not to approve the proposed transfer. Any disagreement of the Minister
                                            must be based on reasonable causes related to technical and financial capacities of the proposed
                                            assignee.

 

		22.2	If one
                                            of the Parties does a partial assignment of its rights and obligations arising from this
                                            Contract, the assignee shall be responsible, alone and jointly, for the guarantees, responsibilities
                                            and obligations of the assignor. If the assignment is total, the assignee shall be responsible
                                            alone for the said obligations and guarantees. Any assignee must adhere to the bank guarantees
                                            and give a guarantee to its parent company, if any, as required by this Contract.

 

    Page 36 of 77

    

    

 

ARTICLE
23: FORCE MAJEURE

 

		23.1	The
                                            Parties shall not be held accountable for any default or delay in fulfilling their obligations
                                            arising from this Contract if this default is due to a case of Force Majeure.

 

		23.2	Any
                                            action or event that is beyond the reasonable control of the Parties and which prevents them
                                            indefinitely or temporarily from fulfilling their obligations by virtue of the Contract shall
                                            be considered a case of Force Majeure. Therefore, the Force Majeure occurrence shall include
                                            but not be limited to the following cases: war or similar situations, embargoes, blockades,
                                            earthquakes, floods, fire, strike or lock-out, terrorist act, riots, and acts of state.

 

		23.3	The
                                            Party that shall put forward the case of Force Majeure should:

 

		a)	Inform
                                            as soon as possible the other Party by all means and confirm by registered mail with acknowledgement
                                            of receipt by describing precisely the event;

 

		b)	Take,
                                            if possible, all appropriate and legal measures to eliminate the cause of Force Majeure;

 

		c)	Inform
                                            the other Party in the same forms as soon as the Force Majeure has been eliminated and resume
                                            the execution of the contractual obligations.

 

		23.4	If the
                                            case of Force Majeure lasts for more than three (3) months, the Parties to the Contract shall
                                            meet to determine the appropriate actions to undertake.

 

		23.5	It shall
                                            be agreed that if for reasons of Force Majeure, one Party is unable to fulfil an obligation
                                            or exercise a right, then, in accordance with the Contract, the deadline given to fulfil
                                            the obligation or exercise the right, including any obligation or any subsequent right, shall
                                            be extended for a period equal to the duration of the Force Majeure.

 

    Page 37 of 77

    

    

 

ARTICLE
24: ARBITRATION AND EXPERTISE

 

		24.1	Arbitration
                                            

 

		24.1.1	Subject
                                            to the provisions above related to the expertise, any conflict or complaint related to a
                                            question or operation relating to the Contract, including among others, any dispute or complaint
                                            related to its validity, its interpretation, its implementation or omission of the obligations
                                            that it shall entail and that cannot be solved amicably between the Parties, should be settled
                                            with prejudice and exclusively through arbitration on the initiative of either Party.

 

		24.1.2	The
                                            arbitration procedure shall be enacted by three (3) arbitrators in accordance with the rules
                                            of conciliation and arbitration of the International Centre for Settlement of Investment
                                            Disputes (ICSID) of the World Bank Group. The Parties agree to respect the decisions of the
                                            arbitration tribunal.

 

		24.1.3	Unless
                                            the Parties otherwise decide by mutual agreement in writing, the third arbitrator designated
                                            as indicated above must not be a Benin national or a person having the same nationality as
                                            the Contractor.

 

		24.1.4	For
                                            any arbitration procedure in accordance with this Article:

 

		a)	The
                                            procedure must take place in Paris (France), unless otherwise decided by the Parties by mutual
                                            agreement;

 

		b)	French
                                            shall be the official language in any respect, and

 

		c)	The
                                            decision of the majority of the arbitrators shall be imposed on the Parties.

 

		24.2	Expertise

 

		24.2.1	Any
                                            Party wishing to submit a matter for the decision of an expert in compliance with a provision
                                            of the Contract that provides for that procedure, including the Accounting Appendix, or any
                                            other that the Parties shall decide to submit by mutual agreement for the decision of an
                                            expert under this Article, should notify it to the other Party. This notification must include
                                            a list of at least three (3) proposed experts. The other Party should respond to that notification
                                            within thirty (30) days following the date of receipt either by accepting one (1) of the
                                            proposed experts or by proposing at least three (3) others. In this last case, the Party
                                            that presented the initial notification shall have thirty (30) days to accept one (1) or
                                            reject all of the experts proposed by the other Party. Non-notification shall constitute
                                            a rejection of the proposed experts.

 

		24.2.2	If
                                            the Parties do not reach an agreement in selecting an expert within the sixty (60) days following
                                            the date of the first notification by virtue of the paragraph above, any of the parties may
                                            ask the Technical Expert Centre of the International Chamber of Commerce (ICC), based in
                                            Paris, to designate an expert in accordance with its regulations.

 

		24.2.3	If
                                            the expert agreed upon by the Parties or designated in accordance with the above-mentioned
                                            provisions declines the request of the Parties, dies or, for any other reason, is in the
                                            impossibility to act as an expert, the Parties must meet immediately to designate another
                                            expert to replace it. If the parties do not reach an agreement within thirty (30) days following
                                            the date it has been established that the first expert could not act, any of the Parties
                                            may ask the Technical Expert Centre of the ICC to designate another one in accordance with
                                            its regulations.

 

		24.2.4	The
                                            Parties shall be bound to cooperate with the expert as much as possible and each Party must
                                            ensure the cooperation of its Affiliates. The Parties should ensure the accessibility of
                                            the data and information the Parties or their Affiliates can give and that, according to
                                            the expert, could contribute to its decision. The representatives of the Parties shall have
                                            the right to consult the expert and to give it written information, but the expert can impose
                                            reasonable limits to this right. It shall be free to evaluate if a document or information
                                            submitted for its assessment is justified or relevant.

 

		24.2.5	All
                                            costs related to the selection and use of the expert shall be financed jointly and equally
                                            by the Parties.

 

		24.2.6	Any
                                            decision taken by the expert in accordance with this Article by virtue of a provision of
                                            the Contract that explicitly provides for this procedure shall be final and binding on the
                                            Parties. No Party shall submit an issue decided by an expert to an arbitration procedure
                                            as provided in this Contract. By mutual agreement among the Parties, issues submitted to
                                            the decision of an expert may be the object of an ultimate and final decision through arbitration,
                                            if the Parties agree to do so when submitting the issue to an expert.

 

    Page 38 of 77

    

    

 

ARTICLE
25: CANCELLATION

 

		25.1	CANCELLATION
                                            BY THE STATE OR BY THE CONTRACTOR

 

		25.1.1	Notwithstanding
                                            any other action provided for herein, this Contract may be terminated by the Minister in
                                            charge of Hydrocarbons without damages to the Contractor for any of the following reasons:

 

		a)	any
                                            significant breach by the Contractor of any provision contained in this Contractor or the
                                            Law on Hydrocarbons that is not corrected within 30 days after notification and which is
                                            not attributable to an action or omission of the Government or any Person representing the
                                            Government;

 

		b)	a
                                            delay of over three (3) months by the Contractor in making any payment owed to the Government
                                            which is not corrected and which is not attributable to an action or omission of the Government
                                            or any Person representing the Government;

 

		c)	the
                                            interruption of Development works in a Field for six (6) consecutive months, except when
                                            such interruptions:

 

		(i)	has
                                            been approved in advance by the Minister in charge of Hydrocarbons; or

 

		(ii)	is
                                            the result of an action or omission of the Government or any Person representing the Government;
                                            or

 

		(iii)	is
                                            the result of Force Majeure occurrence;

 

		d)	when,
                                            after Production of a Field is begun, its exploitation is interrupted for at least three
                                            (3) consecutive months, without the prior authorisation of the Minister unless this interruption
                                            (i) is due to an action or omission of the Government or any Person representing the Government
                                            or (ii) is the result of a force majeure occurrence;

 

		e)	when
                                            the Contractor does not comply with an arbitration judgement within the required time-frame
                                            in accordance with the provisions of Article 24, provided that this non-compliance is not
                                            attributable to an action or omission of the Government or any Person representing the Government;

 

		f)	a
                                            breach of this Contract resulting from illegal operations or operations in violation of national
                                            or international law (not attributable to an action or omission of the Government or a Person
                                            representing the Government);

 

		g)	if
                                            the contractor:

 

		●	decides
                                            not to extend the Initial Exploration Period and no Commercial Discovery has been declared
                                            by the Contractor during this period;

 

		●	decides
                                            to extend the Initial Exploration Period and no Commercial Discovery has been declared by
                                            the Contractor during an Extension Period or an additional extension thereof;

 

		●	is
                                            declared bankrupt or begins court-ordered liquidation as a result of its financial insolvency
                                            or has made legal or financial arrangements with its creditors as a result of its insolvency,
                                            unless the Contractor is able to provide the Government with a new financial guarantee acceptable
                                            to the Minister in charge of Hydrocarbons, at his absolute discretion, which shall guarantee
                                            the capacity of this Party to fulfil its obligations arising from this Contract.

 

		25.1.2	During
                                            the exploitation period, the Contractor may terminate the Contract by written notice to the
                                            Minister at least sixty (60) days before the date of termination, provided that the Contractor
                                            has fulfilled all of its contractual obligations, tax obligations and obligations arising
                                            from the corresponding Annual Work Programme.

 

		25.1.3	If
                                            the Contract is terminated in accordance with this Article, the Contractor shall have the
                                            right to remove and export all goods it has used and the title of ownership of which has
                                            not been transferred, partially or totally, subject to paying all debts due to the Government.
                                            The Contractor shall lose all other rights related to the Contract. It shall not be released
                                            from any of the obligations it may have contracted before the effective date of termination,
                                            whether they derive from the said termination or are the object of the termination.

 

		25.1.4	If
                                            the Contractor challenges any of the events provided in this Article or affirms that one
                                            of these events happened but it has remedied it, the Contractor may appeal to an arbitration
                                            procedure or the decision of an expert within thirty (30) days following the date of receipt
                                            of the termination notification from the Minister.

 

		25.1.5	Before
                                            leaving the Contract Region following a termination, the Contractor should make sure that
                                            all the wells are left in good state in accordance with Best Practices.

 

		25.1.6	The
                                            termination of the Contract takes place without any prejudice to any other right that, in
                                            compliance with the Contract, could have been established in favour of the Parties before
                                            the said termination.

 

		25.2	Notification
                                            of Termination and grace period

 

		25.2.1	The
                                            Minister in charge of Hydrocarbons shall declare this Contract terminated after sending a
                                            formal notification to the Contractor by any means that leaves a written record requesting
                                            that it remedy the situation or failure within 15 days of receipt of this notice with regard
                                            to payments or within 60 days of receipt of this notice for all other situations.

 

		25.2.2	If
                                            the Contractor does not comply with this notification within the required period or does
                                            not demonstrate within fifteen (15) Days or sixty (60) days that it has began and shall continue
                                            diligently and promptly to remedy the situation or failure in question, the Minister may
                                            automatically terminate this Contract.

 

    Page 39 of 77

    

    

 

ARTICLE
26: BANK GUARANTEE

 

		26.1	To fulfil
                                            its minimum work obligations to the reasonable satisfaction of the Government, the Contractor
                                            must submit an irrevocable bank guarantee of one million ($1,000,000) US Dollars within ninety
                                            (90) days of the Effective Date.

 

		26.2	Failing
                                            to present the bank guarantee within the required deadline shall be a violation of the provisions
                                            of the Contract and shall lead de facto to its termination by the Minister in accordance
                                            with the provisions relating to termination.

 

		26.3	The
                                            payable amount in compliance with the above-mentioned bank guarantee shall be gradually reduced
                                            in as much as the minimum work obligations for the year involved are well performed. For
                                            the purpose of this reduction, the Contractor may at any moment submit to the approval of
                                            the Minister a declaration showing the level at which the work obligations have been performed.
                                            This approval should intervene in reasonable deadlines.

 

		26.4	To make
                                            effective the above-mentioned deduction, the Minister should notify his approval of the bank
                                            guarantee to the issuing bank within a deadline of thirty (30) days from the date of receipt
                                            of the Contractor’s request.

 

		26.5	If the
                                            Contractor considers that the above-mentioned approval of the Minister has unjustifiably
                                            delayed or if the Minister considers that the Contractor has not performed a minimum work
                                            obligation satisfactorily in accordance with Best Practices, any one of the Parties may submit
                                            the matter for the decision of an expert.

 

		26.6	The
                                            guarantees to be presented by the Contractor in accordance with this Article must be approved
                                            by the Minister. The Contractor must submit to the Minister the original documents of the
                                            guarantees so that he can check and preserve them.

 

    Page 40 of 77

    

    

 

ARTICLE
27: NOTIFICATION

 

		27.1	To
                                            be considered valid, any communication or notification relating to the Contract must be presented
                                            on a working day or received by registered mail, telegraph, telex or fax addressed to the
                                            receiver to the following addresses:

 

The Government:

 

Represented by the Minister of Energy,
Oil and Mining Research, Water and Development of Sustainable Energy

 

04 P.O. Box: 1412

 

Cotonou (Republic of Benin)

 

Fax (229) 21 31 35 46

 

The Contractor:

 

...........................................................

 

...........................................................

 

...........................................................

 

..........................................................

 

		27.2	The
                                            Parties shall have the right to change their address for the purpose of the provisions of
                                            notification and communication by notifying it in writing to the other Party at least five
                                            (5) days before the effective date of change.

 

    Page 41 of 77

    

    

 

ARTICLE
28: APPLICABLE LEGISLATION, STABILISATION AND COMPENSATION

 

		28.1	This
                                            Contract shall be governed and interpreted in accordance with the laws and regulations in
                                            force in the republic of Benin.

 

		28.2	If
                                            the laws and regulations in force in Benin at the date of signature and applicable to the
                                            implementation or interpretation of the Contract or to the economic rights of the Parties
                                            are amended in a way to modify noticeably the existing economic balance between the Parties
                                            at the date of signature, they should meet to discuss any amendment that, by mutual agreement,
                                            shall restore the said balance. Any amendment adopted by mutual agreement by the Parties
                                            should take into account the most likely technical and commercial parameters in case of future
                                            development of the Hydrocarbons. If the parties do not agree on the parameters to be used
                                            for these calculations, or on the amendments that should restore the existing economic balance
                                            at the date of signature, the disagreements must be submitted for decision by an expert.

 

If
the laws of Benin are modified and therefore reduce the benefits or advantages of the contracting party, the terms of the Contract shall
be modified in order to balance the economic benefits of the contracting Party as they were on the Date of Signing of the Contract.

 

		28.3	If,
                                            in the Code or the regulation in force in Benin, there is no appropriate rule for the disagreement
                                            related to the Contract, the customs and practices of the international oil industry and
                                            the principles of law applicable in the field in the oil countries shall be used.

 

		28.4	The
                                            Parties agree that the Government shall bear the consequences of contractual, legal and financial
                                            commitments vis-à-vis the third parties, as well as any conflict and damages occurring
                                            for the duration of the Contract.

 

    Page 42 of 77

    

    

 

ARTICLE
29: INFRASTRUCTURE

 

		29.1	The
                                            Government shall make things easier for the Contractor to undertake the Oil Operations, use
                                            any roads, storage tanks and other storage and treatment structures, quays and other loading
                                            and exportation structures, railroads, pipelines and other existing transportation infrastructures
                                            in Benin and that are not used exclusively for other activities including other oil activities.

 

		29.2	The
                                            Contractor shall pay the rights of passage and other reasonable fees for using such infrastructures
                                            in accordance with the regulations in force in Benin. The costs incurred in this context
                                            shall be considered as Oil Costs and may be recovered by the Contractor but shall not exceed
                                            those paid by the public in general or other parties in the same situation as the Contractor.

 

    Page 43 of 77

    

    

 

ARTICLE
30: GUARANTEES FROM PARENT COMPANIES

 

The
Contractor shall agree to produce on the Effective Date of the Contract a letter from the Parent Companies guaranteeing the performances
of ELEPHANT OIL LTD for all obligations described or referred to in the Contract.

 

    Page 44 of 77

    

    

 

ARTICLE
31: FINAL PROVISIONS

 

		31.1	If on
                                            one or more occasions, the Ministry or the Contractor fails to put forward or to underline
                                            the fulfilment of one of the provisions of the Contract, this shall not be interpreted as
                                            a renunciation of the future application of the provision or right in question.

 

		31.2	All
                                            matters that are not expressly set out in this Contract shall be governed by the Code and
                                            the other laws and regulations of the Republic of Benin.

 

		31.3	If a
                                            provision of the Contract is declared null or invalid for any reason whatsoever, that shall
                                            not mean that the Contract or any of its provisions may be declared null or void, unless
                                            the Contract or its other provisions are concerned by that nullity.

 

		31.4	The
                                            Contract cannot be modified without the unmistakable and written consent of the Parties,
                                            but the Minister may, however, extend the period, during which the Contractor should perform
                                            well any obligation incumbent on it, or both Parties may exercise freely, implicitly or explicitly
                                            any right conferred to them by virtue of this Contract.

 

		31.5	The
                                            titles used in the Contract shall serve only to make it understandable and shall not be interpreted
                                            as bearing a particular meaning.

 

		31.6	Any
                                            reference in the singular shall include the plural and vice-versa.

 

		31.7	Any
                                            reference to gender shall include both genders.

 

		31.8	The
                                            Contract constitutes the full agreement of the Parties and shall replace all results of agreements
                                            and negotiations completed between the Parties before the date of signature.

 

		31.9	The
                                            Contract, once signed by both Parties, shall be published in the Official Gazette of the
                                            Republic of Benin and everywhere the need shall arise.

 

		31.10	This
                                            Contract is signed in two (2) originals.

 

Drafted
in Cotonou on 

 

	For the Government 

    of the Republic of Benin 
	 	For the Contractor
    

     

	 

    The Minister
    of Energy, Oil and Mining Research, Water and Development of Renewable Energy

     

    Barthélémy
    Dahoga KASSA 
	 	 

    President
    of ELEPHANT OIL LTD

     

     

    Matthew
    LOFGRAN

 

    Page 45 of 77

    

    

 

APPENDIXES

 

    Page 46 of 77

    

    

 

APPENDIXES

 

APPENDIX A: COORDINATES
OF THE CONTRACT REGION

 

APPENDIX B: MAP
OF THE CONTRACT REGION

 

APPENDIX C: BANK
GUARANTEE

 

APPENDIX D: ACCOUNTING
APPENDIX

 

APPENDIX E: ABANDONMENT
PROCEDURE

 

    Page 47 of 77

    

    

 

APPENDIX “A”

 

COORDINATES
OF THE CONTRACT REGION 

 

		Ø	BLOC
                                            B = 4590 Km2

 

	BLOCS	POINTS	LONGITUDE	LATITUDE	AREA
	 	 	degree	Min	Dry	degree	Min	Dry	Km2
	B	C’	2	20	0	6	52	0	4590
	D’	1	37	20	6	52	0
	HDD:
    	1	38	0	6	14	0
	CC	2	20	0	6	21	0

 

    Page 48 of 77

    

    

 

APPENDIX B 

 

  

    Page 49 of 77

    

    

 

APPENDIX “C”

 

BANK GUARANTEE
TEMPLATE

 

The Minister of Energy, Oil
and Mining Research, Water, and Development of Renewable Energy

 

COTONOU

 

Dear Sir/Madam,

 

This guarantee
shall be based on the Oil Exploration and Exploitation Contract in the Republic of Benin, between the Minister of Mines, Energy and Water
of the Republic of Benin, representing the Benin Government (henceforth designated the Minister), and .........................................................
(henceforth designated the Contractor), signed on ______________ of the year ____________, (henceforth designated the Contract).

 

In accordance with
Article 26 of the Contract, the Contractor shall be bound to give to the Minister a bank guarantee in order to ensure the performance
of its obligations related to the minimum works planned during the exploration period in compliance with Article 6 of the Contract.

 

The Bank ________________________,
hereby declares to be joint and several guarantor of the Contractor before the Minister for up to _____________________________________________________________________________
(_________________________________) US dollars to ensure the good performance, by the Contractor, of the minimum work obligations set
out in Article 6 of the Contract.

 

The obligation
which the Bank shall assume __________________________ under this guarantee shall be limited to paying to the Minister the amount requested
in its payment request, provided it does not exceed the normal amount of the bank guarantee on the date the bank payment request is submitted,
after deduction from the initial amount of the amount of the reduction authorisations issued by the Minister and received by the Bank
in accordance with the provisions of section 4 of this guarantee.

 

1-
This bank guarantee shall be several, irrevocable, unconditional and automatically enforceable. It shall be payable within the specified
deadlines, upon presentation of a notarized letter addressed by the Minister to the Bank and requesting the payment of an amount not
exceeding the amount in force in the bank guarantee declaring that the Contractor has not performed its minimal work obligations in accordance
with the provisions of the Contract, and accompanying the said letter, by way of sole complaint and justification, of a certified copy
before notary of the notarized letter addressed by the Minister to the Contractor indicating to him his intention to make effective the
bank guarantee.

 

This
notarized letter of the Minister to the Contractor must be submitted to the latter at least fifteen (15) calendar days before the date
on which the Minister presents the claim for payment to the Bank.

 

    Page 50 of 77

    

    

 

2-
The amount of this bank guarantee must be reduced each time the Bank __________________ receives from the Minister a letter indicating
that the Contractor has performed part of its minimum work obligations in accordance with the Contract. The reductions shall be made
according to the following procedures, amounts and conditions:

 

		a)	With
                                            regard to the performance of the seismic works: each kilometre of seismic survey performed
                                            and interpreted, up to ......km, representing the minimal work obligations: _____________________________
                                            ( ______________ ) US dollars;

 

		b)	With
                                            regard to exploration drillings: each compulsory exploration well duly drilled up to a geological
                                            age target of the Lower Cretaceous age or basement ( ___________________ ) US dollars.

 

3-
The Contractor must present the application for reduction to the Minister who, in accordance with the stipulations of the Contract,
should authorize them speedily and in writing within the deadlines provided in Article 26 of the Contract, not sending a notification
of the said authorization to the Contractor. This authorization must specify the amount of the reduction to be made in accordance with
the above-mentioned paragraphs.

 

4-
After receipt of the above-mentioned notification of the Minister, the Bank ___________________________ must immediately reduce the
amount of the bank guarantee in the proportion indicated and must inform the Minister about that reduction in writing.

 

It
shall not be necessary to establish a new guarantee document with the reduced amount; the initial document shall be considered valid
for the indicated amount.

 

5-
The bank guarantee shall expire at the latest _______________ ( ___________________________ ) calendar years and ( _____________________
) working days (in accordance with the definitions of the Contract) from the date this Contract has been signed, that is _____________________,
unless before that date the Bank ______________ and the Contractor assume all their responsibilities related to this guarantee; in that
case this bank guarantee shall be annulled on the date of the above-mentioned letter of the Minister.

 

From
the expiry or cancellation date, no claim shall be presented on account of this bank guarantee, and the Bank ___________________________
and the Contractor shall be entirely divested of any responsibility or obligation on account of this guarantee.

 

Respectfully,

 

The
Bank _________________________________

 

    Page 51 of 77

    

    

 

APPENDIX “D”

 

ACCOUNTING APPENDIX

 

ACCOUNTING AND
FINANCIAL PROCEDURES

 

This Appendix shall
be attached and shall be part of the Exploration and Exploitation Contract.

 

Dated

 

_______________________________________________

 

Between the Government
of the Republic of Benin,

 

ELEPHANT OIL
INTERNATIONAL 

 

and

 

The xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

 

    Page 52 of 77

    

    

 

TABLE OF CONTENTS

 

		 	PAGES
	CHAPTER 1:	General Provisions	54
	CHAPTER 2:	Classifications, distribution of costs and expenditures	56
	CHAPTER 3:	Cost recovery method of the Contractor	60
	CHAPTER 4:	Inventory and valuation of assets	66
	CHAPTER 5:	Activity report during the Exploitation Period	66
	CHAPTER 6:	Production Report	68
	CHAPTER 7:	Report on the value of production	69
	CHAPTER 8:	Report on recoverable costs	70
	CHAPTER 9:	Statements of expenses and revenues	71
	CHAPTER 10:	Annual report	72
	CHAPTER 11:	Annual budget	73
	CHAPTER 12:	Forecasts and long-term plans	74
	CHAPTER 13:	Accounting & financial review procedures	75
	CHAPTER 14:	Disagreement with the Contract	76

 

    Page 53 of 77

    

    

 

CHAPTER 1: GENERAL
PROVISIONS

 

The
main objective of this Appendix shall be to establish the accounting rules and procedures used to determine the investments, expenditures,
operating costs and revenues of the Contractor.

 

		1.1	Definitions
                                            

 

The terms used
in this Appendix shall have the same meaning as in the Contract.

 

		1.2	The
                                            reports the Contractor should present:

 

		a)	Within
                                            thirty days (30) following the Effective Date, the Contractor shall submit for the approval
                                            of the Minister the outlines of a draft accounting procedures and operational records. These
                                            procedures should comply with the standards in force in Benin and compatible with those of
                                            the International Oil Industry. Within the sixty (60) days following the receipt of the above-mentioned
                                            documents, the Minister should either approve them or request their revision. Within a deadline
                                            of ninety (90) days following the approval by the Minister, the Contractor, based on the
                                            recommendations made, will fine-tune the accounting manuals and procedures that shall be
                                            in force over the life of the Contract.

 

		b)	The
                                            reports related to the Oil Operations that the Contractor should produce regularly shall
                                            be those stipulated in the Contract, the Appendix and those that shall form later the subject-matter
                                            of an agreement between the Parties or that may be required by Benin legislation.

 

		1.3	Accounting
                                            System

 

The accounting
system of the Oil Operations shall be prepared by the Contractor in accordance with the provisions of the Contract and the National Accounting
System. The Full Cost Accounting method (FCA) shall be used.

 

    Page 54 of 77

    

    

 

		1.4	Languages
                                            and units of account to be used:

 

		a)	The
                                            accounts shall be kept in Benin local currency. The metric unit and the Barrels shall be
                                            the measures concerned by this Appendix. French shall be the language used.

 

		b)	The
                                            rules of accounting and financial procedures shall aim at preventing the Minister and the
                                            Contractor from experiencing gains or losses through exchange at the expense or profit of
                                            either of the Parties. However, in case of a gain or loss on exchange, it shall be credited
                                            or debited from the accounts under this Contract.

 

		c)	The
                                            revenues and expenditures in CFA Franc or in US dollars shall be converted from the CFA Franc
                                            into US Dollar and from the US dollar into CFA franc based on the average between the exchange
                                            rate as sold and the exchange rate as purchased of the currencies in question, as published
                                            the last day of the preceding month by specialized journals of Central Bank of the West African
                                            States (BCEAO) or the IMF.

 

		d)	If
                                            an increase or decrease – isolated or cumulative -, of ten percent (10 %) or more takes
                                            place in the exchange rates between the CFA franc and the US Dollar, during any month, the
                                            exchange rate to be used shall be the following:

 

		e)	For
                                            the period going from the first day of the month until the day such increase or decrease
                                            takes place for the first time, the average of the official exchange rates as purchased and
                                            as sold between the US dollar and the CFA Franc as published the last day of the preceding
                                            month;

 

		f)	For
                                            the period going from the day when this increase or this decrease takes place for the first
                                            time until the end of the Month, the average rate of the official exchange rates as purchased
                                            and as sold between the US dollar and the CFA Franc as published the day when such increase
                                            or decrease takes place.

 

		1.5	Payments
                                            

 

		a)	All
                                            payments between the Parties, unless otherwise agreed upon, will be made in accordance with
                                            the Contract and through a bank to be designated by both Parties.

 

		b)	All
                                            the amounts owed by one of the Parties, by virtue of the Contract during any one Calendar
                                            Month, shall be subject at the time of payment, for any day of the Month following the deadline,
                                            to a compound daily interest corresponding to the rate of the Contract + 1%.

 

    Page 55 of 77

    

    

 

CHAPTER 2: CLASSIFICATIONS,
DISTRIBUTION OF COSTS & EXPENDITURES

 

All
expenditures related to the Oil Operations shall be classified and distributed as follows:

 

		2.1	Exploration
                                            Costs shall comprise all direct costs and indirect expenses incurred for Oil Exploration
                                            in the Contract Region, before obtaining the Exploration Permit, namely:

 

		a)	Geophysical,
                                            geochemical, paleontological, geological, topographic and seismic surveys and their respective
                                            interpretations.

 

		b)	The
                                            drilling and core boring of Exploration and Evaluation Wells, provided they are not transformed
                                            into Development Wells.

 

		c)	The
                                            labour and materials used to drill the above-mentioned Exploration Wells including the associated
                                            services.

 

		d)	Facilities
                                            used exclusively to this end, including access roads.

 

		e)	Costs
                                            of services related to operations as described in Section 2.4 of this Chapter and agreed
                                            upon between the Minister and the Contractor.

 

		f)	Administrative
                                            and general expenditures related to the Exploration Operation as described in Section 2.5
                                            of this Chapter, and agreed upon between the Minister and the Contractor.

 

		g)	Any
                                            other contractual costs incurred before the beginning of the commercial production and that
                                            was not set out in Section 2.2.

 

    Page 56 of 77

    

    

 

		2.2	Production
                                            development investments comprising all expenditures incurred during Development and Production
                                            Operations, namely:

 

		a)	Drilling
                                            of Production Wells from a reservoir already discovered, whether they are dried up or in
                                            production.

 

		b)	Completion
                                            of wells for production.

 

		c)	Intangible
                                            costs for drilling such as labour, consumables and costs relating to drilling and deepening
                                            wells for production.

 

		d)	Costs
                                            of development facilities such as pipelines, flexible, production and processing units, wellhead
                                            and bottom hole equipments, assisted recovery systems, drilling platforms, facilities for
                                            storage of Hydrocarbons, terminals and dykes for exportation, ports and their facilities
                                            and access roads for production activities.

 

		e)	Costs
                                            of services relating to Production Operations described in Section 2.4 of this Chapter and
                                            as agreed upon between the Minister and the Contractor.

 

		f)	Administrative
                                            and general expenditures related to the operations described in Section 2.5 of this Chapter
                                            and agreed upon between the Minister and the Contractor.

 

		g)	Any
                                            other Development costs incurred before the beginning of Commercial Production.

 

    Page 57 of 77

    

    

 

		2.3	Operating
                                            Costs comprising expenditures incurred to run the Field, after the start up of the commercial
                                            production. These include:
	 	 	 

		●	Cost
                                            of electrical power supplies to run the Wells.

 

		●	Maintenance
                                            and repair costs of machines, equipments and installations.

 

		●	Processing,
                                            transport and storage costs of Crude Oil or Gas.

 

		●	Costs
                                            of the production control laboratory.

 

		●	Ground,
                                            sea and air transportation fees for equipment and staff.

 

		●	Costs
                                            related to security, protection and surveillance.

 

		●	Well
                                            reconditioning costs.

 

		●	Insurance
                                            and certification costs.

 

		2.4	Service
                                            costs representing the direct or indirect expenditures for support services for Oil Operations,
                                            namely warehouses, dykes, ships, vehicles, rolling stock, air transport, security and fire
                                            fighting stations, workshops, water systems and sewers, power plants, housing, recreational
                                            and community facilities as well as furniture, tools and equipment used for those activities.
                                            Service costs for one Calendar Year comprising all of the costs incurred in the Year in question
                                            for hiring, purchasing and/or constructing such installations as well as the annual costs
                                            incurred for their maintenance and operation. All of the service costs shall be properly
                                            shared as stipulated above.

 

    Page 58 of 77

    

    

 

		2.5	Administrative
                                            and general expenditures abroad including:

 

		a)	All
                                            administrative and general expenditures of the Headquarters and offices including personnel
                                            costs;
	 	 	 

		b)	Costs
                                            of services rendered by the Headquarters outside Benin.

 

All
administrative and general expenditures, distributed as stipulated above, shall be defined each month of a Calendar Year by a percentage
of accumulated Oil Costs during the said Calendar Year according to the following scale:

 

	 	From 0 to 10,000,000
    dollars	-	3 %
	 	 	 	 
	 	next 10,000,000 dollars	-	2 %
	 	 	 	 
	 	more than 20,000,000 dollars	-	1 %

 

    Page 59 of 77

    

    

 

CHAPTER 3: COST
RECOVERY METHOD OF THE CONTRACTOR

 

By
virtue of the provisions of the Contract, the Contractor should bear all costs and expenditures related to the Oil Operations. These
costs and expenditures shall be recovered by the Contractor according to the following provisions:

 

		3.1	Costs
                                            recoverable without the approval of the Minister relating to works previously planned by
                                            the Contractor and approved by the Minister in accordance with the provisions of the Contract.

 

They
shall include: exploration costs, development costs, operating costs, costs of services and administrative and general expenditures described
respectively in sections 2.1; 2.2; 2.3; 2.4 and 2.5 above.

 

		a)	Personnel
                                            

 

Costs
related to the employees of the Contractor assigned to Benin and directly employed temporarily or permanently in the context of the Oil
Operations shall be considered under the following conditions:

 

		(i)	The
                                            complete costs of wages and salaries;

 

		(ii)	Reasonable
                                            costs incurred by the Contractor for leave, illness, disability benefits, living and housing
                                            allowance, travel, bonuses and other benefits generally applicable to wages and salaries
                                            deductible as direct costs in the context of this Appendix, as well as the proportional costs
                                            for benefits of employees such as, among others, life insurance and health insurance, corporate
                                            insurance, hospitalization, retirement, bonuses and other similar benefits.

 

		(iii)	Expenditures
                                            or contributions made on account of taxes imposed on the said employees by a public authority;

 

		(iv)	Transport
                                            fees of employees, equipment, materials and elements necessary for the Oil Operations.

 

		(v)	Costs
                                            incurred by the Contractor to relocate employees to or from the Contract Region or in its
                                            vicinity, whether they are assigned permanently or temporarily to the Oil Operations.

 

When
an employee is assigned to activities other than the Oil Operations, the relocation costs should be charged according to rigorous accounting
principles that are widely accepted.

 

The
relocation, travel costs of employees and their family, moving personnel effects of employees and of their family and any other expenses
in compliance with the practices of the oil industry.

 

The
relocation costs from the Contract Region or its vicinity to another foreign location shall not be recoverable unless if this foreign
site is a habitual residence area of the employees.

 

		b)	Offices,
                                            equipment and other facilities:

 

		(i)	Costs
                                            incurred by using offices, outbuildings, camps, warehouses, housing and other facilities
                                            of the Contractor in Benin and used directly for the Oil Services. If these installations
                                            are used for operations other than the Oil Operations and it is not possible to define the
                                            expenditures as direct expenditures related to the Oil Operations for which the service is
                                            rendered, the costs should be systematically and reasonably charged to the installations
                                            to which the service has been rendered.

 

		(ii)	Costs
                                            incurred through the acquisition, hiring, installation, exploitation, repairs and maintenance
                                            of communication systems, including radio and microwave installations used directly for the
                                            operations.

 

    Page 60 of 77

    

    

 

		c)	Performance
                                            of Services

 

		i)	Costs
                                            and expenditures incurred using Consultants on account of technical services and those of
                                            any other nature directly related to the Oil Operations, including but not limited to, laboratory
                                            analyses, industrial designs, geophysical and geological interpretations, engineering and
                                            data processing obtained from external sources.

 

		ii)	Amounts
                                            charged for services rendered by the affiliates should be competitive with the costs of services
                                            of the same quality by a third party.

 

		d)	Contractor’s
                                            material and equipments

 

For
the evaluation of material and equipment provided by the Contractor based on its own inventory or that of its Affiliates, the values
’‘A’’, ’‘B’’, ’‘C’’ should be considered depending on the situation,
since the surplus on the correct price on the Benin national market is not known:

 

		-	New Material
                                            and Equipment (Category ’‘A’’)

 

New
materials and equipment shall be evaluated at the price of the corresponding commercial invoice increased by additional import costs,
if any, and by other costs generally accepted by accounting techniques and practices.

 

		-	Used materials
                                            and equipments (Category ’‘B and ’‘C’’) shall be considered
                                            used without needing to be restored; these materials and equipment shall be evaluated at
                                            seventy-five percent (75%) of the price of the new materials and equipment.

 

Equipment
and materials shall be considered category ’‘C’’ when they can be used for their initial function after they
have been restored appropriately. These equipment and materials shall be evaluated at fifty percent (50%) of the price of the new equipment
and materials.

 

    Page 61 of 77

    

    

 

		e)	Acquisition
                                            of goods and equipments

 

		i)	The cost
                                            of acquisition of goods and equipment from third parties shall include customs fees, transport
                                            fees, loading and unloading fees, fees for purchasing procedures, customs import and export
                                            duties, fees to obtain licenses and costs of equipment and goods lost during transit and
                                            which are not covered by an insurance company. The accumulation of excess stocks must be
                                            minimized, taking into account the place of the sources of supply and the time necessary
                                            to receive the goods and equipment at remote locations.

 

		ii)	Any material
                                            bought by the Contractor in the context of the Oil Operations shall be inspected at the Government’s
                                            request before using them in accordance with applicable regulations.

 

		iii)	Since
                                            the Contractor does not guarantee the material beyond the guarantee offered by the supplier
                                            or the manufacturer, any money received by the Contractor from the suppliers, manufacturers
                                            or their representatives to compensate damaged materials or equipment shall be credited to
                                            the Contractor’s accounts at the end of the Contract and shall be deducted from recoverable
                                            costs.

 

    Page 62 of 77

    

    

 

		f)	Insurance
                                            costs

 

These
shall be costs incurred by the Contractor or by an Affiliate Company to obtain a competitive insurance policy in the context of the Oil
Operations on a competitive basis.

 

		g)	Training
                                            costs

 

These
shall be expenditures incurred by the Contractor for training its employees and for any necessary training under the Contract.

 

		h)	Rental
                                            charges in accordance with Article 4 of the Contract

 

		3.2	Recoverable
                                            costs subject to the Minister’s approval 

 

These
include:

 

		a)	Research
                                            and development fees for new equipment, materials and techniques meant for Oil exploration,
                                            development and production and that are not included in the work programme approved by the
                                            Minister.

 

		b)	Costs
                                            and expenditures not mentioned in this Appendix and that are incurred in the context of the
                                            execution of the Oil Operations.

 

    Page 63 of 77

    

    

 

		c)	Interests
                                            charged on loans taken by the Contractor to fund the oil operations. Any interest rate in
                                            compliance with the international financial market and agreed upon by the parties shall be
                                            recoverable.

 

		d)	Rents,
                                            expenses and other taxes:

 

Rents,
except those associated with the residences of the Contractor, taxes, contributions, duties, dues and all taxes and charges collected
by the Government for Oil Operations and paid directly or indirectly by the Contractor in accordance with the provisions of the Contract.

 

		e)	Costs
                                            and losses resulting from events that are not covered by the insurance policies as defined
                                            in the Contract, only in the case where the said costs and losses might be the exclusive
                                            result of a default or gross negligence of the Contractor or an Affiliated Company or one
                                            of its sub-contractors.

 

		f)	Legal
                                            costs and expenses related to the Oil Operations.

 

		3.3	Non-recoverable
                                            costs.

 

These
include:

 

		a)	Fines,
                                            additional charges and readjustments for late payment of dues and taxes in force in the country
                                            or adjustments for incorrect payment of those dues and taxes provided such delays or incorrect
                                            payments are attributable to the Contractor.

 

    Page 64 of 77

    

    

 

		b)	Import
                                            duties for goods and equipment that are not necessary for the Oil Operations and for housing
                                            non-essential staff.

 

		c)	All
                                            costs and expenses incurred before the Effective Date.

 

		d)	Expenditures
                                            on account of supplier credit interests.

 

		e)	Amounts
                                            paid for non-performance of the obligations of the Contract.

 

		f)	Expenses
                                            associated with badly executed operations due to a gross technical default of the Contractor
                                            or its sub-contractors.

 

		g)	Costs
                                            and expenses of any bank guarantee related to the Contract.

 

		h)	Donations
                                            in general.

 

		i)	Costs
                                            of inventory in case the rights of the Contractor are transferred by virtue of the Contract.

 

		j)	Costs
                                            of inventory in case the rights of the Contractor are transferred by virtue of the Contract.

 

		k)	Marketing
                                            service costs of the Crude Oil and its transportation beyond the delivery point.

 

		l)	Costs
                                            of expert reports and arbitration set out in the Contract.

 

		m)	Additional
                                            amount of 300% related to Operations under exclusive risks.

 

		n)	Commissions
                                            paid by the Contractor to intermediaries.

 

		o)	Costs
                                            and expenses without accounting evidence.

 

		p)	Costs
                                            and expenses for goods or services exceeding the international market price for comparable
                                            goods and services used in West Africa at the time of their acquisition, if circumstances
                                            do not justify such extra costs.

 

    Page 65 of 77

    

    

 

CHAPTER
4: INVENTORY AND VALUATION OF ASSETS

 

		4.1	The
                                            Contractor must keep the records of the movable and immovable property used in the Oil Operations
                                            in accordance with standard accounting practices of the country and the International Oil
                                            Industry.

 

		4.2	At reasonable
                                            intervals, but at least once a Year concerning moveable property and at least every three
                                            (3) years for fixed assets, the Contractor shall perform an inventory of the assets covered
                                            by the Contract. At least thirty (30) days in advance, the Contractor shall communicate in
                                            writing to the Minister its intention to perform the said inventory; the Minister shall be
                                            present by representation during this inventory. The Contractor shall clearly show the principles
                                            used as a basis to value the stocks.

 

		4.3	The Minister
                                            may request information from the Contractor on its assets whenever he deems it necessary.

 

    Page 66 of 77

    

    

 

CHAPTER 5: ACTIVITIES
REPORT DURING THE EXPLORATION PERIOD 

 

		5.1	During
                                            the Exploration Period, the Contractor should prepare an activity report for each quarter
                                            that shall include:

 

		●	The
                                            detailed description list of activities accomplished during the said quarter. This report
                                            shall be supported by plans, maps, geological sections and any other data indicating the
                                            level of accomplishment of the works. 

 

		●	Costs
                                            related to the various above-mentioned activities. 

 

		5.2	The
                                            activity report shall be submitted to the Minister for approval within thirty (30) days following
                                            the end of the quarter covered.

 

    Page 67 of 77

    

    

 

CHAPTER 6: PRODUCTION
REPORT

 

		6.1	Once
                                            the commercial production begins in the Contract Region, the Contractor should prepare for
                                            each Quarter a production report that shall include namely for each exploitation zone the
                                            following data:

 

		a)	The
                                            quantity of the Crude Oil produced and collected during the Quarter.

 

		b)	The
                                            quantity of the Crude Oil used for Oil Operations during the Quarter.

 

		c)	The
                                            quantity of available Crude Oil at the end of the Quarter in question.

 

		d)	Parameters
                                            and performances of the reservoir, records of core loggings and well tests and their interpretations,
                                            analyses of produced fluids.

 

		6.2	The
                                            production report of each Quarter shall be submitted to the Minister for approval within
                                            thirty (30) days following the end of the Quarter covered.

 

    Page 68 of 77

    

    

 

CHAPTER 7: REPORT
ON THE VALUE OF PRODUCTION

 

		7.1	Each
                                            Quarter, the Contractor should prepare a report on the precise determinations of the market
                                            value of the Crude Oil produced and collected after deducting losses associated with the
                                            Oil Operations. This report shall include the following data:

 

		a)	The
                                            quantities sold and prices obtained by the Contractor as a result of selling the Crude Oil
                                            to third parties during the Quarter in question.

 

		b)	The
                                            information the Contractor has concerning the prices of Crude produced by the major producers
                                            and exporting countries including contractual prices, reductions and discounts as well as
                                            the prices obtained on the ’’SPOT’’ markets.

 

		c)	The
                                            report on the value of production shall be submitted to the Minister for approval within
                                            the (30) days following the Quarter involved.

 

    Page 69 of 77

    

    

 

CHAPTER 8:
REPORT ON RECOVERABLE COSTS

 

		8.1	The
                                            Contractor should prepare for each semester a report on the recoverable costs, which shall
                                            include the following information:

 

		a)	Recoverable
                                            oil costs of the previous Quarter carried-over, if any.

 

		b)	Recoverable
                                            Oil Costs of the quarter in question.

 

		c)	Total
                                            amount of the recoverable Oil Costs of the Quarter in question indicated in the above paragraph.

 

		d)	Quantity
                                            and total value of the Crude Oil determined by the Contractor to recover the Oil Costs during
                                            the Quarter involved.

 

		e)	Oil
                                            Costs recovered during the Quarter involved.

 

		f)	The
                                            cumulated total amount of recovered oil costs up to the end of the Quarter covered.

 

		g)	The
                                            amount of recoverable Oil Costs to be carried over to the next Calendar Quarter.

 

		8.2	The
                                            report of recoverable costs of each quarter shall be submitted to the Minister for approval
                                            within three (03) months following the end of each semester.

 

		8.3	Notwithstanding
                                            the obligation to keep accounting records in CFA Franc, the Contractor shall keep a separate
                                            account in US dollars for the determination of the Gross Recovery [costs].

 

    Page 70 of 77

    

    

 

CHAPTER 9: STATEMENTS
OF EXPENSES AND REVENUES 

 

		9.1	The
                                            Contractor should prepare for each Quarter a statement of expenses and revenues made in the
                                            context of the Contract. This statement shall make a distinction between the Exploration
                                            Costs, capital investments, development and exploitation costs and the Operating Costs, and
                                            will identify the main expenditure headings corresponding to these categories. It will include:

 

		a)	The
                                            real expenditures and revenues of the Quarter covered.

 

		b)	The
                                            cumulated expenses and revenues for the budget of the Year covered.

 

		c)	The
                                            last forecast of the cumulated expenses for the end of the Year.

 

		d)	The
                                            gaps between the budget estimate, the achievements and their explanation.

 

		9.2	The statement
                                            of expenditures and revenues of each Quarter shall be submitted to the Minister for approval
                                            within the thirty (30) days following the end of the Quarter covered.

 

    Page 71 of 77

    

    

 

CHAPTER
10: ANNUAL REPORT

 

The
Contractor should prepare an annual report that shall summarise the information related to production, cost recovery, revenues and expenses.
This report shall be based on the actual quantities of the Oil produced and incurred fees. From this report, any necessary adjustment
shall be made to payments to the Parties pursuant to the Contract. The annual report for each Calendar Year shall be submitted to the
Minister for approval within sixty (60) days following the end of the said Year.

 

    Page 72 of 77

    

    

 

CHAPTER 11:
ANNUAL BUDGET 

 

		11.1	The
                                            Contractor should prepare an Annual Budget that shall make the distinction between Exploration
                                            Costs, Development and Exploitation Capital Investments and Operating Costs by showing the
                                            following:

 

		a)	Expenditures
                                            and revenues forecast for the Budget Year in accordance with the Contract.

 

		b)	Accumulation
                                            of expenditures and revenues up to the end of the said Budget Year.

 

		c)	Programme
                                            showing the most important headings for development and exploitation capital investments
                                            for the said Budget Year.

 

		d)	For
                                            a budgetary item and provided that the approved General Work Programme is respected, the
                                            Contractor may initiate expenditures up to ten percent (10%) of the said item and justify
                                            the said expenditures. When this limit is exceeded, the Contractor shall take all the appropriate
                                            measures to inform the Minister and justify any surplus of expenditures within thirty (30)
                                            days following its implementation.

 

		11.2	The
                                            Annual Budget shall be submitted to the Minister within a deadline of ninety (90) days before
                                            the beginning of the Year except for the first Contract Year where the said Budget shall
                                            be submitted within a deadline of thirty (30) days following the Effective Date of the Contract.

 

    Page 73 of 77

    

    

 

CHAPTER
12: FORECASTS AND LONG-TERM PLANS

 

The
Contractor should prepare and submit to the Minister the following two (2) long-term plans:

 

		12.1	Exploration
                                            Programme

 

During
the Exploration Phases, the Contractor shall prepare an Exploration Programme for each phase from the Effective Date of the Contract,
a programme which shall contain the following information:

 

		a)	Estimates
                                            of the Exploration costs showing the expenditures for each Year covered by the programme.

 

		b)	Details
                                            of seismic operations for each Year

 

		c)	Details
                                            of drilling activities planned for each Year.

 

		d)	Details
                                            of utilization and infrastructure needs for each Year.

 

The
exploration programme shall be reviewed every year. The Contractor shall prepare and submit to the Minister, the first exploration programme
within sixty (60) days following the Effective Date of the Contract. It shall do the same every year, within a period of forty-five (45)
days, before the end of the Calendar Year.

 

		12.2	Development
                                            Forecasts 

 

The
Contractor should prepare three-year Development Forecasts beginning the first day of January following the date the first evaluation
programme was approved by the Ministry. The Contractor shall thus prepare and submit to the Minister the revised development forecasts
at least forty-five (45) days before each Calendar Year, as long as required by the Contract or by mutual agreement between the parties.

 

		12.3	Change
                                            in the Programmes and Forecasts 

 

The
Minister and the Contractor shall agree that the details of the Exploration Programme and Development Forecasts may need some changes
based on certain circumstances and results obtained. In this spirit, a review of the said programme and forecasts may be carried out
annually.

 

    Page 74 of 77

    

    

 

CHAPTER
13: ACCOUNTING REVISION & FINANCING PROCEDURES 

 

The
terms of accounting and financial procedures may be amended by mutual agreement between the Parties. Amendments shall be through written
documents specifying the date on which they shall become effective.

 

    Page 75 of 77

    

    

 

CHAPTER
14: DISAGREEMENTS WITH THE CONTRACT

 

In
case of discrepancy between the terms of this Appendix and those of the Contract, the terms of the Contract shall prevail.

 

    Page 76 of 77

    

    

 

APPENDIX “E’’

 

ABANDONMENT
PROCEDURE 

 

The
procedure to dismantle offshore installations shall indicate the following steps to be followed to remove the structures from waters
of 85 to 150 feet (26m to 46m) deep.

 

		I.	MOBILIZATION

 

		1.	Obtain
                                            all approvals and authorizations relating to the abandonment of the installations and throwing
                                            the structures in a deep water site.

 

		2.	Plug
                                            and abandon each well. Cut the conductor of each well 15 feet below the dredge level.

 

		3.	Empty
                                            all hydrocarbons from the flasks or reservoirs and wash any surface pipes, discharge lines
                                            and oil pipelines with water.

 

		II.	DISMANTLING

 

		1.	Disconnect
                                            and remove mobile equipment and installations.

 

		2.	Cut
                                            the feet and move the deck of the structure.

 

		3.	Cut
                                            the feet below the dredge level and move the skirt of the structure.

 

		4.	Leave
                                            the skirt in the appropriate depth of water or take it onshore to a designated location.

 

    Page 77 of 77

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00349-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00349-of-00352.parquet"}]]