SAMPLE NATURAL GAS CLAUSES IN GRANTING INSTRUMENTS

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1 SAMPLE NATURAL GAS CLAUSES IN GRANTING INSTRUMENTS ANGOLA (2) CHINA EGYPT INDIA INDONESIA MOZAMBIQUE MYANMAR NIGERIA TRINIDAD AND TOBAGO Sample Gas Clauses - 1 -

2 ANGOLA (Alternative 1) Article 29 Natural Gas 1) CONTRACTOR GROUP shall have the right to use in the Petroleum Operations, Associated Natural Gas produced from the Development Areas and will have the right to process such Gas and separate the liquids therefrom. 2) Associated Natural Gas surplus to the requirements defined in the preceding paragraph shall be made available free to SONAGOL, wherever the later so determines. The cost of transportation of said gas by pipeline is a recoverable cost under the Law. 3) SONANGOL may ask CONTRACTOR GROUP to join SONANGOL in order to develop some projects for the utilization of such surplus Associated Natural Gas, under terms and economic conditions to be mutually agreed. 4) If Non-Associated Natural Gas is discovered within the Contract Area then SONANGOL will have the exclusive right to appraise, develop and produce said Gas for its own account and risk. If SONANGOL so determines and if agreed with CONTRACTOR GROUP within a term determined by SONANGOL, the discovery of Non-Associated Natural Gas shall be developed jointly by SONAGOL or one of its Affiliates and CONTRACTOR GROUP. Sample Gas Clauses - 2 -

3 ANGOLA (Alternative 2) Article 29 Natural Gas 1) CONTRACTOR GROUP shall have the right to use Associated Natural Gas produced from Development Areas for any purpose, including the Petroleum Operations, for domestic consumption or for export and will have the right to process such Gas and separate the liquids therefrom. Costs to produce, treat and so use such Gas shall be recovered and classified in accordance with Annex C. 2) Associated Natural Gas surplus to the requirements defined in the preceding paragraph is available at the separator free to SONANGOL. 3) SONANGOL may ask CONTRACTOR GROUP to join SONANGOL in order to develop some projects for the utilization of such surplus Associated Natural Gas, under terms and economic conditions to be mutually agreed. 4) If Non-Associated Natural Gas is discovered within the Contract Area then SONANGOL and CONTRACTOR GROUP shall endeavor to agree on the terms under which such Gas will be developed by CONTRACTOR GROUP. Such development shall include the use of Non-Associated Natural Gas for oil field operations, for domestic consumption or for export. If no agreement is reached within thirty-six (36) months of the date when such Gas was discovered, or such longer period as may be agreed by SONANGOL, then it shall be free to develop the discovery for its own account and risk. If SONANGOL so agrees, then CONTRACTOR GROUP shall have the right to participate in this Gas development with reimbursement of SONANGOL's expenses according to Article 30 plus an amount equal to one thousand per cent (1000%) of such expenses. 5) In the course of activities provided for under this Agreement, flaring of Associated and/or Non-Associated Natural Gas, except flaring necessary for testing or other operational reasons in accordance with practices generally accepted in the international Petroleum industry, is prohibited except on prior authorization of the Ministry of Petroleum following a request by SONANGOL. CONTRACTOR GROUP shall formulate such request for SONANGOL which shall include an evaluation of alternatives to flaring that have been considered along with information on the amount and quality of Gases involved and the duration of the requested flaring. Sample Gas Clauses - 3 -

4 CHINA Article 18 Associated Natural Gas and Non-Associated Natural Gas 18.1 Associated Natural Gas Associated Natural Gas produced from any Oil Field within the Contract Area shall be used primarily for purposes related to the Production Operations and production enhancement of Oil Fields including, without limitation, oil treating, gas injection, gas lifting and power generation Based on the principle of full utilization of the Associated Natural Gas and with no impediment to normal production of the Crude Oil, the Overall Development Program of each Oil Field shall include a plan of utilization of Associated Natural Gas. If there is any excess Associated Natural Gas remaining in any Oil Field after utilization pursuant to Article herein (hereafter referred to as "Excess Associated Natural Gas"), the Operator shall carry out a feasibility study regarding the commercial utilization of such Excess Associated Natural Gas. Such feasibility study, if carried out before the Development Operations of an Oil Field, shall be included as part of the feasibility study on the development of the Oil Field If the Parties agree that Excess Associated Natural Gas has no commercial value, then such Natural Gas shall be disposed of by the Operator, provided that there is no impediment to normal production of the Crude Oil If the Parties agree that Excess Associated Natural Gas has commercial value, CNOOC and Contractor will complete the gas sales contract(s) and other commercial and technical arrangements required to develop such Natural Gas. Investments in the utilization of Excess Associated Natural Gas shall be made in proportion to the Parties' respective participating interests in the development of the Oil Field. The construction of facilities for such utilization and the production of the Excess Associated Natural Gas shall be carried out at the same time as the Oil Field construction and production, or at any time as may be agreed to by the Parties If any Party considers that Excess Associated Natural Gas has commercial value while the other Party considers that Excess Associated Natural Gas has no commercial value, the Party which considers Excess Associated Natural Gas to have commercial value may utilize such Excess Associated Natural Gas, at its own cost and expense and without impeding the production of Crude Oil and without affecting the shares of Crude Oil and Natural Gas otherwise allocable to the Parties under the other provisions of this Contract, but if such Excess Associated Natural Gas is not so utilized at any time or from time to time, then such Excess Associated Natural Gas shall be disposed of by the Operator, provided that there is no impediment to normal production of the Crude Oil. Sample Gas Clauses - 4 -

5 The production period for Associated Natural Gas shall be of the same length as the production period for the Oil Field from which the Associated Natural Gas is produced, as provided in Article 4.5 herein The price of Associated Natural Gas produced from the Contract Area shall be determined by the Parties based on general pricing principles prevailing internationally taking into consideration such factors as the market, quality and quantity of the Natural Gas (including the equivalent substitute energy) and shall be not less than a price which could be realized at the time of said Natural Gas sale for a substantially similar volume of such Natural Gas in Hong Kong or an export market. Unless otherwise agreed by the Parties, the Parties shall participate in all gas sales agreements entered into for the sale of Associated Natural Gas produced from the Contract Area in proportion to their respective participating interests in the Oil Field(s) from which the Associated Natural Gas is to be produced Investments made in conjunction with the utilization of both Associated Natural Gas from any Oil Field as stipulated in Article herein and Excess Associated Natural Gas from any Oil Field as stipulated in Article herein, together with investments incurred after approval of the Overall Development Program for any Oil Field in carrying out feasibility studies on the utilization of Excess Associated Natural Gas as referred to in Article herein, shall be charged to the development costs of the Oil Field Non-associated Natural Gas When any Non-associated Natural Gas is discovered within the Contract Area, the Parties shall implement a program regarding the appraisal and possible development and marketing of the Non-associated Natural Gas in the domestic and international markets. This program shall include the following principles: After Non-associated Natural Gas has been discovered within the Contract Area, the Operator shall inform the Parties and present to the JMC, a discovery report, including, without limitation, an initial estimate of the boundaries of the Non-associated Natural Gas reservoir and a range of recoverable reserves The decision period for commitment by Contractor to a delineation program shall be no longer than twenty-one (21) months from the submission of the discovery report pursuant to Article During this decision period, Operator and CNOOC will form a "Marketing Team" whose goal will be to conduct preliminary market studies and analyze the markets for the Non-associated Natural Gas. The number of CNOOC representatives and their roles on the Marketing Team shall be determined by the JMC. Additionally, Operator will be investigating such technical issues as reserve size ranges, deliverability, and other issues pertaining to the exploitation of the Nonassociated Natural Gas. During this decision period, Operator will report to the JMC at regular intervals on how the technical evaluation is proceeding and will supply any preliminary information concerning the viability of moving forward with a delineation Sample Gas Clauses - 5 -

6 program. Within the said decision period, Contractor will make its election whether or not to commit to a delineation program for the Non-associated Natural Gas If the Contractor commits to a delineation program for the Non-associated Natural Gas reservoir, delineation and review of the potential of the Non-associated Natural Gas reservoir will continue for a period not longer than ten (10) years from the submission of the discovery report pursuant to Article During the delineation and review period, Contractor shall maintain all rights and interests in the acreage which is under review so long as Contractor is seeking in good faith to conduct the agreed delineation program within the agreed time period. If Contractor does not seek in good faith to conduct the agreed delineation program within the agreed time period, Contractor shall be required to forfeit all rights and interests in the acreage which is under review The expenses incurred by the Operator in carrying out the said evaluation and delineation Work Program and the expenses incurred by the Marketing Team representatives in conducting the preliminary market studies and analyzing the markets for the Non-associated Natural Gas shall be charged to the exploration costs of the Contract Area Following the completion of the delineation program and review of the potential of the discovery, Contractor shall submit an appraisal report to the JMC. If the JMC decides that the discovery is commercial, the Parties shall agree on a development plan for the Gas Field. The agreement concerning the development shall be a supplementary document and an integral part hereof. The Parties shall also endeavor to finalize Natural Gas Sales Contract(s) and other agreements necessary for the commercialization of the Natural Gas The price of the Non-associated Natural Gas produced from the Contract Area shall be determined based on general pricing principles prevailing internationally taking into consideration such factors as the market, quality and quantity of the Natural Gas (including the equivalent substitute energy) and shall be not less than a price which could be realized at the time of said Natural Gas sale for a substantially similar quantity of such Natural Gas in Hong Kong or an export market. Unless otherwise agreed by the Parties, the Parties shall participate in all gas sales agreements entered into for the sale of Non-associated Natural Gas produced from the Contract Area in proportion to their respective participating interests in the Gas Field(s) from which the Non-associated Natural Gas is to be produced The production period of any Gas Field within the Contract Area shall be a period of twenty-five (25) consecutive Production Years beginning on the Date of Commencement of Commercial Production unless otherwise provided for in Article 4.6 or Article 25 hereof. If such production period exceeds forty (40) consecutive Contract Years from the Date of Commencement of the Implementation of the Contract, the term of the Contract for Non-associated Natural Gas shall extend until the end of such production period. The Parties shall endeavor to conclude Gas Sales Contract(s) and implement an Overall Development Program for each Gas Field to deplete such Field Sample Gas Clauses - 6 -

7 within its production period, subject always to the application of good international petroleum industry development and operating practices If the JMC decides unanimously that a Non-associated Natural Gas reservoir is non-commercial, the corresponding area covered by the Non-associated Natural Gas reservoir may be retained in the Contract Area during the exploration period. But, if at the expiration of the exploration period, the JMC still considers the said Nonassociated Natural Gas reservoir to be non-commercial, the corresponding area shall be excluded from the Contract Area unless the Contract is extended pursuant to Article Prior to the expiration of the exploration period, if the JMC considers that a Non-associated Natural Gas reservoir which has been determined to be non-commercial needs to be reappraised because of some favorable factors, the Operator shall work out a new evaluation report on that Non-associated Natural Gas reservoir and submit it to JMC for review and approval Natural Gas Transportation Contractor may participate in the installation and operation of the pipeline(s) required to land the Natural Gas in the domestic market and share in any revenues generated from the use of said pipeline(s) by Third Parties. If Contractor participates in the installation and operation of such pipeline(s), the installation and operation of such pipeline(s) shall be included in the Overall Development Program and Petroleum Operations under this Contract If CNOOC provides Natural Gas transportation services to Contractor, then: the tariffs charged to Contractor for such services shall be fair and reasonable based on the investment and shall be appropriate for offshore infrastructure projects in the People's Republic of China; and CNOOC will provide such transportation services in a time frame that will not delay field development Fiscal Terms for Natural Gas The Annual Gross Production of Natural Gas from each Gas Field within the Contract Area in each Calendar Year within the production period shall be allocated in accordance with the following sequence and proportions: Five percent (5%) of the Annual Gross Production of Natural Gas shall be used for payment of the Consolidated Industrial and Commercial Tax (CICT) and shall be paid to the competent authorities of the Chinese Government through CNOOC. Sample Gas Clauses - 7 -

8 Royalty shall be paid in accordance with the People's Republic of China Ministry of Finance "Regulations on the Payment of Royalty for the Exploitation of Offshore Petroleum Resources." The Annual Gross Production of Natural Gas less the amount of Natural Gas allocated for payment of CICT and Royalty in accordance with Articles and shall be "Cost Recovery Gas." Cost Recovery Gas shall be used for recovering the operating costs in respect of such Gas Field actually incurred but not yet recovered by the Parties pursuant to Article hereof after the value of the said "Cost Recovery Gas" has been determined in accordance with Article hereof The remainder of the Cost Recovery Gas shall, after payment for operating costs in accordance with Article , be deemed as "Investment Recovery Gas." Such Investment Recovery Gas shall be used for the recovery of the exploration costs in respect of the Contract Area which were incurred and not yet recovered by the Contractor and shall be used for the recovery of the development costs in respect of the Gas Field itself which were incurred and not yet recovered by CNOOC and Contractor in accordance with Articles and hereof and Deemed Interest thereon. The method of recovery and the recovery sequence are as follows: (a) (b) (c) Beginning in the Calendar Year during which the commercial production of Natural Gas from any Gas Field within the Contract Area commences, the Investment Recovery Gas referred to in Article herein based on the value which has been determined in accordance with Article hereof shall be paid first to the Contractor for the recovery of the exploration costs which were incurred in respect of, and have not yet been recovered from, the Contract Area. The unrecovered exploration costs shall be carried forward to the succeeding Calendar Years until fully recovered. Beginning in the Calendar Year during which the exploration costs incurred by the Contractor in respect of the Contract Area have been fully recovered, the remainder of the Investment Recovery Gas of a Gas Field shall be used for the simultaneous recovery of the development costs incurred and not yet recovered respectively by CNOOC and the Contractor and Deemed Interest thereon in respect of such Field in proportion to their respective participating interests therein after the value of such remainder of the Investment Recovery Gas has been determined in accordance with Article hereof. The unrecovered development costs and Deemed Interest thereon shall be carried forward to the succeeding Calendar Years until fully recovered. During the production period of a Gas Field, costs for an additional development project incurred pursuant to Article 18.7 hereof and Deemed Interest thereon shall be recovered together with the unrecovered development costs and Deemed Interest thereon. If the development costs and Deemed Interest thereon in respect of such Gas Field have been fully recovered, then costs for the said additional development project and Deemed Interest thereon shall be recovered from the Sample Gas Clauses - 8 -

9 Investment Recovery Gas of such Field referred to in Article in accordance with the provisions specified in Article herein. The unrecovered costs for the additional development project and Deemed Interest thereon in respect of such Gas Field shall be carried forward to the succeeding Calendar Years until fully recovered. (d) After the recovery of development costs and Deemed Interest thereon and/or costs for the additional development project and Deemed Interest thereon from any Gas Field by the Parties, the remainder of the Investment Recovery Gas shall automatically be regarded as part of the Remainder Gas referred to in Article herein The remainder of the Annual Gross Production of Natural Gas after the allocation referred to in Article shall be deemed "Remainder Gas." Such "Remainder Gas" shall be divided into "Share Gas" of the Chinese side and "Allocable Remainder Gas." The Allocable Remainder Gas from each Gas Field in each Calendar Year shall be equal to the Remainder Gas of that Calendar Year multiplied by the factor (Y) for each Gas Field within the Contract Area in that Calendar Year. The factor (Y) of each Gas Field in each Calendar Year shall be determined in accordance with the following successive incremental tiers on the basis of the Annual Gross Production of Natural Gas from such Gas Field during that Calendar Year. Annual Gross Production of Natural Gas from Each Gas Field (Billions of Cubic Meters) equal to or less than over to over Factors in Percentage Applicable to Each Production Tier of Each Gas Field within the Contract Area Y1 = % Y2 = % Y3 = % The factor (Y) shall be calculated in the same fashion as the factor (X) for Crude Oil, as shown in the example calculation set out in Article hereof The "Allocable Remainder Gas" of each Gas Field in each Calendar Year referred to in Article herein shall be shared by the Parties in proportion to their respective participating interests in the development costs, fifty-one percent (51%) for CNOOC and forty-nine percent (49%) for the Contractor. In the event that CNOOC does not participate in the development of a Gas Field within the Contract Area, the Contractor shall obtain one hundred percent (100%) of the "Allocable Remainder Gas" of that Field. In the event that CNOOC participates to an extent less than fifty-one percent (51%) in the development of a Gas Field within the Contract Area, the "Allocable Remainder Gas" of such Field in that Calendar Year shall be shared by the Parties in proportion to their actual respective participating interests in such Field All volumes of Natural Gas owed to the Parties for recovery and remuneration under Articles and shall be valued at the sales price(s) of Natural Gas Sample Gas Clauses - 9 -

10 realized through the gas sales agreement(s) with a buyer(s) at the point(s) of sale to the buyer(s) for the appropriate time period The Natural Gas produced from each Oil Field in the Contract Area shall be allocated as specified in Article 18.4 herein All Crude Oil produced from a Gas Field shall be dealt with as provided in Articles 12 and 13 hereof The procedures specified in this Article 18 shall be applied, by analogy, to determination of additional development projects in any Gas Field within the Contract Area during the production period, such projects being designed to increase the level of production and/or total quantity of Petroleum recoverable from the said Field. Sample Gas Clauses

11 EGYPT Article II Annexes to the Agreement Annex F is a current map of the National gas Pipeline Grid System established by the GOVERNMENT. The point of delivery for gas shall be agreed upon by EGPC and CONTRACTOR under a Gas Sales Agreement, which point of delivery shall be located at the flange connecting the development lease pieplien to the nearest point on the National Gas pipeline Grid System as depicted in Annex F or as otherwise agreed by EGPC and CONTRACTOR. Article VII Recovery of Costs and Expenses and Production Sharing (b) Production Sharing (ii) Gas and LPG Gas and LPG produced and saved under this Agreement and not used in Petroleum operations (SCFD) (quarterly average). That portion or increment up to less than SCFD. That portion or increment from and up to less than SCFD. That portion or increment from SCFD and above. EGPC SHARE ( percent) ( %) ( percent) ( %) ( percent) ( %) CONTRACTOR SHARE ( percent) ( %) ( percent) ( %) ( percent) ( %) (2) After the end of each contractual year during the term of any Gas Sales Agreement entered into pursuant to Article VII (e), EGPC and CONTRACTOR (as sellers) shall render to EGPC or EGAS (as buyer) a statement for an amount of Gas, if any, equal to the amount by which the quantity of Gas of which EGPC or EGAS (as buyer) has taken delivery falls below seventy-five percent (75%) of the Contract quantities of Gas as established by the applicable Gas Sales Agreement (the Shortfall ), provided the Gas is available. Within sixty (60) days of receipt of the statement, EGPC or EGAS (as buyer) shall pay EGPC and CONTRACTOR (as sellers) for the amount of the Shortfall, if any. The Shortfall shall be included in EGPC s and Sample Gas Clauses

12 (c) (2)Gas and LPG CONTRACTOR s entitlement to Gas pursuant to Artilce VII (a) and Article VII (b) in the fourth (4 th ) quarter of such contractual year. Quantities of Gas not taken but to be paid for shall be recorded in a separate Takeor-Pay Account. Quantities of Gas ( Make Up Gas ) which are delivered in subsequent years in excess of seventy-five percent (75%) of the contract quantities of Gas as established by the applicable Gas Sales Agreement, shall be set against and reduce quantities of Gas in the Take-or-Pay account to the extent thereof and, to that extent, no payment shall be due in respect of such Gas. Such Make Up Gas shall not be included in CONTRACTOR s entitlement to Gas pursuant to Article VII (a) and (b). CONTRACTOR shall have no rights to such Make Up Gas. If at the end of any Contract year, EGPC and CONTRACTOR (as sellers) fail to deliver seventy-five percent (75%) of the annual contract quantity of Gas as defined in the Gas Sales Agreement with EGPC or EGAS (as buyer), the difference between seventy-five percent (75%) of the annual Contract quantity of Gas and the actual gas quantity delivered shall be referred to as the Deliver-or-Pay Shortfall Gas. EGPC or EGAS (as buyer) shall have the right to take a quantity of Gas equal to Deliver-or- Pay the Shortfall Gas and such quantity of Gas shall be priced at ninety percent (90%) of the Gas price as defined in the Gas Sales Agreement. The mechanism for the Deliver-or-Pay concept will be determined in the Gas Sales Agreement. The percentages set forth in Article VII (a) and (b) in respect of LPG produced from a plant constructed and operated by or on behalf of EGPC and CONTRACTOR shall apply to all LPG available for delivery. (i) The Cost Recovery and Production Sharing Gas Price will be agreed upon between CONTRACTOR and EGPC or EGAS after the Commercial Discovery and before converting an area to a Development Lease(s) according to the average prevailing Gas price of the Mediterranean region at that time. Except Gas for export (LNG), where production sharing Gas price will be at net back price. (ii) The Cost Recovery and Production Shares of (LPG) produced from a plant constructed and operated by or on behalf of EGPC and CONTRACTOR shall be separately valued for Propane and Butane at the outlet of such LPG plant according to the following formula (unless otherwise agreed between EGPC and CONTRACTOR): PLPG = 0.95 PR Where PLPG = LPG price (separately determined for Propane and Butane) in U.S. Dollars per metric ton. Sample Gas Clauses

13 PR = The average over a period of a month of the figures representing the mid-point between the high and low prices in U.S. Dollars per metric ton quoted in "Platt's LPGaswire" during such month for Propane and Butane FOB Ex-Ref/Stor. West Mediterranean. In the event that "Platt's LPGaswire" is issued on certain days during a month but not on others, the value of (PR) shall be calculated using only those issues which are published during such month. In the event that the value of (PR) can not be determined because "Platt's LPGaswire" is not published at all during a month, EGPC and CONTRACTOR shall meet and agree to the value of (PR) by reference to other published sources. In the event that there are no such other published sources or if the value of (PR) cannot be determined pursuant to the foregoing for any other reason, EGPC and CONTRACTOR shall meet and agree the value of (PR) by reference to the value of LPG (Propane and Butane) delivered FOB from the Mediterranean Area. Such valuation of LPG is based upon delivery at the delivery point specified in Article VII (e) (2) (iii). (iii) (iv) The prices of Gas and LPG so calculated shall apply during the same month. The Cost Recovery and Production Shares of Gas and LPG disposed of by EGPC and CONTRACTOR other than to EGPC or EGAS pursuant to Article VII (e) shall be valued at their actual realized price. (d) Forecasts: Operating Company shall prepare (not less than ninety (90) days prior to the beginning of each calendar semester following first regular production) and furnish in writing to CONTRACTOR and EGPC a forecast setting out a total quantity of Petroleum that Operating Company estimates can be produced, saved and transported hereunder during such calendar semester in accordance with good oil and gas industry practices. Operating Company shall endeavor to produce each calendar semester the forecast quantity. The Crude Oil shall be run to storage tanks or offshore loading facilities constructed, maintained and operated according to GOVERNMENT Regulations, by Operating Company in which said Crude Oil shall be metered or otherwise measured for royalty, and other purposes required by this Agreement. Gas shall be handled by Operating Company in accordance with the provisions of Article VII (e). (e) Disposition of Petroleum: Sample Gas Clauses

14 (1) EGPC and CONTRACTOR shall have the right and the obligation to separately take and freely export or otherwise dispose of, currently all of the Crude Oil to which each is entitled under Article VII (a) and (b). Subject to payment of sums due to EGPC under Article VII (a) (2) and Article IX, CONTRACTOR shall have the right to remit and retain abroad all funds acquired by it including the proceeds from the sale of its share of Petroleum. Notwithstanding anything to the contrary under this Agreement, priority shall be given to meet the requirements of the A.R.E. market from CONTRACTOR's share under Article VII ( b ) of the Crude Oil produced from the Area and EGPC shall have the preferential right to purchase such Crude Oil at a price to be determined pursuant to Article VII ( c ) The amount of Crude Oil so purchased shall be a portion of CONTRACTOR's share under Article VII (b). Such amount shall be proportional to CONTRACTOR's share of the total production of crude oil from the concession areas in the A.R.E. that are also subject to EGPC's preferential right to purchase. The payment for such purchased amount shall be made by EGPC in U.S. Dollars or in any other freely convertible currency remittable by CONTRACTOR abroad. It is agreed upon that EGPC shall notify CONTRACTOR, at least forty-five (45) days prior to the beginning of the Calendar Semester, of the amount to be purchased during such semester under this Article VII (e) (1). (2) With respect to Gas and LPG produced from the Area: (i) Priority shall be given to meet the requirements of the local market as determined by EGPC. (ii) In the event that EGPC or EGAS is to be the buyer of Gas, the disposition of Gas to the local markets as indicated above shall be by virtue of long term Gas Sales Agreements to be entered into between EGPC and CONTRACTOR (as sellers) and EGPC or EGAS (as buyer). EGPC and CONTRACTOR (as sellers) shall have the obligation to deliver Gas to the following point where such Gas shall be metered for sales, royalty, and other purposes required by this Agreement: (a) In the event no LPG plant is constructed to process such Gas, the delivery point shall be at the flange connecting the Lease pipeline to the nearest point on the National Gas Pipeline Grid System as depicted in Annex "F" hereto, or as otherwise agreed by EGPC and CONTRACTOR. (b) In the event an LPG plant is constructed to process such Gas, such Gas shall, for the purposes of valuation and sales, be metered at the outlet to such LPG Plant. However, notwithstanding the fact that the metering shall take place at the LPG Plant outlet, CONTRACTOR shall through the Operating Company Sample Gas Clauses

15 build a pipeline suitable for transport of the processed Gas from the LPG Plant outlet to the nearest point on the National Gas Pipeline Grid System as depicted in Annex "F" hereto, or otherwise agreed by EGPC and CONTRACTOR. Such pipeline shall be owned in accordance with Article VIII (a) by EGPC, and its cost shall be financed and recovered by CONTRACTOR as Development Expenditures pursuant to Article VII. (iii) EGPC and CONTRACTOR shall consult together to determine whether to build an LPG plant for recovering LPG from any Gas produced hereunder. In the event EGPC and CONTRACTOR decide to build such a plant, the plant shall, as is appropriate, be in the vicinity of the point of delivery as determined in Article II and Article VIl (e)2(ii). The delivery of LPG for, royalty and other purposes required by this Agreement shall be at the outlet of the LPG plant. The costs of any such LPG plant shall be recoverable in accordance with the provisions of this Agreement unless the Minister of Petroleum agrees to accelerated recovery. (iv) EGPC or EGAS (as buyer) shall have the option to elect, by ninety (90) days prior written notice to EGPC and CONTRACTOR (as sellers), whether payment for the Gas which is subject to a Gas Sales Agreement between EGPC and CONTRACTOR (as sellers) and EGPC or EGAS (as buyer) and LPG produced from a plant constructed and operated by or on behalf of EGPC and CONTRACTOR, as valued in accordance with Article VII (c), and to which CONTRACTOR is entitled under the Cost Recovery and Production Sharing provisions of Article VII, of this Agreement, shall be made 1) in cash or 2) in kind. Payments in cash shall be made by EGPC or EGAS (as buyer) at intervals provided for in the relevant Gas Sales Agreement in U.S. Dollars, remittable by CONTRACTOR abroad. Payments in kind shall be calculated by converting the value of Gas and LPG to which CONTRACTOR is entitled into equivalent barrels of Crude Oil to be taken concurrently by CONTRACTOR from the Area, or to the extent that such Crude Oil is insufficient, Crude Oil from CONTRACTOR's other concession areas or such other areas as may be agreed. Such Crude Oil shall be added to the Crude Oil that CONTRACTOR is otherwise entitled to lift under this Agreement. Such equivalent barrels shall be calculated on the basis of the provisions of Article VII (c) relating to the valuation of Cost Recovery Crude Oil. Sample Gas Clauses

16 Provided that: (aa) Payment of the value of Gas and LPG shall always be made in cash in U.S. Dollars remittable by CONTRACTOR abroad to the extent that there is insufficient Crude Oil available for conversion as provided for above. (bb) Payment of the value of Gas and LPG shall always be made in kind as provided for above to the extent that payments in cash are not made by EGPC. Payments to CONTRACTOR (whether in cash or kind), when related to CONTRACTOR's Cost Recovery Petroleum, shall be included in CONTRACTOR's Statement of Recovery of Costs and of Cost Recovery Petroleum referred to in Article IV of Annex "E" of this Agreement. (v) (vi) (vii) Should EGPC or EGAS (as buyer) fail to enter into a long-term Gas Sales Agreement with EGPC and CONTRACTOR (as sellers) within four (4) years from a notice of Commercial Gas Discovery pursuant to Article III, EGPC and CONTRACTOR shall have the right to take and freely dispose of the quantity of Gas and LPG in respect of which the notice of Commercial Discovery is given by exporting such Gas and LPG. The proceeds of sale of CONTRACTOR's share of Gas and LPG disposed of pursuant to the above sub-paragraph (v) may be freely remitted or retained abroad by CONTRACTOR. In the event EGPC and CONTRACTOR agree to accept new Gas and LPG producers to join in an ongoing export project, such producers shall have to contribute a fair and equitable share of the investment made. (viii) (aa) Upon the expiration of the four (4) year period referred to in Article VII (e) (2) (v), CONTRACTOR shall have the obligation to exert its reasonable efforts to find an export market for Gas reserves. (bb) ln the event at the end of the four (4) year period referred to under Article VII (e) (2) (v), CONTRACTOR and EGPC have not entered into a Gas Sales Agreement, CONTRACTOR shall retain its rights to such Gas reserves for a further period of up to four (4) years, subject to Article VII (e) (2) (viii)(cc), during which period EGPC shall attempt to find a market for Gas reserves. (cc) In the event that EGPC and CONTRACTOR is not exporting the Gas and EGPC and CONTRACTOR has not entered into a Gas Sales Agreement with EGPC / EGAS pursuant to Article VII (e) (2) prior to the expiry of eight (8) years from CONTRACTOR's notice of Commercial Gas Discovery, CONTRACTOR shall surrender the Gas reserves in respect of which such notice has been given. It being understood that Sample Gas Clauses

17 CONTRACTOR shall, at any time prior to the expiry of such eight ( 8 ) year period, surrender the Gas reserves, if CONTRACTOR is not exporting the Gas and CONTRACTOR does not accept an offer of a Gas Sales Agreement from EGPC within six (6) months from the date such offer is made provided that the Gas Sales Agreement offered to CONTRACTOR shall take into consideration the relevant technical and economic factors to enable a commercial contract including: - A sufficient delivery rate. - Delivery pressure to enter the National Gas Pipeline Grid System at the point of delivery. - Delivered Gas quality specifications not more stringent than those imposed or required for the National Gas Pipeline Grid System. - The Gas prices as specified in the Gas Sales Agreement. (dd) (ix) In the event that CONTRACTOR has not entered into a Gas Sales Agreement pursuant to Article VII (e) (2) or otherwise found an acceptable scheme for commercial disposal of such Gas, at the time of the expiration of eight (8) years from CONTRACTOR's notice of Commercial Discovery of Gas or failing agreement with EGPC on gas disposal at the expiration of eight (8) years, CONTRACTOR shall surrender to EGPC such Development Lease (s) in which Gas discovery is made. CONTRACTOR shall not be obligated to surrender a Development Lease based on a Commercial Gas Discovery, if Crude Oil has been discovered in commercial quantities in the same Development Lease. Sample Gas Clauses

18 INDIA ARTICLE 21 NATURAL GAS 21.1 Subject to Article 21.2, the Indian domestic market shall have the first call on the utilisation of Natural Gas discovered and produced from Contract Area. Accordingly, any proposal by the Contractor relating to Discovery and production of Natural Gas from the Contract Area shall be made in the context of the Government s policy for the utilisation of Natural Gas and shall take into account the objectives of the Government to develop its resources in the most efficient manner and to promote conservation measures The Contractor shall have the right to use Natural Gas produced from the Contract Area for the purpose of Petroleum Operations including reinjection for pressure maintenance in Oil Fields, gas lifting and captive power generation required for Petroleum Operations For the purpose of sales in the domestic market pursuant to this Article 21, the Contractor shall have freedom to market the Gas and sell its entitlement Associated Natural Gas (ANG) In the event that a Discovery of Crude Oil contains ANG, the Contractor shall declare in the proposal for the declaration of the said Discovery as a Commercial Discovery as specified in Article 10, whether (and by what amount) the estimated production of ANG is anticipated to exceed the quantities of ANG which will be used in accordance with Article 21.2 (such excess being hereinafter referred to as the Excess ANG ). In such an event the Contractor shall indicate whether, on the basis of the available data and information, it has reasonable grounds for believing that the Excess ANG could be commercially exploited in accordance with the terms of this Contract along with the Commercial Production of the Crude Oil and the Contract Area, and whether the Contractor intends to so exploit the Excess ANG Based on the principle of full utilisation and minimum flaring of ANG, a proposed development plan for an Oil discovery shall, to the extent practicable, include a plan for utilisation of the ANG including estimated quantities to be flared, reinjected, and to be used for Petroleum Operations; and, if the Contractor proposes to commercially exploit the Excess ANG for sale in the domestic market in accordance with Government s policy, or elsewhere, the proposed plans for such exploitation If the Contractor wishes to exploit the Excess ANG, subject to Article 21.1, the Contractor shall be free to explore for the commercial exploitation of the said Excess ANG and submit its proposals for such exploitation to the Government in accordance with Article Where the Contractor is of the view that the Excess ANG, cannot be commercially exploited and chooses not to exploit the said Excess ANG, or is unable to find a market for the Excess ANG pursuant to Article , the Government shall be entitled to take and utilise such Excess ANG free of any cost/charge. Sample Gas Clauses

19 If the Government elects to take the Excess ANG as provided in Article (a) the Contractor shall deliver such Excess ANG to the Government (or its nominee) free of any cost/charge, at the downstream flange of the Gas/Oil separation facilities; (b) the Contractor shall, based on sound petroleum engineering practices, install such facilities as would facilitate, insofar as practicable, uninterrupted deliver of such Excess ANG to the Government or its nominee; (c) the cost of all facilities installed pursuant to paragraph (b) above shall be borne by the Government (or its nominee); (d) the Government or its nominee shall bear all costs including gathering, treating, processing and transporting costs beyond the downstream flange of the Gas/Oil separation facilities; and (e) the delivery of such Excess ANG shall be subject to procedures to be agreed between the Government or its nominee and the Contractor prior to such delivery, such procedures to include matters relating to timing of off-take of such Excess ANG. Parties shall endeavour such procedures do not restrict Oil production The Excess ANG which is not commercially exploited by the Contractor, or taken by the Government or its nominee pursuant to this Article 21, shall be returned to the subsurface structure or flared or otherwise disposed of as approved by the Government in the context of the Development Plan, provided that flaring will be resorted to only for small quantities and as a last resort As soon as practicable after the submission of the proposed development plan, the Contractor and the Government or its nominee shall meet to discuss the sale and/or disposal of any ANG discovered with a view to giving effect to the provisions of this Article 21 in a timely manner Non Associated Natural Gas (NANG) In the event of a Discovery of NANG in the Contract Area, the Contractor shall promptly report such Discovery to the Management Committee and the Government and the provisions of Articles 10.1 and 10.2 shall apply. The remaining provisions of Article 10 would apply to the Discovery and development of NANG only insofar as they are not inconsistent with the provisions of this Article. Notwithstanding the provisions of Article 3, the Contractor shall be entitled to retain the Discovery Area subject to the provisions of this Article If, pursuant to Article 10.1, the Contractor gives notification that the Discovery is of potential commercial interest, the Contractor shall submit to the Management Committee, within one (1) year from the date of notification of the above said Discovery, the proposed Appraisal Programme, including a Work Programme and Budget to carry out an adequate and effective appraisal of such Discovery, to determine (i) without delay, whether such Discovery is a Commercial Discovery and (ii) with reasonable precision, the boundaries of the area to be delineated as the Development Area. Such proposed Appraisal Programme shall be supported by all relevant data such as Well data, Contractor s estimate of reserve range and Sample Gas Clauses

20 production potential, and shall indicate the date of commencement of the proposed Appraisal Programme The proposed Appraisal Programme together with the Work Programme and Budget referred to in Article shall be reviewed by the Management Committee within sixty (60) days of its submission by the Contractor. The Management Committee shall offer its comments within said period. The said Appraisal Programme together with the Work Programme and Budget submitted by the Contractor as revised or modified or amended in light of the Management Committee review and advice, shall be adopted as the Appraisal Programme and the Contractor shall promptly proceed with implementation of the said Programme If on the basis of the results of the Appraisal Programme, the Contractor is of the opinion that NANG has been discovered in commercial quantities, it shall submit to the Management Committee as soon as practicable but not later than three (3) years from the date of notification of the aforementioned Discovery, a proposal for the declaration of the Discovery as a Commercial Discovery. Such proposal shall take into account the Government s policies on Gas utilisation and propose alternative options, if any for use or consumption of the NANG and be accompanied by a report on the Discovery supported by, inter alia, technical and economic data, evaluations, interpretations and analyses of such data and feasibility studies relating to the Discovery prepared by or on behalf of the Contractor, and other relevant information. If no proposal is submitted to the Management Committee by the Contractor within three (3) years from the said Discovery, the Contractor shall relinquish its rights to develop such Discovery and the area relating to such Discovery shall be excluded from the Contract Area Where the Contractor has submitted a proposal for the declaration of a Discovery as a Commercial Discovery, the Management Committee shall consider the proposal of the Contractor with reference to commercial utilisation or commercial development of the NANG in the domestic market or elsewhere and in the context of Government s policy on Gas utilisation and the chain of activities required to bring the NANG from the Delivery Point to potential consumers in the domestic market or elsewhere. The Management Committee may, within eighty five (85) days of the submission of the said proposal, request the Contractor to submit any additional information on the Discovery, the anticipated markets or any other related matter, that may reasonably be required to facilitate a review. The Contractor shall submit the required information within thirty (30) days of the request by the Management Committee. The Management Committee will advise the Contractor of its review within one hundred and thirty five (135) days from the submission of proposal or within fifty five (55) days from the receipt of additional information, as the case may be, on the proposal made by the Contractor to declare the Discovery as a Commercial Discovery If the Contractor declares the Discovery a Commercial Discovery after taking into account the advice of the Management Committee as referred to in the Article , the Contractor shall, within one (1) year of the declaration of the Discovery as a Commercial Discovery, submit a development plan for the development of the Discovery to the Management Committee for approval. Such plan shall be supported by all relevant information including, inter alia, the information required in Article Sample Gas Clauses

21 Unless otherwise agreed by the Management Committee, it shall consider the proposed development plan and give their approval within one hundred and sixty five (165) days of submission thereof or eighty five (85) days from the receipt of the clarifications/additional information from the Contractor. Any clarification/additional information required by the Management Committee shall be asked for within eighty five (85) days of receipt of the proposal from the Contractor. The Contractor shall provide such additional information within thirty (30) days from the receipt of request by the Management Committee. If the Management Committee fails to convey its decision within one hundred and sixty five (165) days from the submission of the development plan or eighty five (85) days from the receipt of the clarifications/additional information, whichever is later, the Contractor may submit the development plan for the approval of the Government. Also, where, the Management Committee rejects the development plan of the Contractor, the Contractor can submit the development plan for the approval of the Government Where the development plan is submitted to the Government for approval pursuant to Article , the Government shall convey its decision within one hundred and fifteen (115) days from the date of receipt of the proposal from the Contractor. Government, where it considers necessary, may ask clarifications/additional information from the Contractor within eighty five (85) days and shall convey its decision within fifty five (55) days from the date of receipt of such clarifications/additional information If the Government has failed to approve or disapproves the Contractor s proposed development plan, within one hundred and fifteen (115) days from receipt or within fifty five (55) days from the receipt of clarifications/information from the Contractor as mentioned in the Article , the Government shall advise the Contractor, in writing, of the reasons for such failure or disapproval and the Government and the Contractor shall meet to discuss the said development plan and the reasons for the said failure to approve or disapproval, and use their best efforts to agree on appropriate modifications thereto to meet the Government s concerns or objections. Thereafter, the Contractor shall have the right to resubmit, within eighty five (85) days of communication from the Government, the proposed development plan duly amended to meet the Government s concerns. Such right or resubmission of the proposed development plan shall be exercisable by the Contractor only once. The Government will respond to the re-submitted plan within one hundred and fifteen (115) days. If no such plan is submitted to the Government within the above specified period, the Contractor shall relinquish its right to develop such Gas Discovery and such Discover shall be excluded from the Contract Area In the event that the Management Committee or Government, as may be the case, approves the Contractor s development plan for the development of such Commercial Discovery, with such modifications and amendments as the Management Committee or Government, as may be the case, may approve, the said Gas Discovery shall be promptly developed by the Contractor in accordance with the approved plan which shall be the Development Plan. Sample Gas Clauses