Afghan-Tajik Basin Phase I Tender ISLAMIC REPUBLIC OF AFGHANISTAN MINISTRY OF MINES & PETROLEUM THE AFGHAN-T AJIK BASIN PHASE I TENDER EXPLORATION AND ~RODUCTION SHARING CONTRACT FOR HYDROCARBONS EXPLORATION, DEVELOPMENT AND PRODUCTION IN MAZAR-I-SHARIF BLOCK 8 October 2013 Afghan-Tajik Basin Phase I Tender TABLE OF CONTENTS ARTICLE I DEFIN TIONS & INTERPRETATION ..................................................................... 2 ARTICLE II GRANf OF RIGHTS TO THE CONTRACTOR ................................................... 1 0 ARTICLE III TER ~ ........................................................................................................... .......... 10 ARTICLE IV RELI~QUISHME N T ...................... .... .. .............................. ...... ... ........................ .. 12 ARTICLE V GENEtL OBLIGATIONS OF THE CONTRACTOR ........................................ 13 ARTICLE VI EXPLPRA TION PHASE; WINNING BIDDER'S EXPLORATION PROGRAM ............................................................................................................................. 20 ARTICLE VII DISdOVERY; DEVELOPMENT AND PRODUCTION .................................... 22 ARTICLE VIII FINt NCIAL AND PERFORMANCE GUARANTEES; BONUSES ................ 30 ARTICLE IX OBLIf ATIONS OF THE MINISTRy .................................................................. 32 ARTICLE X ALLOf A TION OF PRODUCTION ....................................................................... 34 ARTICLE XI MEA~UREMENT OF HYDROCARBONS ......................................................... 37 ARTICLE XII DOMESTIC REQUIREMENTS ........... .. ....................... .. ................................. .. . 38 ARTICLE XIII PAYMENT PROCEDURE ................................................................................ .40 ARTICLE XIV SUJ FACE RENTAL FEES ................................................................................ 40 ARTICLE XV NATpRAL GAS .................................................................................................. 42 ARTICLE XVI INCf ME TAX ................................................................................................... .44 ARTICLE XVII CUfTOMS DUTIES .......................................................................................... 45 ARTICLE XVIII EXlCHANGE AND CURRENCY CONTROLS ............................................. .46 ARTICLE XIX TRdf-TMENT UNDER AFGHANISTAN LAW ............................................... 47 ARTICLE XX TRAINING, EMPLOYMENT AND LOCAL CONTENT ................................. .47 ARTICLE XXI PU, CHASES IN AFGHANISTAN .................................................................. .48 ARTICLE XXII JOlrT DEVELOPMENT / UNITIZATION .................................................... .48 ARTICLE XXIII H~ALT H , SAFETY AND ENVIRONMENTAL PROTECTION .................. 50 ARTICLE XXIV DISPUTE SETTLEMENT/ ARBITRATION .................................................. 53 ARTICLE XXV TEf MINATION AND REVOCATION ........................................................... 55 ARTICLE XXVI BOOKS, ACCOUNTS AND AUDITS; RECORDS, REPORTS AND INSPECTIONS .............................................................................................................. 58 ARTICLE XXVII INSURANCE AND INDEMNIFICATION ................................................... 60 ARTICLE XXVIII ASSIGNMENT AND SUBCONTRACTORS .............................................. 61 Afghan-Tajik Basin Phase I Tender ARTICLE XXIX L1 W OF THE CONTRACT ............................................................................ 64 ARTICLE XXX FOrCE MAJEURE ........................................................................................... 64 ARTICLE XXXI E~TIRE CONTRACT AND AMENDMENTS ............................................... 64 ARTICLE XXXII , AIVERS; CUMULATIVE REMEDIES ..................................................... 65 ARTICLE XXXIII J RANSPARENCY IN AFGHANISTAN HYDROCARBONS OPERATIONS ........................................................................................................................ 65 ARTICLE XXXIV I OTICES ...................................................................................................... 66 ARTICLE XXXV EfFECTIVENESS AND REGISTRATION .................................................. 67 EXHIBIT A DESCRIPTION OF CONTRACT AREA EXHIBIT B MAP IOF CONTRACT AREA EXHIBIT C ACCate. The term of the Development and Production Phase for each Field shall extend ~ or a maximum of twenty-five (25) years from the date on which a permit to conduct Development and Production Operations in respect of such Field has been granted purs ~ ant to Section 7. I (k)(iv). 3.5 Extension oflDevelopment and Production Phase. In the event that the Contractor has fulfilled all its obligations for the specified term of the Contract, the Contractor may request an e ~ ~ ension of the Development and Production Phase for a further period not exceeding ter (10) years. The Ministry shall approve any such request, unless the Contractor h s failed to establish an economic basis for such extension, subject to the provisions of he Hydrocarbons Law. 11 Afghan-Tajik Basin Phase I Tender ARTICLE IV RELINQUISHMENT 4.1 Exploration Phase. Without prejudice to Section 7.1 , during the Exploration Phase, the Contractor s~all relinquish to the Ministry parts of the original Contract Area as follows: (aJ on o ~ before the end of the Initial Exploration Period, the Contractor shall relin'lfish at least twenty-five percent (25%) of the original Contract Area that has not been converted into a Field; (b) on or Ibefore the end of the First Extension Period, the Contractor shall relinquish at leabt an additional area equal to twenty-five percent (25%) of the remaining Contrkct Area that has not been converted into a Field; and (c) at the end of the Exploration Phase, the Contractor shall relinquish the remainder of th9 Contract Area that has not been converted into a Field or has not had a Discolvery which is under evaluation for development or is otherwise subject to an Evaluation Agreement. 4.2 Size and shl e of Relin uished Areas. The size and shape of the part or parts of the Contract Ara to be relinquished shall be determined by the Contractor; provided, however, that: (a) the c bntractor shall advise the Ministry at least ninety (90) Days prior to the date of re l ~ nquishment which parts of the Contract Area the Contractor wishes to relinquish; (b) the Cfntractor shall consult with the Ministry regarding the shape and size of each indivTual portion of the areas being relinquished; and (c) unless the Ministry expressly allows otherwise, the area being relinquished shall not b ~ divided into more than two (2) portions, each of which shall comprise, and be der ned by reference to, graticular sections as described in Exhibit B, provided, howeyer, that the Ministry shall permit the area being relinquished to be divided into !fore than two (2) portions if necessary to avoid including within the area part 9r all of a Field or area in which a Discovery has been made which the Contrflctor is not otherwise required to relinquish hereunder. To the extent that the boundaries of the original Contract Area permit, each individual portion being relinqLished shall: (i) be not less than twenty percent (20%) of the area being relinquished at such time; (ii) be not less than fifty percent (50%) of the largest individual portion being relinquished at such time; 12 Afghan-Tajik Basin Phase I Tender (iii) have a longest side not more than three times as long as the shortest side; and (iv) have sides parallel to the boundaries of the original Contract Area. 4.3 Voluntary Relinquishment. The Contractor shall have the right to relinquish all or any part of the Cbntract Area upon at least ninety (90) Days' written notice to the Ministry. In the event ff partial relinquishment pursuant to this Section 4.3, the area relinquished shall be credl;ted against that portion of the Contract Area which the Contractor is next required to relinquish pursuant to Section 4.1 . 4.4 Compliance IWith Obligations. No relinquishment made in accordance with this Article IV shall reli ~ ve the Contractor of: (a) its obligation to make payments due as a result of surface rental fees incurred prior to the date of any such relinquishment; (b) its obligation to comply WIth the Winning Bidder's Exploration Program; or (c) any other obligation that may have accrued prior to the date of relinquishment. 4.5 Clean-up aJd Restoration. Upon relinquishment of any area, the Contractor shall perform all nbcessary clean-up activities and undertake all necessary restoration measures in accordancf with Good Oil Field Practices and Afghanistan Law, and shall take all action neces ~ ary in accordance with Good Oil Field Practices to prevent hazards to the environment, flora and fauna, the local community, human health and life or third-party property, pr vided that the Contractor shall have no obligation to restore any area to a condition better than that established in the Baseline Environmental Assessment. ARTICLE V GENERAL OBLIGATIONS OF THE CONTRACTOR 5.1 Conduct of Hydrocarbons Operations. The Contractor shall be responsible for conducting lall Hydrocarbons Operations within the Contract Area diligently, expeditiousl ~ and efficiently in accordance with Good Oil Field Practices and the prevailing legislation and pursuant to Work Programs and Work Program Budgets approved in I accordance with Section 5.3. Without limiting the generality of the foregoing, the Contractor shall: (aJ expe ~ d all necessary funds and purchase or lease all technology, equipment, machJnery, materials and supplies required to be purchased or leased in conn9ction with Hydrocarbons Operations and furnish all other funds for the perfo ~ mance of Hydrocarbons Operations as may be required, including payment to th ~ rd parties that perform services as contractors or subcontractors to the Contractor; (b) provit all technical expertise and assistance, including foreign personnel, requirled for the conduct of Hydrocarbons Operations; 13 Afghan-Tajik Basin Phase I Tender ensure that all equipment, materials, supplies, plant and installations used by the (c) Cont ~ actor, its contractors and subcontractors comply with Good Oil Field pract cs and are of proper construction and kept in good working order; (d) ensure that Exploration Wells with shows of Hydrocarbons sufficient to warrant testink under Good Oil Field Practices are properly tested; (e) use t ~ e resources in the Contract Area as productively as practicable, prevent damage to producing formations, and ensure that Hydrocarbons discovered, drillirtg fluids, mud or any other waste (solid or fluid) do not escape and are not waster I • (f) act i ' accordance with Good Oil Field Practices to prevent damage to HydrJcarbon and water bearing strata that are adjacent to a producing formation, and pl revent water from entering any strata bearing Hydrocarbons, except where water injection methods are used for enhanced recovery operations or are intended otherwise in accordance with Good Oil Field Practices; (g) act in accordance with Good Oil Field Practices to (i) protect the environment such as to avoid any damage to flora and fauna and any other pollution of the envirJnment and (ii) subject to Section 9.3, secure the safety, health and welfare of pe ~ sons engaged in Hydrocarbons Operations and the public; (h) to the extent possible, prevent and mitigate any risks arising from Hydrocarbons Operations, and compensate third parties to the extent required by Afghanistan I Law in respect of any actual injury, damage or loss resulting from an act or omiss ~ on of the Contractor, its subcontractors or its agents, employees or repreJentatives in the course of the conduct of Hydrocarbons Operations, and ensur ~ prompt, fair and full compensation to such parties to the extent required by apPli1abie law and the decisions of authorized dispute settlement bodies; (i) comply with applicable laws relating to employment when employing domestic or foreigf staff, provide acceptable working conditions and living accommodations, and aecess to medical attention and nursing care, for all personnel employed by it, its cor tractors and its subcontractors in Hydrocarbons Operations, and otherwise ensure that international norms related to labor, social protection and human rightsl,are respected and that no child labor or forced labor is used in connection with IfYdrOCarbons Operations; and (j) comply with the applicable environmental laws and regulations of Afghanistan. 5.2 Operator. (a) The ~ ontractor hereby appoints TPAL to act as the Operator responsible for carrying out Hydrocarbons Operations in the Contract Area for and on behalf of the Cbntractor. Each Contractor Entity hereby authorizes the Operator to take such ~ ctions as agent on behalf of the Contractor and to exercise such rights, 14 Afghan-Tajik Basin Phase I Tender privilFges and powers and to comply with such obligations under this Contract as are ar ibuted to or imposed on Contractor herein or under Afghanistan Law. (b) The ([)perator shall, subject to the terms and conditions of this Contract, have all the rights, privileges, powers and responsibilities of the Contractor set forth herein and ~ nder Afghanistan Law. The Ministry shall be entitled to deal exclusively with Ithe Operator in respect of all matters relating to this Contract and the contr ctor's performance of Hydrocarbons Operations. (c) The ~ ontractor shall notify the Ministry in writing of any proposed change in the Operftor or the Operator's responsibilities and any change in the Operator or the Operftor's responsibilities shall require the prior written consent of the Ministry (not to be unreasonably withheld). (d) All J ts and omissions of the Operator under this Contract shall be binding upon and ~ eemed to constitute acts and omissions of the Contractor. Each Contractor Entit1' shall be jointly and severally liable for all duties and obligations of the Cont ~ actor and each Contractor Entity hereunder except (i) those relating to paymFnt of Income Tax pursuant to Article XVI and (ii) for the accuracy of inforrr.ation provided to the Ministry under this Contract in connection with its own affairs (including but not limited to information provided in connection with a profosed transfer or assignment pursuant to Article XXVIII), which shall be the separate obligation of each Contractor Entity. (e) With ~ ' thirty (30) Days after the Effective Date, (i) the Operator and each contr:ctor Entity shall register to do business in Afghanistan and (ii) the Operator shall appoint and notify the Ministry of the name of a competent Person (the "Per"on-in-Charge") to be in charge of all Hydrocarbons Operations in the Conttr,ct Area. The Person-in-Charge shall ensure to the best of his ability that he and ~Il workers in his charge know and comply with all relevant laws and regulations, and with any safety manual that is applicable to the operations under his c ~ ntroi. The Person-in-Charge shall ensure that the Contractor's operating proce ~ ures and working conditions provide for the safety of the personnel engaged in Hydrocarbons Operations, the protection of the equipment used in H ydr ~ carbons Operations, the protection of the environment and the conservation of rekources. The Person-in-Charge shall be responsible for preparing and submitting to the Ministry on a timely basis all programs, budgets, manuals, repork documents and other communications required from the Contractor pursurnt to this Contract or Afghanistan Law. (t) The ~ erson - in - Charge shall serve as the legal representative in Afghanistan for the Contractor and each Contractor Entity. The Person-in-Charge shall have an offic9 in an adequate location in Afghanistan for exercising the tasks of such representative, be a resident in Afghanistan with legal address and have authority to reBresent the Contractor and each Contractor Entity in all matters relating to this Contract. In the event of replacement of the Person-in-Charge, such 15 Afghan-Tajik Basin Phase I Tender replatement shall be similarly notified to the Ministry upon the effective date of the rj laCement. 5.3 Work progrlams and Budgets. (a) The Contractor shall prepare and submit to the Ministry for approval a Work Prog¥ m and Work Program Budget for Hydrocarbons Operations and Hydr?carbons Operations Expenditures (i) for the period from the Effective Date until p ecember 31, 2013 within sixty (60) Days after the Effective Date and (ii) for t ~ e period from January 1, 2014 until December 31, 2014 on or before November 1, 2013. Notwithstanding any other provision of this Contract, the Wor ~ Programs and Work Program Budgets shall include the annual training programs described in Sections 20.1 and 20.2. The Ministry and the Contractor shall I promptly agree on the Work Programs and Work Program Budgets SUbmitted pursuant to this Section 5.3(a). (b) At 19ast ninety (90) Days prior to the beginning of each Calendar Year comrrrencing on or after January 1, 2015, the Contractor shall prepare and submit to the Ministry for approval a Work Program and Work Program Budget for Hydrt carbons Operations and Hydrocarbons Operations Expenditures by Quarter, setting forth the Hydrocarbons Operations the Contractor proposes to carry out during the ensuing Calendar Year. (c) To th ~ maximum extent practicable, the Contractor shall involve representatives of the Ministry in the preparation of the Work Programs and Work Program Budgbts. (d) Each Work Program and Work Program Budget shall comply with the Winning Bidd9r's Exploration Program (including any changes thereto adopted pursuant to Secti~n 6.5), as well as with Good Oil Field Practices and the prevailing legislation and regulations. (e) APprL al by the Ministry of the proposed Work Programs and Work Program BUdgbts will not be unreasonably withheld or delayed. (f) ShOU ~ the Ministry wish to propose revisions to the Work Program or Work Program Budget, it shall within thirty (30) Days after receipt thereof so notify the Cont+ctor, specifying in reasonable detail its reasons for doing so. Promptly there,fter, the Parties shall meet and endeavor to agree on the revisions proposed by thlMinistry. (g) If the Contractor and the Ministry fail to agree upon any revisions proposed by the Minisry within sixty (60) Days of the receipt of the Contractor's proposals, the l point of disagreement shall be resolved as follows: (i) with respect to Work Programs and Work Program Budgets that relate to Exploration Operations, the Contractor's proposals, revised in accordance 16 Afghan-Tajik Basin Phase I Tender with any agreed amendments or additions thereto, shall be deemed adopted, provided that they are in compliance with Section 5.3(d); and (ii) with respect to Work Programs and Work Program Budgets that relate to Development and Production Operations, the Contractor's proposals, revised in accordance with any agreed amendments or additions thereto, shall be deemed adopted provided that they are consistent with the Development Program and Development Program Budget adopted pursuant to Section 7.1 (i)(ii) and are in compliance with Section 5.3(d). (h) The ~arties recognize that the details of a Work Program may require changes in lightdof the then prevailing circumstances. In such event, the Contractor may intro uce such changes as may be necessary, following consultation with the Minisltry, but subject to the following: (i) in the case of changes to a Work Program and Work Program Budget relating to Exploration Operations, such changes may be implemented provided that compliance with Section 5.3(d) is maintained; and (ii) in the case of changes to a Work Program and Work Program Budget relating to Development and Production Operations, such changes may be implemented to the extent that they are not inconsistent with the applicable Development Program and Development Program Budget adopted pursuant to Section 7.1 (i)(ii) and compliance with Section 5 .3( d) is maintained. 5.4 Drilling Op~rations. I (a) The ~ =ontractor is required to design Wells and conduct drilling operations, inclUr'ng the casing, cementing and plugging of Wells, in accordance with Good Oil Fi Id Practices. (b) Ever I Well in the Contract Area shall be identified by name, number and geographic coordinates, which shall be shown on maps, plans and similar records that the Contractor shall keep and submit to the Ministry. (c) priorflo commencing the drilling of any Well or re-entering any Well on which work as been discontinued for more than ninety (90) Days, the Contractor shall give e Ministry written notice no later than seven (7) Days before such work shall lommence and submit a proposed Well program. The proposal shall include the fo lowing information: (i) the official name and number of the Well and a description of its precise location by reference to geographical coordinates; (ii) a detailed work program describing the drilling technique to be employed and all ancillary operations (including casing, cementing, mud, coring, logging, Well control and testing), an estimate of the time to be taken and 17 Afghan-Tajik Basin Phase I Tender depth objective, the estimated costs of the Well program, and the safety of the Well; measures to be employed in the drilling (iii) a summary of the geological and geophysical data, and any interpretations thereof, upon which the Contractor made the decision to drill or commence work on the respective Well (accompanied by appropriate maps and cross-sections); (iv) the name of the drilling contractor and designation of the drilling rig; and (v) the name of other service companies to be employed, together with a brief description of the equipment and services to be provided. (d) If an)! work related to any Well is suspended for a period exceeding thirty (30) Days,1 the Contractor shall notify the Ministry in writing to that effect and shall provime the Ministry with reasons for suspending work related to that Well. (e) The ~ ontractor shall give forty-eight (48) hours notice in writing before recommencing work on any Well on which work has been suspended for more I than tr irty (30) Days but for less than ninety (90) Days. (f) The Gontractor shall not, without the prior written approval of the Ministry, drill any t ell from any surface area within the Contract Area which is less than five hundrfd (500) meters from a boundary of the Contract Area, or from within the contTct Area through any vertical boundary of the Contract Area. (g) The Gontractor shall securely plug and clearly mark any Well that it abandons, in accor ~ ance with Good Oil Field Practices, to prevent pollution and damage to the depo¥ and underground strata through the entry of water or otherwise. The Contrrctor shall, except when the Ministry otherwise directs or this Contract otherf ise provides, remove all equipment, materials and facilities relating thereto and provide that cemented strings or other forms of casing shall not be withdrawn witho ~ t the written approval of the Ministry. (h) In ret ion to every Well being drilled, completed, tested or abandoned, the Contrkctor shall submit to the Ministry daily Well reports during the conduct of drillirlg operations describing the progress and results of the operations. In additibn, the Contractor shall submit a Well completion report accompanied by copie$ of all logs obtained from the Well within two (2) Months from the date of rig re1case of a Well. (i) The 9ontractor shall, within one hundred and eighty (180) Days of the completion of an ~ survey, test or drilling operations, or, in the case of data that cannot reaso?ably be obtained or compiled in that period, as soon as possible thereafter, submIt to the Ministry copies of all geological and geophysical data obtained by the Cbntractor in the course of conducting Hydrocarbons Operations, including any irlterpretations thereof and logs and records of Wells. 18 Afghan-Tajik Basin Phase I Tender G) The 90ntractor shall drill each Exploration Well to the depth set forth in the Well program, unless: (i) formation is encountered at a lesser depth than originally anticipated; (ii) basement is encountered at a lesser depth than originally anticipated; (iii) in the Contractor's reasonable opinion, continued drilling of the Exploration Well is too hazardous because of abnormal or unforeseen conditions; (iv) Good Oil Field Practices require the suspension or termination of drilling operations due to insurmountable, abnormal or unforeseen technical or operational conditions; or (v) the Parties agree in writing to terminate the drilling operations in respect of the Exploration Well. (k) If the Contractor determines it is reasonable to stop drilling pursuant to Section 5.4G) it will notify the Ministry immediately and a determination will be made jointly whether to amend the Work Program, the Winning Bidder's Exploration i Progr m, the Minimum Exploration Program and the Well program accordingly to: (i) enable successful completion of the Exploration Well; (ii) substitute another Exploration Well; or (iii) determine an alternative solution acceptable to the Parties. In th event the Parties elect to substitute another Exploration Well pursuant to Secti9n 5.4(k)(ii), the amount guaranteed under the Financial Guarantee shall be reduced by the cost of the abandoned Exploration Well. 5.5 Reports on I Hydrocarbons Operations. The Contractor shall keep the Ministry regularly andl fully informed of the progress and results of all Hydrocarbons Operations and shall ~ rovide the Ministry with all geologic information, data, samples, interpretationr and reports, including progress and completion reports, and keep such original data, records and full particulars at its registered office in Afghanistan, as are required under this Contract, the Hydrocarbons Law or applicable regulations. 5.6 Other MinJ als. (a) If, in fhe course of Hydrocarbons Operations, the Contractor discovers minerals other ~ han Hydrocarbons in the Contract Area that are of economic value and are capable of being developed, it shall within thirty (30) Days inform the Ministry of I the m'nerals discovered, their location and such other information as the Ministry 19 Afghan-Tajik Basin Phase I Tender may reasonably request and In addition submit a sample of the discovered minerls to the Ministry. (b) If, ar· er the Effective Date, the Ministry seeks to grant licenses within the Cont act Area authorizing prospecting for, exploration for or mining of any mine als or other substances other than Hydrocarbons, the Ministry shall obtain the :3.50 then P = 60% In the l bove formula: "E" sf ll mean the Ministry's percentage share of Net Hydrocarbons, and "R" sfall mean the cumulative Gross Contractor Revenues up to the end of the Quarter immediately preceding the Quarter in question, divided by the cumulative Hydroicarbons Operations Expenditures incurred up to the end of the Quarter immefiately preceding the Quarter in question. Calculations I and Adjustments. The calculations required by this Article X shall be 10.2 made for eac ~ Quarter on a cumulative basis. An example of the required calculations is 35 Afghan-Tajik Basin Phase I Tender attached heret10 as Exhibit 1. To the extent that actual quantities, prices and expenses are not known, calculations shall be made on the basis of the estimate, and quarterly updates thereto, proviaed to the Ministry pursuant to Section 10.3. Within thirty (30) Days after the end of ekch Quarter, adjustments shall be made based on actual Hydrocarbons quantities, pri ~ es and expenses in relation to such Quarter to the extent then available. Within ninetyl (90) Days after the end of each Calendar Year, final calculations shall be prepared and submitted to the Ministry for approval, and any necessary adjustments shall be made baSer I upon the detailed accounts submitted for such Calendar Year pursuant to Section 26.2. 10.3 Estimates antl Approvals. Not less than ninety (90) Days prior to the beginning of each Calendar Yea~, the Contractor shall prepare and furnish to the Ministry for approval an estimate by Qiuarter for the forthcoming Calendar Year of all Gross Contractor Revenues and Hydrocatons Operations Expenditures, and of the value of the Royalty and of the Ministry'S an ~ the Contractor's respective shares of Net Hydrocarbons, Net Taxable Income and Ifcome Tax for such Calendar Year. Such estimate shall be consistent with the forecast statement furnished pursuant to Section 7.2(c) and the Work Program Budget approved pu ~ suant to Section 5.3, and shall set forth the other assumptions and projections u~on which it is based. Upon approval by the Ministry, such estimate shall serve as the b~sis for the quarterly calculations required pursuant to Section 10.2 and for the Income 'Ijax pursuant to Article XVI. Quarterly updates of such estimate shall be submitted by the Contractor to the Ministry within thirty (30) Days after the end of each Quarter. 10.4 Deemed Sales. The Hydrocarbons allocated to the Ministry under this Article X in any Quarter shall,1 unless the Ministry otherwise elects in accordance with Section 10.5, be deemed sold ~y the Ministry to the Contractor upon production at the wellhead. The purchase price for each type of Hydrocarbons produced shall be the applicable Market Price for suc ~ Hydrocarbons, and shall be payable to the Ministry no later than thirty (30) Days following the Quarter in which such Hydrocarbons are produced. Payment shall be accompanied Iby a certificate from the Contractor setting forth in detail the basis for computation (j)f the purchase price, in a form acceptable to the Ministry. The provisions of this Sectioh 10.4 shall not apply to Hydrocarbons produced during production testing and sold by t, e Contractor, the proceeds of which shall be applied to reduce the amount of the Contraitor's capital expenditures in accordance with the Accounting Procedures. 10.5 Notice and ~ Iection . The Ministry may, in respect of any Calendar Year, elect to retain title to all or ~ny I part of the Hydrocarbons allocated to it under this Article X, rather than sell such Hydrocarbons to the Contractor. In such event, the Ministry shall provide the Contractor wlth notice of its election at least six (6) Months prior to the commencement of the Calendar Year in question. If the Ministry elects to retain Hydrocarbons that include Natutal Gas, it shall follow the Contractor's procedures for nomination and scheduling 0 transportation, volumetric balancing, and similar operational requirements approved by e Ministry pursuant to Section 7.2(a). 36 Afghan-Tajik Basin Phase I Tender ARTICLE XI MEASUREMENT OF HYDROCARBONS Verification. Within thirty (30) Days following the end of each Quarter, the Contractor 11.1 shall submit the Ministry for its verification the volumes, gravity in API and sulfur content of th~ Liquid Hydrocarbons produced and saved from the Contract Area during the Quarter inlquestion. In the event that the Ministry raises objections to the Contractor's determinations, the Parties shall meet within fifteen (I5) Days from the Ministry's notice of objection tJ mutually agree upon the appropriate determinations. 11.2 Measuring EbuiPment. The Contractor shall supply, operate and maintain equipment for measuring the volume and quality of the Hydrocarbons produced and saved, or transported, ~tored or exported under this Contract, including gravity, density, temperature ahd pressure measuring devices and any other devices that may be required. All measurerrlent equipment and devices shall, prior to their installation or usage, be approved in 1Titing by the Ministry. Such equipment and devices shall at all reasonable times be available for inspection and testing by the Ministry or its authorized representativef. Any such inspection or testing shall not interfere with the normal operation oft, e facilities involved. The equipment and devices used or installed pursuant to this secti01 11.2 shall not be replaced or altered without the prior written approval of the Ministry. 11.3 Measurement Standards. The Contractor shall undertake to measure the volume and quality of the ~ ydrocarbons produced, saved, transported, stored and exported hereunder, consistent with Good Oil Field Practices for fiscal metering, with such frequency and according to t Ch procedures as are approved in writing by the Ministry. 11.4 Notice. The Fontractor shall give the Ministry timely notice of its intention to conduct measuring operations and the Ministry shall have the right to be present at and observe, either directly or through authorized representatives, such operations. 11.5 Measurement Inaccuracies and Adjustment. If it is determined, following an inspection or Itest carried out by the Ministry or its representatives, that the equipment, devices or prTcedures used for measurement are inaccurate and exceed the permissible tolerances W ~fuiCh shall be established by agreement between the Ministry and the Contractor to be entered into prior to the installation and usage of such equipment, and such determi ation is verified by an independent surveyor acceptable to the Ministry and the Contractot, such inaccuracy shall be deemed to have existed for one-half of the period since the last previous such inspection or test, unless it is proved that such inaccuracy has been in exist9nce for a longer or shorter period. Appropriate adjustments covering such period shall b made within thirty (30) Days from the date of such determination. 37 Afghan-Tajik Basin Phase I Tender ARTICLE XII DOMESTIC REQUIREMENTS 12.1 Local Preference. In marketing any part of its share of the Liquid Hydrocarbons produced and Isaved from the Contract Area, the Contractor shall seek competitive bids in U.S. Dollars from national and international purchasers for the purchase of the Liquid Hydrocarbonsl in accordance with generally accepted procedures and standards for competitive t~nders in the international petroleum industry, including reasonable, non- discriminator requirements concerning financial capability and assurance of payment. The Contract Ir shall notify the Ministry in writing from time to time of its procedures for marketing Liquid Hydrocarbons. In the event that comparable bids are received from a bidder that is Ian Afghan national or company and another bidder that is not, the bidder that is an Afghan national or company will be preferred. Within thirty (30) Days following the pontractor's completion of the bid evaluations, the Contractor shall prepare and deliver tT, the Ministry a competitive bid analysis setting forth the Contractor's recommendat ~ on as to the winning bidder, the reasons therefor, and the commercial and contractual te1ms to be agreed upon. 12.2 Storage. Liquid Hydrocarbons that the Ministry has elected to take in kind and not to sell to the Cartractor shall, to the extent practicable, be delivered by the Contractor at regularly spaged intervals at the Delivery Point or to the Ministry's storage facilities in the Field, or ~ oth, at the option of the Ministry. The Ministry shall provide at such Delivery Points, at its sole expense and risk, all storage, transportation and other facilities necessary to r ~ ceive such Liquid Hydrocarbons. 12.3 Internal conlumption of Liquid Hydrocarbons. Out of the total quantity of Liquid Hydrocarbons production to which the Contractor is entitled in each Calendar Year, the Ministry may elect to take a quantity of Liquid Hydrocarbons, of the gravity, grade and quality of its choice (but which shall be of no better than average quality if this substantially qecreases the marketability of the remaining Liquid Hydrocarbons), that the Ministry requires to satisfy the requirements of internal consumption in Afghanistan for such ca l enda ~ Year. The Ministry shall reimburse the Contractor for such quantity at the applicable Market Price. The maximum quantity of Liquid Hydrocarbons that the Ministry mayltake to satisfy the internal consumption requirements of the country shall be calculated as follows: DMOe = APe x (DMOt-GO V) / APt Where: DMOe is the maximum quantity of Liquid Hydrocarbons from the Contract Area that the Ministry may take to satisfy the internal consumption requirements of the country in the period of reference; 38 Afghan-Tajik Basin Phase I Tender APe is the total quantity of Liquid Hydrocarbons produced from the Contract Area during the reference period, less (a) the amount of the Royalty, (b) the Ministry's share of Liquid Hydrocarbons production under Section 1 0.1 (d), (c) consumption of Liquid Hydrocarbons incidental to Hydrocarbons Operations, and (d) the quantity of Liquid Hydrocarbons that Contractor is already selling to the Afghanistan domestic market. DMOt is the internal consumption requirements of Afghanistan during the reference period; GOV is (a) the quantity of Liquid Hydrocarbons rendered, in the reference period, to the Ministry by all contractors in the form of production payments, royalties and production shares plus (b) any quantity of Liquid Hydrocarbons produced directly by the Ministry or any State oil company within Afghanistan in the reference period; and APt is the volume of all Liquid Hydrocarbons produced in Afghanistan in the reference period. 12.4 Internal Consumption of Natural Gas. Out of the total quantity of Natural Gas to which the Cortractor is entitled in each Calendar Year, the Ministry may elect to take a quantity of Natural Gas to meet its internal consumption requirements on the following basis. The Co ~ tractor shall be obliged to provide and supply to the State such quantities of Natural Ga ~ that are equal to the proportion that the Contractor's production of Natural Gas bears to t~e aggregate quantities of Natural Gas produced in Afghanistan (according to the princinles set forth in Section 12.3 for Liquid Hydrocarbons) at the applicable Market priCe ~ S), provided that if the Contractor has notified the Ministry within thirty (30) Days of Fxecuting a Natural Gas sales contract of greater than twelve (12) Months duration excluding option periods, volumes of Natural Gas committed to purchasers under such c ~ ntracts shall be excluded from the amounts that might be available to the State for intelnal consumption. The Contractor shall have no obligation to pay for any infrastructure necessary to transport, process or deliver Natural Gas to the Ministry. If the Ministry elects to take a quantity of Natural Gas to meet its internal consumption requirements,1 it shall follow the Contractor's procedures for nomination and scheduling of transportatIon, volumetric balancing, and similar operational requirements approved by the Ministr pursuant to Section 7.2(a). 12.5 Notification and Election. If the Ministry elects to exercise its rights under Sections 12.3 or 12.4, ~ t shall so notify the Contractor in accordance with the provisions of Section 10.5. The amounts to be taken shall be based upon estimates, including those contained in the forecasl statement furnished pursuant to Section 7.2(c), and final adjustments shall 39 Afghan-Tajik Basin Phase I Tender be made witllin ninety (90) Days after the end of each Calendar Year on the basis of actual quantities. ARTICLE XIII PAYMENT PROCEDURE Payments to the Ministry. All payments due to the Ministry hereunder shall be made in 13.1 U.S. Dollars to the Treasury Single Account in Da Afghanistan Bank, details of which I may be provii ed from time to time by the Ministry, and shall be made in accordance with the provision of the Public Finance and Expenditure Management Law. 13.2 Payments to the Contractor. All payments due to the Contractor hereunder shall be made in U.S. Dollars at a bank to be designated by the Contractor or, at the Ministry's election, such other currency as is acceptable to the Contractor. 13.3 Timing of Payments. Except as otherwise expressly provided herein, all payments required to b~ made pursuant to this Contract shall be made within thirty (30) Days following the r nd of the Month in which the obligation to make such payment occurs. 13.4 Late Payments. If any payment is not made when due, such unpaid amount shall be increased as from and after the due date until the date of payment at a rate, compounded monthly, of five percent (5%) per annum above the London Interbank Offer Rate ("LIBOR") fEr one (I) month deposits of U.S. Dollars, as reported in the London Financial Ti es or any other agreed publication. ARTICLE XIV SURFACE RENTAL FEES 14.1 State-owned Land. In accordance with the Hydrocarbons Regulations, the Contractor shall be liable for payment of the following annual surface rental fees to the Ministry in of all bnsurrendered State-owned land forming part of the Contract Area: respect (a) for so long as a Commercial Discovery has not been declared with respect to any Field: (i) during the Initial Exploration Period, one U.S. Dollar (US$ 1.00) per hectare; (ii) during the First Extension Period, four U.S. Dollars (US$ 4.00) per hectare; and (iii) during the Second Extension Period and any extension granted pursuant to Section 3.1, eight U.S. Dollars (US$ 8.00) per hectare; 40 Afghan-Tajik Basin Phase I Tender (b) from the first declaration of Commercial Discovery with respect to any Field: (i) fifteen U.S. Dollars (US$ 15.00) per hectare, excluding Fields; and (ii) forty U.S. Dollars (US$ 40.00) per hectare of each Field. Timing of Payments. The Contractor shall make surface rental fee payments to the 14.2 Ministry ann1ally in respect of the then current Calendar Year. The first annual surface rental fee pal,ment under Section 14.1 shall be made within thirty (30) Days after the date on whi9h the Ministry has provided the Operator with an approved surveyor geographic PJojection in accordance with Section 14.4. Following the provision of such surveyor ge0r,raphic projection to the Operator, all subsequent annual surface rental fee payments sha~1 be made within thirty (30) Days after each anniversary of the Effective Date. In the top Dat~~n - II. The G ~ arn ntoc 's obligations und" this Guamntee shall be independent and ahsotute. and thel Guarantor shall have no right to set-off or counterclaim with respect to any other claims irmay have against the Ministry or any other Person. 12. All of t ~ e obligations of the Guarantor set forth herein shall bind the Guarantor and its successprs and perm itted assigns. The Guarantor may nOl assign or delegate its duties hereunier without the prior written consent of the Ministry, and any purported aSSignlent or delegation without such consent shall be null and void. Thc Guarantor contir s that this Guarantee shall remain in cffect notwithstanding the assignment of the Gu rant or Subsidiary's Participating Interest to an Affiliated Entity of the Guarantor Subsidiary. Upon any such assignment the assignee shall be considered the Guarantor Subsidiary for all purposes hereunder to the extent of the assigned obligatJns. The Guarantor also confirms that any assignee of the Ministry under the Contrait may exercise all rights and remedies of the Ministry under this Guarantee. No other person or entity shall be a beneficiary of this Guarantee or have or acquire any rig1ts by reason of this Guarantee. 13. This G ~ arantee shall be governed and construed in accordance with Afghanistan Law. Any diJPute, controversy or claim arising out of or relating to this Guarantee that is not res91ved by mutual agreement within forty-five (45) Days from the date on which the eXisfence of a dispute is notified in writing by one party to the other shall be settled by arbilation initiated by either party by submission to the International Centre for Settlement of Investment Disputes ("ICSID") pursuant to the Convention on the Sett l em~nt of Investment Disputes between States and Nationals of other States as of March [I S, 1965 ("ICSlD Convention") and the arbitration rules promulgated thereun~er. For the avoidance of doubt, the Ministry hereby expressly consents to the submid1ion of any dispute which may arise under this Guarantee to ICSlD for settlem1nt by arbitr.ation in accordance with Article 25 (1) of the ICSTD Convention. For the purpose of Article 25 (2) (b) of the ICSTD Convention, the Guarantor shall be treated fS a national of a state other than Afghanistan. The number of arbitrators shall be thre9" The arbitration shall be conducted in the English language. The arbitration award ~ ay take the form of an order to pay a sum of money, or an order to perform an act, or' order to refrain from an act, or any combination of such orders. The place of arbitrati n shall be London, England. The award rendered shall be final and conclus ve. Judgment on the award rendered may be entered in any court having ju riSd ic ~ ion or application may be made in stich court tor a judicial acceptance of the award ard an order of enforcement, as the case may be. Each party agrees that at the request pf the other party it will consent (and will cause its Guarantor Subsidiary to consent) to thc consolidation of any arbitration brought under the provisions of this Clause 113 with any arbitration under Section 24.10f the Contract in which the Ministr., on the one hand, and the Contractor or any Contractor Entity, on the other hand, is a party that relates to matters at issue in the arbitration brought under this Clause 3. 14. Any failure of the Ministry to exercise any right, in whole or in part. hereunder shall not be construed as a waiver of the right to exercise the same or any other right. 15. No arnL drnent or modification of this Guarantec shall be effective unless in writing and Sigl' ed by both the Guarantor and the Ministry. 16. The Gu rantor shall pay upon demand and presentation of invoices all reasonable and actual osts and expenses incurred by the Ministry in connection with the successful enforceplent of this Guarantee (excluding all costs and expenses incurred by the Minist1' in connection "vith claims under the Insurance), including, without limitation, rcasonat le fces and expenses of counsel. 17. J\ II no]ices, demands, instructions, waivers, consents or othcr communications h e reu n ~ cr shall be in writing in the English language and deemed to have been properly effective upon receipt, and shall be sent by personal delivery, courier, first class . . rnj l il or fax.' to the following addresses: GUAR NTOR: [TUR 'YE PETROLLERi A.O. SOgutor Mahalbi 2180 Cad, No,86, 06100, CankayaiAnkam TuckiyeJ MINISTRY: Ministry lof Mines & Petroleum Pashtoo1istan Watt Across from Ministry of Finance Kabul, Afghanistan Telephorte: +93 (0) 202 100 309 Attn: Dirt ctor of Afghanistan Petroleum Authority The Ad1resses and fax numbers by either party to this Guarantee for notices given pursuant to this Guarantee may be changed by means of written notice to the other party at least fourteen (14) working days prior to effective date of such change. 18. This Gu rantee shall be effective immediately. IN WITNESS IWHEREOF, the Guarantor has caused this Guarantee to be executed and the Ministry duly authorized the same, both parties represented by their respective duly authorized representatives on this day of 08 October 20 J 3. TiJRKiYE PETROLLERi A.O.j By ~ .e ------=:::::::: ".--- - -~ ITitlel ~ .... ; ~ Besim ~I$MA N P~esjdent and CEO Act THE MINISTRY OF MINES & PETROLEUM OF THE GOVERNMENT OF THE ISLAMIC REPUBLIC OF AF G ~ H AN JSTA N {j By __ ~ __ ~ __________________ ___ The Minister of Mines & Petroleum Afghan-Tajik Basin Phase I Tender EXHIBIT F LONG RANGE PLAN FOR THE TRAINING OF AFGHAN NATIONALS F-I EXHIBITF LONG RANGE PLAN FOR THE TRAINING OF AFGHAN NATIONALS 1. Overview & General Approach Contractor is coLmitted to the training and development of a competent Afghan workforce that meets the n~eds of our business and increases the capability and percentage of Afghan personnel in ou1 operations over time. Consistent with this, as well as the requirements of the EPSC, Contractor will foster an environment where training and development is a key activity within dur operations. All Afghan employees will be encouraged to participate in developing their lown skills to enhance their knowledge for use in their current job, as well as jobs that they can reasonably expect to progress to during their careers. Our training plans will be based o ~ individual job evaluations and competency assessments, which will help Contractor identify the optimal training requirements for each Afghan employee. A sophisticated cob puter-based assessment system will be used to design and track each Afghan employee's skills levels to track progress and future training needs. In this regard, c l ntractor will: I • Implement on-the-job, course-based in-house as well as external training. In-house training J ill be conducted by experienced personnel from the Operator as well as internatio ~ al - standard trainers from well reputed training companies from all over the world. External training will be in the .form of training activities or professional conjerencks located inside or (subject to the reasonable availability of visas) outside of Afghanistan. • Use per.f0fmance reviews to identify individual development plans that will encompass enhanced 'performance in an employee's current position as well as on their long term I development. • Manage r d develop training activities via an annual training program that reflects individual team and organizational needs. j Work with • I sub-contractors to establish training program requirements for their personnel. • Provide tmining programs to the Ministry and other Afghan Government entities consistent with their needs and as agreed in the annual training program. F-2 2. Annual Training Program I Each year, the Operator will submit an Annual Training Program (' A TP') at the same time as the Work Program and Work Program Budget. The ATP shall identify the specific classes or other training activities that will be conducted for Afghan employees, Afghan subcontractors and Ministry personnel in the coming year. 'rhe A TP shall be subject to approval by the Ministry. I The minimum AlfP cost will meet the amounts specified in the Contract. 3. Post commercir Discovery, In-Country Training - 'Center of Excellence' Once Contractor proves a Commercial Discovery and has an approved Development Program and Development Program Budget, Contractor, in association with the Ghazanfar Group, will establish a 'Center of Excellence' dedicated training facility to be located in Northern AfghaJistan, which will provide classroom space and resources for course work offered by eXPl teachers from inside and outside the company together with computer- based, self-pace I courses driven by specialized software. The Center will enhance training activities by providing our Afghan employees with the necessary onsite physical classroom facilities for more and better quality, cost-effective training in-country. 4. Contractors As a significant portion of the operations that will be provided by third party contractors working in Afg ~ anistan on behalf of Contractor, we will routinely seek to include Afghan training commitments in our contracts with such third party contractors. 5. Training Program for 2013 I During the Initia Exploration Period (i.e., the first four years of Hydrocarbons Operations), training will be primarily focused on introductory skills appropriate to setting up office operations, the exploration activities being conducted and preparation for development activities. I It is hard to predict the exact training program during the first year of Hydrocarbons Operations, as the specific needs of staff yet to be hired cannot be ascertained now. However, subject to further evaluation of need and availability, the following lays out the training areas (subject to revision) for the first year of Hydrocarbons Operations: F-3 Preliminary ~I raining Areas Staff Categork Course Support • Safe Driving Ad . . . 1 • Basic Secretarial & Office Administration mmlstratIl e • Microsoft Office Applications Financial • Introduction to Accounting Software Technical • Basic Geology and Geophysics • Basic Seismic Acquisition Ministry • Mini Oil & Gas MBA of Procurement Activities • Oversight All • English Language • Introduction to HSE Practices Ministry personnel may attend any of the courses offered, and/or attend a 'Mini Oil & Gas MBA' program,lwhich would most likely be outside of Afghanistan. Ministry feedback on proposed training for their personnel is appreciated. During the first ~ ear of Hydrocarbons Operations, Contractor will provide more details on the specific cou1ses to be offered, how the courses will be conducted and the location in Afghanistan (or Flsewhere) for such training. Contractor will appoint a Human Resources M~n~ger who SJall be the person accountable for assessing training needs and planning trammg events. Training plans for future years will be submitted along with the Work Program and Work Program Budge ~ for that year. Such training plans shall take into account the training activities carriedl out during the first year of Hydrocarbons Operations for the purposes of assessing whether the Contractor has fulfilled the training requirements under the Contract I for such future years. F-4 Afghan-Tajik Basin Phase I Tender EXHIBITG BIDDING FORM G-I Afghan-Tajik Basin Phase I Tender id Form B AFGHAN-TAJIK BASIN PHASE I TENDER Ministry of Mines of the Islamic Republic of Afghanistan I Kabul, Islamic Repufnc of Afghanistan BIDDER: l llrkiye Petrolleri Anonim OrtakJigi r10n Oil (International) Limited D Kuwait Energy Afghanistan Umited G h~z a nf ar Investment Limited BLOCK: Blcrl k 4 - M azar- I ~Sharif Bleck ROYALTY BID: lwei e ointsix ercent 12.6 % BIDDER'S REPRESEr ATIVE: Mark W. Sawyer (Dragon Oil), Michael Andersen (Kuwait Energy), Murat Fehmi Karci {TPAOr nd Ismail Ghazanfar {Ghazanfar) The undersigned, Turkiye Petrolleri Anonim Ortakligi, Dragon Oil (International) Limited, Kuwait Energy Afghanistan limite ~ and Ghazanfar Investment Limited, hereby unconditionaUy commit that, if selected as the winning B i d ~ ers in the above-referenced tender process, they will cause a company organized under the laws of the Islamic Republic of Afghanistan and wholly owned bV them to enter into the Exploration and PrJduction Sharing Contract for the Mazar-I-Sharif Block (the "EPSC") 1n the final form I distributed to the ~i dde r s in the above-referenced tender process, with the royalty referred to in the EPSC being the percentage indicated above. Unless such period is extended by the Ministry, the EPSC shall be executed + later than thirty (30) days after notification by the Ministry of award of the EPSC. The undersigned a€knowledge that noncompliance wIth the obligation set forth above shall result in a drawing on the BidjGUarantee. The undersigned f rther certifies that the electronic version of the bid submitted with the original paper version is the samJ as the original paper version, except for electronic format. I Dragon Oil (International) Limited Kuwait Energy Afghanistan limited A{ l tu~)h ..£4~~~~~ . ~~::..=::= =-----_ Title: [ -"> (J ~ Title: . ."1 / , .('1 t1-c J , IC /lit (...v VFr./1'v{2f>-J , ~, TUrkiye Petrolleri 4nonim Ortakligi Ghazanfar Investment LilT\ited -~ \~- ~-----~ --I ..:.-,/ ..L . tS Title: U,-c. (.. I P rea \'.l.o- J- Title: C 'E 0 Afghan-Tajik Basin Phase I Tender EXHIBITH INIMUM EXPLORATION PROGRAM H-I Afghan-Tajik Basin Phase I Tender EXHIBITH MINIMUM EXPLORATION PROGRAM The Contract I r shall perform the following minimum Exploration Operations during the Exploration l ase: Exploration Wells Initial Expl ~ration Period 2 First Exten1ion Period 2 Second Extl"'ion Period 2 Each EXPlorat on Well shall be drilled to a target depth that penetrates the Guri/Bukhara horizon. For ~ urposes of determining the original amount of the Financial Guarantee, each such Ekploration Well shall be deemed to have a value of fifteen million I U.S. Dollars ~ US$ 15,000,000.00). For the Initial Exploration Period, drilling in respect of one of the Itwo (2) Exploration Wells must commence prior to the end of the second (2nd ) Contraat Year, and drilling on both must commence prior to the end of the third (3rd) Con t r ac ~ Year; provided, however, that such deadlines shall be extended by the Ministry to later dates within the Initial Exploration Period if the Contractor demonstrates to the Ministrl1y'S reasonable satisfaction that such extension would allow the Contractor to efficientlYj adequately and in a technically sound fashion comply with its Work Program obligations to better prioritize its operations in order to optimize production of Hydrocarbons from the Contract Area. The amount of any Exploration Wells drilled in excess of thel required minimum Exploration Operations for any given period shall be carried forwa ~ d to the next period and shall be taken into account to satisfy the required minimum Ex ~ lora t ion Operations and/or calculate the amount of the Financial Guarantee required for sbch subsequent period. H-2 Afghan-Tajik Basin Phase I Tender EXHIBIT I WINN NG BIDDER'S EXPLORATION PROGRAM 1-1 EXHIBIT I WINNING BIDDER'S EXPLORATION PROGRAM FOR THE MAZAR-I-SHARIF BLOCK Part 1 Work commitments Geological nd geophysical ("G&G") studies and services, including: 1. o appf(llximately fifteen hundred square kilometers (1500 km2) high resolution aerot agnetic and gravity survey and interpretation o G&G studies and services outsourced from specialized service companies ·· I . I d· 2. SelsmlC program, mc u mg: o at lekst one thousand two hundred line kilometers (1200 line km) of new reco I naissance and detailed 20 seismic 3. Two (2) E ploration Wells to the shallower of three thousand five hundred meters (3500 m) 0 the top ofthe Lower Cretaceous formation 4. Lo.ggi:I: ::yall Wells, including, at a rn inirnurn, the following logs: o sonil : :::1: .. Calmer In sections Lhere target reservoirs are expected, the following additional logs will be run: .. Resistivity .. FMI 5. VSP at the end of each Well 1-2 6. Coring progLm, including cuts at a minimum of thirty-five meters (35 m) of two (2) or more cores t each Well 7. Wellsite operations including: o cOllebtion of ditch samples o tagg10lng and description of samples for lithology and shows o strip log plotting showing drill time, lithology, porosity and verbal description of samRle • bott1ms-up sample of drilling breaks and evaluation for shows and porosity o core cut if shows and porosity are detected • drill stem test if core results show encouragement, drilling is determined to be safe and required equipment is available within a reasonable time 8. Post-drilling evaluation of each Well Part 2 Total estimated cost Sixty four million U.S. Dollars (US$ 64,000,000) (excluding G&A, training and land rentals) 1-3 Afghan-Tajik Basin Phase I Tender EXHIBIT J ARTICLE X CALCULATION EXAMPLE J-l Afghan Tajik Exploration & Development Example of R-Factor Calculation Row (US$ '000 Except Oil & Gas Volumes) Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Total Revenue Qi! 6 Actual Sale Price (Bbl) 80.00 80.00 80.00 80.00 80.00 80.00 80.00 80.00 80.00 80.00 7 Total Oil Sold (Bbl) ° ° ° 2,000,000 4,000,000 5,000,000 6,000,000 7,000,000 7,000,000 7,000,000 38,000,000 8 Cumulative Oil Sold (Bbl) ° ° ° 2,000,000 6,000,000 11,000,000 17,000,000 24,000,000 31,000,000 38,000,000 9 Total Actual Revenue for Oil ° 160,000 320,000 400,000 480,000 560,000 560,000 560,000 3,040,000 10 ° ° 11 Associated Gas (AG) 12 Actual Sale Price for AG (MCF) 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 1,515,160 3,030,320 3,787,900 4,545,480 5,303,060 5,303,060 5,303,060 28,788,040 13 Total AG Sold (MCF) 000 1,515,160 4,545,480 8,333,380 12,878,860 18,181,920 23,484,980 28,788,040 14 Cumulative AG Sold (MCF) 000 r "------'marACfiThTRevenue fDr.tlG---------------O ' ° O· --- ~ i ,576 r5;152 --------,; 8;940 ~ 2;727 ~ 6;5r5 ~ 6;515 26;5r5------r43;940er-------- 16 17 Condensates from Associated Gas 18 Actual Sale Price for Condensates (Bbl) 80.00 80.00 80.00 80.00 80.00 80.00 80.00 80.00 80.00 80.00 19 Total Condensates Sold (Bbl) o ° ° 57,600 115,200 144,000 172,800 201,600 201,600 201,600 1,094,400 20 Cumulative Condensate Sold (Bbl) o o ° 57,600 172,800 316,800 489,600 691,200 892,800 1,094,400 21 Total Actual Revenue for Condensates ° o 4,608 9,216 11,520 13,824 16,128 16,128 16,128 87,552 22 ° 23 Oil. AG and Condensates Combined 24 Total Actual Revenue o o ° 172,184 344,368 430,460 516,551 602,643 602,643 602,643 3,271,492 25 Cumulative Actual Revenue o ° ° 172,184 516,551 947,011 1,463,562 2,066,206 2,668,849 3,271,492 Effective 0.00 0.00 0.00 86.09 86.09 86.09 86.09 86.09 86.09 86.09 26 Actual Price on Physical Sales I Bbl of Oil Sold 27 28 All Recoverable Capex & Expenses 29 Total Capex, SG&A & Opex 5,000 25,000 35,000 160,000 200,000 200,000 200,000 200,000 150,000 75,000 1,250,000 30 Cumulative Capex, SG&A & Opex 5,000 30,000 65,000 225,000 425,000 625,000 825,000 1,025,000 1,175,000 1,250,000 31 Effective Cumulative Cost/Bbl of Oil Sold n/a nfa nfa 112.50 70.83 56.82 48.53 42.71 37.90 32.89 32 33 Production Sharing 34 Royalty Oil to GolRA at 12.6% (Bbl) o ° ° 252,000 504,000 630,000 756,000 882,000 882,000 882,000 4,788,000 35 Oil Remaining for Exp & Profit Share o ° 1,748,000 3,496,000 4,370,000 5,244,000 6,118,000 6,118,000 6,118,000 33,212,000 36 ° 37 Cost Recovery Hydrocarbons 38 Unrecovered Exp From Previous Period o 5,000 30,000 65,000 74,511 ° ° ° ° ° 39 Recoverable Exp This Period 5,000 25,000 35,000 160,000 200,000 200,000 200,000 200,000 150,000 75,000 1,250,000 40 Total Recoverable Exp Due to Operator - $ 5,000 30,000 65,000 225,000 274,511 200,000 200,000 200,000 150,000 75,000 41 Remaining Hydrocarbons Allocated to Exp (Bbl) o o ° 1,748,000 3,188,585 2,323,099 2,323,099 2,323,099 1,742,324 871,162 14,519,368 42 Value of Hydrocarbons Allocated to Exp o ° ° 150,489 274,511 200,000 200,000 200,000 150,000 75,000 1,250,000 43 Unrecovered Exp Carried Forward 5,000 30,000 65,000 74,511 ° ° ° o ° ° 44 Cumulative Recoverable Exp Paid to Operator o ° ° 150,489 425,000 625,000 825,000 1,025,000 1,175,000 1,250,000 45 46 Net Hydrocarbons (Bbl) o o ° ° 307,415 2,046,901 2,920,901 3,794,901 4,375,676 5,246,838 18,692,632 47 R Formula Calculation 0.000 0.000 0.000 0.000 0.669 1.062 1.183 1.291 1.393 1.499 0% 100.0% 100.0% 50.0% 50.0% 48.9% 48.0% 48 Net Hydrocarbons to Contractor (%) 100.0% 100. 100.0% 49.7% 49 Net Hydrocarbons to Contractor (Bbl) o ° ° ° 307,415 1,023,451 1,460,451 1,884,917 2,137,862 2,518,790 9,332,885 50 NH to Contractor -Value o ° ° ° 26,466 88,111 125,733 162,276 184,053 216,847 803,486 51 Gross Contractor Revenue (GCR) o ° ° 150,489 300,977 288,111 325,733 362,276 334,053 291,847 2,053,486 52 Cumulative GCR o ° ° 150,489 451,466 739,577 1,065,310 1,427,586 1,761,638 2,053,486 53 54 Net Hydrocarbons to GolRA (Bbl) ° ° ° ° ° 1,023,451 1,460,451 1,909,984 2,237,814 2,728,048 9,359,747 55 Total Hydrocarbons to GolRA wi Royalty (Bbl) o ° ° 252,000 504,000 1,653,451 2,216,451 2,791,984 3,119,814 3,610,048 14,147,747 56 Total S Paid to GolRA for Royalty & Profit Oil o ° ° 21,695 43,390 142,349 190,818 240,367 268,591 310,796 1,218,006 57 Cumulative Paid to GolRA for Royalty & Profit Oil ° ° ° 21,695 65,085 207,434 398,253 638,620 907,211 1,218,006 Afghan Tajik Exploration & Development Example of R-Factor Calculation Row (US$ '000 Except Oil & Gas Volumes) Notes Revenue Qi! 6 Actual Sale Price (Bbl) Assumption. For demonstration purposes only. 7 Total Oil Sold (Bbl) Assumption. For demonstration purposes only. 8 Cumulative Oil Sold (Bbl) 9 Total Actual Revenue for Oil Formula: RowI6*Row7/1000 10 11 Associated Gas lAG) 12 Actual Sale Price for AG (MCF) Assumption. For demonstration purposes only. 13 Total AG Sold (MCF) Assumption of 0.75758 mcf of Associated Gas for each barrel of oil 14 Cumulative AG Sold (MCF) 15 TotalActuarRevenue fo,71G Formula:RowTZ*Row13/1000--- -- 16 17 Condensates from Associated Gas 18 Actual Sale Price for Condensates (Bbl) Assumption. For demonstration purposes only. 19 Total Condensates Sold (Bbl) Assumption of 0.0288 mcf of condensate for each barrel of oil 20 Cumulative Condensate Sold (Bbl) 21 Total Actual Revenue for Condensates Formula: Row18*Row19/1000 22 23 Oil. AG and Condensates Combined 24 Total Actual Revenue Formula: Row9+Row15+Row21 25 Cumulative Actual Revenue 26 Effective Actual Price on Physical Sales / Bbl of Oil Sold Expressed in terms of bbls of oil sold. 27 28 All Recoverable Capex & Expenses 29 Total Capex, SG&A & Opex Assumption. For demonstration purposes only. 30 Cumulative Capex, SG&A & Opex 31 Effective Cumulative Cost/Bbl of Oil Sold Expressed in terms of bbls of oil sold. Formula: Row30*1000/Row8 32 33 Production Sharing 34 Royalty Oil to GolRA at 12.6% (Bbl) Expressed in terms of bbls of oil, but GIRoA also receives proportional AG & condensates. Formula: Row7*12.6% 35 Oil Remaining for Exp & Profit Share Formula: Row7-Row34 36 37 Cost Recovery Hydrocarbons 38 Unrecovered Exp From Previous Period Formula: [Previous Period]Row43 39 Recoverable Exp This Period Formula: Row29 40 Total Recoverable Exp Due to Operator - S Formula: Row38+Row39 41 Remaining Hydrocarbons Allocated to Exp (Bbl) Measured in oil. Formula: =IF(Row35=0,0,IF(Row26=0,0,IF(Row35>(Row40*1000/Row26),(Row40*1000/Row26),Row35))) 42 Value of Hydrocarbons Allocated to Exp Includes value of oil & proportional AG & condensates. Formula: Row41*Row26/1000 43 Unrecovered Exp Carried Forward Formula: Row40-Row42 44 Cumulative Recoverable Exp Paid to Operator Formula: Row42+[Previous Period]Row44 45 46 Net Hydrocarbons IBb!) Formula: Row35-Row41 47 R Formula Calculation Formula: [Previous Period]Row52/[Previous Period]M30. Note: Contract stipulates Previous "Period" is Previous "Month". 48 Net Hydrocarbons to Contractor (%) Form u I a: I F( Row4 7 < 1, 1, I F (Row4 7 < 1. 25 ,0. 5, I F (Row4 7> 2.5 ,0.4, (0.4+( (2 .5-Row4 7)/( 2.5-1.25)) * (0.5-0.4))))) 49 Net Hydrocarbons to Contractor (Bbl) Measured in oil - Contractor also receives proportional AG & condensates. Formula: Row48*Row46 50 NH to Contractor - Value Includes value of oil & proportional AG & condensates. Formula: Row49*Row26/1000 51 Gross Contractor Revenue (GCR) Includes value of oil & proportional AG & condensates. Formula: Row42+Row49*Row26/1000 52 Cumulative GCR Formula: Row51+[Previous Period]Row52 53 54 Net Hydrocarbons to GolRA (Bbl) Measured in oil- GIRoA also receives proportional AG & condensates. Formula: Row46-Row49 55 Total Hydrocarbons to GolRA w/ Royalty (Bbl) Measured in oil - GIRoA also receives proportional AG & condensates. Formula: Row54+Row34 56 Total $ Paid to GolRA for Royalty & Profit Oil Includes value of oil & proportional AG & condensates. Formula: Row55*Row26/1000 57 Cumulative Paid to GolRA for Royalty & Profit Oil Formula: Row56+[Previous Period]Row57 Afghan-Tajik Basin Phase I Tender EXHIBITK FORM OF HYDROCARBONS LICENSE K-I Afghan-Tajik Basin Phase I Tender 3Jslamic RepubItc of ~fg b anistan :ministrp of :mines QExploration lLicense Issued to Persuant to contract __ _ For __ _ Basin of northern Afghanistan Valid From ______ To _____ _ Ministry of Mines Date: ___ _ K-2 Afghan-Tajik Basin Phase I Tender ~.).J~' --+ _ _ ~1 _ _ _ -...J jIJ~1 es""b -+---:~J lJ K-3 Afghan-Tajik Basin Phase I Tender EXHIBITL FO I OF PERMIT FOR DEVELOPMENT AND PRODUCTION OPERATIONS L-I Afghan-Tajik Basin Phase I Tender Jfslamic Republic of £lfgbanistan ;ffiinistrp of ;ffiines ~e mit for ~ebel opment anb ~r obu(tion ~eration Issued to Persuant to contract __ For _ _ _ Basin of northern Afghanistan Valid From ___ _ _ To _ _ __ _ Ministry of Mines Oate: ___ _ L-2 Afghan-Tajik Basin Phase I Tender ,,~~ l ~~l ~ )-'cA 6 ,.. ~~~ ~~ ~ h 1u -' ~~l 4 j~ "4 A;4.l ~ ~~ J U-' t, j1 ~1· t -----+----II J • eo L-3 MEMORANDUM OF UNDERSTANDING between THE MINISTRY OF MINES & PETROLEUM OF THE GOVERNI ENT OF THE ISLAMIC REPUBLIC OF AFGHANISTAN, DRAGON OIL (MAZAR-I-SHARIF) LIMITED, TP AFGHANISTAN LIMITED, and GHAZANFAR INVESTMENT LTD. for CUSTOMS DUTY EXEMPTION FOR ITEMS USED EXCLUSIVELY FOR HYDROCARBONS OPERATIONS 1. Parties. This Memorandum of Understanding ("MOU") is entered into on this 8th day of October 2013 betwecln the Ministry of Mines & Petroleum of the Government of the Islamic Republic of Afghani~tan (the "MoMP"), acting on behalf of the Government of the Islamic Republic of Afghani~tan (the "Government"), Dragon Oil (Mazar-i-Sharif) Limited ("Dragon Oil"), TP Afghanistah Limited ("TPAL"), and Ghazanfar Investment Ltd. ("Ghazanfar"). Each of the MoMP, DragOr Oil, TPAL and Ghazanfar may be referred to as a "Party," and collectively they may be referred to as the "Parties." Each of Dragon Oil, TPAL and Ghazanfar may be referred to a ~ a "Contractor Entity" and collectively as the "Contractor". 2. Background andi Scope. On behalf of the Government, the MoMP has entered into an Exploration and Production Sharing Contract, dated October 8, 2013, with the Contractor for hydrocarbons explor1tion, development and production in the Mazar-i-SharifBlock of the Afghan-Tajik Basin bf Afghanistan (the "EPSC"). Pursuant to Section 17.1(a) of the EPSC, the I Parties have agreed that for the duration of the EPSC, each of the Contractor Entities shall be entitled to import intb Afghanistan (including by its subcontractors as joint consignees) free of Customs Duties the clquipment and supplies designated by the Parties as required to be imported for Hydrocarbons OJerations and shall be entitled to export the same (provided that no transfer of ownership of suc ~ equipment or supplies has occurred after the date of their import into Afghanistan) free of Fustoms Duties pursuant to the terms and conditions of this MOU, as it may be amended from time to time. Capitalized terms used but not defined herein have the meanings I provided in the EPS- ..:.......4) October 8, 2013 Mr. Mark Sawyer I Manager - New V1ntures Dragon Oil (Internjtional) Ltd. c/o Dragon Oil (HOjldings) Ltd. P.O. Box 34666 Dubai United Arab Emira es Mr. Tayfun Yener L nucu Director 'rUrkiye Petrolleri Anonim Ortakllgl (TPAO) SogUtozii Mahallesi 2180 Cadde No. 86061 0lb Ankara C;ankaya/ TUrkiye Mr. Ismael Ghazanfar Ghazanfar Investm6nt Ltd. Kart-e-Parwan Kabul Afghanistan Subject: Final EX 1'0mtion ami Production Sharing Contmcts ("EPSCs'J for the MaZllr-i- I Sharif (lnti santiu(f Blocks Dear Consortium: j Reference is made 0 the EPSCs for the Mazar-i-Sharif and Sanduqli Blocks initialed on July 15, 20 130n behalf oftlie Ministry of Mines & Petroleum and the Consortium (the "Initialed EPSCs"). The Ministry noteslthat the final execution copies of the EPSCs it provided to the Consortium on October 5. 2013 incduded various ministerial changes to the Initialed EPSCs required to prepare the documents for t gnature atthe sign in g ceremony to be held today, October 8, 20 13. In recognition of the limited time available to the Consortium to review and approve these ministerial changes the Ministry agrees to provide the Consortium until October 22,2013 to review the final EPr Cs and notify the Ministry regarding any material changes from the Initialed EPSCs that may bel contained therein. Upon receiving such notification, the Ministry and the Consortium will endeavor to agree on such material changes to the final EPSCs as may be required to bring the final EPSCs into conformity with the Initialed EPSCs. Sincerely, Abdul Jalil Jumriany Director General I Afghanistan Petroleum Authority Ministry of Mines & Petroleum Government ofthe Islamic Republic of Afghanistan AGREED AND ACCEPTED: Ma'k ~~ r vr Manager, New Velftures and Business Developlf ent Dragon Oil (MazarCi-Sharif) Limited and Dragon Oil (SandU1Rli) Limited ~ ~"'=ttJ TP AFghanistan Lif ited -&~ ~ ~ r Chief Executive Officer Ghazanfar Investment Ltd. ~ .. .. . " .• " . ~ . J ~ . 'ygJ.--=l ~ Gl1AZANFAR GROUP LlC Dear Ministl'Y: Subject: Procurement Manual for Sanduqli and Maz.ar-i-Sharif EP$Cs Refcrence is made to the subject Agreements which will be signed together willi the EPSCs. The Consortium m ~ mber3 expect to learn a. great deal about the procurement process during the first year of operations as they implement the Procurement Manual and may identifY improycment$ 10 tbe process. Accordingly, ~,v h ere improvements are identified by the COllsortium, it will make suitable recommcndntiolns to the Minisfry. The Consortium and the Ministry \,~II use Iheir reasonable efforts and "' .. """ "'1 10 I"",..,....,..., _ ,m .... th, """""",'" ..... " In. Hm"y .... ", •. ..-ilYT' !!!!d~ ~ ", L l mi ~ AgJ'~ n this - I day of Oclober, 2013: -;1' /1 ~ Q Minister of Min and Petroleum