PETROLEUM PROSPECTING LICENSE This Deed made the ~ day of ~ . , 2013 between the Government of the Republic of Guyana, represented herein by t e M1mster (heremafter referred to as "the M1mster" or the "Government" as the case may be) of the One Part; And Repsol Exploraci6n S.A.(hereinafter refened to as "Repsol"); a Company incorporated under the Jaw of Spain with its registered office at Mendez Alvaro No 44, 28045 Madrid - Spain and registered in Guyana under the Companies Act 1991 with its registered address in Guyana situated at 157 'C' Waterloo Street, North Cummingsburg, Georgetown, Guyana; (hereinafter referred to as the "Licensee") of the Other Part; WHEREAS in accordance with the Petroleum (Exploration and Production) Act 1986 (Act No. 3 of 1986) and the Regulations made thereunder (hereinafter refelTed to as the "Act" 1 and "Regulations" respectively),the Licensee have by application dated 6 h day of December 2012, applied to the Minister for the grant of a Petroleum Prospecting License in respect of the area constituted by blocks described and identified in the First Schedule hereto and shown on a map thereto attached; WHEREAS under authority confelTed by section 10 of the Act the Minister has entered into an agreement of even date herewith (hereinafter refelTed to as the "Petroleum Agreement") with the Licensee for the grant to the Licensee of a Petroleum Prospecting License subject to the tem1s of the Petroleum Agreement. NOW, THEREFORE, in exercise of the powers confetTed upon the Minister by section 10 and 21 of the Act: 1. I, the Minister, do hereby grant to the Licensee for a period of four ( 4) Years commencing on the Effective Date of the Petroleum Agreement (with two (2) optional renewal periods ofthree (3) Years each), this Petroleum Prospecting License in respect of the area constituted by the blocks described in the First Schedule hereto and identified and shown on the map attached thereto (hereinafter refelTed to as the "prospecting area") conferring on the Licensee, by subject to the Act and the Regulations made thereunder and to the conditions specified hereunder or to which the Licensee is otherwise subject under the Petroleum Agreement, the exclusive right to explore in the prospecting area for petroleum and the right to carry on such operations and execute such works therein as are necessary for that purpose. 2. This Petroleum Prospecting License is granted subject to the following conditions: A) In accordance with Article 4.1 of the Petroleum Agreement, during the term of this Petroleum Prospecting License, the Licensee shall, in or in relation to, the prospecting area, catTy out the work in Article 4.1(a) and 4.1(b) and 4.1(c) of the Petroleum Agreement. Government Of Guyana- Repsol Exploraci6n S.A. Petroleum Prospecting License Page 1 The initial period of four ( 4) Years shall be divided into two (2) phases, phase 1 shall be for two and a half (2.5) Years and phase 2 shall be for one and a half (1.5) Years. Phase 1 of the initial period (two and a half (2.5) Years) (a) During phase 1, the Contractor shall: • Acquire, process and interpret 500 km of 2D seismic within the Contract Area, and • Acquire, process and interpret 2,000 sq. km of 3D seismic within the Contract Area (b) At the end of phase 1, the Contractor shall elect either to relinquish the entire Contract Area or enter phase 2. Phase 2 of the initial period (one and a half (1.5) Years) (a) During phase 2, Contractor shall commence to drill an Exploration Well to the Cretaceous Formation in accordance to Article 4.2. (b) At the end of the initial period of four ( 4) Years, the Contractor shall elect either to relinquish the eGtire Contract Area except: (i) for any Discovery Area in respect of which the Minister is informed under section 30 of the Act, (ii) for any Natural Gas Discovery Area pending the outcome from market development which is to assist Contractor with whether to declare commerciality and (iii) for the area contained in any Petroleum Production Licence, or subject to Article 5 relinquish twenty percent (20%) of the Contract Area and renew the Petroleum Prospecting Licence for a further period of up to three (3) Years. First renewal period of three (3) Years: The first renewal period of three (3) Years shall be divided into two (2) phases, each phase consisting of eighteen (18) months. Contractor shall submit a proposal with the work commitment to be performed during the two phases of the first renewal period along with the relevant application. At the end of the first renewal period of three (3) Years, the Contractor shall elect either, to relinquish of which the the entire Contract Area except: (i) for any Discovery Area in respect Minister is informed under section 30 of the Act, (ii) for any Natural Gas Discovery Area pending the outcome from market development which is to assist Contractor with whether to declare commerciality and, (iii) for the area contained in any Petroleum Production Licence, or subject to Article 5, relinquish twenty percent (20%) of the Contract Area and renew the Petroleum Prospecting Licence for a second period of three (3) Years. Government Of Guyana- Repsol Exploraci6n S.A. Petroleum Prospecting License Page2 Second renewal period of three (3) Years: The second renewal period of three (3) Years shall be divided into two (2) phases, each phase consisting of eighteen (18) months. Contractor shall submit a proposal with the work commitment to be performed during the two phases of the second renewal period along with the relevant application. At the end of the of three (3) Years, the Contractor shall relinquish the entire second renewal period Contract Area except: (i) for any Discovery Area in respect of which the Minister is informed under section 30 of the Act, (ii) for any Natural Gas Discovery Area pending the outcome from market development pursuant to section 33(1) of the Act and as set out in Article 8.4, which is to assist Contractor with whether to declare commerciality and, (iii) for the area contained in any Petroleum Production Licence and any other portion of the Contract Area on which the Minister agrees to permit the Contractor to conduct further exploration activities. (B) Within sixty (60) days after the Effective Date of the Petroleum Agreement, the licensee shall submit to the Minister details of the work programme and budget (on the basis of the minimum work programme specified in (A) above) to be undertaken during the remaining portion of the calendar year. Thereafter, for so long as this Petroleum Prospecting License remains in force, the Licensee shall submit an annual work programme and budget (on the basis of the minimum work progranm1e specific: i:: (A) above) not later than c:1e 0) ~ o nth prior to the of the calendar year. beginning (C) Subject to the provisions of the Act and the Petroleum Agreement and other conditions of the Petroleum Prospecting License, the Licensee shall conduct prospecting operations hereunder in accordance with the annual work programme and budget submitted pursuant to clause 2(B) herein. (D) The Licensee shall, before commencing any prospecting operations in the prospecting area, furnish to the Minister the name and address of the manager who at the time of commencement of such prospecting operations shall have supervision over the prospecting operations to be carried out. Thereafter, any change in name and/or address of the manager shall be forthwith notified to the Minister. Any notice which the Minister or any person authorized by the Minister is required or entitled to serve upon the Licensee shall be sufficiently served if the same shall be delivered or sent by post to such manager at such address and served in accordance with Article 33 of the Petroleum Agreement. (E) The Licensee shall observe and give effect to the terms of the Petroleum Agreement. 3. Where during any period covered by this Petroleum Prospecting License the obligations of the Licensee under this petroleum prospecting license have been suspended by reason of force majeure pursuant to the Petroleum Agreement, the period for which this petroleum prospecting license has been granted shall be extended as specified in Article 24 ofthe Petroleum Agreement. 4. The Licensee shall pay to the Government during the tenn hereby granted an annual Government Of Guyana- Repsol Exploraci6n S.A. Petroleum Prospecting License Page3 LJ charge in respect of the prospecting area as specified in Article 10 of the Petroleum Agreement. 5. The Licensee shall be entitled to renew this petroleum prospecting license as set forth in Ariicle 3.l(b) of the Petroleum Agreement. 6. Unless the context otherwise requires, tenns and expressions used in this Petroleum lJ Prospecting License shall have the same meaning as in the Act or the Petroleum Agreement. u IN WITNESS WHEREOF, I Donald Ramotar, the Minister, do hereby grant this Petroleum Prospecting License and set my hand and affixed the seal of the Government of the Republic of Ll Guyana and the Licensee has set his seal, the day, month and year first herein above written. u Signed By: The Minister Responsible For Petroleum Ll Representing the Government of the Republic u ~· ofGuya l His Excellency, Donald amotar President of the Republic of Guyana u (Minister Responsible for Petroleum) u Witness Signed By: Repsol Ll LJ LJ Government Of Guyana-Repsol Exploracion S.A. Petroleum Prospecting License FIRST SCHEDULE DESCRIPTION OF PROSPECTING AREA Description of area to be granted under Petroleum Prospecting License pursuant to Article 3 of the Petroleum Agreement. The area comprises approximately 6,525 square kilometres described herein consisting of graticular blocks identified herein and shown on the Block Reference Map attached Latitude and Longitude Measurements are West and North respectively POINT No. LATITUDE LONGITUDE 1 8° 00.00' N sr 2s.oo· w 2 8° 00.00' N sr 2o.oo· w 3 8° 00.00' N sr 1s.oo·w 4 r 5o.oo· N sr 15.oo· w 5 r so oo· N 5r 1o.oo· w 6 r 4o.oo· N sr 1o.oo· w 7 yo r profits which may become p..:..ya'.:>le from time to time under m ~y laws, acts, statutes, regulations or orders by the Government; and (iii) any other similar charge imposed and payable in respect of Petroleum Operations at the date hereof, or from time to time hereafter, except charges ofthe type specified in Article 15.1 (a-b). 15.5 The Contractor shall provide the Minister with the Contractor's income tax returns to be submitted by the Minister to the Commissioner General, Guyana Revenue Authority so the Minister can pay income tax on behalf of the Contractor as provided under Article 15.4 (a). On such returns, the Minister shall note that he is paying the income taxes on behalf of the Contractor, so that the Commissioner General, Guyana Revenue Authority can properly prepare the receipts required under this Article 15 .5. Within one hundred and eighty ( 180) days following the end of each year of assessment, the Minister shall furnish to Contractor proper tax certificates in Contractor's name from the Commissioner General, Guyana Revenue Authority evidencing the payment of the Contractor's income tax under the Income Tax Act and corporation tax under the Corporation Tax Act. Such certificates shall state the amount of tax paid individually on behalf of Contractor or parties comprising the Contractor and other particulars customary for such certificates. 15.6 The Government's share of Profit Petroleum specified in Article 11 includes royalty payable by the Contractor at the rate of one percent (1 %) of Crude Oil produced and sold, and delivery to the Minister, pursuant to Article 14 of his share of Profit Petroleum equivalent to royalty shall constitute payment of such royalty in kind. Within one hundred and eighty (180) days following the end of each year of assessment receipts evidencing Page 40 Petroleum Agreement Government of Guyana - Repsol Exploracion S.A. payment of Contractor's royalty shall be furnished by the Minister to the Contractor stating the amount and other particulars customary for such receipts. 15.7 Subject to the conditions of section 49 of the Act, the Minister may remit in whole or in part, or defer payment of any royalties payable by Contractor. 15.8 Nothing in this Agreement shall be construed to place an obligation on the Government to file a tax return declaring its share of production or profit share or to regard such profit share as income within the meaning of section 5 of the Income Tax Act (Cap 81 :01) or section 4 of the Corporation Tax Act (Cap 81:03) 15.9 The Minister hereby agrees that the Contractor shall be exempted from the Property Tax Act pursuant to section 51 of the Act and any other act which amends or replaces in part or in whole the Property Tax Act 15.10 Notwithstanding any provision to the contrary in this Article, Contractor, Affiliated Companies or Non-Resident Sub-Contractors shall be exempted from VAT during the Exploration period on services rendered. 15.11 Notwithstanding any provision to the contrary in this Article, the Government warrants and agrees with the Contractor that it will procure from the Guyana Revenue Authority (GRA) the granting of assurances in respect to the Value Added Tax Act for:- (i) The contractor and sub-contractors of the company to be registered in accordance with the relevant sections of the Value Added Tax Act; and (ii) Upon the submission and filing of the appropriate Value Added Tax Return forms within the prescribed timeframe, Contractor and sub-contractors shall have the right to obtain VAT refunds according to applicable Value Added Tax Regulations. 1 S .12 The Minister agrees that for the duration of the Exploration Period, and for any area within the Contract Area where exploration activity is in progress, the provisions of section 1 O(b) of the Corporation Tax Act (Cap 81:03), including any successor provisions to section 1 O(b) of the Corporation Tax Act (Cap 81 :03), shall not apply to the Contractor, with respect to any payments made to any Affiliated Companies or Sub-Contractors. Notwithstanding any provision to the contrary in this Article, Affiliated Companies or Non-Resident Sub-Contractors shall not be subject to the provisions of the Income Tax Act of Guyana (Cap. 81.01) and the Corporation Tax Act of Guyana (Cap 81 :03) during the Exploration Period on income earned in Guyana for any given tax year if the Affiliated Company or Non-Resident Sub-Contractor has conducted business in Guyana for one hundred eighty three (183) days or Jess on a cumulative basis in the tax year of assessment. 15.13 There shall be no tax, duty, fee, withholding, charge or other impost applicable on interest payments, dividends, deemed dividends, transfer of profits or deemed remittance of profits from Contractor's, Affiliated Companies' or Non-Resident Sub-Contractors' branch in Page 41 Petroleum Agreement of Guyana - Repsol Exploraci6n S.A. Govemment Guyana to its foreign or head office or to Affiliated Companies. 15.14 The Minister agrees that for the duration of the Exploration Period, and for any area within the Contract Area where exploration activity is in progress, the provisions of section 18(h) of the Income Tax Act (Cap 81 :01 ), including any successor provisions to section 18(h) of the Income Tax Act (Cap 81:01 ), shall not apply to each party comprising the Contractor, with respect to head-office expenses paid to any Affiliated Companies. 15.15 The Expatriate Employee shall be liable to pay personal income tax in Guyana on income earned in Guyana. Guyana (represented herein by the Minister) shall cause the proper authorities to issue appropriate tax certificates to Expatriate Employees when required. (i) If an Expatriate Employee is liable to pay income tax in Guyana on income earned in Guyana, such Expatriate Employee shall pay such income tax at a rate equal to the current income tax rate of Guyana; (ii) Notwithstanding any provision to the contrary in this Article, Expatriate Employees shall not be subject to the provisions of the Income Tax Act of Guyana (Cap. 81.01) and shall not be liable for personal income tax in Guyana on income earned in Guyana for any given tax year if the expatriate is physically present in Guyana for one hundl · ~d ~ighty three (183) days or le::;s Jn a :'.l::::.:.lative basis in the tax year of assessment. 15.16 An Order shall be made giving effect to the provisions of this Article in statutory fonn and language as specified in section 51 of the Act. Page 42 Petroleum Agreement Government of Guyana -Repsol Exploraci6n S.A. Article 16 - Contracts and Assignments 16.1 The relevant party comprising the Contractor or the Operator shall, upon request, provide to the Minister copies of: (a) contracts with respect to the sale or disposal of Petroleum (including mvmces issued thereunder); (b) any deed of assignment of an interest of any party comprising the Contractor under this Agreement pursuant to Article 25; (c) any instrument by which the Contractor pledges, mortgages, encumbers or hypothecates its interest under this Agreement or the Contract Area. 16.2 Assignments of any kind between one party comprising Contractor and its Affiliated Company, as well as any assignment of any kind made in accordance with this Agreement (including one to an unrelated party) shall be exempted from any duties or taxes, including Capital Gain Taxes payable in such respect and shall be subject to a fee payable to GGMC upon approval of the assignment for the amount of one hundred thousand United States Dc~lar :; (lOO,OOOUS$.). Page 43 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. Article 17 - Domestic Supply Obligation 17.1 Tem1s for Crude Oil. (a) If the Crude Oil requirements of the domestic market in Guyana (the "Crude Oil Domestic Demand") exceed the Minister's total entitlement from all Crude Oil production in Guyana, then the Contractor shall be obliged together with any third parties which produce Crude Oil in Guyana, to supply and sell a volume of Crude Oil to be used for such Crude Oil requirements in Guyana, calculated on the basis of the ratio which the Contractor's Lifting Entitlement to Crude Oil bears to the sum of Contractor's Lifting entitlement plus the total entitlement of all other producers in Guyana subject to Article 17.l(c). The volume of Crude Oil which the Contractor shall be required to sell under this Article shall not exceed the Contractor's share of Profit Petroleum. The Minister shall give the Contractor notice on or prior to April 1 of the year preceding the Calendar Year in which the Government will have the said requirement and the term of tbe supply shall be on a Calendar Year basis unless otherwise agreed. For tbe purpose of this Agreement, Crude Oil Domestic Demand shall consist of those quar.ti::es of S:--:de Oil (i) used to produce refin ::d products or petrochemicals in Guyana for end use by business and residential consumers in Guyana, or (ii) used to produce power in Guyana for end use by business and residential customers in Guyana, the amounts for which shall be based upon independent, verifiable govetmnent statistics. Crude Oil, refined products, petrochemicals or fuel for power generation that are exported from Guyana shall not be considered part of Crude Oil Domestic Demand. (b) The Contractor shall, in any Year, have a right to supply out of Contractor's Lifting Entitlement the proportion of the Crude Oil requirements of Guyana that the quantity produced from the Contract Area bears to the total production at the time in Guyana to the extent that such requirement is not satisfied from any contract entered into prior to the date of commencement of production from the Contract Area. For the purpose of this paragraph, the term "the Crude Oil requirements of Guyana" means the amount by which, in any Year, Crude Oil Domestic Demand exceeds the Minister's total entitlement to all Crude Oil produced in Guyana. The Contractor shall give the Minister notice on or prior to April 1 of the Calendar Year preceding the Calendar Year in respect of which Contractor wishes to exercise the aforesaid right and the term of the supply shall be on a Calendar Year basis unJess otherwise agreed. Notwithstanding the foregoing the Contractor shall have the right to supply the total amount calculated pursuant to the foregoing provisions. (c) The price payable for the sale of Crude Oil pursuant to this Article shall be paid in United States dollars (or other currency as may be agreed) at a place specified by the Contractor within thirty (30) days of receipt of the Contractor's invoice by the Page 44 Petroleum Agreement Govemment of Guyana - Repsol Exploraci6n S.A. Minister, and shall be determined in accordance with Article 13, failing which Contractor's obligations in respect of the Domestic Supply Obligations of this Article 17 shall be suspended until payment is made good, at which time deliveries shall be resumed subject to any alternative commitments that may have been reasonably entered into by Contractor to dispose of the Crude Oil during the period of default in payment. Contractor shall recover any amount due and unpaid by the Government, plus interest at the Agreed Interest Rate, from the Govermnents Lifting Entitlement of Crude Oi I. (d) Any sale of Crude Oil as provided for in Article 17.l(a)- (c) shall occur at the Delivery Point or such other point as the Minister and the Contractor may mutually agree. (e) All tenns and conditions for the sale of Crude Oil pursuant to this Article, shall be of sale entered into between the Minister and Contractor. specified in a contract 17.2 Terms tor Natural Gas. (a) If the Natural Gas requirements of the domestic market in Guyana (the "Natural Gas Domestic Demand") exceed the Minister's total entitlement from all Natural :::::J. ~ production in Guyana, then the Ccntractor shall be obliged tof;et~er \·.':i. :l-. -J.ny third parties which produce Natural Gas in Guyana, to supply and sell a volume of Natural Gas to be used for such NatlL·al Gas Domestic Demand in Guyana, calculated on the basis of the ratio which the Contractor's Lifting Entitlement to Natural Gas bears to the sum of Contractor's Lifting entitlement plus the total entitlement of all other producers in Guyana subject to Article 17.2(c). The volume ofNatural Gas which the Contractor shall be required to sell under this Article shall not exceed the Contractor's share of Profit Petroleum. The Minister shall give the Contractor notice on or prior to April 1 of the year preceding the Calendar Year in which the Government will have the said requirement and the term of the supply shall be on a Calendar Year basis unless otherwise agreed. For the purpose of this Agreement, Natural Gas Domestic Demand shall consist of those quantities of Natural Gas used for domestic residential, commercial and industrial consumption, including fuel used for domestic power generation determined by the Minister before the submission of a Development Plan, including a forecast of the reasonable variation in demand in the future. Natural Gas liquefied or compressed in Guyana for export or used as feedstock for petrochemical exports, such as methanol and fertilizer, shall not be considered part ofNatural Gas Domestic Demand. Any sales of Natural Gas to the domestic market shall be priced at the net-back price of such Natural Gas in the production Field, which shall be calculated as the market destination price where the Natural Gas would be sold minus: transport, marketing, processing, compression, liquefaction and any other fee or tariff paid to Page 45 Petroleum Agreement of Guyana - Repsol Exploraci6n S.A. Government take the gas from the Field to the destined market. In the event of a failure to reach agreement on the price, volume and/or terms of sale, either Party may submit the dispute for sole expert determination pursuant to Article 26.3. (b) The Contractor shall, in any Year, have a right to supply out of Contractor's Lifting Entitlement the proportion of the Natural Gas requirements of Guyana that the quantity produced from the Contract Area bears to the total production at the time in Guyana to the extent that such requirement is not satisfied from any contract entered into prior to the date of commencement of production from the Contract Area. For the purpose of this paragraph, the tem1 "the Natural Gas requirements of Guyana" means the amount by which, in any Year, Domestic Demand exceeds the Minister's total entitlement to all Natural Gas produced in Guyana. The Contractor shall give the Minister notice on or prior to April 1 of the Calendar Year preceding the Calendar Year in respect of which Contractor wishes to exercise the aforesaid right and the term of the supply shall be on a Calendar Year basis unless otherwise agreed. Notwithstanding the foregoing the Contractor shall have the right to supply the total amount calculated pursuant to the foregoing provisions. (c) The price payable for the sale of Natural Gas pursuant to this Article shall be paid in United States dollars (or other cmrency as may be agreed) at a place specified by the Contractor witL~r. -thirty (30) days of receipt of tbe Co-::t:-::ctor's invoice by the Minister, and shall be determined in accordance with Article 17.2(a), failing which Contractor's obligations in respect of the Domestic Supply Obligations of this Article 17 shall be suspended until payment is made good, at which time deliveries shall be resumed subject to any alternative commitments that may have been reasonably entered into by Contractor to dispose of the Natural Gas during the period of default in payment. Contractor shall recover any amount due and unpaid by the Government, plus interest at the Agreed Interest Rate, from the Governments Lifting Entitlement ofNatural Gas. (d) Any sale of Natural Gas as provided for in Article 17.2(a) - (c) shall occur at the Delivery Point or such other point as the Minister and the Contractor may mutually agree. (e) All terms and conditions for the sale ofNatural Gas pursuant to this Article, shall be specified in a contract of sale entered into between the Minister and Contractor. Page 46 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. Article 18 - Guyana Resources 1 8.1 Jn the conduct of Petroleum Operations pursuant to this Agreement the Contractor shall require that the Operator give preference to: (a) the purchase of Guyanese goods and materials, provided that such goods and materials are available on a timely basis of the quality and in the quantity required by Operator at competitive prices; and (b) the employment of Guyanese Sub-Contractors in so far as they are commercially competitive and satisfy the Operator's financial and technical requirements and meet the requirements of Article 18.1 (a). 18.2 The Operator shall establish appropriate tender procedures for the acquisition of goods. materials <:~.nd services which shall ensure that Guyanese suppliers and Sub-Contractors are given adequate opportunity to compete for the supply of goods and services. 18.3 Within ninety (90) days after the end of each Calendar Year the Operator shall provide the Minister with a report outlining its achievements Iri ·utilising Guyanese resources durmg that Calendar Year. Page 47 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. Article 19 - Employment and Training 19.1 Subject to the requirements of any Jaw relating to immigration, Govenunent shall provide the necessary work permits and other approvals required by the Contractor for employment of Expatriate Employees in Guyana for the purpose of Petroleum Operations. 19.2 Without prejudice to the right of the Contractor to select employees and determine the number thereof in the conduct of Petroleum Operations, the Operator shall employ and Sub-Contractors shall employ Guyanese citizens having appropriate qualifications and experience whenever and wherever possible,. 19.3 During each year of the tenn of the Petroleum Prospecting License, or any renewal thereafter the Contractor shall pay to GGMC the amounts of: Initial Period: Thirty thousand United States Dollars ($30,000US$.) First Renewal Period: Thirty thousand United States Dollars ($30,UOOUS$.) Second Renewal Period: Thirty thousand United States Dollars (30,000US$.) Payments under this Article 19.3 shall be paid directly into bank accounts held and controlled by the GGMC as no~ ~ :5~ c · in writing. The purposes of these payments are noted hereunder; (a) to provide Guyanese personnel nominated by GGMC with on-the-job training in Contractor's operations in Guyana and overseas and/or practical training at institutions abroad, particularly in the areas of logistical planning for undertaking Petroleum Operations, seismic acquisition and interpretation, economic analysis, petroleum accounting and contract administration; (b) to send qualified Guyanese personnel selected by GGMC on courses at universities, colleges or other training institutions selected by GGMC; (c) to send Guyanese personnel selected by GGMC to conferences and semmars related to the petroleum industry; (d) to purchase for GGMC advanced technical books, professional publications, scientific instrun1ents or other equipment required by GGMC. 19.4 During each year of the term of the Petroleum Prospecting Licence, or any renewal thereafter, the Contractor, in accordance with its internal applicable policy, shall fully cover the cost of air travel, tuition and registration fees, suitable lodging and stipend for daily living and upkeep, to provide training to one suitably qualified Guyanese selected by the GGMC to pursue a Masters Degree in Oil and Gas E&P progranune in the "Centro Superior de Formacion" in Madrid, Spain. Candidates for this Master Degree must be university qualified and must pass the registration requirements. In the event that the Page 48 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. capacity of "Centro Superior de Formacion" is full in any given year, then the Contractor will either propose an alternate university in Europe or United States, to provide the training or will provide to have simultaneous training for more than one candidate in a different year. Page 49 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. Article 20 - Rights to Assets and Insurance 20.1 Rights to Assets (a) The Contractor shall have the right to use free of charge assets previously installed by the Contractor in relinquished areas which are required for the Petroleum Operations in the remaining portion of the Contract Area provided that in the event of re-licencing of the relinquished area, such licence shall exclude the aforesaid assets. (b) Subject to Article 20.1 (c) upon expiry or termination of this Agreement in accordance with the provisions hereof, the Contractor shall upon notification by GGMC pursuant to Article 20.1 (d)(i): (i) deliver to the Minister, free of charge, in good order and condition, (fair wear and tear excepted) all installations, works, pipelines. pumps, casings, tubings, engines and other equipment, machinery or assets of a fixed or pem1anent nature constructed, used or employed by the Contractor or the Operator in the Contract Area; (ii) deliver to the Mimster, free of charge, any fixed assets relating to Petroleum Operations outside the Contract Area and movable assets owned by the Contractor or Operator and used or employed in connection with Petroleum Operations and located in Guyana for which costs have been fully recovered in accordance with Annex C herein; where costs have not been fully recovered the provisions of Article 20.1 (b )(iii) shall apply; (iii) sell to the Minister any other assets owned by the Contractor or Operator and used or employed by the Contractor or Operator in the Contract Area or elsewhere in Guyana in connection with Petroleum Operations at a price equivalent to the unrecovered cost of the assets. (c) The above provisions of Article 20.1 (b) shall not apply to: (i) assets which are still required by the Contractor or Operator for use in respect of an area in Guyana subject to another petroleum agreement at the time of expiry or termination of this Agreement; (ii) equipment and other assets rented or leased by Contractor in Guyana; (iii) equipment and other assets rented or leased by Contractor and imported in Guyana for use in Petroleum Operations and subsequently exported therefrom; (iv) equipment and any other assets owned or leased by a Sub-Contractor; Page 50 Petroleum Agreement of Guyana - Repsol Exploraci6n S.A. Govemment (v) household goods and vehicles which are the personal prope11y of employees of the Contractor and Sub-Contractor; (vi) equipment and assets otherwise not owned by Contractor or Operator. of all assets acquired as provided in section (d) The Contractor shall notify the Minister 4 of Annex C to this Agreement. (i) At least six (6) Calendar Months before expiry of the term of this Agreement, within three (3) Calendar Months following notice of termination of this Agreement or promptly following cancellation of all Licences, GGMC shall notify the Contractor of the assets to be delivered or sold to the Government. (ii) Subject to the terms and the provisions of this Article, the Contractor shall not, within one (1) year of the date upon which it estimates that termination of this Agreement will occur, remove from the Contract Area or sell any assets of a fixed or permanent nature which might be deliverable to the Government under this Article without the consent of the Minister, such consent not to be unreasonably withheld. (iii) Abandonment Programme and Budget (aa) Within sixty (60) days after the expiration of the tenn of this Agreement or the sooner relinquishment of some or all of the Contract Area, the Contractor shall carry out to the Minister's satisfaction an abandonment programme agreed with the Minister for all installations and pipelines provided by Contractor under this Agreement that the Minister elects not to have delivered up to him in accordance with Article 20.1 (b). With respect to the area being relinquished and/or facilities thereon, such abandonment programme shall comply with and be limited to internationally accepted standards prevailing at the time of abandonment. (bb) Concurrent with the submission of a Development Plan as provided in Article 8.4, the Contractor shall submit for the Minister's approval a proposed abandonment programme and budget covering by Contractor under this all such installations and pipelines provided Agreement. The abandonment programme and budget may be revised from time to time with the agreement of the Minister to account for any changes in the Development Plan. ( cc) The Minister shall act without unreasonable delay in reaching a decision on the Contractor's proposal under Article 20.l(d)(iii)(bb) and may approve or modify or impose conditions thereon. Before Page 51 Petroleum Agreement Govemment of Guyana - Repsol Exploraci6n S.A. modifying or imposing conditions on the proposal, the Minister shall of the proposed modification or conditions and notify the Contractor give the Contractor the opportunity to make written representations within sixty (60) days thereafter about the proposed modifications or conditions. After taking into consideration such representations the Minister and the Contractor shall make their best efforts to mutually agree on the proposed modifications or conditions of the abandomnent programme and budget In the event that the Minister and Contractor cannot mutually agree on the proposed abandomnent programme and budget, either Party may by written notice to the other Party propose that the dispute be referred for determination in accordance with the provisions of Article 26. (dd) In the event that the Contractor does not present a timely proposal to the Minister under Article 20.1(d)(iii)(bb) the Minister after giving thirty (30) days notice to the Contractor of his intention to do so, may prepare an abandonment programme and budget for the Contract Area if the Contractor does not present a proposal by the · end of the thirty (30) day period. When the Minister has so prepared the abandonment programme and budget, it shall have the same effect as i+ it h?ri hP.en submitted by the Contractor 1.nr1 approved by the Minister. ( ee) Contractor shall have the right on an annual basis to propose a revised abandomnent prograrmne and budget Such proposal shall ). Any be subject to the approval process in Article 20.1 ( d)(iii)( cc revisions to the abandonment programme and budget shall result in a revision to the guarantee referred to in Article 20.1 ( d)(iii)(hh). (ff) All funds required to carry out the approved abandonn1ent programme shall be made available by Contractor when the costs for abandonment are incurred. (gg) All costs included in the approved abandonment progra!11ille and budget shall be recoverable as operating costs on a unit of production basis commencing during the period when the abandonment programme and budget is approved. The amount to be recovered in a respective period shall be calculated by dividing the approved abandonment budget by the estimated ultimate recoverable reserves, which may be revised from time to time based upon the actual performance of the Field(s) and multiplying the result by the units produced in the period. (hh) Contractor shall deliver to the Minister within seven (7) days after the date the abandonment programme and budget are approved an Page 52 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. undertaking from Contractor·s immediate parent company stating that such parent company shall ensure provision of financial and technical resources necessary to conduct the approved abandonment programme. The amount of the financial unde11aking shall be equal to the amount recovered under Article 20.1 (d)(iii)(gg) less any amounts spent under the approved abandonment programme. (ii) Notwithstanding the provisions of Article 20.1 ( d)(iii)(ff), in the event the Minister elects to have all or a portion of the facilities delivered up to him in accordance with Article 20.1 (b), the Contractor shall pay the Minister at the time of transfer the amounts stipulated in the latest approved abandonment budget for the transferred facilities. Upon transfer and receipt of the funds, the Minister shall assume all responsibilities for the transferred facilities and their abandonment and shall hold the Contractor harmless against any liability with respect thereto accruing after the date of such transfer to the Minister. (iv) Subject to Article 20.1 (c), in the event that the Government acquires any assets pursuant to this Article, the Govemment shall assume all liabilities, 'Nith r ~ sp ~ ct to such assets, arising from apd qfter the date of acquisition an~ shall not direct the Contractor to remove or abandon any such assets pursuant to regulation 9 (l)(a) of the Regulations. The Government shall indemnify and hold Contractor harn1less for any and all costs and claims which may arise from the use or abandonment of any asset from and after the date of acquisition by the Government. (v) Assets not acquired by the Government pursuant to this Article may be sold or otherwise freely disposed of by the Contractor subject to Article 21.2 and the Regulations. 20.2 Insurance (a) The Contractor shall effect at all times during the term of this Agreement, insurance as required by applicable laws, rules, and regulations and of such type and in such amount as is customary in the international petroleum industry in accordance with good oil field practice appropriate for Petroleum Operations in progress in respect of but not limited to: (i) loss or damage to all assets used in Petroleum Operations; (ii) pollution caused in the course of Petroleum Operations for which the Contractor or the Operator may be held responsible; (iii) loss or damage to property or bodily injury suffered by any third party in the course of Petroleum Operations for which the Contractor may be liable Page 53 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. to provide an indemnity pursuant to Article 2.4; (iv) the Contractor's and/or Operator's liability to its employees engaged m Petroleum Operations. To the extent pem1itted by applicable laws, rules and regulations, such insurance may be provided through Contractor's affiliate insurance company. (b) Subject to the Minister's approval, which shall not be unreasonably withheld, the Contractor, notwithstanding the provisions of Article 20.2(a), shall have the right to self-insure all or part of the aforementioned insurances in Article 20.2(a). (c) The Contractor shall require the Operator to carry and to endeavour to have its Sub-Contractors carry insurance of such type and in such amount as is customary in the international petroleum industry in accordance with good oil field practices. Page 54 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. Article 21 - Import Duties 21.1 The Contractor, and the Sub-Contractors engaged in Petroleum Operations shall be pennitted to import, free of duty, VAT or all or any other duties, taxes, levies or imposts, all equipment and supplies required for Petroleum Operations including but not limited to drill ships, platfom1s, vessels, geophysical tools, communications equipment, explosives. radioactive sources, vehicles, oilfield supplies, lubricants, consumable items (other than foodstuffs or alcoholic beverages or fuel), as well as all items listed on Annex D. The aforementioned items, including but not limited to the items listed on Annex D, shall be deemed approved and certified by the Chief Inspector to be for use solely in carrying out Petroleum Operations. The Contractor shall give prior notification to the Minister of Sub-Contractors engaged in Petroleum Operations. • Subject to Article 21.1, and for as long as this Petroleum Agreement remains in force the Contractor and Sub-Contractors engaged in Petroleum Operations hereunder shall be required to pay to the relevant authority excise tax on any fuel imports, where such imports have been certified by the Chief Inspector to be used solely in carrying out Petroleum Operations in any area within the Contract Area, at a rate often percent (10%) or the prevailing rate, whichever is lesser. 21.2 Subject to Article 20, any of the items imported into Guyana may, if no longer required for Petroleum Operations here~nder , be freely exported at any time by the importing party, without the payment of any export duty or impost; provided, however, that on the sale or transfer by the importer of any such item to any person in Guyana (other than the Government) import duty shall be payable by the impmier on the value thereof at the date of such sale or transfer as determined by the Customs and Excise Department in accordance with their applicable rules. 21.3 Each Expatriate Employee, who have been assigned to work in Guyana for the Operator or its Sub-Contractors shall be pern1itted, subject to the limitations and conditions set out in the Customs Act, to import into Guyana free of import duty and taxes within six (6) months on first arrival his personal and household effects including one (1) motor vehicle, provided, however, that no property so imported by the employee shall be sold by him in Guyana except in accordance with Government regulations and upon the payment of the prescribed customs duties. Any importation or replacement of motor vehicles by Expatriate Employees shall be a matter for consultation with the Minister. 21.4 Each Expatriate Employee shall have the right to export from Guyana, free of all duties and taxes, and at any time, all of the items imported under Article 21.3. Page 55 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. Article 22 - Foreign Exchange Control 22.1 Each party comprising the Contractor shall, during the term of this Agreement have the right: (a) to retain abroad all foreign exchange obtained from the exp01i sales of Contractor's Petroleum and to remit and retain abroad all foreign exchange earned from sales of Petroleum or assets in Guyana; (b) to finance Petroleum Operations hereunder in any currency through any combination of equity, inter-affiliate or third party loans, inter-company open accounts, or production payments but no payments of principal or interest in respect thereof shall be made from any source in Guyana other than the bank accounts referred to in Article 22.1 (c); (c) to open and maintain bank accounts denominated in Guyanese dollars and/or United States dollars in Guyana and freely dispose of the sums deposited therein without any restriction; provided the said accounts are credited only with sums deposited in foreign currency or with the proceeds of the sale of foreign currency oeing credits relating to or derived from retroleum Operations; (d) to ')pen and maintain bank accounts in any foreign currency outside Guyana '.vhich may be credited without restriction and freely dispose of any sums deposited therein without restriction and without any obligation to convert into Guyana currency any part of the said amounts, save that such accounts shall not be credited with the proceeds of the sale of any Guyanese currency without the consent of the Bank of Guyana; (e) to purchase and, with the approval of the Bank of Guyana, to sell Guyanese currency, through the authorized banks, without discrimination, at the rate of exchange determined by the Bank of Guyana for authorized banks at the time of purchase or sale. 22.2 Expatriate Employees engaged in Petroleum Operations shall be subjected to all Exchange Control Regulations that may be in effect from time to time. Expatriate Employees shall be entitled to remit freely abroad any portion of their salaries paid in Guyana and any investment income that may be earned on the portion of their salaries paid in Guyana. 22.3 Where any party comprising Contractor, Affiliated Company or Sub-Contractor by notice in writing to the Commissioner General, Guyana Revenue Authority has guaranteed the full and proper discharge by an Expatriate Employee engaged in Petroleum Operations of his liability to income tax under the laws of Guyana, that Expatriate Employee shall be entitled to receive payment of the whole or any part of his remuneration in the country in which he is nonnally resident. Page 56 Petroleum Agreement of Guyana - Repsol Exploraci6n S.A. Government Article 23 -Accounting and Audits 23.1 The Contractor shall be responsible for maintaining accounting records relating to Petroleum Operations under this Agreement in accordance with the Accounting Procedures set out in Annex C hereto. 23.2 The Minister shall have the right to audit the accounting records of the Contractor in respect of Petroleum Operations in accordance with Accounting Procedure. 23.3 Nothing in this Article shall be construed as limiting the right of Govenunent or any officer of Government pursuant to any statutory power to audit or cause to be audited the books of the Contractor. Page 57 Petroleum Agreement Government of Guyana -Repsol Exploraci6n S.A. Article 24 - Force Majeure 24.1 Any non-performance or delay in performance, wholly or in part, by any Patiy hereto or any of its obligations under this Agreement or in fulfilling any condition of any Licence granted to such Party or in meeting any requirement of the Act or Regulations and any Licence issued thereunder, shall, except for the payment of monies due by Government to Contractor or monies due to Govemment under section 43 (4) of the Act (unless such failure to pay is prevented by any action of the Govemment), not be a breach of this Agreement, the Licence or the Act and Regulations if and to the extent that such non-perfonnance or delay, wholly or in part, is caused by Force Majeure as defined in this Article. 24.2 In this Article, the term "Force Majeure" shall mean any event beyond the reasonable control of the Party claiming to be affected by such event which has not been brought about at its instance and which has caused such non-performance or delay in performance and, without limitation to the generality of the foregoing, includes acts of God, natural phenomena or calamities, earthquakes, floods, tsunamis, epidemics, quarantines, fires, wars declared, or undeclared, hostilities, invasions, blockades, riots, strikes, insurrection, civil disturbances, mining of the seas, piracy, intemational disputes affecting the extent of th~ Sont;·:::ct Area and any govemmental J.ct:on or inaction, that would preve::: :~1c performance of an obligation or ability of the Contractor to export Petroleum (except as provided in Article 14.5). 24.3 Where any Party is claiming suspension of its obligations on account of Force Majeure, such Party shall promptly notify the other Parties in writing of the occurrence thereof giving particulars of the Force Majeure and obligations affected. Each Party shall promptly notify the other Pmiies as soon as the Force Majeure has been removed or no longer prevents it from carrying out its obligations hereunder. 24.4 Where a Party is prevented from exercising any rights or performing any obligations under this Agreement due to a Force Majeure, the Minister hereby agrees pursuant to section 43 (3) of the Act, subject to the proviso therein, that a period of additional time necessary for restoration of damages caused during a Force Majeure delay shall be added to the time allowed under this Agreement for the performance of such obligation and for the performance of any obligation or the exercise of any right dependent thereon and to the term of any Licence issued pursuant to this Agreement. In the event the Parties cannot agree on whether the occurrence of the event in question is considered a "force majeure" event, or if the Minister does not agree an additional time period should be added, pursuant to section 43(3) of the Act, then a Party may refer the dispute to Arbitration pursuant to Article 26, to determine the nature of the "force majeure" event and its influence on the contractual obligations of the Party concemed. The Contractor shall have the option of terminating this Agreement without any further obligation if Force Majeure exceeds one (1) year. Page 58 Petroleum Agreement of Guyana - Repsol Exploraci6n S.A. Government 24.5 Without prejudice to the other provisions of this Article, the Parties shall meet to discuss the consequences of the Force Majeure and the course of action to be adopted in the circumstances. 24.6 The Government shall not invoke Force Majeure due to any order, regulation or written directive of the Government which affects the Government's perfom1ance of its obligations under this Agreement. Page 59 Petroleum Agreement Govemment of Guyana - Repsol Exploraci6n S.A. Article 25 -Assignment 25.1 Subject to the regulation 20 of the Regulations, any party comprising the Contractor shall not assign, or transfer in whole or in part, any of its rights, privileges, duties or obligations under this Agreement, or any Licence issued pursuant to this Agreement, to any person, firm or corporation, without the prior written consent of the Minister. 25.2 The Minister shall give his consent under Article 25.1 where: (a) the assignment or transfer will not adversely affect the performance or obligations under this Agreement; (b) the assigmnent is not contrary to the interests of Guyana; or (c) subject to (a) above, the assignment or transfer is to an approved Affiliated Company. 25.3 In the event that the Minister does not give his consent or does not refuse a request for an assignment or transfer by any party comprising Contractor within sixty (60) days of receipt of such rec;_"Je ~~, consent shall be deemed tc have tc~ : : ~iven by the Minister. 25.4 Any assignment made pursuant to this Article shall bind the assignee to all the terms and conditions hereof and the terms and conditions of any Licence issued pursuant to this Agreement unless otherwise agreed, and as a condition to any assignment, the assignee shall provide an unconditional undertaking to the Minister to assume all obligations by any party comprising the Contractor under this Agreement or any Licence issued pursuant to this Agreement. 25.5 An application for assignment or transfer of a Licence shall be made in accordance with Form E of the schedule specified in the Regulations. The applicant shall submit such additional infonnation relating to the intended assignee which the Minister may reasonably require to enable him to dispose of the application. Page 60 Petroleum Agreement Government of Guyana - Repsol Exploracion S.A. Article 26 - Sole Expert Determination and Arbitration 26.1 The Parties shall make reasonable efforts to resolve amicably all Disputes by negotiation. A notice of the existence of a Dispute shall be given by a Party to another Pa.Jiy in accordance with Article 33. In the event that no agreement is reached within sixty (60) days after the date on which a Patiy notifies the other that a Dispute exists, or such longer period as specifically agreed by the Parties, any Party shall have the right to have such Dispute detern1ined by arbitration or a sole expert as provided for in this Article 26. 26.2 Any claim, demand, cause of action, dispute, or controversy arising out of or in c01mection with this Agreement, including any question regarding its formation, existence, validity, enforceability, performance, tern1ination, or alleged breach ("Dispute") which catmot be settled amicably by negotiation shall be resolved by binding arbitration or by a sole expert pursuant to Article 26.3, Article 26.4 or Article 26.6, whichever applies. 26.3 Any matter required to be referred to a sole expert for detern1ination under this Agreement, including under Articles 5.4, 8.5, 12.2(a)(i), 13.4, and any other matter which the Parties expressly agree in writing to refer to a sole expert, shall be referred to a sole expert for determination, by a Party giving notice to such effect pursuant to Article 33. The sole expert shall be appointed by agrec:r.:.:nt between the Parties, and in th-: C'.·ent the Parties fail to agree on the sole expert within thirty (30) days after receipt of the written notice from any Party proposing the appointment of a sole expert, such expert shall be :.tppointed by the International Centre for Expertise of the International Chamber of Commerce ("ICC").A sole expert shall be an independent and impartial person of international standing with relevant qualifications and experience. The expert, once appointed, shall have no ex parte communications with any of the parties to the Dispute concerning the expert determination or the underlying Dispute. The Parties shall cooperate fully in the expeditious conduct of such expert determination and to provide the expert with access to all facilities, books, records, documents, information and personnel necessary to make a fully informed decision in an expeditious manner. The sole expert shall act as an expert and not as an arbitrator or mediator, and shall endeavour to resolve the Dispute within thirty (30) days of his appointment, but no later than sixty (60) days after his appointment. The sole expert shall decide the manner in which any determination is made, but in any event shall accept oral and/or written submissions and arguments from the Parties. All correspondence, documentation and information provided by a Party to the sole expert shall be copied to the other Party, and any oral submissions to the sole expert shall be made in the presence of all Parties and each Party shall have a right of response. The decision of the sole expert on on the Parties. The Parties shall refer any matters referred to him shall be final and binding Dispute arising out of or relating to such expert decision, including enforcement thereof, to arbitration pursuant to Article 26.4 or Article 26.6, whichever applies. 26.4 Subject to the provisions herein, the Parties hereby consent to submit to the International Centre for the Settlement of Investment Disputes (ICSID) any Dispute relating to or arising Page 61 Petroleum Agreement Govemment of Guyana - Repsol Exploraci6n S.A. out of this Agreement to arbitration pursuant to the rules of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (hereinafter referred to as the "Convention"). It is hereby stipulated that the transaction to which this Agreement relates is an investment within the meaning of the Convention. The Government hereby irrevocably waives any claim to immunity for itself, its agencies, its enterprises, and any of its assets with regard to any sole expert determination or arbitration pursuant to this ArtiCle 26 and to any proceedings to recognise or to enforce this Atiicle 26 or any proceeding to recognise or enforce a sole expert detennination, or an arbitral award rendered in an arbitration thereunder. Without prejudice to the generality of the foregoing, the waiver of immunity shall include immunity from service of process and immunity from jurisdiction of any competent court or any arbitration tribunal, and immunity of any of the Government's, its agencies', or its enterprises' property from execution of any sole expert determination or arbitration award or judgment entered thereon. 26.5 If the Secretary-General of ICSID refuses to register a request for arbitration or if a tribunal of arbitrators constituted pursuant to Article 26.4 above detem1ines t~~la a dispute is outside ofiCSID'sjurisdiction, either Party may request arbitration ofthe disp te before three arbitrators pursuant to the Arbitration Rules of the United Nations Co ission on International Trade Law (UNCITRAL). The American Arbitration Associa ion shall administer the arbitration under the UNCITRAL Arbitration Rules and shall act as the appointing auth :;rit; when the UNCITRAL Arb~tra~ion Rules call for an app0i.1ting authority. 26.6 The seat of the arbitration proceedings pursuant to this Article 26 shall be Washington DC, United States of America, however, hearings may be held at such other place as the Parties may agree to in writing. The arbitration proceedings shall be conducted in the English language. 26.7 The fees and expenses of a sole expert (as well as the charges for the use ofiCSID or other facilities) shall be borne equally by the Contractor and the Goverrunent. Each Party shall bear any other expenses it incurs in connection with expert or conciliation proceedings. In the case of arbitration proceedings, the arbitrators shall assess the expenses incurred by the Parties, the fees and expenses of the arbitrators, the charges for the use of the facilities and any other costs related to the arbitration and shall decide by whom such costs shall be paid in their award. The arbitral award shall be made and payable in dollars of the United States of America, free of any tax or other deduction. The award shall include interest, unless the arbitration tribunal determines that it is not appropriate. Interest shall run from the date of any breach or violation of this Agreement. Interest shall continue to run from the date of award until the award is paid in full. Interest shall be calculated at the Agreed Interest Rate. The arbitrator(s) shall render a decision within six (6) months after having been confirmed, or such other time as the Parties may agree. 26.8 The decision of a majority of the arbitrators shall be final and binding on all the Parties and judgment on the award may be entered by any court of competent jurisdiction. Page 62 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. Article 27 -Applicable Law 27.1 This Agreement shall be governed by, interpreted and construed in accordance with the laws of the Republic of Guyana, and, consistent with such rules of international law as may be applicable or appropriate, including the generally accepted customs and usages of the international petroleum industry. 27.2 The parties comprising the Contractor agrees to abide by the laws, regulations, orders, directives and notifications of Guyana which shall also apply to its Affiliated Companies and Sub-Contractors engaged in Petroleum Operations in Guyana. Page 63 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. Article 28 - Protection of the Environment 28.1 In accordance with the Environmental Protection Act, 1996, the Contractor shall obtain an environmental authorization as required from the Environmental Protection Agency and comply with the provisions of that Environmental Protection Act in relation to any activity of this Agreement that is governed by that Environmental Protection Act. 28.2 The Contractor is precluded from initiating any exploration or development activity on those areas outside of the Contract Area which the Enviro1m1ental Protection Agency may determine to be sensitive or protected. 28.3 In furtherance of regulation 6 of the Regulations in the conduct of Petroleum Operations the Contractor shall take necessary and adequate precautions, in accordance with good international petroleum industry practice, against pollution and for the protection of the environment and the living resources of the rivers and sea. 28.4 If the Contractor's failure to comply with the provisions of Article 28.1 results in pollution or damage to the environment, riverine or marine life or otherwise, the Contractor shall take all reasonable measures in accordance with good international petroleum industry practice to remedy the failure and the effects thered and s l:::~l where pollution occurs treat or disperse it in an environmentally acceptable manner. The Contractor shall not be obligated to remedy vr clean up pollution or environmental damage of any type that existed prior to the commencement of Petroleum Operations by the Contractor or arises as a consequence of pre-existing environmental conditions. 28.5 The Contractor shall notify the Minister forthwith in the event of any emergency or accident arising from Petroleum Operations affecting the environment and shall take such action as may be prudent and necessary in accordance with good international petroleum industry practice in such circumstances. 28.6 If the Contractor does not act promptly pursuant to Article 28.4 so as to control or clean up any pollution within a reasonable period specified by the Minister, the Minister may, after giving the Contractor reasonable notice in the circumstances, take any actions which are necessary in accordance with good international petroleum industry practice and the reasonable costs and expenses of such actions shall be borne by the Contractor. Page 64 Petroleum Agreement of Guyana - Repsol Exploraci6n S.A. Govemment Article 29 -Termination and Cancellation 29.1 This Agreement shall be deemed to have been tem1inated if the Petroleum Prospecting Licence granted to the Contractor pursuant to Article 3 and every Petroleum Production Licence granted to the Contractor under Article 8 has either expired or, under and in accordance with the Act and any relevant provision of this Agreement, been surrendered by the Contractor or lawfully cancelled by the Minister pursuant to section 42 of the Act but save as aforesaid, shall continue in full force and effect so long as the Contractor continues to hold any of the said Licences. 29.2 Should any issue arise between the Parties as to whether the Contractor is in default and such issue cannot be amicably settled by consultation between the Parties and a dispute thereon is referred for resolution pursuant to Atiicle 26, this Agreement and the said Licences shall continue in force pending resolution of such dispute. 29.3 Pursuant to section 42 of the Act, the Minister shall not cancel a Licence on the basis of default unless the Minister has, by notice served on the licensee, given not less than thirty (30) days notice of such intention and the basis of default. In the notice the Minister shall specify a reasonable date, not less than sixty (60) Business Days, before which the licensee or :;:eme.:y :he default. me:/ submit a written response 29.4 On t(.rrnination of this Agreement, or cancellation of any Licence as aforesaid, the rights and obligations of the Parties shall cease by the termination or cancellation, but such tennination, or cancellation shall not affect any right of action existing or liabilities incurred by a Party before the date of termination or cancellation, and any legal proceedings that might have been commenced or continued against a Party may be commenced or continued against it. Page 65 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. Article 30 - Effective Date 30.1 The Effective Date shall be IJ.j~ Hft+J 'lvl3 . Page 66 Petroleum Agreement Government of Guyana - Repsol Exploracion S.A. Article 31 -Miscellaneous 31.1 The Government assures the Contractor that the Contract Area lies entirely within the tenitorial limits of Guyana and that Guyana has sovereignty over such area. The Government shall continue to asseti its right to the entire Contract Area and seek to resolve cunent or future claims, if any, by other States that impugn any portion of the Contract Area. The Government shall also use its best efforts to permit due observance of the tenns and conditions of this Agreement by both Parties. Both Parties undetiake not to take any action inconsistent with the terms and conditions of the Agreement 31 .2 This Agreement shall not be amended or modified in any respect except by written agreement entered into by all the Parties which shall state the date upon which the amendment or modification shall become effective. 31 .3 In the event of any conflict between any provisions in the main body of this Agreement and any provisions in the Annexes, the provision in the main body shall prevail. 31.4 The headings of this Agreement are for convenience of reference only and shall not be taken into account in interpreting the terms of this Agreement. 31.5 A reference to the singular in this Agreement includes a reference to the plural and vice versa. 31.6 The provisions of this Agreement shall inure to the benefit of and be binding upon the Parties and their permitted assignees and successors in interest. 31.7 No waiver by any Party of any one or more obligations or defaults by any other Party shall be construed as a waiver of any other obligations or defaults whether of a like or of a different character. 31.8 This Agreement supersedes and replaces any previous Agreement or understanding between the Parties whether oral or written on the subject matter hereof, prior to the date of this Agreement. Page 67 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. Article 32 -Stability of Agreement 32.1 Except as may be expressly provided herein, the Govemment shall not amend, modify, rescind, tem1inate, declare invalid or unenforceable, require renegotiation of, compel replacement or substitution, or otherwise seek to avoid, alter, or limit this Agreement without the prior writ1en consent of Contractor. 32.2 After the signing of this Agreement and in conformance with Article 15, the Government shall not increase the economic burdens of Contractor under this Agreement by applying to this Agreement or the operations conducted thereunder any increase of or any new petroleum related fiscal obligation, including, but not limited to, any new taxes whatsoever, any new royalty, duties, fees, charges, value-added tax (VAT) or other imposts. 32.3 If at any time after the signing of this Agreement there is a change in the laws of Guyana whether t.hTough the amendment of existing Jaws (including the hydrocarbons law, the customs code or tax code) or the enactment of new laws or a change having the force of law in the interpretation, implementation or application thereof (whether the change is specific to the Agreement, the Contractor or of general application) and such change has a materially adverse effect on the economic benefits, includin!_! those resulting from the fiscal regime provided by this Agreement, accruing to the Contractor hereunder during the term of this Agreement, th~ Government shall promptly take any and all affirmative actions to restore the lost or impaired economic benefits to Contractor, so that Contractor receives the same economic benefit under the Agreement that it would have received prior to the change in law or its interpretation, application, or implementation. The foregoing obligation shall include the obligation to resolve promptly by whatever means may be necessary any conflict or anomaly between this Agreement and any such new or amended legislation, including by way of exemption, legislation, decree and/or other authoritative acts. 32.4 In the event that Contractor's overall economic benefits have been materially and adversely affected by actions or changes as set forth above in Section 32.3, whether directly or indirectly, Contractor may notify the Government in writing. The Parties shall then meet within thirty (30) days after such notification with the objective of reaching agreement on a remedial action to be taken by the Government, whether by exemption, legislation, decree and/or other authoritative acts or by amendment to the terms of the Agreement. If the Parties are unable to resolve their differences within one hundred twenty (120) days after Contractor has issued the aforementioned notification, then the Contractor may refer the matter to arbitration in accordance with Aliicle 26. In such case, the arbitral tribunal is authorized to modify the Agreement to re-establish the economic benefits under the Agreement to Contractor described in Article 32.3, or in the event this is not possible, including for example where such dispute would not qualify or constitute a legal dispute under Article 25 of the ICSID Convention, to award damages to Contractor that fully compensate it for the loss of economic benefits under the Agreement, both historical and future losses. Page 68 Petroleum Agreement of Guyana - Repsol Exploraci6n S.A. Government Article 33 - Notices 33.1 All notices and other communications to be given under this Agreement shall be deemed to have been made properly if delivered in person in writing, mailed with charges prepaid or sent by facsimile, by one Party to the other at their respective addresses in Guyana as set forth below and copied to their overseas addresses. Any such notice or communication given as aforesaid shall be deemed to have been given and received at the time of delivery (if delivered by hand or by courier) or at the time of receipt (if transmitted by facsimile): The Minister Responsible for Petroleum c/o Guyana Geology And Mines Commission 68 Upper Brickdam, Stabroek, P.O. BOX 1028, Georgetown, GUY ANA. Attention: Commissioner, GGMC Telephone 592-225-3047 Facsimile: 592-227-0084 Repsol Exploraci6n S.A. c/o 157C Waterloo Srreet, North Cummingsburg, Georgetown, GUY ANA And 2001 Timber lock Place, Suite 4000 The Woodlands, TX 77380, United States of America Attention: Jose A. Muril1as Telephone: 592-226 1810 Facsimile: . .592-226 1825 33.2 Any Party may, by notice as provided hereunder to the other Parties and GGMC change its address and other particulars for notice purposes. IN WITNESS whereof the Parties have caused their duly authorised representatives to set their hands at the City of Georgetown, in the Republic of Guyana in the presence of one another the day and year first above written. Signed by: The Minister Responsible For Petroleum ANNEX A DESCRIPTION OF CONTRACT AREA Description of area to be granted under Petroleum Prospecting License pursuant to Article 3 of the Petroleum Agreement. The area comprises approximately 6,525 square kilometres described herein consisting of graticular blocks identified herein and shown on the Block Reference Map at Annex B. Latitud dl ong1tu d e M easuremen t s are W es t an d N h e an ort res pee tively POINT No. LATITUDE LONGITUDE 1 so 00.00' N 5r 25.oo· w 2 so 00.00' N 5r 2o.oo· w 3 so 00.00' N 5r 15.oo·w 4 r 5o.oo· N 5r 15.00' w 5 r 5o.oo· N 5r 1o.oo· w 6 r 4o.oo· N 5r 1o.oo· w 7 r 4o.oo· N 56° 55.00' w s r 35.00' N 56° 55.00' w 9 r 35.oo· N 56° 45.00' w 10 r 3o.oo· N 56° 45.00' w 11 r 3o.oo· N 56° 35.00' w 12 r 15.00' N 56° 35.00' w 13 r 15.oo· N 56° 40.00' w 14 r 1o.oo· N 56° 40.00' w 15 r 1o.oo· N 56° 45.00' w 16 6° 55 00' N 56° 45.00' w 17 6° 55.00' N 56° 50.00' w 1S 6° 45.00' N 56° 50.00' w 19 6° 45.00' N 56° 55.00' w 20 6° 40.00' N 56° 55.00' w 21 6° 40.00' N 5r 1o.oo· w 22 r 2o.oo· N 5r 1o.oo·w 23 r 20.00' N 5yo 15.oo·w 24 r 3o.oo· N 5r 1s.oo·w 25 r 3o.oo· N sr 2o.oo· w 26 r 35.oo· N 5r 2o.oo· w 27 r 4o.oo· N 5r 2o.oo· w 2S yo 40.00' N sr 25.oo· w 29 yo 45.00' N 5r 25.oo·w Petroleum Agreement of Guyana-Repsol Exploraci6n S.A. Government ANNEX A (cont'd) DESCRIPTION OF CONTRACT AREA The following five (5) minute by five (5) minute square graticular blocks describe the area. The blocks as described are shown on the Block Reference Map at Annex B Block Q 8,9,20,21,32-34,44-46,57-60,69-72,82-84, 94-96,107,108,119,120,131 '132, 143,144 Block R 49,61-63,73-77,85-89,97-101 '1 09-112,121-123,133-135 Block X 11 '12,23,24,35,36,47,48 BlockY 1-3,13, 14,25,26,37 *denotes part block Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. ANNEX 8 BLOCK REFERENCE MAP Page Intentionally Blank Block Reference Map in Next Page Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. I 85K OOK BTK 98K 99K IOK 11K IlK 13K ~K ~K IlK B6L ""L en. IIIII. IOL I1L 12L ~L . ML 11K MK HK 1001< 101K 1021< 103K To.tK 105K 106K 107K 108K 97L 100L 101L 102L 103L 1041.. 105L 10GL 1071.. 108L 10!1K 110K 111K 112K 113K 114K 115K 11el< 1171< 119K 111K 120K 101L 110L 111L 112L 11~ 114L 11!!1. t16L 117L 118L ' IL 121lL 121K 122K 123K 124K 125K 128K 1271< 1281< 129K 130K 131K 132K 121L 122L 123L 124L 125L 128L 177L 129L 129l 130L 131l 132L 133K 136K 137K 139K 139K 1 140K ~ 141K J 142K 143K T .... K 133L 134L 135L 13SL 13TL 138L 139L 1..0L 1.t1 l U2Lj 1.t3L TUL &,~~~--+--+--~~ -i-- .-~ ANNEX C-ACCOUNTING PROCEDURE This Annex is part of this Petroleum Agreement (hereinafter referred to as "the Agreement") - Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. SECTION 1 -GENERAL PROVISIONS 1.1 Det1nitions For the purpose of this Accounting Procedure the terms used herein which are defined in the Agreement or in the Act shall have the same meaning when used in this Accounting Procedure. 1.2 Documentation Required to be Submitted by the Contractor (a) The Contractor shall keep the accounts, operating records, reports and statements relating to the Petroleum Operations: (i) in accordance with the terms of the Agreement and this Accounting Procedure; and (ii) in such form as may be agreed from time to time between the Parties which shall identify the categories of costs, expenses, expenditures and credits classified in Sections 2 and 3 of this Annex. (b) Pcrsaant to (::) above, the Contractor shall make quarterly Statements relating ~o the Petroleum Operations including: (i) Production Statement (see Section 5 of this Annex). (ii) Value of Production and Pricing Statement (see Section 6 of this Annex). (iii) Statement of Expenditures and Receipts (see Section 7 of this Atmex). (iv) Cost Recovery Statement (see Section 8 of this Annex). (v) End-of-Year Statement (see Section 9 ofthis Annex). (vi) Budget Statement (see Section 10 ofthis Annex). 1.3 Language, Units of Account and Exchange Rates (a) Accounts shall be maintained in Guyanese dollars and United States dollars; however, the United States dollars accounts will prevail in case of conflict. Barrels shall be employed for measurements of production of Crude Oil required under the Agreement and this Annex. Standard cubic feet (scf) shall be employed for measurements of production ofNatural Gas required under the Agreement and this Annex. The language employed shall be English. (b) Should there be any gain or loss from exchange of currency, it will be credited or Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. charged to the accounts under the Agreement. (c) (i) Amounts received and costs, expenses and expenditures made in cunencies other than United States dollars or Guyanese dollars shall be converted into United States dollars by using the relevant foreign exchange rate published in the Wall Street Journal on the tirst business day following the Month in which the relevant transaction occurred. (ii) Amounts received and costs, expenses and expenditures made in Guyanese dollars or in United States dollars shall be converted from Guyanese dollars into United States dollars or from United States dollars into Guyanese dollars on the basis of the average of the buying and selling exchange rates between the currencies in question as determined and published by the Bank of Guyana, prevailing on the last Business Day of the Calendar Month preceding the Calendar Month that the relevant transaction occuned. (iii) The actual exchange rates applied in accordance with sub-section 1.3 (c) (ii) above and, where relevant, sub-section 1.3 (c) (i) above, shall be identified in the rele --. .: ar..~ Statements required under SU 1 J -Sec ~ i e:: 1.2 (a) of this Annex. 1.4 Payments (a) All payments between the Parties under the Agreement shall, unless otherwise agreed, be made in United States dollars and through a bank designated by the receiving Party. (b) All sums due under the Agreement during any Calendar Month shall, for each day such sums are overdue bear interest at the Agreed Interest Rate. 1.5 Audit and Inspection Rights of Government (a) The Minister shall have the right to audit upon ninety (90) days written notice, at his sole cost and expense, accounts and records of the Contractor, maintained hereunder with respect to each Calendar Year within two (2) years from the end of each such Year. For purposes of auditing, the Minister may audit, examine and verify, at reasonable times during normal business hours but not more than once per Calendar Year, all charges and credits relating to the Contractor's activities under the Agreement and all books of accounts, accounting entries, material records and inventories, vouchers, payrolls, invoices and any other documents, correspondence and records necessary to audit and verify the charges and credits. During such annual audit, examination and verification in respect of each Calendar Year the Minister may review items previously subjected to audit in Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. earlier Years but such review shall: (i) only be carried out in conjunction with the annual audit for any g1ven Year; and (ii) subject to Section 1.5 (b), no sooner than twelve (12) months following the previous audit thereof; and (iii) only be for the purposes of verifying a matter arising in a later period, which relates to the earlier Year(s) in question or as specified in Section 1.5 (b). In conducting such audits, the auditors may physically examine at the sole cost and expense of the Minister, property, facilities and stocks used in Petroleum Operations wherever located. Such examinations shall take place at reasonable times during normal business hours upon fifteen (15) days prior notice. (b) At the conclusion of each audit, the Parties shall endeavour to settle outstanding matters and a written report will be issued to the Contractor within sixty (60) days of the conclusion of such audit. The report shall include all claims arising from such audit. The Contractor shall reply to the report in writing as soon as possible and in any event not later than sixty (60) days following receipt of the report indicating acceptance or rejection of the audit claim and in the case of a rejection showing explanations thereof. Should the Minister consider that the report or reply requires further investigation on any item therein, the Minister shall have the right to conduct further investigation in relation to such matter within sixty (60) days of its receipt of Contractor's reply. If within sixty(60) days of the Minister's further investigation, the Parties are unable to agree to the disposition of the Minister's audit claim, the claim shall be submitted to arbitration in accordance with Article 26 of the Agreement. All adjustments resulting from an audit agreed to by the Contractor and the Minister conducting the audit shall be reflected promptly in the accounts by the Contractor and any consequential adjustments in Crude Oil entitlements shall also be made promptly. In the event that an audit claim by the Minister is not settled to the satisfaction by the Contractor's reply as provided for above, the Contractor shall be entitled to recover any disputed amounts pending final resolution of the claim. However, any subsequent adjustments in the Minister's share of Profit Petroleum following resolution of the claim shall be repaid with interest, at the Agreed Interest Rate as Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. a first claim from Contractor's share of future Profit Oil. In the event that the Contractor's share of Profit Petroleum is insufficient to provide for the Minister's extra entitlement including interest, the Contractor shall promptly make an equivalent payment in United States dollars to the Minister. (c) Without prejudice to the finality of matters as described in sub-sections 1.5 (a) and 1.5 (b) all documents referred to in those sub-sections shall be maintained and made available for inspection by the Minister for two (2) years following their date of issue providing, however, that where issues are outstanding with respect to an audit, the Contractor shall maintain documents for a longer period until the issues are resolved. (d) The Contractor may require that audits hereunder of accounts and records maintained by Affiliated Companies of the Operator, other than any Affiliated Company of the Operator which is conducting a substantial part of the Petroleum Operations on behalf of the Contractor be conducted either by the Operator's statutory auditors working under the instruction of the Minister (provided such appointment is accepted by the statutory auditors), failing which, by an independent finn of auditors of intemational standing to be approved by the Minister. (e) Nothing herein above provided shall entitle the Minister or his auditors to have access to data and records which: (i) are subject to statutory restrictions on disclosure; or (ii) do not relate to Petroleum Operations; or (iii) are not customarily disclosed in auditing practice m the international petroleum industry; provided however, that where the Minister or his auditors seek confirmation that charges subject to restricted access under (a), (b) and (c) above have been properly charged under this Agreement and Accounting Procedure, they shall be entitled to seek (at their sole cost) from the statutory auditors of the Contractor or its Affiliated Companies, as the case may be, certification that such charges have been levied on a fair and reasonable basis. Petroleum Agreement Government of Guyana-Repsol Exploraci6n S.A. SECTION 2-CLASSIFICATION. OEFI'\ITION AJ\0 ALLOCATION OF COSTS. EXPENSES A~O EXI'ENOITlfRES All costs, expenses and expenditures relating to the Petroleum Operations referred to in Section 3 shall be classified, defined and allocated as follows: 2.1 Exploration Costs are ali direct and allocated indirect expenditures incurred in the search for Petroleum in an area which is or was, at the time when such costs were incurred, in the Contract Area, including: (a) Aerial, geophysical, geochemical, paleontological, geological, topographical and seismic surveys and studies and their interpretation provided the data relates to the Contract Area. (b) Core hole drilling and water well drilling. (c) Labour, materials or equipment, and services used in drilling Exploration and Appraisal Wells with the object of finding Petroleum or for the purposes of appraising the extent of producible reservoirs already discovered provided such wells are not completed as producing wells. (d) Facilitie~ cr allc-::::t~d portions thereof used solei:· n: support of the purposes described in (a) (b) and (c) above. (e) All General and Administrative Costs, Armual Overhead Charges and all Service Costs allocated to Exploration Costs. (f) Any other Contract Costs incurred in the search for and appraisal of Petroleum after the Effective Date. (g) Armual amounts set forth and paid to GGMC pursuant to Article 19.3 of the Agreement. (h) Rentals. (i) Licenses and other fees. 2.2 Development Costs shall consist of all expenditures incurred in: (a) Drilling wells, which are completed as producing wells and drilling wells for purposes of producing from a producible reservoir whether these wells are dry or producing, and drilling wells for the injection of water or gas to enhance recovery of Petroleum. (b) Completing wells by way of installation of casing or equipment or otherwise after a well has been drilled for the purpose of bringing the well into use as a producer or as a well for the injection of water or gas to enhance recovery of petroleum. Petroleum Agreement Govemment of Guyana- Repsol Exploraci6n S.A. (c) Intangible drilling costs such as labour, consumable material and services having no salvage value which are incurred in drilling and deepening of wells for production purposes. (d) The costs of field facilities such as pipelines, Dow lines, production and treatment units, wellhead equipment subsurface equipment, enhanced recovery systems, offshore platforms, petroleum storage facilities. expo11 terminals and p1ers, harbours and related facilities and access roads for production activities. (e) Engineering and design studies for field facilities. (f) All General and Administrative Costs, Annual Overhead Charges and all Service Costs allocated to Development Costs. 2.3 Operating Costs are all expenditures incurred in the Petroleum Operations, which are other than Exploration Costs, Development Costs, General and Administ!ative Costs and Annual Overhead Charge and Service Costs. The balance of General and Administrative Costs and Service Costs not allocated to Exploration Costs or Development Costs shall be allocated to Operating Costs. 2.4 Service Costs (a) These are direct and indirect expenditures in support of the Petroleum Operations including but not limited to warehouses, piers, marine vessels, vehicles, motorised rolling equipment, aircraft, fire and security stations, workshops, water and sewage plants, power plants, housing, community and recreational facilities and furniture, tools and equipment used in these activities and safety and security services. Service Costs in any Calendar Year shall include the total costs incurred in such Year to purchase and/or construct said facilities as well as the annual costs to maintain and operate the san1e. (b) All Service Costs will be allocated to Exploration Costs, Development Costs and Operating Costs in accordance with standard industry accounting practice or on an equitable basis otherwise agreed between the Minister and the Contractor. 2.5 General and Administrative Costs and Annual Overhead Charge (a) General and Administrative Costs are all general and administrative costs in respect of the local office or offices including but not limited to supervisory, accounting and employee relations services, but which are not otherwise recovered. (b) An Annual Overhead Charge for services rendered outside Guyana and not otherwise charged under this Accounting Procedure, for managing the Contractor's activities under the Agreement and for staff advice and assistance including but not limited to financial, legal, accounting and employee relations Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. services. For the period from the Effective Date until the date on which the first Petroleum Production Licence under the Agreement is granted by the Minister this annual charge shall be five percent (5%) of the Contract Costs including those covered in sub-sections 2.1 through 2.5(a), incurred during the Calendar Year. From the date of grant of the Petroleum Production Licence the Annual Overhead Charge will be: First O,OOO,OOO.of Contract Costs: 5% US$1 Next US$1 O,OOO,OOO.of Contract Costs: 3% In excess ofUS$20,000,000.ofContract Costs: 1.5% (c) All General and Administrative Costs and Annual Overhead Charge will be allocated to Exploration Costs, Development Costs and Operating Costs in accordance with standard industry accounting practice or on an equitable basis otherwise agreed between the Minister and the Contractor. Petroleum Agreement of Guyana - Repsol Exploraci6n S.A. Government SECTION 3-COSTS, EXPENSES, EXPENDITURES AND CREDITSOF THE CONTRACTOR 3 .I Costs Recoverable Without Further Approval of the Minister Subject to the provisions of the Agreement, the Contractor shall bear and pay the following costs and expenses in respect of the Petroleum Operations. These costs and expenses will be classified w1der the headings referred to in Section 2. They are all recoverable as Contract Costs by the Contractor under the Agreement. (a) Surface Rights This covers all costs attributable to the acquisition, renewal or relinquishment of surface rights acquired and maintained in force for the Contract Area including to Article 10 of the Agreement. any amounts payable pursuant (b) Labour and Associated Labour Costs (i) Gross salaries and wages including bonuses of the employees of the Parties comprising the Contractor directly engaged in the Petroleum Operations, irrespective of the location of such employees, it being understood that in the case of :k:.:e personnel only a portion of ·,vh')se time is wholly dedicated to Petroleum Operations, only that pro-rata portion of applicable wages and salaries will be charged. (ii) Costs regarding holiday, vacation, sickness and disability payments applicable to the salaries and wages chargeable under (i) above. (iii) Expenses or contributions made pursuant to assessments or obligations imposed under the laws of the Republic of Guyana which are applicable to cost of salaries and wages chargeable under (i) above. (iv) Cost of established plans for employees' life insurance, hospitalisation, pensions, and other benefits of a similar nature customarily granted to the employees of the Parties comprising the Contractor. (v) Reasonable travel and personal expenses of such employees including those made for travel and relocation of the Expatriate Employees assigned to the Republic of Guyana all of which shall be in accordance with the nonnal practice of the Parties comprising the Contractor. (vi) Any personal income taxes owing to the Republic of Guyana by employees of the Parties comprising Contractor and paid or reimbursed by a Party comprising the Contractor. (c) Transportation Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. The cost of transportation of employees, equipment materials and supplies necessary for the conduct of the Petroleum Operations. (d) Charges for Services (i) Third Patiy Contracts The actual costs of contracts for technical and other services entered into by the Contractor for the Petroleum Operations, made with third parties other than Affiliated Companies of the Contractor are recoverable; provided that the prices paid by the Contractor are competitive with those generally charged by other international or domestic suppliers for comparable work and services. (ii) Affiliated Companies Without prejudice to the charges to be made in accordance with sub-section 2.5, in the · case of services rendered to the Petroleum Operations by an Affiliated Company, the charges will be no higher than the usual prices charged by the Affiliated Company to third parties for comparab~e servi ·:~s under similar terms and co:-:ditions elsewhere and will be fair and reasonable in the light of prevailing international oil industry practice and conditions. The salaries, wages and related costs of employees of an Affiliated Company that are temporarily or permanently assigned in Guyana and are directly engaged in Petroleum Operations shall be chargeable to the project at their actual documented cost. The salaries, wages and related costs of employees of an Affiliated Company that are temporarily or pennanently outside of Guyana and are directly engaged in Petroleum Operations shall be chargeable to the project at their actual documented cost. Costs for salaries, wages and related costs shall be charged to the project on an actual basis or at a rate based upon the· average cost in accordance with the Affiliated Company's usual practice. The methodology of determining rates based on average cost shall be provided to the Government upon their request. Such rates may be reviewed at least annually with the Minister. Reasonable actual documented expenses (including travel costs) of those employees whose salaries and wages are chargeable to the project and are reimbursed by the Contractor under their usual practice shall also be charged to the project. (e) Material (i) So far as is practicable and consistent with efficient and economical operation, only such material or equipment shall be purchased or furnished by the Contractor for use in the Petroleum Operations as may be required Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. for use in the reasonably foreseeable future and the accumulation of surplus stocks shall be minimized. (ii) The Contractor does not warrant material beyond the supplier's or manufacturer's guarantee express or implied, and in case of defective material or equipment, any adjustment received by the Contractor from the suppliers/manufacturers or their agents will be credited to the accounts under the Agreement. (iii) (a) Except as provided in (b) below, material purchased by the Contractor for use in the Petroleum Operations shall be valued to include invoice price less trade and cash discounts (if any), purchase and procurement fees plus freight and forwarding charges between point of supply and point of shipment, freight to port of destination, insurance, taxes, custom duties, consular fees, other items chargeable against imported material and, where applicable, handling and transportation expenses from point of importation to warehouse or operating site, and cost of the material in question should not exceed those prevailing in normal arms length transactions on the open market for material of similar quality and supplied on similar terms at the time of procurement. (b) Material purchased from Affiliated Companies of the Parties comprising Contractor shall be charged at the prices specified at (1) and (2) hereof. (1) New Material (Condition "A") Shall be valued and invoiced at a price, which should not exceed the price prevailing in normal arms length transactions on the open market at the time of procurement. (2) Used Material (Conditions "B" and "C") (i) Material which is in sound and serviceable condition and is suitable for reuse without reconditioning shall be classified as Condition "B" and priced at not more than seventy-five percent (75%) of the price of new material defined in (1) above. (ii) Material, which cannot be classified as Condition "B" but which: (a) after reconditioning will be further serviceable for original function as good Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. second-hand material (Condition "B"), or (b) is serviceable for original function but not suitable for reconditioning; shall be classified as Condition "C" and priced at not more than fifty percent (50%) of the current price of new material (Condition ''A") as defined in (1) above. The cost of reconditioning shall be charged to the reconditioned material provided that the Condition "C" material value plus the cost of reconditioning does not exceed the value of Condition "B" material. (iii) Material, which cannot be classified as Condition "B" or Condition "C", shall be priced at a value commensurate with its use. (iv) When the use of material is temporary and its justify service to the Petroleum Operations does not the reduction in price as providrd for in (2) (ii) hereof, such material shall be priced on a basis that will result in a net charge to the accounts under the Agreement consistent with the value of the service rendered. (f) Rentals, Duties and Other Assessments All rentals, taxes, levies, charges, fees, contributions and any other assessments and charges levied by the Government in connection with the Petroleum Operations and paid directly by the Contractor. (g) Insurance and Losses Insurance premium and cost incurred for insurance pursuant to Article 20 provided that if such insurance is wholly or partly placed with an Affiliated Company of the Parties comprising the Contractor, such premium and costs shall be recoverable only to the extent generally charged by competitive insurance companies other than an Mfiliated Company of a Party comprising the Contractor. Costs, losses and damages incurred to the extent not made good by insurance, are recoverable, including costs, losses or damages resulting from the indemnities in Article 2 of the Agreement, unless such costs, losses or damages have resulted solely from an act of willful misconduct or gross negligence of the Contractor. Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. (h) Legal Expenses All costs and expenses of litigation and legal or related services necessary or expedient for the procuring, perfecting, retention and protection of the Contract Area and in defending or prosecuting lawsuits involving the Contract Area or any third party claim arising out of activities under the Agreement or sums paid in respect of legal services necessary or expedient tor the protection of the interest of the Parties are recoverable. Where legal services are rendered in such matters by salaried or regularly retained lawyers of the Contractor or an Affiliated Company of the Parties comprising Contractor, such compensation will be included instead under sub-section 3.1(b) or 3.1(d) above as applicable. (i) Training Costs All costs and expenses incurred by the Contractor in trammg of Guyanese personnel and such other amounts as may be expended on training under Article 19 of the Agreement. (j) General and Administrative Costs and Annual Overhead Charge The costs described in sub-section 2.5(a) and the charge described in sub-section 2.5(b). (k) Pre-Contraci Costs The sum of one million United States Dollars (US$1,000,000.) in respect of all costs and expenses incurred by Contractor prior to the Effective Date. (1) Interest and Financing Costs Interest, expenses and related fees incurred on loans raised by the Pm1ies comprising the Contractor for Petroleum Operations and other financing costs provided that such expenses, fees and costs are consistent with market rates. (m) Abandonment Costs Amortized abandonment costs calculated pursuant to Article 20.1(d)(iii). (n) Social project contributions Costs and expenses not exceeding two million United States Dollars (2,000,000US$.) in any given Year incurred by Contractor in social programmes in the influence area of the Licence. Petroleum Agreement Govemment of Guyana - Repsol Exploraci6n S.A. 3.2 Costs Recoverable only with Approval of the Minister (a) Costs and expenses exceeding two million United States Dollars (2,000,000US$) in any given Year incurred by Contractor in social programmes in the influence area of the Licence. (b) Donations, and charitable contributions to recognized organisations in Guyana. (c) Expenditure on research into and development of new equipment, material and techniques for use in searching for developing and producing petroleum which will be of benefit to Petroleum Operations. 3.3 Costs not Recoverable under the Agreement (a) With the exception of the sum specified m sub-section 3.1(k), costs incurred before the Effective Date. (b) Petroleum marketing or transportation costs of Petroleum beyond the Delivery Point. ~ c) Amounts paid under Article 3.2 0fthe Agreement, if any, and, other amounts paid with regard to non-fulfillment of contractual obligations, subject to Section 3.1(g). (d) Costs of arbitration and the sole expert in respect of any dispute under the Agreement. (e) Fines and penalties imposed by Courts of Laws of the Co-operative Republic of Guyana. (f) Payments made in accordance with Article 15.4 of the Agreement. (g) Costs incurred as a result of willful misconduct or gross negligence of the Contractor or failure to insure where insurance is ·required pursuant to Article 20.2(a) ofthe Agreement. 3.4 Other Costs and Expenses Other costs and expenses not covered or dealt with in the provisions of this Section 3 and which are incurred by the Contractor in the conduct of the Petroleum Operations are recoverable subject to the approval of the Minister. 3.5 Credits under the Agreement The net proceeds of the following transactions will be credited to the Accounts under the Agreement and shall reduce the amount of Contract Costs, which the Contractor is Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. entitled to recover from Cost Petroleum, by a corresponding amount: (a) The net proceeds of any insurance or claim in connection with the Petroleum Operations or any assets charged to the accounts under the Agreement when such operation or assets were insured and the premium charged to the accounts under the Agreement. (b) Revenue received from third parties for the use of propetiy or assets the cost of which has been charged to the accounts under the Agreement. (c) Any adjustment received by the Contractor from the suppliers/manufacturers or their agents in connection with defective material the cost of which was previously charged to the accounts under the Agreement. (d) Rentals, refunds or other credits received by the Contractor which apply to any charge which has been made to the accounts under the Agreement, including any costs and expenses previously charged to the accounts pursuant to sub-section 3.1 (h) and which have been successfully recouped from legal proceedings but excluding any award granted to the Contractor under arbitration or sole expert proceedings referred to in sub-section 3.3(d) above. (e) The value at the time of export of inventory materials subsequently exported from the Co-operative Republic of Guyana without being used in the Petroleum Operations, the acquisition costs of which have been charged to the accow1ts under the Agreement. (f) The proceeds from the sale or exchange by the Contractor of materials, equipment, plant or facilities, the acquisition costs of which have been charged to the accounts under the Agreement, including such items sold to the Governn1ent; (g) The proceeds from the sale of Petroleum Data which relates to the Contract Area provided that the acquisition costs of such rights and information have been charged to the accounts under the Agreement; (h) The proceeds derived from the sale or licence of any intellectual property the development costs of which have been charged to the accounts under the Agreement. 3.6 Duplication of Charges and Credits Notwithstanding any provision to the contrary in this Accounting Procedure, it is the intention that there shall be no duplication of charges or credits to the accounts under the Agreement. Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. SECTION 4 -RECORDS AND VALUATION OF ASSETS The Contractor shall maintain detailed records of property in use for the Petroleum Operations in accordance with nom1al practice in exploration and production activities of the international petroleum industry. The Contractor shall notify the Minister annually in writing of all assets acquired and all assets disposed of during the preceding twelve (12) months. At reasonable intervals but at least once a year with respect to moveable assets and once every three (3) years with respect to immovable assets, inventories of the property under the Agreement shall be taken by the Contractor. The Contractor shall give the Minister at least thirty (30) days written notice of its intention to take such inventory and the Minister shall have the right to be represented when such inventory is taken. The Contractor will state clearly the principles upon which valuation of the inventory has been based. When an assignment of rights under the Agreement takes place a special inventory may be taken by the Contractor at the request of the assignee provided that the costs of such inventory are borne by the assignee. Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. SECTION 5 - PRODUCTION STATEMENT 5.1 Upon commencement of production of Petroleum from the Contract Area, the Contractor shall submit a monthly Production Statement to the Minister showing the following information separately for each Field and in aggregate for the Contract Area. (a) The gross quantity of Crude Oil and Natural Gas produced. (b) The quantities of Crude Oil and Natural Gas used for the purpose of canying on Petroleum Operations including drilling and Production Operations and pumping to Field storage. (c) Quanti ties of Crude Oil and Natura I Gas lost. (d) The quantities ofNatural Gas flared. (e) The quantity of Crude Oil produced and saved. (f) The quantity ofNatural Gas produced and saved. (g) The quantity ::>f ~ tocks of Crude Oil held at ~h e begi:::r:.::::g of the Calendar Month in question. (h) The quantity of stocks of Crude Oil held at the end of the Calendar Month in question. (i) The number of days in the Month during which Petroleum was produced from each Field. G) The average daily production rate for each Field, calculated in accordance with Article 11.6 of the Agreement. 5.2 The Production Statement for each Calendar Month shall be submitted to the Minister not later than sixty (60) days after the end of such Calendar Month. Petroleum Agreement Government of Guyana- Repsol Exploracion S.A. SECTION 6-VALUE OF PRODUCTION AND PRICING STATEMENT 6.1 The Contractor shall, for the purposes of Atiicle 13 of the Agreement prepare a statement providing calculations of the value of Crude Oil and the value of the Natural Gas produced and saved during each Calendar Month for each Field. This statement, which shall be prepared for each quality of Crude Oil and the Natural Gas produced from the Contract Area, shall contain the following information: (a) The quantities, prices and receipts realised therefor by the Contractor as a result of Third Party Sales of Crude Oil and the Natural Gas made during the Calendar Month in question. (b) The quantities, prices and receipts realised therefor by the Contractor as a result of sales of Crude Oil and the Natural Gas made during the Calendar Month in question, other than Third Party Sales. (c) The percentage of total volume of Crude Oil sales which were Third Party Sales. (d) The percentage of total volume of Natural Gas sales which were Third Party Sales. (e) Information supplied to the Minister by Contractor for the purposes of Article 13.2 of the Agreement. 6.2 The Value of Production and Pricing Statement for each Calendar Month shall be submitted to the Minister not later than sixty (60) days after the end of such Calendar Month. Petroleum Agreement of Guyana- Repsol Exploraci6n S.A. Government SECTION 7 - STATEMENT OF EXPENDITURE AND RECEIPTS 7.1 The Contractor shall prepare with respect to each Calendar Quarter, or on a monthly basis if requested by the Minister in writing, a Statement of Expenditure and Receipts under the Agreement. The Statement will distinguish between Exploration Costs, Development Costs and Operating Costs consistent with the individual categories specified in Sections 2 and 3 herein and will separately identify major items of expenditures within these categories. The statement will show the following: (a) Actual expenditures and receipts on a monthly basis for the period in question. (b) Cumulative expenditure and receipts for the budget year in question. (c) Cumulative expenditures and receipts since the Effective Date. (d) Latest forecast of cumulative expenditures to year end. (e) Variations between budget forecast and latest forecast, with explanations thereof. 7.2 Subject to 7.1 , the Statement of Expenditure and Receipts shall be submitted to the Minister no later ~h:-J1 si::::· (SO) days after the end of such C ~ le~dar Qumier or Month as the case may be. Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. SECTION 8- COST RECOVERY STATEMENT 8.1 The Contractor shall prepare with respect to each Calendar Month a Cost Recovery Statement containing the following information: (a) Recoverable Contract Costs carried forward from the previous Month, if any. (b) Recoverable Contract Costs for the Month in question. (c) Total Recoverable Contract Costs, which is that cost at sub-section 8.1 (a) plus that cost at sub-section 8.1 (b). (d) Quantity and value of Cost Petroleum taken and disposed of by the Contractor for the Month in question. (e) Contract Costs recovered for the Month in question. (f) Total cumulative amount of Contract Costs to be carried forward into the next Month. 8.2 Tl ~ ~ inf:·:r.::::.tion to be-submitted under Se:tic!1 8.1 (d) and (e) above sha~I t.Je g : - ·~ r:. in separate statements for each Field, so as to indicate together, the Contractor's total allocation of Cost Oil as required under Article 11 of the Agreement. 8.3 The Cost Recovery Statement to be submitted under sub-section 8.1 shall identify the unrecovered cost of assets for the purpose of Article 20.1 (b )(iii) of the Agreement. 8.4 During the Production Period, the Cost Recovery Statement for each Month shall be submitted to the Minister no later than sixty(60) days after the end of such Month and twice a year during the Exploration Period, not later than 90 days after the end of each calendar semester. Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. SECTION 9-END-OF-YEAR STATEMENT 9.1 The Contractor shall prepare an End-of-Year Statement. The Statement will contain aggregated information for the Year in the same format as required in the Value of Production and Pricing Statement, Cost Recovery Statement and Statement of Expenditures and Receipts but will be based on actual quantities of Petroleum produced and expenses incurred. The End-of-Year Statement for each Calendar Year shall be submitted to the Minister within one hundred and twenty ( 120) days of the end of such Calendar Year. (a) Crude Oil (i) In the event the domestic supply obligations under Article 17 are effected by the Government as to Crude Oil, not later than one hundred and twenty (120) days after the end of each Calendar Year, the Minister, acting on behalf of the Government, shall make available to Contractor an amtual summary (the "Domestic Supply Report") describing (a) the Government's total entitlement from all Crude Oil production in Guyana during the prior Calendar Year, (b) the quantity of Crude Oil actually provided to the Government by Contractor and all third parties which produce Cr.:dc Oil in Guyana during the priJr C:!~:;::!ar Year, and (c) a description of the quantities and use of all Crude Oil provided to the Government by Contractor and all third parties which produce Crude Oil in Guyana, including without limitation, domestic power supply from power plant facilities, refined products for domestic consumption from refineries, etc., and any quantities of Crude Oil, refined products, petrochemicals or fuel for power generation that are exported from Guyana. (b) Nat ural Gas (i) In the event the domestic supply obligations under Article 17 have been effected by the Government as to Natural Gas, not later than one hundred and twenty (120) days after the end of each Calendar Year, the Minister, acting on behalf of the Government, shall make available to Contractor an annual summary (the "Domestic Supply Report") describing (a) the Government's total entitlement from all Natural Gas production in Guyana during the prior Calendar Year, (b) the quantity ofNatural Gas actually provided to the Government by Contractor and all third parties which produce Natural Gas in Guyana during the prior Calendar Year, and (c) a description of the quantities and use of all Natural Gas provided to the Government by Contractor and all third parties which produce Natural Gas in Guyana, including without limitation, domestic residential, commercial and industrial consumption, fuel used for domestic power generation, etc., or, and any quantities of Natural Gas liquefied or compressed in Guyana Petroleum Agreement of Guyana - Repsol Exploraci6n S.A. Government for export or used as feedstock for petrochemical exports, such as methanol and fe1iilizer. Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. SECTION 10-BUDGET STATEMENT 1 0.1 The Contractor shall prepare an armual budget pursuant to Article 7 of the Agreement (the '·Budget Statement"). The Budget Statement will distinguish between Exploration Costs, Development Costs and Operating Costs consistent with the individual categories speciiied in Sections 2 and 3 and will show the following: (a) Forecast expenditures and receipts under the Agreement for the Calendar Year. (b) Cumulative expenditures and receipts to the end of the said Year. Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. ANNEX D-Pre-Approved and Certified Petroleum Operations Items A Acids (stimulation)- chemicals used downhole or injected in oil/gas formations Acoustical survey equipment- including sonar, side scanning sonar, full wave form sonic loggers Aeromagnetic recording survey systems Air slips also known as tubing slips All terrain vehicles (A TVs) Automated equipment at the wellhead, processing plant or refinery used to monitor and control production B Bags (cloth) with printed tags- used in well testing Bails (links) Barrel -chemical mixing when used at the wellhead Batteries- for production machinery and equipment Batteries - geophysical when used exclusively for seismic prospecting in blasting and recording systems Bits - drill includes PDCs, tricones Blasting systems - used for seismic prospecting Blowout ignition system Blowout preventers (BOPs) Boxes-shipping (used in well testing), core Building - portable Building -support- when used as weather-related protective covering for equipment such as electrical generators or instrumentation Buildings-that provide ufrr~...~ or dwelling space; geologist lab ltailc:r"s; skid-mounted living trailers Bulldozers -earth moving equipment c Cable - electrical Cable - wire rope Cables -electrical (integrated into machinery) Cables used for seismic prospecting Calibration gas-for H2S monitors and H2S analyzers Casing Casing accessories Catwalks-see Scaffolding Cement-oilwell Cementing equipment Centralizers- casing attachment Centrifuge- used to remove fine drill solids from mud systems Chemical mixing barrel -when used at the wellhead Chemical storage drums-when used at the manufacturing or processing site Chemicals used in drilling and production operations Chemicals used in refining operations Choke manifold and valves Circulating system - includes discharge and return lines Circulating systems- includes mud tanks, mud mixers, discharge and return lines and separators Cleaners/degreasers - includes oilfield equipment Cloth bags with printed tags- used in well testing Coil tubing Coil tubing reel Collars - drilling Communication equipment- includes satellite communications equipment Annex D Page I Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. Compressors -for compression of air or natural gas Computers-to monitor production/drilling machinery and equipment Consumables- consumable equipment used in drilling and production operations Control panels- used to run generators at a well head Core boxes Corrosion inhibitors - added to upstream installations for preventative maintenance Couplings Custom software-designed for and integrated into drilling and production machinery or equipment D Data processing units used for seismic prospecting DC electric motors (integrated) used to drive the drawworks mud pumps, or top drives, also commonly called traction motors Deflocculants- used in fresh water mud systems Dehydration chemicals Dehydrators- including mole sieve used at the well head; used during the production testing phase Demulsifiers- used in production operations to remove water from crude oil Density counters- spectral gamma-gamma Detectors-flame, when used during the production testing phase as an alternative to a flare stack Diesel power generating systems Discharge and return lines Dispersants - production chemicals Distribution panel -electrical that controls the electrical distribution for the entire rig package Dope-pipe Drift"'- fM casing, tubing, and line pipe Drill bits. includes tricone, PDCs (Polycrystalline Diamond Compact) Drill collar handling equipment Drill collars- used in exploration and development drilling Drill line spool - wire rope Drill pipe- used in exploration and development drilling Drill pipe handling equipment Drill stem testing equipment- includes instrumentation Drilling - detergent; muds; surfactants Drilling Rigs and associated equipment- Onshore and Offshore Drilling fluid -chemicals used to create drilling fluid (see mud) Drills- all drills used exclusively for seismic prospecting includes heli, enviro, LIS, track, truck, buggy Drives -top, rotary and pump Drums-for chemical storage when used at the manufacturing or processing site E EDR system (only an EDR and the embedded dedicated computer equipment that is integrated into the unit) used at the drilling site Electric generators and alternators Electric logging equipment Electrical cable - distribution panel, electrical generating systems Electrical distribution panel Electrical generating systems (integrated) Electrical submersible pumps - ESP -for artificial lift of petroleum Electrical surveying equipment Electrical thermostats Electromagnetic surveying equipment- includes time and frequency domain induced polarization equipment Emergency gas shut off devices Annex D Page 2 Petroleum Agreement Government of Guyana-Repsol Exploraci6n S.A. Engine oils Engines- used for oilfield service Equipment- hoisting Explosives- includes those used in seismic, coring, construction F Field potentiometers Filter bags- for the production machinery and equipment Fishing tools for retrieving tools lost downhole Fittings- includes those used in the transportation and distribution system, for example, on gathering lines Flame detectors-when used during the production testing phase as an alternative to a flare stack Flare stacks- includes mobile flare stacks used during the production testing phase Flare tank systems, located at the wellsite, that are directly connected to the drilling rig and are used to control polluting emissions Flare tanks and lines Float equipment Fluids-fracturing, stimulating, well servicing Foamers - used downhole to enhance production Forklifts Fracturing chemicals Fracturing equipment Fuel gas lines-for oil and gas production machinery Fuel storage tanks- see Tanks Full wave form sonic logn~r~ G Gamma-ray spectrometers Gas-welding, acetylene, argon-when used as an inert welding gas or in repair jobs; calibration gas for H2S monitors and H2S analyzers Gas dehydration equipment used in processing plants or refineries up to the point where the petroleum or natural gas is a marketable product Gas detection monitors that detect hazardous gas and provide a warning Gas flow equipment-when used downhole to monitor gas flow Gas lift lines- located at a production wellsite to encourage the flow or transport of gas from the reservoir to the surface Gas shut off devices (emergency)-that are attached to a gas line and automatically shut off gas supply Gauges - engine Generating systems-diesel power, electrical Gensets/generators-portable, mobile or standby alternators generators/gensets) Geophones Geophysical batteries -when used exclusively for seismic prospecting in blasting and recording systems Geronimo and escape lines Global positioning systems used for seismic prospecting; used for creating stakeless surveys Graders Gradiometers-includes potassium gradiometers for radioactive methods of geophysical prospecting Gravel -for well pads, processing plant on-site roads Gravitational recording survey systems Gravity meters Grease Ground penetrating radar equipment Gunny sacks Guns-perforating that are used during the production testing phase Annex D Page 3 Petroleum Agreement Government of Guyana- Rep sol Exploraci6n S.A. H Hammer wrenches Hand held tools Heat exchangers Heaters-line, located at the well head to preheat gas but not line heaters on pipeline; used during the production testing phase Heli-drills for seismic prospecting Hoisting equipment Hooks and swivels- drill pipe handling equipment Hydraulic tank Hydraulic winches Hydrogen sulfide - used for gas scrubbing Hyperspectral spectrometers used for remote sensing Imaging equipment- seismic Incinerator-when used during the production testing phase in place of a flare stack to burn off excess natural gas Indicator-weight Inductive conductivity probes used for electrical or electromagnetic surveying infrared and hyperspectral spectrometers Infrared spectrometers used for remote sensing Inhibitors-corrosion added to upstream installations for preventative maintenance lnjectr· h"'ad that runs or retrieves the coil t11bing Instruments- instruments or equipment for seismic prospecting Integrated dtesel power generating systems Integrated electrical operating systems Integrated fuel tanks-see Tanks Integrated navigation systems used for seismic prospecting Integrated pump units Integrated steam heaters L Lab testing equipment- used for testing drilling fluids Lab testing equipment- used for testing production fluids Labels-for vials used in well testing Laptop computers (see entry under Computers) LIDAR (Light Detection and Ranging) mapping equipment used for remote sensing Light towers or light plants Lighting - industrial explosion proof Lights Lignite- drilling mud or fluid Line heaters- located at the well head to preheat gas, but not line heaters on the pipeline Line heaters- used on pipelines, but not line heaters located at the well head for preheating gas Industry) Line pipe Liners used on the ground Lines-catline, drill, flare, load line, geronimo and escape, sand line, spool, tong Lines-discharge, return, flare Links (bales) Liquefaction equipment- used in a processing plant or refinery to liquefy C02 so that it can be transported and marketed Annex D Page 4 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A. Liquid viscosifiers Loaders-includes loaders used to move drill pipe to and from the drilling rig Logging equipment-electric wireline Lubricants - specialty M Machinery and equipment used to inject substances into a reservoir Magnetic susceptibility meters Magnetometers Main-drum (also known as a drill drum) Main drum also known as drill drum - part of the drawworks Maintenance tools- includes cheater bars Manifold-choke, valve that is an integral piece of the high pressure pumping system Manifold - choke; mud Manufactured proppant Measurement while drilling equipment (MWD) - used to monitor the drill bit's downhole position Meter skids- used in the transportation of natural gas or petroleum from the well head as they are part of the distribution system Mobile radios Molecular sieve (Mole sieve pellets)- when used as a part of exempt dehydrator equipment Monitoring equipment-that monitors or controls the operation of machinery and equipment Monitors- hazardous gas detection monitors that provide a warning Mooring systems -for storage vessels Motors-includes mud motors Motors-traction, mud Motors-used in the production testing phase; mud motors used downhole in the drilling process Mud -chemicals used in the creation of drilling fluid Mud - mixers, tank, manifold, motors Mud logging equipment and supplies MWD (Measurement While Drilling) equipment and supplies N Navigation systems used for seismic prospecting; used for creating stakeless surveys Nitrogen- used to stimulate production Non-polarizing electrodes used for making measurements in drill holes 0 Optical sensors p Packers Paint supplies Perforating guns- used during the production testing phase Pipe dope Pipeline installation equipment Pipeline coatings - cement or otherwise Piping systems - used downhole in the production and testing phase Pit volume totalizer (PVT)- used for monitoring the bore hole Polarization equipment- time and frequency domain induced Portable building Potentiometers - field Power-tongs and jaws (also see Tongs) Power plants- includes diesel, electrical Annex D Page 5 Petroleum Agreement Government of Guyana- Repsol Exploraci6n S.A. Power tongs Power washers Pressure piping systems and its components- used during the production testing phase Preventers- blowout (BOP) Probes-inductive conductivity used for electrical or electromagnetic surveying Production processing equipment- includes separators, compressors, tanks, flow lines, pumps and valves Prospecting, seismic- see seismic prospecting Protectors - thread Pump lines and valves that run from the mud pump to well Pump units - includes submersible trash or sump Pumpjacks Pumps - explosion proof Pumps and motors-used in the production testing phase R Racks-pipe used in the drilling process Radar equipment-ground penetrating, side looking aperture Radio-phone, mobile, VHF, two-way Radio antenna - MDS Radioactive prospecting - scintillometers, spectral gamma-gamma density counters, geigermuller counters, gamma-ray spectrometers, potassium gradiometers Radioactive sources- used in wireline logging Ram thread protectors-telescoping Rer:tctive wolrjin:J gases- when used in a repair Sf'rvic~ Recorder box used for seismic prospecting Recording system used for seismic prospecting Reel for coil tubing Reflectance equipment used for remote sensing Regulators-includes when used in the transportation and distribution system, for example, gathering lines Remote sensing equipment- includes ultraviolet lamps and reflectance, infrared and hyperspectral spectrometers Resistivity survey equipment used for electrical or electromagnetic surveying Return and discharge lines of a circulating system Rod basket Rotary and pump drives Rotary and pump drives Rotary table s Safety valves- used for well control that are a part of the equipment on the service rig Sand - includes sand used to stimulate well production Satellite communications equipment SCADA equipment-(Supervisory Control and Data Acquisition) used at the well head, processing plant or refinery Scintillometers Seismic-instrumentation, drilling equipment, imaging equipment Seismic explosives Seismic prospecting- recording system, seismic instrumentation, geophones, cables, data processing units Seismic vessels and associated equipment Self-potential meters used for electrical or electromagnetic surveying Annex 0 Page 6 Petroleum Agreement Government of Guyana- Repsol Exploracion S.A. Sensors - optical Separator vessels - used during the production testing phase Snubbing unit-composed of a blowout preventor stack, a hydraulic jack and a power unit to run the hydraulics Solids control equipment Sonar- includes side scanning Sonic loggers -full wave form Spectral gamma-gamma density counters Spectrometers- infrared or hyperspectral used for remote sensing, gamma ray Spools - includes drill line spool Spools (specialized pieces that adapt tubing to BOPs or for spacing requirements between BOP and wellhead) Stabbing guides- used in the drilling process Stimulating fluids Stimulation acids- chemicals used downhole or injected in oil/gas formations Storage tanks- (see Tanks) Submersible trash pump unit- used to pump drilling fluids, mud/water Sulphur recovery equipment- used in processing plants and refineries Survey equipment (see Global positioning systems and Navigation systems) T Tank battery Tanks-flare, integrated fuel, mud or water, stand alone fuel tank fully integrated with drilling rig that serves as the direct fuel supply for the rig Tanks-storage-used at a refi..,er_.' or processing plant Tanks-water storage Telecommunication equipment Thermostats-electrical designed for use with any of the machinery or equipment on this list Thread protectors- used in the drilling process Time and frequency domain induced polarization equipment used for electrical or electromagnetic surveying Tongs-backup and integral tongs, power tongs and jaws Tongs-power also called rotary or casing tongs, power tongs and jaws, backup and integral tongs Tools-fishing tools for retrieving tools lost downhole Tools- hand Top drives- Drill Rig Torque gauges-used in the drilling process Towers-light Traction motors Travelling blocks Tricones-drill bits Tubing - includes coil Tubing slips also known as air slips Two-way radios u Ultraviolet lamps used for remote sensing v Vacuum and wash pump used to clean up around rig and wash equipment Vacuum tanks or systems-truck- or trailer-mounted Vacuum units Valve-outlet, manifold (integral part of the high pressure pumping system) Annex D Page 7 Petroleum Agreement of Guyana- Rep sol Exploraci6n S.A. Government Valve manifold (integral part of the high pressure pumping system) Valves-includes those used in the transportation and distribution system, for example, gathering lines Valves-safety-used for well logging, drill stem testing or the production testing phase Vehicles Vessels -separator- used during the production testing phase Vessels - supply and anchor handling for offshore petroleum operations Vessels -for storage of crude oil (FPSO) Vessels - Mobile Offshore Drilling Units Vibrators used for seismic prospecting Viscosifiers - liquid; dry polymer; concentrated w Walkways - see Scaffolding Waste gas transmission- see Pipes Waste management bins Waste water treatment units-mobile Water clarifiers - used to remove residual oil in produced water prior to disposal or re-use Water disposal lines- includes associated machinery and equipment that are located within the processing plant Water storage tanks Welding equipment and supplies Well flow lines transporting raw product from a well to a satellite, battery, line pipe or processing plant Well logging equipment- includes surface and downhole tools Well testing equipment- includes surface and downhole tools Wellhead eq• ·irf"1ent Winches Wireline (or slickline) unit- skid- or truck-mounted Annex D Page 8 Petroleum Agreement Government of Guyana - Repsol Exploraci6n S.A.