SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-9743

ENRON OIL & GAS COMPANY

(Exact name of registrant as specified in its charter)

DELAWARE (State or other jurisdiction of incorporation or organization) No.)

47-0684736 (I.R.S. Employer Identification

1400 SMITH STREET, HOUSTON, TEXAS 77002-7369 (Address of principal executive offices) (zip code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 713-853-6161 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Title of each class Name of each exchange on which registered ----------------------------------------------------------Common Stock, $.01 par value New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / /. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ Aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing sale price in the daily composite list for transactions on the New York Stock Exchange on March 2, 1995 was $636,486,102. As of March 2, 1995, there were 159,940,827 shares of the registrant's Common Stock, $.01 par value, outstanding.

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DOCUMENTS INCORPORATED BY REFERENCE. Certain portions of the registrant's definitive Proxy Statement for the May 2, 1995 Annual Meeting of Shareholders ("Proxy Statement") are incorporated in Part III by reference.

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TABLE OF CONTENTS PART I

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Business............................. General.......................... Business Segments................ Exploration and Production....... Marketing........................ Wellhead Volumes and Prices, and Lease and Well Expenses........ Other Natural Gas Marketing Volumes and Prices............. Competition...................... Regulation....................... Relationship Between the Company and Enron Corp................. Other Matters.................... Current Executive Officers of the Registrant..................... Properties........................... Oil and Gas Exploration and Production Properties and Reserves....................... Legal Proceedings.................... Submission of Matters to a Vote of Security Holders..................... PART II Market for the Registrant's Common Equity and Related Shareholder Matters............................ Selected Financial Data.............. Management's Discussion and Analysis of Financial Condition and Results of Operations...................... Financial Statements and Supplementary Data................... Disagreements on Accounting and Financial Disclosure................. PART III Directors and Executive Officers of the Registrant....................... Executive Compensation............... Security Ownership of Certain Beneficial Owners and Management... Certain Relationships and Related Transactions......................... PART IV Exhibits, Financial Statement Schedule, and Reports on Form 8-K................................
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15 18 18

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29

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PART I

ITEM 1. BUSINESS GENERAL Enron Oil & Gas Company (the "Company"), a Delaware corporation, is engaged, either directly or through a marketing subsidiary with regard to domestic operations or through various subsidiaries with regard to international operations, in the exploration for, and the development, production and marketing of, natural gas and crude oil primarily in major producing basins in the United States, as well as in Canada, Trinidad and India and to a lesser extent, selected other international areas. The Company's principal producing areas are further described under "Exploration and Production" below. At December 31, 1994, the Company's estimated net proved natural gas reserves were 1,910 billion cubic feet ("Bcf") and estimated net proved crude oil, condensate and natural gas liquids reserves were 37 million barrels ("MMBbl"). (See "Supplemental Information to Consolidated Financial Statements"). At such date, approximately 70% of the Company's reserves (on a natural gas equivalent basis) was located in the United States, 16% in Canada, 11% in Trinidad and 3% in India. As of December 31, 1994, the Company employed approximately 740 persons. The Company pursues its oil and gas exploration and development operations primarily by the acquisition, through various means including but not limited to leasing, purchasing and farming-in of acreage that is either undeveloped or lightly developed, and drilling of internally generated prospects. The Company also maintains a strategy of selling selected oil and gas properties that for various reasons may no longer fit into future operational plans or are not assessed to have sufficient future growth potential, and when the economic value to be obtained by selling the properties and reserves in the ground is evaluated to be greater than what would be obtained by holding the properties and producing the reserves over time. As a result, the Company typically receives each year a varying but rather substantial level of proceeds related to such sales which proceeds are available for general corporate use. Enron Corp. currently owns 80% of the outstanding common stock of the Company. (See "Relationship Between the Company and Enron Corp."). Unless the context otherwise requires, all references herein to the Company include Enron Oil & Gas Company, its predecessors and subsidiaries, and any reference to the ownership of interest or pursuit of operations in any international areas by the Company recognizes that all such interests are owned and operations are pursued by subsidiaries of Enron Oil & Gas Company. Unless the context otherwise requires, all references herein to Enron Corp. include Enron Corp., its predecessors and affiliates, other than the Company and its subsidiaries. With respect to information on the Company's working interest in wells or acreage, "net" oil and gas wells or acreage are determined by multiplying "gross" oil and gas wells or acreage by the Company's working interest in the wells or acreage. Unless otherwise defined, all references to wells are gross. BUSINESS SEGMENTS The Company's operations are all natural gas and crude oil exploration and production related. Accordingly, such operations are classified as one business segment. EXPLORATION AND PRODUCTION NORTH AMERICAN OPERATIONS. The Company's six principal domestic producing areas are the Big Piney area, South Texas area, Matagorda Trend area, Canyon Trend area, Pitchfork Ranch area and Vernal area. Properties in these areas comprised approximately 76% of the Company's domestic reserves (on a natural gas equivalent basis) and 76% of the Company's maximum domestic net natural gas deliverability as of December 31, 1994 and are substantially all operated by the Company. 1 The Company's other domestic natural gas and crude oil producing properties are located primarily in other areas of Texas, Utah, New Mexico and Oklahoma. At December 31, 1994, 93% of the Company's proved domestic reserves (on a natural gas equivalent basis) was natural gas and 7% was crude oil, condensate and natural gas liquids. A substantial portion of the Company's domestic natural gas reserves is in
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long-lived fields with well-established production histories. The opportunity exists to increase production in many of these fields through continued infill and other development drilling. The Company also has natural gas and crude oil producing properties located in Western Canada, primarily in the provinces of Alberta, Saskatchewan and Manitoba. BIG PINEY AREA. The Company's largest reserve accumulation is located in the Big Piney area in Sublette and Lincoln counties in southwestern Wyoming. The Company is the holder of the largest productive acreage base in this area, with approximately 219,000 net acres under lease directly within field limits. The Company operates approximately 650 natural gas wells in this area in which it owns a 91% average working interest. Deliveries from the area net to the Company averaged 124 million cubic feet ("MMcf") per day of natural gas and 1.5 thousand barrels ("MBbl") per day of crude oil, condensate, and natural gas liquids in 1994. At December 31, 1994, maximum natural gas deliverability net to the Company was approximately 142 MMcf per day. The current principal producing intervals are the Frontier and Mesaverde formations. The Frontier formation, which occurs at 6,500-10,000 feet, contains approximately 66% of the Company's current Big Piney reserves. The Company drilled 67 wells in the Big Piney area in 1994 and anticipates an active drilling program will continue for several years. (See "Other Matters - Tight Gas Sand Tax Credits (Section 29) and Severance Tax Exemption"). SOUTH TEXAS AREA. The Company's activities in South Texas are focused in the Wilcox, Expanded Wilcox, Frio and Lobo producing horizons. The primary area of activity is in the Lobo Trend which occurs primarily in Webb and Zapata counties. The Company operates approximately 470 wells in the South Texas area. Production is primarily from the Lobo sand of the Wilcox formation at depths ranging from 7,000 to 11,000 feet. The Company has approximately 250,000 net acres under lease in this area. Natural gas deliveries net to the Company averaged 181 MMcf per day in 1994. At December 31, 1994, maximum natural gas deliverability net to the Company was approximately 201 MMcf per day. The Company drilled 56 wells in the South Texas area in 1994 and anticipates an active drilling program will continue for several years. (See "Other Matters - Tight Gas Sand Tax Credits (Section 29) and Severance Tax Exemption"). MATAGORDA TREND AREA. The Company has an interest in several fields in the Matagorda Trend area, located 20 miles south of Port O'Connor, Texas in federal waters. The Company has a 78% working interest in Block 638 and a 92% working interest in Block 620. In Matagorda Blocks 555, 556, 700 and 713, the Company has an approximate 70%, 50%, 62% and 64% working interest, respectively. In addition, the Company has an approximate 82% and 50% working interest in Mustang Island Blocks 758 and 784, respectively. In addition, the Company has extended its Matagorda Trend holdings into the Mustang Island area as a result of the purchase in 1994 of 15 OCS Blocks in the Matagorda and Mustang Island areas. The Company had a new field discovery at Mustang Island 759 in which it owns a 75% working interest and which is expected to commence deliveries in mid 1995 at a net rate of approximately 50 MMcf per day. The Company operates all of the offshore tracts mentioned above. Natural gas deliveries from these areas net to the Company averaged 65 MMcf per day in 1994. At December 31, 1994, maximum natural gas deliverability net to the Company from these blocks was approximately 85 MMcf per day. CANYON TREND AREA. The Company's activities in this area have been concentrated in Crockett, Sutton, Terrell and Val Verde Counties, Texas where the Company drilled 331 natural gas wells during the period 1992 through 1994. During 1994, the Company increased its acreage position by 2 approximately 7,800 net acres to approximately 91,800 net acres and now operates approximately 500 natural gas wells in this area in which it owns a 97% average working interest. Production is from the Canyon sands and Strawn limestone at depths from 5,500 to 11,500 feet. In 1994, natural gas deliveries net to the Company averaged 65 MMcf per day and at December 31, 1994, maximum natural gas deliverability net to the Company was approximately 66 MMcf per day. The Company expects to maintain an active drilling program in the Canyon Trend area during 1995. (See "Other Matters - Tight Gas Sand Tax Credits (Section 29) and Severance Tax Exemption"). PITCHFORK RANCH FIELD. The Pitchfork Ranch field located in Lea County, New Mexico, produces primarily from the Bone Spring, Atoka and Morrow formations. In 1994, deliveries net to the Company averaged 36 MMcf per day of natural gas and approximately 2 MBbl per day of crude oil, condensate and natural gas liquids. At December 31, 1994, maximum deliverability net to the Company was approximately 39 MMcf per day of natural gas and 3 MBbl per day of crude oil, condensate and natural gas liquids. During 1994, the Company increased crude oil, condensate and natural gas liquids reserves and deliverability through drilling. Additionally, the Company has increased its acreage position by approximately 12,300 net acres to approximately 27,900 net acres and expects to maintain an active drilling program in this field during 1995. (See "Other Matters - Tight Gas Sand Tax Credits (Section 29) and Severance Tax Exemption").

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VERNAL AREA. In the Vernal area, located primarily in Uintah County, Utah, the Company operates approximately 195 producing wells and presently controls approximately 79,000 net acres. In 1994, natural gas deliveries net to the Company from the Vernal area averaged 24 MMcf per day which is the maximum deliverability. Production is from the Green River and Wasatch formations located at depths between 4,500-8,000 feet. The Company has an average working interest of approximately 60%. The Company drilled 20 wells in the Vernal area in 1994 and expects to maintain a comparable drilling program during 1995. (See "Other Matters - Tight Gas Sand Tax Credits (Section 29) and Severance Tax Exemption"). CANADA. The Company is engaged in the exploration for and the development and production of natural gas and crude oil and the operation of natural gas processing plants in western Canada, principally in the provinces of Alberta, Saskatchewan, and Manitoba. The Company conducts operations from offices in Calgary. The Company produces natural gas from seven major areas and crude oil from three major areas. The Sandhills area in Southern Saskatchewan is the largest single producing area where an additional 160 wells were drilled in 1994 resulting in deliverability net to the Company from the field of approximately 38 MMcf per day at December 31, 1994. Maximum Canadian natural gas deliverability net to the Company at December 31, 1994 was approximately 85 MMcf per day, and the Company held approximately 354,000 net undeveloped acres in Canada. The Company expects to maintain an active drilling program in Canada during 1995. OUTSIDE NORTH AMERICA OPERATIONS. The Company has operations offshore Trinidad and India and is conducting exploration in selected other international areas. Properties offshore Trinidad and India comprised 100% of the Company's reserves and production outside of North America. TRINIDAD. In November 1992, the Company was awarded a 95% working interest concession in the South East Coast Consortium Block offshore Trinidad, encompassing three undeveloped fields, previously held by three government-owned energy companies. The Kiskadee field is currently being developed while the remaining two undeveloped fields are anticipated to be developed over the next three to five years. Existing surplus processing and transportation capacity at the Pelican Field facilities owned and operated by Trinidadian companies is being used to process and transport the production. Natural gas is being sold into the local market under a take-or-pay agreement with the National Gas Company of Trinidad and Tobago. At December 31, 1994, maximum natural gas deliverability net to the Company was approximately 150 MMcf per day and the Company held approximately 71,000 net undeveloped acres in Trinidad. Natural gas market takes were increased to approximately 121 MMcf per day and condensate deliveries were increased to approximately 5 MBbl per day, both net to the Company, as of January 1, 1995. 3 INDIA. In December 1994, the Company signed agreements covering profit sharing, joint operations and product sales and representing a 30% working interest in and was designated operator of the Tapti, Panna and Mukta Blocks located offshore Bombay, India. The blocks were previously operated by the Indian national oil company, Oil & Natural Gas Corporation Limited, which retains a 40% working interest. The 363,000 acre Tapti Block contains two major proved gas accumulations delineated by 22 expendable exploration wells that have been plugged. The Company plans to commence development of the Tapti Block accumulations immediately. The 106,000 acre Panna Block and the 192,000 acre Mukta Block are partially developed with five producing platforms located in the Panna and Mukta fields. The fields were producing approximately 3 MBbl per day of crude oil net to the Company as of December 31, 1994; all associated gas was being flared. The Company intends to continue development of the accumulations and to expand processing capacity to allow crude oil production at full deliverability as well as to permit natural gas sales. OTHER INTERNATIONAL. The Company continues to pursue other selected conventional natural gas and crude oil opportunities outside North America. During 1995, the Company will pursue other exploitation opportunities in countries where indigenous natural gas reserves have been identified, particularly where synergies in natural gas transportation, processing and power cogeneration can be optimized with other Enron Corp. affiliated companies. In early 1995, the Company and the Qatar General Petroleum Corporation signed a nonbinding letter of intent concerning the possible development of a liquefied natural gas project for natural gas to be produced from the North Dome Field. The Company and Enron Corp. may jointly hold up to a 40 percent working interest in the joint venture and would drill and develop the agreed upon reserves. In addition, the Company signed letters of intent in early 1995 with the National Oil Corporation of Uzbekistan, and Gazprom, the Russian Natural Gas Company, to pursue the feasibility of joint venture development and marketing of previously discovered hydrocarbon reserves in Uzbekistan. The Company continues evaluation and assessment of its international opportunity portfolio in the coalbed methane recovery arena, including projects in South Wales in the U.K., the Lorraine Basin in France, Galilee Basin in Queensland, Australia and in two basins in China. A similar project in Russia continues under evaluation. MARKETING WELLHEAD MARKETING. The Company's North America wellhead natural gas production is currently being sold on the spot market and under long-term natural gas contracts at market responsive prices. In many instances, the long-term contract prices closely approximate the prices received for natural gas being sold on the spot market. Wellhead natural gas volumes from Trinidad are sold at prices that are based on a fixed price schedule with periodic escalations. Natural gas volumes in India will be sold to the Gas Authority
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of India, Ltd. under a take-or-pay contract at a price linked to a basket of world market fuel oil quotations with floor and ceiling limits. Approximately 45% of the Company's wellhead natural gas production is currently being sold to pipeline and marketing subsidiaries of Enron Corp. Substantially all of the Company's wellhead crude oil and condensate is sold under short-term contracts at market responsive prices. OTHER MARKETING. Enron Oil & Gas Marketing, Inc. ("EOGM"), a wholly-owned subsidiary of the Company, is a marketing company engaging in various marketing activities. Both the Company and EOGM contract to provide, under short and long-term agreements, natural gas to various purchasers and then aggregate the necessary supplies for the sales with purchases from various sources including third-party producers, marketing companies, pipelines or from the Company's own production. In addition, EOGM has purchased and constructed several small gathering systems in order to facilitate its entry into the gathering business on a limited basis. Both EOGM and the Company utilize other short and long-term hedging and trading mechanisms including sales and purchases utilizing NYMEX-related commodity market transactions. These marketing activities have 4 provided an effective balance in managing the Company's exposure to commodity price risks in the energy market. In September 1992, the Company sold a volumetric production payment for $326.8 million to a limited partnership of which an Enron Corp. affiliated company is general partner with a 1% interest. Under the terms of the production payment agreements, the Company conveyed a real property interest in approximately 124 billion cubic feet equivalent ("Bcfe") (136 trillion British thermal units) of its natural gas and other hydrocarbon reserves. Effective October 1, 1993, the agreements were amended providing for the extension of the original term of the volumetric production payment through March 31, 1999 and including a revised schedule of daily quantities of hydrocarbons to be delivered which is approximately one-half of the original schedule. The revised schedule will total approximately 89.1 Bcfe (97.8 trillion British thermal units) versus approximately 87.9 Bcfe (96.4 trillion British thermal units) remaining to be delivered under the original agreement. Daily quantities of hydrocarbons no longer required to be delivered under the revised schedule during the period from October 1, 1993 through June 30, 1996 are available for sale by the Company. The Company retains responsibility for its working interest share of the cost of operations. The Company also entered into a separate agreement with the same limited partnership whereby it has agreed to exchange volumes owned by the Company in various other areas for equivalent volumes produced by the Company and owned by the limited partnership under the terms of the volumetric production payment. The costs incurred, if any, to effect redeliveries pursuant to such exchange are borne by the Company. The Company also has contracted to supply natural gas to a Texas City, Texas cogeneration facility which is owned by Cogenron Inc. Cogenron Inc. is 50% owned by Enron Corp. The primary contract provides for the sale of natural gas under a fixed schedule of prices substantially above current spot market prices. Current deliveries of approximately 45 MMcf of natural gas per day are being supplied primarily by purchases at market responsive prices under a long-term agreement with an Enron Corp. subsidiary. The Company has also entered into a price swap agreement with a third party that has the effect of converting the prices under this contract to a fixed schedule of prices. The resulting prices under this combination of purchase and price swap agreements are substantially below the fixed schedule of prices in the primary sales contract. The arrangements are designed, as to the volumes involved, to provide the Company a fixed margin of profit under its agreement with Cogenron Inc. However, the Company's commitment to deliver volumes of natural gas in excess of the current delivery levels at the schedule of predetermined prices discussed above could be disadvantageous to the Company during any time spot market prices exceed the applicable contract prices for natural gas. 5 WELLHEAD VOLUMES AND PRICES, AND LEASE AND WELL EXPENSES The following table sets forth certain information regarding the Company's wellhead volumes of and average prices for natural gas per thousand cubic feet ("Mcf"), crude oil and condensate, and natural gas liquids per barrel ("Bbl"), and average lease and well expenses per thousand cubic feet equivalent ("Mcfe" - natural gas equivalents are determined using the ratio of 6.0 Mcf of natural gas to 1.0 barrel of crude oil and condensate or natural gas liquids) delivered during each of the three years in the period ended December 31, 1994: YEAR ENDED DECEMBER 31, 1994 ----------------VOLUMES (PER DAY) Natural Gas (MMcf) United States(1)............. 534
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1993 ---------

1992

614

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Canada....................... 30 Trinidad..................... --------Total(1)................... 564

72 63 --------749 =========

58 2 --------709 ========= -

========= Crude Oil and Condensate (MBbl) United States................ 6.3 Canada....................... 2.2 Trinidad..................... India........................ --------Total...................... 8.5

8.0 2.0 2.5 .1 --------12.6 =========

6.6 2.2 .1 --------8.9 ========= -

========= Natural Gas Liquids (MBbl) United States................ .3 Canada....................... .4 --------Total...................... .7

.3 .4 --------.7 =========

.2 .4 --------.6 =========

========= AVERAGE PRICES Natural Gas ($/Mcf) United States(2)............. 1.61 Canada....................... 1.18 Trinidad..................... Composite(2)............... 1.58 Crude Oil and Condensate ($/Bbl) United States................ 18.29 Canada....................... 16.80 Trinidad..................... India........................ Composite.................. 17.90 Natural Gas Liquids ($/Bbl) United States................ 11.56 Canada....................... 10.05 Composite.................. 10.69 LEASE AND WELL EXPENSES ($/MCFE) United States................
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1.71 1.42 .93 1.62

1.97 1.34 .89 1.92

16.06 14.05 15.50 15.70 15.62

16.96 14.63 14.36 16.37

12.45 8.45 9.90

13.85 9.46 11.12

.19

.18

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.20 Canada....................... .50 Trinidad..................... India........................ Composite.................. .22 - --------.17 .13 .20 1.46 .21 .34 .48

(1) Includes 48 MMcf per day in 1994, 81 MMcf per day in 1993 and 28 MMcf per day in 1992 delivered under the terms of a volumetric production payment agreement effective October 1, 1992, as amended. (2) Includes an average equivalent wellhead value of $1.27 per Mcf in 1994, $1.57 per Mcf in 1993 and $1.70 Mcf in 1992 for the volumes described in note (1), net of transportation costs. 6 OTHER NATURAL GAS MARKETING VOLUMES AND PRICES The following table sets forth certain information regarding the Company's volumes of natural gas delivered under other marketing and volumetric production payment arrangements, and resulting average per unit gross revenue and per unit amortization of deferred revenues along with associated costs during each of the three years in the period ended December 31, 1994. (See "Marketing" for a discussion of other natural gas marketing arrangements and agreements). YEAR ENDED DECEMBER 31, 1994 ----------------Volumes (MMcf per day)(1)............ 255 Average Gross Revenue ($/Mcf)(2)..... 2.62 Associated Costs ($/Mcf)(3)(4)....... 1.99 --------Margin ($/Mcf)....................... 0.63 ========= - --------324 $ 2.38 2.06 --------$ 0.32 $ 1993 --------293 2.57 2.32 --------$ 0.25 $ $ 1992

=========

=========

(1) Includes 48 MMcf per day in 1994, 81 MMcf per day in 1993 and 28 MMcf per day in 1992 delivered under the terms of volumetric production payment and exchange agreements effective October 1, 1992, as amended. (2) Includes per unit deferred revenue amortization for the volumes detailed in note (1) at an equivalent of $2.46 per Mcf ($2.36 per million British thermal units) in 1994, $2.50 per Mcf ($2.40 per million British thermal units) in 1993 and $2.51 per Mcf ($2.40 per million British thermal units) in 1992. (3) Includes an average value of $1.92 per Mcf in 1994, $2.20 per Mcf in 1993 and $2.37 per Mcf in 1992, including average equivalent wellhead value, any applicable transportation costs and exchange differentials, for the volumes detailed in note (1). (4) Including transportation and exchange differentials. COMPETITION
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The Company actively competes for reserve acquisitions and exploration leases, licenses and concessions, frequently against companies with substantially larger financial and other resources. To the extent the Company's exploration budget is lower than that of certain of its competitors, the Company may be disadvantaged in effectively competing for certain reserves, leases, licenses and concessions. Competitive factors include price, contract terms, and quality of service, including pipeline connection times and distribution efficiencies. In addition, the Company faces competition from other producers and suppliers, including competition from other world wide energy supplies including Canadian natural gas. REGULATION DOMESTIC REGULATION OF NATURAL GAS AND CRUDE OIL PRODUCTION. Natural gas and crude oil production operations are subject to various types of regulation, including regulation in the United States by state and federal agencies. Domestic legislation affecting the oil and gas industry is under constant review for amendment or expansion. Also, numerous departments and agencies, both federal and state, are authorized by statute to issue and have issued rules and regulations which, among other things, require permits for the drilling of wells, regulate the spacing of wells, prevent the waste of natural gas and liquid hydrocarbon resources through proration and restrictions on flaring, require drilling bonds and regulate environmental and safety matters. The regulatory burden on the oil and gas industry increases its cost of doing business and, consequently, affects its profitability. A substantial portion of the Company's oil and gas leases in the Big Piney area and in the Gulf of Mexico, as well as some in other areas, are granted by the federal government and administered by the Bureau of Land Management (the "BLM") and the Minerals Management Service (the "MMS") federal agencies. Operations conducted by the Company on federal oil and gas leases must comply 7 with numerous statutory and regulatory restrictions concerning the above and other matters. Certain operations must be conducted pursuant to appropriate permits issued by the BLM and the MMS. Sales of crude oil, condensate and natural gas liquids by the Company are made at unregulated market prices. The transportation and sale for resale of natural gas in interstate commerce are regulated pursuant to the Natural Gas Act of 1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA"). These statutes are administered by the Federal Energy Regulatory Commission (the "FERC"). Effective January 1, 1993, the Natural Gas Wellhead Decontrol Act of 1989 deregulated natural gas prices for all "first sales" of natural gas, which includes all sales by the Company of its own production. Consequently, sales of the Company's natural gas currently may be made at market prices, subject to applicable contract provisions. Regulation of natural gas importation is administered primarily by the Department of Energy's Office of Fossil Energy (the "DOE/FE"), pursuant to the NGA. The NGA provides that any party seeking to import natural gas must first seek DOE/FE authorization, which authorization may be granted, modified or denied in accordance with the public interest. The Energy Policy Act of 1992 amended the NGA's public interest standard with respect to imports from and exports to certain countries, such as Canada, to deem imports from and exports to such countries to be in the public interest, and require such import/export applications to be granted without delay. In addition, the Energy Policy Act amended the NGPA to treat natural gas imported from Canada as "first sales" of natural gas under Section 3 of the NGPA, thus allowing such imported natural gas to be sold for resale without certificate authorization from the FERC. Additionally, the National Energy Board of Canada has dramatically revised its natural gas export policies to permit large volumes of Canadian natural gas to compete with natural gas produced in the U.S. for the U.S. spot market. Additional natural gas pipeline capacity from Canada to the U.S. has been built and other such construction proposals are pending approval. While the impact on the Company of this change is uncertain, it is possible that it will increase competition in the markets in which the Company sells natural gas. For example, Canadian natural gas competes directly with natural gas produced from the Company's Big Piney area for customers located in the Pacific Northwest region of the United States. Since 1985, the FERC has endeavored to make natural gas transportation more accessible to gas buyers and sellers on an open and non-discriminatory basis. These efforts have significantly altered the marketing and pricing of natural gas. Commencing in April 1992, the FERC issued Order Nos. 636, 636-A and 636-B ("Order No. 636"), which mandate a fundamental restructuring of interstate pipeline sales and transportation services. Order No. 636 requires interstate natural gas pipelines to "unbundle" or segregate the sales, transportation, storage, and other components of their existing city-gate sales service, and to separately state the rates for each unbundled service. Under Order No. 636, unbundled pipeline sales can be made only in the production areas. Order No. 636 also requires interstate pipelines to assign capacity rights they have on upstream pipelines to such pipelines' former sales customers and provides for the recovery by interstate pipelines of costs associated with the transition from providing bundled sales services to providing unbundled transportation and storage services. The purpose of Order No. 636 is to further enhance competition in the natural gas industry by assuring the comparability of pipeline sales service and services offered by a pipelines' competitors. As of
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early 1995, the FERC had issued final orders accepting most pipelines' Order No. 636 compliance filings and had commenced a series of one-year reviews of individual pipeline implementations of Order No. 636. Numerous parties have filed petitions for court review of Order No. 636 as well as orders in individual pipeline restructuring proceedings. Upon such judicial review, these orders may be amended or reversed in whole or in part. Order No. 636 does not directly regulate the Company's activities, but has had and will have an indirect effect because of its broad scope. With Order No. 636 and pending ongoing FERC reviews of individual pipeline restructurings, subject to court review, it is difficult to predict with precision its effects. In many instances, however, Order No. 636 has substantially reduced or brought to an end interstate pipelines' traditional roles as 8 wholesalers of natural gas in favor of providing only storage and transportation services. Order No. 636 has also substantially increased competition in natural gas markets, even though there remains significant uncertainty with respect to the marketing and transportation of natural gas. In spite of this uncertainty, Order No. 636 may enhance the Company's ability to market and transport its natural gas production, although it may also subject the Company to more restrictive pipeline imbalance tolerances and greater penalties for violation of such tolerances. In December 1992, the FERC issued Order No. 547, governing the issuance of blanket marketer sales certificates to all natural gas sellers other than interstate pipelines. The order eliminates the need for natural gas producers and marketers to seek specific authorization under Section 7 of the NGA from the FERC to make sales of natural gas, such as imported natural gas and natural gas purchased from interstate pipelines. Instead, effective January 7, 1993, these natural gas sellers, by operation of the order, will be issued blanket certificates of public convenience and necessity allowing them to make jurisdictional natural gas sales for resale at negotiated rates without seeking specific FERC authorization. The FERC intends Order No. 547, in tandem with Order No. 636, to foster a competitive market for natural gas by giving natural gas purchasers access to multiple supply sources at market-driven prices. In July 1994, the FERC eliminated a regulation that had rendered virtually all sales of natural gas by pipeline affiliates, such as the Company, to be deregulated first sales. As a result, only sales by the Company of its own production now qualify for this status. All other sales of gas by the Company, such as those of gas purchased from third parties, are now jurisdictional sales subject to the Order No. 547 certificate. The Company does not anticipate this change will have any significant current adverse effects in light of the flexible terms and conditions of the existing blanket certificate. Such sales are subject to the future possibility of greater federal oversight, however, including the possibility the FERC might prospectively impose more restrictive conditions on such sales. In December 1993, the FERC issued Order No. 497-E, which modified in some respects the standards of conduct, record keeping and reporting requirements and other measures that govern relationships between interstate pipelines and their marketing affiliates. Order No. 497-E narrowed the contemporaneous disclosure standard of conduct and the reporting requirements, while at the same time possibly expanding the class of pipeline and marketing affiliate employees to whom the standards of conduct apply. In 1994, the Commission issued Order Nos. 566, 566-A and 566-B, in which it extended indefinitely its regulations (Order No. 497 regulations) governing relationships between interstate pipelines and their marketing affiliates, subject to revisions to delete an out-of-date standard and revise certain reporting and record keeping requirements. Among other matters, these new rules require pipelines to post on their electronic bulletin boards, within 24 hours of gas flow, information concerning discounted transportation provided to marketing affiliates to enable competing marketers to request comparable discounts. The rules retain existing standards, as revised by Order No. 497-E, requiring the contemporaneous disclosure to all shippers of transportation-related information provided a marketing affiliate, and prohibiting disclosure of certain information to marketing affiliates. Order No. 497 does not directly regulate the Company's activities, although a substantial portion of the Company's natural gas production is sold to or transported by interstate pipeline affiliates which are subject to the Order. The Company's activities may therefore be indirectly affected by these regulations. The Company owns, directly or indirectly, certain natural gas pipelines that it believes meet the traditional tests the FERC has used to establish a pipeline's status as a gatherer not subject to FERC jurisdiction under the NGA. State regulation of gathering facilities generally includes various safety, environmental, and in some circumstances, non-discriminatory take requirements, but does not generally entail rate regulation. Natural gas gathering may receive greater regulatory scrutiny at both the state and federal levels as the pipeline restructuring under Order No. 636 is implemented. For example, the State of Oklahoma in 1993 enacted a prohibition against discriminatory gathering rates and recently announced plans to conduct an inquiry on alleged discriminatory practices by gatherers and transporters. In certain recent cases, the FERC has asserted ancillary NGA jurisdiction over gathering activities of interstate pipelines and their affiliates. In late 1993, the FERC convened a 9 conference to consider issues relating to gathering services performed by interstate pipelines or their affiliates. Commencing in May 1994, the FERC issued a series of orders in individual cases that delineate its gathering policy as a result of the comments received. Among other matters, the FERC slightly narrowed its statutory tests for establishing gathering status and reaffirmed that, except in situations in which the gatherer acts in concert with an interstate pipeline affiliate to frustrate the FERC's transportation policies, it does not have jurisdiction over natural gas gathering facilities and services and that such facilities and services are properly regulated by state authorities. This FERC action may further encourage regulatory scrutiny of natural gas gathering by state agencies. In addition, the FERC has approved several transfers by interstate pipelines, including certain of the Company's pipeline affiliates, of
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gathering facilities to unregulated independent or affiliated gathering companies. This could increase competition among gatherers in the affected areas. Certain of the FERC's orders delineating its new gathering policy are subject to pending court appeals. The Company's gathering operations could be adversely affected should they be subject in the future to the application of state or federal regulation of rates and services. The FERC has recently announced its intention to reexamine certain of its transportation-related policies, including the appropriate manner for setting rates for new interstate pipeline construction, the manner in which interstate pipelines release transportation capacity under Order No. 636, and the use of market-based rates for interstate gas transmission. While any resulting FERC action would affect the Company only indirectly, these inquiries are intended to further enhance competition in natural gas markets. The Company's natural gas gathering operations may be or become subject to safety and operational regulations relating to the design, installation, testing, construction, operation, replacement, and management of facilities. Pipeline safety issues have recently become the subject of increasing focus in various political and administrative arenas at both the state and federal levels. For example, federal legislation addressing pipeline safety issues was considered last year, which, if enacted, would have included a federal "one-call" notification system and certain new facilities specifications applicable to certain new construction. Similar "one call" legislation has been reintroduced in the U.S. Congress. The Company cannot predict what effect, if any, the adoption of this or other additional pipeline safety legislation might have on its operations, but does not believe that any adverse effect would be material. The Company cannot predict the effect that any of the aforementioned orders or the challenges to such orders will ultimately have on the Company's operations. Additional proposals and proceedings that might affect the natural gas industry are pending before Congress, the FERC and the courts. The Company cannot predict when or whether any such proposals or proceedings may become effective. It should also be noted that the natural gas industry historically has been very heavily regulated; therefore, there is no assurance that the less regulated approach currently being pursued by the FERC will continue indefinitely. Thus, the Company cannot predict the ultimate outcome or durability of the unbundled regulatory regime mandated by Order No. 636. ENVIRONMENTAL REGULATION. Various federal, state and local laws and regulations covering the discharge of materials into the environment, or otherwise relating to the protection of the environment, may affect the Company's operations and costs as a result of their effect on natural gas and crude oil exploration, development and production operations. It is not anticipated that the Company will be required in the near future to expend amounts that are material in relation to its total exploration and development expenditure program by reason of environmental laws and regulations, but inasmuch as such laws and regulations are frequently changed, the Company is unable to predict the ultimate cost of compliance. CANADIAN REGULATION. In Canada, the petroleum industry operates under Federal, provincial and municipal legislation and regulations governing land tenure, royalties, production rates, pricing, environmental protection, exports and other matters. The price of natural gas and crude oil in Canada has been deregulated and is now determined by market conditions and negotiations between buyers and sellers. 10 Various matters relating to the transportation and export of natural gas continue to be subject to regulation by both provincial and Federal agencies; however, the North American Free Trade Agreement has reduced the risk of altering cross-border commercial transactions. Canadian governmental regulations may have a material effect on the economic parameters for engaging in oil and gas activities in Canada and may have a material effect on the advisability of investments in Canadian oil and gas drilling activities. The Company is monitoring political, regulatory and economic developments in Canada. INTERNATIONAL REGULATION. The Company's exploration and production operations outside North America are subject to various types of regulations imposed by the respective governments of the countries in which the Company's operations are conducted, and may affect the Company's operations and costs within that country. The Company currently has operations offshore Trinidad and India and exploration activities in other selected international areas. RELATIONSHIP BETWEEN THE COMPANY AND ENRON CORP. OWNERSHIP OF COMMON STOCK. Enron Corp. owns 80% of the outstanding shares of common stock of the Company and, through its ability to elect all directors of the Company, has the ability to control all matters relating to the management of the Company, including any determination with respect to acquisition or disposition of Company assets, future issuance of common stock or other securities of the Company and any dividends payable on the common stock. Enron Corp. also has the ability to control the Company's exploration, development, acquisition and operating expenditure plans. If Enron Corp. should sell a substantial amount of the common stock of the Company that it owns, such action could adversely affect the prevailing market price for the common stock and could impair the Company's ability to raise capital through the sale of its equity securities. In addition, a sale by Enron Corp. of any common stock owned by Enron Corp. would cause Enron Corp.'s ownership interest in the Company to fall below 80% with the
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result that (i) the Company would cease to be included in the consolidated federal income tax return filed by Enron Corp. and (ii) the tax allocation agreement between the Company and Enron Corp. described below would terminate. The Company has granted certain registration rights to Enron Corp. with respect to the common stock owned by Enron Corp. (See "Contractual Arrangements" below). There is no agreement between Enron Corp. and the Company that would prevent Enron Corp. from acquiring additional shares of common stock of the Company. CONTRACTUAL ARRANGEMENTS. The Company entered into a Services Agreement (the "Services Agreement") with Enron Corp. effective January 1994, pursuant to which Enron Corp. provides various services, such as maintenance of certain employee benefit plans, provision of telecommunications and computer services, lease of office space and the provision of purchasing and operating services and certain other corporate staff and support services. Such services historically have been supplied to the Company by Enron Corp., and the Services Agreement provides for the further delivery of such services substantially identical in nature and quality to those services previously provided. The Company has agreed to a fixed rate for the rental of office space and to reimburse Enron Corp. for all other direct costs incurred in rendering services to the Company under the contract and to pay Enron Corp. for allocated indirect costs incurred in rendering such services up to a maximum of $6.7 million for 1994, such cap to be increased in subsequent years for inflation and certain changes in the Company's allocation bases with any increase not to exceed 7.5% per year. The Services Agreement is for an initial term of five years through December 1998 and will continue thereafter until terminated by either party. The Company is included in the consolidated federal income tax return filed by Enron Corp. as the common parent for itself and its subsidiaries and affiliated companies, excluding any foreign subsidiaries. Consistent therewith and pursuant to a Tax Allocation Agreement (the "Tax Agreement") between the Company, the Company's subsidiaries and Enron Corp., either Enron Corp. will pay to the Company and each subsidiary an amount equal to the tax benefit realized in the Enron Corp. consolidated federal income tax return resulting from the utilization of the Company's or the 11 subsidiary's net operating losses and/or tax credits, or the Company and each subsidiary will pay to Enron Corp. an amount equal to the federal income tax computed on its separate taxable income less the tax benefits associated with any net operating losses and/or tax credits generated by the Company or the subsidiary which are utilized in the Enron Corp. consolidated return. Enron Corp. will pay the Company and each subsidiary for the tax benefits associated with their net operating losses and tax credits utilized in the Enron Corp. consolidated return, provided that a tax benefit was realized except as discussed in the following paragraph, even if such benefits could not have been used by the Company or the subsidiary on a separately filed tax return. The Company has entered into an agreement with Enron Corp. providing for the Company to be paid for all realizable benefits associated with tight gas sand federal income tax credits concurrent with tax reporting and settlement for the periods in which they are generated. (See "Other Matters Tight Gas Sand Tax Credits (Section 29) and Severance Tax Exemption"). The Tax Agreement applies to the Company and each of its subsidiaries for all years in which the Company or any of its subsidiaries are or were included in the Enron Corp. consolidated return. To the extent a state or other taxing jurisdiction requires or permits a consolidated, combined, or unitary tax return to be filed and such return includes the Company or any of its subsidiaries, the principles expressed with respect to consolidated federal income tax allocation shall apply. Pursuant to the terms of a Stock Restriction and Registration Agreement with Enron Corp., the Company has agreed that upon the request of Enron Corp. (or certain assignees), the Company will register under the Securities Act of 1933 and applicable state securities laws the sale of the Company common stock owned by Enron Corp. which Enron Corp. has requested to be registered. The Company's obligation is subject to certain limitations relating to a minimum amount of common stock required for registration, the timing of registration and other similar matters. The Company is obligated to pay all expenses incidental to such registration, excluding underwriters' discounts and commissions and certain legal fees and expenses. CONFLICTS OF INTEREST. The nature of the respective businesses of the Company and Enron Corp. and its affiliates is such as to potentially give rise to conflicts of interest between the two companies. Conflicts could arise, for example, with respect to transactions involving purchases, sales and transportation of natural gas and other business dealings between the Company and Enron Corp. and its affiliates, potential acquisitions of businesses or oil and gas properties, the issuance of additional shares of voting securities, the election of directors or the payment of dividends by the Company. Circumstances may also arise that would cause Enron Corp. to engage in the exploration for and/or development and production of natural gas and crude oil in competition with the Company. For example, opportunities might arise which would require financial resources greater than those available to the Company, which are located in areas or countries in which the Company does not intend to operate or which involve properties that the Company would be unwilling to acquire. Also, Enron Corp. might acquire a competing oil and gas business as part of a larger acquisition. In addition, as part of Enron Corp.'s strategy of securing supplies of natural gas or capital, Enron Corp. may from time to time acquire producing properties or interests in entities owning producing properties, and
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thereafter engage in exploration, development and production activities with respect to such properties or indirectly engage in such activities through such companies. Enron Corp. may also acquire interests in oil and gas properties or companies in connection with its financing activities. For example, in its financing activities Enron Corp. or an entity in which it has an interest may make loans secured by oil and gas properties or securities of oil and gas companies, may acquire production payments or may receive interests in oil and gas properties as equity components of lending tranactions. As a result of its lending activities, Enron Corp. may also acquire oil and gas properties or companies upon foreclosure of secured loans or as part of a borrower's rearrangement of its obligations. Such acquisition, exploration, development and production activities may directly or indirectly compete with the Company's business. Thus, there can be no assurances that Enron Corp. will not engage directly or indirectly through entities other than the Company, in the natural gas and crude oil exploration, development and production business in competition with the Company. 12 The Company and Enron Corp. and its affiliates have in the past entered into significant intercompany transactions and agreements incident to their respective businesses, and the Company and Enron Corp. and its affiliates may be expected to enter into material transactions and agreements from time to time in the future. Such transactions and agreements have related to, among other things, the purchase and sale of natural gas, the financing of exploration and development efforts by the Company, and the provision of certain corporate services. (See "Marketing" and the Consolidated Financial Statements and notes thereto). The Company believes that its existing transactions and agreements with Enron Corp. and its affiliates have been at least as favorable to the Company as could be obtained from third parties, and the Company intends that the terms of any future transactions and agreements between the Company and Enron Corp. and its affiliates will be at least as favorable to the Company as could be obtained from third parties. OTHER MATTERS ENERGY PRICES. Since the Company is primarily a natural gas company, it is more significantly impacted by changes in natural gas prices than in the prices for crude oil, condensate and natural gas liquids. During recent periods, domestic natural gas has been priced significantly below parity with crude oil, condensate and natural gas liquids based on the energy equivalency of, and differences in transportation and processing costs associated with, the respective products. This imbalance in parity has been primarily driven by, among other things, a supply of domestic natural gas volumes in excess of demand requirements. The Company is unable to predict when this supply imbalance may resolve due to the significant impacts of factors such as general economic conditions, technology developments, weather and other international energy supplies over which the Company has no control. Average North America wellhead natural gas prices have fluctuated, at times rather dramatically, during the last three years. While these fluctuations resulted in increases in average wellhead natural gas prices realized by the Company of 15% from 1991 to 1992 and 22% from 1992 to 1993, the average North America natural gas price received by the Company decreased 13% from 1993 to 1994. Wellhead natural gas volumes from Trinidad are sold at prices that are based on a fixed schedule of periodic escalations. While natural gas deliveries in India are not expected to commence until 1996, the price of such deliveries, when initiated, will be indexed to a basket of world market fuel oil quotations structured to include floor and ceiling limits. Due to the many uncertainties associated with the world political environment, the availabilities of other world wide energy supplies and the relative competitive relationships of the various energy sources in the view of the consumers, the Company is unable to predict what changes may occur in natural gas prices in the future. Substantially all of the Company's wellhead crude oil and condensate is sold under short-term contracts at market responsive prices. Crude oil and condensate prices also have fluctuated, at times rather dramatically, during the last three years. These fluctuations have resulted in an overall decline in average wellhead crude and condensate prices realized by the Company of 5% from 1991 to 1992, 9% from 1992 to 1993 and 5% from 1993 to 1994. Due to the many uncertainties associated with the world political environment, the availabilities of other world wide energy supplies and the relative competitive relationships of the various energy sources in the view of the consumers, the Company is unable to predict what changes may occur in crude oil and condensate prices in the future. To mitigate the risk of market price fluctuations, the Company engages in certain price risk management activities to hedge commodity prices associated with the sales and purchases of natural gas and crude oil. TIGHT GAS SAND TAX CREDITS (SECTION 29) AND SEVERANCE TAX EXEMPTION. Federal United States tax law provides a tax credit for production of certain fuels produced from nonconventional sources (including natural gas produced from tight formations), subject to a number of limitations. Fuels qualifying for the credit must be produced from a well drilled or a facility placed in service before January 1, 1993, and must be sold before January 1, 2003. The credit, which is currently approximately $.52 per MMBtu of natural gas, is computed by reference to the price of crude oil, and is phased out as the price of crude oil exceeds $23.50 in 1980 dollars (adjusted for inflation) with complete phaseout if such price exceeds $29.50 in 1980 dollars 13

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(similarly adjusted). Under this formula, the commencement of phaseout would be triggered if the average price for crude oil rose above approximately $44 per barrel in current dollars. Significant benefits from the tax credit are accruing to the Company since a portion (and in some cases a substantial portion) of the Company's natural gas production from new wells drilled after November 5, 1990, and before January 1, 1993, on the Company's leases in several of the Company's significant producing areas qualify for this tax credit. Certain natural gas production from wells spudded or completed after May 24, 1989 and before September 1, 1996 in tight formations in Texas qualifies for a ten-year exemption, ending August 31, 2001, from Texas severance taxes, subject to certain limitations. OTHER. All of the Company's oil and gas activities are subject to the risks normally incident to the exploration for and development and production of natural gas and crude oil, including blowouts, cratering and fires, each of which could result in damage to life and property. Offshore operations are subject to usual marine perils, including hurricanes and other adverse weather conditions, and governmental regulations as well as interruption or termination by governmental authorities based on environmental and other considerations. In accordance with customary industry practices, insurance is maintained by the Company against some, but not all, of the risks. Losses and liabilities arising from such events could reduce revenues and increase costs to the Company to the extent not covered by insurance. The Company's operations outside of North America are subject to certain risks, including expropriation of assets, risks of increases in taxes and government royalties, renegotiation of contracts with foreign governments, political instability, payment delays, limits on allowable levels of production and current exchange and repatriation losses, as well as changes in laws, regulations and policies governing operations of foreign companies generally. CURRENT EXECUTIVE OFFICERS OF THE REGISTRANT The current executive officers of the Company and their names and ages are as follows:

NAME ---Forrest E. Hoglund................. and Joe Michael McKinney............... Mark G. Papa....................... George E. Uthlaut.................. Walter C. Wilson................... Ben B. Boyd........................ Dennis M. Ulak.....................

AGE --61

POSITION -------Chairman of the Board, President Chief Executive Officer; Director President-International Operations President-North American Operations Senior Vice President-Operations Senior Vice President and Chief Financial Officer Vice President and Controller Vice President and General Counsel

55 48 61 52 53 41

Forrest E. Hoglund joined the Company as Chairman of the Board, Chief Executive Officer and Director in September 1987. Since May 1990, he has also served as President of the Company. Mr. Hoglund was a director of USX Corporation from February 1986 until September 1987. He joined Texas Oil & Gas Corp. ("TXO") in 1977 as president, was named Chief Operating Officer in 1979, Chief Executive Officer in 1982, and served TXO in those capacities until September 1987. Mr. Hoglund is also a director of Texas Commerce Bancshares, Inc. Joe Michael McKinney has been President-International Operations since February 1994 with responsibilities for all exploration, drilling, production and engineering activities for the Company's international ventures outside North America. Mr. McKinney joined Enron Oil & Gas International, Inc., a wholly-owned subsidiary of the Company, in December 1991 as Senior Vice President of Operations and was elected President and Chief Operating Officer of Enron Oil & Gas International, Inc. in April 1993, a capacity in which he continues to serve. Prior to joining the Company, Mr. McKinney held operations management positions with Union Texas Petroleum Company, The Superior Oil Company and Exxon Company, USA. 14 Mark G. Papa has been President-North American Operations since February 1994. From May 1986 through January 1994, Mr. Papa served as Senior Vice President-Operations. Mr. Papa joined Belco Petroleum Corporation, a predecessor of the Company, in 1981 as Division Production Coordinator and served as Senior Vice President-Drilling and Production, BelNorth Petroleum Corporation from May 1984 until May 1986.
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George E. Uthlaut has been Senior Vice President-Operations of the Company since November 1987. Mr. Uthlaut was previously employed by Exxon Corporation (and affiliates) for 29 years in a number of managerial and technical positions. His last position was Headquarters Operations Manager, Production Department, Exxon Company, USA. Walter C. Wilson has been Senior Vice President and Chief Financial Officer since May 1991. Mr. Wilson joined the Company in November 1987 as Vice President and Controller and was named Senior Vice President-Finance in October 1988. Prior to joining the Company Mr. Wilson held financial management positions with Exxon Company, USA for 16 years and The Superior Oil Company for 4 years. Ben B. Boyd has been Vice President and Controller since March 1991. Mr. Boyd joined the Company in March 1989 as Director of Accounting and was named Controller in May 1990. Prior to joining the Company, Mr. Boyd held financial management positions with DeNovo Oil & Gas, Inc., Scurlock Oil Company and Coopers & Lybrand. Dennis M. Ulak has been Vice President and General Counsel since March 1992. Mr. Ulak joined the Company in March 1987 as Senior Counsel and was named Assistant General Counsel in August 1990. Prior to joining the Company, Mr. Ulak held various legal positions with Enron Corp. and Northern Natural Gas Company. ITEM 2. PROPERTIES OIL AND GAS EXPLORATION AND PRODUCTION PROPERTIES AND RESERVES RESERVE INFORMATION. For estimates of the Company's net proved and proved developed reserves of natural gas and liquids, including crude oil, condensate and natural gas liquids, see "Supplemental Information to Consolidated Financial Statements." There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures, including many factors beyond the control of the producer. The reserve data set forth in Supplemental Information to Consolidated Financial Statements represent only estimates. Reserve engineering is a subjective process of estimating underground accumulations of natural gas and liquids, including crude oil, condensate and natural gas liquids, that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the amount and quality of available data and of engineering and geological interpretation and judgment. As a result, estimates of different engineers normally vary. In addition, results of drilling, testing and production subsequent to the date of an estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities ultimately recovered. The meaningfulness of such estimates is highly dependent upon the accuracy of the assumptions upon which they were based. In general, the volume of production from oil and gas properties owned by the Company declines as reserves are depleted. Except to the extent the Company acquires additional properties containing proved reserves or conducts successful exploration and development activities, or both, the proved reserves of the Company will decline as reserves are produced. Volumes generated from future activities of the Company are therefore highly dependent upon the level of success in acquiring or finding additional reserves and the costs incurred in doing so. The Company's estimates of reserves filed with other federal agencies agree with the information set forth in Supplemental Information to Consolidated Financial Statements. 15 ACREAGE. The following table summarizes the Company's developed and undeveloped acreage at December 31, 1994. Excluded is acreage in which the Company's interest is limited to owned royalty, overriding royalty and other similar interests.
DEVELOPED -----------------------GROSS NET ------------ ---------United States California....................... Texas............................ Federal Offshore................. Wyoming.......................... Oklahoma......................... Utah............................. New Mexico....................... Kansas........................... Michigan......................... Colorado......................... Mississippi...................... Montana.......................... Other............................ 1,142 345,558 195,009 160,364 104,844 59,620 81,416 12,215 11 10,111 1,942 1,301 4,894 -----------935 265,039 94,960 113,540 59,502 48,085 36,852 11,482 10 1,490 1,853 1,169 2,953 ---------UNDEVELOPED ---------------------------GROSS NET ------------- ------------683,350 234,057 424,823 312,323 69,664 36,525 67,460 35,892 34,810 34,037 10,100 6,689 2,926 ------------633,424 218,862 388,236 234,423 62,434 31,187 35,563 33,729 34,810 16,674 9,262 4,961 2,151 ------------TOTAL ---------------------------GROSS NET ------------- ------------684,492 579,615 619,832 472,687 174,508 96,145 148,876 48,107 34,821 44,148 12,042 7,990 7,820 ------------634,359 483,901 483,196 347,963 121,936 79,272 72,415 45,211 34,820 18,164 11,115 6,130 5,104 -------------

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Total........................ Canada Alberta.......................... Saskatchewan..................... Manitoba......................... British Columbia................. Total Canada................. Other International Australia........................ China............................ Russia........................... France........................... India Trinidad......................... United Kingdom................... Total Other International.... Total....................

978,427 330,932 158,870 11,531 656 -----------501,989 60,000 4,200 -----------64,200 -----------1,544,616 ============

637,870 152,360 145,891 9,581 164 ---------307,996 18,000 3,990 ---------21,990 ---------967,856 ==========

1,952,656 228,043 207,660 1,820 ------------437,523 9,600,000 1,700,000 1,425,000 1,015,000 602,207 74,851 173,600 ------------14,590,658 ------------16,980,837 =============

1,705,716 148,731 202,999 1,820 ------------353,550 9,600,000 850,000 712,500 507,500 180,662 71,108 86,800 ------------12,008,570 ------------14,067,836 =============

2,931,083 558,975 366,530 13,351 656 ------------939,512 9,600,000 1,700,000 1,425,000 1,015,000 662,207 79,051 173,600 ------------14,654,858 ------------18,525,453 =============

2,343,586 301,091 348,890 11,401 164 ------------661,546 9,600,000 850,000 712,500 507,500 198,662 75,098 86,800 ------------12,030,560 ------------15,035,692 =============

PRODUCING WELL SUMMARY. The following table reflects the Company's ownership in gas wells in 390 fields and oil wells in 87 fields located in Texas, offshore Texas and Louisiana in the Gulf of Mexico, Oklahoma, New Mexico, Utah, Wyoming, and various other states, Canada, Trinidad and India at December 31, 1994. Gross oil and gas wells include 188 with multiple completions.

PRODUCTIVE WELLS --------------------GROSS ----------Gas.................................. 3,246 Oil.................................. 564 -----Total............................ 3,810 ====== 4,501 933 -----5,434 ====== NET

16 DRILLING AND ACQUISITION ACTIVITIES. During the years ended December 31, 1994, 1993 and 1992 the Company spent approximately $493.9, $430.1 and $395.7 million, respectively, for exploratory and development drilling and acquisition of leases and producing properties. The Company drilled, participated in the drilling of or acquired wells as set out in the table below for the periods indicated:
YEAR ENDED DECEMBER 31, ------------------------------------------------------------1994 1993 1992 ------------------------------------------------GROSS NET GROSS NET GROSS NET ------------------------------Development Wells Completed Domestic Gas.......................... Oil.......................... Dry..........................

308 34 41

244.23 29.57 32.15 2003.

352 45 59

279.00 19.01 46.83

484 19 64

399.06 10.80 56.12

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Total...................... International Gas.......................... Oil.......................... Dry.......................... Total...................... Total Development................ Exploratory Wells Completed Domestic Gas.......................... Oil.......................... Dry.......................... Total...................... International Gas.......................... Oil.......................... Dry.......................... Total...................... Total Exploratory................ Total...................... Wells in Progress at end of period... Total...................... Wells Acquired Gas.............................. 597.29* Oil.............................. 25.80* Total......................

----383 250 11 13 ----274 ----657 -----

------305.95 190.30 5.10 11.50 ------206.90 ------512.85 -------

----456 227 4 11 ----242 ----698 -----

------344.84 190.10 3.50 7.60 ------201.20 ------546.04 -------

----567 2 13 5 ----20 ----587 -----

------465.98 2.00 11.70 4.05 ------17.75 ------483.73 -------

13 3 23 ----39 9 1 14 ----24 ----63 ----720 45 ----765 ===== 41 60 ----101 =====

9.80 2.57 18.17 ------30.54 7.90 .50 12.50 ------20.90 ------51.44 ------564.29 28.79 ------593.08 ======= 40.90* 38.99* ------79.89 =======

14 3 32 ----49 14 2 10 ----26 ----75 ----773 82 ----855 ===== 44 ----44 =====

10.03 2.50 22.08 ------34.61 11.40 .90 7.35 ------19.65 ------54.26 ------600.30 61.09 ------661.39 ======= 26.44* 12.80* ------39.24 =======

11 1 16 ----28 7 4 4 ----15 ----43 ----630 82 ----712 ===== 641 28 ----669 =====

8.72 .40 13.42 ------22.54 5.75 3.69 2.85 ------12.29 ------34.83 ------518.56 60.75 ------579.31 =======

------623.09 =======

- --------* Includes the acquisition of additional interests in certain wells in which the Company previously held an interest.

All of the Company's drilling activities are conducted on a contract basis with independent drilling contractors. The Company owns no drilling equipment. 17 ITEM 3. LEGAL PROCEEDINGS The Company and its subsidiaries and related companies are named defendants in numerous lawsuits and named parties in numerous governmental proceedings arising in the ordinary course of business. While the outcome of lawsuits or other proceedings against the Company cannot be predicted with certainty, management does not expect these matters to have a material adverse effect on the financial condition or results of operations of the Company. TransAmerican Natural Gas Corporation ("TransAmerican") has filed a petition against the Company and Enron Corp. alleging breach of contract, tortious interference with contract, misappropriation of trade secrets and violation of state antitrust laws. The petition, as amended, seeks actual damages of $100 million plus exemplary damages of $300 million. The Company has answered the petition and is actively defending the matter; in addition, the Company has filed counterclaims against TransAmerican and a third-party claim against its sole shareholder, John R. Stanley, alleging fraud, negligent misrepresentation and breach of state antitrust laws. On April 6, 1994, Enron Corp. was granted summary judgement, wherein the court ordered that TransAmerican can take nothing on its claims against Enron Corp. Trial, which was set most recently for September 12, 1994 has been continued, and there is no current setting. Although no assurances can be given, the Company believes that the claims made by TransAmerican are totally without merit, that the ultimate resolution of the matter will not have a materially
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adverse effect on its financial condition or results of operations, and that such ultimate resolution could result in a recovery to the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of 1994. 18 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The following table sets forth, for the periods indicated, the high and low sale prices per share for the common stock of the Company, as reported on the New York Stock Exchange Composite Tape, and the amount of cash dividends paid per share. The 1992, 1993, and First Quarter and Second Quarter 1994 sales prices and cash dividends per share have been restated to reflect the two-for-one stock split declared in May 1994 by the Board of Directors. Shares were issued on June 15, 1994 to shareholders of record as of May 31, 1994.

PRICE RANGE -------------------HIGH LOW DIVIDENDS ----------------1992 First Quarter.................... Second Quarter................... Third Quarter.................... Fourth Quarter................... 1993 First Quarter.................... Second Quarter................... Third Quarter.................... Fourth Quarter................... 1994 First Quarter.................... Second Quarter................... Third Quarter.................... Fourth Quarter................... ---------

CASH

10.94 13.63 17.94 17.19 20.31 22.50 26.81 27.00 23.75 24.63 23.00 22.75

8.31 10.25 12.69 13.75 13.38 17.88 19.88 17.06 19.31 22.38 18.50 17.38

.025 .025 .025 .025 .030 .030 .030 .030 .030 .030 .030 .030

As of March 2, 1995, there were approximately 291 record holders of the Company's common stock, including individual participants in security position listings. There are an estimated 5,600 beneficial owners of the Company's common stock, including shares held in street name. Following the initial public offering and sale of its common stock in October 1989, the Company paid quarterly dividends of $0.025 per share beginning with an initial dividend paid in January 1990 with respect to the fourth quarter of 1989. Beginning in January 1993 with respect to the fourth quarter of 1992, the Company has paid quarterly dividends of $0.03 per share. The Company currently intends to continue to pay quarterly cash dividends on its outstanding shares of common stock. However, the determination of the amount of future cash dividends, if any, to be declared and paid will depend upon, among other things, the financial condition, funds from operations, level of exploration and development expenditure opportunities and future business prospects of the Company. 19 ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------1994 1993 1992 1991 1990 ------------- ------------- ------------- ------------- ------------(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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STATEMENT OF INCOME DATA: Net operating revenues............... Operating expenses Lease and well................... Exploration...................... Dry hole......................... Impairment of unproved oil and gas properties................. Depreciation, depletion and amortization................... General and administrative....... Taxes other than income.......... Total........................ Operating income..................... Other income (expense)............... Interest expense (net of interest capitalized)....................... Income before income taxes........... Net income........................... Earnings per share of common

625,823 60,384 41,811 17,197 24,936

581,020 59,344 36,921 18,355 20,467

459,026 49,406 33,278 10,764 15,136

402,588 49,922 31,470 14,698 12,791

403,137 43,806 35,031 12,986 20,571

242,182 51,418 28,254 ------------466,182 ------------159,641 2,783 8,489 ------------153,935 ------------$ 147,998 ============= =============

249,704 45,274 35,396 ------------465,461 ------------115,559 6,635 9,921 ------------112,273 ------------$ 138,025 ============= ============= =============

179,839 160,885 155,877 36,648 36,216 38,254 28,346 18,222 22,966 ------------- ------------- ------------353,417 324,204 329,491 ------------- ------------- ------------105,609 78,384 73,646 (3,476) (3,215) (2,153) 22,289 ------------79,844 ------------$ 97,580 ============= ============= ============= 29,500 ------------45,669 ------------$ 47,916 ============= ============= ============= 36,879 ------------34,614 ------------$ 45,468 ============= ============= =============

Average number of common =============

AT DECEMBER 31, ------------------------------------------------------------------------1994 1993 1992 1991 1990 ------------- ------------- ------------- ------------- ------------(IN THOUSANDS) BALANCE SHEET DATA: Oil and gas properties - net......... $ 1,684,811 $ 1,546,045 $ 1,468,011 Total assets......................... 1,861,867 1,811,162 1,731,012 Long-term debt - --------and $17 million in 1994, 1993, 1992 and 1991, respectively, relating to tight gas sand federal income tax credits and $7 million and $25 million in 1991 and 1990, respectively, associated with the utilization of a net operating loss carryforward. estimated state income taxes and certain franchise taxes, a portion of which is treated as income tax under Statement of Financial Accounting Standards (SFAS) No. 109 - "Accounting for Income Taxes", and a $5 million benefit from the reduction of the Company's deferred federal income tax liability resulting from a reevaluation of deferred tax requirements. deferred federal income tax liability resulting from a reevaluation of deferred tax requirements partially offset by an approximate $7 million predominantly non-cash charge primarily to adjust the Company's accumulated deferred federal income tax liability for the increase in the corporate federal income tax rate from 34% to 35%. 20 Company's common stock to be effected as a non-taxable dividend of one share for each share outstanding. Shares were issued on June 15, 1994 to shareholders of record as of May 31, 1994. All per share amounts presented herein are reflected on a post-split basis. million shares of common stock resulting in aggregate net proceeds to the Company of approximately $112 million used primarily to repay long-term debt. In September 1992, the Company completed the sale of a volumetric production payment, resulting in net proceeds of approximately $327 million used to repay long-term debt and for other general corporate purposes. $ 1,339,666 1,455,608 $ 1,305,136 1,417,939

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following review of operations for each of the three years in the period ended December 31, 1994 should be read in conjunction with the consolidated financial statements of the Company and notes thereto beginning with page F-1.
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RESULTS OF OPERATIONS NET OPERATING REVENUES. Volume and price statistics for the specified years were as follows: YEAR ENDED DECEMBER 31, 1994 ----------------Wellhead Volumes Natural Gas (MMcf per day)(1).... 564 Crude Oil and Condensate (MBbl per day)....................... 8.5 Natural Gas Liquids (MBbl per day)........................... 0.7 Wellhead Average Prices Natural Gas ($/Mcf)(2)........... 1.58 Crude Oil and Condensate ($/Bbl)........................ 17.90 Natural Gas Liquids ($/Bbl)...... 10.69 Other Natural Gas Marketing Volumes (MMcf per day)(1)........ 255 Average Gross Revenue ($/Mcf)(3)..................... 2.62 Associated Costs ($/Mcf) (4)(5)................. 1.99 --------Margin ($/Mcf)................... 0.63 ========= - --------1993 --------1992

749

709

12.6

8.9

0.7

0.6

1.62

1.92

15.62 9.90

16.37 11.12

324

293

2.38

2.57

2.06 --------$ 0.32

2.32 --------$ 0.25 $

=========

=========

(1) Includes 48 MMcf per day in 1994, 81 MMcf per day in 1993 and 28 MMcf per day in 1992 delivered under the terms of volumetric production payment and exchange agreements effective October 1, 1992, as amended. (2) Includes an average equivalent wellhead value of $1.27 per Mcf in 1994, $1.57 per Mcf in 1993 and $1.70 per Mcf in 1992 for the volumes detailed in note (1), net of transportation costs. (3) Includes per unit deferred revenue amortization for the volumes detailed in note (1) at an equivalent of $2.46 per Mcf ($2.36 per million British thermal units) in 1994, $2.50 per Mcf ($2.40 per million British thermal units) in 1993 and $2.51 per Mcf ($2.40 per million British thermal units) in 1992. (4) Includes an average value of $1.92 per Mcf in 1994, $2.20 per Mcf in 1993 and $2.37 per Mcf in 1992, including average equivalent wellhead value, any applicable transportation costs and exchange differentials, for the volumes detailed in note (1). (5) Including transportation and exchange differentials.
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21 During 1994, net operating revenues increased to $626 million, up $45 million as compared to 1993. Average wellhead natural gas volumes increased approximately 6% compared to 1993 primarily reflecting the effects of development activities in Trinidad and Canada partially offset by voluntary curtailments of production in the United States in 1994. The volume reductions in the United States as a result of voluntary curtailments were more than offset by the new natural gas deliveries from the Kiskadee field offshore Trinidad and increased deliveries in Canada. The increase in wellhead natural gas volumes added $28 million to net operating revenues. Average wellhead natural gas prices were down significantly from 1993 reducing net operating revenues by approximately $83 million. This 16% reduction in average wellhead natural gas prices reflects the overall decline in the United States natural gas markets during the last half of 1994 and increased volumes from Trinidad sold under a long-term contract at a price considerably below North American spot market prices. A 42% increase in wellhead crude oil and condensate volumes over 1993 added $22 million to net operating revenues primarily reflecting development activities in Trinidad and increased production in the United States. A 5% decrease in wellhead crude oil and condensate average prices decreased net operating revenues by approximately $3 million. Other marketing activities associated with sales and purchases of natural gas, natural gas and crude oil price swap transactions, other commodity price hedging of natural gas and crude oil prices utilizing NYMEX-related commodity market transactions, and margins relating to the volumetric production payment added $50 million to net operating revenues during 1994. This increase of $42 million from the same period in 1993 primarily results from a gain of $11 million on natural gas commodity price hedging activities utilizing NYMEX-related commodity market transactions in 1994 versus an $18 million loss during 1993 and increased margins associated with other natural gas marketing activities. The average associated costs of natural gas marketing, price swap and volumetric production payment transactions, including, where appropriate, average wellhead value, transportation costs and exchange differentials, decreased $.26 per Mcf. The average price received for these transactions decreased $.19 per Mcf. Related other natural gas marketing volumes increased 10%. The impact of these other marketing activities, a substantial portion of which serve as hedges of commodity price risks for a portion of wellhead deliveries, are more than offset by increases or reductions in revenues associated with market responsive prices for wellhead deliveries. (See Note 2 to Consolidated Financial Statements.) Gains on sales of selected oil and gas reserves and related assets were $54 million in 1994 as compared to $13 million in 1993. While the quantity of equivalent reserves sold in 1994 was slightly less than 1993, higher average proceeds received per equivalent unit in 1994 as compared to 1993 primarily contributed to the increased gain recognition. In continuing its strategy of fully utilizing its assets in optimizing profitability, cash flow and return on investments, the Company expects to continue the sale of similar properties from time to time. During 1993, net operating revenues increased to $581 million, up $122 million as compared to 1992. Average wellhead natural gas volumes increased approximately 26% compared to 1992 primarily reflecting the effects of exploration and development activities relating to tight gas sand formations. Wellhead natural gas delivered volumes were curtailed less during portions of 1993 than for the comparable periods in 1992 due to the significant increases realized in wellhead natural gas prices in 1993. Average wellhead natural gas prices were up approximately 22% in 1993 over those received in 1992, adding approximately $87 million to net operating revenues. Increases in wellhead natural gas volumes in 1993 added $83 million to net operating revenues compared to 1992. Average wellhead crude oil and condensate prices in 1993 were down 9% compared to 1992, reducing net operating revenues by $5 million. Increases in wellhead crude oil and condensate volumes in 1993 added approximately $2 million to net operating revenues compared to 1992. 22 Other marketing activities associated with sales and purchases of natural gas, natural gas price swap transactions, other commodity price hedging of natural gas and crude oil and condensate prices utilizing NYMEX-related commodity market transactions, and margins relating to the volumetric production payment added $8 million to net operating revenues during 1993. This decrease of $54 million from 1992 primarily results from shrinking margins associated with sales under long-term fixed price contracts and amortization of volumetric production payment deferred revenue due to increases in market responsive natural gas prices associated with volumes supplying these dispositions and losses on natural gas commodity price hedging activities utilizing NYMEX-related commodity market transactions. The average associated costs of natural gas marketing, price swap and volumetric production payment transactions, including, where appropriate, average wellhead value, transportation costs and exchange differentials, increased $.33 per Mcf. Related other natural gas marketing volumes increased 15%. OPERATING EXPENSES. During 1994, total operating expenses of $466 million were approximately $1 million higher than the $465 million incurred in 1993. Lease and well expenses of $60 million were approximately $1 million higher than last year primarily due to
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increased expenses related to new operations offshore Trinidad partially offset by cost reductions in North America. Exploration expenses of $42 million increased $5 million from the previous year primarily due to an increased level of exploration activities. Impairment of unproved oil and gas properties increased $4 million from 1993 primarily due to impairments associated with certain offshore Gulf of Mexico leases. Depreciation, depletion and amortization ("DD&A") expense decreased from $250 million in 1993 to $242 million in 1994 reflecting a $.09 per Mcfe decrease in the average DD&A rate to $.80 per Mcfe. The rate decrease is primarily due to increased production from offshore Trinidad at an average DD&A rate significantly less than the North American operations DD&A rate and a $.03 per Mcfe reduction in the North American operations DD&A rate. General and administrative expenses increased $6 million to $51 million primarily due to overall higher costs associated with expanded international and domestic operations. Taxes other than income decreased approximately $7 million from 1993 primarily due to lower taxable United States wellhead volumes and prices and reductions included in 1994 related to revisions of certain prior year production taxes. Included in 1994 and 1993 are benefits associated with reductions in state franchise taxes of $4 million and $3 million, respectively. The Company continues to benefit from certain state severance tax exemptions allowed on high cost natural gas volumes. Total per unit operating costs for lease and well expense, DD&A, general and administrative expense, interest expense, and taxes other than income decreased $.14 per Mcfe, averaging $1.29 per Mcfe during 1994 compared to $1.43 per Mcfe for 1993. The decrease was primarily due to per unit reductions in DD&A and taxes other than income as discussed above. During 1993, total operating expenses of $465 million were $112 million higher than the $353 million incurred in 1992. Lease and well expenses increased approximately $10 million primarily due to expanded domestic and international operations. Exploration expenses increased approximately $4 million primarily due to increased exploration activities in North America. An unsuccessful Gulf of Mexico well added nearly $4 million to dry hole expenses and a related $3 million to lease impairments in 1993. Dry hole expenses also reflect the impact of increased drilling activity outside North America. DD&A expense increased $70 million to $250 million reflecting an increase in production volumes and an average DD&A rate increase from $.79 per Mcfe in 1992 to $.89 per Mcfe for 1993. The DD&A rate increase is primarily due, as expected, to factors associated with the tight gas sands drilling program which costs are being more than offset by benefits realized in the form of tight gas sand federal income tax credits and certain state severance tax exemptions. General and administrative expenses increased almost $9 million to $45 million primarily reflecting cost reductions included in 1992 related to changes associated with certain employee compensation plans and overall higher costs in 1993 due to an expansion of domestic and international operations. Taxes other than income increased $7 million primarily due to increased production volumes and revenues in 1993, partially offset by continuing benefits associated with certain state severance tax 23 exemptions allowed on high cost natural gas volumes and a $3 million reduction of state franchise taxes resulting from refunds of prior year payments received in 1993. Total per unit operating costs for lease and well expense, DD&A, general and administrative expense, interest expense, and taxes other than income increased $.03 per Mcfe, averaging $1.43 per Mcfe during 1993 compared to $1.40 per Mcfe for 1992. The total increase was associated with DD&A expense which was up $.10 per Mcfe as noted above being partially offset by a reduction of $.07 Mcfe in all other costs. OTHER INCOME. Other income for 1993 includes $4 million in interest income associated with the investment of funds temporarily surplus to the Company (See Note 4 to Consolidated Financial Statements) and $4 million associated with settlements related to the termination of certain long-term natural gas contracts. INTEREST EXPENSE. Net interest expense in 1994 decreased approximately $1 million to $8 million as compared to 1993 primarily due to favorable interest rates on new financing acquired by a subsidiary of the Company in Trinidad and the retirement of higher interest rate debt. The estimated fair value of outstanding interest rate swap agreements at December 31, 1994 was a negative $0.5 million based on termination values obtained from third parties. (See Note 13 to Consolidated Financial Statements). Net interest expense decreased $12 million, or 55%, to $10 million in 1993 as compared to 1992 reflecting the repayment of a substantial portion of the Company's long-term debt in 1992 with proceeds from the sale of common stock in August 1992 and the sale of a volumetric production payment in September 1992. The estimated fair value of outstanding interest rate swap agreements at December 31, 1993 was a negative $3.3 million based upon termination values obtained from third parties. INCOME TAXES. Income tax provision in 1994 includes a benefit of approximately $36 million associated with tight gas sand federal income tax credit utilization, a benefit of approximately $8 million related to reduced estimated state income taxes and a portion of certain franchise taxes which is treated as income tax under SFAS No. 109, and a $5 million benefit from the reduction of the Company's deferred federal income tax liability resulting from a reevaluation of deferred tax requirements. Income tax benefit in 1993 includes a benefit of approximately $65 million associated with tight gas sand federal income tax credit utilization, an approximate $7 million predominantly one-time non-cash charge recorded in the third quarter of 1993 primarily to adjust the Company's accumulated deferred federal income tax liability for the increase in the corporate federal income tax rate from 34% to
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35% and a $12 million benefit from the reduction of the Company's deferred federal income tax liability resulting from a reevaluation of deferred tax requirements. CAPITAL RESOURCES AND LIQUIDITY CASH FLOW. The primary sources of cash for the Company during the three-year period ended December 31, 1994 included funds generated from operations, the sale of common stock, the sale of a volumetric production payment, proceeds from the sale of selected oil and gas reserves and related assets and the issuance of new debt. Primary cash outflows included funds used in operations, exploration and development expenditures, dividends, and the repayment of debt. Discretionary cash flow, a frequently used measure of performance for exploration and production companies, is generally derived by adjusting net income to eliminate the effects of depreciation, depletion and amortization, impairment of unproved oil and gas properties, deferred taxes, gains on sales of oil and gas reserves and related assets, certain other miscellaneous non-cash amounts, except for amortization of deferred revenue, and exploration and dry hole expenses. However, based on the continuing practice of the Company of selling selected oil and gas reserves and related assets in furtherance of its strategy of fully utilizing its assets in optimizing profitability, cash flow and return on investments, it believes that net proceeds from these transactions should also be considered as available discretionary cash flow and is so presenting those values for 1994. Values for prior years have also been reclassified for consistency. In the case of the Company, the elimination of revenues 24 associated with the amortization of deferred revenues created by the sale by the Company of a volumetric production payment is reflected in investing cash flows. The Company generated discretionary cash flow of approximately $514 million in 1994, $521 million in 1993 and $346 million in 1992. The 1993 amount includes $50 million associated with a federal income tax refund resulting from the settlement of an audit of federal income taxes paid in prior years. Net operating cash flows were approximately $426 million in 1994, $480 million in 1993 and $306 million in 1992. Decreased 1994 net operating cash flows were primarily due to proceeds in 1993 from the receipt of a refund on settlement of an audit of federal income taxes discussed above. Increased 1993 net operating cash flows were primarily due to increased net operating revenues and a decrease in provision for current taxes resulting from both increased tight gas sand federal income tax credit utilization and proceeds from the receipt of a refund on settlement of an audit of federal income taxes paid in prior years. In accordance with the requirements of SFAS No. 95 - "Statement of Cash Flows", net proceeds from the sale of selected oil and gas reserves and related assets are not included in the determination of cash from operations. SALE OF SELECTED OIL AND GAS RESERVES AND RELATED ASSETS. During 1994, the Company received proceeds of $91 million from the sale of selected oil and gas reserves and related assets compared to $42 million received in 1993. While the quantity of equivalent reserves sold in 1994 was slightly less than 1993, higher average proceeds received per equivalent unit of reserves sold in 1994 as compared to 1993 resulted in significantly higher 1994 proceeds. Taxable gains resulting from the 1994 sales generated income taxes of $20 million, leaving net proceeds of $71 million. Taxable gains resulting from the 1993 sales generated federal income taxes of $8 million, leaving net proceeds of $34 million. SALE OF VOLUMETRIC PRODUCTION PAYMENT. In September 1992, the Company sold a volumetric production payment for $326.8 million to a limited partnership. (See "Business - Marketing - Other Marketing" and Note 5 to Consolidated Financial Statements). Under the terms of the production payment agreements, the Company conveyed a real property interest in approximately 124 Bcfe (136 trillion British thermal units) of certain natural gas and other hydrocarbons to the purchaser. Effective October 1, 1993, the agreements were amended providing for the extension of the original term of the volumetric production payment through March 31, 1999 and including a revised schedule of daily quantities of hydrocarbons to be delivered which is approximately one-half of the original schedule. The revised schedule will total approximately 89.1 Bcfe (97.8 trillion British thermal units) versus approximately 87.9 Bcfe (96.4 trillion British thermal units) remaining to be delivered under the original agreement. Daily quantities of hydrocarbons no longer required to be delivered under the revised schedule during the period from October 1, 1993 through June 30, 1996 are available for sale by the Company. The Company retains responsibility for its working interest share of the cost of operations. In accordance with generally accepted accounting principles, the Company accounted for the proceeds received in the transaction as deferred revenue which is being amortized into revenue and income as natural gas and other hydrocarbons are produced and delivered to the purchaser during the term, as revised, of the volumetric production payment thereby matching those revenues with the depreciation of asset values which remained on the balance sheet following the sale and the operating expenses incurred for which the Company retained responsibility. The Company expects the above transaction, as amended, to have minimal impact on future earnings. However, cash made available by the sale of the volumetric production payment has provided considerable financial flexibility for the pursuit of investment alternatives. 25 EXPLORATION AND DEVELOPMENT EXPENDITURES. The table below sets out components of actual exploration and development expenditures for the years ended December 31, 1994, 1993 and 1992, along with those budgeted for the year 1995.
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EXPENDITURE CATEGORY - --------------------------

ACTUAL ------------------------------BUDGETED 1994 1993 1992 1995 --------- --------- ---------

(IN MILLIONS) Capital Drilling and Facilities......... Leasehold Acquisitions.......... Producing Property Acquisitions.................. Capitalized Interest and Other.. Total....................... Exploration Expenses................ Total............................... $ 342 52 $ 331 29 $ 260 23 $ 345 25

34 14 --------442 59 --------$ 501 =========

9 14 --------383 55 --------$ 438 =========

65 14 --------362 44 --------$ 406 =========

15 15 ------400 50 ------$ 450 =======

Exploration and development expenditures increased $63 million, or 14%, in 1994 compared to 1993. The increase primarily reflects the acquisitions of selected properties to compliment existing North American producing areas and the addition of new international activities in India. (See "Business - Exploration and Production" for additional information detailing the specific geographic locations of the Company's drilling programs and "Outlook" below for a discussion related to 1995 exploration and development expenditure plans). Exploration and development expenditures in 1993 increased to $438 million, an 8% increase, as compared to the $406 million expended in 1992. The increase was attributable to increased domestic drilling activity with reduced emphasis on development drilling expenditures associated with tight gas sand formations. The Company also implemented its first development program outside of North America. During 1993, the Company installed a jacket, platform and production facilities and initiated natural gas production from the Kiskadee field offshore the southeast coast of Trinidad. FINANCING. The Company's long-term debt-to-total-capital ratio was 15% and 14% as of December 31, 1994 and 1993, respectively. The Company has entered into an agreement with Enron Corp. pursuant to which the Company may borrow funds from Enron Corp. at a representative market rate of interest on a revolving basis. During 1994, there were no funds borrowed by the Company under this agreement. Under a promissory note effective January 1, 1993 at a fixed interest rate of 7%, the Company may advance funds temporarily surplus to the Company to Enron Corp. for investment purposes. Daily outstanding balances of funds advanced to Enron Corp. under the note averaged $69 million during 1994 with no balance outstanding at December 31, 1994. There was a balance of $7 million outstanding at December 31, 1994 under a commercial paper program initiated in 1990. Proceeds from the commercial paper program were used to fund current transactions. During 1994, total long-term debt increased $37 million to $190 million as a result of $23 million of new borrowings related to certain international drilling activities, a $7 million increase in commercial paper, and the recording of a $7 million capital lease obligation. (See Note 4 to the Consolidated Financial Statements). The estimated fair value of the Company's long-term debt, including current maturities of $2 million and $30 million, at December 31, 1994 and 1993 was $186 million and $192 million, respectively, based upon quoted market prices and, where such prices were not available, upon interest rates currently available to the Company at year end. (See Note 13 to the Consolidated Financial Statements). OUTLOOK. There continues to exist a good deal of uncertainty as to the direction of future North America natural gas price trends and a rather wide divergence in the opinions held by some in the industry. However, recent history would tend to support, and it seems there is emerging among a larger number of industry representatives somewhat of a consensus, that natural gas prices will remain below parity with crude oil, condensate and natural gas liquids for some time. This situation is being impacted by improvements in the technology used in drilling and completing oil and gas 26 wells that are tending to mitigate the impacts of fewer oil and gas wells being drilled, the deregulation of the natural gas market under Federal Energy Regulatory Commission Order 636 and subsequent related orders, and improvements being realized in the availability and utilization of natural gas storage capacity. However, the continually increasing recognition of natural gas as a more
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environmentally friendly source of energy along with the availability of significant domestically sourced supplies should result in further increases in demand and a supporting/strengthening of the overall natural gas market over time. Being primarily a natural gas producer, the Company is more significantly impacted by changes in natural gas prices than by changes in crude oil and condensate prices. (See "Business - Other Matters - Energy Prices"). Based on the portion of the Company's anticipated natural gas volumes for which prices have not, in effect, been hedged using NYMEX-related commodity market transactions, long-term marketing contracts and the sale of a volumetric production payment, the Company's net income and cash flow sensitivity to changing natural gas prices is approximately $10 million for each $.10 per Mcf change in average wellhead natural gas prices. Using various commodity price hedging mechanisms, the Company has, in effect, locked in prices for an average of about one-half of its anticipated wellhead natural gas volumes and about one-third of its anticipated wellhead crude oil and condensate volumes for the year 1995 and about one-third of its anticipated wellhead natural gas volumes and about one-sixth of its anticipated wellhead crude oil and condensate volumes for the year 1996. The percentage of volumes hedged may change during the remainder of 1995 and will change in future years. Other factors representing positive impacts that are more certain continue to hold good potential for the Company in future periods. While the drilling qualification period for the tight gas sand federal income tax credit expired as of December 31, 1992, the Company has continued in 1994, and should continue in the future, to realize significant benefits associated with production from wells drilled during the qualifying period as it will be eligible for the federal income tax credit through the year 2002. However, all other factors remaining equal, the annual benefit, which was $36 million in 1994 and is estimated to be approximately $21 million for 1995, is expected to continue to decline in future periods as production from the qualified wells declines. The drilling qualification period for a certain state severance tax exemption available on qualifying high cost natural gas revenues continues through the latter part of 1996. Consequently, new qualifying production will be added prospectively to that qualified at year end 1994. (See "Business - Other Matters - - Tight Gas Sand Tax Credit (Section 29) and Severance Tax Exemption"). Other natural gas marketing activities are also expected to continue to contribute meaningfully to financial results. The Company completed a fairly significant restructure of its other natural gas marketing portfolio during 1992 with the sale of a volumetric production payment of approximately 124 Bcfe (136 trillion British thermal units) for $326.8 million that was subsequently revised in 1993 (See "Business - Marketing - Other Marketing" and Note 5 to Consolidated Financial Statements) and elimination of most delivery obligations under four long-term fixed price marketing contracts. The proceeds from the sale of the volumetric production payment added substantially to the financial flexibility of the Company supporting future development while the combined effect of all elements of the restructuring on net income has not been, and will not in the future be, significant. These factors are expected to contribute significantly to earnings, cash flow, and the ability of the Company to pursue the continuation of an active exploration, development and selective acquisition program. The Company plans to continue to focus a substantial portion of its development and certain exploration expenditures in its major producing areas in North America. However, based on the continuing uncertainty associated with North America natural gas prices and the current weakness in that market, and as a result of the recent success realized in Trinidad and opportunities available to the Company in conjunction with the recent signing of agreements in India, the Company anticipates expending an increasing portion of its available funds in the further development of these opportunities. In addition, the Company expects to include limited but meaningful exploratory exposure in other areas outside of North America in its expenditure plans. (See "Business - Exploration and Production" for additional information detailing the specific geographic locations of the related drilling programs). Early-in-year activity will be managed within an annual expected expenditure 27 level of approximately $450 million. This early-in-year planning will address the continuing uncertainty with regard to the future of the North America natural gas price environment and will be structured to maintain the flexibility necessary under the Company strategy of funding exploration, development and acquisition activities primarily from available internally generated cash flow. The continuation of expenditures in other areas outside of North America, will be primarily for additional evaluation of coalbed methane recovery potential in the U.K., France, Australia, China, Russia and certain other countries. The level of exploration and development expenditures may vary in 1995 and will vary in future periods depending on energy market conditions and other related economic factors. Based upon existing economic and market conditions, the Company believes net operating cash flow and available financing alternatives in 1995 will be sufficient to fund its net investing cash requirements for the year. However, the Company has significant flexibility with respect to its financing alternatives and adjustment of its exploration and development expenditure plans as circumstances warrant. While the Company has certain continuing commitments associated with expenditure plans related to operations in India, they are not anticipated to be material when considered in relation to the total financial capacity of the Company. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required hereunder is included in this report as set forth in the "Index to Financial Statements" on page F-1. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item regarding directors is set forth in the Proxy Statement under the caption entitled "Election of Directors", and is incorporated herein by reference. See list of "Current Executive Officers of the Registrant" in Part I located elsewhere herein. There are no family relationships among the officers listed, and there are no arrangements or understandings pursuant to which any of them were elected as officers. Officers are appointed or elected annually by the Board of Directors at its first meeting following the Annual Meeting of Shareholders, each to hold office until the corresponding meeting of the Board in the next year or until a successor shall have been elected, appointed or shall have qualified. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is set forth in the Proxy Statement under the caption "Compensation of Directors and Executive Officers", and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is set forth in the Proxy Statement under the captions "Election of Directors" and "Compensation of Directors and Executive Officers", and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is set forth in the Proxy Statement under the caption "Certain Transactions", and is incorporated herein by reference. 28 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K (a)(1) AND (2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE See "Index to Financial Statements" set forth on page F-1. (a)(3) EXHIBITS See pages E-1 through E-5 for a listing of the exhibits. (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed by the Company during the last quarter of 1994. 29 INDEX TO FINANCIAL STATEMENTS ENRON OIL & GAS COMPANY

PAGE ---Consolidated Financial Statements: Management's Responsibility for Financial Reporting.... F-2

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Reports of Independent Public Accountants.............. Consolidated Statements of Income for Each of the Three Years in the Period Ended December 31, 1994.... Consolidated Balance Sheets - December 31, 1994 and 1993............................................. Consolidated Statements of Shareholders' Equity for Each of the Three Years in the Period Ended December 31, 1994.............................. Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended December 31, 1994.... Notes to Consolidated Financial Statements............. Supplemental Information to Consolidated Financial Statements............................................... Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts and Reserves......................................... Other financial statement schedules have been omitted because they are inapplicable or the information required therein is included elsewhere in the consolidated financial statements or notes thereto.

F-3

F-4

F-5

F-6

F-7 F-8

F-21

S-1

F-1 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The following consolidated financial statements of Enron Oil & Gas Company and its subsidiaries were prepared by management which is responsible for their integrity, objectivity and fair presentation. The statements have been prepared in conformity with generally accepted accounting principles and accordingly include some amounts that are based on the best estimates and judgements of management. Arthur Andersen LLP, independent public accountants, was engaged to audit the consolidated financial statements of Enron Oil & Gas Company and its subsidiaries and issue a report thereon. In the conduct of the audit, Arthur Andersen LLP was given unrestricted access to all financial records and related data including minutes of all meetings of shareholders, the Board of Directors and committees of the Board. Management believes that all representations made to Arthur Andersen LLP during the audit were valid and appropriate. Their audits of the years presented included developing an overall understanding of the Company's accounting systems, procedures and internal controls, and conducting tests and other auditing procedures sufficient to support their opinion on the financial statements. Arthur Andersen LLP was also engaged to examine and report on management's assertion about the effectiveness of the system of internal controls of Enron Oil & Gas Company and its subsidiaries. The reports of Arthur Andersen LLP appear on the following page. The system of internal controls of Enron Oil & Gas Company and its subsidiaries is designed to provide reasonable assurance as to the reliability of financial statements and the protection of assets from unauthorized acquisition, use or disposition. This system includes, but is not limited to, written policies and guidelines including a published code for the conduct of business affairs, conflicts of interest and compliance with laws regarding antitrust, anti-boycott and foreign corrupt practices policies, the careful selection and training of qualified personnel, and a documented organizational structure outlining the separation of responsibilities among management representatives and staff groups.

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The adequacy of financial controls of Enron Oil & Gas Company and its subsidiaries and the accounting principles employed in financial reporting by the Company are under the general oversight of the Audit Committee of the Board of Directors. No member of this committee is an officer or employee of the Company. The independent public accountants have direct access to the Audit Committee and meet with the committee from time to time to discuss accounting, auditing and financial reporting matters. It should be recognized that there are inherent limitations to the effectiveness of any system of internal control, including the possibility of human error and circumvention or override. Accordingly, even an effective system can provide only reasonable assurance with respect to the preparation of reliable financial statements and safeguarding of assets. Furthermore, the effectiveness of an internal control system can change with circumstances. It is management's opinion that, considering the criteria for effective internal control over financial reporting and safeguarding of assets which consists of interrelated components including the control environment, risk-assessment process, control activities, information and communication systems, and monitoring, the Company maintained an effective system of internal control as to the reliability of financial statements and the protection of assets against unauthorized acquisition, use or disposition for all periods presented.

BEN B. BOYD Vice President and Board, Controller Houston, Texas February 17, 1995

WALTER C. WILSON Senior Vice President and Chief Financial Officer

FORREST E. HOGLUND Chairman of the President and Chief Executive Officer

F-2

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Enron Oil & Gas Company: We have examined management's assertion that the system of internal control of Enron Oil & Gas Company and its subsidiaries for the year ended December 31, 1994, was adequate to provide reasonable assurance as to the reliability of financial statements and the protection of assets against unauthorized acquisition, use or disposition, included in the accompanying report on Management's Responsibility for Financial Reporting. Our examination was made in accordance with standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the system of internal control, testing and evaluating the design and operating effectiveness of the system of internal control, and such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Because of inherent limitations in any system of internal control, errors or irregularities may occur and not be detected. Also, projections of any evaluation of the system of internal control to future periods are subject to the risk that the system of internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management's assertion that the system of internal control of Enron Oil & Gas Company and its subsidiaries for the year ended December 31, 1994, was adequate to provide reasonable assurance as to the reliability of financial statements and the protection of assets against unauthorized acquisition, use or disposition is fairly stated in all material respects, based upon the control criteria therein. ARTHUR ANDERSEN LLP Houston, Texas February 17, 1995 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Enron Oil & Gas Company:

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We have audited the accompanying consolidated balance sheets of Enron Oil & Gas Company (a Delaware corporation) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Enron Oil & Gas Company and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Houston, Texas February 17, 1995 F-3 ENRON OIL & GAS COMPANY CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED DECEMBER 31, 1994 ----------NET OPERATING REVENUES Natural Gas Associated Companies........... Trade.......................... Crude Oil, Condensate and Natural Gas Liquids Associated Companies........... Trade.......................... Gains on Sales of Reserves and Related Assets.................. Other............................. Total.................... OPERATING EXPENSES Lease and Well.................... Exploration....................... Dry Hole.......................... Impairment of Unproved Oil and Gas Properties...................... Depreciation, Depletion and Amortization.................... General and Administrative........ Taxes Other Than Income........... Total.................... 1993 ----------1992 -----------

267,997 221,896

279,921 225,241

280,501 108,487

46,782 29,556 54,014 5,578 ----------625,823 60,384 41,811 17,197 24,936 242,182 51,418 28,254 ----------466,182

38,953 16,881 13,318 6,706 ----------581,020 59,344 36,921 18,355 20,467 249,704 45,274 35,396 ----------465,461

38,775 20,152 6,037 5,074 ----------459,026 49,406 33,278 10,764 15,136 179,839 36,648 28,346 ----------353,417

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OPERATING INCOME..................... OTHER INCOME (EXPENSE)............... (3,476) INCOME BEFORE INTEREST EXPENSE AND TAXES.............................. INTEREST EXPENSE Incurred Affiliate...................... Other.......................... Capitalized....................... (3,580) Net Interest Expense........... INCOME BEFORE INCOME TAXES........... INCOME TAX PROVISION (BENEFIT)....... (17,736) NET INCOME........................... EARNINGS PER SHARE OF COMMON STOCK... AVERAGE NUMBER OF COMMON SHARES......

----------159,641 2,783 ----------162,424

----------115,559 6,635 ----------122,194

----------105,609

----------102,133

629 13,984 (6,124) ----------8,489 ----------153,935 5,937 ----------$ 147,998 =========== $ .93 =========== 159,845 ===========

15,378 (5,457)

1,747 24,122

----------- ----------9,921 22,289 ----------- ----------112,273 79,844 (25,752) ----------$ 138,025 =========== $ .86 =========== 159,966 =========== ----------$ 97,580 =========== $ .63 =========== 154,533 ===========

The accompanying notes are an integral part of these consolidated financial statements. F-4 ENRON OIL & GAS COMPANY CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) AT DECEMBER 31, 1994 ------------------------ASSETS CURRENT ASSETS Cash and Cash Equivalents......... 103,129 Accounts Receivable Associated Companies........... 59,143 Trade.......................... 66,109 Inventories....................... 14,082 Other............................. 6,962 ------------Total....................... 249,425 OIL AND GAS PROPERTIES (Successful
2003.

1993

5,810

57,352 68,781 15,731 8,744 ------------156,418

EDGAR Online, Inc.

Efforts Method)...................... 2,772,220 Less: Accumulated Depreciation, Depletion and Amortization...... 1,226,175 ------------Net Oil and Gas Properties................ 1,546,045 OTHER ASSETS......................... 15,692 ------------TOTAL ASSETS......................... 1,811,162 =============

3,015,435

1,330,624 -------------

1,684,811 20,638 ------------$ 1,861,867 $

=============

LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable Associated Companies........... 13,250 Trade.......................... 143,542 Accrued Taxes Payable............. 17,354 Dividends Payable................. 4,795 Current Maturities of Long-Term Debt............................ 30,000 Other............................. 8,989 ------------Total....................... 217,930 LONG-TERM DEBT Affiliate......................... Other............................. 153,000 OTHER LIABILITIES.................... 9,477 DEFERRED INCOME TAXES................ 270,154 DEFERRED REVENUE..................... 227,528

13,353 117,791 17,631 4,800

1,718 9,308 ------------164,601

25,000 165,337 10,035 269,292 184,183

COMMITMENTS AND CONTINGENCIES (Note 9) SHAREHOLDERS' EQUITY

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Common Stock, $.01 Par, 160,000,000 Shares Authorized and Issued at December 31, 1994 and No Par, 160,000,000 Shares Authorized and Issued at December 31, 1993............... Additional Paid In Capital........ Cumulative Foreign Currency Translation Adjustment.......... (6,855) Retained Earnings................. Common Stock Held in Treasury, 9,173 shares at December 31, 1994 and 160,000 shares at December 31, 1993............... (3,398) Total Shareholders' Equity...................... TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................

201,600 403,488 (15,298) 453,810

200,800 417,531

324,995

(181) ------------1,043,419 ------------$ 1,861,867 ============= ------------933,073 ------------$ 1,811,162 =============

The accompanying notes are an integral part of these consolidated financial statements. F-5 ENRON OIL & GAS COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT -----------$ 6,947 COMMON STOCK HELD IN TREASURY ----------$ -

Balance at December 31, 1991......... Net Income........................ Shares Issued by Public Offering.. Dividends Paid, $.025 Per Share in April, July and October, and Declared, $.03 in December...... Translation Adjustment............ Treasury Stock Purchased.......... Treasury Stock Issued Under Stock Option Plan..................... Balance at December 31, 1992......... Net Income........................ Dividends Paid/Declared, $.12 Per Share........................... Translation Adjustment............ Treasury Stock Purchased.......... Treasury Stock Issued Under Stock Option Plan..................... Balance at December 31, 1993......... Net Income........................ Two-for-One Stock Split........... Dividends Paid/Declared, $.12 Per Share............................. Translation Adjustment............. Treasury Stock Purchased/ Tendered.......................... Treasury Stock Issued Under Stock

COMMON STOCK ----------$ 200,759 41

ADDITIONAL PAID IN CAPITAL ----------$ 310,504 111,820

RETAINED EARNINGS ----------$ 124,975 97,580 -

TOTAL SHAREHOLDERS' EQUITY -------------$ 643,185 97,580 111,861

----------200,800 ----------200,800 800 -

(577) ----------421,747 (4,216) ----------417,531 (800) -

(8,673) -----------(1,726) (5,129) -----------(6,855) (8,443) -

(16,390) ----------206,165 138,025 (19,195) ----------324,995 147,998 (19,183) -

(1,827) 1,827 ----------(16,698) 13,300 ----------(3,398) (35,960)

(16,390) (8,673) (1,827) 1,250 -------------826,986 138,025 (19,195) (5,129) (16,698) 9,084 -------------933,073 147,998 (19,183) (8,443) (35,960)

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Option Plan....................... Balance at December 31, 1994.........

----------$ 201,600 ===========

(13,243) ----------$ 403,488 ===========

-----------$ (15,298) ============

----------$ 453,810 ===========

39,177 ----------$ (181) ===========

25,934 -------------$ 1,043,419 ==============

The accompanying notes are an integral part of these consolidated financial statements. F-6 ENRON OIL & GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) YEAR ENDED DECEMBER 31, 1994 --------CASH FLOWS FROM OPERATING ACTIVITIES Reconciliation of Net Income to Net Operating Cash Inflows: Net Income........................ Items Not Requiring (Providing) Cash Depreciation, Depletion and Amortization................. Impairment of Unproved Oil and Gas Properties............... Deferred Income Taxes.......... (17,917) Other, Net..................... Exploration Expenses.............. Dry Hole Expenses................. Gains On Sales of Reserves and Related Assets.................. (6,037) Other, Net........................ (6,147) Changes in Components of Working Capital and Other Liabilities Accounts Receivable............ (12,732) Inventories.................... Accounts Payable............... Accrued Taxes Payable.......... Other Liabilities.............. (2,886) Other, Net..................... Changes in Components of Working Capital Associated with Investing and Financing Activities...................... (74,232) NET OPERATING CASH INFLOWS........... INVESTING CASH FLOWS Additions to Oil and Gas Properties...................... (362,403) Exploration Expenses.............. (33,278) 1993 --------1992 ---------

$ 147,998

$ 138,025

97,580

242,182 24,936 1,788 (2,735) 41,811 17,197 (54,014) 4,490

249,704 20,467 25,612 1,768 36,921 18,355 (13,318) 1,242

179,839 15,136

5,713 33,278 10,764

(883) (2,163) (25,648) 277 1,086 (1,463)

(24,586) (4,548) 26,208 7,443 772 (44,443) 3,687 46,327 247

33,784

31,038 --------425,897

40,042 --------479,664 --------306,404

(442,078) (41,811)

(383,064) (36,921)

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Dry Hole Expenses................. (10,764) Proceeds from Sales of Reserves and Related Assets (Note 10).... Proceeds from Sale of Volumetric Production Payment.............. Amortization of Deferred Revenue......................... (25,380) Changes in Components of Working Capital Associated with Investing Activities............ Other, Net........................ (3,686) NET INVESTING CASH OUTFLOWS.......... (1,092) FINANCING CASH FLOWS Long-Term Debt Affiliate...................... (132,836) Other.......................... (139,556) Common Stock Issued............... Dividends Paid.................... (15,385) Treasury Stock Purchased.......... (1,827) Proceeds from Sales of Treasury Stock........................... Other, Net........................ NET FINANCING CASH INFLOWS (OUTFLOWS)......................... (176,493) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................ CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.................. CASH AND CASH EQUIVALENTS AT END OF YEAR...............................

(17,197)

(18,355)

90,515 (43,345)

41,815 -} (73,867)

33,412 326,775

(32,120) (8,758) --------(494,794)

(37,256) (4,905) --------(512,553)

74,232

---------

25,000 (25,300) (19,178) (14,139)

33,000 (19,200) (16,698) 111,861

4,113 1,082 --------(28,422) --------(97,319) 103,129 --------$ 5,810 =========

9,084 (2,786) --------3,400 --------(29,489) 132,618 --------$ 103,129 =========

1,250 ---------

--------128,819 3,799 --------$ 132,618 =========

The accompanying notes are an integral part of these consolidated financial statements. F-7 ENRON OIL & GAS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION. The consolidated financial statements of Enron Oil & Gas Company (the "Company"), 80% of the outstanding common stock of which is owned by Enron Corp., include the accounts of all domestic and foreign subsidiaries. All material intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to consolidated
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financial statements for prior years to conform with the current presentation. CASH EQUIVALENTS. The Company records as cash equivalents all highly liquid short-term investments with maturities of three months or less. (See Note 4 "Long-Term Debt - Financing Arrangements with Enron Corp.") OIL AND GAS OPERATIONS. The Company accounts for its natural gas and crude oil exploration and production activities under the successful efforts method of accounting. Oil and gas lease acquisition costs are capitalized when incurred. Unproved properties with significant acquisition costs are assessed quarterly on a property-by-property basis and any impairment in value is recognized. Amortization of any remaining costs of such leases begins at a point prior to the end of the lease term depending upon the length of such term. Unproved properties with acquisition costs that are not individually significant are aggregated, and the portion of such costs estimated to be nonproductive, based on historical experience, is amortized over the average holding period. If the unproved properties are determined to be productive, the appropriate related costs are transferred to proved oil and gas properties. Lease rentals are expensed as incurred. Oil and gas exploration costs, other than the costs of drilling exploratory wells, are charged to expense as incurred. The costs of drilling exploratory wells are capitalized pending determination of whether they have discovered proved commercial reserves. If proved commercial reserves are not discovered, such drilling costs are expensed. The costs of all development wells and related equipment used in the production of crude oil and natural gas are capitalized. Depreciation, depletion and amortization of the cost of proved oil and gas properties is calculated using the unit-of-production method. Estimated future dismantlement, restoration and abandonment costs (classified as long-term liabilities), net of salvage values, are taken into account. Certain other assets are depreciated on a straight-line basis. Inventories, consisting primarily of tubular goods and well equipment held for use in the exploration for, and development and production of crude oil and natural gas reserves, are carried at cost with selected adjustments made from time to time to recognize changes in condition value. Natural gas revenues are recorded to recognize that during the course of normal production operations joint interest owners will, from time to time, take more or less than their ultimate share of natural gas volumes from jointly owned reservoirs. These volumetric imbalances are monitored over the life of the reservoir to achieve balancing, or minimize imbalances, by the time reserves are depleted. Final cash settlements are made, generally at the time a property is depleted, under one of a variety of arrangements generally accepted by the industry depending on the specific circumstances involved. The Company accrues revenues associated with undertakes and defers revenues associated with overtakes to recognize these potential ultimate imbalances. Based on the Company's strategy of maximizing the economic value of its assets through a combination of both developing and producing over time, crude oil and natural gas reserves and the sale of such reserves in place with related assets; effective for 1994, gains and losses associated with such sales in place are being classified as Net Operating Revenues in the consolidated statements of income. F-8 ACCOUNTING FOR INTEREST AND PRICE RISK MANAGEMENT The Company engages in price and interest rate risk management activities for primarily non-trading purposes. Such activities consist of transactions to hedge commodity prices associated with the sales and purchases of natural gas and crude oil in order to mitigate the risk of market price fluctuations and interest rate swap agreements to effectively convert portions of floating rate debt to a fixed rate basis, thereby reducing the impact of interest rate changes on future income. Changes in the market value of commodity price and interest rate swap transactions entered into as hedges are deferred so that the gain or loss is recognized in the period in which the revenues or expenses associated with the hedged transactions are applicable. In certain situations, the Company has designated portions of and may in the future designate certain commodity price swap transactions or portions thereof as for trading purposes. These transactions are accounted for using the mark-to-market method of accounting. Under this method, unrealized gains or losses resulting from the impact of price movements are recognized as net gains or losses in Net Operating Revenues in the consolidated statements of income. CAPITALIZED INTEREST COSTS. Certain interest costs have been capitalized as a part of the historical cost of unproved oil and gas properties. Interest costs capitalized during each of the three years in the period ended December 31, 1994 are set out in the consolidated statements of income. INCOME TAXES. Taxable income of the Company, excluding that of any foreign subsidiaries, is included in the consolidated federal income tax return filed by Enron Corp. Pursuant to a tax allocation agreement between the Company, the Company's subsidiaries and Enron Corp., either Enron Corp. will pay to the Company and each subsidiary an amount equal to the tax benefit realized in the Enron
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Corp. consolidated federal income tax return resulting from the utilization of the Company's or the subsidiary's net operating losses and/or tax credits, or the Company and each subsidiary will pay to Enron Corp. an amount equal to the federal income tax computed on its separate taxable income less the tax benefits associated with any net operating losses and/or tax credits generated by the Company or the subsidiary which are utilized in the Enron Corp. consolidated return. Enron Corp. will pay the Company and each subsidiary for the tax benefits associated with their net operating losses and tax credits utilized in the Enron Corp. consolidated return, provided that a tax benefit was realized even if such benefits could not have been used by the Company or the subsidiary on a separately filed tax return. The Company has entered into an agreement with Enron Corp. providing for the Company to be paid for all realizable benefits associated with tight gas sand federal income tax credits concurrent with tax reporting and settlement for the periods in which they are generated. The tax allocation agreement applies to the Company and each of its subsidiaries for all years in which the Company or any of its subsidiaries are or were included in the Enron Corp. consolidated return. Taxes for any foreign subsidiaries of the Company are calculated on a separate return basis. The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes". SFAS No. 109 requires the asset and liability approach for accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases (See Note 8 "Income Taxes"). FOREIGN CURRENCY TRANSLATION. For subsidiaries whose functional currency is deemed to be other than the U.S. dollar, asset and liability accounts are translated at year-end exchange rates and revenue and expenses are translated at average exchange rates prevailing during the year. Translation adjustments are included as a separate component of shareholders' equity. EARNINGS PER SHARE. Earnings per share is computed on the basis of the average number of common shares outstanding during the periods. F-9 2. NATURAL GAS AND CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDS NET OPERATING REVENUES Natural Gas Net Operating Revenues are comprised of the following:

1994 --------------------Wellhead Natural Gas Revenues Associated Companies(1)(2)....... 223,249 Trade............................ 103,288 ----------Total.................... 326,537 =========== =========== Other Natural Gas Marketing Activities Gross Revenues from: Associated Companies(3)...... 186,600 Trade(4)..................... 57,482 ----------Total.................... 244,082
2003.

1993 -----------

1992

279,339 162,553

340,508 156,301

----------$ 441,892

----------$ 496,809 $

===========

159,726 121,965

139,576 135,606

----------281,691

----------275,182

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Associated Costs from: Associated Companies(1)(5)(6)........... 133,170 Trade........................ 52,283 ----------Total.................... 185,453

181,756 62,513 ----------244,269 -----------

182,456 66,273 ----------248,729 ----------26,453

----------Net...................... 58,629 Commodity Price Hedging Gain (Loss)(7)...................... 3,822 ----------Total.................... 62,451 =========== =========== =========== $ 48,001 $ 8,353 $ 37,422

10,579 -----------

(18,100) -----------

Crude Oil, Condensate and Natural Gas Liquids Net Operating Revenues are comprised of the following: 1994 --------------------Wellhead Crude Oil, Condensate and Natural Gas Liquids Revenues Associated Companies............. 38,474 Trade............................ 20,152 ----------Total........................ 58,626 =========== Other Crude Oil and Condensate Marketing Activities Commodity Price Hedging Gain(7)........................ 301 =========== - --------1993 ----------1992

44,979 29,556

38,953 16,881

----------$ 74,535

----------$ 55,834 $

===========

===========

1,803

===========

===========

(1) Wellhead Natural Gas Revenues in 1994, 1993 and 1992 include $126,783, $129,504 and $84,317, respectively, associated with deliveries by Enron Oil & Gas Company to Enron Oil & Gas Marketing, Inc., a wholly-owned subsidiary, reflected as a cost in Other Natural Gas Marketing Activities - Associated Costs. (2) Includes $22,434, $46,358 and $17,173 in 1994, 1993 and 1992, respectively, associated with the equivalent wellhead value of
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volumes delivered under the terms of a volumetric production payment agreement effective October 1, 1992, as amended, net of transportation. (3) Includes the effect of a price swap agreement with an Enron Corp. affiliated company which in effect fixed the price of certain sales. (4) Includes $43,345, $73,867 and $25,380 in 1994, 1993 and 1992, respectively, associated with the amortization of deferred revenues under the terms of volumetric production payment and exchange agreements effective October 1, 1992, as amended. (5) Includes the effect of a price swap agreement with a third party which in effect fixed the price of certain purchases. (6) Includes $33,779, $65,042 and $23,977 in 1994, 1993 and 1992, respectively, for volumes delivered under volumetric production payment and exchange agreements effective October 1, 1992, as amended, including equivalent wellhead value, any applicable transportation costs and exchange differentials. (7) Represents gain or loss associated with commodity price swap transactions primarily with Enron Corp. affiliated companies based on NYMEX-related commodity prices in effect on dates of execution, less customary transaction fees. F-10 3. OTHER ASSETS Other Assets at December 31, 1994 includes an investment in 349,387 shares of Enron Corp. common stock purchased for $10 million, at an average of $28.62 per share from Enron Corp. (the fair market value of such shares on the dates of acquisition), in connection with an anticipated acquisition of certain oil and gas properties by a subsidiary of the Company which is scheduled to close in March 1995. The Enron Corp. common stock will be used in connection with the future redemption of redeemable preferred stock to be issued by the subsidiary. 4. LONG-TERM DEBT REVOLVING CREDIT AGREEMENT. The Company is a party to a Revolving Credit Agreement dated as of March 11, 1994, among the Company and the banks named therein (the "Credit Agreement"). The Credit Agreement provides for aggregate borrowings of up to $100 million, with provisions for increases, at the option of the Company, up to $300 million. Advances under the Credit Agreement bear interest, at the option of the Company, based on a base rate, an adjusted CD rate or a Eurodollar rate. Each advance under the Credit Agreement matures on a date selected by the Company at the time of the advance, but in no event after January 15, 1998. There were no advances outstanding under the Credit Agreement at December 31, 1994. FINANCING ARRANGEMENTS WITH ENRON CORP. The Company engages in various transactions with Enron Corp. that are characteristic of a consolidated group under common control. Activities of the Company not internally funded from operations have been and may be funded from time to time by advances from Enron Corp. The Company entered into an agreement with Enron Corp., effective October 12, 1989 (as amended effective September 29, 1992), under which the Company may borrow funds from Enron Corp. at a representative market rate of interest on a revolving basis. During 1994 and 1993, there were no funds borrowed by the Company under this agreement. Any loan balance that may be outstanding from time to time is payable on demand but no later than September 29, 1995, the maturity date of this agreement. Any balances outstanding would be classified as long-term based on the Company's intent and ability to refinance such amounts using available borrowing capacity. The Company also entered into an agreement with Enron Corp., effective October 12, 1989 (as amended effective September 29, 1992), which provides the Company the option of depositing any excess funds that may be available from time to time with Enron Corp. with interest at a representative market rate during the periods the funds were held by Enron Corp. Effective January 1, 1993, the Company executed a promissory note at a fixed interest rate of 7% with Enron Corp. providing for the investment of funds temporarily surplus to the Company from time to time with Enron Corp. Daily outstanding balances of funds advanced to Enron Corp. under this note averaged $68.8 million and $60.3 million during 1994 and 1993, respectively. There were no advances outstanding at December 31, 1994 and $96.6 million outstanding at December 31, 1993 under this agreement, which amounts are classified as cash equivalents on the consolidated balance sheets. Interest income recorded in 1994 and 1993 under the terms of this note totaled $4.7 million and $4.4 million, respectively. In July 1994, the Company prepaid $25 million of loans payable due in April 1995 with proceeds from a promissory note payable to Enron Corp. which note is in the same amount and with essentially the same terms as the loan prepaid. The promissory note is classified as long-term based on the Company's intent and ability to refinance such note upon maturity with other long-term debt. The interest rate swap agreement which effectively fixed the interest rate of the original loan payable at 8.98% through maturity remains in effect for the promissory note payable to Enron Corp. F-11

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LONG-TERM DEBT, OTHER. Long-Term Debt, Other at December 31 consisted of the following: 1994 --------------------Loan(s) Payable.................. 50,000 Senior Notes..................... 70,000 Promissory Notes................. 33,000 Commercial Paper................. Capitalized Lease Obligation..... ----------Total................ 153,000 =========== =========== $ 165,337 $ $ 25,000 70,000 56,000 6,700 7,637 ----------$ 1993

The Loan Payable is due in 1995 and bears interest at a variable rate based on the London Interbank Offered Rate which has, in effect, been converted to a fixed interest rate of 8.92% through maturity using an interest rate swap agreement in equivalent dollar amounts. The note is classified as long-term based on the Company's intent and ability to replace such loan upon maturity with other long-term debt. The Senior Notes bear interest at 9.1% with principal repayments of $30 million due in 1996 and $20 million due in 1997 and 1998. In March 1994, a subsidiary of the Company received two advances, evidenced by promissory notes, aggregating $31 million under a credit agreement dated as of March 8, 1994 between the subsidiary and a financial institution. One of the advances is in the amount of $16 million, bears interest at a fixed rate of 4.52% and is due in 1998. The other advance is in the amount of $15 million, bears interest at a floating rate that resets quarterly equal to 84% of the London Interbank Bid Rate which is 1/8 of 1% less than the London Interbank Offered Rate and is due in 1998. Both advances are collateralized with a letter of credit issued by a bank on behalf of the subsidiary and guaranteed by the Company. The advances were used to partially repay a promissory note payable to a bank by the subsidiary. In May 1994, the subsidiary received a $25 million advance, evidenced by a promissory note, under a credit agreement dated May 27, 1994 between the subsidiary and a financial institution. The credit agreement provides for aggregate borrowings of up to $44 million and is due in 1999. The advances bear interest based on various interest rate options, as defined in the credit agreement, which ranged from 4.03% to 5.59% during 1994. The advance is guaranteed by the Company and was used to partially repay temporary advances from the Company to the subsidiary for qualified development costs. There was a $6.7 million balance outstanding at December 31, 1994, under a commercial paper program initiated in 1990. The proceeds from the commercial paper program outstanding from time to time are used to fund current transactions and are classified as long-term based on the Company's intent and ability to replace such obligation with other long-term debt. The interest rate for the obligation at December 31, 1994 was 6.33%. Certain of the borrowings described above contain covenants requiring the maintenance of certain financial ratios and limitations on liens, debt issuance and dispositions of assets. In 1991, the Company filed with the Securities and Exchange Commission a registration statement providing for the issuance and sale from time to time of up to $250 million of debt securities to the public. As of December 31, 1994, no debt securities had been issued under this registration statement. FAIR VALUE OF LONG-TERM DEBT. At December 31, 1994, the Company had $190 million of long-term debt and $2 million of current maturities outstanding. At December 31, 1993, there was $153 million of long-term debt and $30 million of current maturities outstanding. The estimated fair value of such debt, including current maturities, at December 31, 1994 and 1993 was approximately $186 million and $192 million, respectively. The fair value of long-term debt is the value the Company would have to pay to retire the debt, including any premium or discount to the debtholder
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F-12 for the differential between the stated interest rate and the year-end market rate. The fair value of long-term debt is based upon quoted market prices and, where such quotes were not available, upon interest rates available to the Company at year-end. 5. DEFERRED REVENUE In September 1992, the Company sold a volumetric production payment for $326.8 million to a limited partnership of which an Enron Corp. affiliated company is general partner with a 1% interest. Under the terms of the production payment agreements, the Company conveyed a real property interest of approximately 124 billion cubic feet equivalent ("Bcfe") (136 trillion British thermal units) of natural gas and other hydrocarbons. The natural gas and other hydrocarbons were originally scheduled to be produced and delivered over a period of forty-five months which period commenced October 1, 1992. Effective October 1, 1993, the agreements were amended providing for the extension of the original term of the volumetric production payment through March 31, 1999 and including a revised schedule of daily quantities of hydrocarbons to be delivered which is approximately one-half of the original schedule. The revised schedule will total approximately 89.1 Bcfe (97.8 trillion British thermal units) versus approximately 87.9 Bcfe (96.4 trillion British thermal units) remaining to be delivered under the original agreement. Daily quantities of hydrocarbons no longer required to be delivered under the revised schedule during the period from October 1, 1993 through June 30, 1996 are available for sale by the Company. The Company retains responsibility for its working interest share of the cost of operations. The Company also entered into a separate agreement with the same limited partnership whereby it has agreed to exchange volumes owned by the Company for equivalent volumes produced and owned by the limited partnership. The costs incurred, if any, to effect redeliveries pursuant to such exchange are borne by the Company. A portion of the proceeds of the sale was used to repay a portion of the Company's long-term debt, with surplus funds advanced to Enron Corp. under a note agreement which facilitates the deposit of funds temporarily surplus to the Company. The Company accounted for the proceeds received in the transaction as deferred revenue which is being amortized into revenue and income as natural gas and other hydrocarbons are produced and delivered during the term, as revised, of the volumetric production payment agreement. Annual remaining amortization of deferred revenue, based on revised scheduled deliveries under the volumetric production payment agreement, as amended, at December 31, 1994 was as follows:

1995................................. 43,344 1996................................. 43,463 1997................................. 43,344 1998................................. 43,344 1999................................. 10,688 --------Total........................ 184,183 =========

6. SHAREHOLDERS' EQUITY The Board of Directors of the Company approved in December 1992, as amended in September 1994, the purchasing and holding in treasury at any time of up to 500,000 shares of common stock of the Company for, but not limited to, meeting obligations associated with stock option grants to qualified employees pursuant to the Company's stock option plans. (See Note 9 "Commitments and Contingencies - - Stock Option Plans"). At December 31, 1994 and 1993, 9,173 shares and 160,000 shares, respectively, were held in treasury under this authorization. On May 3, 1994, the shareholders of the Company approved and the Board of Directors subsequently declared a two-for-one split of the Company's common stock to be effected as a non-taxable dividend of one share for each share outstanding. Shares were issued on June 15, 1994 to shareholders of record as of May 31, 1994. An amendment to the Restated Certificate of Incorporation of the Company to increase the total number of authorized shares of the common stock of the Company from 80 million to 160 million shares and to change the par value of common stock from F-13
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no par to $.01 par per share was filed with the Secretary of State of Delaware. All share and per share amounts in the financial statements and supplemental financial information have been restated to consider the effect of the two-for-one stock split. 7. TRANSACTIONS WITH ENRON CORP. AND RELATED PARTIES NATURAL GAS AND CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDS NET OPERATING REVENUES. Wellhead Natural Gas and Crude Oil, Condensate and Natural Gas Liquids Revenues and Other Natural Gas and Other Crude Oil and Condensate Marketing Activities include revenues from and associated costs paid to various subsidiaries and affiliates of Enron Corp. pursuant to contracts which, in the opinion of management, are no less favorable than could be obtained from third parties. Other Natural Gas and Other Crude Oil and Condensate Marketing Activities also include certain commodity price swap and NYMEX-related commodity transactions with Enron Corp. affiliated companies which, in the opinion of management, are no less favorable than could be obtained from third parties. (See Note 2 "Natural Gas and Crude Oil, Condensate and Natural Gas Liquids Net Operating Revenues"). GENERAL AND ADMINISTRATIVE EXPENSES. The Company is charged by Enron Corp. for all direct costs associated with its operations. Such direct charges, excluding benefit plan charges (See Note 9 "Commitments and Contingencies - Employee Benefit Plans"), totaled $13.7 million, $11.5 million and $4.9 million for the years ended December 31, 1994, 1993 and 1992, respectively. Management believes that these charges are reasonable. Additionally, certain administrative costs not directly charged to any Enron Corp. operations or business segments are allocated to the entities of the consolidated group. Allocation percentages are generally determined utilizing weighted average factors derived from property gross book value, net operating revenues and payroll costs. Effective January 1, 1994, the Company entered into an agreement with Enron Corp. with an initial term of five years through December 1998, which agreement replaced a similar previous agreement, providing for services substantially identical in nature and quality to those services previously provided and for allocated indirect costs incurred in rendering such services up to a maximum of $6.7 million for 1994, such cap to be increased in subsequent years for inflation and certain changes in the Company's allocation bases with any increase not to exceed 7.5% per year. Management believes the indirect allocated charges for the numerous types of support services provided by the corporate staff are reasonable. Approximately $6.6 million, $7.9 million and $9.5 million were charged to the Company for indirect general and administrative expenses for the years ended December 31, 1994, 1993 and 1992, respectively. FINANCING. See Note 4 "Long-Term Debt - Financing Arrangements with Enron Corp." for a discussion of financing arrangements with Enron Corp. F-14 8. INCOME TAXES The principal components of the Company's net deferred income tax liability at December 31, 1994 and 1993 were as follows:

1994 --------------------Deferred Income Tax Assets Non-Producing Leasehold Costs...... 5,234 Seismic Costs Capitalized for Tax.............................. 5,643 Other.............................. 6,337 ----------Total Deferred Income Tax Assets....................... 17,214 Deferred Income Tax Liabilities Oil and Gas Exploration and Development Costs Deducted for Tax Over Book Depreciation, Depletion and Amortization.......
2003.

1993

7,685

4,683 4,194 -----------

16,562

252,599

EDGAR Online, Inc.

276,422 Capitalized Interest............... 6,866 Volumetric Production Payment Book Revenue Over Income for Tax...... 1,288 Other.............................. 2,792 ----------Total Deferred Income Tax Liabilities.................. 287,368 ----------Net Deferred Income Tax Liability.................... 270,154 ===========

5,763

26,777 715 -----------

285,854 -----------

269,292

===========

The components of income (loss) before income taxes were as follows:

1994 --------------------United States........................ 74,226 Foreign.............................. 5,618 ----------Total........................ 79,844 =========== $ 125,510 28,425 ----------$ 153,935

1993 ----------$ 117,460 (5,187) ----------$ 112,273 $ $

1992

===========

===========

Total income tax provision (benefit) was as follows:

1994 ----------Current: Federal.......................... (292) State............................ Foreign.......................... Total........................ Deferred: Federal.......................... (21,729) State............................ $ 113

1993 ----------$

1992 -----------

(52,555) $

2,745 1,291 ----------4,149 3,818 (14,414)

5 2 1,186 471 ----------- ----------(51,364) 181 20,845 4,357 3,119

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EDGAR Online, Inc.

Foreign.......................... Total........................ (17,917) Income Tax Provision (Benefit)..... (17,736)

12,384 ----------1,788 ----------$ 5,937 ===========

410 ----------25,612

693 -----------

----------- ----------$ (25,752) $ =========== ===========

F-15 The differences between taxes computed at the U.S. federal statutory tax rate and the Company's effective rate were as follows:

Statutory Federal Income Tax Rate.... State Income Tax, Net of Federal Benefit............................ Income Tax Related to Foreign Operations......................... Tight Gas Sand Federal Income Tax Credits............................ Revision of Prior Years' Tax Estimates.......................... Amended Return Recoveries............ Federal Tax Rate Increase............ Other................................ Effective Income Tax Rate........ (22.21)%

1994 1993 1992 ----------- ----------- ----------35.00% 35.00% 34.00% (4.93) 3.44 (23.71) 2.53 3.08 (58.05) 2.58 (2.07) (54.24)

(3.25) (10.73) (2.62) (0.84) 5.23 (0.07) (1.64) ----------- ----------- ----------3.86% (22.94)% =========== =========== ===========

Current income tax receivable from (payable to) Enron Corp. at December 31, 1994, 1993 and 1992 amounted to $(506), $(6,892) and $5,619, respectively. The Company has an alternative minimum tax ("AMT") credit carryforward of $2.7 million which can be used to offset regular income taxes payable in future years. The AMT credit carryforward has an indefinite carryforward period. The Company's foreign subsidiaries' undistributed earnings of approximately $64 million at December 31, 1994 are considered to be indefinitely invested outside the U.S. and, accordingly, no U.S. federal or state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends, the Company may be subject to both foreign withholding taxes and U.S. income taxes, net of allowable foreign tax credits. Determination of any potential amount of unrecognized deferred income tax liabilities is not practicable. 9. COMMITMENTS AND CONTINGENCIES EMPLOYEE BENEFIT PLANS. Employees of the Company are covered by various retirement, stock purchase and other benefit plans of Enron Corp. During each of the years ended December 31, 1994, 1993 and 1992, the Company was charged $5.1 million, $4.5 million and $3.6 million, respectively, for all such benefits, including pension expense totaling $0.3 million, $0.5 million and $0.5 million, respectively, by Enron Corp. As of September 30, 1994, the most recent valuation date, the plan net assets of the Enron Corp. defined benefit plan in which the employees of the Company participate exceeded the actuarial present value of projected plan benefit obligations by approximately
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$18.9 million. The assumed discount rate, rate of return on plan assets and rate of increases in wages used in determining the actuarial present value of projected plan benefits were 8.0%, 10.5% and 4.0%, respectively. The Company also has in effect pension and savings plans related to its Canadian and Trinidadian subsidiaries. Activity related to these plans is not significant to the Company's operations. The Company provides certain medical, life insurance and dental benefits to eligible employees who retire under the Enron Corp. Retirement Plan and their eligible surviving spouses. Benefits are provided under the provisions of a contributory defined dollar benefit plan. The Company accrues the cost of these postretirement benefits over the service lives of the employees expected to be eligible to receive such benefits. The transition obligation existing at January 1, 1993 is being amortized over an average period of 19 years. The accumulated postretirement benefit obligation ("APBO") existing at December 31, 1994 totaled $106.7 million, of which $91.0 million is applicable to current retirees and current employees eligible to retire. The measurement of the APBO assumes an 8% discount rate and a health care cost trend rate of 12.3% in 1994 decreasing to 5% by the year 2006 and beyond. A 1% increase in the health care cost trend rate would have the effect of increasing the APBO and the F-16 net periodic expense by approximately $7.9 million and $0.8 million, respectively. The Company does not currently intend to prefund its obligations under its postretirement welfare benefit plans. STOCK OPTION PLANS. The Company has various stock option plans ("the Plans") under which employees of the Company and its subsidiaries and non-employee members of the Board of Directors have been or may be granted rights to purchase shares of common stock of the Company generally at a price not less than the market price of the stock at the date of grant. Options granted under the Plans vest over a period of time based on the nature of the grants and as defined in the individual grant agreements. The following table sets forth the transactions for the Plans for the years ended December 31: NUMBER OF STOCK OPTIONS 1994 1993 1992 ------------- ------------ -----------4,124,800 3,908,050 5,128,095(1) 920,600 4,048,050 (1,967,920) (671,850) (70,420) ------------Outstanding at December 31 (Grant Prices of $9.25-$23.81 per Share)............................ Available for Grant at December 31.. - --------(32,000) -----------------------

Outstanding at January 1............ Granted......................... Exercised....................... (127,500) Forfeited....................... (12,500)

7,214,555 ============= 3,218,175 =============

4,124,800 ============ 1,075,850 ============

3,908,050 ============ 1,964,450 ============

(1) Includes 1,920,275 options granted on December 30, 1994 under an all employee stock option grant. At December 31, 1994, 1,826,880 options outstanding were vested. Of the remaining unvested options, 2,802,530, 892,780, 727,030, 581,280 and 384,055 vest in the years 1995, 1996, 1997, 1998 and 1999, respectively. During 1994, 1993 and 1992, the Company purchased or was tendered 1,817,093, 831,850 and 127,500 of its common shares, respectively, and delivered such shares upon the exercise of stock options, except for shares held in treasury at December 31, 1994 and 1993 as set out below. The difference between the cost of the treasury shares and the exercise price of the options, net of federal income tax benefit of $7.2 million and $2.8 million for the years 1994 and 1993, respectively, is reflected as an adjustment to Additional Paid In Capital. In October 1993, as amended in September 1994, the Company commenced a stock repurchase program authorized by the Board of Directors to facilitate the availability of treasury shares of common stock for, but not limited to, the settlement of employee stock option exercises pursuant to the Plans. At December 31, 1994 and 1993, 9,173 and 160,000 shares, respectively, were
2003. EDGAR Online, Inc.

held in treasury under this authorization. (See Note 6 "Shareholders' Equity"). LETTERS OF CREDIT. At December 31, 1994 and 1993, the Company had letters of credit outstanding totaling approximately $32.2 and $46.2 million, respectively. The letters of credit outstanding at December 31, 1994 and December 31, 1993 include $31.9 million issued in connection with a loan between one of the Company's subsidiaries and a trust and $33 million issued in connection with a promissory note between the subsidiary and a bank, respectively. CONTINGENCIES. There are various suits and claims against the Company having arisen in the ordinary course of business. However, management does not believe these suits and claims will individually or in the aggregate have a material adverse effect on the Company's financial condition or results of operations. TransAmerican Natural Gas Corporation ("TransAmerican") has filed a petition against the Company and Enron Corp. alleging breach of contract, tortious interference with contract, misappropriation of trade secrets and violation of state antitrust laws. The petition, as amended, seeks actual damages of $100 million plus exemplary damages of $300 million. The Company has answered the petition and is actively defending the matter; in addition, the Company has filed counterclaims against TransAmerican and a third-party claim against its sole shareholder, F-17 John R. Stanley, alleging fraud, negligent misrepresentation and breach of state antitrust laws. On April 6, 1994, Enron Corp. was granted summary judgment wherein the court ordered that TransAmerican can take nothing on its claims against Enron Corp. Trial, which was set most recently for September 12, 1994 has been continued and there is no current setting. Although no assurances can be given, the Company believes that the claims made by TransAmerican are totally without merit, that the ultimate resolution of the matter will not have a materially adverse effect on its financial condition or results of operations, and that such ultimate resolution could result in a recovery to the Company. The Company has been named as a potentially responsible party in certain Comprehensive Environmental Response Compensation and Liability Act proceedings. However, management does not believe that any potential assessments resulting from such proceedings will individually or in the aggregate have a materially adverse effect on the financial condition or results of operations of the Company. 10. CASH FLOW INFORMATION Gains on sales of certain oil and gas reserves and related assets in the amount of $54.0 million, $13.3 million and $6.0 million for the years ended December 31, 1994, 1993 and 1992, respectively, are required by current accounting guidelines to be removed from Net Income in connection with determining Net Operating Cash Inflows while the related proceeds are required to be classified as investing cash inflows. The Company believes that proceeds from the sales of reserves and related assets should be considered in analyzing the elements of operating cash inflows. The current federal income tax impact of these sales transactions was calculated by the Company to be $19.8 million, $8.2 million and $8.2 million for the years ended December 31, 1994, 1993 and 1992, respectively, which entered into the overall calculation of current federal income tax. The Company believes that this federal income tax impact should also be considered in analyzing the elements of the cash flow statement. Cash paid for interest and paid (received) for income taxes was as follows for the years ended December 31: 1994 ------------------Interest (net of amount capitalized)....................... 21,576 Income taxes......................... 7,365 1993 ---------1992

10,436 1,352

10,517 (65,543)

11. BUSINESS SEGMENT INFORMATION The Company's operations are all natural gas and crude oil exploration and production related. Accordingly, such operations are classified as one business segment. Financial information by geographic area is presented below for the years ended December 31, or at December 31: 1994 ------------Gross Operating Revenues
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1993 -------------

1992 -------------

United States.................... Foreign..........................

656,546 86,763 ------------============= $ 138,001 21,640

653,929 46,316 ------------============= $

527,165 32,997 ------------============= 115,552

Operating Income (Loss) United States.................... Foreign.......................... (9,943) Total........................ Identifiable Assets United States.................... Foreign.......................... Total........................

126,410 $ (10,851)

------------$ 159,641 ============= $ 1,505,926 355,941 ------------$ 1,861,867 =============

------------$ 115,559 ============= $ 1,564,330 246,832 ------------$ 1,811,162 =============

------------$ 105,609 ============= $ 1,568,093 162,919 ------------$ 1,731,012 =============

- --------$101,136 in 1994, 1993 and 1992, respectively.

F-18 12. OTHER INCOME (EXPENSE) Other income (expense) consisted of the following for the years ended December 31: 1994 1993 1992 ----------- ----------- ----------$ 4,990 $ 5,789 $ 1,555 (3,143) (2,520) 936 ----------$ 2,783 =========== 4,248 (882) ----------$ 6,635 =========== -

Interest Income...................... Reserve Accruals..................... (2,194) Contract Settlements................. Other, Net........................... (2,837) Total........................ (3,476)

----------$ ===========

13. PRICE AND INTEREST RATE RISK MANAGEMENT Periodically, the Company enters into certain trading and non-trading activities including NYMEX-related commodity market transactions and other contracts. The non-trading portions of these activities have been designated to hedge the impact of market price fluctuations on anticipated commodity delivery volumes or other contractual commitments. Gains and losses relating to trading transactions were not material to the accompanying consolidated financial statements. All trading positions were closed subsequent to year-end. INTEREST RATE SWAP AGREEMENTS. In early 1992, the Company entered into interest rate swap agreements to hedge certain floating interest rate exposure in 1992 and 1993. This floating rate exposure arises from debt with interest payments subject to floating interest rates. (See Note 4 "Long-Term Debt"). The notional value of these interest rate swap agreements was $75 million. Effective January 1, 1993, Enron Corp. assumed the Company's remaining obligations under these swap agreements. At December 31, 1994, the Company had outstanding interest rate swap agreements with notional principal amounts of $50 million which terminate in April 1995. The interest rate swap agreements were entered into to hedge certain floating rate obligations and effectively fix the interest rate on the notional amount of debt at 8.98% and 8.92%. The estimated fair value of the outstanding swap agreements at December 31, 1994 was a negative $0.5 million. The fair value of interest rate swap agreements is based upon termination
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values obtained from third parties. FOREIGN CURRENCY CONTRACTS. The Company enters into foreign currency contracts from time to time to hedge specific currency exposure from commercial transactions. At December 31, 1994, there were no foreign currency contracts outstanding. ENERGY COMMODITY PRICE SWAPS. The Company entered into certain commodity price swap agreements to, in effect, hedge the market risk caused by fluctuations in the cost of natural gas. The agreements call for the Company to make payments to (or receive payments from) counterparties based upon the differential between a fixed and a variable price for natural gas volumes specified by the contracts. Such natural gas price swap agreements run for periods of up to ten years expiring in 1999. The Company is the fixed price payor on a notional quantity of 66 trillion British thermal units ("TBtu") of natural gas with a fair value of negative $103.7 million at December 31, 1994. The agreements were entered into to, in effect, fix the price of certain purchases which are used to supply a fixed price sales contract. Inclusive of the effect of the price swap, the differential between the escalating fixed purchase price and the escalating fixed sales price results in profit margins ranging from $1.15 per million British thermal unit ("MMBtu") to $1.44 per MMBtu on approximately 66 TBtu to be purchased and delivered for sale over the remaining term of the contracts. From time to time, the Company enters into primarily NYMEX-related commodity market transactions with affiliates of Enron Corp. to, in effect, mitigate the risk of market price fluctuations on future deliveries of certain portions of its natural gas and crude oil and condensate. At December 31, 1994, the Company had outstanding positions covering notional volumes of approximately 50 TBtu and 51 TBtu of natural gas for the years 1995 and 1996, respectively and approximately 2.5 million barrels ("MMBbl") of crude oil for the year 1995, 1.3 MMBbl of crude oil for the year 1996 and 1.1 MMBbl of crude oil for each of the years 1997 through 1999. The fair value of the positions was $30.7 million at December 31, 1994. F-19 The following table summarizes the estimated fair value of financial instruments and related transactions for non-trading activities at December 31, 1994:

CARRYING AMOUNT VALUE(1) -------------------Long-Term Debt(2).................... Interest Rate Swap Agreements(2)..... Foreign Currency Contracts........... Energy Commodity Price Swaps(3)...... Related Fixed Price Sales Contract(3)........................ NYMEX-Related Commodity Market Positions.......................... - ---------

ESTIMATED FAIR

(IN MILLIONS) $ 190.3 $ 185.7 (0.5) (103.7) 170.8 30.7

(1) Estimated fair values have been determined by using available market data and valuation methodologies. Judgment is necessarily required in interpreting market data and the use of different market assumptions or estimation methodologies may affect the estimated fair value amounts. (2) See Note 4 "Long-Term Debt." (3) The fair value of the Energy Commodity Price Swaps should be considered with the fair value of the Related Fixed Price Sales Contract in determining the overall market risk of these related business transactions. CREDIT RISK. While notional contract amounts are used to express the magnitude of price and interest rate swap agreements, the amounts potentially subject to credit risk, in the event of nonperformance by the other parties, are substantially smaller. The Company does not anticipate nonperformance by the other parties. 14. CONCENTRATION OF CREDIT RISK Substantially all of the Company's accounts receivable at December 31, 1994 result from crude oil and natural gas sales and/or joint
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interest billings to affiliate and third party companies in the oil and gas industry. This concentration of customers and joint interest owners may impact the Company's overall credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions. In determining whether or not to require collateral from a customer or joint interest owner, the Company analyzes the entity's net worth, cash flows, earnings, and credit ratings. Receivables are generally not collateralized. Historical credit losses incurred on receivables by the Company have been immaterial. F-20 ENRON OIL & GAS COMPANY SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE INDICATED) (UNAUDITED EXCEPT FOR RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES) OIL AND GAS PRODUCING ACTIVITIES The following disclosures are made in accordance with SFAS No. 69 - "Disclosures about Oil and Gas Producing Activities": OIL AND GAS RESERVES. Users of this information should be aware that the process of estimating quantities of "proved" and "proved developed" crude oil and natural gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir. The data for a given reservoir may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history, and continual reassessment of the viability of production under varying economic conditions. Consequently, material revisions to existing reserve estimates occur from time to time. Although every reasonable effort is made to ensure that reserve estimates reported represent the most accurate assessments possible, the significance of the subjective decisions required and variances in available data for various reservoirs make these estimates generally less precise than other estimates presented in connection with financial statement disclosures. Proved reserves represent estimated quantities of crude oil, condensate, natural gas and natural gas liquids that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under economic and operating conditions existing at the time the estimates were made. Proved developed reserves are proved reserves expected to be recovered, through wells and equipment in place and under operating methods being utilized at the time the estimates were made. Canadian provincial royalties are determined based on a graduated percentage scale which varies with prices and production volumes. Canadian reserves, as presented on a net basis, assume prices and royalty rates in existence at the time the estimates were made, and the Company's estimate of future production volumes. Future fluctuations in prices, production rates, or changes in political or regulatory environments could cause the Company's share of future production from Canadian reserves to be materially different from that presented. Estimates of proved and proved developed reserves at December 31, 1994, 1993 and 1992 were based on studies performed by the Company's engineering staff for reserves in the United States, Canada, Trinidad and India. Opinions by DeGolyer and MacNaughton, independent petroleum consultants, for the years ended December 31, 1994, 1993 and 1992 covering producing areas containing 59%, 65% and 69%, respectively, of proved reserves of the Company on a net-equivalent-cubic-feet-of-gas basis, indicate that the estimates of proved reserves prepared by the Company's engineering staff for the properties reviewed by DeGolyer and MacNaughton, when compared in total on a net-equivalent-cubic-feet-of-gas basis, do not differ materially from the estimates prepared by DeGolyer and MacNaughton. Such estimates by DeGolyer and MacNaughton in the aggregate varied by not more than 5% from those prepared by the Company's engineering staff. All reports by DeGolyer and MacNaughton were developed utilizing geological and engineering data provided by the Company. No major discovery or other favorable or adverse event subsequent to December 31, 1994 is believed to have caused a material change in the estimates of proved or proved developed reserves as of that date. F-21 The following table sets forth the Company's net proved and proved developed reserves at December 31 for each of the four years in the period ended December 31, 1994, and the changes in the net proved reserves for each of the three years in the period then ended as estimated by the Company's engineering staff. NET PROVED AND PROVED DEVELOPED RESERVE SUMMARY
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UNITED STATES ------------Proved reserves at December 31, 1991........................... Revisions of previous estimates.................. Purchases in place........... Extensions, discoveries and other additions............ Sales in place............... Production................... Proved reserves at December 31, Revisions of previous estimates.................. Purchases in place........... Extensions, discoveries and other additions............ Sales in place............... Production................... Proved reserves at December 31, Revisions of previous estimates.................. Purchases in place........... Extensions, discoveries and other additions............ Sales in place............... Production................... Proved reserves at December 31, ============= Proved reserves at December 31, 1991........................... Revisions of previous estimates.................. Purchases in place........... Extensions, discoveries and other additions............ Sales in place............... Production................... Proved reserves at December 31, Revisions of previous estimates.................. Purchases in place........... Extensions, discoveries and other additions............ Sales in place............... Production................... Proved reserves at December 31, Revisions of previous estimates.................. Purchases in place........... Extensions, discoveries and other additions............ Sales in place............... Production................... Proved reserves at December 31, ============= F-22 Proved developed reserves at Natural Gas (Bcf) December 31, 1991............ 13,822 365 65 2,320 (296) (2,411) ------------1,455.9 (46.3) 30.5 228.0 (27.7) (200.0) -------------

CANADA -----128.9 (4.1) 112.6 6.3 (11.2) ------

TRINIDAD ---------------

INDIA -----------------

TOTAL --------1,584.8 (50.4) 143.1 234.3 (27.7) (211.2) ---------

(31.3) 9.2 234.9 (12.5) (240.0) -------------

11.0 2.6 47.7 (1.5) (21.3) ------

101.3 (.8) --------

---------

(20.3) 11.8 383.9 (14.0) (262.1) ---------

(17.1) 18.8 233.8 (29.3) (228.6) -------------

(6.5) 9.2 50.2 (1.0) (26.3) -----====== 6,512 (885) 698 (4) (963) ------

15.0 113.9 (23.2) -------======== --------

29.3 --------========= ---------

(8.6) 57.3 397.9 (30.3) (278.1) --------========= 20,334 (520) 65 3,018 (300) (3,374) ---------

1,490 15 3,552 (3,230) (2,520) -------------

(536) 489 1,115 (23) (932) ------

2,251 (33) --------

---------

954 504 6,918 (3,253) (3,485) ---------

2,179 358 5,332 (257) (2,997) -------------

(177) 2,848 (905) -----======

455 2,687 (931) -------========

7,617 -

2,457 7,975

10,867 (257) (32) (4,865) --------- --------========= =========

1,138.5 2003.

113.0

1,251.5

EDGAR Online, Inc.

December 31, 1991............

13,002

6,484

19,486

British thermal units) in 1994, 87 billion cubic feet equivalent (96 trillion British thermal units) in 1993 and 114 billion cubic feet equivalent (126 trillion British thermal units) in 1992 associated with a volumetric production payment sold effective October 1, 1992 to be delivered over a seventy-eight month period, as revised, which period commenced October 1, 1992.

CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES. The following table sets forth the capitalized costs relating to the Company's natural gas and crude oil producing activities at December 31, 1994 and 1993:

Proved properties.................... Unproved properties.................. Total............................ Accumulated depreciation, depletion and amortization................... (1,226,175) Net capitalized costs................

1994 -------------$ 2,889,242 126,193 -------------3,015,435 (1,330,624) -------------$ 1,684,811 ==============

1993 -------------$ 2,675,419 96,801 -------------2,772,220

-------------$ 1,546,045 ==============

COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT ACTIVITIES. The acquisition, exploration and development costs disclosed in the following tables are in accordance with definitions in SFAS No. 19 "Financial Accounting and Reporting by Oil and Gas Producing Companies". Acquisition costs include costs incurred to purchase, lease, or otherwise acquire property. Exploration costs include exploration expenses, additions to exploration wells in progress, and depreciation of support equipment used in exploration activities. Development costs include additions to production facilities and equipment, additions to development wells in progress and related facilities, and depreciation of support equipment and related facilities used in development activities. The following tables set forth costs incurred related to the Company's oil and gas activities for the years ended December 31:
FOREIGN ---------------------------------------------CANADA TRINIDAD INDIA OTHER ---------- ---------- ---------- ----------

UNITED STATES ------------1994 Acquisition Costs of Properties Unproved......................... Proved........................... Total........................ Exploration Costs.................... Development Costs.................... Total........................

TOTAL -----------

45,776 17,367 ------------63,143 70,669 223,241 ------------$ 357,053 =============

6,618 4,523 ---------11,141 8,210 35,896 ---------$ 55,247 ==========

---------850 60,778 ---------$ 61,628 ==========

12,300 ---------12,300 2,302 767 ---------$ 15,369 ==========

(17) ---------(17) 11,242 564 ---------$ 11,789 ==========

52,377 34,190 ----------86,567 93,273 321,246 ----------$ 501,086 ===========

F-23 1993 Acquisition Costs of Properties Unproved......................... $

23,686

4,556

887

29,129

2003.

EDGAR Online, Inc.

Proved........................... Total........................ Exploration Costs.................... Development Costs.................... Total........................ 1992 Acquisition Costs of Properties Unproved......................... Proved........................... Total........................ Exploration Costs.................... Development Costs.................... Total........................

6,625 ------------30,311 53,918 247,705 ------------$ 331,934 =============

2,598 ---------7,154 9,096 28,045 ---------$ 44,295 ==========

---------1,367 41,262 ---------$ 42,629 ==========

------------------$ ==========

---------887 18,595 ---------$ 19,482 ==========

9,223 ----------38,352 82,976 317,012 ----------$ 438,340 ===========

21,844 25,958 ------------47,802 38,547 256,814 ------------$ 343,163 =============

1,173 39,281 ---------40,454 5,787 5,162 ---------$ 51,403 ==========

---------151 735 ---------$ 886 ==========

------------------$ ==========

3 ---------3 10,990 ---------$ 10,993 ==========

23,020 65,239 ----------88,259 55,475 262,711 ----------$ 406,445 ===========

following tables set forth results of operations for oil and gas producing activities for the years ended December 31: FOREIGN -------------------------------------------UNITED STATES CANADA TRINIDAD INDIA OTHER ------------------------------------------1994 Operating Revenues Associated Companies............. $ 315,866 $ 8,452 $ $ $ Trade............................ 115,375 42,017 35,908 509 Gains (Losses) on Sales of Reserves and Related Assets.... 54,026 (12) ------------------------------------------Total........................ 485,267 50,457 35,908 509 Exploration Expenses, including Dry Hole............................... 42,242 4,503 836 2,302 9,125 Production Costs..................... 68,998 12,776 5,083 26 Impairment of Unproved Oil and Gas Properties......................... 23,862 1,074 Depreciation, Depletion and Amortization....................... 218,433 16,572 6,572 281 ------------------------------------------Income (Loss) before Income Taxes.... 131,732 15,532 23,417 (1,819) (9,406) Income Tax Provision (Benefit)....... (8,617) 6,175 12,804 (910) (2,873) ------------------------------------------Results of Operations................ $ 140,349 $ 9,357 $ 10,613 $ (909) $ (6,533) ============= ========= ======== ======== ========= F-24 1993 Operating Revenues Associated Companies............. Trade............................ Gains (Losses) on Sales of Reserves and Related Assets.... Total........................ Exploration Expenses, including Dry Hole............................... Production Costs..................... Impairment of Unproved Oil and Gas Properties......................... Depreciation, Depletion and Amortization....................... Income (Loss) before Income Taxes.... Income Tax Provision (Benefit)....... Results of Operations................ 1992 Operating Revenues Associated Companies............. Trade............................ Gains on Sales of Reserves and

TOTAL -----------

324,318 193,809

54,014 ----------572,141 59,008 86,883 24,936 241,858 ----------159,456 6,579 ----------$ 152,877 ===========

$ 369,824 140,552 13,724 ------------524,100 35,029 75,767 19,499 234,292 ------------159,513 (15,525) ------------$ 175,038 =============

9,637 33,228

1,209

379,461 174,989

(406) --------42,459 6,657 14,063 968 14,630 --------6,141 2,265 --------$ 3,876 =========

-------1,209 1,367 1,496 387 -------(2,041) (1,020) -------$ (1,021) ========

---------------------$ ========

--------12,223 154 --------(12,377) (1,742) --------$ (10,635) =========

13,318 ----------567,768 55,276 91,326 20,467 249,463 ----------151,236 (16,022) ----------$ 167,258 ===========

$ 251,649 106,633

10,074 19,313

261,723 125,946

2003.

EDGAR Online, Inc.

Related Assets................. Total........................ Exploration Expenses, including Dry Hole............................... Production Costs..................... Impairment of Unproved Oil and Gas Properties......................... Depreciation, Depletion and Amortization.......................

6,037 ------------364,319 29,705 63,571 12,001

--------29,387 3,829 9,271 1,034

-------151 -

---------------------$ ========

--------10,357 2,101 327 --------(12,785) (4,323) --------$ (8,462) =========

6,037 ----------393,706 44,042 72,842 15,136 179,813 ----------81,873 (17,173) ----------$ 99,046 ===========

167,767 11,719 ---------------------------Income (Loss) before Income Taxes.... 91,275 3,534 (151) Income Tax Provision (Benefit)....... (13,977) 1,202 (75) ---------------------------Results of Operations................ $ 105,252 $ 2,332 $ (76) ============= ========= ======== charges, general corporate expenses and certain gathering and handling fees for each of the three years in the period ended December 31, 1994. The gathering and handling fees and other marketing net revenues are directly associated with oil and gas operations with regard to segment reporting as defined in SFAS No. 14 - "Financial Reporting for Segments of a Business Enterprise", but are not part of Disclosures about Oil and Gas Producing Activities as defined in SFAS No. 69.

F-25 STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES. The following information has been developed utilizing procedures prescribed by SFAS No. 69 and based on crude oil and natural gas reserve and production volumes estimated by the engineering staff of the Company. It may be useful for certain comparison purposes, but should not be solely relied upon in evaluating the Company or its performance. Further, information contained in the following table should not be considered as representative of realistic assessments of future cash flows, nor should the Standardized Measure of Discounted Future Net Cash Flows be viewed as representative of the current value of the Company. The future cash flows presented below are based on sales prices, cost rates, and statutory income tax rates in existence as of the date of the projections. It is expected that material revisions to some estimates of crude oil and natural gas reserves may occur in the future, development and production of the reserves may occur in periods other than those assumed, and actual prices realized and costs incurred may vary significantly from those used. Management does not rely upon the following information in making investment and operating decisions. Such decisions are based upon a wide range of factors, including estimates of probable as well as proved reserves, and varying price and cost assumptions considered more representative of a range of possible economic conditions that may be anticipated. The following table sets forth the standardized measure of discounted future net cash flows from projected production of the Company's crude oil and natural gas reserves at December 31, for the years ended December 31:
1994 - -------------Future production costs.............. (996,526) Future development costs............. (151,645) ----------Future net cash flows before income taxes.............................. 2,236,094 Discount to present value at 10% annual rate........................ (808,153) ----------Present value of future net cash flows before income taxes.......... 1,427,941 Future income taxes discounted at 10% UNITED STATES ------------(606,932) (135,768) ---------CANADA TRINIDAD ---------------(196,275) (9,596) --------(87,479) (1,781) -------INDIA --------(105,840) (4,500) --------TOTAL

1,668,387

281,179

228,498

58,030

(617,960) ----------

(106,353) ---------

(54,380) --------

(29,460) ---------

1,050,427

174,826

174,118

28,570

--------- 2003.

---------

--------

---------

EDGAR Online, Inc.

----------Standardized measure of discounted future net cash flows relating to ========== =========== F-26 1993 Future production costs.............. (915,375) Future development costs............. (194,056) ----------Future net cash flows before income taxes.............................. 2,974,856 Discount to present value at 10% annual rate........................ (1,115,837) ----------Present value of future net cash flows before income taxes.......... 1,859,019 Future income taxes discounted at 10% ----------Standardized measure of discounted future net cash flows relating to ========== =========== 1992 Future production costs.............. (679,565) Future development costs............. (207,127) ----------Future net cash flows before income taxes.............................. 2,493,780 Discount to present value at 10% annual rate........................ (881,153) ----------Present value of future net cash flows before income taxes.......... 1,612,627 Future income taxes discounted at 10% ----------Standardized measure of discounted future net cash flows relating to ========== =========== - --------the producing unit. discounted at 10% annual rate) for 1994, $189.1 million ($146.9 million discounted at 10% annual rate) for 1993 and $203.5 million ($174.5 million discounted at 10% annual rate) for 1992 related to volumes associated with a volumetric production payment sold effective October 1, 1992, as amended, to be delivered over a seventy-eight month period, as revised, which period commenced October 1, 1992. million Canada, $102.2 million Trinidad, $22.5 million India and $411.9 2003. EDGAR Online, Inc. ========= ======== ========= ========= ======== ========= ========= ======== =========

(639,760) (165,473) ----------

(230,230) (21,001) ---------

(45,385) (7,582) --------

---------

2,538,667

341,614

94,575

(951,748) ----------

(143,992) ---------

(20,097) --------

---------

1,586,919

197,622

74,478

----------

---------

--------

---------

(573,763) (194,246) ----------

(105,802) (12,881) ---------

--------

---------

2,249,179

244,601

(790,027) ----------

(91,126) ---------

--------

---------

1,459,152

153,475

----------

---------

--------

---------

million total; $540.3 million U.S., $91.7 million Canada, $35.5 million Trinidad and $667.5 million total and $394.1 million U.S., $63.0 million Canada and $457.1 million total for the years ended December 31, 1994, 1993 and 1992, respectively. 1994, 1993 and 1992, respectively representing the discounted present value at a discount rate of 10% of the "Future revenues" detailed in note (2) after deducting future income taxes.

F-27 CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS. The following table sets forth the changes in the standardized measure of discounted future net cash flows at December 31, for each of the three years in the period ended December 31, 1994.
UNITED STATES TOTAL ------------------------December 31, 1991.................... 1,156,077 Sales and transfers of oil and gas produced, net of production costs........................... (314,827) Net changes in prices and production costs................ 265,762 Extensions, discoveries, additions and improved recovery net of related costs................... 284,230 Development costs incurred........ 49,845 Revisions of estimated development costs........................... (18,134) Revisions of previous quantity estimates....................... (53,402) Accretion of discount............. 131,125 Net change in income taxes........ (20,625) Purchases of reserves in place.... 61,417 Sales of reserves in place........ (34,999) Changes in timing and other....... (69,634) ------------December 31, 1992.................... 1,436,835 Sales and transfers of oil and gas produced, net of production costs........................... (463,124) Net changes in prices and production costs................ 208,640 Extensions, discoveries, additions and improved recovery net of related costs................... $ 1,061,821 ----------$ 94,256 ----------$ ----------$ $ CANADA TRINIDAD INDIA

(294,711)

(20,116)

257,572

8,190

275,231 49,668

8,999 177

(19,540)

1,406

(45,863) 118,901 (20,548) 28,884 (34,984) (65,015) -----------1,311,416

(7,539) 12,224 (77) 32,533 (15) (4,619) ----------125,419

-----------

-----------

(434,609)

(28,802)

287

180,240

28,400

275,722 2003.

27,785

74,191

EDGAR Online, Inc.

377,698 Development costs incurred........ 72,400 Revisions of estimated development costs........................... 30,851 Revisions of previous quantity estimates....................... (20,450) Accretion of discount............. 161,263 Net change in income taxes........ (106,186) Purchases of reserves in place.... 12,169 Sales of reserves in place........ (39,638) Changes in timing and other....... (93,417) ------------December 31, 1993.................... 1,577,041 Sales and transfers of oil and gas produced, net of production costs........................... (431,244) Net changes in prices and production costs................ (620,643) Extensions, discoveries, additions and improved recovery net of related costs................... 372,887 Development costs incurred........ 84,182 Revisions of estimated development costs........................... 12,723 Revisions of previous quantity estimates....................... 7,761 Accretion of discount............. 185,902 Net change in income taxes........ 158,300 Purchases of reserves in place.... 49,108 Sales of reserves in place........ (28,441) Changes in timing and other....... (63,313) ------------December 31, 1994.................... 1,304,263 =============

58,500

13,900

32,196

(1,345)

(26,118) 145,915 (71,492) 9,462 (38,498) (75,043) -----------1,367,691

5,668 15,348 (9,795) 2,707 (1,140) (18,374) ----------159,771

(24,899) ----------49,579

-----------

(362,243)

(37,693)

(30,825)

(483)

(566,358)

(65,287)

11,002

225,366 69,900

51,006 6,700

96,515 7,582

6,792

5,931

(2,909) 158,692 191,875 16,651 (27,980) (54,403) -----------$ 1,023,074

(3,407) 19,762 19,966 3,404 (461) (2,751) ----------$ 156,941

14,077 7,448 (45,789) (6,159) ----------$ 103,430

(7,752) 29,053 ----------$ 20,818 $

============

===========

===========

===========

F-28 UNAUDITED QUARTERLY FINANCIAL INFORMATION

QUARTER ENDED ----------------------------------------------- 2003. EDGAR Online, Inc.

MARCH 31 --------1994 Net Operating Revenues............... Operating Income..................... Income before Income Taxes........... Income Tax Provision (Benefit)....... Net Income........................... Earnings Per Share of Common Stock... Average Number of Common Shares...... 1993 Net Operating Revenues............... Operating Income..................... Income before Income Taxes........... Income Tax Provision (Benefit)....... Net Income........................... Earnings Per Share of Common Stock... Average Number of Common Shares...... 1992 Net Operating Revenues............... Operating Income..................... Income before Income Taxes........... Income Tax Benefit................... Net Income........................... Earnings Per Share of Common Stock... Average Number of Common Shares...... $ 158,208 ========= $ 38,938 ========= $ 39,088 8,830 --------$ 30,258 ========= $ .19 ========= 159,840 ========= $ 136,834 ========= $ 29,633 ========= $ 28,955 (1,253) --------$ 30,208 ========= $ .19 ========= 160,000 ========= $ 98,630 ========= $ 20,936 ========= $ 14,079 (8,208) --------$ 22,287 ========= $ .15 ========= 151,800 =========

JUNE 30 --------$ 155,449 ========= $ 39,081 ========= $ 36,581 2,369 --------$ 34,212 ========= $ .21 ========= 159,859 ========= $ 140,486 ========= $ 31,517 ========= $ 29,598 (3,923) --------$ 33,521 ========= $ .21 ========= 160,000 ========= $ 106,490 ========= $ 19,855 ========= $ 11,665 (2,900) --------$ 14,565 ========= $ .10 ========= 151,800 =========

SEPT. 30 --------$ 160,683 ========= $ 52,020 ========= $ 50,497 9,529 --------$ 40,968 ========= $ .26 ========= 159,777 ========= $ 152,647 ========= $ 38,451 ========= $ 37,168 1,412 --------$ 35,756 ========= $ .22 ========= 160,000 ========= $ 111,840 ========= $ 24,374 ========= $ 18,639 (1,960) --------$ 20,599 ========= $ .13 ========= 154,533 =========

DEC. 31 --------$ 151,483 ========= $ 29,602 ========= $ 27,769 (14,791) --------$ 42,560 ========= $ .27 ========= 159,902 ========= $ 151,053 ========= $ 15,958 ========= $ 16,552 (21,988) --------$ 38,540 ========= $ .24 ========= 159,865 ========= $ 142,066 ========= $ 40,444 ========= $ 35,461 (4,668) --------$ 40,129 ========= $ .25 ========= 160,000 =========

F-29 SCHEDULE II ENRON OIL & GAS COMPANY SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (IN THOUSANDS)
=================================================================================================== COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - --------------------------------------------------------------------------------------------------ADDITIONS DEDUCTIONS BALANCE AT CHARGED TO FOR PURPOSE FOR BALANCE AT BEGINNING OF COSTS AND WHICH RESERVES END OF DESCRIPTION YEAR EXPENSES WERE CREATED YEAR - --------------------------------------------------------------------------------------------------1994 2003. EDGAR Online, Inc.

Reserves deducted from assets to which they apply Revaluation of Accounts Receivable.....................

$ 1,020 ======== ========

$ 2 ======== ========

$ ========= =========

$ 1,022 ======== ========

1993 Reserves deducted from assets to which they apply Revaluation of Accounts Receivable.....................

$ ======== ========

$ 1,020 ======== ========

$ ========= =========

$ 1,020 ======== ========

1992 Reserves deducted from assets to which they apply Revaluation of Accounts Receivable.....................

$ 5,656 ======== ========

$ 600 ======== ========

$ 6,256 ========= =========

$ ======== ========

- ---------

S-1 EXHIBITS Exhibits not incorporated herein by reference to a prior filing are designated by an asterisk (*) and are filed herewith; all exhibits not so designated are incorporated herein by reference to the Company's Form S-1 Registration Statement, Registration No. 33-30678, filed on August 24, 1989 ("Form S-1"), or as otherwise indicated.

3.1(a)

Restated Certificate of Incorporation of Enron Oil & Gas Company (Exhibit 3.1 to Form S-1). Certificate of Amendment of Restated Certificate of Incorporation of Enron Oil & Gas Company (Exhibit 4.1(b) to Form S-8 Registration Statement, Registration No. 33-52201, filed on February 8, 1994). Certificate of Amendment of Restated Certificate of Incorporation of Enron Oil & Gas Company (Exhibit 4.1(c) to Form S-8 Registration Statement, Registration No. 33-58103, filed on March 15, 1995). Bylaws of Enron Oil & Gas Company. Specimen of Certificate evidencing the Common Stock (Exhibit 3.3 to Form S-1). Promissory Note due May 1, 1996, dated May 1, 1991 (Exhibit 4.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991). Amended and Restated Enron Oil & Gas Company 1994 Stock Plan (Exhibit 4.3 to Form S-8 Registration Statement, Registration No. 33-58103, filed on March 15, 1995). Services Agreement, dated as of January 1, 1994, between Enron Oil & Gas Company and Enron Corp. (Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993).
2003. EDGAR Online, Inc.

3.1(b)

3.1(c)

3.2* 3.3

4.1

4.3

10.1

10.2

Stock Restriction and Registration Agreement dated as of August 23, 1989 (Exhibit 10.2 to Form S-1). Tax Allocation Agreement dated as of August 23, 1989 (Exhibit 10.3 to Form S-1), and First Amended and Tax Allocation Agreement dated as of August 9, 1991, as amended on February 6, 1992 (Exhibit 10.3 to Form S-1 Registration Statement, Registration No. 33-50462, filed on August 5, 1992).

10.3 Restated

10.4 (Exhibit

Enron Corp. Deferral Plan dated December 10, 1985 10.12 to Form S-1).

10.5 10.7

Enron Corp. 1988 Stock Plan (Exhibit 10.13 to Form S-1). Enron Corp. 1984 Stock Option Plan (Exhibit 10.15 to Form S-1). Enron Corp. 1986 Stock Option Plan (Exhibit 10.16 to Form S-1). Employment Agreement between Enron Oil & Gas Company and Forrest Hoglund, dated as of September 1, 1987, as (Exhibit 10.19 to Form S-1), and Second and Third Amendments to Employment Agreement dated June 30, 1989

10.8

10.9(a) amended

and February 14, 1992, respectively (Exhibit 10.10 to Form S-1 Registration Statement, Registration No. 33-50462, filed on August 5, 1992). 10.9(b)* 4th Amendment to Employment Agreement dated December 14, 1994, among Enron Corp., Enron Oil & Gas Company and Forrest Hoglund. Fuel Supply Contract, dated as of June 30, 1986, by and between Enron Oil & Gas Company, HNG Oil Company, Petroleum Corporation and Enron Cogenration One Company, as amended (Exhibit 10.23 to Form S-1). 10.11 Gas Sales Contract dated September 2, 1987 between Enron Oil & Gas Company and Cogenron Inc., as amended (Exhibit 10.24 to Form S-1). Letter Agreement dated August 20, 1987 between Enron Oil Gas Company and Panhandle Gas Company (Exhibit 10.25 to Form S-1). E-1 10.13 Pension Program for Enron Corp. Deferral Plan Participants, effective January 1, 1985, as amended (Exhibit 10.29 to Form S-1).
2003. EDGAR Online, Inc.

10.10 BelNorth

10.12 &

10.14

Enron Oil & Gas Company 1993 Nonemployee Director Stock Option Plan (Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). Credit Agreement, dated as of March 11, 1994, among Enron Oil & Gas Company, the Banks named therein and Texas Commerce Bank, National Association, as Administrative Agent and Promissory Note due January 15, 1998, dated March 11, 1994 to the order of Texas Commerce Bank National Association, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of The Bank of York, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of The Bank of Nova Scotia, Promissory Note due January 15, 1998, dated March 11,

10.15(a)

New

1994 to the order of Credit Lyonnais Cayman Islands Branch, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of Credit Suisse, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of The First National Bank of Chicago, and Promissory Note due January 15, 1998, dated March 11, 1994 to the order of Bank of America National Trust and Savings Association (Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.15(b)* of Canada and Promissory Note due January 15, 1998, dated April 14, 1994, to the order of Texas Commerce Bank National Association and Promissory Note due January 15, 1998, dated April 14, 1994, to the order of Royal Bank of Canada. 10.16 of Corp. and Enron Oil & Gas Market- ing, Inc. (Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991), Confirmation dated June 14, 1992 (Exhibit 10.17 to Form S-1 Registration Statement, Registration No. 33-50462, filed on August 5, 1992) and Confirmations dated March 25, 1991, April 25, 1991, and September 23, 1992 (assigned to Enron Risk Management Services Corp. by Enron Finance Corp. pursuant to an Assignment and Assumption Agreement, dated as of November 1, 1993, by and between Enron Finance Corp., Enron Risk Management Services Corp. and Enron Oil & Gas Marketing, Inc.). (Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.17 Assignment and Assumption Agreement, dated as of November 1, 1993, by and between Enron Oil & Gas Marketing, Inc., Enron Oil & Gas Company and Enron Risk Management
2003. EDGAR Online, Inc.

Assignment and Acceptance dated April 14, 1994, between Texas Commerce Bank National Association and Royal Bank

Interest Rate and Currency Exchange Agreement, dated as June 1, 1991, between Enron Risk Management Services

Services

Corp. (Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.18 ISDA Master Agreement, dated as of November 1, 1993, between Enron Oil & Gas Company and Enron Risk Management Services Corp., and Confirmation Nos. 1268.0, 1286.0, 1291.0, 1292.0, 1304.0, 1305.0, 1321.0, 1335.0, 1338.0, 1370.0, 1471.0, 1485.0, 1486.0, 1494.0, 1495.0, 1509.0, 1514.0, 1533.01, 1569.0, 1986.0, 2217.0, 2227.0, 2278.0, 2299.0, 2372.0, 2647.0 (Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 1993). 10.19 1990 (Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990). 10.22 Gas Sales Agreement between Enron Gas Marketing, Inc. and Enron Oil & Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.38 to Form S-1). Gas Purchase Agreement between Enron Oil & Gas Company Enron Oil & Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.41 to Form S-1). 10.24 and Gas Purchase Agreement between Enron Oil & Gas Company Enron Oil & Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.42 to Form S-1). E-2 10.25 Enron Corp. 1991 Stock Plan (Exhibit 10.08 to Enron Corp. Annual Report on Form 10-K for the year ended December 31, 1991). Enron Corp. 1988 Deferral Plan (Exhibit 10.49 to Form S-1). Form of Enron Corp. Long-Term Incentive Plan Effective as of January 1, 1987 (Exhibit 10.50 to Form S-1). Enron Executive Supplemental Survivor Benefits Plan Effective January 1, 1987 (Exhibit 10.51 to Form S-1). 1988 FlexPerq Program Summary (Exhibit 10.52 to Form Letter Agreement between Colorado Interstate Gas Company and Enron Oil & Gas Marketing, Inc. dated November 1,

31,

10.23 and

10.26

10.27

10.28

10.29 S-1). 10.30

Credit Agreement between Enron Corp. and Enron Oil & Gas Company dated September 29, 1992 (Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). Credit Agreement between Enron Oil & Gas Company and
2003. EDGAR Online, Inc.

10.31 Enron

Corp. dated September 29, 1992 (Exhibit 10.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.33 Swap Agreement between Banque Paribas and Enron Oil & Gas Company, dated as of December 5, 1990 (Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990), and Confirmations dated March 25, 1991 and April 25, 1991 (Exhibit 10.37 to Form S-1 Registration Statement, Registration No. 33-50462, filed on August 5, 1992). Enron Oil & Gas Company 1992 Stock Plan (Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991). Enron Corp. 1992 Deferral Plan (Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991). Conveyance of Production Payment, dated September 25, 1992, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). First Amendment to Conveyance of Production Payment, effective April 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.36(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.36(c) Second Amendment to Conveyance of Production Payment, dated effective July 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.36(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). Third Amendment to Conveyance of Production Payment, effective October 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.36(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.37(a) Hydrocarbon Exchange Agreement dated September 25, 1992, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.35 to the Annual Report on Form 10-K for the year ended December 31, 1992). 10.37(b)* Amendment to Hydrocarbon Exchange Agreement dated effective as of January 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited
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10.34

10.35

10.36(a)

10.36(b) dated

10.36(d) dated

Company's

Partnership.

10.37(c)*

First Amendment to Hydrocarbon Exchange Agreement dated effective as of April 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited

Partnership. 10.37(d)* Second Amendment to Hydrocarbon Exchange Agreement dated effective as of July 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited

Partnership. 10.37(e)* Amendment to Hydrocarbon Exchange Agreement dated effective as of August 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited

Partnership. E-3 10.37(f) Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.38 Purchase and Sale Agreement, dated September 25, 1992, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.36 to the Annual Report on Form 10-K for the year ended December 31, 1992). 10.39(a) Production and Delivery Agreement, dated September 25, 1992, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). First Amendment to Production and Delivery Agreement, dated effective April 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.39(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). Second Amendment to Production and Delivery Agreement, dated effective July 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.39(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). Third Amendment to Production and Delivery Agreement, dated effective October 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.39(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). Credit Agreement, dated as of March 8, 1994 between Enron Gas & Oil Trinidad Limited and Caribbean Regional Development Investment Trust, and Request for Advance No.
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Fourth Amendment to Hydrocarbon Exchange Agreement, dated effective October 1, 1993, between Enron Oil & Gas

Company's

10.39(b)

10.39(c)

10.39(d)

10.40

1, dated March 4, 1993, and Request for Advance No. 2, dated March 4, 1993 (Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.41 Promissory Note due May 1, 1998, dated as of March 8, 1994, to the order of Caribbean Regional Development Investment Trust (Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December 31,

1993). 10.42 1994 Promissory Note due May 1, 1998, dated as of March 8, to the order of Caribbean Regional Development Investment Trust (Exhibit 10.42 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.43 Letter of Credit and Reimbursement Agreement, dated March 8, 1994, between Enron Gas & Oil Trinidad Limited and Credit Suisse (Exhibit 10.43 to the Company's Annual Report on Form 10-K for the year ended December 31,

1993). 10.44 Parent Guaranty, dated March 8, 1994 between Enron Oil & Gas Company and Credit Suisse (Exhibit 10.44 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). Letter Loan Agreement dated as of May 27, 1994, between Enron Gas & Oil Trinidad Limited and The Bank of Nova Scotia. Promissory Note due May 27, 1999, dated as of May 31, 1994, to the order of The Bank of Nova Scotia. Promissory Note due May 27, 1999, dated as of January 10, 1995, to the order of The Bank of Nova Scotia. Guaranty dated as of May 27, 1994, between Enron Oil & Company and The Bank of Nova Scotia. 10.47* Attorney Opinion Letter of Enron Oil & Gas International, Inc. dated December 18, 1994 (Panna and Mukta Fields). Certificate of Enron Oil & Gas India Ltd. dated December 22, 1994 (Panna and Mukta Fields). E-4 10.49* Financial and Performance Guarantee of Enron Oil & Gas International, Inc. dated December 22, 1994 (Panna and Mukta Fields). Joint Operating Agreement effective as of December 22, 1994, among Oil & Natural Gas Corporation Limited, Enron Oil & Gas India Ltd. and Reliance Industries Limited for contract area identified as Panna and Mukta Fields (Appendices B-1 and B-2 have been intentionally omitted.
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10.45(a)*

10.45(b)*

10.45(c)*

10.46* Gas

10.48*

10.50*

The Company hereby agrees to furnish a copy of either appendix to the Commission upon request). 10.51* 1994, Production Sharing Contract dated as of December 22, among The Government of India, Oil & Natural Gas Corporation Limited, Reliance Industries Limited and Enron Oil & Gas India Ltd., for contract area identified as Panna and Mukta Fields [Appendices B-1 and B-2 and Appendix G (Figures G-1, VIIA-1 to 10, VIIB-1 to 20 and VIII-3) have all been intentionally omitted. The Company hereby agrees to furnish a copy of any such appendix and/or figure to the Commission upon request]. 10.52* Attorney Opinion Letter of Enron Oil & Gas International, Inc. dated December 18, 1994 (Tapti Fields). Certificate of Enron Oil & Gas India Ltd. dated December 22, 1994 (Tapti Fields). Financial and Performance Guarantee of Enron Oil & Gas International, Inc. dated December 22, 1994 (Tapti Fields). Joint Operating Agreement effective as of December 22, 1994, among Oil & Natural Gas Corporation Limited, Enron Oil & Gas India Ltd. and Reliance Industries Limited, for contract area identified as Mid-Tapti and South-Tapti Gas Fields [Appendix B (Figure B-1) has been intentionally omitted. The Company hereby agrees to furnish a copy of such appendix to the Commission upon request]. Production Sharing Contract dated as of December 22, among The Government of India, Oil & Natural Gas Corporation Limited, Reliance Industries Limited and Enron Oil & Gas India Ltd., for contract area identified as Mid and South Tapti Field [Appendix B, Appendix G (Figures G-1, VII-1 to 11, VIII-2 to 4 and Appendix 3) have all been intentionally omitted. The Company hereby agrees to furnish a copy of any such appendix, to the Commission upon request]. 22* 23.1* 23.2* List of subsidiaries. Consent of DeGolyer and MacNaughton. Opinion of DeGolyer and MacNaughton dated January 13, 1995. Consent of Arthur Andersen LLP. Powers of Attorney. Financial Data Schedule.

10.53*

10.54*

10.55*

10.56* 1994,

23.3* 24* 27* -

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E-5 SIGNATURES ]PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 22ND DAY OF MARCH, 1995. ENRON OIL & GAS COMPANY (REGISTRANT)

By

WALTER C. WILSON (WALTER C. WILSON) SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

/s/

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF REGISTRANT AND IN THE CAPACITIES WITH ENRON OIL & GAS COMPANY INDICATED AND ON THE 22ND DAY OF MARCH, 1995. SIGNATURE - ----------------------/s/FORREST E. HOGLUND (FORREST E. HOGLUND) TITLE -------------------------------Chairman of the Board, President and Chief Executive Officer and Director (Principal Executive Officer) Senior Vice President and Chief Financial Officer (Principal Financial Officer) Vice President and Controller (Principal Accounting Officer) Director

/s/WALTER C. WILSON (WALTER C. WILSON)

/s/BEN B. BOYD (BEN B. BOYD) FRED C. ACKMAN* (FRED C. ACKMAN) RICHARD D. KINDER* (RICHARD D. KINDER) KENNETH L. LAY* (KENNETH L. LAY) EDWARD RANDALL, III* (EDWARD RANDALL, III) *By /s/ANGUS H. DAVIS (ANGUS H. DAVIS) (ATTORNEY-IN-FACT FOR PERSONS INDICATED)

Director

Director

Director

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 2003.

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EXHIBIT 3.2 BYLAWS OF ENRON OIL & GAS COMPANY A Delaware Corporation Date of Adoption August 23, 1989 As Amended December 12, 1990 and February 8, 1994

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BYLAWS

Table of Contents Page ---Article I. Section Section Article II. Section Section Section Section Section Section Section Section Section Section Section Section

OFFICES 1. 2. Registered Office Other Offices 1 1

STOCKHOLDERS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Place of Meetings Quorum; Adjournment of Meetings Annual Meetings Special Meetings Record Date Notice of Meeting Stockholder List Proxies Voting; Elections; Inspectors Conduct of Meetings Treasury Stock Business to Be Brought Before the Annual Meeting 1 1 2 2 2 3 3 3 4 5 5 5

Article III. Section Section Section Section Section Section Section Section Section Section Section Section

BOARD OF DIRECTORS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Power; Number; Term of Office Quorum; Voting Place of Meetings; Order of Business First Meeting Regular Meetings Special Meetings Nomination of Directors Removal Vacancies; Increases in the Number of Directors Compensation Action Without a Meeting; Telephone Conference Meeting Approval or Ratification of Acts or Contracts by Stockholders 6 7 7 7 7 7 8 9 9 9 9 10

Article IV. Section Section Section Section Section

COMMITTEES 1. 2. 3. 4. 5. Executive Committee Audit Committee Other Committees Procedure; Meetings; Quorum Substitution and Removal of Members; Vacancies 10 11 11 11 11

Article V. Section Section

OFFICERS 1. 2. Number, Titles and Term of Office Powers and Duties of the Chairman
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12

Section

3.

Section Section Section Section Section Section Section Section Section Article VI. Section Section Section Section Section

4. 5. 6. 7. 8. 9. 10. 11. 12.

of the Board Powers and Duties of the President, President-North American Operations, and President-International Operations Powers and Duties of Vice Chairman of the Board Vice Presidents General Counsel Secretary Deputy Corporate Secretary and Assistant Secretaries Treasurer Assistant Treasurers Action with Respect to Securities of Other Corporations Delegation

12

12 13 13 13 14 14 14 14 15 15

CAPITAL STOCK 1. 2. 3. 4. 5. Certificates of Stock Transfer of Shares Ownership of Shares Regulations Regarding Certificates Lost or Destroyed Certificates -315 16 16 16 16

Article VII. Section Section Section Section Section Section Article VIII.

MISCELLANEOUS PROVISIONS 1. 2. 3. 4. 5. 6. Fiscal year Corporate Seal Notice and Waiver of Notice Facsimile Signatures Reliance upon Books, Reports and Records Application of Bylaws 16 17 17 17 17 18 18

AMENDMENTS

-4BYLAWS OF ENRON OIL & GAS COMPANY Article I OFFICES SECTION 1. REGISTERED OFFICE. The registered office of the Corporation required by the General Corporation Law of the State of Delaware to be maintained in the State of Delaware shall be the registered office named in the original Certificate of Incorporation of the Corporation, or such other office as may be designated from time to time by the Board of Directors in the manner provided by law. SECTION 2. OFFICES. The Corporation may also have offices at such other places both within and without the state of incorporation of the Corporation as the Board of Directors may from time to time determine or the business of the Corporation may require.

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Article II STOCKHOLDERS SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders shall be held at the principal office of the Corporation, or at such other place within or without the state of incorporation of the Corporation as shall be specified or fixed in the notices or waivers of notice thereof. SECTION 2. QUORUM; ADJOURNMENT OF MEETINGS. Unless otherwise required by law or provided in the Certificate of Incorporation or these Bylaws, (i) the holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at any meeting of stockholders for the transaction of business, (ii) in all matters other than election of directors, the affirmative vote of the holders of a majority of such stock so present or represented at any meeting of stockholders at which a quorum is present shall constitute the act of the stockholders, and (iii) where a separate vote by a class or classes is required, a majority of the outstanding shares of such class or classes, present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter and the affirmative vote of the majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, subject to the provisions of clauses (ii) and (iii) above. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Notwithstanding the other provisions of the Certificate of Incorporation or these Bylaws, the chairman of the meeting or the holders of a majority of the issued and outstanding stock, present in person or represented by proxy and entitled to vote thereat, at any meeting of stockholders, whether or not a quorum is present, shall have the power to adjourn such meeting from time to time, without any notice other than announcement at the meeting of the time and place of the holding of the adjourned meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at such meeting. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally called. SECTION 3. ANNUAL MEETINGS. An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place (within or without the state of incorporation of the Corporation), on such date, and at such time as the Board of Directors shall fix and set forth in the notice of the meeting, which date shall be within thirteen (13) months subsequent to the last annual meeting of stockholders. SECTION 4. SPECIAL MEETINGS. Unless otherwise provided in the Certificate of Incorporation, special meetings of the stockholders for any purpose or purposes may be called at any time by the Chairman of the Board, by the President, by the Vice Chairman of the Board, by a majority of the Board of Directors, or by a majority of the executive committee (if any), at such time and at such place as may be stated in the notice of the meeting. A special meeting of stockholders shall be called by the Chairman of the Board, the President or the Secretary upon written request therefor, stating the purpose(s) of the meeting, delivered to such officer and signed by the holder(s) of at least ten percent (10%) of the issued and outstanding stock entitled to vote at such meeting. Business transacted at a special meeting shall be confined to the purpose(s) stated in the notice of such meeting. -2SECTION 5. RECORD DATE. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors of the Corporation may fix a date as the record date for any such determination of stockholders, which record date shall not precede the date on which the resolutions fixing the record date are adopted and which record date shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting of stockholders, nor more than sixty (60) days prior to any other action. If the Board of Directors does not fix a record date for any meeting of the stockholders, the record date for determining stockholders entitled to notice of or to vote at such meeting shall be at the close of business on the day next preceding the day on which notice is given, or, if in accordance with Article VII, Section 3 of these Bylaws notice is waived, at the close of business on the day next preceding the day on which the meeting is held. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided,
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however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 6. NOTICE OF MEETINGS. Written notice of the place, date and hour of all meetings, and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given by or at the direction of the Chairman of the Board, the President, the Vice Chairman of the Board, the Secretary or the other person(s) calling the meeting to each stockholder entitled to vote thereat not less than ten (10) nor more than sixty (60) days before the date of the meeting. Such notice may be delivered either personally or by mail. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. SECTION 7. STOCKHOLDER LIST. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in the name of such stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The stockholder list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. -3SECTION 8. PROXIES. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy. Proxies for use at any meeting of stockholders shall be filed with the Secretary, or such other officer as the Board of Directors may from time to time determine by resolution, before or at the time of the meeting. All proxies shall be received and taken charge of and all ballots shall be received and canvassed by the secretary of the meeting, who shall decide all questions touching upon the qualification of voters, the validity of the proxies, and the acceptance or rejection of votes, unless an inspector or inspectors shall have been appointed by the chairman of the meeting, in which event such inspector or inspectors shall decide all such questions. No proxy shall be valid after three (3) years from its date, unless the proxy provides for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power. Should a proxy designate two or more persons to act as proxies, unless such instrument shall provide the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all the powers of voting or giving consents thereby conferred, or if only one be present, then such powers may be exercised by that one; or, if an even number attend and a majority do not agree on any particular issue, each proxy so attending shall be entitled to exercise such powers in respect of such portion of the shares as is equal to the reciprocal of the fraction equal to the number of proxies representing such shares divided by the total number of shares represented by such proxies. SECTION 9. VOTING; ELECTIONS; INSPECTORS. Unless otherwise required by law or provided in the Certificate of Incorporation, each stockholder shall on each matter submitted to a vote at a meeting of stockholders have one vote for each share of stock entitled to vote which is registered in his name on the record date for the meeting. For the purposes hereof, each election to fill a directorship shall constitute a separate matter. Shares registered in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the bylaws (or comparable instrument) of such corporation may prescribe, or in the absence of such provision, as the Board of Directors (or comparable body) of such corporation may determine. Shares registered in the name of a deceased person may be voted by the executor or administrator of such person's estate, either in person or by proxy. All voting, except as required by the Certificate of Incorporation or where otherwise required by law, may be by a voice vote; provided, however, upon request of the chairman of the meeting or upon demand therefor by stockholders holding a majority of the issued and outstanding stock present in person or by proxy at any meeting a stock -4vote shall be taken. Every stock vote shall be taken by written ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. All elections of directors shall be by written ballots, unless otherwise provided in the Certificate of Incorporation. At any meeting at which a vote is taken by written ballots, the chairman of the meeting may appoint one or more inspectors, each of whom shall subscribe an oath or affirmation to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of such inspector's ability. Such inspector shall receive the written ballots, count the votes and make and sign a certificate of the result thereof. The chairman of the meeting may appoint any person to serve as inspector, except no candidate for the office of director shall be appointed as an inspector. Unless otherwise provided in the Certificate of Incorporation, cumulative voting for the election of directors shall be prohibited.

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SECTION 10. CONDUCT OF MEETINGS. The meetings of the stockholders shall be presided over by the Chairman of the Board, or if the Chairman of the Board is not present, by the President, or if the President is not present, by the Vice Chairman of the Board, or if neither the Chairman of the Board, the President nor the Vice Chairman of the Board is present, by a chairman elected at the meeting. The Secretary of the Corporation, if present, shall act as secretary of such meetings, or if the Secretary is not present, the Deputy Corporate Secretary or an Assistant Secretary shall so act; if neither the Secretary or the Deputy Corporate Secretary or an Assistant Secretary is present, then a secretary shall be appointed by the chairman of the meeting. The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to the chairman in order. SECTION 11. TREASURY STOCK. The Corporation shall not vote, directly or indirectly, shares of its own stock owned by it and such shares shall not be counted for quorum purposes. Nothing in this Section 11 shall be construed as limiting the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. SECTION 12. BUSINESS TO BE BROUGHT BEFORE THE ANNUAL MEETING. To be properly brought before the annual meeting of stockholders, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 12 of Article II, who shall be entitled to vote at such -5meeting and who complies with the notice procedures set forth in this Section 12 of Article II. In addition to any other applicable requirements, for business to be brought before an annual meeting by a stockholder of the Corporation, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders of the Corporation. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (iii) the acquisition date, the class and the number of shares of voting stock of the Corporation which are owned beneficially by the stockholder, (iv) any material interest of the stockholder in such business, and (v) a representation that the stockholder intends to appear in person or by proxy at the meeting to bring the proposed business before the meeting. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 12. The chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 12 of Article II, and if the chairman should so determine, the chairman shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 12 of Article II, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 12. Article III BOARD OF DIRECTORS SECTION 1. POWER; NUMBER; TERM OF OFFICE. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, and subject to the restrictions imposed by law or the Certificate of Incorporation, the Board of Directors may exercise all the powers of the Corporation. The number of directors which shall constitute the whole Board of Directors shall -6be determined from time to time by the Board of Directors (provided that no decrease in the number of directors which would have the effect of shortening the term of an incumbent director may be made by the Board of Directors). If the Board of Directors makes no such determination, the number of directors shall be three. Each director shall hold office for the term for which such director is elected, and until such Director's successor shall have been elected and qualified or until such Director's earlier death, resignation or removal.
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Unless otherwise provided in the Certificate of Incorporation, directors need not be stockholders nor residents of the state of incorporation of the Corporation. SECTION 2. QUORUM; VOTING. Unless otherwise provided in the Certificate of Incorporation, a majority of the total number of directors shall constitute a quorum for the transaction of business of the Board of Directors and the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 3. PLACE OF MEETINGS; ORDER OF BUSINESS. The directors may hold their meetings and may have an office and keep the books of the Corporation, except as otherwise provided by law, in such place or places, within or without the state of incorporation of the Corporation, as the Board of Directors may from time to time determine. At all meetings of the Board of Directors business shall be transacted in such order as shall from time to time be determined by the Chairman of the Board, or in the Chairman of the Board's absence by the President (should the President be a director), or in the President's absence by the Vice Chairman of the Board, or by the Board of Directors. SECTION 4. FIRST MEETING. Each newly elected Board of Directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of the stockholders. Notice of such meeting shall not be required. At the first meeting of the Board of Directors in each year at which a quorum shall be present, held next after the annual meeting of stockholders, the Board of Directors shall elect the officers of the Corporation. SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times and places as shall be designated from time to time by the Chairman of the Board or, in the absence of the Chairman of the Board, by the President (should the President be a director), or in the President's absence, by the Vice Chairman of the Board. Notice of such regular meetings shall not be required. SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President (should the President be a director) -7or the Vice Chairman of the Board or, on the written request of any two directors, by the Secretary, in each case on at least twenty-four (24) hours personal, written, telegraphic, cable or wireless notice to each director. Such notice, or any waiver thereof pursuant to Article VII, Section 3 hereof, need not state the purpose or purposes of such meeting, except as may otherwise be required by law or provided for in the Certificate of Incorporation or these Bylaws. Meetings may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in writing. SECTION 7. NOMINATION OF DIRECTORS. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 7 of Article III, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section 7 of Article III. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation (i) with respect to an election to be held at the annual meeting of the stockholders of the Corporation, 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders of the Corporation, and (ii) with respect to an election to be held at a special meeting of stockholders of the Corporation for the election of directors, not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever first occurs. Such stockholder's notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, all information relating to the person that is required to be disclosed in solicitations for proxies for election of directors, or is otherwise required, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including the written consent of such person to be named in the proxy statement as a nominee and to serve as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such stockholder, and (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. In the event that a person is validly designated as nominee to the Board and shall thereafter become unable or unwilling to stand for election to the Board of Directors, -8the Board of Directors or the stockholder who proposed such nominee, as the case may be, may designate a substitute nominee.
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No person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 7 of Article III. The chairman of the meeting of stockholders shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws, and if the chairman should so determine, the chairman shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 7 of Article III, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 7 of Article III. SECTION 8. REMOVAL. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. SECTION 9. VACANCIES; INCREASES IN THE NUMBER OF DIRECTORS. Unless otherwise provided in the Certificate of Incorporation, vacancies existing on the Board of Directors for any reason and newly created directorships resulting from any increase in the authorized number of directors may be filled by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director; and any director so chosen shall hold office until the next annual election and until such Director's successor shall have been elected and qualified, or until such Director's earlier death, resignation or removal. SECTION 10. COMPENSATION. Directors and members of standing committees may receive such compensation as the Board of Directors from time to time shall determine to be appropriate, and shall be reimbursed for all reasonable expenses incurred in attending and returning from meetings of the Board of Directors. SECTION 11. ACTION WITHOUT A MEETING; TELEPHONE CONFERENCE MEETING. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or any committee designated by the Board of Directors, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Such consent shall have the same force and effect as a unanimous vote at a meeting, and may be stated as such in any document or instrument filed with the Secretary of State of the state of incorporation of the Corporation. -9Unless otherwise restricted by the Certificate of Incorporation, subject to the requirement for notice of meetings, members of the Board of Directors, or members of any committee designated by the Board of Directors, may participate in a meeting of such Board of Directors or committee, as the case may be, by means of a conference telephone connection or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. SECTION 12. APPROVAL OR RATIFICATION OF ACTS OR CONTRACTS BY STOCKHOLDERS. The Board of Directors in its discretion may submit any act or contract for approval or ratification at any annual meeting of the stockholders, or at any special meeting of the stockholders called for the purpose of considering any such act or contract, and any act or contract that shall be approved or be ratified by the vote of the stockholders holding a majority of the issued and outstanding shares of stock of the Corporation entitled to vote and present in person or by proxy at such meeting (provided that a quorum is present) shall be as valid and as binding upon the Corporation and upon all the stockholders as if it has been approved or ratified by every stockholder of the Corporation. Article IV COMMITTEES SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate an Executive Committee consisting of one or more of the directors of the Corporation, one of whom shall be designated chairman of the Executive Committee. During the intervals between the meetings of the Board of Directors, the Executive Committee shall possess and may exercise all the powers of the Board of Directors, including the power to authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that the Executive Committee shall not have the power or authority of the Board of Directors in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution of the Corporation, amending, altering or repealing these Bylaws or adopting new bylaws for the Corporation or otherwise acting where action by the Board of Directors is specified by the Delaware General Corporation Law. The Executive Committee shall also have, and may exercise,
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all the powers of the Board of Directors, except as aforesaid, whenever a quorum of the Board of Directors shall fail to be -10present at any meeting of the Board. SECTION 2. AUDIT COMMITTEE. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate an Audit Committee consisting of one or more of the directors of the Corporation, one of whom shall be designated chairman of the Audit Committee. The Audit Committee shall have and may exercise such powers and authority as provided in the resolution creating it and as determined from time to time by the Board of Directors. SECTION 3. OTHER COMMITTEES. The Board of Directors may, by resolution passed from time to time by a majority of the whole Board of Directors, designate such other committees as it shall see fit consisting of one or more of the directors of the Corporation, one of whom shall be designated chairman of each such committee. Any such committee shall have and may exercise such powers and authority as provided in the resolution creating it and as determined from time to time by the Board of Directors. SECTION 4. PROCEDURE; MEETINGS; QUORUM. Any committee designated pursuant to this Article IV shall keep regular minutes of its actions and proceedings in a book provided for that purpose and report the same to the Board of Directors at its meeting next succeeding such action, shall fix its own rules or procedures, and shall meet at such times and at such place or places as may be provided by such rules, or by such committee or the Board of Directors. Should a committee fail to fix its own rules, the provisions of these Bylaws, pertaining to the calling of meetings and conduct of business by the Board of Directors, shall apply as nearly as may be. At every meeting of any such committee, the presence of a majority of all the members thereof shall constitute a quorum, except as provided in Section 5 of this Article IV, and the affirmative vote of a majority of the members present shall be necessary for the adoption by it of any resolution. SECTION 5. SUBSTITUTION AND REMOVAL OF MEMBERS; VACANCIES. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. The Board of Directors shall have the power at any time to remove any member(s) of a committee and to appoint other directors in lieu of the person(s) so removed and shall also have the power to fill vacancies in a committee. -11Article V OFFICERS SECTION 1. NUMBER, TITLES AND TERM OF OFFICE. The officers of the Corporation shall be a Chairman of the Board, a President, a President-North American Operations, a President-International Operations, one or more Vice Presidents (any one or more of whom may be designated Executive Vice President or Senior Vice President), a General Counsel, a Treasurer, a Secretary and such other officers as the Board of Directors may from time to time elect or appoint (including, but not limited to, a Vice Chairman of the Board, a Deputy Corporate Secretary, one or more Assistant Secretaries and one or more Assistant Treasurers). Each officer shall hold office until such officer's successor shall be duly elected and shall qualify or until such officer's death or until such officer shall resign or shall have been removed. Any number of offices may be held by the same person, unless the Certificate of Incorporation provides otherwise. Except for the Chairman of the Board and the Vice Chairman of the Board, no officer need be a director. SECTION 2. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall be the chief executive officer of the Corporation. Subject to the control of the Board of Directors and the Executive Committee (if any), the Chairman of the Board shall have general executive charge, management and control of the properties, business and operations of the Corporation with all such powers as may be reasonably incident to such responsibilities; may agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation and may sign all certificates for shares of capital stock of the Corporation; and shall have such other powers and duties as designated in accordance with these Bylaws and as from time to time may be assigned to the Chairman of the Board by the Board of Directors. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors. SECTION 3. POWERS AND DUTIES OF THE PRESIDENT, PRESIDENT-NORTH AMERICAN OPERATIONS, AND PRESIDENT-INTERNATIONAL OPERATIONS. (a) Unless the Board of Directors otherwise determines, the President shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation; and, unless the Board of Directors
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otherwise determines, the President shall, in the absence of the Chairman of the Board or if there be no Chairman of the Board, preside at all meetings of the stockholders and (should the President be a director) of the Board of Directors; and the President shall have such other powers and duties as designated in accordance with these Bylaws and as from time to time may be assigned to the President by the Board of Directors or the Chairman of the Board. -12(b) Unless the Board of Directors otherwise determines, the President-North American Operations shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation pertaining to the Corporation's North American operations; and the President-North American Operations shall have such other powers and duties as designated in accordance with these Bylaws and as from time to time may be assigned to the President-North American Operations by the Board of Directors or the Chairman of the Board. (c) Unless the Board of Directors otherwise determines, the PresidentInternational Operations shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation pertaining to the Corporation's international operations; and the PresidentInternational Operations shall have such other powers and duties as designated in accordance with these Bylaws and as from time to time may be assigned to the President-International Operations by the Board of Directors or the Chairman of the Board. SECTION 4. POWERS AND DUTIES OF THE VICE CHAIRMAN OF THE BOARD. The Board of Directors may assign areas of responsibility to the Vice Chairman of the Board, and, in such event, and subject to the overall direction of the Chairman of the Board and the Board of Directors, the Vice Chairman of the Board shall be responsible for supervising the management of the affairs of the Corporation and its subsidiaries within the area or areas assigned and shall monitor and review on behalf of the Board of Directors all functions within the corresponding area or areas of the Corporation and each such subsidiary of the Corporation. In the absence of the President, or in the event of the President's inability or refusal to act, the Vice Chairman of the Board shall perform the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. Further, the Vice Chairman of the Board shall have such other powers and duties as designated in accordance with these Bylaws and as from time to time may be assigned to the Vice Chairman of the Board by the Board of Directors or the Chairman of the Board. SECTION 5. VICE PRESIDENTS. Each Vice President shall at all times possess power to sign all certificates, contracts and other instruments of the Corporation, except as otherwise limited in writing by the Chairman of the Board, the President or the Vice Chairman of the Board or of the Corporation. Each Vice President shall have such other powers and duties as from time to time may be assigned to such Vice President by the Board of Directors, the Chairman of the Board, the President or the Vice Chairman of the Board. SECTION 6. GENERAL COUNSEL. The General Counsel shall act as chief legal advisor -13to the Corporation. The General Counsel may have one or more staff attorneys and assistants, and may retain other attorneys to conduct the legal affairs and litigation of the Corporation under the General Counsel's supervision. SECTION 7. SECRETARY. The Secretary shall keep the minutes of all meetings of the Board of Directors, committees of the Board of Directors and the stockholders, in books provided for that purpose; shall attend to the giving and serving of all notices; may in the name of the Corporation affix the seal of the Corporation to all contracts of the Corporation and attest the affixation of the seal of the Corporation thereto; may sign with the other appointed officers all certificates for shares of capital stock of the Corporation; shall have charge of the certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection of any director upon application at the office of the Corporation during business hours; shall have such other powers and duties as designated in these Bylaws and as from time to time may be assigned to the Secretary by the Board of Directors, the Chairman of the Board, the President or the Vice Chairman of the Board; and shall in general perform all acts incident to the office of Secretary, subject to the control of the Board of Directors, the Chairman of the Board, the President or the Vice Chairman of the Board. SECTION 8. DEPUTY CORPORATE SECRETARY AND ASSISTANT SECRETARIES. The Deputy Corporate Secretary and each Assistant Secretary shall have the usual powers and duties pertaining to such offices, together with such other powers and duties as designated in these Bylaws and as from time to time may be assigned to the Deputy Corporate Secretary or an Assistant Secretary by the Board of Directors, the Chairman of the Board, the President, the Vice Chairman of the Board, or the Secretary. The Deputy Corporate Secretary shall exercise the powers of the Secretary during that officer's absence or inability or refusal to act. SECTION 9. TREASURER. The Treasurer shall have responsibility for the custody and control of all the funds and securities of the Corporation, and shall have such other powers and duties as designated in these Bylaws and as from time to time may be assigned to the Treasurer by the Board of Directors, the Chairman of the Board, the President or the Vice Chairman of the Board. The Treasurer shall perform all acts incident to the position of Treasurer, subject to the control of the Board of Directors, the Chairman of the Board,
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the President and the Vice Chairman of the Board; and the Treasurer shall, if required by the Board of Directors, give such bond for the faithful discharge of the Treasurer's duties in such form as the Board of Directors may require. SECTION 10. ASSISTANT TREASURERS. Each Assistant Treasurer shall have the usual powers and duties pertaining to such office, together with such other powers and duties as designated in these Bylaws and as from time to time may be assigned to each Assistant Treasurer by the Board of Directors, the Chairman of the Board, the President, -14the Vice Chairman of the Board, or the Treasurer. The Assistant Treasurers shall exercise the powers of the Treasurer during that officer's absence or inability or refusal to act. SECTION 11. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS. Unless otherwise directed by the Board of Directors, the Chairman of the Board, the President or the Vice Chairman of the Board, together with the Secretary, the Deputy Corporate Secretary or any Assistant Secretary shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of security holders of or with respect to any action of security holders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation. SECTION 12. DELEGATION. For any reason that the Board of Directors may deem sufficient, the Board of Directors may, except where otherwise provided by statute, delegate the powers or duties of any officer to any other person, and may authorize any officer to delegate specified duties of such officer to any other person. Any such delegation or authorization by the Board shall be effected from time to time by resolution of the Board of Directors. Article VI CAPITAL STOCK SECTION 1. CERTIFICATES OF STOCK. The certificates for shares of the capital stock of the Corporation shall be in such form, not inconsistent with that required by law and the Certificate of Incorporation, as shall be approved by the Board of Directors. Every holder of stock represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board, President, Vice Chairman of the Board or a Vice President and the Secretary, Deputy Corporate Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Corporation representing the number of shares (and, if the stock of the Corporation shall be divided into classes or series, certifying the class and series of such shares) owned by such stockholder which are registered in certified form; provided, however, that any of or all the signatures on the certificate may be facsimile. The stock record books and the blank stock certificate books shall be kept by the Secretary, or at the office of such transfer agent or transfer agents as the Board of Directors may from time to time determine. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature or signatures shall have been placed upon any such certificate or certificates shall have ceased to be such officer, transfer agent or registrar before such certificate is issued by the Corporation, such certificate may nevertheless be issued by the Corporation with the same effect as if such person were such officer, transfer -15agent or registrar at the date of issue. The stock certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder's name and number of shares. SECTION 2. TRANSFER OF SHARES. The shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives upon surrender and cancellation of certificates for a like number of shares. Upon surrender to the Corporation or a transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 3. OWNERSHIP OF SHARES. The Corporation shall be entitled to treat the holder of record of any share or shares of capital stock of the Corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the state of incorporation of the Corporation. SECTION 4. REGULATIONS REGARDING CERTIFICATES. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of certificates for shares of capital stock of the Corporation.

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SECTION 5. LOST OR DESTROYED CERTIFICATES. The Board of Directors may determine the conditions upon which the Corporation may issue a new certificate of stock in place of a certificate theretofore issued by it which is alleged to have been lost, stolen or destroyed and may require the owner of such certificate or such owner's legal representative to give bond, with surety sufficient to indemnify the Corporation and each transfer agent and registrar against any and all losses or claims which may arise by reason of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate in the place of the one so lost, stolen or destroyed. Article VII MISCELLANEOUS PROVISIONS SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall begin on the first day of January of each year. SECTION 2. CORPORATE SEAL. The corporate seal shall be circular in form and shall have inscribed thereon the name of the Corporation and the state of its incorporation, -16which seal shall be in the charge of the Secretary and shall be affixed to certificates of stock, debentures, bonds, and other documents, in accordance with the direction of the Board of Directors or a committee thereof, and as may be required by law; however, the Secretary may, if the Secretary deems it expedient, have a facsimile of the corporate seal inscribed on any such certificates of stock, debentures, bonds, contracts or other documents. Duplicates of the seal may be kept for use by the Deputy Corporate Secretary or any Assistant Secretary. SECTION 3. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required to be given by law, the Certificate of Incorporation or under the provisions of these Bylaws, said notice shall be deemed to be sufficient if given (i) by telegraphic, cable or wireless transmission (including by telecopy or facsimile transmission) or (ii) by deposit of the same in a post office box or by delivery to an overnight courier service company in a sealed prepaid wrapper addressed to the person entitled thereto at such person's post office address, as it appears on the records of the Corporation, and such notice shall be deemed to have been given on the day of such transmission or mailing or delivery to courier, as the case may be. Whenever notice is required to be given by law, the Certificate of Incorporation or under any of the provisions of these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person, including without limitation a director, at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws. SECTION 4. FACSIMILE SIGNATURES. In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors. SECTION 5. RELIANCE UPON BOOKS, REPORTS AND RECORDS. A member of the Board of Directors, or a member of any committee designated by the Board of Directors, shall, in the performance of such person's duties, be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinion, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or committees of the Board of Directors, or by any other person as to matters the member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of -17the Corporation. SECTION 6. APPLICATION OF BYLAWS. In the event that any provisions of these Bylaws is or may be in conflict with any law of the United States, of the state of incorporation of the Corporation or of any other governmental body or power having jurisdiction over this Corporation, or over the subject matter to which such provision of these Bylaws applies, or may apply, such provision of these Bylaws shall be inoperative to the extent only that the operation thereof unavoidably conflicts with such law, and shall in all other respects be in full force and effect. Article VIII AMENDMENTS The Board of Directors shall have the power to adopt, amend and repeal from time to time Bylaws of the Corporation, subject to the
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right of the stockholders entitled to vote with respect thereto to amend or repeal such Bylaws as adopted or amended by the Board of Directors. -18-

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EXHIBIT 10.9(b) 4TH AMENDMENT TO EMPLOYMENT AGREEMENT This Agreement, made and entered into and effective as of the 14th day of December, 1994, by and among Enron Corp. ("Enron" or "Parent") and Enron Oil & Gas Company ("Company"), and Forrest E. Hoglund ("Employee"), is an amendment to that certain Employment Agreement made and entered into among the parties the 28th day of August, 1987 and made effective as of September 1, 1987 (the "Employment Agreement"), as amended to date. WHEREAS, the parties desire to amend the Employment Agreement; NOW, THEREFORE, in consideration of the Employee's continued engagement with Company, and of the covenants contained herein, and for other good and valuable consideration, the parties agree as follows: 1. Article 2: TERM OF EMPLOYMENT is amended to read as follows: "Unless sooner terminated pursuant to other provisions hereof, Employee's period of employment under this Agreement shall extend from the effective date of this Agreement through September 1, 1998 (the "Initial Term")." 2. Before December 31, 1994, the Company shall cause Employee to receive a grant of an option under the Enron Oil & Gas Company 1992 Stock Plan (the "Plan") to purchase one million eight hundred twenty thousand (1,820,000) shares of common stock of the Company (the "Shares") at a price equal to the Fair Market Value (as defined in the Plan) of such shares on the date of grant; PROVIDED, HOWEVER, said grant shall be contingent upon and subject to the Company's shareholders approving before May 15, 1995 an amendment to the Plan that increases the number of shares available for granting Awards under the Plan by a number not less than said number of Shares. If for any reason after the grant is made such shareholder approval is not obtained before May 15, 1995, this Agreement shall be rescinded and the grant made hereunder shall become null and void as though it never existed. 3. This Agreement is an amendment to the Employment Agreement, and the parties agree that all other terms, conditions and stipulations contained in the Employment Agreement shall remain in full force and effect and without any change or modification, except as provided herein. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. Forrest E. Hoglund

/S/ FORREST E. HOGLUND ENRON OIL & GAS COMPANY By: /S/ WALTER E. WILSON Name: Walter E. Wilson Title: Sr. V.P. & CFO

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EXHIBIT 10.15(b) ASSIGNMENT AND ACCEPTANCE Dated April 14, 1994 Reference is made to the Revolving Credit Agreement dated as of March 11, 1994 (the "CREDIT AGREEMENT"), among Enron Oil & Gas Company, a Delaware corporation (the "BORROWER"), the Banks (as defined in the Credit Agreement) named therein, and Texas Commerce Bank National Association, as administrative agent ("the Administrative Agent"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. Texas Commerce Bank National Association (the "ASSIGNOR") and Royal Bank of Canada (the "ASSIGNEE") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, without recourse, and the Assignee hereby purchases and assumes from the Assignor, a 33.3333333% interest in and to all the Assignor's rights and obligations under the Credit Agreement as of the Assignment Date (as defined below) (including, without limitation, such percentage interest in the Advances owing to the Assignor outstanding on the Assignment Date together with such percentage interest in all unpaid interest with respect to such Advances and facility fees accrued to the Assignment Date and such percentage interest in the Note held by the Assignor). 2. The Assignor (i) represents that as of the date hereof, its Commitment (without giving effect to assignments thereof which have not yet become effective) is $30,000,000 and the outstanding balance of its Advances (unreduced by any assignments thereof which have not yet become effective) is $0; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim: (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its respective obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iv) requests that the Administrative Agent exchange such Note for a new Note executed by the Borrower and payable to the Assignor in a principal amount equal to $20,000,000 and a new Note executed by the Borrower and payable to the Assignee in a principal amount equal to $10,000,000. 3. The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (ii) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (iii) agrees that it will, independently and without reliance upon the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to such Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank; (vi) agrees that it will keep confidential all information with respect to the Borrower furnished to it by a Borrower or the Assignor (other than information generally available to the public or otherwise available to the Assignor on a nonconfidential basis); and (vii) confirms that it has delivered a completed Administrative Questionnaire to the Administrative Agent. 4. The effective date for this Assignment and Acceptance shall be April 21, 1994 (the "ASSIGNMENT DATE"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. 5. Upon such acceptance and recording, from and after the Assignment Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Bank thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording, from and after the Assignment Date, the Administrative Agent shall make all payments in respect of the interest assigned hereby (including payments of all principal, interest, fees and other amounts) to the Assignee. The Assignor and the Assignee shall make all appropriate adjustments in payments for periods prior to the Assignment Date by the Administrative Agent or with respect to the making of this Assignment and Acceptance directly between themselves. 7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

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Texas Commerce Bank National Association

Commitment: $20,000,000

By: /S/ JAMES R. McBRIDE Name: James R. McBride Title: Managing

Director

Royal Bank of Canada

Commitment: $10,000,000

By: /S/ GIL J. BENARD Name: Gil J. Benard Title: Senior

Manager

Telecopy Number: (718) 522-6292 DOMESTIC LENDING OFFICE: Royal Bank of Canada New York Loans Administration Pierrepont Plaza 300 Cadman Plaza West, 14th Flr. Brooklyn, New York 10201-2701 Attn: Linda Swanston EURODOLLAR LENDING OFFICE: Royal Bank of Canada New York Loans Administration Pierrepont Plaza 300 Cadman Plaza West, 14th Flr. Brooklyn, New York 10201-2701 Attn: Linda Swanston Accepted: Enron Oil & Gas Company

By: /S/ WALTER C. WILSON Name: Walter C. Wilson Title: Senior Vice President and Chief Financial Officer

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PROMISSORY NOTE U. S. $10,000,000.00 Houston, Texas April 14, 1994 FOR VALUE RECEIVED, the undersigned, Enron Oil & Gas Company, a Delaware corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of Royal Bank of Canada (the "Bank") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below) on or before January 15, 1998 the principal sum of ten million U.S. dollars (U.S. $10,000,000.00) or, if less, the aggregate unpaid principal amount of the Advances (as defined in the Revolving Credit Agreement of even date herewith among the Borrower, the Bank, certain other lenders parties thereto and Texas Commerce Bank National Association, as Administrative Agent for the Bank and such other lenders; such Credit Agreement, as amended from time to time being herein referred to as the "CREDIT AGREEMENT") owing to the Bank outstanding on the Termination Date; PROVIDED that for the full term of this Promissory Note the interest rate produced by the aggregate of all sums paid or agreed to be paid to the holder of this Promissory Note for the use, forbearance or detention of the debt evidenced hereby shall not exceed the Highest Lawful Rate (as defined in the Credit Agreement). The Borrower promises to pay interest on the unpaid principal amount of each Advance owing to the Bank from the date of such Advance until such principal amount is paid in full, at such interest rates, and due at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Texas Commerce Bank National Association, as Administrative Agent, at 712 Main Street, Houston, Texas, in same day funds. Each Advance owed to the Bank by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Bank, and prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note; PROVIDED that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This Promissory Note is one of the Notes referred to in, and is subject to and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (a) provides for the making of Advances by the Bank to the Borrower from time to time in an aggregate amount not to exceed at any one time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each Advance owing to the Bank being evidenced by this Promissory Note, and (b) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. Unless otherwise defined herein, any term used in this Promissory Note and defined in the Credit Agreement shall have the meaning ascribed to it in the Credit Agreement. Except only for any notices which are specifically required by the Credit Agreement, the Borrower waives notice (including, but not limited to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of dishonor), demand, presentment for payment and protest. THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. ENRON OIL & GAS COMPANY, a Delaware corporation

By: /s/ W. C. WILSON W. C. Wilson Title: Senior Vice President & Chief Financial Officer

2003.

EDGAR Online, Inc.

ADVANCES AND PAYMENTS OF PRINCIPAL

Date - -----------

Amount of Advance -------

Type of Advance -------

Principal Paid or Prepaid ---------

Amount of Unpaid Principal Balance ---------

Notation Made By

PROMISSORY NOTE U. S. $20,000,000.00 Houston, Texas April 14, 1994 FOR VALUE RECEIVED, the undersigned, Enron Oil & Gas Company, a Delaware corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of Texas Commerce Bank National Association (the "Bank") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below) on or before January 15, 1998 the principal sum of twenty million U.S. dollars (U.S. $20,000,000.00) or, if less, the aggregate unpaid principal amount of the Advances (as defined in the Revolving Credit Agreement of even date herewith among the Borrower, the Bank, certain other lenders parties thereto and Texas Commerce Bank National Association, as Administrative Agent for the Bank and such other lenders; such Credit Agreement, as amended from time to time being herein referred to as the "CREDIT AGREEMENT") owing to the Bank outstanding on the Termination Date; PROVIDED that for the full term of this Promissory Note the interest rate produced by the aggregate of all sums paid or agreed to be paid to the holder of this Promissory Note for the use, forbearance or detention of the debt evidenced hereby shall not exceed the Highest Lawful Rate (as defined in the Credit Agreement). The Borrower promises to pay interest on the unpaid principal amount of each Advance owing to the Bank from the date of such Advance until such principal amount is paid in full, at such interest rates, and due at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Texas Commerce Bank National Association, as Administrative Agent, at 712 Main Street, Houston, Texas, in same day funds. Each Advance owed to the Bank by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Bank, and prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note; PROVIDED that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This Promissory Note is one of the Notes referred to in, and is subject to and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (a) provides for the making of Advances by the Bank to the Borrower from time to time in an aggregate amount not to exceed at any one time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each Advance owing to the Bank being evidenced by this Promissory Note, and (b) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. Unless otherwise defined herein, any term used in this Promissory Note and defined in the Credit Agreement shall have the meaning ascribed to it in the Credit Agreement. Except only for any notices which are specifically required by the Credit Agreement, the Borrower waives notice (including, but not limited to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of dishonor), demand, presentment for payment and protest. THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. ENRON OIL & GAS COMPANY, a Delaware corporation

By: /s/

W. C. WILSON W. C. Wilson
2003. EDGAR Online, Inc.

Title: & Officer

Senior Vice President Chief Financial

2003.

EDGAR Online, Inc.

ADVANCES AND PAYMENTS OF PRINCIPAL

Date - -----------

Amount of Advance -------

Type of Advance -------

Principal Paid or Prepaid ---------

Amount of Unpaid Principal Balance ---------

Notation Made By

2003.

EDGAR Online, Inc.

EXHIBIT 10.37(b) AMENDMENT TO HYDROCARBON EXCHANGE AGREEMENT This Amendment to Hydrocarbon Exchange (this "Amendment") is entered into this 17th day of February, 1993, effective January 1, 1993, by and between ENRON OIL & GAS COMPANY ("EOG") and CACTUS HYDROCARBON 1992-A LIMITED PARTNERSHIP ("Cactus"). Where the context requires, EOG and Cactus shall be referred to individually as a "Party and collectively as the "Parties." WITNESSETH WHEREAS, Cactus and EOG entered into the certain Hydrocarbon Exchange Agreement dated September 25, 1992 filed for record (i) in the office of the county Clerk of Lincoln County, Wyoming, under File No. 755520 and recorded in Volume 318 PR, Page 1, on October 8, 1992 and (ii) in the office of the County Clerk of Sublette County, Wyoming, under File No. 238876 and recorded in Volume 90 O&G, Page 224, on October 2, 1992 (the "Exchange Agreement"); and WHEREAS, Cactus and EOG desire to amend the Exchange Agreement to add additional Cactus' Points of Receipt. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties mutually agree as follows: 1. Reference is made to the Exchange Agreement for all purposes. All references in the Exchange Agreement and this Amendment to the defined term Exchange Agreement or Agreement shall include and refer to the Exchange Agreement as amended by this Amendment. Unless otherwise defined herein, capitalized terms used herein shall have the same meanings given to them in the Exchange Agreement. 2. The parties hereby agree to amend Exhibit C of the Exchange Agreement to add under the heading "Matagorda" and "South Texas" as additional Cactus Points of Receipt the following point "MOPS"/FGT Interconnect near Tivoli, Refugio County, Texas. Exhibit C of the Exchange Agreement is hereby amended to delete Exhibit C in its entirely and substitute the attached Exhibit C. 3. Except as amended herein, the Exchange Agreement shall be and remain in force and effect as originally written. IN WITNESS WHEREOF, EOG and Cactus have caused this Amendment to be executed this 17th day of February, effective January 1, 1993. CACTUS HYDROCARBON 1992-A LIMITED PARTNERSHIP By Enron Big Piney Corp., General Partner ATTEST

By: /s/ ELAINE OVERTURF Name: Elaine Overturf Title: Deputy Corporate Secretary Finance

By: /s/ GENE E. HUMPHREY Name: Gene E. Humphrey Title: Vice President, Structured

ENRON OIL & GAS COMPANY ATTEST

By: /s/ J. JEFFERS SPENCER HOYLE Name: J. Jeffers Spencer Hoyle

2003.

By:

/s/ ANDREW N. Andrew N.

Name:

EDGAR Online, Inc.

Title: Senior Counsel President,

Title:

Vice Marketing

STATE OF TEXAS COUNTY OF HARRIS On this 5th day of February, 1993, before me, a Notary Public in and for said state, personally appeared Gene E. Humphrey, Vice President, Structured Finance of Enron Piney Corp., General Partner of Cactus Hydrocarbon 1992-A Limited Partnership, known to me to be the person who executed the within Amendment to Hydrocarbons Exchange Agreement on behalf of said corporation, acting as General Partner of said partnership and acknowledged to me that he executed the same for the purposes therein stated. Given under my hand and notarial seal.

[Seal] 1993 STATE OF TEXAS COUNTY OF HARRIS ss. ss. ss.

/s/ DEBORAH KORKMAS Deborah Korkmas Notary Public My Commission expires: May 21,

On this 17th day of February, 1993, before me personally appeared Andrew N. Hoyle to me personally known, who, being by me duly sworn, did say that he is the V.P., Mktg. of Enron Oil & Gas Company and that the seal affixed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors and said Andrew N. Hoyle acknowledged said instrument to be the free act and deed of said corporation. Given under my hand and notarial seal.

[Seal]

/s/ MICHELLE C. VALASEK Michelle C. Valasek Notary Public My Commission expires: June 30,

1993

PAGE 1
EXHIBIT C TO HYDROCARBON EXCHANGE AGREEMENT CACTUS' POINTS OF RECEIPT

2003.

EDGAR Online, Inc.

Oct-92 Nov-92 Dec-92 Jan-93 Feb-93 Mar-93 Apr-93 May-93 Jun-93 Jul-93 Aug-93 Sep-93 Oct-93 Nov-93 Dec-93 Jan-94 Feb-94 Mar-94 Apr-94 May-94 Jun-94 Jul-94 Aug-94 Sep-94 Oct-94 Nov-94 Dec-94 Jan-95 Feb-95 Mar-95 Apr-95 May-95 Jun-94 Jul-95 Aug-95 Sep-95 Oct-95 Nov-95 Dec-95 Jan-96 Feb-96 Mar-96 Apr-96 May-96 Jun-96

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

DAYS ---31 30 31 31 28 31 30 31 30 31 31 30 31 30 31 31 28 31 30 31 30 31 31 30 31 30 31 31 28 31 30 31 30 31 31 30 31 30 31 31 29 31 30 31 30

TOMAHAWK ----------------------DAILY VOL. MONTHLY VOL. (MMBTU'S) (MMBTU'S) ------------------31,500 976,500 31,500 945,000 31,500 976,500 31,500 976,500 31,500 882,000 31,500 976,500 31,500 945,000 31,500 976,500 31,500 945,000 31,500 976,500 31,500 976,500 31,500 945,000 31,500 976,500 31,500 945,000 31,500 976,500 31,500 976,500 31,500 882,000 31,500 976,500 31,500 945,000 31,500 976,500 31,500 945,000 31,500 976,500 31,500 976,500 31,500 945,000 31,500 976,500 25,983 779,490 25,983 805,473 25,983 805,473 25,983 727,524 25,983 805,473 25,983 779,490 25,983 805,473 25,983 779,490 25,983 805,473 25,983 805,473 25,983 779,490 25,983 805,473 22,212 666,360 22,212 688,572 22,212 688,572 22,212 644,148 22,212 688,572 22,212 666,360 22,212 688,572 22,212 666,360 ---------38,852,811 ==========

BIG BLUE -------------------------DAILY VOL. MONTHLY VOL. (MMBTU'S) (MMBTU'S) ------------------13,500 418,500 13,500 405,000 13,500 418,500 13,500 418,500 13,500 378,000 13,500 418,500 13,500 405,000 13,500 418,500 13,500 405,000 13,500 418,500 13,500 418,500 13,500 405,000 13,500 418,500 13,500 405,000 13,500 418,500 13,500 418,500 13,500 378,000 13,500 418,500 13,500 405,000 13,500 418,500 13,500 405,000 13,500 418,500 13,500 418,500 13,500 405,000 13,500 418,500 13,500 405,000 13,500 418,500 13,500 418,500 13,500 378,000 13,500 418,500 13,500 405,000 13,500 418,500 13,500 405,000 13,500 418,500 13,500 418,500 13,500 405,000 13,500 418,500 13,500 405,000 13,500 418,500 13,500 418,500 13,500 391,500 13,500 418,500 13,500 405,000 13,500 418,500 13,500 405,000 --------18,481,500 ==========

MATAGORDA -----------------------DAILY VOL. MONTHLY VOL. (MMBTU'S) (MMBTU'S) ----------------45,000 1,395,000 22,500 675,000 22,500 697,500 22,500 697,500 22,500 630,000 22,500 697,500 22,500 675,000 22,500 697,500 22,500 675,000 22,500 697,500 22,500 697,500 22,500 675,000 22,500 697,500 22,500 675,000 22,500 697,500 22,500 697,500 22,500 630,000 22,500 697,500 22,500 675,000 22,500 697,500 22,500 675,000 22,500 697,500 22,500 697,500 22,500 675,000 22,500 697,500 22,500 675,000 22,500 697,500 22,500 697,500 22,500 630,000 22,500 697,500 22,500 675,000 22,500 697,500 22,500 675,000 22,500 697,500 22,500 697,500 22,500 675,000 22,500 697,500 22,500 675,000 22,500 697,500 22,500 697,500 22,500 652,500 22,500 697,500 22,500 675,000 22,500 697,500 22,500 675,000 ---------31,500,000 ==========

SOUTH TEXAS -----------------------------------------------DAILY VOL. MONTHLY VOL. VOL. (MMBTU'S) (MMBTU'S) ------------------------------Oct-92 ........... 40,000 1,240,000 Nov-92 ........... 40,000 1,200,000 Dec-92 ........... 40,000 1,240,000 Jan-93 ........... 40,000 1,240,000 Feb-93 ........... 40,000 1,120,000
2003.

TOTAL

DAILY VOL. (MMBTU'S) --------130,000 107,500 107,500 107,500 107,500

MONTHLY (MMBTU'S)

4,030,000 3,225,000 3,332,500 3,332,500 3,010,000

EDGAR Online, Inc.

Mar-93 Apr-93 May-93 Jun-93 Jul-93 Aug-93 Sep-93 Oct-93 Nov-93 Dec-93 Jan-94 Feb-94 Mar-94 Apr-94 May-94 Jun-94 Jul-94 Aug-94 Sep-94 Oct-94 Nov-94 Dec-94 Jan-95 Feb-95 Mar-95 Apr-95 May-95 Jun-94 Jul-95 Aug-95 Sep-95 Oct-95 Nov-95 Dec-95 Jan-96 Feb-96 Mar-96 Apr-96 May-96 Jun-96

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

40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 0 0 0 0 0 0

1,240,000 1,200,000 1,240,000 1,200,000 1,240,000 1,240,000 1,200,000 1,240,000 1,200,000 1,240,000 1,240,000 1,120,000 1,240,000 1,200,000 1,240,000 1,200,000 1,240,000 1,240,000 1,200,000 1,240,000 1,200,000 1,240,000 1,240,000 1,120,000 1,240,000 1,200,000 1,240,000 1,200,000 1,240,000 1,240,000 1,200,000 1,240,000 1,200,000 1,240,000 0 0 0 0 0 0 ---------47,480,000 ==========

107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 107,500 101,983 101,983 101,983 101,983 101,983 101,983 101,983 101,983 101,983 101,983 101,983 101,983 98,212 98,212 58,212 58,212 58,212 58,212 58,212 58,212

3,332,500 3,225,000 3,332,500 3,225,000 3,332,500 3,332,500 3,225,000 3,332,500 3,225,000 3,332,500 3,332,500 3,010,000 3,332,500 3,225,000 3,332,500 3,225,000 3,332,500 3,332,500 3,225,000 3,332,500 3,059,490 3,161,473 3,161,473 2,855,524 3,161,473 3,059,490 3,161,473 3,059,490 3,161,473 3,161,473 3,059,490 3,161,473 2,946,360 3,044,572 1,804,572 1,688,148 1,804,572 1,746,360 1,804,572 1,746,360 ----------136,314,311 ===========

2003.

EDGAR Online, Inc.

PAGE 2
EXHIBIT C (CONTINUED) TO HYDROCARBON EXCHANGE AGREEMENT CACTUS' POINTS OF RECEIPT TOMAHAWK - ---------------------------POINT OF RECEIPT: Trailblazer/CIG Interconnect Weld County, Colorado BIG BLUE -----------------------POINT OF RECEIPT: El Paso/CIG Interconnect Moore County, Texas MATAGORDA -----------------------------------POINTS OF RECEIPT: 1. Seagull Shoreline/HPL Interconnect, Oyster Lake, Texas 2. Seagull/TETCO Interconnect, Blessing, Texas 3. HPL/TOMCAT Tailgate, Calhoun County, Texas 4. Seagull/Matagorda Gas Processing Plant, Matagorda, TX 5. 'MOPS'/HPL Interconnect, near Tivoll, Refugio County, TX 6. 'MOPS'/FGT Interconnect, near Tivoll, Refugio County, TX

SOUTH TEXAS POINTS OF RECEIPT: 1. Seagull Shoreline/HPL Interconnect, Oyster Lake, Texas 2. Seagull/TETCO Interconnect, Blessing, Texas 3. HPL/TOMCAT Tailgate, Calhoun County, Texas 4. Seagull/Matagorda Gas Processing Plant, Matagorda, TX 5. 'MOPS'/HPL Interconnect, near Tivoll, Refugio County, TX 6. HPL 'Vonnie Cook' Facilities, Hidalgo County , TX 7. HPL 'Pillsbury' Facilities, McMullen County, TX 8. HPL/Transco Interconnect @ Bammel Storage Facility, Harris County, TX 9. HPL/NGPL Interconnect near Devers, Liberty County, TX 10. HPL/Exxon Interconnect near Katy, Waller County, TX 11. HPL/Lonestar Interconnect near Katy, Waller County, TX 12. HPL/UTTCO Interconnect near Katy, Waller County, TX 13. HPL/Oasis Interconnect near Katy, Waller County, TX 14. 'MOPS'/FGT Interconnect, near Tivoll, Refugio County, TX

2003.

EDGAR Online, Inc.

EXHIBIT 10.37(c) FIRST AMENDMENT TO HYDROCARBON EXCHANGE AGREEMENT Reference for all purposes in hereby made to that certain Hydrocarbon Exchange Agreement (the "Exchange Agreement"), Dated September 25, 1992, by and between ENRON OIL & GAS COMPANY, a Delaware corporation ("EOG") to CACTUS HYDROCARBON 1992-A LIMITED PARTNERSHIP, a Delaware limited partnership, whose address in 1400 Smith Street, P.O. Box 1188, Houston, Texas 77251-1188 ("Cactus"), pertaining to certain Hydrocarbons, which Exchange Agreement is recorded as set forth on Exhibit C hereto under the caption "Hydrocarbon Exchange Agreement." WHEREAS, EOG and Cactus desire to amend the Exchange Agreement as hereinafter set forth as of April 1, 1993 (the "Effective Date") to release certain oil and gas leases, wells and related interests as sources of supply from the Exchange Agreement and to add certain additional oil and gas leases and related interests as sources of supply and to make other changes as provided herein: NOW, THEREFORE, for and in consideration of the premises and of the sum of Ten Dollars and no/100ths ($10.00) and other good and valuable consideration, cash in hand paid to EOG by Cactus, EOG and Cactus do hereby amend the Exchange Agreement as follows: 1. Capitalized terms as used herein shall have the meanings given to them in the Exchange Agreement unless otherwise defined herein. 2. Exhibit A to the Exchange Agreement is hereby amended by deleting those oil and gas leases and related interests set forth on Exhibit A-1 hereto and those wells set forth on Exhibit A-2 hereto and adding those oil and gas leases and related interests set forth on Exhibit B hereto. 3. Except as expressly amended hereby, the Exchange Agreement shall remain in full force and effect as heretofore entered into and amended. EOG and Cactus ratify and confirm the Exchange Agreement as hereby amended. EXECUTED in multiple originals this 21st day of May, 1993, but effective as of the Effective Date.

EOG: WITNESSES: ENRON OIL & GAS COMPANY By: /s/ D. WEAVER Name: D. Weaver Title: Agent and Attorney-in-fact

Cactus: WITNESSES: /s/ MARY NELL BROWNING Mary Nell Browning /s/ CINDY WALTON Cindy Walton CACTUS HYDROCARBON 1992-A LIMITED PARTNERSHIP By: Enron Big Piney Corp. General Partner

By: /s/ ANDREW S. FASTOW Name: Andrew S. Fastow Title: Vice President

EXHIBIT EXHIBIT EXHIBIT EXHIBIT

"A-1" "A-2" "B" "C"

Description Description Description Recordation Agreement

of Deleted Leases of Deleted Wells of Added Leases Schedule-Hydrocarbon Exchange

2003.

EDGAR Online, Inc.

Please return to: Crystal L. Lightfield 2500 First City Tower 1001 Fannin Houston, Texas 77002 STATE OF COLORADO ) )

ss.

COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this 21st day of May, 1993, by D. Weaver as Agent and Attorney-in-Fact of Enron Oil & Gas Company. WITNESS my hand and official seal.

My Commission Expires: CHRISTY 3-27-97 Christy

/s/ DEBBIE Debbie Notary Public

STATE OF TEXAS COUNTY OF HARRIS

ss. ss. ss.

On this 20th day of May, 1993, before me, the undersigned Notary Public in and for the State of Texas, personally appeared Andrew S. Fastow, to me personally known, who, being by me duly sworn, did say that he is the Vice President of Enron Big Piney Corp., General Partner of CACTUS HYDROCARBON 1992-A LIMITED PARTNERSHIP, a Delaware limited partnership, and that the instrument was signed on behalf of said corporation, acting as General Partner of said limited partnership and that he acknowledged the instrument to be the free act and deed of the limited partnership.

/s/ SUSAN LOUISE W. WADLE Susan Louise W. Wadle NOTARY PUBLIC, IN AND FOR THE STATE OF TEXAS

Printed Name of Notary

2003.

EDGAR Online, Inc.

EXHIBIT A-1 Attached to and made a part of that certain First Amendment to Hydrocarbon Exchange Agreement effective as of the 1st day of April, 1993 between Enron Oil & Gas Company ("EOG") and Cactus Hydrocarbon 1992-A Limited Partnership ("Cactus").

DELETED LEASES SUBLETTE COUNTY, WYOMING ENRON LEASE NO. - ---------0050097-000 LESSOR -----EV-023584 LEGAL DESCRIPTION ----------------TOWNSHIP 28 NORTH, RANGE 113 WEST, 6TH P.M. Section 23: Lot 4 (27,24), W/2NW/4 Below 1500' above the top of the Frontier formation TOWNSHIP 29 NORTH, RANGE 113 WEST, 6TH P.M. Section 16: E/2 Below 1500' above the top of the Frontier formation TOWNSHIP 28 NORTH, RANGE 113 WEST, 6TH P.M. Section 4: Lots 7 (35.76), 8 (36.27), S/2NW/4, SW/4 Below 1500' above the top of the Frontier formation TOWNSHIP 29 NORTH, RANGE 113 WEST, 6TH P.M. Section 21: E/2 Section 27: NW/4NW/4 Section 28: N/2NE/4 Below 1500' above the top of the Frontier formation TOWNSHIP 28 NORTH, RANGE 113 WEST 6TH P.M. Section 27: Resurvey Tract 48 From 1500' above the top of the Frontier formation to the base of the Frontier formation DATE ---6/1/48 LEASE RECORDING --------Not Recorded

0050109-000

State WY07395

9/16/48

Not Recorded

0050115-000

WY-04732

2/1/51

Not Recorded

0050116-000

W-026038-A

2/1/50

BK 31, PG 206

0050125-000

McGinnis, Mary et al

7/1/46

BK2, PG 101

LINCOLN COUNTY, WYOMING ENRON LEASE NO. --------0050272-000 LESSOR -----EV-09156-B LEGAL DESCRIPTION ----------------TOWNSHIP 26 NORTH, RANGE 113 WEST, 6TH P.M. Section 5: E/2SE/4 No depth limitations DATE ---6/1/48 LEASE RECORDING --------BK 17, PG 283

EXHIBIT A-2 Attached to and made a part of that certain First Amendment to Hydrocarbon Exchange Agreement effective as of the 1st day of April, 1993 between Enron Oil & Gas Company ("EOG") and Cactus Hydrocarbon 1992-A Limited Partnership ("Cactus").

WELL NRI

WELL

DELETED WELLS LEGAL

WI

NRI

WI

2003.

EDGAR Online, Inc.

NAME APO -----SHU 65-05G 20.3500%

NUMBER -----06152-00-00-1

DESCRIPTION ----------TOWNSHIP 26 NORTH, RANGE 113 WEST, 6TH P.M. Section 5: E/2 Lincoln County, Wyoming

BPO --25.000%

BPO --20.350%

APO --25.000%

Tip Top Unit 1.0870% Participating Area "B"

06144-00-00-1

TOWNSHIP 27 NORTH, RANGE

1.4233%

1.0870%

1.4233%

113 WEST 6TH P.M. Parts of Sections 5 and 6 TOWNSHIP 28 NORTH, RANGE 113 WEST, 6TH P.M. Portions of Sections 6-8, 16, 17 and 18 TOWNSHIP 28 NORTH RANGE 114 WEST, 6TH P.M. Portions of Sections 1 and 12 Sublette County, Wyoming

2003.

EDGAR Online, Inc.

EXHIBIT B Attached to and made a part of the certain First Amendment to Hydrocarbon Exchange Agreement effective as of the 1st day of April, 1993 between Enron Oil & Gas Company ("EOG") and Cactus Hydrocarbon 1992-A Limited Partnership ("Cactus").
ADDED LEASES SUBLETTE COUNTY, WYOMING MOBIL LEASE NO. - --------W-2645 LESSOR -----E-02577 LEGAL DESCRIPTION ----------------TOWNSHIP 28 NORTH, RANGE 113 WEST 6TH P.M. Section 22: Lot 2 (23.91) From the surface to 1500' above the top of the Frontier formation TOWNSHIP 28 NORTH, RANGE 113 WEST 6TH P.M. Section 27: Lots 2 (13.62), 3 (9.19) Section 29: W/2NW/4 From the surface to 1500' above the top of the Frontier formation TOWNSHIP 28 NORTH, RANGE 113 WEST 6TH P.M. Section 20: SW/4SW/4 From the surface to 1500' above the top of the Frontier formation DATE ---1/1/48 LEASE RECORDING --------Not Available

W-2579

E-02396

7/1/48

Not Available

W-2571

E-02376

12/1/47

BK 31, PG 429

W-2569

E-02287

TOWNSHIP 28 NORTH, RANGE 113 WEST 7/1/47 6TH P.M. Section 19: Lots 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 and 17 From the surface to 1500' above the top of the Frontier formation TOWNSHIP 28 NORTH, RANGE 113 WEST 6TH P.M. Section 30: N/2NE/4 From the surface to 1500' above the top of the Frontier formation TOWNSHIP 28 NORTH, RANGE 113 WEST 6TH P.M. Section 30: S/2NE/4 From the surface to 1500' above the top of the Frontier formation 10/1/48

Not Available

W-2568

E-02332

Not Available

W-2566

E-02355

6/1/48

Not Available

2003.

EDGAR Online, Inc.

EXHIBIT B (continued) ADDED LEASES MOBIL LEASE NO. - --------W-2586 LEASE RECORDING --------Not Available

LESSOR -----W-01495

LEGAL DESCRIPTION DATE -------------------TOWNSHIP 28 NORTH, RANGE 113 WEST 2/1/50 6TH P.M. Section 18: Lots 11, 12, 13, 14, 15, 16, 17, 18 (W/2SE/4) From the surface to 1500' above the top of the Frontier formation

2003.

EDGAR Online, Inc.

EXHIBIT C Attached to and made a part of that certain First Amendment to Hydrocarbon Exchange Agreement effective as of the 1st day of April, 1993 between Enron Oil & Gas Company ("EOG") and Cactus Hydrocarbon 1992-A Limited Partnership ("Cactus").

DOCUMENT -------Hydrocarbon Exchange Agreement dated September 25, 1992 between EOG and Cactus

FILING ENTITY ------------Lincoln County

RECORDING REFERENCE ------------------Book 318 PR, Page 1 File No. 755520 October 8, 1992 Book 90 O&G, Page File No. 238876 October 2, 1992

Sublette County 224

2003.

EDGAR Online, Inc.

EXHIBIT 10.37(d) SECOND AMENDMENT TO HYDROCARBON EXCHANGE AGREEMENT Reference for all purposes is hereby made to that certain Hydrocarbon Exchange Agreement dated September 25, 1992, by and between ENRON OIL & GAS COMPANY, a Delaware corporation ("EOG") to CACTUS HYDROCARBON 1992-A LIMITED PARTNERSHIP, a Delaware limited partnership, whose address is 1400 Smith Street, P.O. Box 1188, Houston, Texas 77251-1188 ("Cactus"), as amended by that certain First Amendment to Hydrocarbon Exchange Agreement (the "Exchange Agreement"), dated effective April 1, 1993, pertaining to certain Hydrocarbons, which Exchange Agreement is recorded as set forth on Exhibit C hereto. WHEREAS, EOG and Cactus desire to amend the Exchange Agreement as hereinafter set forth as of July 1, 1993 (the "Effective Date") to release certain oil and gas leases, wells and related interests as sources of supply from the Exchange Agreement and to add certain additional oil and gas leases, wells and related interests as sources of supply and to make other changes as provided herein: NOW, THEREFORE, for and in consideration of the premises and of the sum of Ten Dollars and no/100ths ($10.00) and other good and valuable consideration, cash in hand paid to EOG by Cactus, EOG and Cactus do hereby amend the Exchange Agreement as follows: 1. Capitalized terms as used herein shall have the meanings given to them in the Exchange Agreement unless otherwise defined herein. 2. Exhibit A to the Exchange Agreement is hereby amended by deleting those oil and gas leases and related interests set forth on Exhibit A-1 hereto and those wells set forth on Exhibit A-2 hereto and adding those oil and gas leases and related interests set forth on Exhibit B-1 hereto and those wells set forth on Exhibit B-2 hereto. 3. Except as expressly amended hereby, the Exchange Agreement shall remain in full force and effect as heretofore entered into and amended. EOG and Cactus ratify and confirm the Exchange Agreement as hereby amended. 4. This instrument is being executed in several counterparts, all of which are identical. Each of such counterparts shall for all purposes be deemed to be an original and all such counterparts shall together constitute but one and the same instrument. WITNESS THE EXECUTION HEREOF, this 24th day of September 1993, to be effective as of the Effective Date. EOG: WITNESSES: ENRON OIL & GAS COMPANY

/s/ CINDY WALTON Cindy WALTON /s/ MARY NELL BROWNING Mary Nell Browning

By: /s/ G.E. UTHLANT Name: G.E. Uthlant Title: Senior Vice President

Cactus: WITNESSES: LIMITED CACTUS HYDROCARBON 1992-A PARTNERSHIP

/s/

MARY NELL BROWNING Mary Nell Browning

By:

Enron Big Piney Corp. General Partner

/s/

DEBORAH KORKMAS Deborah Korkmas

By: /s/ ANDREW S. FASTOW Name: Andrew S. Fastow Title: Vice President

2003.

EDGAR Online, Inc.

EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT

"A-1" "A-2" "B-1" "B-2" "C"

Description of Deleted Leases Description of Deleted Wells Description of Added Leases Description of Added Wells Recordation Schedule - Hydrocarbon Exchange Agreement and First Amendment to Hydrocarbon Exchange Agreement ss. ss. ss.

STATE OF TEXAS COUNTY OF HARRIS

On this 29th day of September, 1993, before me, the undersigned Notary Public in and for the state of Texas, personally appeared G.E. Uthlant, to me personally known, who being by me duly sworn, did say that he is the Senior Vice President of ENRON OIL & GAS COMPANY, a Delaware corporation, and that the instrument was signed in behalf of the corporation by authority of its Board of Directors and that he acknowledged the instrument to be the free act and deed of the corporation.

/s/ SUSAN LOUISE W. WADLE Susan Louise W. Wadle NOTARY PUBLIC, IN AND FOR STATE OF TEXAS Printed Name of Notary STATE OF TEXAS COUNTY OF HARRIS ss. ss. ss.

On this 29th day of September, 1993, before me, the undersigned Notary Public in and for the State of Texas, personally appeared Andrew S. Faston to me personally known, who being by me duly sworn, did say that he is the Vice President of Enron Big Piney Corp., General Partner of CACTUS HYDROCARBON 1992-A LIMITED PARTNERSHIP, a Delaware limited partnership, and that the instrument was signed on behalf of said corporation, acting as General Partner of said limited partnership and the he acknowledged the instrument to be the free act and deed of the limited partnership.

/s/ SUSAN LOUISE W. WADLE Susan Louise W. Wadle NOTARY PUBLIC, IN AND FOR THE STATE OF TEXAS

2003.

EDGAR Online, Inc.

Printed Name of Notary EXHIBIT A-1 Attached to and made a part of that certain Second Amendment to Hydrocarbon Exchange Agreement effective as of the 1st day of July, 1993 between Enron Oil & Gas Company ("EOG") as Grantor and Cactus Hydrocarbon 1992-A Limited Partnership ("Cactus") as Grantee.

DELETED LEASES SUBLETTE COUNTY, WYOMING ENRON LEASE NO. - --------50427-000 LESSOR -----W-05527 LEGAL DESCRIPTION ----------------TOWNSHIP 26 NORTH, RANGE 112 WEST, 6TH P.M. Section 22: NE/4NE/4, SE/4, S/2NE/4 Section 23: NW/4NW/4, SW/4NW/4,3 E/2NW/4, SW/4 Limited to only the Frontier formation under said lands. DATE ---2/1/59 LEASE RECORDING --------Not Recorded

EXHIBIT A-2 Attached to and made a part of that certain Second Amendment to Hydrocarbon Exchange Agreement effective as of the 1st day of July, 1993 between Enron Oil & Gas Company ("EOG") as Grantor and Cactus Hydrocarbon 1992-A Limited Partnership ("Cactus") as Grantee.
DELETED WELLS LINCOLN COUNTY, WYOMING WELL NAME - --------Fontenelle 11-3 WELL NUMBER ----------0912100001 LEGAL DESCRIPTION ----------------TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 36: NW/4NW/4 Formation: Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 3: SW/4NW/4 Formation: Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 11: NW/4SW/4 Formation Consl. Frontier ABCD TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 24: NW/4SW/4 Formation Consl. Frontier ABCD TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 34: NW/4SW/4 Formation Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 1: SW/4SW/4 Formation Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 2: SW/4SW/4 Formation Consl. Frontier ABCD WI BPO -----.0170308 NRI BPO ------.0148326 WI APO -----.0195606 NRI APO ------.0161375

Fontenelle 12-03

0912200001

.0134239

.0118418

.0195606

.0161375

Fontenelle 13-11

0912300001

.0134239

.0118418

.0195606

.0161375

Fontenelle 13-24

0912400001

.0134239

.0118418

.0195597

.0184859

Fontenelle 13-34

0012400001

.0134239

.0118418

.0195597

.0184859

Fontenelle 14-01

0912500001

.0134239

.0118418

.0195606

.0161375

Fontenelle 14-02

0912600001

.0134239

.0118418

.0195606

.0161375

2003.

EDGAR Online, Inc.

Fontenelle 14-04

0912800001

TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 4: SW/4NW/4 Formation Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 6: Lot 7 Formation Consl. Frontier ABCD TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 27: SW/4SW/4 Formation Consl. Frontier ABCD TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 36: SE/4NW/4 Formation Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 111 WEST 6TH P.M. Section 7: NE/4SW/4 Formation Consl. Frontier ABCD TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 25: NE/4SW/4 Formation Consl. Frontier ABCD TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 33: Lot 7 Formation Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 4: NW/4NE/4 Formation Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 4: NW/4NE/4 Formation Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 111 WEST 6TH P.M. Section 6: NW/4NE/4 Formation Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 10: SW/4NE/4 Formation Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 4: NW/4SE/4 Formation Consl. Frontier ABCD TOWNSHIP 15 NORTH, RANGE 112 WEST 6TH P.M. Section 12: NW/4SE/4 Formation Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 13: NW/4SE/4 Formation Consl. Frontier ABCD TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 25: NW/4SE/4 Formation Consl. Frontier ABCD TOWNSHIP 15 NORTH, RANGE 112 WEST 6TH P.M. Section 3: SW/4SE/4 Formation Consl. Frontier ABCD

.0134239

.0118418

.0195606

.0161375

Fontenelle 14-06

0912900001

.0134239

.0118418

.0195606

.0161375

Fontenelle 14-27

0912700001

.0134239

.0118418

.0195606

.0161375

Fontenelle 22-36

0913100001

.0134239

.0118418

.0195606

.0161375

Fontenelle 23-07F

0913400001

.0134239

.0118418

.0195606

.0161375

Fontenelle 23-25

0913200001

.0134239

.0118418

.0195606

.0161375

Fontenelle 23-33

0913300001

.0134239

.0118418

.0195606

.0161375

Fontenelle 31-04

0913500001

.0134239

.0118418

.0195606

.0161375

Fontenelle 31-05

0913600001

.0134239

.0118418

.0195606

.0161375

Fontenelle 31-06F

0913700001

.0134239

.0118418

.0195606

.0161375

Fontenelle 32-10

0913800001

.0134239

.0118418

.0195606

.0161375

Fontenelle 33-04

0914100001

.0148326

.0148326

.0195606

.0161375

Fontenelle 33-12

0128800001

.0134239

.0118418

.0195606

.0161375

Fontenelle 33-13

0913900001

.0134239

.0118418

.0195606

.0161375

Fontenelle 33-24

0914000001

.0134239

.0118418

.0195606

.0161375

Fontenelle 34-03

0914000001

.0134239

.0118418

.0195606

.0161375

2003.

EDGAR Online, Inc.

Fontenelle 34-09

0914500001

TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 9: SW/4SE/4 Formation Consl. Frontier ABCD TOWNSHIP 26 NORTH, RANGE 111 WEST 6TH P.M. Section 23: SW/4SE/4 Formation Consl. Frontier ABCD TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 28: Lot 9 Formation Consl. Frontier ABCD TOWNSHIP 25 NORTH, RANGE 112 WEST 6TH P.M. Section 9: NE/4NE/4 Formation Consl. Frontier ABCD TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 24: Lot 1 Formation Consl. Frontier ABCD TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 36: Lot 1 Formation Consl. Frontier ABCD

.0134239

.0118418

.0195606

.0161375

Fontenelle 34-23

0914200001

.0134239

.0118418

.0195606

.0161375

Fontenelle 34-28

0914300001

.0134239

.0118418

.0195606

.0161375

Fontenelle 41-09

0914900001

.0134239

.0118418

.0195606

.0161375

Fontenelle 41-24

0914600001

.0134239

.0118418

.0195606

.0161375

Fontenelle 41-26

0914800001

.0134239

.0118418

.0195606

.0161375

2003.

EDGAR Online, Inc.

EXHIBIT B-1 Attached to and made a part of that certain Second Amendment to Hydrocarbon Exchange Agreement effective as of the 1st day of July, 1993 between Enron Oil & Gas Company ("EOG) as Grantor and Cactus Hydrocarbon 1992-A Limited Partnership ("Cactus") as Grantee.

ADDED LEASES LINCOLN COUNTY, WYOMING ENRON LEASE NO. - --------75237-000 LESSOR -----ST of WY 86-00117 LEGAL DESCRIPTION ----------------TOWNSHIP 26 NORTH, RANGE 112 WEST, 6TH P.M. Section 16: NW/4, NW/4NE/4, S/2NE/4,S1/2 DATE ---2/2/86 RECORDED -------Book 236 PR, Page 170

2003.

EDGAR Online, Inc.

EXHIBIT B-2 Attached to and made a part of that certain Second Amendment to Hydrocarbon Exchange Agreement effective as of the 1st day of July, 1993 between Enron Oil & Gas Company ("EOG") as Grantor and Cactus Hydrocarbon 1992-A Limited Partnership ("Cactus") as Grantee.
ADDED WELLS LINCOLN COUNTY, WYOMING WELL NAME --------Spur Canyon #1 WELL NUMBER ----------0236940001 LEGAL DESCRIPTION ----------------TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 16: NE/4NW/4 WI BPO -----100% NRI BPO ------75% WI APO -----100% NRI APO ------75%

West Stead Canyon #22-16

0240000001

TOWNSHIP 26 NORTH, RANGE 112 WEST 6TH P.M. Section 16: SW/4NE/4

100%

75%

100%

75%

2003.

EDGAR Online, Inc.

EXHIBIT C Attached to and made a part of that certain Second Amendment to Hydrocarbon Exchange Agreement effective as of the 1st day of May, 1993 between Enron Oil & Gas Company ("EOG") as Grantor and Cactus Hydrocarbon 1992-A Limited Partnership ("Cactus") as Grantee.

DOCUMENT -------Hydrocarbon Exchange Agreement dated September 25, 1992 between EOG and Cactus

FILING ENTITY ------------Lincoln County

RECORDING REFERENCE ------------------Book 318 PR, Page 1 File No. 755520 October 8, 1992 Book 90 O&G, Page File No. 238876 October 2, 1992

Sublette County 224

First Amendment to Hydrocarbon Exchange Agreement dated effective April 1, 1993 between

Lincoln County

Book 330 PR, Page 39 File No. 765868 June 4, 1993 Book 92 O&G, Page File No. 241741 May 28, 1993

Sublette County 333

2003.

EDGAR Online, Inc.

EXHIBIT 10.37(e) AMENDMENT TO HYDROCARBON EXCHANGE AGREEMENT This Amendment to Hydrocarbon Exchange Agreement (this "AMENDMENT") is entered into this 17th day of June 1994, effective August 1, 1993, by and between ENRON OIL & GAS COMPANY ("EOG") and CACTUS HYDROCARBON 1992-A LIMITED PARTNERSHIP ("CACTUS"). Where the context requires, EOG and Cactus shall be referred to individually as a "PARTY" and collectively as the "PARTIES." WITNESSETH: WHEREAS, Cactus and EOG entered into that certain Hydrocarbon Exchange Agreement dated September 25, 1992, as amended by instrument dated effective January 1, 1993 (collectively, the "EXCHANGE AGREEMENT"); and WHEREAS, Cactus and EOG desire to amend the Exchange Agreement to change the Index for the Matagorda Point of Receipt; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties mutually agree as follows: 1. Reference is made to the Exchange Agreement for all purposes. All references in this exchange agreement and this Amendment to the defined term Exchange Agreement or Agreement shall include and refer to the Exchange Agreement as amended by this Amendment. Unless otherwise defined herein, capitalized terms used herein shall have the same meanings given to them in the Exchange Agreement. 2. The Parties hereby agree to amend Exhibit D of the Exchange Agreement to delete the reference to "Texas Eastern Transmission Co.-Texas" under heading "Index" for the Matagorda Point of Receipt and replace it with "Texas Eastern Transmission Co.-South Texas." 3. Except as amended herein, the Exchange Agreement shall be and remain in force and effect as originally written. IN WITNESS WHEREOF, EOG and Cactus have caused this Amendment to be executed this 17th day of June, 1994. ENRON OIL & GAS COMPANY ATTEST:

By: /S/ J. JEFFERS SPENCER HOYLE Name: J. Jeffers Spencer Hoyle Title: Assistant Secretary President,

By:

/S/ ANDREW N. Andrew N. Vice Marketing

Name: Title:

CACTUS HYDROCARBON 1992-A LIMITED PARTNERSHIP BY: ENRON BIG PINEY CORP., GENERAL PARTNER ATTEST:

By: /S/ JOAN QUICK JR.

2003.

By: /S/ JERE C. OVERDYKE,

EDGAR Online, Inc.

Name: Jr. Title:

Joan Quick Contract Admin.

Name: Title:

Jere C. Overdyke, Vice President

STATE OF TEXAS COUNTY OF HARRIS

ss. ss. ss.

On this 17th day of June, 1994, before me personally appeared Andrew N. Hoyle, to me personally known, who, being by me duly sworn, did say that he is the Vice President, Mktg. of Enron Oil & Gas Company and that the seal affixed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors and said Andrew N. Hoyle acknowledged said instrument to be the free act and deed of said corporation. Given under my hand and notarial seal.

/S/ MICHELLE GREEN Michelle Green Notary Public My Commission Expires: September 2, 1997 STATE OF TEXAS COUNTY OF HARRIS ss. ss. ss.

On this 14th day of June 1994, before me personally appeared Jere C. Overdyke, Jr., Vice President, of Enron Piney Corp., General Partner of Cactus Hydrocarbon 1992-A Limited Partnership, known to me to be the person who executed the within Amendment to Hydrocarbons Exchange Agreement on behalf of said corporation, acting as General Partner of said partnership and acknowledged to me that he executed the same for the purposes therein stated. Given under my hand and notarial seal.

/S/ BERTHA M. FRAZIER Bertha M. Frazier Notary Public My Commission Expires: 4-19-96

2003.

EDGAR Online, Inc.

EXHIBIT 10.45(a) THE BANK OF NOVA SCOTIA Cable Address Hato Rey Branch 'Scotiabank' Plaza Scotiabank 273 Ponce De Leon Ave. 4th Floor Address Your Hato Rey, Puerto Rico Reply To G.P.O Box 6262 May 27, 1994 San Juan, P.R. 00936 Enron Gas & Oil Trinidad Limited Second Floor, The Mutual Centre 16 Queen's Park West Port of Spain Republic of Trinidad & Tobago British West Indies ATTN: MANAGING DIRECTOR Dear Sirs: We hereby submit this Letter Loan Agreement (the "Agreement") setting out the terms and conditions under which The Bank of Nova Scotia's Hato Rey Branch (the "Bank") agrees to extend to Enron Gas & Oil Trinidad Limited (the "Borrower") the credit facilities referred to herein: LETTER LOAN AGREEMENT 1. BORROWER: Enron Gas & Oil Trinidad Limited 2. TYPE OF CREDIT: Non-Revolving Term Credit available by way of direct advances. Although the credit facility is a non-revolving facility, the Borrower will be allowed to borrow, repay and reborrow the Working Capital Amount (as defined hereinafter) within the term of the Loan as provided hereunder. 3. LOAN AMOUNT: Up to an aggregate amount not to exceed at any time outstanding US$44,000,000 (the "Commitment"). 4. PURPOSES: To finance (or refinance or replace with Advances funded with 936 Deposits as permitted by paragraphs (c)(7)(i) and (c)(7)(ii) of the Federal CBI Regulations) the costs of the Borrower's exploration for and development and production of natural gas and crude oil from the Kiskadee and Ibis Fields in the South East Coast Consortium Block offshore Trinidad & Tobago, including without limitation, the constructing of off-shore platforms, laying of pipelines, drilling of wells and installation of all related equipment and facilities (the "Active Business Assets"). The proceeds of the Loan may also be used for working capital purposes, provided that the amount used for such purposes may not exceed 10% of the amount invested in Active Business Assets (the "Working Capital Amount"). 5. DEFINITIONS: "936 Deposits" means deposits of eligible funds by exempted businesses under the Puerto Rico Industrial Incentives Acts and/or the Puerto Rico Tax Incentive Act. "936 Option Rate" shall have the meaning described in Section 8(a) hereof. "Active Business Assets" shall have the meaning described in Section 4 hereof. "Advance" means an advance from the Bank to the Borrower pursuant to Section 7 hereof. "Base Rate" means the variable per annum reference rate of interest, as announced and adjusted by The Bank of Nova Scotia from time to time in the City of New York as its base rate, for United States dollar loans made by such bank in the United States and Puerto Rico. No representation is made by the Bank that such rate is the lowest or most favorable rate offered by The Bank of Nova Scotia. "Business Day" means (i) as to LIBOR funded portions of the Loan, a day of the year on which dealings are carried on in the London interbank market and banks are open for business in London and not required or authorized to close in New York City, Puerto Rico or Trinidad & Tobago and (ii) as to the 936 Deposits and Base Rate funded portions of the Loan, a day in which the Bank is not required or authorized to close for business in Puerto Rico or Trinidad & Tobago. "Commissioner" shall have the meaning described in Section 18.3(a) hereof. "Date of this Agreement" means the date on which the Borrower accepts this Agreement by execution of the original and one counterpart.

2003.

EDGAR Online, Inc.

"Event of Default" shall have the meaning described in Section 19 hereof. "Federal CBI Regulations" shall have the meaning described in Section 18.3(b) hereof. "Funding Period" means one of the successive periods into which the period between the date of the first Advance and the Maturity Date shall be divided. The termination date of each such Funding Period shall be referred to as a Rollover Date. "Governmental Authority" means (a) the United States of America, (b) the Commonwealth of Puerto Rico, (c) Trinidad & Tobago, (d) any political subdivision of any jurisdiction referenced in clauses (a) through (c) of this sentence and (e) any court, agency, department, commission, board, bureau or instrumentality of any jurisdiction referenced in clauses (a) through (c) of this sentence. "Guarantor" shall mean Enron Oil & Gas Company. "Guaranty" shall have the meaning described in Section 13 hereof. "Interest Payment Date" shall mean the first day of each of the months of January, April, July and October. "LIBOR" means the rate of interest per annum at which deposits of equal or like amounts in United States dollars are offered by the principal office of The Bank of Nova Scotia in London, England, to prime banks in the London interbank market at 11:00 a.m. (London time), two (2) business days before the first day of the particular Funding Period for a period equal to such Funding Period, as adjusted by the Bank to reflect the impact of the municipal license taxes upon the Bank. "LIBOR Option Rate" shall have the meaning described in Section 8(b) hereof. "Loan" means the principal sum of US$44,000,000, or, if less, the aggregate unpaid principal amount of the Advances owing to the Bank outstanding from time to time. "Loan Documents" means this Agreement with its Exhibits, the Promissory Notes, the Non Revolving Term Note, and the Guaranty. "Non Revolving Term Note" shall have the meaning described in Section 7(b) hereof. "Promissory Note" means a promissory note of the Borrower payable to the order of the Bank, in the form and substance of Exhibit "A" attached hereto and incorporated herein, evidencing the indebtedness of the Borrower resulting from each Advance made hereunder by the Bank. "Regulation 3582" shall have the meaning described in Section 18.3(a) hereof. "Regulation 5002" shall have the meaning described in Section 18.3(a) hereof. "Termination Date" means the date that is the earlier of 5 years from the Date of this Agreement or the date that the Agreement terminates pursuant to Section 19 hereof. "Working Capital Amount" shall have the meaning described in Section 4 hereof. 6. TERMS/MATURITY: The Borrower shall repay the Bank the outstanding principal amount of the Loan due hereunder in full on the fifth anniversary date of the Date of this Agreement (the "Maturity Date"). 7. EVIDENCING AVAILMENTS/DRAWINGS: (a) The Bank agrees, on the terms and conditions set forth herein, to make one or more Advances to the Borrower from time to time on any Business Day during the period from the Date of this Agreement until the Termination Date in an aggregate amount not to exceed at any time outstanding the Commitment. Each Advance shall reduce the amount of the Commitment by the principal amount of such Advance. Each Advance shall be in an aggregate amount of not less than US$500,000 and integral multiples of US$500,000 above such amount, and shall be evidenced by a Promissory Note. Within the limits of the Commitment, the Borrower may borrow the Working Capital Amount, prepay such amount pursuant to Section 12 hereof and reborrow such amount under this Section 7(a). (b) When the Commitment has been fully drawn or if no further draws are to be made hereunder, all Promissory Notes outstanding shall be substituted and replaced by one Non-Revolving Term Note. The Non-Revolving Term Note shall be in the form and substance of Exhibit "B" attached hereto and incorporated herein.
2003. EDGAR Online, Inc.

8. INTEREST RATES: The Borrower shall have the following interest rate options on each Advance: (a) The cost of 30, 60, 90 or 180 day 936 Deposits (as determined by the Bank and adjusted for the cost to the Bank of the municipal license taxes), plus 50 basis points per annum (subject to the availability of 936 Deposits and to the continuing qualification of the Loan for 936 funding) (the "936 Option Rate"); (b) 1, 2, 3, or 6 months cost of LIBOR plus 50 basis points per annum (subject to the availability of LIBOR funds) (the "LIBOR Option Rate"); (c) If both 936 Deposits and LIBOR funds become unavailable or may not be used, the Base Rate interest rate will apply fluctuating concurrently with any changes in such Base Rate; (d) Notwithstanding anything to the contrary provided in paragraphs (a) and (b) above, at any time during the term of the Loan, the Borrower may request the Bank to fix the rate of interest on all or any portion of the Loan, effective on a Rollover Date, for a period not to exceed the then remaining term of the Loan, subject to the availability to the Bank of 936 Deposits or LIBOR funds with the same maturity as the term of the fixed rate, at a rate mutually agreeable to the Borrower and the Bank. Any prepayment by the Borrower of all or any portion of the Loan with a fixed interest rate, shall be subject to the payment by the Borrower of the breakage costs described in Section 12 hereof; (e) Notwithstanding anything to the contrary herein provided, the interest rate applicable to any principal under the Loan outstanding after the Maturity Date or after the Loan is declared due and payable pursuant to Section 19 hereof shall be 2% per annum over the Base Rate; (f) Upon the first Advance and thereafter three Business Days prior to the first day of each new Funding Period, the Bank shall notify to the Borrower the following rates of interest on such Business Day (a) subject to the availability to the Bank of 936 Deposits and to the eligibility of the Advance to be funded with 936 Deposits, the 936 Option Rate; and (b) subject to the availability to the Bank of LIBOR funds for such Funding Period, the LIBOR Option Rate. In the case of 936 Deposit funding, the Borrower must advise the Bank not later than 12 noon Puerto Rico time on the first Business Day of the ensuing Funding Period, and in the case of LIBOR funding two (2) Business Days before such Business Day which of the two funding options it selects for the ensuing Funding Period. The interest rate applicable to such Funding Period shall be the interest rate applicable on the first day of the Funding Period to the funding option selected by the Borrower. If the Borrower fails to make such timely notice of election then the interest rate beginning on the first day of such Funding Period shall be computed on the basis of the 30 day 936 Option Rate until a new Funding Period is established, or, if 936 Deposits are not available, on the basis of 30 day LIBOR Option Rate or, if LIBOR funds are not available, on the basis of the Base Rate. 9. FEES: (a) The Borrower shall pay to the Bank on the Date of this Agreement a one-time front end fee of 15 basis points times the Commitment amount. This fee includes the Bank's cost of presenting the necessary applications for 936 funding to the Puerto Rico government agencies. (b) On each anniversary date from the Date of this Agreement, the Borrower shall pay the Bank an annual administration fee of US$10,000.00. (c) On each Interest Payment Date, the Borrower shall pay the Bank a Standby Fee amounting to 15 basis points of the unutilized portion of the Commitment, computed on a daily basis, on the basis of a 365/366 days year. 9.A VARIATIONS ININTEREST RATES AND STANDBY FEE: The interest rates and the Standby Fee set forth in Sections 8 and 9(c) hereof, shall be increased and reduced concurrently with any increases or reductions in the Guarantor's senior unsecured long term debt rating by Standard and Poor's ("S&P") or Moody's, as follows:

S&P or Moody's Rating -------------A or A2, or better BBB+ or Baa1, or better

Standby Fee -------12.5 bp

LIBOR Plus ----37.5 bp

936 Plus ---37.5 bp

15 bp
2003.

50 bp
EDGAR Online, Inc.

50 bp

BBB and Baa2 BBB- or Baa3 BBB- and Baa3 BB+ or lower and Ba1 or lower bp

17.5 bp 20 bp 25 bp

55 bp 62.5 bp 75 bp

55 bp 62.5 bp 75 bp

37.5 bp

112.5 bp

112.5

10. CALCULATION AND PAYMENT OF INTEREST: The Borrower shall pay interest quarterly in arrears on each Interest Payment Date, or on Rollover Dates, whichever is earlier, on the actual daily unpaid principal balance of the Loan and calculated on each such day on the basis of (i) a 365/366 day calendar year for the actual number of days elapsed with respect to Base Rate Advances, and (ii) a 360-day calendar year for the actual number of days elapsed with respect to 936 Option Rate and/or LIBOR Option Rate Advances. 11. REPAYMENT: The principal amount of the Loan or the outstanding balance thereof shall be repaid in full on the Maturity Date. Payments hereunder shall be made by the Borrower at the Bank's Hato Rey Branch located at Plaza Scotiabank, Hato Rey, Puerto Rico or by wire transfer to the following account: Federal Reserve Bank of New York, Account the Bank of Nova Scotia, New York, ABA No. 02600-2-532, Account The Bank of Nova Scotia, Hato Rey, Transit 13185. In the event that the day in which a payment due under this Agreement is not a Business Day, such payment shall be due on the immediately succeeding Business Day. 12. PREPAYMENT: No prepayment of all or any portion of the Loan shall be permitted at any time in whole or in part when Advances are funded with 936 Deposits or LIBOR funds, except on a Rollover Date. If a prepayment is made on a date other than a Rollover Date, the Borrower shall pay to the Bank an amount equal to the additional costs and/or losses incurred by the Bank as a result of the prepayment, as determined solely by the Bank. A certificate by the Bank showing the computation of the additional costs and/or losses shall be conclusive evidence of the amount thereof, in the absence of manifest error. 13. SECURITY: The unconditional in solidum guaranty of Enron Oil & Gas Company in favor of the Bank, dated as of the Date of this Agreement, in the form of Exhibit C (the "Guaranty"), shall be in full force and effect before any Advance is made pursuant to this Agreement, and such security shall remain in full force and effect until all principal and interest due hereunder is fully paid and all other obligations of the Borrower hereunder have been fully satisfied. 14. REPRESENTATIONS AND WARRANTIES OF BORROWER: In order to induce the Bank to lend hereunder, the Borrower represents and warrants as follows: 14.1 ORGANIZATION AND STANDING OF BORROWER The Borrower has been duly organized and is validly existing in good standing under the laws of Trinidad & Tobago. 14.2 AUTHORITY AND NO VIOLATION The Borrower has the corporate power and authority to execute, deliver and perform its obligations under this Agreement, the Promissory Notes and the Non Revolving Term Note (hereinafter collectively with the Promissory Notes referred to as the "Notes") to be delivered by it and to make the borrowings hereunder. The execution, delivery and performance of this Agreement and the Notes, and the borrowings hereunder (a) have been duly authorized by all requisite corporate or shareholder action, (b) do not conflict with or result in a violation or breach of the corporate documents of the Borrower or of any agreement, instrument, statute, regulation, rule, order, writ, judgment or decree to which the Borrower or its property is directly or indirectly a party or is directly or indirectly subject and (c) will not give cause for acceleration of any indebtedness of the Borrower. 14.3 NO CONSENT REQUIRED No approval, authorization or other action by, or filings with any Governmental Authority or other entity is required in connection with the execution, delivery and performance by the Borrower of this Agreement, the borrowings hereunder and the execution and delivery of the Notes. 14.4 FINANCIAL CONDITION OF BORROWER The Borrower has heretofore furnished to the Bank the audited balance sheet of the Borrower's operations in Trinidad & Tobago as of December 31, 1993 and the related statements of income, retained earnings and cash flows for the period ended December 31, 1993. Such financial statements were prepared in accordance with generally accepted accounting principles consistently applied by the Borrower, and present fairly the financial condition and results of operations at the dates and for the periods indicated therein. 14.5 NO MATERIAL ADVERSE CHANGE There has been no material adverse change (not in the ordinary course of business) in the
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financial condition of the Borrower since December 31, 1993. 14.6 LITIGATION There are no lawsuits or other claims or proceedings pending or, to the knowledge of the Borrower, threatened, against or affecting the Borrower or any of its properties, by or before any Governmental Authority, which, if adversely determined (individually or in the aggregate), would have a material adverse effect on the financial condition of the Borrower, or which involve this Agreement or any of the transactions contemplated hereby. The Borrower is not in default with respect to any order, writ, injunction, decree, rule or regulation of any Governmental Authority, which default would have a material adverse effect upon the financial condition of the Borrower. 14.7 COMPLIANCE WITH LAWS, ETC. The Borrower is in compliance and shall comply with all applicable laws, rules, regulations and orders, to the extent noncompliance therewith would have a material adverse effect on the financial condition of the Borrower. 15. AFFIRMATIVE COVENANTS: From the date of this Agreement and for so long as the same shall be in effect or any amount shall remain outstanding under any Note made pursuant to this Agreement and for so long as Borrower owes any obligation whatsoever to the Bank pursuant to this Agreement, the Borrower agrees that it shall: 15.1 CORPORATE EXISTENCE Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its corporate existence, material rights, licenses, permits and franchises and comply in all material respects with all laws and regulations applicable to it provided, however, that the Borrower shall not be required to preserve any right, license, permit or franchise if the Borrower shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower, and that the loss thereof is not disadvantageous in any material respects to the Bank. 15.2 INSURANCE Maintain insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties as the Borrower, provided, that self-insurance by the Borrower shall not be deemed a violation of this covenant to the extent that companies engaged in similar businesses and owning similar properties as the Borrower self-insure. 15.3. NOTICE OF EVENT OF DEFAULT Promptly give to the Bank notice in writing of the occurrence of any Event of Default. 15.4. NOTICE OF JUDGMENTS AND CHANGE IN CONTROL Promptly give to the Bank notice in writing of (i) any final judgment(s) in excess of US$10,000,000 in the aggregate entered against the Borrower which are not vacated, discharged, paid or stayed pending appeal within a period of 30 days after entry of such judgment, or vacated, discharged or paid within 30 days after entry of final order of affirmance on appeal and (ii) a change in control of the Borrower. For purposes of this section a change in control shall be deemed to occur if the Guarantor ceases to own directly or indirectly at least 50% of the Borrower's issued and outstanding common stock and any other voting stock. 16. NEGATIVE COVENANTS: From the Date of this Agreement and for so long as the same shall be in effect or any amount shall remain outstanding under any Note made pursuant to this Agreement, the Borrower agrees that it will not, directly or indirectly: 16.1 MERGER, ACQUISITION OR SALE OF ASSETS Consolidate or merge into or transfer its properties and assets substantially as an entirety to another person, unless (i) the surviving person, if other than the Borrower, assumes by supplemental agreement satisfactory in form and substance to the Bank all the obligations under this Agreement; (ii) after giving effect to such assumption, there would not exist any Event of Default hereunder; and (iii) the Guaranty remains in full force and effect. 16.2 NEGATIVE PLEDGES Borrower shall not constitute, permit or allow to remain in effect, any liens or encumbrances of any type or nature on its assets, including Active Business Assets, except, (i) mortgages, deeds of trust, pledges, liens, security interests, assignments, deposit arrangements or other preferential arrangements, charges or encumbrances in favor of the Bank, (ii) liens for taxes or assessments or other governmental charges or levies if not yet due and payable or, if due and payable, if they are being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained; (iii) pledges in favor of the Guarantor; (iv) undetermined or inchoate liens or charges incidental to the construction, operation, maintenance or development of oil and gas reserves off the coast of Trinidad & Tobago by the Borrower; (v) obligations or duties of the Borrower to any municipality or Governmental Authority with respect to any franchise, grant, license, permit or similar arrangement; (vi) judgment liens, the aggregate of which does not exceed US$10,000,000, or the aggregate amount of which is greater, if such greater amount is stayed by appeal, or which has been appealed and secured, if necessary, by the filing of an appeal bond; (vii) the pledge of hydrocarbons produced or recovered from any property, an interest in which is owned or leased by the Borrower; (viii) the pledge of current assets to secure current liabilities, if in the ordinary course of business; and (ix) mechanics' and/or materialmen's liens. Borrower shall not dispose of any of its assets financed with the proceeds of the Loan, except in the ordinary course of its trade or business.

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16.A 936 INDEMNITY AND HOLD HARMLESS: The Borrower agrees, upon demand, to indemnify and hold harmless the Bank against and from all taxes (plus interest assessed thereon), cost, damage, liability, fine, penalty, claim, cause of action, judgment, court cost and legal or other expense, including attorneys' fees, relating directly or indirectly to Section 936 of the Internal Revenue Code, the Federal CBI Regulations or Regulations 3582 or 5002 by reason of any of the following: (a) any act of commission or omission by the Borrower; (b) any adverse determination made by the United States Internal Revenue Service, the Commissioner of Financial Institution of Puerto Rico (the "Commissioner") or any Governmental Authority in the United States or the Commonwealth as to the qualification of any of the Advances or any transactions related thereto as an eligible activity or an investment in Active Business Assets under Section 936 of the Internal Revenue Code, the Federal CBI Regulations or Regulations 3582 or 5002; or (c) any failure by the Borrower to permit the Bank to discharge or fulfill its duties or obligations under the Federal CBI Regulations or Regulations 3582 or 5002; or (d) any change to Section 936 of the Internal Revenue Code or the regulations thereunder or in the interpretation thereof, that results in any adverse consequence to the Bank due to any Advance funded with 936 Deposits being outstanding; provided, however, an indemnity under this clause (d) shall be limited to the excess of the actual losses over the amount of any other adjustments or indemnities provided for such losses elsewhere in this Agreement. 17. REPORTING REQUIREMENTS: (a) Borrower shall provide to the Bank audited financial statements within 120 days after the end of each fiscal year. Such financial statements will include the Borrower's balance sheet and the related statements of income, cash flows and retained earnings, with related notes, as of the close of such fiscal year and for the year then ended, the foregoing financial statements to be in form consistent with that theretofore released by the Borrower on an annual basis. The audited financial statements must be accompanied by the audit report from the Borrower's independent public accountants; (b) Concurrently with the financial statements referred above, a certificate of a director of the Borrower knowledgeable about the Borrower's financial affairs, certifying that to the best of his knowledge no Event of Default has occurred and is continuing or, if such an event has occurred and is continuing, specifying the nature and the extent thereof. 18. CONDITIONS PRECEDENT: 18.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE The obligation of the Bank to make its initial Advance hereunder is subject to the conditions precedent that the Bank shall have received on or before the day of the initial Advance the following, all in form and substance satisfactory to the Bank: (a) the Promissory Note or the Non-Revolving Term Note properly executed by the Borrower to the order of the Bank: (b) the Guaranty of Enron Oil & Gas Company; (c) a certificate of the Secretary or an Assistant Secretary of the Borrower dated the date of the initial Advance and certifying (A) that attached thereto is a true and complete copy of the Memorandum and Articles of Association of the Borrower as in effect on the date of such certification, (B) that attached thereto is a true and complete copy of resolutions adopted by the Board of Directors of the Borrower authorizing the borrowings hereunder, the execution, delivery and performance in accordance with their respective terms of this Agreement, the Promissory Note, the Non Revolving Term Note and any other documents required or contemplated hereunder or thereunder, and (C) as to the incumbency and specimen signature of each authorized signature of the Borrower executing this Agreement, the Promissory Note, the Non-Revolving Term Note or any other document delivered by it in connection herewith. (d) a certificate of the Secretary of State of Delaware, dated as of a recent date as to the good standing of the Guarantor and as to the charter documents on file in the office of such Secretary of State. (e) a certificate of the Secretary or an Assistant Secretary of the Guarantor dated the date of the initial Advance and certifying (A) that attached thereto is a true and complete copy of the by-laws of the Guarantor as in effect on the date of such certification, (B) that attached thereto is a true and complete copy of resolutions adopted by the Board of Directors of the Guarantor authorizing the execution, delivery and performance in accordance with its terms of the Guaranty (C) that the certificate of incorporation of the Guarantor has not been amended since the date of the last amendment thereto indicated on the certificate of the Secretary of State furnished pursuant to clause (d) above and (D) as to the incumbency and specimen signature of each officer of the Guarantor executing the Guaranty.

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(f) Opinions of Borrower's Trinidad & Tobago counsel and of Guarantor's general counsel in form and substance satisfactory to the Bank. (g) a favorable opinion of Axtmayer Adsuar Muniz & Goyco, counsel for the Bank, as to the validity and enforceability of this Agreement, and as to the qualification of the Loan for funding with 936 Deposits under the Federal CBI Regulations and Regulation 3582 and 5002 in form and substance acceptable to the Bank. 18.2 CONDITIONS PRECEDENT TO ALL ADVANCES: The obligation of the Bank to make each Advance, including the initial Advance is subject to the following conditions precedent: (a) The representations and warranties set forth in Section 14 hereof shall be true and correct in all material respects on and as of the date of each borrowing hereunder with the same effect as if made on and as of such date. (b) On the date of each borrowing hereunder, the Borrower shall be in compliance with all of the terms and provisions set forth herein to be observed or performed and no Event of Default shall have occurred and be continuing. Each borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such borrowing as to the matters specified in paragraph (a) and (b) of this section. 18.3 ADDITIONAL REPRESENTATIONS, WARRANTIES, COVENANTS AND CONDITIONS PRECEDENT TO 936 ADVANCES: The obligation of the Bank to make advances funded with 936 Deposits shall be subject to the conditions set forth in Sections 18.1 and 18.2 and to the following representations, warranties, covenants and conditions: (a) All the necessary Governmental Authority approvals as to the qualification of the Loan under Section 936(d)(4) of the Internal Revenue Code and the Federal CBI Regulations (as defined hereinafter) and Regulations 3582 and 5002 issued by the Commissioner pursuant to the Puerto Rico Industrial Incentive Acts, including without limitation the Commissioner's confirmation of its approval given to Citibank, have been obtained. (b) The Bank shall make the Loan available to the Borrower subject to the terms and conditions of this Agreement and induced by and relying on the Borrower's warranty that, for the purpose of complying with Regulation 5002 and with Section 936(d)(4) of the United States Internal Revenue Code and Section 1.936-10(c) of the regulations promulgated thereunder (the "Federal CBI Regulations"), the Loan shall be used solely for the acquisition of Active Business Assets. The proceeds of the Loan may also be used for working capital purposes provided that the amount used for such purposes may not exceed 10% of the amount invested in Active Business Assets. (c) On the Date of this Agreement and on each anniversary date of this Agreement, the Borrower will submit (i) a certification to the Bank in the form of Exhibit "D" hereto as to Borrower's qualification as a qualified recipient under Section 1.936-10(c)(9) of the Federal CBI Regulations and (ii) a 936 representation letter in the form of Exhibit "E" hereto. (d) Borrower will use the proceeds of the Loan at all times during the period that the Loan is outstanding solely for the acquisition of Active Business Assets or for working capital purposes in full compliance under the provisions of Section 1.936-10(c)(4) of the Federal CBI Regulations. (e) Borrower will be the owner of the Active Business Assets for United States tax purposes and will not lease back the assets to the person from whom the assets are acquired. (f) Borrower agrees to expend the proceeds of the Loan in the acquisition of Active Business Assets or for working capital purposes no later than six (6) months from the date the funds are disbursed by the Bank. During this six-month period the proceeds of the Loan and proceeds from the investment thereof will be invested in compliance with the temporary investment requirements set forth in the Federal CBI Regulations. (g) Borrower agrees to notify the Assistant Commissioner (International) of the United States Internal Revenue Service (the "Assistant Commissioner of the IRS"), the Bank, and the Commissioner if it no longer is a qualified recipient under Section 1.936-10(c)(9) of the Federal CBI Regulations, or if for any other reason the investment has ceased to qualify as a qualified investment under the Federal CBI Regulations or under Regulation 5002, promptly upon the occurrence of such disqualifying event. (h) Borrower will permit examination by the Office of the Assistant Commissioner of the IRS (or by the office of any District Director authorized by the Assistant Commissioner of the IRS) and by the Commissioner or his delegate, of all necessary books and records that are sufficient to verify that the funds were used for investment in Active Business Assets or for working capital purposes in
2003. EDGAR Online, Inc.

conformity with the terms of this Agreement. (i) Borrower will submit annually to the Bank, together with the certified financial statements required pursuant to Section 17(a) hereof, an opinion of its independent auditors disclosing the amount of the Loan and the business activity in which such assets are used and stating that there is no reason to doubt that the proceeds of the Loan have been properly used pursuant to Section 1.936-10 of the Federal CBI Regulations and to Regulation 5002 and continue to be properly used pursuant to such regulations. (j) Prior to the first Advance the Bank and the Borrower will submit to the Assistant Commissioner of the IRS and to the Commissioner a certificate in the form of Exhibit "F", hereto, pursuant to the provisions of Section 1.936-10(c)(12) of the Federal CBI Regulations. (k) The Bank will comply with the due diligence requirements imposed upon the Bank by Section 1.936-10(c)(13) of the Federal CBI Regulations and by Article 6 of Regulation 5002. 19. EVENTS OF DEFAULT: If any of the following events (herein each called an "Event of Default") shall occur and be continuing: (a) any material representation or warranty made by (i) the Borrower under or in connection with this Agreement or in the Notes or any material statement or representation made in any report, financial statement, certificate or other document furnished to the Bank under or in connection with this Agreement, or (ii) the Guarantor under or in connection with the Guaranty, shall prove to have been false or misleading in any material respect when made or delivered and such materiality is continuing; (b) the Borrower shall fail to make any payment of any principal of or interest on the Promissory Notes or on the Non-Revolving Term Note, or of any fees or other amounts payable by the Borrower hereunder, when and as the same shall become due and payable, and, in the case of payments other than of any principal amount of the Promissory Notes or the Non-Revolving Term Note, such default shall continue unremedied for five days; (c) default shall be made by the Borrower in the due observance and performance of any covenant, condition or agreement contained in Sections 15 or 16 hereof in any material respect; (d) default shall be made by the Guarantor in the due observance and performance of any material covenant, condition or agreement of the Guaranty; (e) default shall be made by the Borrower in the due observance or performance of any other covenant, condition or agreement to be observed or performed pursuant to the terms of this Agreement and such default shall continue unremedied for 30 days after written notice thereof shall be given to the Borrower by the Bank; (f) the Borrower shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under applicable bankruptcy, insolvency or similar law or laws of Trinidad & Tobago, or of any other jurisdiction, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), shall remain undismissed or unstayed for a period of 60 days; or a firm, final and unappealable order, judgment or decree approving or ordering any of the foregoing shall be entered in any such proceeding or case; (g) there is a material adverse change in the financial position of Borrower; (h) the validity of the Guaranty shall be contested by the Guarantor or the Guarantor shall deny liability under the Guaranty or any material provision of the Guaranty shall be deemed invalid or unenforceable for any reason; (i) the Guarantor ceases to own, directly or indirectly, a controlling interest in the Borrower; then in every such event and at any time thereafter during the continuance of such event, the Bank may, by notice to the Borrower, declare the principal of and the interest on the Loan and all other amounts payable hereunder to be forthwith due and payable, whereupon all outstanding principal and interest thereon accruing up to the date of payment and all such other amounts shall become and be forthwith due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything in this Agreement or in the Notes to the contrary notwithstanding, and the obligations of the Bank to make Advances hereunder shall thereupon forthwith terminate. 20. PAYMENT NET OF TAXES AND INDEMNIFICATION: Any and all payments by the Borrower hereunder and under the the Loan Documents shall be made free and clear of and without deduction for any and all present and future taxes and withholdings of any
2003. EDGAR Online, Inc.

type and nature imposed by a Governmental Authority of Trinidad & Tobago or of any other country in which Borrower conducts operations. If Borrower is required by law to deduct any such taxes or withholdings from or in respect to payments under this Agreement or under the Loan Documents such payments shall be increased as necessary so that the Bank receives an amount equal to the sum it would have received had no such deduction been made, and Borrower shall pay such taxes and withholdings to the relevant taxing authority and provide to the Bank acceptable evidence of such payment. In the event that the Bank receives any credit or refund of any such taxes or withholdings included in any payment made by the Borrower pursuant to this Section 20, the Bank shall thereupon reimburse the Borrower for the amount of such credit or refund actually received. A certificate by the Bank as to the amount of the credit or refund shall constitute conclusive evidence of the amount thereof, absent manifest error. Promptly after the close of its fiscal year, the Bank will provide the Borrower an annual statement certifying whether or not any credit or refund of any taxes or withholdings has been obtained by the Bank and the amount thereof, if any. 21. CHANGE IN LAW: If any change in applicable law or regulations or in the interpretation thereof by a court of justice or any Governmental Authority charged with the administration thereof shall make it unlawful for the Bank to continue to maintain all or a portion of the credit facilities provided herein or for the Borrower to comply with its obligations as contemplated by this Agreement, the Borrower shall forthwith, upon demand by the Bank to the Borrower, prepay in full the principal amount of the illegal portion of the Loan then outstanding together with accrued interest thereon; provided, that if such unlawfulness is only applicable with respect to certain type(s) of Advance(s), the Borrower shall have the option of selecting another funding option which will not be illegal, instead of prepaying the Loan in full or in part. 22. INCREASED COSTS CAPITAL ADEQUACY, ETC.: (a) If due to either (1) the introduction of or any change in or in the interpretation of any law or regulation by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof or (2) the compliance with any guideline or request from any Governmental Authority, central bank or comparable agency (whether or not having the force of law), there shall be any increase in the cost to the Bank of agreeing to make or making, funding or maintaining Advances (other than the increased costs described in clause (c) below), the Borrower shall from time to time, upon demand by the Bank pay to the Bank additional amounts sufficient to compensate the Bank for such increased cost. A certificate in reasonable detail as to the basis for and the amount of such increased cost, submitted to the Borrower by the Bank, shall be conclusive and binding for all purposes, absent manifest error. Promptly after the Bank becomes aware of any such introduction, change or proposed compliance, the Bank shall notify the Borrower thereof. No Bank shall be permitted to recover increased costs incurred or accrued more than 90 days prior to such notice to the Borrower. (b) If the Borrower so notifies the Bank within five Business Days after any Bank notifies the Borrower of any increased cost pursuant to the provisions of Section 22(a), the Borrower shall convert all Advances of the type affected by such increased cost then outstanding into Advances of another type in accordance with Sections 8 and 12 and, additionally, reimburse such Bank for such increased cost in accordance with Section 22(a). (c) If the Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule, regulation or treaty regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank (or its lending office) with any requestor directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency (except to the extent such request or directive arises as a result of the individual creditworthiness of such Bank), has or would have the effect of increasing the amount of capital required or expected to be maintained as a result of its Commitment hereunder, the Bank shall have the right to give prompt written notice thereof to the Borrower which notice shall show in reasonable detail the calculation of such additional amounts as shall be required to compensate the Bank for the increased cost to the Bank as a result of such increase in capital and shall certify that such costs are generally being charged by the Bank to other similarly situated borrowers under similar credit facilities, which notice shall be conclusive and binding for all purposes, absent manifest error, although the failure to give any such notice shall not, unless such notice fails to set forth the information required above or except as otherwise expressly provided in Section 22(d), release or diminish any of the Borrower's obligations to pay additional amounts pursuant to Section 22(d). (d) The Bank agrees that, upon giving notice specified in Section 22(c), at the request of the Borrower, it will promptly enter into good faith negotiations with the Borrower with respect to the method of reimbursement for the additional costs specified in such notice. No later than 15 days after the date of the giving of any such notice, and assuming the Bank has made itself available for the aforesaid good faith negotiations, the Borrower shall have the option, to be exercised in writing, to (1) compensate such Bank for the specified
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additional costs on the basis, if any, negotiated between the Bank and the Borrower, (2) select a new funding option for the outstanding Advances, if any, that will not be subject to the additional costs or (3) terminate the Bank's commitment to maintain and fund Advances of the type subject to the increased costs set forth in Section 22(c) to the extent, and on the terms and conditions, specified in Section 22(e); provided that if the Borrower fails to exercise the option to terminate or if all of the funding options are subject to the additional costs, it shall be deemed to have agreed to reimburse the Bank from time to time on demand the additional costs specified in the Bank's notice delivered pursuant to Section 22(c). Notwithstanding the foregoing, the Borrower shall not be obligated to reimburse the Bank pursuant to this Section 22(d) or Section 22(e) for any additional costs under Section 22(c) incurred or accruing more than 90 days prior to the date on which the Bank gave the written notice specified in Section 22(c). (e) In the event that the Borrower has given notice to the Bank pursuant to Section 22(d) that it elects to terminate the Bank's commitment to maintain and fund Advances of the type subject to the increased costs set forth in section 22(c), such termination shall become effective at the Borrower's option 15 days thereafter or at the end of the current Funding Period, unless the Bank withdraws its request for additional compensation. On the date of the termination, (x) the Borrower shall deliver notice of the effectiveness of the termination to the Bank, (y) the Borrower shall pay all amounts owed by the Borrower to the Bank under this Agreement in connection with the Advances subject to the increased costs set forth in Section 22(c) (including principal of and interest on such Advances owed to the Bank, accrued facility fees and amounts specified in the Bank's notice delivered pursuant to Section 22(c) with respect to the period prior to such termination). The Borrower may elect to terminate the Bank's Commitment pursuant to Section 22(d) only if at such time no Event of Default is then in existence or would be in existence but for requirement that notice be given or time elapse or both. (f) The Bank shall use its reasonable efforts (consistent with its internal policies and legal and regulatory restrictions) to select a jurisdiction for its lending office or change the jurisdiction of its lending office , as the case may be, so as to avoid the imposition of any increased costs under this Section 22 or to eliminate the amount of any such increased cost which may thereafter accrue; provided that no such selection or change of the jurisdiction for its lending office shall be made if, in the reasonable judgment of the Bank, such selection or change would be disadvantageous to the Bank. 23. COVENANT TO PROVIDE DOCUMENTATION: The Borrower agrees to provide the Bank with a copy of the Memorandum of Articles of Association certified as of a recent date by the appropriate officer of Trinidad & Tobago not later than 90 days after the initial Advance hereunder. 24. PLACE AND ADMINISTRATION OF LOAN: The Loan will be made at and administered by the Bank's Plaza Scotiabank Hato Rey, Puerto Rico branch to whom all notices in connection with this Agreement and the Loan shall be given in the manner set out below. 25. LEGAL FEES: The Borrower shall pay the fees of the Bank's legal counsel related to the execution of the Loan Documents, such legal fees not to exceed US$25,000. 26. ADDRESS FOR NOTICES TO PARTIES: Unless either party advises the other in writing to the contrary all notices under this Agreement shall be made to the parties by mail, personal delivery or facsimile transmission to their following respective addresses in writing: 26.1 To the Borrower: Enron Gas & Oil Trinidad Limited Second Floor, The Mutual Centre 16 Queen's Park West Port of Spain Republic of Trinidad & Tobago British West Indies ATTN: MANAGING DIRECTOR Telephone: (809) 622-8653 Telecopier: (809) 628-4218 with copy to: Enron Gas & Oil Trinidad Limited PO Box 1188 Houston, Texas 77251-1188 ATTN: WALTER C. WILSON, DIRECTOR Telephone: (713) 853-5012 Telecopier: (713) 646-8062 26.2 To the Bank:
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The Bank of Nova Scotia 273 Ponce de Leon Avenue Hato Rey, PR 00917 ATTN: MR. ARTURO NUNEZ with copy to: The Bank of Nova Scotia 1100 Louisiana, Suite 3000 Houston, Texas Telephone: (713) 752-0900 Telecopier: (713) 752-2425 27. AMENDMENTS: This Agreement may not be amended or modified except by a writing, signed by or on behalf of the Bank and the Borrower. 28. ASSIGNMENT; BINDING UPON SUCCESSORS: The Bank shall have the absolute right to assign this Agreement. This Agreement shall be binding upon and inure to the benefit of the Bank and the Borrower and their successors and assigns. 29. SECTION HEADINGS: The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 30. REASONABLE EFFORTS: Subject to the terms and conditions herein provided, and unless otherwise stated to the contrary the parties hereto agree to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective, as soon as reasonably practicable, the transactions contemplated by this Agreement. 31. RIGHTS OF THIRD PARTIES: Nothing in this Agreement shall be construed as giving any person, firm, corporation or other entity, other than the parties hereto and their respective successors and permitted assigns, any rights, remedy or claim under or in respect of this Agreement or any provision hereof. 32. NO WAIVER: No waiver shall be deemed to be made by the Bank of any of its rights hereunder unless the same shall be in writing and signed on behalf of the Bank. A waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the Bank or the obligations of the Borrower to the Bank in any other respect at any other time. 33. APPLICABLE LAW: This Agreement shall be governed by, and construed and interpreted in accordance with the laws of the Commonwealth of Puerto Rico. The Bank and the Borrower submit themselves irrevocably to the jurisdiction of the courts of the Commonwealth of Puerto Rico for any actions or proceedings related to this Agreement. Please evidence the Borrower's acceptance of this Agreement by causing the execution of the original and one counterpart of same by an authorized corporate officer. Yours very truly,

/s/ Arturo Nunez ACCEPTED THIS 27th DAY OF May, 1994. BY: Enron Gas & Oil Trinidad Limited By: /s/ W. C. Wilson Its: Director

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EXHIBIT A PROMISSORY NOTE US$ Maturity: , 1999 FOR THE VALUE RECEIVED, Enron Gas & Oil Trinidad Limited (the "Borrower"), a corporation organized under the laws of Trinidad & Tobago, promises to pay to the order of The Bank of Nova Scotia (the "Bank"), a banking corporation organized and existing under the laws of Canada, at the principal offices of the Bank, Plaza Scotiabank Building, 273 Ponce de Leon Avenue, Hato Rey, San Juan, Puerto Rico, or such other place that the Bank may designate, the principal sum of US$______________ in lawful currency of the United States of America or, if less, the aggregate unpaid principal amount of the Advance (as defined in the Letter Loan Agreement dated May , 1994 between the Borrower and the Bank, such Letter Loan Agreement as amended from time to time being herein referred to as the "Loan Agreement") owing to the Bank outstanding on the Maturity Date. The principal of this obligation will be repaid in one installment due on , 1999. Interest will accrue and be payable on the outstanding principal balance of this obligation from this date on at the following alternative rates: 1. The cost of 30, 60, 90, or 180 day 936 Deposits to the Bank (as determined by the Bank and adjusted for the cost to the Bank of municipal license taxes), plus 50 basis points per annum (subject to the availability of 936 Deposits and to the continuing qualification of the Loan for 936 funding) (the "936 Option Rate"); 2. 1, 2, 3, or 6 months cost of LIBOR to the Bank plus 50 basis points per annum (subject to the availability of LIBOR funds) ( the "LIBOR Option Rate"). 3. If both 936 Deposits and LIBOR funds become unavailable or may not be used, the applicable interest rate will be the Base Rate fluctuating concurrently with any changes in such Base Rate. 4. Notwithstanding anything to the contrary provided in paragraphs (1) and (2) above, at any time during the term of the Loan, the Borrower may request the Bank to fix the rate of interest on all or any portion of the Loan for a period not to exceed the then remaining term of the Loan, subject to the availability to the Bank of 936 Deposits or LIBOR funds with a term at least equal to such term, at a rate mutually agreeable to the Borrower and the Bank. Any prepayment by the Borrower of all or any portion of the principal amount of the Loan with a fixed interest rate shall be subject to payment by the Borrower of the breakage costs set forth in Section 12 of the Loan Agreement. 5. Notwithstanding anything to the contrary herein provided, the interest rate applicable to any overdue principal under the Loan shall be 2% over the Base Rate per annum. The interest rates set forth herein shall be increased and reduced concurrently with any increases or reductions in the Guarantor's senior unsecured long term debt rating by Standard and Poor's ("S&P") or Moody's as follows:

S&P or Moody's Rating LIBOR Plus - ------------------------------------A or A2, or better 37.5 bp BBB+ or Baa1, or better BBB and Baa2 BBB- or Baa3 BBB- and Baa3 BB+ or lower and Ba1 or lower

936 Plus

37.5 bp

50 bp 55 bp 62.5 bp 75 bp

50 bp 55 bp 62.5 bp 75 bp

112.5 bp
2003.

112.5 bp

EDGAR Online, Inc.

Upon the first Advance and thereafter three Business Days prior to the first day of each new Funding Period, the Bank shall notify to the Borrower the following rates of interest on such Business Day (a) subject to the availability to the Bank of 936 Deposits and to the eligibility of the Advance to be funded with 936 Deposits, the 936 Option Rate; and (b) subject to the availability to the Bank of LIBOR funds for such Funding Period, the LIBOR Option Rate. In the case of 936 Deposit funding, the Borrower must advise the Bank not later than 12 noon Puerto Rico time on the first Business Day of the ensuing Funding Period, and in the case of LIBOR funding two (2) Business Days before such Business Day which of the two funding options it selects for the ensuing Funding Period. The interest rate applicable to such Funding Period shall be the interest rate applicable on the first day of the Funding Period to the funding option selected by the Borrower. If the Borrower fails to make such timely notice of election then the interest rate beginning on the first day of such Funding Period shall be computed on the basis of the 30 day 936 Option Rate until a new Funding Period is established, or, if 936 Deposits are not available, on the basis of 30 day LIBOR Option Rate or, if LIBOR funds are not available, on the basis of the Base Rate. The Borrower shall pay interest quarterly in arrears on each Interest Payment Date, or on a Rollover Date, whichever is earlier, on the actual daily unpaid principal balance of the Loan and calculated on each such day on the basis of (i) a 365/366 day calendar year for the actual number of days elapsed with respect to Base Rate Advances, and (ii) a 360-day calendar year for the actual number of days elapsed with respect to 936 Option Rate and/or LIBOR Option Rate Advances. Up to an amount equal to the Working Capital Amount may be repaid and reborrowed hereunder prior to the Maturity Date provided that repayments of such amount shall be allowed only on Rollover Dates. Upon failure to pay principal, or interest, or the occurrence of any other event of default as stipulated in the Loan Agreement, the Bank may at its option declare the full unpaid balance of this obligation to be immediately due and payable together with any accrued and unpaid interest, and may proceed to enforce the security under the Loan Agreement and/or interpose judicial proceedings to collect said sums plus costs, expenses and a reasonable sum for attorney's fees. The Borrower hereby waives presentment, protest, demand and notice of non-payment and submits itself to the jurisdiction of the courts of the Commonwealth of Puerto Rico for any judicial proceeding hereunder. The terms "the Borrower" and "the Bank" as used herein include their respective successors or assigns. This Promissory Note has been issued under and pursuant to the Loan Agreement which is supplementary as to any matter pertinent to this Promissory Note not expressly provided herein. All capitalized terms used herein shall have the meaning ascribed to such terms in the Loan Agreement. Dated as of May 31, 1994. Enron Gas & Oil Trinidad Limited

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EXHIBIT B NON-REVOLVING TERM NOTE US$44,000,000 Maturity: , 1999 FOR THE VALUE RECEIVED, Enron Gas & Oil Trinidad Limited (the "Borrower"), a corporation organized under the laws of Trinidad & Tobago, promises to pay to the order of The Bank of Nova Scotia (the "Bank"), a banking corporation organized and existing under the laws of Canada, at the principal offices of the Bank, Plaza Scotiabank Building, 273 Ponce de Leon Avenue, Hato Rey, San Juan, Puerto Rico, or such other place that the Bank may designate, the principal sum of US$44,000,000 in lawful currency of the United States of America or, if less, the aggregate unpaid principal amount of the Advance (as defined in the Letter Loan Agreement dated May , 1994 between the Borrower and the Bank, such Letter Loan Agreement as amended from time to time being herein referred to as the "Loan Agreement") owing to the Bank outstanding on the Maturity Date. The principal of this obligation will be repaid in one installment due on , 1999. Interest will accrue and be payable on the outstanding principal balance of this obligation from this date on at the following alternative rates: 1. The cost of 30, 60, 90, or 180 day 936 Deposits to the Bank (as determined by the Bank and adjusted for the cost to the Bank of municipal license taxes), plus 50 basis points per annum (subject to the availability of 936 Deposits and to the continuing qualification of the Loan for 936 funding) (the "936 Option Rate"); 2. 1, 2, 3, or 6 months cost of LIBOR to the Bank plus 50 basis points per annum (subject to the availability of LIBOR funds) ( the "LIBOR Option Rate"). 3. If both 936 Deposits and LIBOR funds become unavailable or may not be used, the applicable interest rate will be the Base Rate fluctuating concurrently with any changes in such Base Rate. 4. Notwithstanding anything to the contrary provided in paragraphs (1) and (2) above, at any time during the term of the Loan, the Borrower may request the Bank to fix the rate of interest on all or any portion of the Loan for a period not to exceed the then remaining term of the Loan, subject to the availability to the Bank of 936 Deposits or LIBOR funds with a term at least equal to such term, at a rate mutually agreeable to the Borrower and the Bank. Any prepayment by the Borrower of all or any portion of the principal amount of the Loan with a fixed interest rate shall be subject to payment by the Borrower of the breakage costs set forth in Section 12 of the Loan Agreement. 5. Notwithstanding anything to the contrary herein provided, the interest rate applicable to any overdue principal under the Loan shall be 2% over the Base Rate per annum. The interest rates set forth herein shall be increased and reduced concurrently with any increases or reductions in the Guarantor's senior unsecured long term debt rating by Standard and Poor's ("S&P") or Moody's as follows:

S&P or Moody's Rating - ---------------------------A or A2, or better BBB+ or Baa1, or better BBB and Baa2 BBB- or Baa3 BBB- and Baa3 BB+ or lower and Ba1 or lower

LIBOR Plus ----------

936 Plus

37.5 bp

37.5 bp

50 bp 55 bp 62.5 bp 75 bp

50 bp 55 bp 62.5 bp 75 bp

112.5 bp
2003.

112.5 bp

EDGAR Online, Inc.

Upon the first Advance and thereafter three Business Days prior to the first day of each new Funding Period, the Bank shall notify to the Borrower the following rates of interest on such Business Day (a) subject to the availability to the Bank of 936 Deposits and to the eligibility of the Advance to be funded with 936 Deposits, the 936 Option Rate; and (b) subject to the availability to the Bank of LIBOR funds for such Funding Period, the LIBOR Option Rate. In the case of 936 Deposit funding, the Borrower must advise the Bank not later than 12 noon Puerto Rico time on the first Business Day of the ensuing Funding Period, and in the case of LIBOR funding two (2) Business Days before such Business Day which of the two funding options it selects for the ensuing Funding Period. The interest rate applicable to such Funding Period shall be the interest rate applicable on the first day of the Funding Period to the funding option selected by the Borrower. If the Borrower fails to make such timely notice of election then the interest rate beginning on the first day of such Funding Period shall be computed on the basis of the 30 day 936 Option Rate until a new Funding Period is established, or, if 936 Deposits are not available, on the basis of 30 day LIBOR Option Rate or, if LIBOR funds are not available, on the basis of the Base Rate. The Borrower shall pay interest quarterly in arrears on each Interest Payment Date, or on a Rollover Date, whichever is earlier, on the actual daily unpaid principal balance of the Loan and calculated on each such day on the basis of (i) a 365/366 day calendar year for the actual number of days elapsed with respect to Base Rate Advances, and (ii) a 360-day calendar year for the actual number of days elapsed with respect to 936 Option Rate and/or LIBOR Option Rate Advances. Up to an amount equal to the Working Capital Amount may be repaid and reborrowed hereunder prior to the Maturity Date provided that repayments of such amount shall be allowed only on Rollover Dates. Upon failure to pay principal, or interest, or the occurrence of any other event of default as stipulated in the Loan Agreement, the Bank may at its option declare the full unpaid balance of this obligation to be immediately due and payable together with any accrued and unpaid interest, and may proceed to enforce the security under the Loan Agreement and/or interpose judicial proceedings to collect said sums plus costs, expenses and a reasonable sum for attorney's fees. The Borrower hereby waives presentment, protest, demand and notice of non-payment and submits itself to the jurisdiction of the courts of the Commonwealth of Puerto Rico for any judicial proceeding hereunder. The terms "the Borrower" and "the Bank" as used herein include their respective successors or assigns. This Promissory Note has been issued under and pursuant to the Loan Agreement which is supplementary as to any matter pertinent to this Promissory Note not expressly provided herein. All capitalized terms used herein shall have the meaning ascribed to such terms in the Loan Agreement. Dated as of May 31, 1994. Enron Gas & Oil Trinidad Limited

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EXHIBIT C GUARANTY THIS GUARANTY (this "Guaranty"), dated as of May 27, 1994, made by Enron Oil & Gas Company, a Delaware corporation (the "Guarantor"), in favor of The Bank of Nova Scotia, ("BNS"), W I T N E S S E T H: WHEREAS, pursuant to a Letter Loan Agreement, dated as of _______, 1994 (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the "Letter Loan Agreement"), between Enron Gas & Oil Trinidad, Limited, a company organized and existing under the laws of Trinidad and Tobago (the "Borrower") and BNS, BNS has extended a commitment to make loans (the "Loans") to the Borrower; and WHEREAS, BNS and the Borrower may now or in the future enter into one or more interest rate swap, hedge, collar, floor or similar agreements (collectively, together with all amendments and other modifications, if any, from time to time thereafter made thereto, and together with any and all Confirmations ("Confirmations") thereunder, the "Swap Agreement", such interest rate swaps, hedges, collars, floors or similar agreements with the Borrower herein collectively the "Swaps"); and WHEREAS, as a condition precedent to the making of the Loans under the Letter Loan Agreement and entering into the Swaps pursuant to the Swap Agreement, the Guarantor is required to execute and deliver this Guaranty; WHEREAS, the Guarantor has duly authorized the execution, delivery and performance of this Guaranty; WHEREAS, it is in the best interests of the Guarantor to execute this Guaranty inasmuch as the Guarantor will derive substantial direct and indirect benefits from the Loans made from time to time and the Swaps from time to time entered into with the Borrower by BNS pursuant to the Letter Loan Agreement or the Swap Agreement, as the case may be; NOW, THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged, and in order to induce BNS to make the Loans to the Borrower pursuant to the Letter Loan Agreement and to enter into the Swaps, if any, pursuant to the Swap Agreement, the Guarantor agrees, for the benefit of BNS, as follows: ARTICLE I DEFINITIONS SECTION 1.1. Certain Terms. The following terms (whether or not underscored) when used in this Guaranty, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof): "Borrower" is defined in the first recital. "Business Day" means any day of the year except Saturday, Sunday and any day on which banks are required or authorized to close in Houston, Texas; New York, New York; San Juan, Puerto Rico; or Trinidad and Togabo. "Code" means the Internal Revenue Code of 1986, as amended. "Consolidated" refers to the consolidation of the accounts of the Guarantor and its Subsidiaries in accordance with GAAP. "Consolidated Net Worth" means at any date the Consolidated shareholders' equity of the Guarantor and its Consolidated subsidiaries. "Credit Agreement" means the Revolving Credit Agreement dated as of March 11, 1994 between the Guarantor as Borrower, the Banks party thereto, and Texas Commerce Bank National Association, as Administrative Agent. "Debt" of any Person means, at any date, without duplication, (a) obligations for the repayment of money borrowed which (1) are evidenced by bonds, notes, debentures, loan agreements, credit agreements or similar instruments or agreements and (2) are or should be shown on a balance sheet as debt in accordance with GAAP, (b) obligations as lessee under leases which, in accordance with GAAP, are capital leases, and (c) guaranties of payment or collection of any obligations described in clauses (a) and (b) of other Persons, provided, that clauses (a) and (b) include, in the case of obligations of the Borrower or any Subsidiary, only such obligations as are or should be shown as debt or capital lease liabilities on a Consolidated balance sheet in accordance with GAAP; provided, further, that none of the following shall constitute Debt: (A) transfers of accounts receivable pursuant to a receivables purchase facility considered a sale under GAAP (and indemnification,
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recourse or repurchase obligations thereunder as are reasonable given market standards for transactions of similar type), (B) the liability of any Person as a general partner of a partnership for Debt of such partnership, if the partnership is not a Subsidiary of such Person, and (C) obligations (other than borrowings, capital leases or financial guaranties by the Guarantor or any Subsidiary) related to the sale, purchase or delivery of hydrocarbons in respect of volumetric production payments conveyed in transfers constituting sales of real property interests for which proceeds are accounted for as deferred revenues under GAAP. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute of similar import, together with the regulations thereunder, as in effect from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) which is a member of a group of which the Guarantor is a member and which is under common control within the meaning of the regulations under Section 414 of the Code. "GAAP" means generally accepted accounting principles consistent with those applied in the preparation of the audited Consolidated financial statements referred to in Section 3.1(d). "Guarantor" is defined in the preamble. "Guaranty" is defined in the preamble. "Insufficiency" means, with respect to any Plan, the amount, if any, by which the present value of the accrued benefits under such Plan exceeds the fair market value of the assets of such Plan allocable to such benefits. "Lender" is defined in the preamble. "Letter Loan Agreement" is defined in the first recital. "Loan Documents" means the Letter Loan Agreement, the notes thereunder and the other documents delivered to BNS under the Letter Loan Agreement together with any Swap Agreement, any Confirmation and any other documents delivered to BNS thereunder. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of the ERISA to which the Guarantor or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" means an employee benefit plan, other than a Multiemployer Plan, subject to Title IV of ERISA to which the Guarantor or any ERISA Affiliate, and more than one employer other than the Guarantor or an ERISA Affiliate, is making or accruing an obligation to make contributions or, in the event that any such plan has been terminated, to which the Guarantor or any ERISA Affiliate made or accrued an obligation to make contributions during any of the five plan years preceding the date of termination of such plan. "Note" means a Promissory Note or Non-Revolving Term Note as those terms are defined in the Letter Loan Agreement. "Other Taxes" is defined in clause (b) of Section 2.8. "PBGC" means the Pension Benefit Guaranty Corporation, or any federal agency or authority of the United States from time to time succeeding to its function. "Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, firm or other entity, or a government or any political subdivision or agency, department or instrumentality thereof. "Plan" means an employee benefit plan (other than a Multiemployer Plan) which is (or, in the event that any such plans has been terminated within five years after a transaction described in Section 4069 of ERISA, was) maintained for employees of the Guarantor or any ERISA Affiliate and covered by Title IV or ERISA. "Principal Subsidiary" means at any time of determination any Subsidiary having total assets in excess of $100,000,000. For purposes of this definition, total assets shall be determined based on the most recent quarterly or annual financial statements available prior to such determination.

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"Rating Level" means the applicable category of rating level which is based on the rating of the Guarantor's senior unsecured long-term debt as classified by Moody's and/or Standard & Poor's and which shall be the highest applicable Rating Level I, Rating Level II, Rating Level III, Rating Level IV, Rating Level V or Rating Level VI, as the case may be, as set forth in Schedule I. "Subsidiary" means any corporation, partnership, joint venture or other entity of which more than 50% of the outstanding capital stock or other equity interests having ordinary voting power (irrespective of whether or not at the time capital stock or other equity interest of any other class or classes of such corporation, partnership, joint venture or other entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by the Guarantor. "Swap" is defined in the preamble. "Swap Agreement" is defined in the preamble. "Taxes" is defined in clause (a) of Section 2.8. "Termination Event" means (a) a "reportable event", as such term is described in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC), or an event described in Section 4062(e) of ERISA, or (b) the withdrawal of the Guarantor or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer", as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Guarantor or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (c) the distribution of a notice of intent to terminate a Plan pursuant to Section 4041(a)(2) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (d) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "Total Capitalization" means, at any time, the sum (without duplication) of (a) Total Debt, and (b) Consolidated Net Worth less any amount thereof attributable to "minority interests" (as defined below). For the purpose of this definition, "minority interests" means any investment or interest of the Guarantor in any corporation, partnership or other entity to the extent that the total amount thereof owned by the Guarantor (directly or indirectly) constitutes 50% or less of all outstanding interests or investments in such corporation, partnership or entity. "Total Debt" means, at any time, all Consolidated Debt of the Guarantor and its Consolidated Subsidiaries. "Withdrawal Liability" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA. SECTION 1.2. Letter Loan Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Guaranty, including its preamble and recitals, have the meanings provided in the Letter Loan Agreement. ARTICLE II GUARANTY PROVISIONS SECTION 2.1. Guaranty. The Guarantor hereby absolutely, unconditionally and irrevocably (a) guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all indebtedness, obligations and liabilities of the Borrower to BNS arising out of, under, or in connection with the Letter Loan Agreement or any of the other Loan Documents (collectively the "Guaranteed Obligations") of the Borrower, whether for principal, interest, fees, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. ss.362(a)), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b), and (b) indemnifies and holds harmless BNS and each holder of a Note for any and all costs and expenses (including reasonable attorney's fees and expenses) incurred by BNS or such holder, as the case may be, in enforcing any of its rights under this Guaranty. This Guaranty constitutes a guaranty of payment when due and not of collection, and the Guarantor specifically agrees that it shall not be necessary or required that BNS or any holder of any Note exercise any right, assert any claim or demand or enforce any remedy whatsoever against the Borrower (or any other Person) before or as a condition to the obligations of the Guarantor hereunder.

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SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in the event of the occurrence and continuation of an Event of Default under Section 5.1 and if such Event of Default shall occur at a time when any of the Guaranteed Obligations may not then be due and payable, then, immediately and without further action by BNS, in the event of an Event of Default of the type referred to in Section 5.1(e) or upon demand by BNS in the event of an Event of Default (other than an Event of Default of the type referred to in Section 5.1(e)) the Guarantor will pay to BNS forthwith the full amount which would be payable hereunder by the Guarantor if all such Guaranteed Obligations were then due and payable. SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Guaranteed Obligations have been paid in full, all obligations of the Guarantor hereunder shall have been paid in full and all Commitments shall have terminated. The Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Letter Loan Agreement or the Swap Agreement, as the case may be, and each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of BNS or any holder of any Note with respect thereto. The liability of the Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of the Letter Loan Agreement, any Note, any other Loan Document, the Swap Agreement or any Confirmation; (b) the failure of BNS or any holder of any Note (i) to assert any claim or demand or to enforce any right or remedy against the Borrower or any other Person (including any other guarantor) under the provisions of the Letter Loan Agreement, any Note, any other Loan Document, the Swap Agreement or any Confirmation or otherwise, or (ii) to exercise any right or remedy against any other guarantor of, or collateral (if any) securing, any Guaranteed Obligations; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other extension, compromise or renewal of any Guaranteed Obligation; (d) any reduction, limitation, impairment or termination of the Guaranteed Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Guarantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Guaranteed Obligations or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of the Letter Loan Agreement, any Note or any other Loan Document or the Swap Agreement or any Confirmation, as the case may be; (f) any addition, exchange, release, surrender or nonperfection of any collateral (if any), or any amendment to or waiver or release or addition of, or consent to departure from, any other guaranty, held by BNS or any holder of any Note securing any of the Guaranteed Obligations; or (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrower, any surety or any other guarantor. SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Guaranteed Obligations is rescinded or must otherwise be restored by BNS or any holder of any Note, upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, as though such payment had not been made. SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that BNS or any holder of any Note protect, secure, perfect or insure any security interest or lien, or any property subject thereto, or exhaust any right or take any action against the Borrower or any other Person (including any other guarantor) or entity or any collateral (if any) securing the Guaranteed Obligations. SECTION 2.6. Subrogation, etc. The Guarantor will not exercise any rights which it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until the prior payment, in full and in cash, of all Guaranteed Obligations. Any amount paid to the Guarantor on account of any such subrogation rights prior to the payment in full of all Guaranteed Obligations shall be held in trust for the benefit of BNS and each holder of a Note and shall immediately be paid to BNS and each holder of a Note and credited and applied against the Guaranteed Obligations whether matured or unmatured, in accordance with the terms of the Letter Loan Agreement or the Swap Agreement, as the case may be. In furtherance of the foregoing, for so long as any Guaranteed Obligations or Commitments remain outstanding, the Guarantor shall refrain from taking any action or commencing any proceeding against the Borrower (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in the respect of payments made under this Guaranty to BNS or any holder of a Note.
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SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc. This Guaranty shall: (a) be binding upon the Guarantor, and its successors, transferees and assigns; and (b) inure to the benefit of and be enforceable by BNS, each holder of a Note and each of their respective successors, transferees and assigns. Without limiting the generality of clause (b), BNS may assign or otherwise transfer (in whole or in part) any Note or Loan or Swap held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all rights and benefits in respect thereof granted to BNS under any Loan Document (including this Guaranty) or otherwise. SECTION 2.8. Payments Free and Clear of Taxes, etc. The Guarantor hereby agrees that: (a) Any and all payments made by the Guarantor hereunder shall be made in accordance with Section 20 of the Letter Loan Agreement or the relevant section or sections of the Swap Agreement and any Confirmations thereunder free and clear of, and without deduction for, any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of BNS and each holder of a Note, (i) taxes imposed on its income, (ii) franchise taxes imposed on it by the jurisdiction under the laws of which BNS or such holder, as the case may be, is organized and by any political subdivision thereof and, in the case of BNS, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of BNS's Puerto Rico office and any political subdivision thereof and (iii) any taxes imposed by the United States of America by means of withholding at the source if an to the extent that such taxes shall be in effect and shall be applicable, to payments to be made to BNS (all such taxes, levies, imposts, deductions, charges, withholdings and liabilities other than those referred to in the foregoing clauses (i), (ii) and (iii) being hereinafter referred to as "Taxes"). If the Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to BNS or any holder of a Note (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) BNS or such holder, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Guarantor shall make such deductions, and (iii) the Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) The Guarantor shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Guaranty (hereinafter referred to as "Other Taxes"). (c) The Guarantor hereby indemnifies and holds harmless BNS and each holder of a Note for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by BNS or such holder, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally assessed (expressly including such amounts paid as a result of the ordinary, sole or contributory negligence of BNS or such holder of a Note, but excluding such amounts paid as a result of the gross negligence or willful misconduct of BNS or such holder of a Note). This indemnification shall be made within thirty (30) days from the date BNS or such holder of a Note, as the case may be, makes written demand therefor. BNS or the holder of a Note shall not be indemnified for Taxes or Other Taxes incurred or accrued unless within 90 days of the date that BNS or such holder of a Note knew or should have known thereof, it notifies the Guarantor thereof. (d) Within 30 days after the date of any payment of Taxes or Other Taxes, the Guarantor will furnish to BNS the original or a certified copy of a receipt evidencing payment thereof. Should BNS or the holder of a Note ever receive any refund, credit or deduction from any taxing authority to which BNS or such holder of a Note would not be entitled but for the payment by the Guarantor of Taxes or Other Taxes as required by this Section 2.8 (it being understood that the decision as to whether or not to claim, and if claimed, as to the amount of any such refund, credit or deduction shall be made by BNS or such holder of a Note in its sole discretion), BNS or such holder of a Note, as the case may be, thereupon shall repay to the Guarantor an amount with respect to such refund, credit or deduction equal to any net reduction in Taxes or Other Taxes actually obtained by BNS or such holder of a Note, as the case may be, and determined by BNS or such holder of a Note, as the case may be, to be attributable to such refund, credit or deduction. (e) Without prejudice to the survival of any other agreement of the Guarantor hereunder (but subject to the expiration of any applicable statute of limitations), the agreements and obligations of the Guarantor contained in this Section 2.8 shall survive the payment in full of the principal of and interest on the Loans. SECTION 2.9. Judgment. The Guarantor hereby agrees that: (a) If, for the purposes of obtaining a judgment in any court, it is necessary to convert a sum due hereunder from one currency into another currency, the rate of exchange used shall be the best available rate at which in accordance with normal banking procedures BNS could purchase such currency with such other currency on the Business Day preceding that on which final judgment is given.
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(b) The obligation of the Guarantor in respect of any sum due from it to BNS or any holder of a Note hereunder shall, notwithstanding any judgment in a currency, be discharged only to the extent that on the Business Day following receipt by BNS or such holder, as the case may be, of any sum adjudged to be so due in such other currency BNS or such holder, as the case may be, may, in accordance with normal banking procedures using the best available exchange rate, purchase the relevant currency with such other currency; in the event that the currency so purchased is less than the sum originally due to BNS or such holder in such currency, the Guarantor, as a separate obligation and notwithstanding any such judgment, hereby indemnifies and holds harmless BNS and such holder against such loss, and if the such currency, so purchased exceeds the sum originally due to BNS or such holder in the relevant currency, BNS or such holder, as the case may be, shall remit to the Guarantor such excess. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1. Representations and Warranties. The Guarantor hereby represents and warrants unto BNS as follows: (a) The Guarantor and each Principal Subsidiary are corporations duly incorporated, validly existing and in good standing under the laws of their respective jurisdictions of incorporation. The Guarantor and each Principal Subsidiary have all corporate powers and all material governmental licenses, authorizations, consents and approvals required in each case to carry on its business as now conducted except where failure to have such would not, in the aggregate, have a material adverse effect on the Guarantor or on the ability of the Guarantor to perform its obligations under this Guaranty. (b) The execution, delivery and performance by the Guarantor of this Guaranty is within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action of the Guarantor, require, in respect of the Guarantor, no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of law or regulation applicable to the Guarantor or the restated certificate of incorporation or by-laws of the Guarantor or any judgment, injunction, order, decree or material ("material" for the purposes of this representation meaning creating a liability of $50,000,000 or more) agreement binding upon the Guarantor or result in the creation or imposition of any lien, security interest or other charge or encumbrance on any asset of the Guarantor or any of its Subsidiaries. (c) This Guaranty is the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, except as the enforceability thereof may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general principles of equity. (d) The audited Consolidated balance sheet of the Guarantor as of December 31, 1993 and the related audited Consolidated statements of income, cash flows and changes in shareholders' equity accounts for the fiscal year then ended and the unaudited Consolidated balance sheet of the Guarantor as of March 31, 1994, and the related unaudited Consolidated statements of income and cash flows for the fiscal quarter then ended, certified by the chief financial or accounting officer of the Guarantor, copies of which have been delivered to BNS, fairly present, in conformity with GAAP except as otherwise expressly noted therein, the Consolidated financial position of the Guarantor as of such dates and its Consolidated results of operations and as applicable changes in financial position for such fiscal periods, subject (in the case of the unaudited balance sheet and statements) to changes resulting from audit and normal year-end adjustments. (e) Since December 31, 1993 there has been no material adverse change in the Consolidated financial position or Consolidated results of operations of the Guarantor and its Subsidiaries, considered as a whole. (f) Except as disclosed in the Guarantor's Form 10-K for the year ended December 31, 1993 or the Guarantor's Form 10-Q for the quarter ended March 31, 1994, which were delivered to BNS prior to the date hereof, there is no action, suit or proceeding pending against the Guarantor or any of its Subsidiaries, or to the knowledge of the Guarantor threatened against the Guarantor or any of its Subsidiaries, before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the Consolidated financial position or Consolidated results of operations of the Guarantor and its Subsidiaries taken as a whole or which in any manner draws into question the validity of this Agreement. (g) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan for which an Insufficiency in excess of $50,000,000 exists. Neither the Guarantor nor any ERISA Affiliate has received any notification (or has knowledge of any reason to expect) that any Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, for which a Withdrawal Liability in excess of $50,000,000 exists. (h) United States federal income tax returns of the Guarantor and its Subsidiaries have been examined and closed through the fiscal
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year ended December 31, 1987. The Guarantor and its Subsidiaries have filed or caused to be filed all United Sates federal income tax returns and all other material domestic tax returns which to the knowledge of the Guarantor are required to be filed by them and have paid or provided for the payment, before the same become delinquent, of all taxes due pursuant to such returns or pursuant to any assessment received by the Guarantor or any Subsidiary, other than those taxes contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Guarantor and its Subsidiaries in respect of taxes are, in the opinion of the Guarantor, adequate to the extent required by GAAP. (i) Neither the Guarantor nor any Subsidiary is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (j) The Guarantor is not a "holding company", a "subsidiary company" of a "holding company", an "affiliate" of a "holding company", or an "affiliate" of a "subsidiary company" of a "holding company", in each case as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. ARTICLE IV COVENANTS, ETC. SECTION 4.1. Affirmative Covenants. The Guarantor covenants and agrees that so long as any portion of the Guaranteed Obligations shall remain unpaid or BNS shall have any outstanding Commitment, the Guarantor will, unless BNS shall otherwise consent in writing, perform the following obligations: (a) Reporting Requirements. Furnish to BNS: (1) (A) promptly after the sending or filing thereof, a copy of each of the Guarantor's reports on Form 8-K (or any comparable form), (B) promptly after the filing or sending thereof, and in any event within 75 days after the end of each of the first three fiscal quarters of each fiscal year of the Guarantor, a copy of the Guarantor's report on Form 10-Q (or any comparable form) for such quarter, which report will include the Guarantor's quarterly unaudited Consolidated financial statements as of the end of and for such quarter, and (C) promptly after the filing or sending thereof, and in any event within 135 days after the end of each fiscal year of the Guarantor, a copy of the Guarantor's annual report which it sends to its public security holders, and a copy of the Guarantor's annual report on Form 10-K (or any comparable form) for such year, which annual report on Form 10-K will include the Guarantor's annual audited Consolidated financial statements as of the end of and for such year; (2) simultaneously with the delivery of each of the annual or quarterly reports referred to in clause (1) above, a certificate of the chief financial officer or the chief accounting officer of the Guarantor in a form acceptable to BNS (x) setting forth in reasonable detail the calculations required to establish whether the Guarantor was in compliance with the requirements of Section 4.2(b) on the date of the financial statements contained in such report, and (y) stating whether there exists on the date of such certificate any Event of Default or event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, and, if so, setting forth the details thereof and the action which the Guarantor has taken and proposes to take with respect thereto; (3) as soon as is possible and in any event within five days after a change in, or issuance of, any rating of any of the Guarantor's senior unsecured long-term debt by Standard & Poor's or Moody's which causes a change in the applicable Rating Level, notify BNS of such change; (4) as soon as possible and in any event within five days after an executive officer of the Guarantor having obtained knowledge thereof, notice of the occurrence of any Event of Default or any event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, continuing on the date of such notice, and a statement of the chief financial officer of the Guarantor setting forth details of such Event of Default or event and the action, if any, which the Guarantor has taken and proposes to take with respect thereto; (5) as soon as possible and in any event(A) within 30 Business Days after the Guarantor or any ERISA Affiliate knows or has reason to know that any Termination Event described in clause (a) of the definition of Termination Event with respect to any Plan for which an Insufficiency in excess of $50,000,000 exists, has occurred and (B) within 10 Business Days after the Guarantor or any ERISA Affiliate knows or has reason to know that any other Termination Event with respect to any Plan for which an Insufficiency in excess of $50,000,000 exists, has occurred or is reasonably expected to occur, a statement of the chief financial officer or chief accounting officer of the Guarantor describing such Termination Event and the action, if any, which the Guarantor or such ERISA Affiliate proposes to take with respect thereto;

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(6) promptly and in any event within five Business Days after receipt thereof by the Guarantor or any ERISA Affiliate, copies of each notice received by the Guarantor or any ERISA Affiliate from the PBGC stating its intention to terminate any Plan for which an Insufficiency in excess of $50,000,000 exists or to have a trustee appointed to administer any Plan for which an Insufficiency in excess of $50,000,000 exists; (7) promptly and in any event within five Business Days after receipt thereof by the Guarantor or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Guarantor or any ERISA Affiliate indicating liability in excess of $50,000,000 incurred or expected to be incurred by the Guarantor or any ERISA Affiliate in connection with (A) the imposition of a Withdrawal Liability by a Multiemployer Plan, (B) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, or (C) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA; and (8) such other information respecting the Consolidated financial position or Consolidated results of operations of the Guarantor that BNS may from time to time reasonably request. (b) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, with all applicable laws, rules, regulations and orders to the extent noncompliance therewith would have a material adverse effect on the Guarantor and its Subsidiaries taken as a whole, such compliance to include, without limitation, the paying before the same shall become due of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith by appropriate proceedings. (c) Maintenance of Insurance. Maintain, and cause each of its Principal Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties as the Guarantor or such Principal Subsidiary, provided, that self-insurance by the Guarantor or any such Principal Subsidiary shall not be deemed a violation of this covenant to the extent that companies engaged in similar businesses and owning similar properties as the Guarantor or such Principal Subsidiary self-insure. The Guarantor may maintain the Principal Subsidiaries' insurance on behalf of them. (d) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Principal Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory), and franchises; provided, however, that this Section 4.1(d) shall not apply to any transactions permitted by Section 4.2(c) or (d) and shall not prevent the termination of existence, rights and franchises of any Principal Subsidiary pursuant to any merger or consolidation to which such Principal Subsidiary is a party, and provided, further, that the Guarantor or any Principal Subsidiary shall not be required to preserve any right or franchise if the Guarantor or such Principal Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Guarantor or such Principal Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to BNS. (e) Visitation Rights. At any reasonable time and from time to time, after reasonable written notice, permit BNS or any agents or representatives thereof to examine the records and books of account of, and visit the properties of, the Guarantor and any of the Principal Subsidiaries and to discuss the affairs, finances and accounts of the Guarantor and any of the Principal Subsidiaries with any of the officers of the Guarantor. SECTION 4.2. Negative Covenants. The Guarantor covenants and agrees that, so long as any portion of the Guaranteed Obligations shall remain unpaid or BNS shall have any outstanding Commitment, the Guarantor will not, without the prior written consent of BNS, do anything prohibited below: (a) Negative Pledge. Fail to perform or observe any term, covenant, or agreement contained in Section 5.01 or 5.02 of the Credit Agreement. The terms, covenants, or agreements in Section 5.01 and 5.02 shall have the same force and effect as if fully recited herein, shall be deemed to have been made in favor of BNS, shall survive the termination or expiration of the Credit Agreement (or the Guarantor's obligations thereunder) and, notwithstanding any such termination or expiration of the Credit Agreement (or the Guarantor's obligations thereunder), shall continue to inure to the benefit of BNS. Any amendment or modification to any of the terms, covenants, or agreements contained in Sections 5.01 and 5.02 of the Credit Agreement shall not be operative and shall have no force and effect with respect to the Guarantor and BNS pursuant to this Guaranty and such terms, covenants, and agreements contained in Sections 5.01 and 5.02 shall be deemed to remain as written without regard to any such amendment or modification. (b) Total Debt to Capitalization. Have a ratio of (i) Total Debt to (ii) Total Capitalization greater than 50%. (c) Disposition of Assets. Lease, sell, transfer or otherwise dispose of, voluntarily or involuntarily, all or substantially all of its assets.
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(d) Mergers, Etc. Merge or consolidate with or into, any Person, unless (1) the Guarantor is the survivor or (2) the surviving Person, if not the Guarantor, is organized under the laws of the United States or a state thereof and assumes all obligations of the Guarantor under this Guaranty, provided, in each case that both immediately before and after giving effect to such proposed transaction, no Event of Default or event which, with the giving of notice or the lapse of time, or both, would constitute an Event of Default exists, or would exist or result. (e) Compliance with ERISA. (1) Terminate, or permit any ERISA Affiliate to terminate, any Plan so as to result in any liability in excess of $50,000,000 of the Guarantor or any ERISA Affiliate to the PBGC, or (2) permit circumstances which give rise to a Termination Event described in clauses (b), (d) or (e) of the definition of Termination Event with respect to a Plan so as to result in any liability in excess of $50,000,000 of the Guarantor or any ERISA Affiliate to the PBGC. ARTICLE V EVENTS OF DEFAULT SECTION 5.1. Events of Default. Each of the following events which shall occur and be continuing shall constitute Events of Default: (a) The Guarantor shall fail to pay any amount hereunder when due and payable; or (b) Any representation or warranty made by the Guarantor (or any of its officers) under or in connection with this Guaranty shall prove to have been incorrect in any material respect when made or deemed made and such materiality is continuing; or (c) The Guarantor shall fail to perform or observe any term, covenant or agreement contained in Section 4.2 or shall fail to perform or observe any other term, covenant or agreement contained herein on its part to be performed or observed if, in the case of such other term, covenant or agreement, such failure shall remained unremedied for 30 days after written notice thereof shall have been given to the Guarantor by BNS; or (d) The Guarantor or any Principal Subsidiary shall (1) fail to pay any principal of or premium or interest on any Debt (other than Debt described in clause (c) of the definition of Debt) which is outstanding in the principal amount of at least $50,000,000 in the aggregate, of the Guarantor or such Principal Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment or as a result of the giving of notice of a voluntary prepayment), prior to the stated maturity thereof, or (2) with respect to Debt described in clause (c) of the definition of Debt, fail to pay any such Debt which is outstanding in the principal amount of at least $50,000,000 in the aggregate, of the Guarantor or such Principal Subsidiary (as the case may be), when the same becomes due and payable, and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt, or (e) The Guarantor or any Principal Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Guarantor or any Principal Subsidiary seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), shall remain undismissed or unstayed for a period of 60 days; or the Guarantor or any Principal Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment, decree or order for the payment of money in excess of $50,000,000 shall be rendered against the Guarantor or any Principal Subsidiary and shall remain unsatisfied and either (1) enforcement proceedings shall have been commenced by any creditor upon such judgment, decreed or order or (2) there shall be any period longer than (i) 30 consecutive days or (ii) such longer period as allowed by applicable law during which a stay of enforcement of such judgment, decree or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) Any Termination Event as defined in clause (b), (d) or (e) of the definition thereof with respect to a Plan shall have occurred and, 30 days after notice thereof shall have been given to the Guarantor by BNS, (1) such Termination Event shall continue to exist and (2) the sum (determined as of the date of occurrence of such Termination Event)
2003. EDGAR Online, Inc.

of the liabilities to the PBGC resulting from all such Termination Events is equal to or greater than $100,000,000; or (h) The Guarantor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to the Multiemployer Plan in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $100,000,000 or requires payments exceeding $50,000,000 in any year; or (i) The Guarantor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Guarantor and its ERISA Affiliates to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years which include the date hereof by an amount exceeding $50,000,000 in the aggregate. ARTICLE VI MISCELLANEOUS PROVISIONS SECTION 6.1. Binding on Successors, Transferees and Assigns; Assignment of Guaranty. In addition to, and not in limitation of, Section 2.7, this Guaranty shall be binding upon the Guarantor and its successors, transferees and assigns and shall inure to the benefit of and be enforceable by BNS and each holder of a Note and their respective successors and assigns (to the full extent provided pursuant to Section 2.7); provided, however, that the Guarantor may not assign any of its obligations hereunder without the prior written consent of BNS and each holder of a Note. SECTION 6.2. Amendments, etc. No amendment to or waiver of any provision of this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in any event be effective unless the same shall be in writing and signed by BNS and the Guarantor, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 6.3. Addresses for Notices to the Guarantor. All notices and other communications hereunder to the Guarantor shall be in writing and mailed or delivered to it, addressed to it at the address set forth below its signature hereto or at such other address as shall be designated by the Guarantor in a written notice to BNS at The Bank of Nova Scotia 273 Ponce de Leon Avenue Hato Rey, Puerto Rico 00917 or such other address specified in a notice complying as to delivery with the terms of this Section. All such notices and other communications shall, when mailed, be effective when deposited in the mails, addressed as aforesaid. SECTION 6.4. No Waiver; Remedies. In addition to, and not in limitation of, Section 2.3 and Section 2.5, no failure on the part of BNS or any holder of a Note to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 6.5. Section Captions. Section captions used in this Guaranty are for convenience of reference only, and shall not affect the construction of this Guaranty. SECTION 6.6. Severability. Wherever possible each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. SECTION 6.7. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. Enron Oil & Gas Company By:____________________________ Title: Address: ______________________ Attention: _____________________ Telex:_________________________
2003. EDGAR Online, Inc.

Telecopy: ______________________

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Schedule 1 ENRON GAS & OIL TRINIDAD LIMITED PRICING APPENDIX Level I ------If the Guarantor's Senior Unsecured Long Term Debt is rated A or better by S&P or A2 or better by Moody's. 12.5bp Level II -------If the Guarantor's Senior Unsecured Long Term Debt is rated BBB+ or better by S&P or Baa1 or better by Moody's. 15.0bp Level III --------If the Guarantor's Senior Unsecured Long Term Debt is rated BBB by S&P and Baa2 by Moody's. Level IV -------If the Guarantor's Senior Unsecured Long Term Debt is rated BBB- by S&P or Baa3 by Moody's. Level V ------If the Guarantor's Senior Unsecured Long Term Debt is rated BBB- by S&P and Baa3 by Moody's. Level VI -------If the Guarantor's Senior Unsecured Long Term Debt is rated BB+ or lower by S&P and Ba1 or lower by Moody's. 37.5bp

Basis for Pricing

Commitment Fee LIBOR+ 936+

17.5bp

20.0bp

25.0bp

37.5bp 37.5bp

50.0bp 50.0bp

55.0bp 55.0bp

62.5bp 62.5bp

75bp 75bp

112.5bp 112.5bp

2003.

EDGAR Online, Inc.

EXHIBIT D CERTIFICATE ISSUED PURSUANT TO SECTION 1.936-10(c)(11) OF THE REGULATION PROMULGATED UNDER THE PROVISIONS OF SECTION 936(d)(4) OF THE UNITED STATES INTERNAL REVENUE CODE Enron Gas & Oil Trinidad Limited ("EGOTL") hereby certifies that, for purposes of the Letter Loan Agreement with The Bank of Nova Scotia dated _______________________, 1994, EGOTL is a "qualified recipient" under the provisions of Section 1.936-10(c)(9) of the regulations promulgated under the provisions of Section 936(d)(4) of the United States Internal Revenue Code. ENRON GAS & OIL TRINIDAD LIMITED

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EXHIBIT E (Enron Gas & Oil Trinidad Limited Letterhead) ___________________ ,1994 The Bank of Nova Scotia 273 Ponce de Leon Avenue Hato Rey, Puerto Rico Re: LOAN OF US$44,000,000 GRANTED BY THE BANK OF NOVA SCOTIA TO ENRON GAS & OIL TRINIDAD LIMITED Gentlemen: We hereby acknowledge that the proceeds of the loan or loans up to aggregate principal amount of US$44,000,000 may be funded in whole or in part with "eligible funds", as the term is defined in Regulation 3582, and all amendments or substitutes thereof. We certify that the proceeds of the loan or loans will be used solely for the acquisition of Active Business Assets that qualify as such under Section 1.936-10(c)(4) of the regulations promulgated under Section 936(d)(4) of the United States Internal Revenue Code (the "Federal CBI Regulations"), to be used by us to finance (or refinance or replace with Advances funded with 936 Deposits as permitted by paragraphs (c)(7)(i) and (c)(7)(ii) of the Federal CBI Regulations) the costs of the Company's exploration, development and production of natural gas and crude oil fields from the Kiskadee and Ibis Fields in the South East Consortium Block offshore Trinidad & Tobago, including without limitation the constructing of offshore platforms, laying of pipelines, drilling of wells and installation of all related equipment and facilities (the "Active Answers Assets"), and for working capital purposes in full compliance with the Federal CBI Regulations. The collateral provided by us for the loan consists of a guaranty of Enron Oil & Gas Company. Cordially, ENRON GAS & OIL TRINIDAD LIMITED By: ____________________________

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EXHIBIT F CERTIFICATE ISSUED PURSUANT TO SECTION 1.936-10(c)(12) OF THE REGULATIONS PROMULGATED UNDER THE PROVISIONS OF SECTION 936(d)(4) OF THE UNITED STATES INTERNAL REVENUE CODE In order to comply with the certification requirement of Section 936 (d)(4)(c)(i) of the United States Internal Revenue Code (the "Code"), and as required by Section 1.936-10(c)(12) of the regulations promulgated thereunder (the "Federal CBI Regulations"), The Bank of Nova Scotia, Hato Rey Branch (the "Bank") and Enron Gas & Oil Trinidad Limited (the"Company") hereby certify to the Assistant Commissioner (International) of the United States Internal Revenue Service and to the Commissioner of Financial Institutions of Puerto Rico as follows: (1) As of the date hereof the Company has complied with the provisions of Section 1.936-10(c)(11) of the Federal CBI Regulations. (2) The loan to the Company is a non-revolving loan of Us$44,000,000 (the "Loan") and may be drawn in one or more advances in minimum principal amounts of US$500,000. The maturity of the Loan will be on _________________________, 1999. The proceeds of the Loan will be used by the Company solely to finance (or refinance or replace with Advances funded with 936 Deposits as permitted by paragraphs (c)(7)(i) and (c)(7)(ii) of the Federal CBI Regulations) the costs of the Company's exploration for and development and production of natural gas and crude oil from the Kiskadee and Ibis Fields in the South East Coast Consortium Block offshore Trinidad & Tobago, including without limitation, the constructing of off-shore platforms, laying of pipelines, drilling of wells and installation of all related equipment and facilities (the "Active Business Assets"). The proceeds of the Loan may also be used for working capital purposes, provided that the amount used for such purposes may not exceed 10% of the amount invested in Active Business Assets (the "Working Capital Amount"). The Loan is secured by the unconditional guarantee of Enron Oil & Gas Company. (3) The Company is a corporation organized under the laws of Trinidad & Tobago and is an indirect wholly owned subsidiary of Enron Oil & Gas Company. The Company is engaged in the exploration and development, production and marketing of oil and gas reserves in Trinidad & Tobago. (4) Trinidad & Tobago qualifies as a "beneficiary country" within the meaning of Section 212(a)(1)(A) of the Caribbean Basin Economic Recovery Act. In addition, (i) there is in effect an agreement for the exchange of tax information between Trinidad & Tobago and the United States and (ii) there is not in effect a finding by the United States Secretary of the Treasury that the tax laws of Trinidad & Tobago discriminate against conventions held in the United States. (5) The Loan qualifies as a qualified investment in a qualified Caribbean Basin country under Section 1.936-10(c) of the Federal CBI Regulations because of the following: (a) the Loan will be made by the Bank a banking institution organized under the laws of Canada, that has been designated as an "eligible institution" under Section 4.2.13 of Regulation 3582. Thus, the requirement that the Loan be made by a "qualified institution," as defined in Section 1.936-10(c)(3) is met; (b) the Loan will be made to the Company, a corporation engaged in the exploration for and the development, production and marketing of oil and gas reserves in Trinidad & Tobago, that has complied with the agreement and representation requirements of Section 1.936- 10(c)(11)(i) of the Federal CBI Regulations. Thus, the requirement that the Loan be made to a "qualified recipient," as defined in Section 1.936-10(c)(9) is met; (c) the proceeds of the Loan will be used by the Company for the acquisition of the Active Business Assets and/or to refinance the acquisition of Active Business Assets in compliance with the provisions of the Federal CBI Regulations, which Active Business Assets are to be used exclusively in the Company's operation in Trinidad & Tobago. Not more than 3.5% of the principal amount of the Loan will be used to finance costs associated with the arranging of the financing and not more than 10% of the amount of the Loan invested in Active Business Assets will be used for working capital purposes. Thus, the requirement that the Loan be made to the qualified recipient for investment in "active business assets", as defined in Section 1.936-10(c)(4) is met; (d) the investment of the Loan proceeds will be made in Trinidad & Tobago which, as stated above, (i) has been designated as a "beneficiary country" under the Caribbean Basin Economic Recovery Act; (ii) has an agreement in effect for the exchange of tax information with the United States; and (iii) is a country with respect to which there is not in effect a finding by the Secretary of the Treasury that its tax laws discriminate against conventions held in the United States. Thus, the requirement that the investment be made in a "qualified Caribbean Basin" country, as defined in Section
2003. EDGAR Online, Inc.

1.936-10(c)(10)(C)(ii) is met; and (e) the Loan has been approved by the Commissioner of Financial Institutions of Puerto Rico and the agreement, representations, certification and due diligence requirements of Section 1.936-10(c)(11), (c)(12), and (c)(13) have been or will be met. (6) The Bank agrees to permit examination by the Assistant Commissioner (International) of the United States Internal Revenue Service (or by the Office of any District Director authorized by the Assistant Commissioner (International)) and by the Commissioner of Financial Institutions of Puerto Rico of all of its necessary books and records that are sufficient to verify that the proceeds of the Loan were used for investments in Active Business Assets, as referred to above. In San Juan, Puerto Rico this _______th day of ________________________, 1994. ENRON GAS & OIL TRINIDAD LIMITED __________________________ _____________________________ By: THE BANK OF NOVA SCOTIA

By:

Title: Title:

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EXHIBIT 10.45(b) PROMISSORY NOTE US$25,000,000 Maturity: May 27, 1999 FOR THE VALUE RECEIVED, Enron Gas & Oil Trinidad Limited (the "Borrower"), a corporation organized under the laws of Trinidad & Tobago, promises to pay to the order of The Bank of Nova Scotia (the "Bank"), a banking corporation organized and existing under the laws of Canada, at the principal offices of the Bank, Plaza Scotiabank Building, 273 Ponce de Leon Avenue, Hato Rey, San Juan, Puerto Rico, or such other place that the Bank may designate, the principal sum of US$25,000,000 in lawful currency of the United States of America or, if less, the aggregate unpaid principal amount of the Advance (as defined in the Letter Loan Agreement dated May 27, 1994 between the Borrower and the Bank, such Letter Loan Agreement as amended from time to time being herein referred to as the "Loan Agreement") owing to the Bank outstanding on the Maturity Date. The principal of this obligation will be repaid in one installment due on May 27, 1999. Interest will accrue and be payable on the outstanding principal balance of this obligation from this date on at the following alternative rates: 1. The cost of 30, 60, 90 or 180 day 936 Deposits to the Bank (as determined by the Bank and adjusted for the cost to the Bank of municipal license taxes), plus 50 basis points per annum (subject to the availability of 936 Deposits and to the continuing qualification of the Loan for 936 funding) (the "936 Option Rate"); 2. 1, 2, 3, or 6 months cost of LIBOR to the Bank plus 50 basis points per annum (subject to the availability of LIBOR funds) ( the "LIBOR Option Rate"). 3. If both 936 Deposits and LIBOR funds become unavailable or may not be used, the applicable interest rate will be the Base Rate fluctuating concurrently with any changes in such Base Rate. 4. Notwithstanding anything to the contrary provided in paragraphs (1) and (2) above, at any time during the term of the Loan, the Borrower may request the Bank to fix the rate of interest on all or any portion of the Loan for a period not to exceed the then remaining term of the Loan, subject to the availability to the Bank of 936 Deposits or LIBOR funds with a term at least equal to such term, at a rate mutually agreeable to the Borrower and the Bank. Any prepayment by the Borrower of all or any portion of the principal amount of the Loan with a fixed interest rate shall be subject to payment by the Borrower of the breakage costs set forth in Section 12 of the Loan Agreement. 5. Notwithstanding anything to the contrary herein provided, the interest rate applicable to any overdue principal under the Loan shall be 2% over the Base Rate per annum. The interest rates set forth herein shall be increased and reduced concurrently with any increases or reductions in the Guarantor's senior unsecured long term debt rating by Standard and Poor's ("S&P") or Moody's as follows:

S & P or Moody's Rating - ----------------------A or A2, or better BBB+ or Baa1, or better BBB and Baa2 BBB- or Baa3 BBB- and Baa3 BB+ or lower and Ba1 or lower

LIBOR Plus ---------37.5 bp

936 Plus

37.5 bp

50 bp 55 bp 62.5 bp 75 bp

50 bp 55 bp 62.5 bp 75 bp

112.5 bp

112.5 bp

2003.

EDGAR Online, Inc.

Upon the first Advance and thereafter three Business Days prior to the first day of each new Funding Period, the Bank shall notify to the Borrower the following rates of interest on such Business Day (a) subject to the availability to the Bank of 936 Deposits and to the eligibility of the Advance to be funded with 936 Deposits, the 936 Option Rate; and (b) subject to the availability to the Bank of LIBOR funds for such Funding Period, the LIBOR Option Rate. In the case of 936 Deposit funding, the Borrower must advise the Bank not later than 12 noon Puerto Rico time on the first Business Day of the ensuing Funding Period, and in the case of LIBOR funding two (2) Business Days before such Business Day which of the two funding options it selects for the ensuing Funding Period. The interest rate applicable to such Funding Period shall be the interest rate applicable on the first day of the Funding Period to the funding option selected by the Borrower. If the Borrower fails to make such timely notice of election then the interest rate beginning on the first day of such Funding Period shall be computed on the basis of the 30 day 936 Option Rate until a new Funding Period is established, or, if 936 Deposits are not available, on the basis of 30 day LIBOR Option Rate or, if LIBOR funds are not available, on the basis of the Base Rate. The Borrower shall pay interest quarterly in arrears on each Interest Payment Date, or on a Rollover Date, whichever is earlier, on the actual daily unpaid principal balance of the Loan and calculated on each such day on the basis of (i) a 365/366 day calendar year for the actual number of days elapsed with respect to Base Rate Advances, and (ii) a 360-day calendar year for the actual number of days elapsed with respect to 936 Option Rate and/or LIBOR Option Rate Advances. Up to an amount equal to the Working Capital Amount may be repaid and reborrowed hereunder prior to the Maturity Date provided that repayments of such amount shall be allowed only on Rollover Dates. Upon failure to pay principal, or interest, or the occurrence of any other event of default as stipulated in the Loan Agreement, the Bank may at its option declare the full unpaid balance of this obligation to be immediately due and payable together with any accrued and unpaid interest, and may proceed to enforce the security under the Loan Agreement and/or interpose judicial proceedings to collect said sums plus costs, expenses and a reasonable sum for attorney's fees. The Borrower hereby waives presentment, protest, demand and notice of non- payment and submits itself to the jurisdiction of the courts of the Commonwealth of Puerto Rico for any judicial proceeding hereunder. The terms "the Borrower" and "the Bank" as used herein include their respective successors or assigns. This Promissory Note has been issued under and pursuant to the Loan Agreement which is supplementary as to any matter pertinent to this Promissory Note not expressly provided herein. All capitalized terms used herein shall have the meaning ascribed to such terms in the Loan Agreement. Dated as of May 31, 1994. Enron Gas & Oil Trinidad Limited

/s/ W. C. Wilson

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EDGAR Online, Inc.

EXHIBIT 10.45(c) PROMISSORY NOTE US$15,000,000 MATURITY: May 27, 1999 FOR THE VALUE RECEIVED, Enron Gas & Oil Trinidad Limited (the "Borrower"), a corporation organized under the laws of Trinidad & Tobago, promises to pay to the order of The Bank of Nova Scotia (the "Bank"), a banking corporation organized and existing under the laws of Canada, at the principal offices of the Bank, Plaza Scotiabank Building, 273 Ponce de Leon Avenue, Hato Rey, San Juan, Puerto Rico, or such other place that the Bank may designate, the principal sum of US$15,000,000 in lawful currency of the United States of America, or, if less, the aggregate unpaid principal amount of the Advance (as defined in the Letter Loan Agreement dated May 27, 1994 between the Borrower and the Bank, such Letter Loan Agreement as amended from time to time being herein referred to as the "Loan Agreement") owing to the Bank outstanding on the Maturity Date. The principal of this obligation will be repaid in one installment due on May 27, 1999. Interest will accrue and be payable on the outstanding principal balance of this obligation from this date on at the following alternative rates: 1. The cost of 30, 60, 90 or 180 day 936 Deposits to the Bank (as determined by the Bank and adjusted for the cost to the Bank of municipal license taxes), plus 50 basis points per annum (subject to the availability of 936 Deposits and to the continuing qualification of the Loan for 936 funding) (the "936 Option Rate"); 1 2. 1, 2, 3, or 6 months cost of LIBOR to the Bank plus 50 basis points per annum (subject to the availability of LIBOR funds) (the "LIBOR Option Rate"). 3. If both 936 Deposits and LIBOR funds become unavailable or may not be used, the applicable interest rate will be the Base Rate fluctuating concurrently with any changes in such Base Rate. 4. Notwithstanding anything to the contrary provided in paragraphs (1) and (2) above, at any time during the term of the Loan, the Borrower may request the Bank to fix the rate of interest on all or any portion of the Loan for a period not to exceed the then remaining term of the Loan, subject to the availability to the Bank of 936 Deposits or LIBOR funds with a term at least equal to such term, at a rate mutually agreeable to the Borrower and the Bank. Any prepayment by the Borrower of all or any portion of the principal amount of the Loan with a fixed interest rate shall be subject to payment by the Borrower of the breakage costs set forth in Section 12 of the Loan Agreement. 5. Notwithstanding anything to the contrary herein provided, the interest rate applicable to any overdue principal under the Loan shall be 2% over the Base Rate per annum. The interest rates set forth herein shall be increased and reduced concurrently with any increases or reductions in the Guarantor's senior unsecured long term debt rating by Standard and Poor's ("S&P") or Moody's as follows:

2 S&P OR MOODY'S RATING PLUS ---------------------------A or A2, or better BBB+ or Baa1, or better BBB and Baa2 BBB- or Baa3 BBB- and Baa3 BB+ or lower and Ba1 or lower LIBOR PLUS ---------37.5 bp 50 bp 55 bp 62.5 bp 75 bp 112.5 bp 37.5 bp 50 bp 55 bp 62.5 bp 75 bp 112.5 bp 936

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Upon the first Advance and thereafter three Business Days prior to the first day of each new Funding Period, the Bank shall notify to the Borrower the following rates of interest on such Business Day (a) subject to the availability to the Bank of 936 Deposits and to the eligibility of the Advance to be funded with 936 Deposits, the 936 Option Rate; and (b) subject to the availability to the Bank of LIBOR funds for such Funding Period, the LIBOR Option Rate. In the case of 936 Deposit funding, the Borrower must advise the Bank not later than 12 noon Puerto Rico time on the first Business Day of the ensuing Funding Period, and in the case of LIBOR funding two (2) Business Days before such Business Day which of the two funding options it selects for the ensuing Funding Period. The interest rate applicable to such Funding Period shall be the interest rate applicable on the first day of the Funding Period to the funding option selected by the Borrower. If the Borrower fails to make such timely notice of election then the interest rate beginning on the first day of such Funding Period shall be computed on the basis of the 30 day 936 Option Rate until a new Funding Period is established, or, if 936 Deposits are not available, on the basis of 30 day LIBOR Option Rate, or, if LIBOR funds are not available, on the basis of the Base Rate. 3 The Borrower shall pay interest quarterly in arrears on each Interest Payment Date, or on a Rollover Date, whichever is earlier, on the actual daily unpaid principal balance of the Loan and calculated on each such day on the basis of (i) a 365/366 day calendar year for the actual number of days elapsed with respect to Base Rate Advances, and (ii) a 360-day calendar year for the actual number of days elapsed with respect to 936 Option Rate and/or LIBOR Option Rate Advances. Up to an amount equal to the Working Capital Amount may be repaid and reborrowed hereunder prior to the Maturity Date provided that repayments of such amount shall be allowed only on Rollover Dates. Upon failure to pay principal, or interest, or the occurrence of any other event of default as stipulated in the Loan Agreement, the Bank may at its option declare the full unpaid balance of this obligation to be immediately due and payable together with any accrued and unpaid interest, and may proceed to enforce the security under the Loan Agreement and/or interpose judicial proceedings to collect said sums plus costs, expenses and a reasonable sum for attorney's fees. The Borrower hereby waives presentment, protest, demand and notice of non-payment and submits itself to the jurisdiction of the courts of the Commonwealth of Puerto Rico for any judicial proceeding hereunder. The terms "the Borrower" and "the Bank" as used herein include their respective successors or assigns. 4 This Promissory Note has been issued under and pursuant to the Loan Agreement which is supplementary as to any matter pertinent to this Promissory Note not expressly provided herein. All capitalized terms used herein shall have the meaning ascribed to such terms in the Loan Agreement. Dated as of January 10, 1995. Enron Gas & Oil Trinidad Limited

/s/ W. C. Wilson 5

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EXHIBIT 10.46 GUARANTY THIS GUARANTY (this "GUARANTY"), dated as of May 27, 1994, made by Enron Oil & Gas Company, a Delaware corporation (the "GUARANTOR"), in favor of The Bank of Nova Scotia, ("BNS"), W I T N E S S E T H: WHEREAS, pursuant to a Letter Loan Agreement, dated as of May 27, 1994 (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the "LETTER LOAN AGREEMENT"), between Enron Gas & Oil Trinidad, Limited, a company organized and existing under the laws of Trinidad and Tobago (the "BORROWER") and BNS, BNS has extended a commitment to make loans (the "Loans") to the Borrower; and WHEREAS, BNS and the Borrower may now or in the future enter into one or more interest rate swap, hedge, collar, floor or similar agreements (collectively, together with all amendments and other modifications, if any, from time to time thereafter made thereto, and together with any and all Confirmations ("CONFIRMATIONS") thereunder, the "Swap Agreement", such interest rate swaps, hedges, collars, floors or similar agreements with the Borrower herein collectively the "Swaps"); and WHEREAS, as a condition precedent to the making of the Loans under the Letter Loan Agreement and entering into the Swaps pursuant to the Swap Agreement, the Guarantor is required to execute and deliver this Guaranty; WHEREAS, the Guarantor has duly authorized the execution, delivery and performance of this Guaranty; WHEREAS, it is in the best interests of the Guarantor to execute this Guaranty inasmuch as the Guarantor will derive substantial direct and indirect benefits from the Loans made from time to time and the Swaps from time to time entered into with the Borrower by BNS pursuant to the Letter Loan Agreement or the Swap Agreement, as the case may be; NOW, THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged, and in order to induce BNS to make the Loans to the Borrower pursuant to the Letter Loan Agreement and to enter into the Swaps, if any, pursuant to the Swap Agreement, the Guarantor agrees, for the benefit of BNS, as follows: ARTICLE I DEFINITIONS SECTION 1.1. CERTAIN TERMS. The following terms (whether or not underscored) when used in this Guaranty, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof): "BORROWER" is defined in the FIRST RECITAL. "BUSINESS DAY" means any day of the year except Saturday, Sunday and any day on which banks are required or authorized to close in Houston, Texas; New York, New York; San Juan, Puerto Rico; or Trinidad and Togabo. "CODE" means the Internal Revenue Code of 1986, as amended. "CONSOLIDATED" refers to the consolidation of the accounts of the Guarantor and its Subsidiaries in accordance with GAAP. "CONSOLIDATED NET WORTH" means at any date the Consolidated shareholders' equity of the Guarantor and its Consolidated subsidiaries. "CREDIT AGREEMENT" means the Revolving Credit Agreement dated as of March 11, 1994 between the Guarantor as Borrower, the Banks party thereto, and Texas Commerce Bank National Association, as Administrative Agent. "DEBT" of any Person means, at any date, without duplication, (a) obligations for the repayment of money borrowed which (1) are evidenced by bonds, notes, debentures, loan agreements, credit agreements or similar instruments or agreements and (2) are or should be shown on a balance sheet as debt in accordance with GAAP, (b) obligations as lessee under leases which, in accordance with GAAP, are capital leases, and (c) guaranties of payment or collection of any obligations described in CLAUSES (A) and (B) of other Persons, PROVIDED, that CLAUSES (A) and (B) include, in the case of obligations of the Borrower or any Subsidiary, only such obligations as are or should be shown as debt or capital lease liabilities on a Consolidated balance sheet in accordance with GAAP; PROVIDED, FURTHER, that none of the following shall constitute Debt:
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(A) transfers of accounts receivable pursuant to a receivables purchase facility considered a sale under GAAP (and indemnification, recourse or repurchase obligations thereunder as are reasonable given market standards for transactions of similar type), (B) the liability of any Person as a general partner of a partnership for Debt of such partnership, if the partnership is not a Subsidiary of such Person, and (C) obligations (other than borrowings, capital leases or financial guaranties by the Guarantor or any Subsidiary) related to the sale, purchase or delivery of hydrocarbons in respect of volumetric production payments conveyed in transfers constituting sales of real property interests for which proceeds are accounted for as deferred revenues under GAAP. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute of similar import, together with the regulations thereunder, as in effect from time to time. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) which is a member of a group of which the Guarantor is a member and which is under common control within the meaning of the regulations under Section 414 of the Code. "GAAP" means generally accepted accounting principles consistent with those applied in the preparation of the audited Consolidated financial statements referred to in SECTION 3.1(D). "GUARANTOR" is defined in the PREAMBLE. "GUARANTY" is defined in the PREAMBLE. "INSUFFICIENCY" means, with respect to any Plan, the amount, if any, by which the present value of the accrued benefits under such Plan exceeds the fair market value of the assets of such Plan allocable to such benefits. "LENDER" is defined in the PREAMBLE. "LETTER LOAN AGREEMENT" is defined in the FIRST RECITAL. "LOAN DOCUMENTS" means the Letter Loan Agreement, the notes thereunder and the other documents delivered to BNS under the Letter Loan Agreement together with any Swap Agreement, any Confirmation and any other documents delivered to BNS thereunder. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of the ERISA to which the Guarantor or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "MULTIPLE EMPLOYER PLAN" means an employee benefit plan, other than a Multiemployer Plan, subject to Title IV of ERISA to which the Guarantor or any ERISA Affiliate, and more than one employer other than the Guarantor or an ERISA Affiliate, is making or accruing an obligation to make contributions or, in the event that any such plan has been terminated, to which the Guarantor or any ERISA Affiliate made or accrued an obligation to make contributions during any of the five plan years preceding the date of termination of such plan. "NOTE" means a Promissory Note or Non-Revolving Term Note as those terms are defined in the Letter Loan Agreement. "OTHER TAXES" is defined in CLAUSE (B) of SECTION 2.8. "PBGC" means the Pension Benefit Guaranty Corporation, or any federal agency or authority of the United States from time to time succeeding to its function. "PERSON" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, firm or other entity, or a government or any political subdivision or agency, department or instrumentality thereof. "PLAN" means an employee benefit plan (other than a Multiemployer Plan) which is (or, in the event that any such plans has been terminated within five years after a transaction described in Section 4069 of ERISA, was) maintained for employees of the Guarantor or any ERISA Affiliate and covered by Title IV or ERISA. "PRINCIPAL SUBSIDIARY" means at any time of determination any Subsidiary having total assets in excess of $100,000,000. For purposes of this definition, total assets shall be determined based on the most recent quarterly or annual financial statements available prior to such determination.
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"RATING LEVEL" means the applicable category of rating level which is based on the rating of the Guarantor's senior unsecured long-term debt as classified by Moody's and/or Standard & Poor's and which shall be the highest applicable Rating Level I, Rating Level II, Rating Level III, Rating Level IV, Rating Level V or Rating Level VI, as the case may be, as set forth in SCHEDULE I. "SUBSIDIARY" means any corporation, partnership, joint venture or other entity of which more than 50% of the outstanding capital stock or other equity interests having ordinary voting power (irrespective of whether or not at the time capital stock or other equity interest of any other class or classes of such corporation, partnership, joint venture or other entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by the Guarantor. "SWAP" is defined in the PREAMBLE. "SWAP AGREEMENT" is defined in the PREAMBLE. "TAXES" is defined in CLAUSE (A) of SECTION 2.8. "TERMINATION EVENT" means (a) a "reportable event", as such term is described in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC), or an event described in Section 4062(e) of ERISA, or (b) the withdrawal of the Guarantor or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer", as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Guarantor or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (c) the distribution of a notice of intent to terminate a Plan pursuant to Section 4041(a)(2) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (d) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "TOTAL CAPITALIZATION" means, at any time, the sum (without duplication) of (a) Total Debt, and (b) Consolidated Net Worth less any amount thereof attributable to "minority interests" (as defined below). For the purpose of this definition, "minority interests" means any investment or interest of the Guarantor in any corporation, partnership or other entity to the extent that the total amount thereof owned by the Guarantor (directly or indirectly) constitutes 50% or less of all outstanding interests or investments in such corporation, partnership or entity. "TOTAL DEBT" means, at any time, all Consolidated Debt of the Guarantor and its Consolidated Subsidiaries. "WITHDRAWAL LIABILITY" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA. SECTION 1.2. LETTER LOAN DEFINITIONS. Unless otherwise defined herein or the context otherwise requires, terms used in this Guaranty, including its preamble and recitals, have the meanings provided in the Letter Loan Agreement. ARTICLE II GUARANTY PROVISIONS SECTION 2.1. GUARANTY. The Guarantor hereby absolutely, unconditionally and irrevocably (a) guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all indebtedness, obligations and liabilities of the Borrower to BNS arising out of, under, or in connection with the Letter Loan Agreement or any of the other Loan Documents (collectively the "Guaranteed Obligations") of the Borrower, whether for principal, interest, fees, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. ss.362(a)), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b), and (b) indemnifies and holds harmless BNS and each holder of a Note for any and all costs and expenses (including reasonable attorney's fees and expenses) incurred by BNS or such holder, as the case may be, in enforcing any of its rights under this Guaranty. This Guaranty constitutes a guaranty of payment when due and not of collection, and the Guarantor specifically agrees that it shall not be necessary or required that BNS or any holder of any Note exercise any right, assert any claim or demand or enforce any remedy whatsoever against the Borrower (or any other Person) before or as a condition to the obligations of the Guarantor hereunder.
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SECTION 2.2. ACCELERATION OF GUARANTY. The Guarantor agrees that, in the event of the occurrence and continuation of an Event of Default under Section 5.1 and if such Event of Default shall occur at a time when any of the Guaranteed Obligations may not then be due and payable, then, immediately and without further action by BNS, in the event of an Event of Default of the type referred to in Section 5.1(e) or upon demand by BNS in the event of an Event of Default (other than an Event of Default of the type referred to in Section 5.1(e)) the Guarantor will pay to BNS forthwith the full amount which would be payable hereunder by the Guarantor if all such Guaranteed Obligations were then due and payable. SECTION 2.3. GUARANTY ABSOLUTE, ETC. This Guaranty shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Guaranteed Obligations have been paid in full, all obligations of the Guarantor hereunder shall have been paid in full and all Commitments shall have terminated. The Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Letter Loan Agreement or the Swap Agreement, as the case may be, and each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of BNS or any holder of any Note with respect thereto. The liability of the Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of the Letter Loan Agreement, any Note, any other Loan Document, the Swap Agreement or any Confirmation; (b) the failure of BNS or any holder of any Note (i) to assert any claim or demand or to enforce any right or remedy against the Borrower or any other Person (including any other guarantor) under the provisions of the Letter Loan Agreement, any Note, any other Loan Document, the Swap Agreement or any Confirmation or otherwise, or (ii) to exercise any right or remedy against any other guarantor of, or collateral (if any) securing, any Guaranteed Obligations; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other extension, compromise or renewal of any Guaranteed Obligation; (d) any reduction, limitation, impairment or termination of the Guaranteed Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Guarantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Guaranteed Obligations or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of the Letter Loan Agreement, any Note or any other Loan Document or the Swap Agreement or any Confirmation, as the case may be; (f) any addition, exchange, release, surrender or nonperfection of any collateral (if any), or any amendment to or waiver or release or addition of, or consent to departure from, any other guaranty, held by BNS or any holder of any Note securing any of the Guaranteed Obligations; or (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrower, any surety or any other guarantor. SECTION 2.4. REINSTATEMENT, ETC. The Guarantor agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Guaranteed Obligations is rescinded or must otherwise be restored by BNS or any holder of any Note, upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, as though such payment had not been made. SECTION 2.5. WAIVER, ETC. The Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that BNS or any holder of any Note protect, secure, perfect or insure any security interest or lien, or any property subject thereto, or exhaust any right or take any action against the Borrower or any other Person (including any other guarantor) or entity or any collateral (if any) securing the Guaranteed Obligations. SECTION 2.6. SUBROGATION, ETC. The Guarantor will not exercise any rights which it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until the prior payment, in full and in cash, of all Guaranteed Obligations. Any amount paid to the Guarantor on account of any such subrogation rights prior to the payment in full of all Guaranteed Obligations shall be held in trust for the benefit of BNS and each holder of a Note and shall immediately be paid to BNS and each holder of a Note and credited and applied against the Guaranteed Obligations whether matured or unmatured, in accordance with the terms of the Letter Loan Agreement or the Swap Agreement, as the case may be. In furtherance of the foregoing, for so long as any Guaranteed Obligations or Commitments remain outstanding, the Guarantor shall refrain from taking any action or commencing any proceeding
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against the Borrower (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in the respect of payments made under this Guaranty to BNS or any holder of a Note. SECTION 2.7. SUCCESSORS, TRANSFEREES AND ASSIGNS; TRANSFERS OF NOTES, ETC. This Guaranty shall: (a) be binding upon the Guarantor, and its successors, transferees and assigns; and (b) inure to the benefit of and be enforceable by BNS, each holder of a Note and each of their respective successors, transferees and assigns. Without limiting the generality of CLAUSE (B), BNS may assign or otherwise transfer (in whole or in part) any Note or Loan or Swap held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all rights and benefits in respect thereof granted to BNS under any Loan Document (including this Guaranty) or otherwise. SECTION 2.8. PAYMENTS FREE AND CLEAR OF TAXES, ETC. The Guarantor hereby agrees that: (a) Any and all payments made by the Guarantor hereunder shall be made in accordance with SECTION 20 of the Letter Loan Agreement or the relevant section or sections of the Swap Agreement and any Confirmations thereunder free and clear of, and without deduction for, any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of BNS and each holder of a Note, (i) taxes imposed on its income, (ii) franchise taxes imposed on it by the jurisdiction under the laws of which BNS or such holder, as the case may be, is organized and by any political subdivision thereof and, in the case of BNS, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of BNS's Puerto Rico office and any political subdivision thereof and (iii) any taxes imposed by the United States of America by means of withholding at the source if an to the extent that such taxes shall be in effect and shall be applicable, to payments to be made to BNS (all such taxes, levies, imposts, deductions, charges, withholdings and liabilities other than those referred to in the foregoing clauses (i), (ii) and (iii) being hereinafter referred to as "TAXES"). If the Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to BNS or any holder of a Note (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) BNS or such holder, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Guarantor shall make such deductions, and (iii) the Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) The Guarantor shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Guaranty (hereinafter referred to as "OTHER TAXES"). (c) The Guarantor hereby indemnifies and holds harmless BNS and each holder of a Note for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by BNS or such holder, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally assessed (expressly including such amounts paid as a result of the ordinary, sole or contributory negligence of BNS or such holder of a Note, but excluding such amounts paid as a result of the gross negligence or willful misconduct of BNS or such holder of a Note). This indemnification shall be made within thirty (30) days from the date BNS or such holder of a Note, as the case may be, makes written demand therefor. BNS or the holder of a Note shall not be indemnified for Taxes or Other Taxes incurred or accrued unless within 90 days of the date that BNS or such holder of a Note knew or should have known thereof, it notifies the Guarantor thereof. (d) Within 30 days after the date of any payment of Taxes or Other Taxes, the Guarantor will furnish to BNS the original or a certified copy of a receipt evidencing payment thereof. Should BNS or the holder of a Note ever receive any refund, credit or deduction from any taxing authority to which BNS or such holder of a Note would not be entitled but for the payment by the Guarantor of Taxes or Other Taxes as required by this Section 2.8 (it being understood that the decision as to whether or not to claim, and if claimed, as to the amount of any such refund, credit or deduction shall be made by BNS or such holder of a Note in its sole discretion), BNS or such holder of a Note, as the case may be, thereupon shall repay to the Guarantor an amount with respect to such refund, credit or deduction equal to any net reduction in Taxes or Other Taxes actually obtained by BNS or such holder of a Note, as the case may be, and determined by BNS or such holder of a Note, as the case may be, to be attributable to such refund, credit or deduction. (e) Without prejudice to the survival of any other agreement of the Guarantor hereunder (but subject to the expiration of any applicable statute of limitations), the agreements and obligations of the Guarantor contained in this SECTION 2.8 shall survive the payment in full of the principal of and interest on the Loans. SECTION 2.9. JUDGMENT. The Guarantor hereby agrees that: (a) If, for the purposes of obtaining a judgment in any court, it is necessary to convert a sum due hereunder from one currency into
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another currency, the rate of exchange used shall be the best available rate at which in accordance with normal banking procedures BNS could purchase such currency with such other currency on the Business Day preceding that on which final judgment is given. (b) The obligation of the Guarantor in respect of any sum due from it to BNS or any holder of a Note hereunder shall, notwithstanding any judgment in a currency, be discharged only to the extent that on the Business Day following receipt by BNS or such holder, as the case may be, of any sum adjudged to be so due in such other currency BNS or such holder, as the case may be, may, in accordance with normal banking procedures using the best available exchange rate, purchase the relevant currency with such other currency; in the event that the currency so purchased is less than the sum originally due to BNS or such holder in such currency, the Guarantor, as a separate obligation and notwithstanding any such judgment, hereby indemnifies and holds harmless BNS and such holder against such loss, and if the such currency, so purchased exceeds the sum originally due to BNS or such holder in the relevant currency, BNS or such holder, as the case may be, shall remit to the Guarantor such excess. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby represents and warrants unto BNS as follows: (a) The Guarantor and each Principal Subsidiary are corporations duly incorporated, validly existing and in good standing under the laws of their respective jurisdictions of incorporation. The Guarantor and each Principal Subsidiary have all corporate powers and all material governmental licenses, authorizations, consents and approvals required in each case to carry on its business as now conducted except where failure to have such would not, in the aggregate, have a material adverse effect on the Guarantor or on the ability of the Guarantor to perform its obligations under this Guaranty. (b) The execution, delivery and performance by the Guarantor of this Guaranty is within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action of the Guarantor, require, in respect of the Guarantor, no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of law or regulation applicable to the Guarantor or the restated certificate of incorporation or by-laws of the Guarantor or any judgment, injunction, order, decree or material ("material" for the purposes of this representation meaning creating a liability of $50,000,000 or more) agreement binding upon the Guarantor or result in the creation or imposition of any lien, security interest or other charge or encumbrance on any asset of the Guarantor or any of its Subsidiaries. (c) This Guaranty is the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, except as the enforceability thereof may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general principles of equity. (d) The audited Consolidated balance sheet of the Guarantor as of December 31, 1993 and the related audited Consolidated statements of income, cash flows and changes in shareholders' equity accounts for the fiscal year then ended and the unaudited Consolidated balance sheet of the Guarantor as of March 31, 1994, and the related unaudited Consolidated statements of income and cash flows for the fiscal quarter then ended, certified by the chief financial or accounting officer of the Guarantor, copies of which have been delivered to BNS, fairly present, in conformity with GAAP except as otherwise expressly noted therein, the Consolidated financial position of the Guarantor as of such dates and its Consolidated results of operations and as applicable changes in financial position for such fiscal periods, subject (in the case of the unaudited balance sheet and statements) to changes resulting from audit and normal year-end adjustments. (e) Since December 31, 1993 there has been no material adverse change in the Consolidated financial position or Consolidated results of operations of the Guarantor and its Subsidiaries, considered as a whole. (f) Except as disclosed in the Guarantor's Form 10-K for the year ended December 31, 1993 or the Guarantor's Form 10-Q for the quarter ended March 31, 1994, which were delivered to BNS prior to the date hereof, there is no action, suit or proceeding pending against the Guarantor or any of its Subsidiaries, or to the knowledge of the Guarantor threatened against the Guarantor or any of its Subsidiaries, before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the Consolidated financial position or Consolidated results of operations of the Guarantor and its Subsidiaries taken as a whole or which in any manner draws into question the validity of this Agreement. (g) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan for which an Insufficiency in excess of $50,000,000 exists. Neither the Guarantor nor any ERISA Affiliate has received any notification (or has knowledge of any reason to expect) that any Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, for which a
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Withdrawal Liability in excess of $50,000,000 exists. (h) United States federal income tax returns of the Guarantor and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1987. The Guarantor and its Subsidiaries have filed or caused to be filed all United Sates federal income tax returns and all other material domestic tax returns which to the knowledge of the Guarantor are required to be filed by them and have paid or provided for the payment, before the same become delinquent, of all taxes due pursuant to such returns or pursuant to any assessment received by the Guarantor or any Subsidiary, other than those taxes contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Guarantor and its Subsidiaries in respect of taxes are, in the opinion of the Guarantor, adequate to the extent required by GAAP. (i) Neither the Guarantor nor any Subsidiary is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (j) The Guarantor is not a "holding company", a "subsidiary company" of a "holding company", an "affiliate" of a "holding company", or an "affiliate" of a "subsidiary company" of a "holding company", in each case as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. ARTICLE IV COVENANTS, ETC. SECTION 4.1. AFFIRMATIVE COVENANTS. The Guarantor covenants and agrees that so long as any portion of the Guaranteed Obligations shall remain unpaid or BNS shall have any outstanding Commitment, the Guarantor will, unless BNS shall otherwise consent in writing, perform the following obligations: (a) REPORTING REQUIREMENTS. Furnish to BNS: (1) (A) promptly after the sending or filing thereof, a copy of each of the Guarantor's reports on Form 8-K (or any comparable form), (B) promptly after the filing or sending thereof, and in any event within 75 days after the end of each of the first three fiscal quarters of each fiscal year of the Guarantor, a copy of the Guarantor's report on Form 10-Q (or any comparable form) for such quarter, which report will include the Guarantor's quarterly unaudited Consolidated financial statements as of the end of and for such quarter, and (C) promptly after the filing or sending thereof, and in any event within 135 days after the end of each fiscal year of the Guarantor, a copy of the Guarantor's annual report which it sends to its public security holders, and a copy of the Guarantor's annual report on Form 10-K (or any comparable form) for such year, which annual report on Form 10-K will include the Guarantor's annual audited Consolidated financial statements as of the end of and for such year; (2) simultaneously with the delivery of each of the annual or quarterly reports referred to in CLAUSE (1) above, a certificate of the chief financial officer or the chief accounting officer of the Guarantor in a form acceptable to BNS (x) setting forth in reasonable detail the calculations required to establish whether the Guarantor was in compliance with the requirements of SECTION 4.2(B) on the date of the financial statements contained in such report, and (y) stating whether there exists on the date of such certificate any Event of Default or event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, and, if so, setting forth the details thereof and the action which the Guarantor has taken and proposes to take with respect thereto; (3) as soon as is possible and in any event within five days after a change in, or issuance of, any rating of any of the Guarantor's senior unsecured long-term debt by Standard & Poor's or Moody's which causes a change in the applicable Rating Level, notify BNS of such change; (4) as soon as possible and in any event within five days after an executive officer of the Guarantor having obtained knowledge thereof, notice of the occurrence of any Event of Default or any event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, continuing on the date of such notice, and a statement of the chief financial officer of the Guarantor setting forth details of such Event of Default or event and the action, if any, which the Guarantor has taken and proposes to take with respect thereto; (5) as soon as possible and in any event(A) within 30 Business Days after the Guarantor or any ERISA Affiliate knows or has reason to know that any Termination Event described in CLAUSE (A) of the definition of Termination Event with respect to any Plan for which an Insufficiency in excess of $50,000,000 exists, has occurred and (B) within 10 Business Days after the Guarantor or any ERISA Affiliate knows or has reason to know that any other Termination Event with respect to any Plan for which an Insufficiency in excess of $50,000,000 exists, has occurred or is reasonably expected to occur, a statement of the chief financial officer or chief accounting
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officer of the Guarantor describing such Termination Event and the action, if any, which the Guarantor or such ERISA Affiliate proposes to take with respect thereto; (6) promptly and in any event within five Business Days after receipt thereof by the Guarantor or any ERISA Affiliate, copies of each notice received by the Guarantor or any ERISA Affiliate from the PBGC stating its intention to terminate any Plan for which an Insufficiency in excess of $50,000,000 exists or to have a trustee appointed to administer any Plan for which an Insufficiency in excess of $50,000,000 exists; (7) promptly and in any event within five Business Days after receipt thereof by the Guarantor or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Guarantor or any ERISA Affiliate indicating liability in excess of $50,000,000 incurred or expected to be incurred by the Guarantor or any ERISA Affiliate in connection with (A) the imposition of a Withdrawal Liability by a Multiemployer Plan, (B) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, or (C) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA; and (8) such other information respecting the Consolidated financial position or Consolidated results of operations of the Guarantor that BNS may from time to time reasonably request. (b) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its Subsidiaries to comply, with all applicable laws, rules, regulations and orders to the extent noncompliance therewith would have a material adverse effect on the Guarantor and its Subsidiaries taken as a whole, such compliance to include, without limitation, the paying before the same shall become due of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith by appropriate proceedings. (c) MAINTENANCE OF INSURANCE. Maintain, and cause each of its Principal Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties as the Guarantor or such Principal Subsidiary, PROVIDED, that self-insurance by the Guarantor or any such Principal Subsidiary shall not be deemed a violation of this covenant to the extent that companies engaged in similar businesses and owning similar properties as the Guarantor or such Principal Subsidiary self-insure. The Guarantor may maintain the Principal Subsidiaries' insurance on behalf of them. (d) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain, and cause each of its Principal Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory), and franchises; PROVIDED, HOWEVER, that this SECTION 4.1(D) shall not apply to any transactions permitted by SECTION 4.2(C) OR (D) and shall not prevent the termination of existence, rights and franchises of any Principal Subsidiary pursuant to any merger or consolidation to which such Principal Subsidiary is a party, and PROVIDED, FURTHER, that the Guarantor or any Principal Subsidiary shall not be required to preserve any right or franchise if the Guarantor or such Principal Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Guarantor or such Principal Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to BNS. (e) VISITATION RIGHTS. At any reasonable time and from time to time, after reasonable written notice, permit BNS or any agents or representatives thereof to examine the records and books of account of, and visit the properties of, the Guarantor and any of the Principal Subsidiaries and to discuss the affairs, finances and accounts of the Guarantor and any of the Principal Subsidiaries with any of the officers of the Guarantor. SECTION 4.2. NEGATIVE COVENANTS. The Guarantor covenants and agrees that, so long as any portion of the Guaranteed Obligations shall remain unpaid or BNS shall have any outstanding Commitment, the Guarantor will not, without the prior written consent of BNS, do anything prohibited below: (a) NEGATIVE PLEDGE. Fail to perform or observe any term, covenant, or agreement contained in Section 5.01 or 5.02 of the Credit Agreement. The terms, covenants, or agreements in Section 5.01 and 5.02 shall have the same force and effect as if fully recited herein, shall be deemed to have been made in favor of BNS, shall survive the termination or expiration of the Credit Agreement (or the Guarantor's obligations thereunder) and, notwithstanding any such termination or expiration of the Credit Agreement (or the Guarantor's obligations thereunder), shall continue to inure to the benefit of BNS. Any amendment or modification to any of the terms, covenants, or agreements contained in Sections 5.01 and 5.02 of the Credit Agreement shall not be operative and shall have no force and effect with respect to the Guarantor and BNS pursuant to this Guaranty and such terms, covenants, and agreements contained in Sections 5.01 and 5.02 shall be deemed to remain as written without regard to any such amendment or modification.

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(b) TOTAL DEBT TO CAPITALIZATION. Have a ratio of (i) Total Debt to (ii) Total Capitalization greater than 50%. (c) DISPOSITION OF ASSETS. Lease, sell, transfer or otherwise dispose of, voluntarily or involuntarily, all or substantially all of its assets. (d) MERGERS, ETC. Merge or consolidate with or into, any Person, unless (1) the Guarantor is the survivor or (2) the surviving Person, if not the Guarantor, is organized under the laws of the United States or a state thereof and assumes all obligations of the Guarantor under this Guaranty, PROVIDED, in each case that both immediately before and after giving effect to such proposed transaction, no Event of Default or event which, with the giving of notice or the lapse of time, or both, would constitute an Event of Default exists, or would exist or result. (e) COMPLIANCE WITH ERISA. (1) Terminate, or permit any ERISA Affiliate to terminate, any Plan so as to result in any liability in excess of $50,000,000 of the Guarantor or any ERISA Affiliate to the PBGC, or (2) permit circumstances which give rise to a Termination Event described in CLAUSES (B), (D) or (E) of the definition of Termination Event with respect to a Plan so as to result in any liability in excess of $50,000,000 of the Guarantor or any ERISA Affiliate to the PBGC. ARTICLE V EVENTS OF DEFAULT SECTION 5.1. EVENTS OF DEFAULT. Each of the following events which shall occur and be continuing shall constitute Events of Default: (a) The Guarantor shall fail to pay any amount hereunder when due and payable; or (b) Any representation or warranty made by the Guarantor (or any of its officers) under or in connection with this Guaranty shall prove to have been incorrect in any material respect when made or deemed made and such materiality is continuing; or (c) The Guarantor shall fail to perform or observe any term, covenant or agreement contained in SECTION 4.2 or shall fail to perform or observe any other term, covenant or agreement contained herein on its part to be performed or observed if, in the case of such other term, covenant or agreement, such failure shall remained unremedied for 30 days after written notice thereof shall have been given to the Guarantor by BNS; or (d) The Guarantor or any Principal Subsidiary shall (1) fail to pay any principal of or premium or interest on any Debt (other than Debt described in CLAUSE (C) of the definition of Debt) which is outstanding in the principal amount of at least $50,000,000 in the aggregate, of the Guarantor or such Principal Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment or as a result of the giving of notice of a voluntary prepayment), prior to the stated maturity thereof, or (2) with respect to Debt described in CLAUSE (C) of the definition of Debt, fail to pay any such Debt which is outstanding in the principal amount of at least $50,000,000 in the aggregate, of the Guarantor or such Principal Subsidiary (as the case may be), when the same becomes due and payable, and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt, or (e) The Guarantor or any Principal Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Guarantor or any Principal Subsidiary seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), shall remain undismissed or unstayed for a period of 60 days; or the Guarantor or any Principal Subsidiary shall take any corporate action to authorize any of the actions set forth above in this SUBSECTION (E); or (f) Any judgment, decree or order for the payment of money in excess of $50,000,000 shall be rendered against the Guarantor or any Principal Subsidiary and shall remain unsatisfied and either (1) enforcement proceedings shall have been commenced by any creditor upon such judgment, decreed or order or (2) there shall be any period longer than (i) 30 consecutive days or (ii) such longer period as
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allowed by applicable law during which a stay of enforcement of such judgment, decree or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) Any Termination Event as defined in CLAUSE (B), (D) or (E) of the definition thereof with respect to a Plan shall have occurred and, 30 days after notice thereof shall have been given to the Guarantor by BNS, (1) such Termination Event shall continue to exist and (2) the sum (determined as of the date of occurrence of such Termination Event) of the liabilities to the PBGC resulting from all such Termination Events is equal to or greater than $100,000,000; or (h) The Guarantor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to the Multiemployer Plan in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $100,000,000 or requires payments exceeding $50,000,000 in any year; or (i) The Guarantor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Guarantor and its ERISA Affiliates to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years which include the date hereof by an amount exceeding $50,000,000 in the aggregate. ARTICLE VI MISCELLANEOUS PROVISIONS SECTION 6.1. BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS; ASSIGNMENT OF GUARANTY. In addition to, and not in limitation of, SECTION 2.7, this Guaranty shall be binding upon the Guarantor and its successors, transferees and assigns and shall inure to the benefit of and be enforceable by BNS and each holder of a Note and their respective successors and assigns (to the full extent provided pursuant to SECTION 2.7); PROVIDED, HOWEVER, that the Guarantor may not assign any of its obligations hereunder without the prior written consent of BNS and each holder of a Note. SECTION 6.2. AMENDMENTS, ETC. No amendment to or waiver of any provision of this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in any event be effective unless the same shall be in writing and signed by BNS and the Guarantor, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 6.3. ADDRESSES FOR NOTICES TO THE GUARANTOR. All notices and other communications hereunder to the Guarantor shall be in writing and mailed or delivered to it, addressed to it at the address set forth below its signature hereto or at such other address as shall be designated by the Guarantor in a written notice to BNS at The Bank of Nova Scotia 273 Ponce de Leon Avenue Hato Rey, Puerto Rico 00917 or such other address specified in a notice complying as to delivery with the terms of this Section. All such notices and other communications shall, when mailed, be effective when deposited in the mails, addressed as aforesaid. SECTION 6.4. NO WAIVER; REMEDIES. In addition to, and not in limitation of, SECTION 2.3 and SECTION 2.5, no failure on the part of BNS or any holder of a Note to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 6.5. SECTION CAPTIONS. Section captions used in this Guaranty are for convenience of reference only, and shall not affect the construction of this Guaranty. SECTION 6.6. SEVERABILITY. Wherever possible each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. SECTION 6.7. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly
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authorized as of the date first above written. Enron Oil & Gas Company

By: /s/ Ben B. Boyd Title: Vice President and Controller Address: P. O. Box 1188, Houston, TX 77251-1188 Attention: Ben B. Boyd Telex:_________________________ Telecopy: 713-646-2353

Schedule 1 ENRON GAS & OIL TRINIDAD LIMITED PRICING APPENDIX Level I ------If the Guarantor's Senior Unsecured Long Term Debt is rated A or better by S&P OR A2 or better by Moody's. 12.5bp Level II -------If the Guarantor's Senior Unsecured Long Term Debt is rated BBB+ or better by S&P OR Baa1 or better by Moody's. 15.0bp Level III --------If the Guarantor's Senior Unsecured Long Term Debt is rated BBB by S&P AND Baa2 by Moody's. Level IV -------If the Guarantor's Senior Unsecured Long Term Debt is rated BBB- by S&P OR Baa3 by Moody's. Level V ------If the Guarantor's Senior Unsecured Long Term Debt is rated BBB- by S&P AND Baa3 by Moody's. Level VI -------If the Guarantor's Senior Unsecured Long Term Debt is rated BB+ or lower by S&P AND Ba1 or lower by Moody's. 37.5bp

Basis for Pricing

Commitment Fee LIBOR+ 936+

17.5bp

20.0bp

25.0bp

37.5bp 37.5bp

50.0bp 50.0bp

55.0bp 55.0bp

62.5bp 62.5bp

75bp 75bp

112.5bp 112.5bp

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EXHIBIT 10.47 ENRON OIL & GAS INTERNATIONAL, INC. P. O. Box 4672 Houston, Texas 77210-4672 (713) 853-6161 Telex 765443 Answerback: ENRONCORP December 18, 1994 Secretary of the Government of India Ministry of Petroleum and Natural Gas Shastri Bhavan New Delhi 110 001 INDIA Gentlemen: Based upon my review of the records of Enron Oil & Gas International, Inc. I have determined that the guarantees issued by it in favor of the Government, pursuant to Article Twenty-nine of two certain Production Sharing Contracts of even date, are legally valid and enforceable. Very truly yours,

/s/ E. J. VANDERMARK E. J. Vandermark Legal Advisor

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EXHIBIT 10.48 CERTIFICATE ENRON OIL & GAS INDIA LTD., formerly known as ENRON INDIA EXPLORATION COMPANY, pursuant to its articles of incorporation and by-laws, has, by the unanimous consent of its directors, authorized its chairman, directors, secretary, assistant secretary, proper officers and its counsel (any one of them acting alone), to negotiate production sharing contracts for the Tapti, Panna and Mukta Fields, offshore India, and to execute, deliver and perform for, in the name of and on behalf of ENRON OIL & GAS INDIA LTD. Dated this 22nd day of December 1994.

/s/ E. J. VANDERMARK E. J. Vandermark Assistant Secretary

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EXHIBIT 10.49 FINANCIAL AND PERFORMANCE GUARANTEE WHEREAS ENRON OIL & GAS INTERNATIONAL, INC., a Company duly organized and existing under the laws of Delaware, U.S.A., having its registered office at 1400 Smith Street, Houston, Texas, U.S.A., (hereinafter referred to as "the Guarantor" which expression shall include its successors and assigns) is the indirect owner of 100% of the capital stock of ENRON OIL & GAS INDIA LIMITED ("Company") and direct owner of its parent company; and WHEREAS Company is signatory to a Production Sharing Contract of even date of this guarantee in respect of an Offshore area identified as Panna and Mukta Fields (hereinafter referred to as "the Contract") made between the Government of India (hereinafter referred to as "the Government"), Company, RELIANCE INDUSTRIES LIMITED and OIL & NATURAL GAS CORPORATION LIMITED (hereinafter referred to as "Contractor" which expression shall include its successors and permitted assigns); and WHEREAS the Guarantor wishes to guarantee the performance of Company or its Affiliate Assignee under the Contract as required by the terms of the Contract; NOW, THEREFORE, this Deed hereby provides as follows: 1. The Guarantor hereby unconditionally and irrevocably guarantees to the Government that it will make available, or cause to be made available, to Company or any other directly or indirectly owned Affiliate of Company to which any part or all of Company's rights or interest under the Contract may subsequently be assigned ('Affiliate Assignee'), to ensure that Company or any Affiliate Assignee can carry out its work commitment as set forth in the Contract. 2. The Guarantor further unconditionally and irrevocably guarantees to the Government reasonable compliance by Company or any Affiliate Assignee, of any obligations of Company or any Affiliate Assignee under the Contract. 3. The Guarantor hereby undertakes to the Government that if Company, or any Affiliate Assignee, shall, in any respect, fail to perform its work commitments under the Contract or commit any material breach of such obligations, then the Guarantor shall fulfill or cause to be fulfilled the obligations in place of Company or any Affiliate Assignee, and will indemnify the Government against all actual losses, damages, costs, expenses, or otherwise which may result directly from such failure to perform or breach on the part of Company. In no event shall Guarantor be liable for any special consequential, indirect, incidental or punitive damages of any kind or character, including, but not limited to, loss of profits or revenues, loss of product or loss of use arising out of or related to a material breach by Company of its obligations under the Contract. 4. This guarantee shall take effect from the Effective Date and shall remain in full force and effect for the duration of the Contract and thereafter until no sum remains payable by Company, or its Affiliate Assignee, under the Contract or as a result of any decision or award made by any expert or arbitration tribunal thereunder. 5. This guarantee shall not be affected by any change in the Articles of Association and by-laws of Company or the Guarantor or in any instrument establishing the Licensee. 6. The liabilities of the Guarantor shall not be discharged or affected by (a) any time indulgence, waiver or consent given to Company; (b) any amendment to the Contract or to any security or other guarantee or indemnity to which Company has agreed; (c) the enforcement or waiver of any terms of the Contract or of any security, other guarantee or indemnity; or (d) the dissolution, amalgamation, reconstruction or reorganization of Company. 7. This guarantee shall be governed by and construed in accordance with the laws of India. IN WITNESS WHEREOF the Guarantor, through its duly authorized representatives, has caused its seal to be duly affixed hereto and this guarantee to be duly executed the 22nd day of December 1994. The seal of Enron Oil and Gas International, Inc. was hereto duly affixed by E. J. Vandermark this 22nd day of December 1994 in accordance with its by-laws and this guarantee was duly signed by J. A. Kopecky and E. J. Vandermark as required by the said by-laws.

/s/ E. J. VANDERMARK E. J. Vandermark Asst. Secretary

2003.

/s/

J. A. KOPECKY J. A. Kopecky Vice

EDGAR Online, Inc.

President

Witness:

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EXHIBIT 10.50 JOINT OPERATING AGREEMENT AMONG OIL & NATURAL GAS CORPORATION LIMITED AND ENRON OIL & GAS INDIA LTD. AND RELIANCE INDUSTRIES LIMITED WITH RESPECT TO CONTRACT AREA IDENTIFIED AS PANNA AND MUKTA FIELDS

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TABLE OF CONTENTS ARTICLE PAGE I Definitions ........................................................... 1 II Effective Date and Term ............................................... 5 III Participating Interest ................................................ 6 3.1 Participating Interest ........................................... 6 3.2 Ownership, Obligations and Liabilities ........................... 6 IV Operator .............................................................. 6 4.1 Designation of Operator .......................................... 6 4.2 Rights and Duties of Operator .................................... 6 4.3 Employees of Operator ............................................ 8 4.4 Information Supplied by Operator ................................. 8 4.5 Settlement of Claims and Lawsuits ................................ 8 4.6 Liability of Operator ............................................ 9 4.7 Insurance Obtained by Operator ................................... 9 4.8 Commingling of Funds ............................................. 10 4.9 Resignation of Operator .......................................... 11 4.10 Removal of Operator ............................................. 11 4.11 Appointment of Successor ........................................ 11 V Operating Committee ................................................... 12 5.1 Establishment of Operating Committee ............................. 12 5.2 Powers and Duties of Operating Committee ......................... 12 5.3 Authority to Vote ................................................ 13 5.4 Subcommittees .................................................... 13 5.5 Notice of Meeting ................................................ 13 5.6 Contents of Meeting Notice ....................................... 13 5.7 Location and Frequency of Meetings ............................... 14 5.8 Operator's Duties for Meetings ................................... 14 5.9 Voting Procedure ................................................. 14 5.10 Record of Votes .................................................
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14 5.11 Minutes ......................................................... 14 5.12 Voting by Notice ................................................ 14 5.13 Effect of Vote .................................................. 15 VI Work Programs and Budgets ............................................. 16 6.1 Preparation of Work Program and Budget ........................... 16 6.2 Adoption of Work Program and Budget and Submission to Management Committee ............................... 16 6.3 Subdivision of Work Program and Budget Items and Transfers ....................................... 16 6.4 Fulfillment of Minimum Work Obligations .......................... 17 6.5 Exploration and Appraisal ........................................ 17 6.6 Development of New Discovery ..................................... 18 6.7 Itemization of Expenditures ...................................... 18 6.8 Contract Awards .................................................. 19 6.9 Authorization for Expenditure ("AFE") Procedure .................. 20 6.10 Supplementary AFEs .............................................. 21 6.11 Approval of AFEs ................................................ 21 6.12 Approval of AFE Not to be Unreasonably Withheld ................. 22 6.13 Overexpenditures of Work Programs and Budgets ................... 22 6.14 Work Program and Budget for Initial Period ...................... 22 VII Operations By Less Than All Parties ................................... 22 7.1 Limitation on Applicability ...................................... 22 7.2 Procedure to Propose Exclusive Operations ...................... 22 7.3 Responsibility for Exclusive Operations ........................ 23 7.4 Consequences of Exclusive Operations ........................... 24 7.5 Premium to Participate in Exclusive Operations ................. 25 7.6 Order of Preference of Operations .............................. 26 7.7 Stand-By Costs ................................................. 26 7.8 Special Considerations Regarding Deepening and Sidetracking .................................... 27 7.9 Miscellaneous ..................................................
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28 VIII Default ............................................................. 29 8.1 Default and Notice ............................................. 29 8.2 Operating Committee Meetings and Data .......................... 29 8.3 Allocation of Defaulted Accounts ............................... 29 8.4 Transfer of Interest ........................................... 30 8.5 Continuation of Interest ....................................... 31 8.6 Abandonment .................................................... 31 8.7 Sale of Hydrocarbons ........................................... 32 8.8 No Right of Set Off ............................................ 32 8.9 Minor Default .................................................. 32 8.10 Reinstatement of Rights ....................................... 32 IX Disposition of Production ........................................... 32 9.1 Right and Obligation to Take in Kind ........................... 32 9.2 Offtake Agreement for Crude Oil ................................ 33 9.3 Separate Agreement for Natural Gas ............................. 34 X Abandonment of Wells ................................................ 34 10.1 Abandonment of Wells Drilled as Joint Operations ............... 34 10.2 Abandonment of Exclusive Operations ............................ 34 XI Surrender ........................................................... 35 11.1 Surrender ...................................................... 35 XII Transfer of Interest or Rights ...................................... 35 12.1 Obligations .................................................... 35 12.2 Rights ......................................................... 36 XIII Withdrawal from Agreement by Transfer or Assignment ................. 36 13.1 Right of Withdrawal ............................................ 36 13.2 Partial or Complete Withdrawal ................................. 36 13.3 Voting ......................................................... 37 13.4 Obligations and Liabilities .................................... 37 13.5 Emergency ...................................................... 37 13.6 Assignment .....................................................
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37 13.7 Approvals ...................................................... 37 13.8 Abandonment Security ........................................... 37 13.9 Withdrawal or Abandonment by all Parties ....................... 38 XIV Relationship of Parties and Tax ..................................... 38 14.1 Relationship of Parties ........................................ 38 14.2 Tax ............................................................ 38 XV Confidential Information - Proprietary Technology ................... 38 15.1 Confidential Information ....................................... 38 15.2 Continuing Obligations ......................................... 39 15.3 Proprietary Technology ......................................... 39 15.4 Trades ......................................................... 39 XVI Force Majeure ....................................................... 39 16.1 Obligations .................................................... 39 16.2 Definition of Force Majeure .................................... 40 XVII Notices ............................................................. 40 XVIII Applicable Law and Dispute Resolution ............................... 41 18.1 Applicable Law ................................................. 41 18.2 Dispute Resolution ............................................. 41 XIX Allocation of Cost Recovery Rights .................................. 42 19.1 Allocation of Total Production ................................. 42 19.2 Allocation of Cost Petroleum ................................... 42 19.3 Allocation of Profit Petroleum ................................. 42 19.4 Allocation of Excess Cost Petroleum ............................ 42 XX General Provisions .................................................. 43 20.1 Conflicts of Interest .......................................... 43 20.2 Public Announcements ........................................... 43 20.3 Successors and Assigns ......................................... 43 20.4 Waiver ......................................................... 43 20.5 Severance of Invalid Provisions ................................ 44 20.6 Modifications ..................................................
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44 20.7 Headings ....................................................... 44 20.8 Singular and Plural ............................................ 44 20.9 Gender ......................................................... 44 20.10 Counterpart Execution ......................................... 44 20.11 Conflict with Contract ........................................ 44 20.12 Entirety ...................................................... 44 Signature Page................................................. 44 Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit "A" "B" "C" "D" "D-1" "D-2" "D-3" "D-4" "D-5" "D-6" "D-7" "D-8" "E" Accounting Procedure Description of Contract Area Example Budget Format - Budget Summary - Geophysical and Geological Expense - Development Drilling (Firm Wells) - Production Facilities Costs - Production Costs - General and Administrative Expense - Fixed Assets and Deposits - Revenue Data to be Provided to Non-Operators

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JOINT OPERATING AGREEMENT THIS AGREEMENT is made as of the Effective Date among OIL & NATURAL GAS CORPORATION LIMITED, having its registered office at Tower II, 8th Floor, Jeevan Bharti, 124 Connaught Circus, New Delhi, 110 001, India, a company incorporated in India (hereinafter referred to as "ONGC"); ENRON OIL & GAS INDIA LTD., a company incorporated in the Cayman Islands, having its registered office at 1400 Smith Street, Houston, Texas, 77002, U.S.A. (hereinafter referred to as "EOGIL"), a wholly owned subsidiary of ENRON EXPLORATION COMPANY; and RELIANCE INDUSTRIES LIMITED, a company incorporated in India, having its registered office at 3rd Floor, Maker Chamber IV, 222 Nariman Point, Bombay, 400 021, India (hereinafter referred to as "RIL"). The companies named above may sometimes individually be referred to as "Party" and collectively as the "Parties". WITNESSETH: WHEREAS, the Parties have entered into a Production Sharing Contract (the "Contract") with the Government of India (hereinafter referred to as "Government") covering certain areas located offshore India known as the Panna and Mukta Fields, referred to as the "Contract Area", and more particularly described in Exhibit B to this Agreement; and WHEREAS, the Parties desire to define their respective rights and obligations with respect to their operations under the Contract. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements and obligations set out below and to be performed, the Parties agree as follows: ARTICLE I - DEFINITIONS As used in this Agreement, the following words and terms shall have the meaning ascribed to them below:

1.1

ACCOUNTING PROCEDURE means the rules, provisions and conditions set forth and contained in Exhibit A to this Agreement. AFE means an authorization for expenditure pursuant to Article 6.9. AFFILIATE means a company that directly or indirectly controls or is controlled by a Party to this Agreement or a company which directly or indirectly controls or is controlled by a company which controls Party to this Agreement, it being understood that "control" means ownership by one company of more than fifty percent (50%) of the voting securities of the other company, or the power to direct, administer and dictate policies of the other company even where the voting securities held by such company exercising such effective control in that other company is less than fifty percent (50%) and the term "controlled" shall have a corresponding meaning.

1.2 1.3

1.4 for

AGREED INTEREST RATE means interest, compounded on a monthly basis, at the rate per annum equal to the one (1) month term, LIBOR rate U.S. dollar deposits, as published by THE WALL STREET JOURNAL or if not published, then by the FINANCIAL TIMES OF LONDON, plus fixed amounts as specified in Article 8.1, applicable on the first

Business Day prior to the due date of payment and thereafter on the first Business Day of each succeeding one (1) month term. If the aforesaid rate is contrary to any applicable usury law, the rate of interest to be charged shall be the maximum rate permitted by such applicable law. 1.5 AGREEMENT means this Agreement, together with the Exhibits attached to this Agreement.

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1.6 extent

APPRAISAL WELL means any well whose purpose at the time of commencement of drilling such well is the determination of the or the volume of Hydrocarbon reserves contained in a New Discovery

or an Existing Discovery. 1.7 BARREL means a quantity consisting of forty-two (42) United States gallons, corrected to a temperature of sixty (60) degrees Fahrenheit under one (1) atmosphere of pressure. BUSINESS DAY means a day on which the banks in India are open for business and carrying out normal business transactions. CALENDAR QUARTER means a period of three (3) months commencing with January 1st and ending on the following March 31st, a period of (3) months commencing with April 1st and ending on the following June 30th, a period of three (3) months commencing with July 1st and ending on the following September 30th, or a period of three (3) months commencing with October 1st and ending on the following December 31st according to the Gregorian Calendar. 1.10 CALENDAR YEAR means a period of twelve (12) months commencing with January 1st and ending on the following December 31st according to the Gregorian Calendar. CASH CALL means any request for payment of cash made by the in accordance with this Agreement, an approved Work Program and Budget, AFEs (wherever applicable) and progress of the work, to the Parties in connection with the Joint Operations. The Cash Call format (Exhibit "C") may be revised by the Operating Committee. 1.12 CASH PREMIUM means the payment made pursuant to Article 7.5(B) by a Non-Consenting Party to reinstate its rights to participate in an Exclusive Operation. COMMERCIAL DISCOVERY means a Discovery of Petroleum reserves which, when produced, are likely to yield a reasonable profit on the funds invested in petroleum operations, after deduction of Contract costs, and which has been declared a Commercial Discovery in accordance the provisions of Article 9 and/or Article 21 of the Contract, after consideration of all pertinent operating and financial data such as recoverable reserves, sustainable production levels, estimated development and production expenditures, prevailing prices and other relevant technical and economic factors according to generally accepted practices in the international petroleum industry. 1.14 the COMPLETION means an operation intended to complete a well through Christmas tree as a producer of Hydrocarbons in one or more Zones, including, but not limited to, the setting of production casing, perforating, stimulating the well and production testing conducted in such operation. COMPLETE and other derivatives shall be construed accordingly.
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1.8

1.9 three

1.11 Operator,

1.13

with

1.15

CONSENTING PARTY means a Party who agrees to participate in and pay its share of the cost of an Exclusive Operation. CONTRACT means the Production Sharing Contract dated between the Government and the Parties identified in this Agreement and any extension, renewal or amendment thereof agreed to in writing by the Parties. CONTRACT AREA means as of the Effective Date the area which is described and delineated in Exhibit B to this Agreement. The perimeter or perimeters of the Contract Area shall correspond to area covered by the Contract, as such area may vary from time to

1.16

1.17

that time during the term of validity of the Contract. 1.18 COST PETROLEUM means the portion of the total volume of Petroleum produced and saved from the Contract Area which the Contractor is entitled to take from the Contract Area in a particular period for the recovery of Contract costs as provided in Article 13 of the Contract. DAY means a calendar day unless otherwise specifically provided. DEFAULTING PARTY shall have the meaning ascribed in Article 8.1. DEEPENING means an operation whereby a well is drilled to an objective Zone below the deepest Zone in which the well was previously drilled, or below the deepest Zone proposed in the associated AFE, whichever is the deeper. DEEPEN and other shall be construed accordingly. 1.22 1.23 DELIVERY POINT shall have the meaning given in the Contract. DEVELOPMENT AREA means that part of the Contract Area corresponding to the area of an Oil Field or Gas Field delineated in simple geometric shape, together with a reasonable margin of additional surrounding the Field consistent with petroleum industry practice and approved by the Management Committee or the Government, as the case may be. 1.24 DEVELOPMENT PLAN means a plan submitted by the Contractor containing proposals required under Article 9 or Article 21 of the Contract for the development of a Commercial Discovery which has been approved by the Management Committee or Government. DEVELOPMENT WELL means a well drilled, deepened, completed or Recompleted after the date of approval of the Development Plan pursuant to development operations or production operations for the purposes of producing Petroleum, increasing production, sustaining production or accelerating extraction of Petroleum including production wells, injection wells and dry wells. DISCOVERY means the finding, during exploration operations, of a deposit of Petroleum not previously known to have existed, which can be recovered at the surface in a flow measurable by conventional
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1.19 1.20 1.21

derivatives

area

1.25

1.26

petroleum industry testing methods. 1.27 EFFECTIVE DATE means the date of signing of the Contract by all parties thereto. ENTITLEMENT means a quantity of Hydrocarbons of which a Party has right and obligation to take delivery pursuant to the Contract or, if applicable, an offtake agreement, and shall be derived from that Party's Participating Interest in the Hydrocarbons produced after adjustment for overlifts and underlifts. 1.29 EXCESS COST PETROLEUM shall have the meaning ascribed in Article 19.4. EXCLUSIVE OPERATION means those operations and activities carried by Operator, pursuant to this Agreement, the costs of which are chargeable to the account of less than all the Parties. 1.31 EXCLUSIVE WELL means a well drilled pursuant to an Exclusive Operation. EXPLOITATION AREA means the Development Area which is established pursuant to the Contract or if the Contract does not establish an Exploitation Area, then that part of the Contract Area which is delineated in a Development Plan approved as a Joint Operation or as an Exclusive Operation. EXPLOITATION PERIOD means any and all periods of exploitation during which the production and removal of Hydrocarbons is permitted under the Contract. EXPLORATION PERIOD means any and all periods of exploration set out in the Contract. EXPLORATION WELL means a well drilled for the purpose of searching for undiscovered Hydrocarbon accumulations on any geological entity (be it of structural,stratigraphic, facies or pressure nature) to at least a depth or stratigraphic level specified in the Work Program and Budget. FIELD means an Oil Field or a Gas Field in the Contract Area in respect of which a Development Plan has been duly approved in accordance with Article 9 and Article 21 of the Contract. FINANCIAL YEAR means the period from April 1st through March 31st of the following Calendar Year. G & G DATA means only geological, geophysical and geochemical data and other information that is not obtained through a well bore. GAS FIELD means an area within the Contract Area consisting of a single Gas reservoir or multiple Gas reservoirs all grouped on or related to the same individual geological structure or stratigraphic conditions, designated by the Contractor and approved by the Government and/or Management Committee, as the case may be (to include the maximum area of potential productivity in the Contract Area in a simple geometric shape) in respect of which a Commercial
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1.28 the

1.30 out

1.32

1.33

1.34

1.35

1.36

1.37

1.38

1.39

Discovery has been declared or a Development Plan has been approved in accordance with Article 9 or Article 21 of the Contract. 1.40 GOVERNMENT means the Government of India and/or any state government as the case may be. GROSS NEGLIGENCE means any act or failure to act (whether sole, or concurrent) which was intended to cause, or which was in reckless disregard of or wanton indifference to, harmful consequences such Party knew, or should have known, such act or failure would have had on the safety or property of another person or entity, but shall not include any error of judgment or mistake made by such Party in the exercise in good faith of any function, authority or discretion conferred on the Party employing such under this Agreement. 1.42 HYDROCARBONS means all substances including liquid and gaseous hydrocarbons which are subject to and covered by the Contract.

1.41 joint

1.43 JOINT ACCOUNT means the accounts maintained by Operator in accordance with the provisions of this Agreement and of the Accounting Procedure for Joint Operations. 1.44 by JOINT OPERATIONS means those operations and activities carried out Operator pursuant to this Agreement, the costs of which are chargeable to all Parties. 1.45 JOINT PROPERTY means, at any point in time, all wells, facilities, equipment, materials, information, funds and the property held for the Joint Account. MANAGEMENT COMMITTEE means the committee constituted pursuant to Article 5 of the Contract. MINIMUM WORK OBLIGATIONS means those items contained in Exhibit "G" of the Contract, phased year-wise as determined by the Operating Committee and the Management Committee. NEW DISCOVERY means a Discovery made after the Effective Date. NON-CONSENTING PARTY means a Party who elects not to participate in an Exclusive Operation. NON-OPERATOR(S) means the Party or Parties to this Agreement other than Operator.

1.46

1.47

1.48 1.49

1.50

1.51

OIL FIELD means an area within the Contract Area consisting of a single oil reservoir or multiple oil reservoirs all grouped on or related to the same individual geological structure, or stratigraphic conditions, designated by the Contractor and approved by the Government and/or the Management Committee, as the case may be (to include the maximum area of potential productivity in the Contract Area in a simple geometric shape) in respect of which a Commercial Discovery has been declared and a Development Plan has been approved in accordance with Article 9 of the Contract and a reference to an Oil Field shall include a reference to the production of associated
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natural gas from that Oil Field. 1.52 OPERATING COMMITTEE means the committee constituted in accordance with Article V. OPERATOR means the Party designated or otherwise appointed under Article 4.1 to conduct Joint Operations or any successor appointed pursuant to Article 4.11. PARTICIPATING INTEREST means the undivided percentage interest of each Party in the rights and obligations derived from the Contract and this Agreement. PARTY means any Party to this Agreement and, where the Contract so permits, any respective successors or assigns in accordance with the provisions of this Agreement. PETROLEUM means crude oil and/or natural gas existing in their natural condition (Hydrocarbons). PETROLEUM COSTS means costs and expenses incurred by the Parties and allowed to be recovered pursuant to the Contract. PLUGGING BACK means a single operation whereby a deeper Zone is abandoned in order to attempt a Completion in a shallower Zone. Plug Back and other derivatives shall be construed accordingly. PRODUCTION COSTS means those costs and expenditures incurred in carrying out production operations as classified and defined in Section 2 of the Accounting Procedure of the Contract and allowed to be recovered in terms of Section 3 thereof. PROFIT PETROLEUM means Petroleum produced and saved from the Area in a particular period as reduced by Cost Petroleum and calculated as provided in Article 14 of the Contract. 1.51 within the existing wellbore. RECOMPLETE and other derivatives shall be construed accordingly. 1.62 REWORKING means an operation conducted in the wellbore of a well after it is Completed to secure, restore or improve production in a Zone which is currently open to production in the wellbore. Such operations include, but are not limited to, well stimulation operations, wire line operations, hydraulic pump-down operations, water shut off operations, coil tubing operations, but excluding any routine maintenance work. REWORK and other derivatives shall be construed accordingly. SIDETRACKING means the directional control and intentional deviation of a well from vertical so as to change the bottom hole location unless done to straighten the hole or to drill around junk in the hole or to overcome other mechanical difficulties. SIDETRACK and other derivatives shall be construed accordingly. SUPERVISORY PERSONNEL means any supervisory employee of a Party who functions as a Party's designated manager or supervisor who is
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1.53

1.54

1.55

1.56

1.57

1.58

1.59

1.60 Contract

RECOMPLETION means an operation whereby a Completion in one Zone is abandoned in order to attempt a Completion in a different Zone

1.63

1.64

responsible for, or in charge of onsite drilling, construction or production and related operations, or any other field operations. 1.65 TESTING, with reference to a well, means an operation intended to evaluate the capacity of a Zone to produce Hydrocarbons. TEST and other derivatives shall be construed accordingly. WILLFUL MISCONDUCT means in relation to the Operator intentional and conscious or reckless disregard by supervisory or management staff the Operator of the terms of this Agreement or of good international oil field practice but shall not include any act or omission reasonably required to meet emergency conditions, including without limitation the safeguarding of life, property and Joint Operations or for the avoidance of doubt any error of judgment or mistake made by any director, employee, agent or contractor of Operator in the exercise, in good faith of any function, authority or discretion conferred upon the Operator. 1.67 and WORK PROGRAM AND BUDGET means a work program for Joint Operations budget therefor, including the production plan, as described and approved in accordance with Article VI and as illustrated in Exhibit "D". Exhibit "D" may be modified by the Operating Committee. 1.68 ZONE means a stratum of earth containing or thought to contain a common accumulation of Hydrocarbons separately producible from any other common accumulation of Hydrocarbons. ARTICLE II - EFFECTIVE DATE AND TERM This Agreement shall have effect from the 22 day of December, 1994 and

1.66 of

shall, subject always to the Parties' continuing obligations under Article XV, continue in effect until the Contract terminates or, otherwise until all materials, equipment and personal property used in connection with the Joint Operations have been removed and disposed of, and final settlement has been made among the Parties. For the avoidance of doubt, portions of this Agreement as described in (A), (B) and (C) below shall remain in effect until: (A) all wells have been properly abandoned in accordance with Article X; and (B) all obligations, claims, arbitrations and lawsuits have been settled or otherwise disposed of in accordance with Article 4.5 and Article XVIII; and (C) the time relating to the protection of confidential information and proprietary technology has expired in accordance with Article XV. The scope and purpose of the Joint Operations are to carry out the petroleum operations as per Contract. As defined in the Contract, petroleum operations means, as the context may require, exploration operations, development operations or production operations or any combination of such operations, including, but not limited to, collection of seismic information, drilling and completion and recompletion of wells, construction, operation and maintenance of all necessary facilities, plugging and abandonment of wells, environmental protection, transportation, storage or disposition of Petroleum to the Delivery Point, site restoration and all other incidental operations or activities as may be necessary. ARTICLE III - PARTICIPATING INTEREST 3.1 PARTICIPATING INTEREST

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(A) The Participating Interests of the Parties as of the Effective Date are: ONGC 40% EOGIL 30% RIL 30% (B) If a Party transfers all or part of its Participating Interest pursuant to the provisions of this Agreement and the Contract, the Participating Interests of the Parties shall be revised accordingly. 3.2 OWNERSHIP, OBLIGATIONS AND LIABILITIES (A) Unless otherwise provided in this Agreement, all the rights and interests in and under the Contract, all Joint Property and any Hydrocarbons produced from the Contract Area shall, subject to the terms of the Contract, be owned by the Parties in accordance with their respective Participating Interests. (B) Unless otherwise provided in this Agreement, the obligations of the Parties under the Contract and all liabilities and expenses incurred by Operator in connection with Joint Operations shall be charged to the Joint Account and all credits to the Joint Account shall be shared by the Parties, as among themselves, in accordance with their respective Participating Interests. (C) Unless otherwise provided in this Agreement, all liabilities incurred by any Party in connection with Joint Operations shall be borne by the Parties in accordance with their respective Participating Interests. (D) Each Party shall pay when due, in accordance with the Accounting Procedure, its Participating Interest share of Joint Account expenses, including cash advances and interest, accrued pursuant to this Agreement. The Accounting Procedure shall govern the accrual and satisfaction of the respective obligations, liabilities and credits among the Parties. ARTICLE IV - OPERATOR 4.1 DESIGNATION OF OPERATOR EOGIL is designated as Operator, and agrees to act as an Operator in accordance with the terms and conditions of the Contract and this Agreement, which terms and conditions shall also apply to any successor Operator. 4.2 RIGHTS AND DUTIES OF OPERATOR (A) Subject to the terms and conditions of this Agreement, Operator shall have all of the rights, functions and duties of Operator under the Contract and shall have exclusive charge of and shall conduct all Joint Operations. Operator may employ independent contractors, Affiliates and/or agents in such Joint Operations. Contracts will be awarded pursuant to Article 6.8. (B) In the conduct of Joint Operations, Operator shall: (1) Perform Joint Operations in accordance with the provisions of the Contract, this Agreement and the instructions of the Operating Committee; (2) Conduct all Joint Operations in a diligent, safe and efficient manner in accordance with good and prudent international petroleum industry practices and conservation principles generally followed by the international petroleum industry under similar circumstances; (3) Subject to Article 4.6, neither gain a profit nor suffer a loss as a result of being the Operator in its conduct of Joint Operations; (4) Perform the duties for the Operating Committee set out in Article V, and prepare and submit to the Operating Committee the proposed Work Programmes and Budgets and AFEs as provided in Article VI; (5) Acquire all permits, consents, approvals, surface or other rights that may be required for or in connection with the conduct of Joint Operations; (6) Permit the representatives of any of the Parties to have at all reasonable times and at their own risk and expense reasonable access to the Joint Operations with the right to observe all such Joint Operations and to inspect all Joint Property and to conduct financial audits as provided in the Accounting Procedure. In the case of offshore operations, transportation and accommodations shall be made available from existing facilities if, in the sole discretion of Operator, no additional cost will be incurred by Operator. In addition, provide for two (2) permanent representatives of each of the Non-Operators to have access to the Contract Area and/or to the Joint Operations at all times and provide all facilities including, but not limited to, transportation and offshore accommodations at the cost of
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the Joint Operations. Such representatives shall look after the interests of Non-Operators/Joint Operation, but shall not interfere with operations; (7) Maintain the Contract in full force and effect. Operator shall promptly pay and discharge all liabilities and expenses incurred in connection with Joint Operations and use its reasonable efforts to keep and maintain the Joint Property free from all liens, charges and encumbrances arising out of Joint Operations; (8) Pay to the Government for the Joint Account, within the periods and in the manner prescribed by the Contract and all applicable laws and regulations, all periodic payments, royalties, taxes, fees and other payments pertaining to Joint Operations, but excluding any taxes measured by the incomes of the Parties; (9) Carry out the obligations of Operator pursuant to the Contract, including, but not limited to, preparing and furnishing such reports, records and information as may be required pursuant to the Contract; (10) Have in accordance with the decisions of the Operating Committee, the exclusive right and obligation to represent the Parties in all dealings with the Government with respect to matters arising under the Contract and Joint Operations. Operator shall notify the other Parties as soon as possible of such meetings. Non-Operators shall have the right to attend such meetings. Nothing contained in this Agreement shall restrict any Party from holding discussions with the Government with respect to any issue peculiar to its particular business interests arising under this Agreement, but in such event such Party shall promptly advise the Parties, if possible, before and in any event promptly after such discussions, provided that such Party shall not be required to divulge to the Parties any matters discussed to the extent the same involve proprietary information on matters not affecting the Parties; and (11) Take all necessary and proper measures for the protection of life, health, the environment and property in the case of an emergency; provided, however, that Operator shall immediately notify the Parties of the details of such emergency and measures. (12) Include, to the extent practical, in its contracts with independent contractors and to the extent lawful, provisions which: (a) ensure such contractors can only enforce their contracts against Operator; (b) permit Operator, on behalf of itself and Non-Operators, to enforce contractual indemnities against, and recover losses and damages suffered by them (insofar as recovered under their contracts) from such contractors; and (c) require such contractors to take insurance required by Article 4.7(F). (13) Carry out all Petroleum operations as per the standard offshore safety practices following the environmental/mining regulations/statutory laws. (14) Provide liaison between field operations and gas/oil purchasers and transporters. 4.3 EMPLOYEES OF OPERATOR Subject to the Contract and this Agreement, Operator shall determine the number of employees, the selection of such employees, the hours of work and the compensation to be paid to all such employees in connection with Joint Operations. Operator shall employ only such employees, agents and contractors as are reasonably necessary to conduct Joint Operations. 4.4 INFORMATION SUPPLIED BY OPERATOR (A) Operator shall provide Non-Operators the following data and reports as they are currently produced or compiled from the Joint Operations as well as the reports listed in Exhibit "E": (1) Copies of all logs or surveys; (2) Daily drilling progress reports; (3) Copies of all drill stem tests and core analysis reports; (4) Copies of the plugging reports; (5) Engineering studies, development schedules and annual progress reports on development projects; (6) Field and well performance reports, including reservoir studies;
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(7) Copies of all reports and data relating to Joint Operations furnished by Operator to the Government, except magnetic tapes which shall be stored by Operator and made available for inspection and/or copying at the sole expense of the Non-Operator requesting same; (8) Other reports as frequently as is justified by the activities or as instructed by the Operating Committee; and (9) Subject to Article 15.3, such additional information for Non- Operators as they or any of them may request, provided that the requesting Party or Parties pay the costs of preparation of such information and that the preparation of such information will not unduly burden Operator's administrative and technical personnel. Only Non-Operators who pay such costs shall receive such additional information. (B) Operator shall give Non-Operators access at all reasonable times to all other data acquired in the conduct of Joint Operations. Any Non- Operator may make copies of such other data at its sole expense. (C) ONGC shall provide all of the information identified above and currently in its possession relating to the Contract Area to the Operator upon payment of mutually agreed costs. 4.5 SETTLEMENT OF CLAIMS AND LAWSUITS (A) Operator shall promptly notify the Parties of any and all material claims or suits and such other claims and suits as the Operating Committee may direct which arise out of Joint Operations or relate in any way to Joint Operations. Operator shall represent the Parties and defend or oppose the claim or suit. Operator may in its sole discretion compromise or settle any such claim or suit or any related series of claims or suits for an amount not to exceed the equivalent of U.S. dollars fifty thousand (US$50,000) exclusive of legal fees. Operator shall obtain the approval and direction of the Operating Committee on amounts in excess of the above stated amount. Each Non-Operator shall have the right to be represented by its counsel at its expense in the settlement, compromise or defense of such claims or suits. (B) Any Non-Operator shall promptly notify the other Parties of any claim made against such Non-Operator by a third party relating to or which may affect the Joint Operations and insofar as such claim relates to or affects the Joint Operations such Non-Operator shall defend or settle the same in accordance with any directions given by the Operating Committee and such costs, expenses and damages as are payable pursuant to such defense or settlement shall be for the Joint Account. (C) Notwithstanding Article 4.5(A) and Article 4.5(B), each Party shall have the right to participate in any such pursuit, prosecution, defense or settlement conducted in accordance with Article 4.5(A) and/or Article 4.5(B) at its sole cost and expense; provided always that no Party may settle its Participating Interest share of any claim without first satisfying the Operating Committee that it can do so without prejudicing the interests of the Joint Operations. 4.6 LIABILITY OF OPERATOR (A) Except as set out in this Article 4.6, the Party designated as Operator shall bear no cost, expense or liability resulting from performing the duties and functions of the Operator. Nothing in this Article shall, however, be deemed to relieve the Party designated as Operator from any cost, expense or liability for its Participating Interest share of Joint Operations. (B) The Parties shall be liable in proportion to their Participating Interests and shall defend and indemnify Operator, Non-Operator and their agents, employees, officers and directors (the "Indemnitees") from any and all costs, expenses (including reasonable attorneys' fees) and liabilities incident to claims, demands or causes of action of every kind and character brought by or on behalf of any person or entity for damage to or loss of property or the environment, or for injury to, illness or death of any person or entity, which damage, loss, injury, illness or death arises out of or is incident to any act or failure to act by Indemnitees in the conduct of or in connection with Joint Operations regardless of the cause of such damage, loss, injury, illness or death and even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), Gross Negligence, strict liability or other legal fault of Operator or Non- Operator (or any such Affiliate performing services for Operator or Non- Operator pursuant to Sections 2.4.2 and 3 of the Accounting Procedure); provided that if any Supervisory or management Personnel of Operator or Non-Operator or any such Affiliates, engage in Gross Negligence and/or Willful Misconduct that proximately causes the Parties to incur cost, expense or liability for such damage, loss, injury, illness or death, then Operator or Non-Operator, as the case may be, shall bear all such costs, expenses and liabilities. 4.7 INSURANCE OBTAINED BY OPERATOR (A) Operator shall procure and maintain or cause to be procured and maintained for the Joint Account all insurance in the types and amounts required by the Contract and applicable laws, rules and regulations.
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(B) Operator shall obtain such further insurance, at competitive rates, as the Operating Committee may from time to time require. (C) Any Party may elect not to participate in the insurance to be procured under Article 4.7(B) provided such Party: (1) gives prompt written notice to that effect to Operator; (2) does nothing which may interfere with Operator's negotiations for such insurance for the other Parties; and (3) obtains and maintains such insurance (in respect of which an annual certificate of adequate coverage from a reputable insurance broker shall be sufficient evidence) or other evidence of financial responsibility which fully covers its Participating Interest share of the risks that would be covered by the insurance procured under Article 4.7 (B), and which the Operating Committee may determine to be acceptable. No such determination of acceptability shall in any way absolve a non-participating Party from its obligation to meet each cash call including any cash call in respect of damages and losses and/or the costs of remedying the same in accordance with the terms of this Agreement. If such Party obtains other insurance, such insurance shall contain a waiver of subrogation in favor of all the other Parties, but only in respect of their interests under this Agreement. (D) The cost of insurance in which all the Parties are participating shall be for the Joint Account and the cost of insurance in which less than all the Parties are participating shall be charged to the Parties participating in proportion to their respective Participating Interests. (E) Operator shall, in respect of all insurance obtained pursuant to this Article: (1) promptly inform the participating Parties when such insurance is obtained and supply them with copies of the relevant policies when the same are issued; (2) arrange for the participating Parties, according to their respective Participating Interests, to be named as co-insureds on the relevant policies with waivers of subrogation in favor of all the Parties; and (3) duly file all claims and take all necessary and proper steps to collect any proceeds and credit any proceeds to the participating Parties in proportion to their respective Participating Interests. (F) Operator shall use its reasonable efforts to require all contractors performing work in respect of Joint Operations to obtain and maintain any and all insurance in the types and amounts required by any applicable laws, rules and regulations or any decision of the Operating Committee and shall use its reasonable efforts to require all such contractors to name the Parties as additional insureds on contractor's insurance policies or to obtain from their insurers waivers of all rights or recourse against Operator and Non-Operators. 4.8 COMMINGLING OF FUNDS Operator shall not commingle with its funds the monies which it receives for the Joint Account pursuant to this Agreement. The Operator shall account to the Non-Operators for the monies of a Non-Operator advanced or paid to Operator, whether for the conduct of Joint Operations or as proceeds from the sale of production under this Agreement. Such monies shall be applied only to their intended use and shall in no way be deemed to be funds belonging to Operator. The Operator shall open and maintain dedicated current and/or deposit accounts in respect of funds in Indian Rupees, United States Dollars and/or any other currency at a bank or banks in India, the United States or elsewhere, in order to deposit and hold funds on behalf of the Parties exclusively for Joint Operations. Where possible, such accounts shall be interest bearing. Upon opening a bank account, the Operator shall notify the Non- Operators the name and address of the bank and the account number. Any changes thereafter should be promptly notified by the Operator to the Non-Operators. 4.9 RESIGNATION OF OPERATOR Subject to Article 4.11, Operator may resign as Operator at any time after completion of the Minimum Work Obligation, unless the Parties agree to an earlier date, by so notifying the other Parties at least one hundred and twenty (120) Days prior to the effective date of such resignation. 4.10 REMOVAL OF OPERATOR (A) Subject to Article 4.11, Operator shall be removed upon receipt of notice from any Non-Operator if: (1) An order is made by a court or an effective resolution is passed for the dissolution, liquidation, winding up, or reorganization of
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Operator; (2) Operator dissolves, liquidates or terminates its corporate existence; (3) Operator becomes insolvent, bankrupt or makes an assignment for the benefit of creditors; or (4) A receiver is appointed for a substantial part of Operator's assets. (5) Operator, together with any Affiliate of Operator, is or becomes the holder of a Participating Interest of less then twenty percent (20%). (6) There is a direct or indirect change in control of Operator (other than a transfer of control to an Affiliate of Operator). For purposes of this Article control means the ownership directly or indirectly of more than fifty percent (50%). (B) Subject to Article 4.11, Operator may be removed by the decision of the Non-Operators if Operator has committed a material breach of this Agreement which Operator has failed to rectify within ninety (90) Days of receipt of a notice from Non-Operators detailing the alleged breach. Any decision of Non-Operators to give notice of breach to Operator or to remove Operator under this Article 4.10(B) shall be made by an affirmative vote of two (2) or more of the total number of Non-Operators holding a combined Participating Interest of at least fifty percent (50%). Notwithstanding the above, in case of disagreement between the Non- Operators on giving notice to the Operator, any Non-Operator may, with the approval of the Government, give notice to the Operator. 4.11 APPOINTMENT OF SUCCESSOR When a change of Operator occurs pursuant to Article 4.9 or Article 4.10: (A) The Operating Committee shall meet as soon as possible to appoint a successor Operator pursuant to the voting procedure of Article 5.9. However, no Party may be appointed successor Operator against its will. (B) If the Operator disputes commission of or failure to rectify a material breach alleged pursuant to Article 4.10(B) and proceedings are initiated pursuant to Article XVIII, no successor Operator may be appointed pending the conclusion or abandonment of such proceedings provided, however, if the arbitrators determine that the Joint Operations are likely to suffer material and/or irreparable harm, they shall have the right to issue an interim order suspending the Operator and appointing a successor Operator. (C) If an Operator is removed neither Operator nor any Affiliate of Operator shall have the right to vote for itself on the appointment of a successor Operator, nor be considered as a candidate for the successor Operator. (D) A resigning or removed Operator shall be compensated out of the Joint Account for its reasonable expenses directly related to its resignation or removal, except in the case of Article 4.10. (E) The Operating Committee shall arrange for the taking of an independent inventory of all Joint Property and Hydrocarbons, and an audit of the books and records of the removed or resigned Operator. Such inventory and audit shall be completed, if possible, no later than the effective date of the change of Operator. The liabilities and expenses of such inventory and audit shall be charged to the Joint Account. (F) The resignation or removal of Operator and its replacement by the successor Operator shall not become effective prior to receipt of any necessary governmental approvals. (G) Upon the effective date of the resignation or removal, the successor Operator shall succeed to all duties, rights and authority prescribed for Operator. The former Operator shall transfer to the successor Operator custody of all Joint Property, books of account, records and other documents maintained by Operator pertaining to the Contract Area and to Joint Operations. Upon delivery of the above-described property and data, the former Operator shall be released and discharged from all obligations and liabilities as Operator accruing after such date. ARTICLE V - OPERATING COMMITTEE 5.1 ESTABLISHMENT OF OPERATING COMMITTEE To provide for the overall supervision and direction of Joint Operations, there is established an Operating Committee composed of representatives of each Party holding a Participating Interest. Each Party shall appoint one (1) representative and one (1) alternate representative to serve on the Operating Committee. Each Party shall as soon as possible after the date of this Agreement give notice in writing to the other Parties of the name and address of its representative and alternate representative to serve on the Operating Committee. Each Party shall have the right to change its representative and alternate at any time by giving proper notice to such effect
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to the other Parties. 5.2 POWERS AND DUTIES OF OPERATING COMMITTEE The Operating Committee shall have power and duty to authorize and supervise Joint Operations that are necessary or desirable to fulfill the Contract and properly explore and exploit the Contract Area in accordance with this Agreement and in a manner appropriate in the circumstances. The Operating Committee is the coordinating body for the direction, control and administration of the Joint Operations. The principal functions of the Operating Committee shall be: (A) To establish policies from time to time governing various aspects or activities of the Joint Operations. (B) To review, approve and revise annual exploration Work Programs and corresponding budgets, as proposed by the Operator. (C) To review reports on Joint Operations conducted in the Contract Area including the status of all existing facilities, safety, environmental aspects and equipment availability. (D) To review and approve any proposal for the appraisal of an area. (E) To review, revise and approve Work Programs and Budgets for petroleum operations as defined in the Contract and as proposed by the Operator. (F) To review and approve Exploration, Appraisal and Development Wells and locations (including locations for wells required for any purposes whatsoever), and transfer of exploitation objectives, Reworking and abandonment of wells. (G) To review and approve well stimulation programs. (H) To review and determine the area to be relinquished, if any. (I) To approve appointment of contractors for carrying out any petroleum operations by Operator beyond the authority vested in the Operator under this Agreement. (J) To review and approve such other matters with respect to petroleum operations in the Contract Area as may be referred to the Operating Committee by any member of the Operating Committee. (K) To refer to the Management Committee and/or the Government whenever applicable matters which require advice or approval of the Management Committee and/or the Government pursuant to the Contract. (L) To review summary operating costs. 5.3 AUTHORITY TO VOTE (A) The representative of a Party, or in his absence his alternate representative, shall be authorized to represent and bind such Party with respect to any matter which is within the powers of the Operating Committee and is properly brought before the Operating Committee. Each such representative shall have a vote equal to the Participating Interest of the Party such person represents. Each alternate representative shall be entitled to attend all Operating Committee meetings but shall have no vote at such meetings except in the absence of the representative for whom he is the alternate. In addition to the representative and alternate representative, each Party may also bring to any Operating Committee meetings such technical and other advisors as it may deem appropriate. (B) Any representative shall be entitled, if either he or his alternate is unable to attend a meeting, to cast his vote by telex or facsimile transmission received prior to the time that the vote is taken in the course of the meeting. (C) Any representative may by notice to all other representatives, appoint a representative of another Party who consents to such appointment as its proxy to attend a meeting and to exercise the appointing representative's right to vote at that meeting whether as directed by the appointing representative or otherwise. A representative appointed as a proxy and attending a meeting may be present in two (2) separate capacities and may vote accordingly. 5.4 SUBCOMMITTEES The Operating Committee may establish such subcommittees, including technical subcommittees, as the Operating Committee may deem appropriate. The functions of such subcommittees shall be in an advisory capacity or as otherwise determined unanimously by the Parties.
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5.5 NOTICE OF MEETING (A) Operator may call a meeting of the Operating Committee by giving notice to the Parties at least fifteen (15) Days in advance of such meeting. (B) Any Non-Operator may request a meeting of the Operating Committee by giving proper notice to all the other Parties. Upon receiving such request, Operator shall call such meeting for a date not less than fifteen (15) Days nor more than twenty (20) Days after receipt of the request. (C) The notice periods above may be waived at the request of Operator or any Non-Operator with the unanimous consent of all the Parties. In the event of a likely material adverse financial impact to the Joint Operation, no Party may unreasonably withhold waiving the notice period. 5.6 CONTENTS OF MEETING NOTICE (A) Each notice of a meeting of the Operating Committee as provided by Operator shall contain: (1) The date, time and location of the meeting; and (2) An agenda of the matters and proposals to be considered and/or voted upon. (B) A Party, by notice to the other Parties given not less than seven (7) Days prior to a meeting, may add additional matters to the agenda for a meeting. (C) On the request of a Party, and with the unanimous consent of all Parties, the Operating Committee may consider at a meeting a proposal not contained in such meeting agenda. 5.7 LOCATION AND FREQUENCY OF MEETINGS All meetings of the Operating Committee shall be held in Bombay, India, or elsewhere as may be decided by the Operating Committee. The Operating Committee shall meet at least once each two (2) months during the first six (6) months following the Effective Date unless otherwise agreed. Thereafter, the Operating Committee shall meet once every three (3) months unless otherwise agreed. 5.8 OPERATOR'S DUTIES FOR MEETINGS (A) With respect to meetings of the Operating Committee and any subcommittee, Operator's duties shall include, but not be limited to: (1) Timely preparation and distribution of the agenda; (2) Organization and conduct of the meeting; and (3) Preparation of a written record or minutes of each meeting. (B) Operator shall have the right to appoint the chairman of the Operating Committee and all subcommittees. 5.9 VOTING PROCEDURE Except as otherwise expressly provided in this Agreement, all decisions, approvals and other actions of the Operating Committee on all proposals coming before it under this Agreement shall be decided by the affirmative vote of the Parties then having collectively one hundred percent (100%) of the Participating Interests. In the event the Operating Committee cannot agree upon a Work Program and Budget relating to the Minimum Work Obligation, the matter shall be referred to the Management Committee by any Party for review and decision. The Management Committee shall decide such issue within twenty (20) Days or as otherwise mutually agreed. If all of the Parties do not agree with the Management Committee decision, the Parties in agreement shall be entitled to proceed in accordance with Article VII hereof. If the Management Committee cannot agree, the matter shall be referred to arbitration or a sole expert. 5.10 RECORD OF VOTES The chairman of the Operating Committee shall appoint a secretary who shall make a record of each proposal voted on and the results of such voting at each Operating Committee meeting. Each representative shall sign and be provided a copy of such record at the end of such meeting and it shall be considered the final record of the decisions of the Operating Committee.
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5.11 MINUTES The secretary shall provide each Party with a copy of the minutes of the Operating Committee meeting within ten (10) Days after the end of the meeting. Each Party shall have ten (10) Days after receipt of such minutes to give notice of its objections to the minutes to the secretary. A failure to give notice specifying objection to such minutes within said ten (10) Day period shall be deemed to be approval of such minutes. In any event, the votes recorded under Article 5.10 shall take precedence over the minutes described above. 5.12 VOTING BY NOTICE (A) In lieu of a meeting, Operator may submit any proposal for a decision of the Operating Committee by giving each representative proper notice describing the proposal so submitted. Each Party shall communicate its vote by proper notice to Operator and the other Parties within one of the following appropriate time periods after receipt of Operator's notice: (1) Twenty-four (24) hours in the case of operations which involve the use of a drilling rig that is standing by in the Contract Area. (2) Thirty (30) Days in the case of all other proposals. (3) Thirty (30) Days in the case of an AFE or supplemental AFE if submitted pursuant to Article 6.9(A). (B) Except in the case of Article 5.12(A)(1), any Non-Operator may by notice delivered to all Parties within twenty (20) Days of receipt of Operator's notice request that the proposal be decided at a meeting rather than by notice. In such an event, that proposal shall be decided at a meeting duly called for that purpose. (C) Except as provided in Article X, any Party failing to communicate its vote in a timely manner shall be deemed to have voted against such proposal. (D) If a meeting is not requested, then at the expiration of the appropriate time period, Operator shall give each Party a confirmation notice stating the tabulation and results of the vote. 5.13 EFFECT OF VOTE All decisions taken by the Operating Committee pursuant to this Article, shall be conclusive and binding on all the Parties, except that: (A) If pursuant to this Article, a Joint Operation has been properly proposed to the Operating Committee and the Operating Committee has not approved such proposal in a timely manner, then any Party shall have the right for the appropriate period specified below to propose in accordance with Article VII, an Exclusive Operation involving operations essentially the same as those proposed for such Joint Operation. No Exclusive Operation shall be conducted which conflicts with a Joint Operation. (1) For proposals involving the use of a drilling rig that is standing by in the Contract Area, such right shall be exercisable for twenty-four (24) hours after the time specified in Article 5.12(A)(1) has expired. (2) For proposals to develop a Discovery, such right shall be exercisable for ten (10) Days after the date the Operating Committee was required to consider such proposal pursuant to Article 5.6 or Article 5.12; (3) For all other proposals, such right shall be exercisable for five (5) Days after the date the Operating Committee was required to consider such proposal pursuant to Article 5.6 or Article 5.12. (B) If a Party voted against any proposal to be conducted as an Exclusive Operation pursuant to Article VII, then such Party shall have the right not to participate in the operation contemplated by such approval. Any such Party wishing to exercise its right of non-consent must give notice of non-consent to all other Parties within five (5) Days (or within twenty-four (24) hours if the drilling rig to be used in such operation is standing by in the Contract Area) following Operating Committee approval of such proposal. The Parties that were not entitled to give or did not give notice of non-consent shall be Consenting Parties as to the operation contemplated by the Operating Committee approval, and shall conduct such operation as an Exclusive Operation under Article VII. Any Party that gave notice of non-consent shall be a Non-Consenting Party as to such Exclusive Operation. (C) If the Consenting Parties to an Exclusive Operation under Article 5.13(A) or Article 5.13(B) concur, then the Operating Committee may, at any time, pursuant to this Article, reconsider and approve, decide or take action on any proposal that the Operating Committee declined to approve earlier, or modify or revoke an earlier approval, decision or action.

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(D) Once a Joint Operation for the drilling, Deepening, Testing, Sidetracking, Plugging Back, Completing, Recompleting, Reworking or plugging of a well, has been approved and commenced, such operation shall not be discontinued without the consent of the Operating Committee; provided, however, that such operation may be discontinued, if: (1) an impenetrable substance or other condition in the hole is encountered which in the reasonable judgment of Operator, after consultation with the Non-Operators, causes the continuation of such operation to be impractical; or (2) other circumstances occur which in the reasonable judgment of Operator causes the continuation of such operation to be unwarranted and after notice the Operating Committee within the period required under Article 5.12(A)(1) approves discontinuing such operation. On the occurrence of either of the events listed under Article 5.13(D)(1) or Article 5.13(D)(2), Operator shall promptly notify the Parties with all available details that such operation is being discontinued pursuant to the foregoing, and any Party shall have the right to propose in accordance with Article VII an Exclusive Operation to continue such operation. ARTICLE VI - WORK PROGRAMS AND BUDGETS In the conduct of Joint Operations, Operator shall perform Joint Operations in accordance with the provisions of the Contract, this Agreement and the instructions of the Operating Committee and conduct all Joint Operations in a diligent, safe and efficient manner in accordance with international petroleum industry practices and conservation principles generally followed by the international petroleum industry under similar circumstances. 6.1 PREPARATION OF WORK PROGRAM AND BUDGET Subject to Article 6.14, on or before the first (1st) Day of November of each Year, the Operator shall submit to the Parties a recommended Work Program and Budget containing the Minimum Work Obligation for the Contract Area for the subsequent Financial Year as per Exhibit "D". At the same time as that Financial Year's Work Program and Budget is submitted, a provisional Work Program and Budget containing the Minimum Work Obligation for the next succeeding Financial Year shall be presented by the Operator. 6.2 ADOPTION OF WORK PROGRAM AND BUDGET AND SUBMISSION TO MANAGEMENT COMMITTEE Subject to Article 6.14, on or before the first (1st) of December of each year, the Operating Committee shall agree upon and adopt a Work Program and Budget for the subsequent Financial Year. At the time of agreeing upon and adopting a Work Program and Budget, the Operating Committee shall provisionally consider, but not act upon or adopt, a Work Program and Budget for the next succeeding Financial Year. As soon as possible after the adoption of a Work Program and Budget, Operator shall provide a copy thereof to each Party. The Operator shall timely submit such Work Programs and Budgets to the Management Committee as required pursuant to Articles 4.2 and 5.6 of the Contract. Any proposed revision of a Work Program and Budget submitted to the Operating Committee shall be considered by the Operating committee within twenty- eight (28) Days after its submission and, to the extent same is approved, shall be submitted by the Operator for consideration by the Management Committee pursuant to Article 4.3 of the Contract. 6.3 SUBDIVISION OF WORK PROGRAM AND BUDGET AND BUDGET ITEMS AND TRANSFERS Each Work Program and Budget shall be subdivided, as illustrated in Exhibit "D", to include three (3) major functional categories: Exploration and Appraisal, Development and Production; and each of those categories shall be further subdivided into subcategories consisting of one or more individual projects/programmed activities. Purchases of materials and supply inventory not specifically made for a designated project/programmed activity shall be budgeted as a separate item. Each individual project/programmed activity shall be identified as either "Firm" or "Contingent" depending upon the degree of complete details furnished at the time of presentation of the Work Program and Budget. (A) For a project to be considered "Firm" within the budget, it will require program description, objectives and cost estimate along with the basis therefor, sufficiently complete and in such detail as to allow thorough evaluation of the project. (B) Projects which do not meet the requirements of Article 6.3(A) at the time the Work Program and Budget is approved by the Operating Committee may also be included in the Work Program and Budget for approval in principle and such projects shall be considered "Contingent". Such projects shall not be implemented without approval of the Operating Committee except as provided in this Article 6.3(B). Any project or group of projects shall be transferred from Contingent to Firm upon approval of the Operating Committee. From time to time throughout the Financial Year, the Operator shall endeavour to provide further specific information necessary for the Operating Committee to evaluate Contingent projects for the purpose of such transfer. Upon receipt of such information, Parties may not unreasonably withhold approval for the transfer of a project from the Contingent to the Firm category. In
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the event the Operating Committee is unable to agree, the matter shall be submitted by any Party to the Management Committee for approval. A project not in the Minimum Work Obligation which fails to obtain Operating Committee approval for transfer may be transferred by any Party provided that Party is prepared to undertake the project as an Exclusive Operation pursuant to Article VII. 6.4 FULFILLMENT OF MINIMUM WORK OBLIGATION Parties shall not unreasonably withhold approval of the projects/programmed activities covered in the annual Work Program and Budget as Minimum Work Obligations or at least that part of such Minimum Work Obligations required to be carried out to maintain the Contract in force. In case of failure of the Operating Committee to approve the Work Program and Budget related to projects/programmed activities included under Minimum Work Obligations, any Party may refer the issue to the Management Committee for approval. 6.5 EXPLORATION AND APPRAISAL Parties acknowledge and agree that neither exploration nor appraisal work may be conducted within any Field which is so designated as of the Effective Date. (A) Notwithstanding the foregoing, Exploration and/or Appraisal Wells may be proposed without limitation as to location, provided, however, that if such location is within a Development Area, such well shall not be commenced without prior approval of the Operating Committee. In the event such well within the Development Area includes an objective Zone which is the stratigraphic equivalent of the Zone or Zones included in the Field and the location is outside the Field, then, provided that production from such Zone does not interfere with production from the Zone/Zones developed or to be developed in the Field, Operating Committee approval shall not be unreasonably withheld. (B) If the proposed Work Program and Budget includes an Exploration Well and/or Appraisal Well, the budget approval shall include the cost of drilling, completing and testing such Exploration/Appraisal Well. For this purpose the Operator shall provide necessary details/information required for the Operating Committee to assess the need/desirability of such Exploration/Appraisal Well. (C) If a New Discovery is made, Operator shall deliver any notice of New Discovery required under the Contract and shall, as soon as possible, submit to the Parties a report containing available details concerning the New Discovery and Operator's recommendation as to whether the New Discovery merits appraisal. The Operating Committee shall meet and decide within forty-five (45) Days whether the New Discovery merits appraisal. If the Operating Committee determines that the New Discovery merits appraisal, Operator, within thirty (30) Days, shall deliver to the Parties a proposed Work Program and Budget for the appraisal of the New Discovery. Within twenty (20) Days of such delivery, or earlier if necessary to meet any applicable deadline under the Contract, the Operating Committee shall meet to consider, modify and then either approve or reject the appraisal Work Program and Budget. If the appraisal Work Program and Budget is approved by the Operating Committee, Operator shall take such steps as may be required under the Contract to secure approval of the appraisal Work Program and Budget by the Management Committee and/or the Government, whichever is applicable. In the event the Management Committee and/or the Government, whichever is applicable, requires changes in the appraisal Work Program and Budget,the matter shall be resubmitted to the Operating Committee for further consideration. (D) Any Party desiring to propose a Completion attempt, or an alternative Completion attempt, must do so within the time period provided in Article 5.12(A)(1) by notifying all other Parties. The Operator shall prepare the AFE for such Completion costs and provide same to the Parties. 6.6 DEVELOPMENT OF NEW DISCOVERY (A) If the Operating Committee determines that a Discovery may be commercial, the Operator shall, as soon as practicable, but not later than ninety (90) Days after completing the appraisal referred to in Article 6.5(C), deliver to the Parties a Development Plan together with the Work Program and Budget for the remainder of the Financial Year and a provisional Work Program and Budget for the next succeeding Financial Year along with annual projections for the remainder of the development of the New Discovery. The Work Programs and Budgets proposed by the Operator shall contain, inter alia: (1) Details of the proposed work to be undertaken, personnel required and expenditures to be incurred, including the timing of same, on a Financial Year basis; (2) An estimated date for the commencement of production; (3) A delineation of the proposed Exploitation Area; and (4) Any other information requested by the Operating Committee.

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(B) After receipt of the Development Plan, or earlier if necessary to meet any applicable deadline under the Contract, the Operating Committee shall meet to consider, modify and then either approve or reject within ninety (90) Days the Development Plan and the Work Program and Budget for the remainder of the Financial Year for the development submitted by Operator. If the Development Plan is approved by the Operating Committee, Operator shall, as soon as possible, deliver any notice of Commercial Discovery required under the Contract and take such other steps as may be required under the Contract to secure approval of the Development Plan by the Management Committee and/or Government, whichever is applicable. In the event the Management Committee and/or Government, whichever is applicable, requires changes in the Development Plan, the matter shall be resubmitted to the Operating Committee for further consideration. If the Development Plan is approved, such work shall be incorporated into and form part of the annual Work Programs and Budgets. 6.7 ITEMIZATION OF EXPENDITURES (A) During the preparation of the proposed Work Programs and Budgets and Development Plans contemplated in this Article, Operator shall consult with the Operating Committee regarding the contents of such Work Programs and Budgets and Development Plans. (B) Each Work Program and Budget and Development Plan submitted by Operator shall contain an itemized estimate of the costs of Joint Operations and all other expenditures to be made for the Joint Account during the Financial Year in question. (C) The Work Program and Budget shall designate the portion or portions of the Contract Area in which Joint Operations itemized in such Work Program and Budget are to be conducted and shall specify the kind and extent of such operations in such detail as the Operating Committee may deem suitable. 6.8 CONTRACT AWARDS (A) Operator shall award, except for an award to an Affiliate, each contract for Joint Operations on the following basis (the amounts stated are in thousands of U.S. dollars):

PROCEDURE A C Applicable to Exploration, Appraisal, Development and Production Operations

PROCEDURE B

PROCEDURE

$100 to $500

$500 to $3,000

>=$3,000

Operator shall not award a contract exceeding US$20,000 to an Affiliate without prior approval of the Operating Committee, provided, however, that the service agreement under which EOGIL secures technical, administrative and related support subject to Sections 2.4.2 and 3.1 of Exhibit "A", Accounting Procedure, shall not be subject to the provisions of this Article 6.8. For contracts valued less than the lower limit of Procedure A, Operator shall award the contract to the best qualified contractor as determined in accordance with Operator's purchasing policies set forth in EOGIL's purchasing policy and procedure, Number 9401. Operator shall inform the Non-Operators of such awards every month. PROCEDURE A Operator shall: (1) Provide the Parties with a list of all the entities approved by the Operating Committee as per Article 6.8(C) for the applicable category of the contract, along with other entities, if any, from whom the Operator proposes to invite tender; (2) Add to such list entities whom a Party requests to be added within five (5) Business Days of receipt of such list; (3) If and when any Party so requests, Operator shall evaluate any entity listed in (1) and (2) above to assure that entity is qualified as based on the qualification criteria agreed in accordance with Article 6.8(B), to perform under the contract; (4) Complete the tendering process within a reasonable period of time;

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(5) Circulate to all Parties a comparative bid analysis stating Operator's choice of the entity for award of contract. Provide also reasons for such choice in case entity chosen is not the lowest bidder; (6) Inform all the Parties of the entities to whom the contract has been awarded; and (7) Upon the request of a Party, provide such Party with a copy of the final version of the contract awarded. PROCEDURE B Operator shall: (1) Provide the Parties with a list of all the entities approved by the Operating Committee as per Article 6.8(C) for the applicable category of the contract, along with other entities, if any, from whom the Operator proposes to invite tender; (2) Add to such list entities whom a Party requests to be added within five (5) Business Days of receipt of such list; (3) If and when any Party so requests, Operator shall evaluate any entity listed in (1) and (2) above to assure that entity is qualified as based on the qualification criteria agreed in accordance with Article 6.8(B), to perform under the contract; (4) Complete the tendering process within a reasonable period of time; (5) Circulate to all Parties a comparative bid analysis stating Operator's choice of the entity for award of contract. Provide also reasons for such choice in case the entity chosen is not the lowest bidder. If the bid selected is not the lowest bid, obtain prior approval of the Operating Committee for award of contract; (6) Award the contract accordingly and inform all the Parties of the entities to whom the contract has been awarded; and (7) Upon the request of a Party, provide such Party with a copy of the final version of the contract awarded. PROCEDURE C Operator shall: (1) Publish invitations for parties to pre-qualify for the proposed contract in one (1) daily national India newspaper, provide to Non-Operators a list of responding parties and an analysis of their qualifications for the contract being contemplated, and include those who qualify, as per the pre-qualification criteria approved as per Article 6.8(B), in the list of entities whom Operator proposes to invite to tender for the said contract; (2) Provide the Parties with a total list of all the entities selected as (1) above and all the entities approved by the Operating Committee as per Article 6.8(C) for the applicable category of the contract, along with other entities, if any, from whom the Operator proposes to invite tender; (3) Add to such list entities whom a Party requests to be added within five (5) Business Days of receipt of such list; (4) If and when any Party so requests, Operator shall evaluate any entity listed in (2) and (3) above to assure that entity is qualified as based on the qualification criteria agreed in accordance with Article 6.8(B), to perform under the contract; (5) Prepare and dispatch the tender documents to the entities on the list as aforesaid and to Non-Operators; (6) After the expiration of the period allowed for tendering, consider and analyze the details of all bids received; (7) Prepare and circulate to the Parties a comparative bid analysis, stating Operator's recommendation as to the entity to whom the contract should be awarded, the reasons therefor, and the technical, commercial and contractual terms to be agreed upon; (8) Obtain the approval of the Operating Committee to the recommended bid. However, failing Operating Committee approval, any Party may refer the issue to Management Committee for decision; and (9) Award the contract accordingly and upon the request of a Party, provide such Party with a copy of the final version of the contract. (B) A set of vendor qualification criteria for each major category of vendor shall be proposed by the Operator and approved by the Operating Committee within thirty (30) Days of its submittal. In the event the Operating Committee fails to approve vendor qualification criteria within thirty (30) Days of the date the same is first submitted by the Operator, the matter shall be referred to the Management
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Committee for decision. The Operating Committee may revise the qualification criteria. (C) It is anticipated that, in order to expedite Joint Operations, contracts will be awarded to qualified vendors who are identified as approved vendors as to specified activities, supplies and/or work as per the applicable Agreement procedure. A list of such approved vendors shall first be established as follows: Operator shall: (1) Provide the Parties with a list of the entities whom Operator proposes to invite to tender for contracts; and (2) Add to such list entities whom a Party requests to be added within fourteen (14) Days of receipt of such list; and obtain approval of the Operating Committee within thirty (30) Days of its submittal to the Operating Committee by the Operator. Such list shall thereafter be maintained by the Operator. The Operating Committee may add to or delete vendors from such list. 6.9 AUTHORIZATION FOR EXPENDITURE ("AFE") PROCEDURE (A) Prior to incurring any commitment or expenditure which exceeds the expenditure guidelines specified in this Article 6.9, Operator shall send to each Non-Operator an AFE containing Operator's best estimate of the total funds required to carry out such work, the estimated timing of expenditures, and any other necessary supportive information. The Operator shall send to each Non-Operator an AFE containing the information specified above for the following: (1) Each project involving seismic acquisition and processing; (2) Each Exploration and Appraisal Well; (3) Each Development Well or group of Development Wells; (4) Deepening of any well below original total depth, involving exploratory footage; (5) Workovers or Reworking a well costing in excess of US$200,000 for any well, including deepening into development Zones; (6) Each platform or group of platforms; (7) Each subsea pipeline/major pipeline; (8) Equipping of Wells exceeding One Hundred Thousand U.S. Dollars (US$100,000) if not already included in an AFE. Equipping of wells includes generally the purchase and installation of equipment and material for lifting, heating, storing and otherwise handling production; (9) Individual construction projects and equipment not already included in an AFE, exceeding One Hundred Thousand U.S. Dollars (US$100,000) each; (10) Commitments for purchases of advance materials for projects not yet approved shall be aggregated and included in an AFE covering a Calendar Quarter; (11) Any other project/programmed expenditure not included above in this Article 6.9 estimated to be in excess of One Hundred Fifty Thousand U.S. Dollars (US$150,000). (B) The restrictions contained in this Article shall be without prejudice to Operator's rights to make expenditures as set out in Article 4.2(B)(11) and Article 13.5. (C) Parties agree that, except as otherwise provided in Article 6.9(A)(5), operating costs and deposits as further specified below in this Article 6.9(C) shall not require AFEs. Such costs shall be reported as against the appropriate budget line item and variances from the budgeted amounts shall be reviewed by the Operating Committee. Operating cost means costs and expenditures of a recurring nature, incurred after the commencement of production in the operation and maintenance of property and necessary for production and handling of produced Petroleum. Costs of a similar nature incurred prior to production commencement shall be provided for in the appropriate AFE(s) in accordance with Article 6.9(A)(1) through (A)(9). Deposits mean non-recurring refundable or adjustable payments toward security/ surety including, but not limited to, expatriate employee housing and office building rental deposits. Operating costs are categorized and detailed as Production Costs [except that workovers or Reworking a well shall be subject to Article 6.9(A)(5)]and general and administrative costs, which costs are contained in categories III and IV of Exhibit "D", Work Program and Budget. Deposits are listed in the "Deposit" section of category V of Exhibit "D".
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6.10 SUPPLEMENTARY AFES Operator shall submit a supplemental AFE for approval when it is anticipated that an AFE will be overexpended by more than ten percent (10%), which approval shall not be unreasonably withheld. 6.11 APPROVAL OF AFES Except as herein otherwise provided, Operator shall be required to obtain approval of an AFE prior to undertaking the work. AFE approval shall be confirmed by returning a signed copy of the AFE to the Operator. Parties shall respond to requests for approval of AFEs within fourteen (14) Days of receipt. A failure to respond to an AFE within this time period shall be deemed an approval of such AFE. 6.12 APPROVAL OF AFE NOT TO BE UNREASONABLY WITHHELD After approval of the Work Program and Budget by the Operating Committee and the Management Committee, no Party may withhold approval of an AFE for any project contained in the Firm budget category unless there is a material variance between the AFE and the project so approved. 6.13 OVEREXPENDITURES OF WORK PROGRAMS AND BUDGETS Cumulative total of all overexpenditures for a Financial Year shall not exceed five percent (5%) of the total Work Program and Budget as currently approved. 6.14 WORK PROGRAM AND BUDGET FOR INITIAL PERIOD The Development Plan together with the corresponding Work Program and Budget for the period ending 31 March 1996 ("Initial Period") shall be submitted to the Operating Committee for approval as soon as possible following the Effective Date. The Operating Committee shall approve the Development Plan and corresponding Work Program and Budget within thirty (30) Days and as soon as practicable thereafter, the Operator shall submit same to the Management Committee. In the event the Operating Committee is unable to approve the Work Program and Budget for the Initial Period by the due date specified in this Article 6.14, any Party may refer the matter to the Management Committee for decision. ARTICLE VII - OPERATIONS BY LESS THAN ALL PARTIES 7.1 LIMITATION ON APPLICABILITY (A) Subject to the Contract, any operation beyond the Minimum Work Obligation can be proposed as a Joint Operation. In the event of difference of opinion among the Parties for taking the operation as Joint Operation, the same may be conducted as Exclusive Operation by the willing Parties subject to provisions of Article VII. All operations shall be conducted as Joint Operations under Article V, or as Exclusive Operations under this Article. No Exploration Well or Appraisal Well which is an Exclusive Well may be Completed in any Field which is so designated as of the Effective Date. If a proposal for an Exploration Well/Appraisal Well for Zones other than those in the Field leads to an Exclusive Operation and such well is located in the Development Area of a Field but outside the Field which is so designated as of the Effective Date, then, in such case, each Non-Consenting Party/Parties shall have a right to place a representative at the site during drilling, Completion and testing and recompleting and Reworking of such a well. No Exclusive Operation shall be conducted which conflicts with Joint Operations. Determination as to whether or not a conflict exists shall be made by the unanimous vote of the Operating committee. If the Operating Committee cannot agree, the matter can be referred to a sole expert or arbitration. (B) Except as otherwise herein provided, operations which are required to fulfill the Minimum Work Obligations must be proposed and conducted as Joint Operations under Article V, and shall not be proposed or conducted as Exclusive Operations under this Article. (C) No Party may propose or conduct an Exclusive Operation under this Article, unless and until such Party has properly exercised its right to propose an Exclusive Operation pursuant to Article 5.13, or is entitled to conduct an Exclusive Operation pursuant to Article X. 7.2 PROCEDURE TO PROPOSE EXCLUSIVE OPERATIONS (A) Subject to Article 7.1, if any Party proposes to conduct an Exclusive Operation, such Party shall give notice of the proposed operation to all Parties, other than Parties who have relinquished their Participating Interest in the Exploitation Area in which the proposed operation is to be conducted. Such notice shall specify that such operation is proposed as an Exclusive Operation, the work to be performed, the location, the objectives, and estimated cost of such operation.
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(B) Any Party entitled to receive such notice shall have the right to participate in the proposed operation. (1) For proposals to Deepen, Test, Complete, Sidetrack, Plug Back, Recomplete or Rework involving the use of a drilling rig that is standing by in the Contract Area, any such Party wishing to exercise such right must so notify Operator within twenty-four (24) hours after receipt of the notice proposing the Exclusive Operation. (2) For proposals to develop a Discovery, any Party wishing to exercise such right must so notify the Party proposing to develop within twenty (20) Days after receipt of the notice proposing the Exclusive Operation. (3) For all other proposals, any such Party wishing to exercise such right must so notify Operator within ten (10) Days after receipt of the notice proposing the Exclusive Operation; (C) Failure of a Party to whom a proposal notice is delivered to properly reply within the period specified above shall constitute an election by that Party not to participate in the proposed operation. (D) If all Parties properly exercise their rights to participate, then the proposed operation shall be conducted as a Joint Operation. The Operator shall commence such Joint Operation as promptly as practicable and conduct it with due diligence. (E) If less than all Parties entitled to receive such proposal notice properly exercise their rights to participate, then: (1) The Party proposing the Exclusive Operation, together with any other Consenting Parties, shall have the right exercisable for the applicable notice period set out in Article 7.2(B), to instruct Operator (subject to Article 7.9(G)) to conduct the Exclusive Operation. (2) If the Exclusive Operation is conducted, the Consenting Parties shall bear the sole liability and expense of such Exclusive Operation in a fraction, the numerator of which is such Consenting Party's Participating Interest as stated in Article 3.1(A) and the denominator of which is the aggregate of the Participating Interests of the Consenting Parties as stated in Article 3.1(A), or in such other proportion totaling one hundred percent (100%) of such liability and expense as the Consenting Parties may agree. (3) If such Exclusive Operation has not been commenced within ninety (90) Days (excluding any extension specifically agreed by all Parties or allowed by the force majeure provisions of Article XVI), the right to conduct such Exclusive Operation shall terminate. If any Party still desires to conduct such Exclusive Operation, written notice proposing such operation must be resubmitted to the Parties in accordance with Article V, as if no proposal to conduct an Exclusive Operation had been previously made. 7.3 RESPONSIBILITY FOR EXCLUSIVE OPERATIONS (A) The Consenting Parties shall bear in accordance with the Participating Interests agreed under Article 7.2(E) the entire cost and liability of conducting an Exclusive Operation and shall indemnify the Non-Consenting Parties from any and all costs and liabilities incurred incident to such Exclusive Operation (including but not limited to all costs, expenses or liabilities for environmental, consequential, punitive or any other similar indirect damages or losses arising from business interruption, reservoir or formation damage, inability to produce petroleum, loss of profits, pollution control and environmental amelioration or rehabilitation) and shall keep the Contract Area free and clear of all liens and encumbrances of every kind created by or arising from such Exclusive Operation. (B) Notwithstanding Article 7.3(A), each Party shall continue to bear its Participating Interest share of the cost and liability incident to the operations in which it participated, including but not limited to plugging and abandoning and restoring the surface location, but only to the extent those costs were not increased by the Exclusive Operation. 7.4 CONSEQUENCES OF EXCLUSIVE OPERATIONS (A) With regard to any Exclusive Operation, for so long as a Non- Consenting Party has the option to re-instate the rights it relinquished under Article 7.4(B) below, such Non-Consenting Party shall be entitled to have access concurrently with the Consenting Parties, to all data and other information relating to such Exclusive Operation, other than G & G Data obtained in an Exclusive Operation. If a Non-Consenting Party desires to receive and acquire the right to use such G & G Data, then such Non-Consenting Party shall have the right to do so by paying to the Consenting Parties its Participating Interest share as set out in Article 3.1(A) of the cost incurred in obtaining such G & G Data. (B) With regard to any Exclusive Operation and subject to Article 7.4(C) and Article 7.8 below, each Non-Consenting Party shall be deemed to have relinquished to the Consenting Parties, and the Consenting Parties shall be deemed to own, in proportion to their respective Participating Interests in the Exclusive Operation:

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(1) All of each such Non-Consenting Party's right to participate in further operations on any Discovery made in the course of such Exclusive Operation; and (2) All of each such Non-Consenting Party's right pursuant to the Contract to take and dispose of Hydrocarbons produced and saved: (a) From the well in which such Exclusive Operation was conducted, and (b) From any wells drilled to appraise or develop a Discovery. (C) A Non-Consenting Party shall have the following and only the following options to reinstate the rights it relinquished pursuant to Article 7.4(B): (1) If the Consenting Parties decide to appraise a Discovery made in the course of an Exclusive Operation, the Consenting Parties shall submit to each Non-Consenting Party the approved appraisal program. For thirty (30) Days (or forty-eight (48) hours if the drilling rig which is to be used in such appraisal program is standing by in the Contract Area) from receipt of such appraisal program, each NonConsenting Party shall have the option to reinstate the rights it relinquished pursuant to Article 7.4(B) and to participate in such appraisal program. The Non-Consenting Party may exercise such option by notifying Operator within the period specified above that such Non-Consenting Party agrees to bear its Participating Interest share of the expense and liability of such appraisal program, to pay the lump sum amount as set out in Article 7.5(A) and to pay the Cash Premium as set out in Article 7.5(B). (2) If the Consenting Parties decide to develop a Discovery made or appraised in the course of an Exclusive Operation, the Consenting Parties shall submit to the Non-Consenting Parties a Development Plan substantially in the form intended to be submitted to the Government under the Contract. For sixty (60) Days from receipt of such Development Plan or such lesser period of time prescribed by the Contract, each Non-Consenting Party shall have the option to reinstate the rights it relinquished pursuant to Article 7.4(B) and to participate in such Development Plan. The Non-Consenting Party may exercise such option by notifying the Party proposing to act as Operator for such Development Plan within the period specified above that such Non-Consenting Party agrees to bear its Participating Interest share of the liability and expense of such Development Plan and such future operating and producing costs, to pay the lump sum amount as set out in Article 7.5(A) and to pay the Cash Premium as set out in Article 7.5(B). (D) If a Non-Consenting Party does not properly and in a timely manner exercise such option, including paying in a timely manner in accordance with Article 7.5, all lump sum amounts and Cash Premiums, if any, due to the Consenting Parties, such Non-Consenting Party shall have forfeited the options as set out in Article 7.4(C) and the right to participate in the proposed program, unless such program, plan or operation is materially modified or expanded. (E) A Non-Consenting Party shall become a Consenting Party with regard to an Exclusive Operation at such time as the Non-Consenting Party gives proper notice pursuant to Article 7.4(C); provided that such Non-Consenting Party shall in no way be deemed to be entitled to any lump sum amount Cash Premium paid incident to such Exclusive Operation. The Participating Interest of such Non-Consenting Party in such Exclusive Operation shall be its Participating Interest set out in Article 3.1(A). The Consenting Parties shall contribute in proportion to their respective Participating Interests in such Exclusive Operation, the Participating Interest of the Non-Consenting Party. If all Parties participate in the proposed operation, then such operation shall be conducted as a Joint Operation pursuant to Article V. (F) If after the expiry of the period in which a Non-Consenting Party may exercise its option to participate in a Development Plan, the Consenting Parties desire to proceed with the said Development Plan, the Party chosen by the Consenting Parties to act as Operator for such development, shall give notice to the Government under the appropriate provision of the Contract requesting a meeting to advise the Government that the Consenting Parties consider the Discovery to be a Commercial Discovery. Following such meeting such Operator for such development shall apply for an Exploitation Area. Unless the Development Plan is materially modified or expanded prior to the commencement of operations under such plan, each Non-Consenting Party to such Development Plan shall not participate in such Exploitation Area covering such development and shall forfeit all interest in such Exploitation Area. Such Non-Consenting Party shall be deemed to have withdrawn from this Agreement to the extent it relates to such Exploitation Area, even if the Development Plan is modified or expanded subsequent to the commencement of operations under such Development Plan. 7.5 PREMIUM TO PARTICIPATE IN EXCLUSIVE OPERATIONS (A) Within thirty (30) Days of the exercise of its option under Article 7.4(C), each such Non-Consenting Party shall pay in immediately available funds to the Consenting Parties who took the risk of such Exclusive Operations in proportion to their respective Participating Interests in such Exclusive Operations a lump sum amount payable in the currency designated by such Consenting Parties. Such lump sum amount shall be equal to such Non-Consenting Party's
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Participating Interest share of all liabilities and expenses, including overhead, that were incurred in Exclusive Operations relating to the Discovery, or well, as the case may be, in which the Non-Consenting Party desires to reinstate the rights it relinquished pursuant to Article 7.4(B), and that were not previously paid by such Non-Consenting Party. (B) In addition to Article 7.5(A), if a Cash Premium is due, then within thirty (30) Days of the exercise of its option under Article 7.4(C) each such Non-Consenting Party shall pay in immediately available funds, in the currency designated by the Consenting Parties who took the risk of such Exclusive Operations, to such Consenting Parties in proportion to their respective Participating Interests a Cash Premium equal to the total of: (1) Two hundred percent (200%) of such Non-Consenting Party's Participating Interest share of all liabilities and expenses, including overhead, that were incurred in any Exclusive Operations relating to the obtaining of the portion of the G & G Data which pertains to the Discovery, and that were not previously paid by such Non-Consenting Party; plus (2) Eight hundred percent (800%) of such Non-Consenting Party's Participating Interest share of all liabilities and expenses, including overhead, that were incurred in any Exclusive Operations relating to the drilling, Deepening, Testing, Completing, Sidetracking, Plugging Back, Recompleting and Reworking of the Exploration Well which made the Discovery in which the Non- Consenting Party desires to reinstate the rights it relinquished pursuant to Article 7.4(B), and that were not previously paid by such Non-Consenting Party; plus (3) Five hundred percent (500%) of the Non-Consenting Party's Participating Interest share of all liabilities and expenses, including overhead, that were incurred in any Exclusive Operations relating to the drilling, Deepening, Testing, Completing, Sidetracking, Plugging Back, Recompleting and Reworking of the Appraisal Well(s) which delineated the Discovery in which the Non- Consenting Party desires to reinstate the rights it relinquished pursuant to Article 7.4(B), and that were not previously paid by such Non-Consenting Party. 7.6 ORDER OF PREFERENCE OF OPERATIONS (A) Except as otherwise specifically provided in this Agreement, if any Party desires to propose the conduct of an operation that will conflict with an existing proposal for an Exclusive Operation, such Party shall have the right exercisable for five (5) Days, or twenty-four (24) hours if the drilling rig to be used is standing by in the Contract Area, from receipt of the proposal for the Exclusive Operation, to deliver to all Parties entitled to participate in the proposed operation such Party's alternative proposal. Such alternative proposal shall contain the information required under Article 7.2(A). (B) Each Party receiving such proposals shall elect by delivery of notice to Operator within the appropriate response period set out in Article 7.2(B) to participate in one of the competing proposals. Any Party not notifying Operator within the response period shall be deemed not to have voted. (C) The proposal receiving the largest aggregate Participating Interest vote shall have priority over all other competing proposals. In the case of a tie vote, the Operator shall choose among the proposals receiving the largest aggregate Participating Interest vote. Operator shall deliver notice of such result to all Parties entitled to participate in the operation within five (5) Days of the end of the response period, or twenty-four (24) hours if the drilling rig to be used is standing by in the Contract Area. (D) Each Party shall then have two (2) Days (or twenty-four (24) hours if the drilling rig to be used is standing by in the Contract Area) from receipt of such notice to elect by delivery of notice to Operator whether such Party will participate in such Exclusive Operation, or will relinquish its interest pursuant to Article 7.4(B). Failure by a Party to deliver such notice within such period shall be deemed an election not to participate in the prevailing proposal. 7.7 STAND BY COSTS (A) When an operation has been performed, all tests have been conducted and the results of such tests furnished to the Parties, stand by costs incurred pending response to any Party's notice proposing an Exclusive Operation for Deepening, Testing, Sidetracking, Completing, Plugging Back, Recompleting, Reworking or other further operation in such well (including the period required under Article 7.6 to resolve competing proposals) shall be charged and borne as part of the operation just completed. Stand by costs incurred subsequent to all Parties responding, or expiration of the response time permitted, whichever first occurs, shall be charged to and borne by the Parties proposing the Exclusive Operation in proportion to their Participating Interests, regardless of whether such Exclusive Operation is actually conducted. (B) If a further operation is proposed while the drilling rig to be utilized is on location, any Party may request and receive up to five (5) additional Days after expiration of the applicable response period specified in Article 7.2(B) within which to respond by notifying
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Operator that such Party agrees to bear all stand by costs and other costs incurred during such extended response period. Operator may require such Party to pay the estimated stand by time in advance as a condition to extending the response period. If more than one Party requests such additional time to respond to the notice, stand by costs shall be allocated between such Parties on a Day-to-Day basis in proportion to their Participating Interests. 7.8 SPECIAL CONSIDERATION REGARDING DEEPENING AND SIDETRACKING (A) An Exclusive Well shall not be deepened or sidetracked without first affording the Non-Consenting Parties in accordance with this Article the opportunity to participate in such operation. (B) In the event any Consenting Party desires to Deepen or Sidetrack an Exclusive Well, such Party shall initiate the procedure contemplated by Article 7.2. If a Deepening or Sidetracking operation is approved pursuant to such provisions, and if any Non-Consenting Party to the Exclusive Well elects to participate in such Deepening or Sidetracking operation, the payment, if any, pursuant to Article 7.5 of such Non- Consenting Party shall be calculated based on the following liabilities and expenses: (1) If the proposal is to Deepen or Sidetrack and is made prior to the Completion of such well as a Commercial Discovery, then payment shall be based on such Non-Consenting Party's Participating Interest share of the liabilities and expenses incurred in connection with drilling the Exclusive Well from the surface to the depth previously drilled which such Non-Consenting Party would have paid had such Non-Consenting Party agreed to participate in such Exclusive Well, plus the Non-Consenting Party's Participating Interest share of the liabilities and expenses of Deepening or Sidetracking and of participating in any further operations on such Exclusive Well in accordance with the other provisions of this Agreement; provided, however, all liabilities and expenses for Testing and Completing or attempting Completion of the well incurred by Consenting Parties prior to the commencement of actual operations to Deepen or Sidetrack beyond the depth previously drilled shall be for the sole account of Consenting Parties in the proportion their Participating Interest bears to the aggregate of their Participating Interests. (2) If the proposal is to Deepen or Sidetrack and is made for an Exclusive Well that has been previously Completed as a Commercial Discovery, but is no longer producing, then payment shall be based on the Non-Consenting Party's Participating Interest share of all costs of drilling and Completing said well from the surface to the depth previously drilled, calculated in the manner provided in Article 7.8(B)(1), less those costs recouped by the Consenting Parties from the sale of production from such Exclusive Well, plus the Non-Consenting Party's Participating Interest share of all costs of re-entering said well, plus the Non-Consenting Party's proportionate part (based on the percentage of the Exclusive Well such Non-Consenting Party would have owned had it previously participated in such Exclusive Well) of the costs of salvable materials and equipment remaining in the hole and salvable surface equipment used in connection with such well shall be determined in accordance with the Accounting Procedure. If at the time such Deepening or Sidetracking operation is conducted the Consenting Parties have recouped from the Exclusive Well the amount calculated pursuant to Article 7.5, then a Non-Consenting Party may participate in the Deepening or Sidetracking of the Exclusive Well with no payment for liabilities and expenses incurred prior to re-entering the well for Deepening or Sidetracking. 7.9 MISCELLANEOUS (A) Each Exclusive Operation shall be carried out by the Operator on behalf of and at the expense of the Consenting Parties. For Exclusive Operations, the Consenting Parties shall act as the Operating Committee, subject to the provisions of this Agreement applied mutatis mutandis to such Exclusive Operation and subject to the terms and conditions of the Contract. (B) The computation of liabilities and expenses incurred in Exclusive Operations, including the liabilities and expenses of Operator for conducting such operations, shall be made in accordance with the principles set out in the Accounting Procedure. (C) Operator shall maintain separate books, financial records and accounts for Exclusive Operations which shall be subject to the same rights of audit and examination as the Joint Account and related records, all as provided in the Accounting Procedure. Said rights of audit and examination shall extend to each of the Consenting Parties and each of the Non-Consenting Parties so long as the latter are, or may be, entitled to elect to participate in such operations. (D) Operator, if it is not a Consenting Party and it is conducting an Exclusive Operation for the Consenting Parties, shall be entitled to request cash advances and shall not be required to use its own funds to pay any cost and expense and shall not be obliged to commence or continue Exclusive Operations until cash advances requested have been made, and the Accounting Procedure shall apply to Operator in respect of any Exclusive Operations conducted by it. (E) Should the submission of a Development Plan be approved in accordance with Article 5.9, or should any Party propose a development in accordance with Article VII, with either proposal not calling for the conduct of additional appraisal drilling, and should any Party wish to drill an additional Appraisal Well prior to development, then the Party proposing the Appraisal Well as an Exclusive Operation shall be entitled to proceed first, but without the right to future reimbursement of costs or to any Premium, pursuant to Article 7.5. If, as the result of drilling such Appraisal Well as an Exclusive Operation, the Party proposing to apply for an Exploitation
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Area decides to not develop the reservoir, then each Non-Consenting Party who voted in favor of such Development Plan prior to the drilling of such Appraisal Well shall pay to the Consenting Party the amount such Non-Consenting Party would have paid had such Appraisal Well been drilled as a Joint Operation. (F) In the case of any Exclusive Operation for Deepening, Testing, Completing, Sidetracking, Plugging Back, Recompleting or Reworking, the Consenting Parties shall be permitted to use, free of cost, all casing, tubing and other equipment in the well, that is not needed for Joint Operations, but the ownership of all such equipment shall remain unchanged. On abandonment of a well after such Exclusive Operation, the Consenting Parties shall account for all such equipment to the Parties who shall receive their respective Participating Interest shares, in value, less cost of salvage. (G) If the Operator is a Non-Consenting Party to an Exclusive Operation to develop a new Discovery, then subject to obtaining any necessary Government approval the Operator may resign, but in any event shall resign on the request of the Consenting Parties, as Operator for the Exploitation Area for such Discovery and the Consenting Parties shall select a Party to serve as Operator. ARTICLE VIII - DEFAULT 8.1 DEFAULT AND NOTICE Any Party that fails to pay when due its Participating Interest share of Joint Account expenses including cash advances and interest, if any, accrued pursuant to this Agreement, subject to Section 1.6.2, (a "Defaulting Party") shall be in default under this Agreement. Operator, or any other Party in the case of the default of Operator, shall promptly give written notice of such default to such Party and each of the non-defaulting Parties, but not later than the third Business Day from the due date. If the Operator is in default, it shall issue notice to the other Parties on the third Business Day after the due date. The amount not paid by the Defaulting Party shall bear interest from the date due until paid in full. Interest "Agreed Interest Rate" will be calculated using the rates specified below: From due date through fifth Business Day, interest is LIBOR + 0.5 From sixth through thirtieth Business Day, interest is LIBOR + 1.5 From thirty-first through forty-sixth Business Day, interest is LIBOR + 3.0 Beyond forty-sixth Business Day, interest is LIBOR + 5.0 8.2 OPERATING COMMITTEE MEETINGS AND DATA After any default has continued for thirty (30) Business Days from the date of written notice of default under Article 8.1, and for as long thereafter as the Defaulting Party remains in default on any payment due under this Agreement, the Defaulting Party shall not be entitled to vote on any matter coming before the Operating Committee during the period such default continues. Unless agreed otherwise by the non-defaulting Parties, the voting interest of each non-defaulting Party shall be in the proportion which its Participating Interest bears to the total of the Participating Interest of all the non-defaulting Parties. Any matters requiring unanimous vote of the Parties shall be deemed to exclude the Defaulting Party. Notwithstanding the foregoing, the Defaulting Party shall be deemed to have approved, and shall join with the non-defaulting Parties in taking any action to maintain and preserve the Contract. 8.3 ALLOCATION OF DEFAULTED ACCOUNTS (A) Operator shall, either at the time of giving notice of default as provided in Article 8.1, or by separate notice, notify each non-defaulting Party of the sum of money it is to pay as its portion (such portion being in the ratio that each non-defaulting Party's Participating Interest bears to the Participating Interests of all non-defaulting Parties) of such amount in default. Each non-defaulting Party shall, if such default continues, pay Operator, within ten (10) Business Days after receipt of such notice, its share of the amount which the Defaulting Party failed to pay. If any non-defaulting Party fails to pay its share of the amount in default as aforesaid, such non-defaulting Party shall thereupon be in default and shall be a Defaulting Party subject to the provisions of this Article. The non-defaulting Parties which pay the amount owed by any Defaulting Party shall be entitled to receive their respective share of the principal and interest payable by such Defaulting Party pursuant to Article 8.1. (B) The total of all amounts paid by the non-defaulting Parties for the Defaulting Party, together with interest accrued on such amounts shall constitute a debt due and owing by the Defaulting Party to the non-defaulting Parties in proportion to such amounts paid. In addition, the non-defaulting Parties may in the manner contemplated by this Article, satisfy such debt (together with interest) and may accrue an amount equal to the Defaulting Party's Participating Interest share of the estimated cost to abandon any Joint Property. (C) A Defaulting Party may remedy its default by paying to Operator the total amount due, together with interest calculated as provided in Article 8.1, at any time prior to a transfer of its interest pursuant to Article 8.4, and, upon receipt of such payment, Operator
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shall remit to each non-defaulting Party its proportionate share of such amount. (D) The rights granted to each non-defaulting Party pursuant to this Article shall be in addition to and not in substitution for any other rights or remedies which each non-defaulting Party may have at law or equity or pursuant to the other provisions of this Agreement. 8.4 TRANSFER OF INTEREST (A) For thirty (30) Days after each failure by the Defaulting Party to remedy its default by the ninetieth (90th) Day following notice of default without prejudice to any other rights of the non-defaulting Parties to recover the amounts paid for the Defaulting Party, together with interest accrued on such amount, each non-defaulting Party shall have the option to give notice to the Defaulting Party requiring the Defaulting Party to transfer, as specified in Article 8.4(E), its interest to the non-defaulting Parties. To that end if any of the non-defaulting Parties so elect, the Defaulting Party shall be deemed to have transferred and to have empowered the electing non-defaulting Parties to execute on said Defaulting Party's behalf any documents required to effect a transfer of all of its right, title and beneficial interest in and under this Agreement and the Contract and in all wells and Joint Property to the electing non-defaulting Parties. If requested, each Party shall execute a Power of Attorney in the form prescribed by the Operating Committee. The Defaulting Party shall, without delay following any request from the non-defaulting Parties, do any and all acts required to be done by applicable law or regulation in order to render such transfer legally valid, including, without limitation, the obtaining of all governmental consents and approvals, and shall execute any and all documents and take such other actions as may be necessary in order to effect prompt and valid transfer of the interests described above, free of all liens and encumbrances. In the event all Government approvals are not timely obtained, the Defaulting Party shall hold its Participating Interest in trust for such non-defaulting Parties who elected to assume such Defaulting Party's Participating Interest. (B) In the absence of an agreement among the non-defaulting Parties to the contrary, any such transfer to the non-defaulting Parties shall be in the proportion that the non-defaulting Parties have paid the amounts due from the Defaulting Party. (C) Subject to Article 12.1(C), on the effective date of transfer of all its Participating Interest, the Defaulting Party shall forthwith cease to be a Party to this Agreement to the extent of the Participating Interest so transferred. The acceptance or non-acceptance by a non-defaulting Party of any portion of a Defaulting Party's Participating Interest shall be without prejudice to any rights or remedies such non-defaulting Parties have to recover the outstanding debts (including interest) owed by the Defaulting Party. (D) Notwithstanding the above, if pursuant to any mutual agreement between any of the Parties, one of the Parties makes an additional contribution on behalf of another Party, the same will not be treated as a Default of the other Party under this Agreement and Contract. Such contribution shall not change the Participating Interest of the Parties. (E) In the event that the default continues for more than ninety (90) days (the "Default Period") and the Defaulting Party does not pay the amount in default plus accrued interest by the end of such time, a proportion of the Participating Interest of such Defaulting Party shall, at the sole election of the Non-Defaulting Parties who wish to acquire such interest, be forfeited to such Non-Defaulting Parties to reflect the ratio that the cumulative contributions of the Defaulting Party bears to the total cumulative contributions of all the Parties to Joint Operations costs, so that following such forfeiture the remaining Participating Interest of the Defaulting Party as a proportion of the total Participating Interests of all the Parties is equal to the said ratio. Following such forfeiture, the reduced Participating Interest of the Defaulting Party shall be in accordance with the following formula: A = B/C where: A = the reduced Participating Interest of the Defaulting Party, and B = the total contributions to Joint Operations costs of the Defaulting Party up to but not including the amount in default, and C = the total contributions to Joint Operations costs of all the Parties up to and including the amount in default. Such forfeiture will not restore the Defaulting Party's powers and rights forfeited under Article 8.2 until such Defaulting Party has paid, in full, the first Cash Call following the date of such forfeiture. The Defaulting Party shall execute such documents as are necessary to transfer its Participating Interest at its sole cost. Notwithstanding the provisions of this Article, in the event that as a result of a forfeiture by the Defaulting Party of a part of its Participating Interest pursuant to the provisions of this Article, the remaining Participating Interest the Defaulting Party falls below ten percent (10%) the Non-Defaulting Parties shall assume such Participating Interest of the Defaulting Party in proportion to their Participating Interest or in such other proportion as may be agreed by them. The Defaulting Party shall execute such documents as are necessary to transfer its remaining Participating Interest at its sole cost. 8.5 CONTINUATION OF INTEREST If within thirty (30) Days after each failure by the Defaulting Party to remedy its default by the ninetieth (90th) Day following notice of
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default the non-defaulting Parties elect to not acquire the Defaulting Party's Participating Interest as provided in Article 8.4 and to continue to bear the Defaulting Party's Participating Interest share of liabilities and expenses, then the non-defaulting Parties shall accumulate all such liabilities and expenses as a debt pursuant to Article 8, but the Defaulting Party shall continue to be a Party subject to Article 8.2 and Article 8.7. If Operator disposes of any Joint Property or any other credit or adjustment is made to the Joint Account, or if Operator sells any of the Defaulting Party's Participating Interest share of Hydrocarbons, then, in respect of the Defaulting Party's Participating Interest share of the proceeds of such disposal, credit or adjustment or sale, Operator shall be entitled to retain and to set off the same against all amounts, together with interest accrued on such amount, due and owing from the Defaulting Party plus an accrued amount equal to the Defaulting Party's Participating Interest share of the estimated cost to abandon any Joint Property. Any surplus remaining after setting off the same as aforesaid shall be paid promptly to the Defaulting Party. 8.6 ABANDONMENT If, within thirty (30) Days after the failure by the Defaulting Party to remedy its default by the ninetieth (90th) Day as aforesaid, no non-defaulting Party elects to acquire the Defaulting Party's Participating Interest as provided in Article 8.4, or to bear the Defaulting Party's Participating Interest share of liabilities and expenses as provided in Article 8.5, then no transfer shall be made and Joint Operations shall be abandoned subject to any necessary consents and notices being given and each Party, including the Defaulting Party shall pay its Participating Interest share of all costs of abandoning and relinquishing the Contract. If abandonment occurs as aforesaid, all monies paid by the non-defaulting Parties for the Defaulting Party pursuant to Article 8.3, together with interest accrued on such amount, shall remain a debt due and owing by the Defaulting Party. 8.7 SALE OF HYDROCARBONS Notwithstanding anything here else contained in this Agreement, if a Party defaults after the commencement of commercial production and has not remedied the default by the ninetieth (90th) Day as aforesaid, then, during the continuance of such default, the Defaulting Party shall not be entitled to its Participating Interest share of Hydrocarbons which shall vest in and be the property of the non-defaulting Parties, and Operator shall be authorized to sell such Hydrocarbons at the best price obtainable under the circumstances, and, after deducting all costs, charges and expenses incurred by Operator in connection with such sale, pay the proceeds proportionately to the non-defaulting Parties, which proceeds shall be credited against all monies advanced pursuant to Article 8.3, together with interest accrued thereon. Any surplus remaining shall be paid to the Defaulting Party, and any deficiency shall remain a debt due from the Defaulting Party to the non-defaulting Parties. As soon as the deficiency is satisfied, the Defaulting Party's rights shall be restored. 8.8 NO RIGHT OF SET OFF Each Party acknowledges and accepts that a fundamental principle of this Agreement is that each Party pays its Participating Interest share of all amounts due under this Agreement as and when required. Accordingly, any Party which becomes a Defaulting Party undertakes that, in respect of either any exercise by the non-defaulting Parties of any rights under or the application of any of the provisions of this Article, such Party shall not raise by way of set off or invoke as a defense, whether in law or equity, any failure to pay amounts due and owing under this Agreement or any alleged or unliquidated claim that such Party may have against Operator or any Non-Operator, whether such claim arises under this Agreement or otherwise. Such Party further undertakes not to raise by way of defense, whether in law or in equity, that the nature or the amount of the remedies granted to the non-defaulting Parties is unreasonable or excessive. 8.9 MINOR DEFAULT Notwithstanding the provisions of this Article 8, Articles 8.2 and 8.4 shall have no effect provided the total amount of funds in default is less than One Million United States Dollars (US$1,000,000). 8.10 REINSTATEMENT OF RIGHTS In the event that the default is found to be in error, either through arbitration or otherwise, the Defaulting Party's rights shall be reinstated as determined by the arbitrators or, if not subjected to arbitration, as otherwise found to be reasonably appropriate. ARTICLE IX - DISPOSITION OF PRODUCTION 9.1 RIGHT AND OBLIGATION TO TAKE IN KIND Except as otherwise provided in this Article, each Party shall have the right and obligation to own, take in kind and separately dispose of its Participating Interest share of total production available to the Parties pursuant to the Contract from any Exploitation Area in such quantities and in accordance with such procedures as may be set forth in the offtake agreement referred to in Article 9.2 or in the special arrangements for natural gas referred to in Article 9.3. If Government is party to the offtake agreement, then the Parties shall
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endeavor to obtain its agreement to the principles set forth in this Article. 9.2 OFFTAKE AGREEMENT FOR CRUDE OIL If crude oil is to be produced from an Exploitation Area, the Parties shall in good faith, negotiate and conclude the terms of an agreement to cover the offtake of crude oil produced under the Contract. The Government may, if necessary and practicable, also be party to the offtake agreement. This offtake agreement shall, to the extent consistent with the Contract, make provision for: (A) The delivery point, at which title and risk of loss of Participating Interest shares of crude oil shall pass to the Parties interested (or as the Parties may otherwise agree); (B) Operator's regular periodic advice to the Parties of estimates of total available production for succeeding periods, Participating Interest shares, and grades of crude oil for as far ahead as is necessary for Operator and the Parties to plan offtake arrangements. Such advice shall also cover for each grade of crude oil total available production and deliveries for the preceding period, inventory and overlifts and underlifts; (C) Nomination by the Parties to Operator of acceptance of their Participating Interest share of total available production for the succeeding period. Such nominations shall in any one period be for each Party's entire Participating Interest share arising during that period subject to operational tolerances and agreed minimum economic cargo sizes or as the Parties may otherwise agree; (D) Elimination of overlifts and underlifts; (E) If offshore loading or a shore terminal for vessel loading is involved, risks regarding acceptability of tankers, demurrage and (if applicable) availability of berths; (F) Distribution to the Parties of Entitlements to ensure, to the extent Parties take delivery of their Entitlements in proportion to the accrual of such Entitlements, that each Party shall receive currently Entitlements of grades, gravities and qualities of Hydrocarbons similar to Hydrocarbons received by each other Party. (G) To the extent that distribution of Entitlements on such basis is impracticable due to availability of facilities and minimum cargo sizes, a method of making periodic adjustments; and (H) The option and the right of the other Parties to sell an Entitlement which a Party fails to nominate for acceptance pursuant to (C) above or of which a Party fails to take delivery, in accordance with applicable agreed procedures, provided that such failure either constitutes a breach of Operator's or Parties' obligations under the terms of the Contract, or is likely to result in the curtailment or shut-in of production. Such sales shall be made only to the limited extent necessary to avoid disruption in Joint Operations. Operator shall give all Parties as much notice as is practicable of such situation and that a sale option has arisen. Any sale shall be of the unnominated or undelivered Entitlement as the case may be and for reasonable periods of time as are consistent with the minimum needs of the industry and in no event to exceed twelve (12) months. The right of sale shall be revocable at will subject to any prior contractual commitments. Sales to non-affiliated third parties shall be for the realized price f.o.b. the delivery point. Sales to any of the Parties or their Affiliates shall be at current market value f.o.b. the delivery point. The Party arranging the sale shall pay to the Party whose Entitlement is involved the above price after deduction of all costs, including storage costs, incurred in respect of such sale and a marketing fee of an agreed percentage of the applicable price less deductions, reflecting actual costs of disposal at immediate notice. Current market value shall be the value of the Entitlement in international markets (unless the Entitlement was required to be delivered into the Government's domestic market, in which case it shall be the value therein) between a willing buyer and a willing seller and shall be agreed between the two Parties concerned, or failing agreement, determined by an expert to be appointed in accordance with procedures set forth in the offtake agreement. 9.3 SEPARATE AGREEMENT FOR NATURAL GAS The Parties recognize that it may be necessary for the Parties to enter into special arrangements for the disposal of the natural gas, which are consistent with the Development Plan and subject to the terms of the Contract. ARTICLE X - ABANDONMENT OF WELLS 10.1 ABANDONMENT OF WELLS DRILLED AS JOINT OPERATIONS (A) Any well which has been drilled as a Joint Operation and which is proposed to be plugged and abandoned shall not be plugged and abandoned without the consent of all Parties.

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(B) Should any such Party fail to reply within the period prescribed in Article 5.12(A)(1) or Article 5.12(A)(2), whichever is applicable, after delivery of notice of the Operator's proposal to plug and abandon such well, such Party shall be deemed to have consented to the proposed abandonment. If all the Parties consent to abandonment, such well shall be plugged and abandoned in accordance with applicable regulations and at the cost, risk and expense of the Parties who participated in the cost of drilling such well. (C) If there is a disagreement amongst the Parties regarding the abandonment of such well, those wishing to continue operations shall assume financial responsibility over the well and shall be deemed to be Consenting Parties conducting an Exclusive Operation pursuant to Article VII. In the case of a producing well, the Consenting Parties shall be entitled to continue producing only from the Zone open to production at the time they assumed responsibility for the well. (D) Consenting Parties taking over a well as provided above shall tender to each of the Non-Consenting Parties such Non-Consenting Parties' Participating Interest share of the value of the well's salvable material and equipment, determined in accordance with the Accounting Procedure, less the estimated cost of salvaging and the estimated cost of plugging and abandoning as of the date the Consenting Party assumed responsibility for the well; provided, however, that in the event the estimated cost of plugging and abandoning and the estimated cost of salvaging are higher than the value of the well's salvable material and equipment, each of the abandoning Parties shall continue to be liable pursuant to Article 7.3(B) for their respective Participating Interest shares of the estimated excess cost. (E) Each Non-Consenting Party shall be deemed to have relinquished to the Consenting Parties in proportion to their Participating Interests all of its interest in the wellbore of a produced well and related equipment in accordance with Article 7.4(B), insofar and only insofar as such interest covers the right to obtain production from that wellbore in the Zone then open to production. (F) Subject to Article 7.9(G), Operator shall continue to operate a produced well for the account of the Consenting Parties at the rates and charges contemplated by this Agreement, plus any additional cost and charges which may arise as the result of the separate allocation of interest in such well. 10.2 ABANDONMENT OF EXCLUSIVE OPERATIONS This Article shall apply mutatis mutandis to the abandonment of an Exclusive Well or any well in which an Exclusive Operation has been conducted; provided that no well shall be permanently plugged and abandoned unless and until all Parties having the right to conduct further operations in such well have been notified of the proposed abandonment and afforded the opportunity to elect to take over the well in accordance with the provisions of this Article X. ARTICLE XI - SURRENDER 11.1 SURRENDER (A) If the Contract requires the Parties to surrender any portion of the Contract Area, Operator shall advise the Operating Committee of such requirement at least one hundred and twenty (120) Days in advance of the earlier of the date for filing irrevocable notice of such surrender or the date of such surrender. Prior to the end of such period, the Operating Committee shall determine pursuant to Article V, the size and shape of the surrendered area, consistent with the requirements of the Contract. If no proposal attains the support of one hundred percent (100%) of the Participating Interests, then the proposal receiving the largest aggregate Participating Interest vote shall be adopted. The Parties shall execute any and all documents and take such other actions as may be necessary to effect the surrender. Each Party renounces all claims and causes of action against Operator and any other Parties on account of any area surrendered in accordance with the foregoing but against its recommendation if Hydrocarbons are subsequently discovered under the surrendered area. (B) A surrender of all or any part of the Contract Area which is not required by the Contract shall require the unanimous consent of the Parties. ARTICLE XII - TRANSFER OF INTEREST OR RIGHTS 12.1 OBLIGATIONS (A) Subject always to the requirements of the Contract, the transfer of all or part of a Party's Participating Interest shall be effective only if it satisfies the terms and conditions of this Article. (B) Except in the case of a Party transferring all of its Participating Interest, no transfer shall be made by any Party which results in the transferor or the transferee holding a Participating Interest of less than ten percent (10%) or holding any Interest other than a Participating Interest in the Contract, the Contract Area and this Agreement.

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(C) The transferring Party shall, notwithstanding the transfer, be liable to the other Parties for any obligations, financial or otherwise, which have vested, matured or accrued under the provision of the Contract or this Agreement prior to such transfer. Such obligations shall include, without limitation, any proposed expenditure approved by the Operating Committee, prior to the transferring Party notifying the other Parties of its proposed transfer. (D) The transferee shall have no rights in and under the Contract, the Contract Area or this Agreement unless and until it obtains any necessary Government approval and expressly undertakes in writing to perform the obligations of the transferor under the Contract and this Agreement in respect of the Participating Interest being transferred, to the satisfaction of the Parties and furnishes any guarantees required by the Government or the Contract. (E) The transferee shall have no rights in and under the Contract, the Contract Area or this Agreement unless each Party has consented in writing to such transfer, which consent shall be denied only if such transferee fails to establish to the reasonable satisfaction of each Party its financial or technical capability to perform its obligations under the Contract and this Agreement. (F) Nothing contained in this Article shall prevent a Party from mortgaging, pledging, charging or otherwise encumbering all or part of its interest in the Contract Area in and under this Agreement for the purpose of security relating to finance provided that: (1) such Party shall remain liable for all obligations relating to such interest; (2) the encumbrance shall be subject to the approval of the Management Committee and any necessary approval under the Contract and be expressly subordinated to the rights of the other Parties under this Agreement; and (3) such Party shall ensure that any such mortgage, pledge, charge or encumbrance shall be expressed to be without prejudice to the provisions of this Agreement. (G) In the event a Party receives an offer to purchase all or a part of its Participating Interest, it shall so notify the other Parties and they shall have the right for a period of ten (10) days to make an offer. If a Party elects to sell all or a part of its Participating Interest, it shall so notify the other Parties upon offering the Participating Interest for sale. 12.2 RIGHTS Each Party shall have the right, subject to the provisions of Article 12.1, to freely transfer its Participating Interest. ARTICLE XIII - WITHDRAWAL FROM AGREEMENT BY TRANSFER OR ASSIGNMENT 13.1 RIGHT OF WITHDRAWAL (A) Subject to the provisions of the Contract and this Article, any Party may withdraw from this Agreement and the Contract by giving notice to all other Parties stating its decision to withdraw and specifying a proposed effective date of withdrawal which shall be at least sixty (60) Days, but not more than one hundred eighty (180) Days after the date of such notice. Such notice shall be unconditional and irrevocable when given. (B) Notwithstanding Article 13.1(A) a Party shall not have the right to withdraw from this Agreement and the Contract until the Minimum Work Obligation set forth in the Contract has been fulfilled. However, if the Operating Committee or any Party decides to accept new Minimum Work Obligations under the Contract, a Party that voted against such decision shall not be prevented from withdrawing; provided that such Party delivers notice of its withdrawal to all Parties within thirty (30) Days of such vote and fully satisfies its outstanding Minimum Work Obligation, if any. (C) Subject to Articles 13.1(A) and (B) and Article 13.5, the effective date of withdrawal for a withdrawing Party shall be the later of: (1) The date proposed in the notice of withdrawal; or (2) The date that the withdrawing Party has fulfilled its obligations under this Article. 13.2 PARTIAL OR COMPLETE WITHDRAWAL (A) Within thirty (30) Days of receipt of each withdrawing Party's notification, each of the other Parties may also give notice that it desires to withdraw from this Agreement and the Contract. Should all Parties give notice of withdrawal, the Parties shall proceed to abandon the Contract Area and terminate the Contract and this Agreement. If less than all of the Parties give such notice of withdrawal, then the withdrawing Parties shall take all steps to withdraw from the Contract and this Agreement on the earliest possible date and execute and deliver all necessary instruments and documents to assign their Participating Interest to the Parties which are not withdrawing, without any compensation whatsoever, in accordance with the provisions of Article 13.6.

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(B) If any part of the withdrawing Party's Participating Interest remains unclaimed after sixty (60) Days from the date of the first notice of withdrawal, the Parties shall be deemed to have decided to withdraw from the Contract and this Agreement, unless at least one Party agrees to accept the unclaimed Participating Interest. (C) Any Party withdrawing under this Article shall withdraw from all exploration activities under the Contract, but not from any Exploitation Area, Commercial Discovery, or Discovery whether appraised or not, made prior to such withdrawal. Such withdrawing Party shall retain its rights in the Joint Property but only insofar as they relate to any Exploitation Area, Commercial Discovery or Discovery whether appraised or not, and shall abandon all other rights in the Joint Property. 13.3 VOTING After giving its notification of withdrawal, a Party shall not be entitled to vote on any matters coming before the Operating Committee, other than matters for which such Party has financial responsibility. 13.4 OBLIGATIONS AND LIABILITIES (A) A withdrawing Party, prior to its withdrawal, shall satisfy all obligations and liabilities it has incurred or attributable to it prior to its withdrawal, including, without limitation, any expenditures budgeted and/or approved by the Operating Committee prior to its written notification of withdrawal (development projects included), and any liability for acts, occurrences or circumstances taking place or existing prior to its withdrawal. Furthermore, any liens, charges and other encumbrances which the withdrawing Party placed on such Party's Participating Interest prior to its withdrawal shall be fully satisfied or released, at the withdrawing Party's expense, prior to its withdrawal. A Party's withdrawal shall not relieve it from liability to the non-withdrawing Parties with respect to any obligations or liabilities attributable to the withdrawing Party which are not identified or identifiable at the time of withdrawal. (B) Notwithstanding the foregoing, a Party shall not be liable for any operations or expenditures it voted against if it sends notification of its withdrawal within five (5) Days (or within twenty-four (24) hours if the drilling rig to be used in such operation is standing by on the Contract Area) of the Operating Committee vote approving such operation or expenditure, nor shall such Party be liable for any operations or expenditures approved by the Operating Committee, excluding those approved pursuant to Article 13.5, after notice has been given pursuant to Article 13.1. 13.5 EMERGENCY A Party's notification of withdrawal shall not become effective if prior to the proposed date of withdrawal a well goes out of control or a fire, blowout, sabotage or other emergency occurs. The notification of withdrawal shall become effective only after the emergency has been contained and the withdrawing Party has paid, or has provided security satisfactory to the Parties, for its Participating Interest share of the costs of such emergency. 13.6 ASSIGNMENT A withdrawing Party shall assign its Participating Interest to each of the non-withdrawing Parties which shall be allocated to them in the proportion which each of their Participating Interests (prior to the withdrawal) bears to the total Participating Interests of all the non- withdrawing Parties (prior to the withdrawal), unless the non- withdrawing Parties agree otherwise. The expenses associated with the withdrawal and assignments shall be borne by the withdrawing Party. 13.7 APPROVALS A withdrawing Party shall promptly join in such actions as may be necessary or desirable to obtain any Government approvals required in connection with the withdrawal and assignments, and any penalties or expenses incurred by the Parties in connection with such withdrawal shall be borne by the withdrawing Party. 13.8 ABANDONMENT SECURITY (A) A withdrawing Party shall provide Security satisfactory to the other Parties to satisfy any such obligations or liabilities which were approved or accrued prior to notice of withdrawal, but which become due after its withdrawal, including, without limitation, Security to cover the costs of an abandonment, if applicable. (B) Failure to provide Security shall constitute default under this Agreement. (C) "Security" means a standby letter of credit issued by a bank or an on demand bond issued by a corporation, such bank or corporation having a credit rating indicating it has sufficient worth to pay its obligations in all reasonably foreseeable circumstances, or, failing the provision of either of those, cash contributed to a secure fund administered by independent trustees and invested in
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short term securities. 13.9 WITHDRAWAL OR ABANDONMENT BY ALL PARTIES In the event all Parties decide to withdraw or are required to do so pursuant to this Article, the Parties agree that they shall be bound by the terms and conditions of this Agreement and the Contract for so long as may be necessary to wind up the affairs of the Parties with the Government, to satisfy any requirements of applicable law and facilitate the sale, disposition or abandonment of property or interests held by the Joint Account. ARTICLE XIV - RELATIONSHIP OF PARTIES AND TAX 14.1 RELATIONSHIP OF PARTIES Unless otherwise specified, the rights, duties, obligations and liabilities of the Parties under this Agreement shall be individual, not joint or collective. It is not the intention of the Parties to create, nor shall this Agreement be deemed or construed to create a mining or other partnership, joint venture, association or trust, or as authorizing any Party to act as an agent, servant or employee for any other Party for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each other under this Agreement, the Parties shall not be considered fiduciaries except as expressly provided in this Agreement. 14.2 TAX Each Party shall be responsible for reporting and discharging its own tax measured by the income of the Party and the satisfaction of such Party's share of all contract obligations under the Contract and under this Agreement. Each Party shall protect, defend and indemnify each other Party from any and all loss, cost or liability arising from a failure or refusal to report and discharge such taxes or satisfy such obligations. ARTICLE XV - CONFIDENTIAL INFORMATION - PROPRIETARY TECHNOLOGY 15.1 CONFIDENTIAL INFORMATION (A) Subject to the provisions of the Contract, the Parties agree that all information and data acquired or obtained by any Party in respect of Joint Operations shall be considered confidential and shall be kept confidential and not be disclosed during the term of the Contract and for a period of one (1) year after expiration of the Contract to any person or entity not a Party to this Agreement, except: (1) To an Affiliate, in connection with Petroleum Operations, provided such Affiliate maintains confidentiality as provided in this Article; (2) To a governmental agency or other entity when required by the Contract; (3) To the extent such data and information is required to be furnished in compliance with any applicable laws or regulations, or pursuant to any legal proceedings or because of any order of any court binding upon a Party; (4) Subject to Article 15.1(B), to potential contractors, contractors, consultants and attorneys employed by any Party where disclosure of such data or information is essential to such contractor's, consultant's or attorney's work; (5) Subject to Article 15.1(B), to a bona fide prospective transferee of a Party's Participating Interest (including an entity with whom a Party or its Affiliates is conducting bona fide negotiations directed toward a merger, consolidation or the sale of a majority of its or an Affiliate's shares); (6) Subject to Article 15.1(B), to a bank or other financial institution to the extent appropriate to a Party arranging for funding for its obligations under this Agreement; (7) To the extent such data and information must be disclosed pursuant to any rules or requirements of any government or stock exchange having jurisdiction over such Party, or its Affiliates; provided that if any Party desires to disclose information in an annual or periodic report to its or its Affiliates' shareholders and to the public and such disclosure is not required pursuant to any rules or requirements of any government or stock exchange, then such Party shall comply with Article 20.2; (8) To its respective employees for the purposes of Joint Operations, subject to each Party taking customary precautions to ensure such data and information is kept confidential; (9) Where any data or information which, through no fault of a Party, becomes a part of the public domain.
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(B) Disclosure as pursuant to Article 15.1(A)(4), (5), and (6) shall not be made unless prior to such disclosure the disclosing Party has obtained a written undertaking from the recipient party to keep the data and information strictly confidential and not to use or disclose the data and information except for the express purpose for which disclosure is to be made. 15.2 CONTINUING OBLIGATIONS Any Party ceasing to own a Participating Interest during the term of this Agreement shall nonetheless remain bound by the obligations of confidentiality and any disputes shall be resolved in accordance with Article XVIII. 15.3 PROPRIETARY TECHNOLOGY (A) Nothing in this Agreement shall require a Party to divulge proprietary technology to the other Parties; provided that where the cost of development of proprietary technology has been charged to the Joint Account, such proprietary technology shall be disclosed to all Parties bearing a portion of such cost and may be used by such Party or its Affiliates in other operations. Operator will not charge for the use of its proprietary technology. Operator will use reasonable efforts to keep Non-Operators informed of the use of the proprietary technology. (B) Non-Operators shall have access to basic field data obtained through Operator's utilization of proprietary technology and to final maps, data and information resulting from such utilization, with entitlement to copies of such basic final data, maps and information as provided for in this Agreement. 15.4 TRADES Notwithstanding the foregoing provisions of this Article, Operator may, with approval of the Management Committee, make data trades for the benefit of the Parties, with any data, the cost of which has been charged to the Joint Account, so obtained to be furnished to all Parties. In such event, Operator must enter into an undertaking with any third party to such trade to keep such information confidential. ARTICLE XVI - FORCE MAJEURE 16.1 OBLIGATIONS If as a result of Force Majeure any Party is rendered unable, wholly or in part, to carry out its obligations under this Agreement, other than the obligation to pay any amounts due or to furnish security, then the obligations of the Party giving such notice, so far as and to the extent that the obligations are affected by such Force Majeure, shall be suspended during the continuance of any inability so caused, but for no longer period. The Party claiming Force Majeure shall notify the other Parties of the Force Majeure situation within seven (7) days, unless prevented from so doing, after the occurrence of the facts relied on and shall keep all Parties informed of all significant developments. Such notice shall give particulars establishing the event of Force Majeure, and also estimate the period of time which said Party will probably require to remedy the Force Majeure. The affected Party shall use all reasonable diligence to remove or overcome the Force Majeure situation as quickly as possible in an economic manner, but shall not be obligated to settle any labor dispute except on terms acceptable to it and all such disputes shall be handled within the sole discretion of the affected Party. 16.2 DEFINITION OF FORCE MAJEURE (A) For the purpose of this Agreement, the term Force Majeure means any cause or event, other than the unavailability of funds, whether similar to or different from those enumerated herein, beyond the reasonable control of, and unanticipated and unforeseeable by, and not brought about at the instance of the Party claiming to be affected by such event, or which, if anticipated or foreseeable, could not be avoided or provided for and which has caused the non-performance or delay in performance. Without limitation to the generality of the foregoing, the term Force Majeure shall include natural phenomena or calamities, earthquakes, typhoons, fires, wars declared or undeclared, hostilities, invasion, blockades and civil disturbances. (B) Where a Party is prevented from exercising any rights or performing any obligations under this Agreement due to Force Majeure, the time for the performance of the obligations affected thereby and for performance of any obligation or the exercise of any right dependent thereon, and the term of this Agreement, may be extended by such additional period as may be agreed by the Parties. (C) Notwithstanding anything contained hereinabove, if any event of Force Majeure occurs and is likely to continue for a period in excess of thirty (30) days, the Parties shall meet to discuss the consequences of the Force Majeure and the course of action to be taken to mitigate the effects thereof or to be adopted in the circumstances. ARTICLE XVII - NOTICES
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Except as otherwise specifically provided, all notices authorized or required between the Parties by any of the provisions of this Agreement, shall be in writing, in English and delivered in person or by registered mail or by courier service or by any electronic means of transmitting written communications which provides confirmation of complete transmission, with the date and time, and addressed to such Parties as designated below. The originating notice given under any provision of this Agreement shall be deemed delivered only when received by the Party to whom such notice is directed, and the time for such Party to deliver any notice in response to such originating notice shall run from the date the originating notice is received. The second or any responsive notice shall be deemed delivered when received. "Received" for purposes of this Article with respect to written notice delivered pursuant to this Agreement shall be actual delivery of the notice to the address of the Party to be notified specified in accordance with this Article. Each Party shall have the right to change its address at any time and/or designate that copies of all such notices be directed to another person at another address, by giving written notice thereof to all other Parties. Any notice to be provided hereunder shall be deemed to be received by the sending Party upon delivery of such notice to the other Parties. Operator shall, in the event of its failure to meet cash calls or make timely payments when due to the Non-Operators, be deemed to have received notice as if it had been timely sent to Operator.

Enron Oil & Gas India Ltd. Limited Amiya Apartments, 1st Floor 63A Linking Road, Santa Cruz (W) Bombay 400 054, INDIA Attention: Managing Director Telecopy: 91-22-604-9119

Oil & Natural Gas Corporation Tower II, 8th Floor, Jeevan Bharati 124 Connaught Circus New Delhi 110001, INDIA Attention: General Manager Telecopy: 91-11-331-6413

Reliance Industries Limited Maker Chambers IV, 3rd Floor 222 Nariman Point Bombay 400021, INDIA Attention: Chief Executive Officer Oil & Gas Telecopy: 022-2042268 ARTICLE XVIII - APPLICABLE LAW AND DISPUTE RESOLUTION 18.1 APPLICABLE LAW This Agreement shall be governed by, construed, interpreted and applied in accordance with the laws of India. 18.2 DISPUTE RESOLUTION (A) Disputes and claims, if any, arising out of or relating to this Agreement or the interpretation or performance of provisions of any of the Articles of this Agreement and which cannot be settled amicably within a reasonable time may be submitted to the decision of a sole expert timely selected by the Operating Committee or a board of arbitrators. (B) The board of arbitrators shall consist of three (3) arbitrators. (C) The Party or Parties instituting the arbitration shall appoint one arbitrator and the Party or Parties responding shall appoint another arbitrator and both Parties shall so advise the other Parties. The two (2) arbitrators appointed by the Parties shall appoint the third arbitrator. (D) If the responding Party or Parties fails to appoint an arbitrator within thirty (30) Days of the receipt of the written request to do so, such arbitrator may, at the request of the first Party, be appointed by the Secretary General of the Permanent Court of Arbitration at The Hague, which arbitrator shall not be the national of the country of either Party. (E) If the two (2) arbitrators fail to agree on the appointment of the third arbitrator within thirty (30) days of the appointment of the second arbitrator and if the Parties do not otherwise agree,the Secretary General of the Permanent Court of Arbitration at the Hague may, at the request of either Party and in consultation with both, appoint the third arbitrator who shall not be a national of the country of either Party. (F) If any arbitrator fails or is unable to act, his successor shall be appointed in the manner set out in this Article as if he was the first appointment. (G) The decision of the board of arbitrators, and in case of difference amongst the arbitrators, the decision of the majority shall be final
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and binding upon the Parties. Such decision may be entered into the Indian court having jurisdiction thereof. (H) Arbitration proceedings shall be in accordance with the arbitration rules of the United Nations Commission on International Trade Laws ("UNCITRAL") of 1985 except that in the event of any conflict between these rules and the provisions of Article 18, the provisions of Article 18 shall govern. (I) The venue of arbitration shall be in London, England and shall be conducted in the English language. The arbitration agreement contained in this Article 18 shall be governed by the laws of England. (J) Assessment of costs of arbitration including incidental expenses and liability for the payment thereof shall be at the discretion of the arbitrators. (K) The right to arbitrate disputes and claims under this Agreement shall survive the termination of this Agreement. (L) The arbitrators shall make reasoned award. (M) The sole expert, if any, shall be an independent and impartial person of international standing with relevant qualifications and experience appointed by agreement between the Parties. Any sole expert appointed shall be acting as an expert and not as an arbitrator and the decision of the sole expert on matters referred to him shall be final and binding on the Parties and not subject to arbitration. If the Parties are unable to agree on a sole expert, the disputed subject matter may be referred to arbitration. (N) The fees and expenses of a sole expert appointed by the Parties shall be borne equally by the Parties. ARTICLE XIX - ALLOCATION OF COST RECOVERY RIGHTS 19.1 ALLOCATION OF TOTAL PRODUCTION For the purposes of recovery of Petroleum Costs, the total quantity of Hydrocarbons which are produced and saved from all Development Areas in a Calendar Quarter and to which the Parties are entitled under the Contract shall be designated as either Cost Petroleum or Profit Petroleum. Such Cost Petroleum and Profit Petroleum shall be allocated among the Development Areas in proportion to each Development Area's total quantity of Hydrocarbons produced and saved in such Calendar Quarter with adjustments in quantities to reflect the differences in value if different qualities of Hydrocarbons are produced, segregated and sold separately. 19.2 ALLOCATION OF COST PETROLEUM Cost Petroleum allocated to each Development Area pursuant to Article 19.1 shall be allocated to the Parties in proportion to their respective Participating Interests in each such Development Area to the extent required to recover in the sequence incurred all Petroleum Costs which are specifically attributable to each such Development Area and which are recoverable in such Calendar Quarter. 19.3 ALLOCATION OF PROFIT PETROLEUM Profit Petroleum allocated to each Development Area pursuant to Article 19.1, if any, shall be allocated among the Parties in proportion to their respective Participating Interests in each such Development Area. 19.4 ALLOCATION OF EXCESS COST PETROLEUM Subject to the Contract, to the extent that the value, determined in accordance with Article 9.2(H), of the Cost Petroleum allocated to each Development Area pursuant to Article 19.1 exceeds the Petroleum Costs which were specifically attributable to each such Development Area and which were recovered pursuant to Article 19.2, the excess ("Excess Cost Petroleum") shall be allocated as follows: (A) First, a percentage (equal to the percentage of Profit Petroleum, if any, to which the Parties would have been entitled during such Calendar Quarter if the Contract applied separately to each such Development Area) of the Excess Cost Petroleum shall be allocated among the Parties in proportion to their respective Participating Interests in each such Development Area; (B) Second, the Excess Cost Petroleum that is not allocated pursuant to Article 19.4(A) shall be allocated among the Parties in proportion to their respective Participating Interests as set out in Article 3.1(A) in order to recover in the sequence incurred any Petroleum Costs which were incurred in the conduct of Joint Operations and which are recoverable in such Calendar Quarter; and

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(C) Third, the Excess Cost Petroleum that is not allocated pursuant to Article 19.4(A) or Article 19.4(B) shall be allocated among the Parties in proportion to their respective Participating Interests in each Exclusive Operation in order to recover in the sequence incurred any Petroleum Costs which were incurred in the conduct of Exclusive Operations and which are recoverable in such Calendar Quarter. ARTICLE XX - GENERAL PROVISIONS 20.1 CONFLICTS OF INTEREST (A) Each Party undertakes that it shall avoid any conflict of interest between its own interests (including the interests of Affiliates) and the interests of the other Parties in dealing with suppliers, customers and all other organizations or individuals doing or seeking to do business with the Parties in connection with activities contemplated under this Agreement. (B) The provisions of the preceding paragraph shall not apply to: (1) A Party's performance which is in accordance with the local preference laws or policies of the host government; or (2) A Party's acquisition of products or services from an Affiliate, or the sale thereof to an Affiliate, made in accordance with rules and procedures established by the Operating Committee. (C) Each Party shall conduct all of its activities pursuant to this Agreement and the Contract in compliance with all laws, rules and regulations applicable to such Party. Each of the Parties warrants that it has not made and will not make, with respect of the matters provided for hereunder, any payments, loans, gifts or promises of payments, loans or gifts, directly or indirectly to or for the use or benefit of any official or employee of the Government or to or for the use of any political party. Each Party shall respond promptly, and in reasonable detail, to any Notice from any other Party or the auditors pertaining to the above stated warranty and shall furnish documentary support for such response upon request from such Party. 20.2 PUBLIC ANNOUNCEMENTS (A) Operator shall be responsible for the preparation and release of all public announcements and statements regarding this Agreement or the Joint Operations; provided that, no public announcement or statement shall be issued or made unless prior to its release all the Parties have been furnished with a copy of such statement or announcement and the unanimous approval of the Parties has been obtained. Where a public announcement or statement becomes necessary or desirable because of danger to or loss of life, damage to property or pollution as a result of activities arising under this Agreement, Operator is authorized to issue and make such announcement or statement without prior approval of the Parties, but shall promptly furnish all the Parties with a copy of such announcement or statement. (B) If a Party wishes to issue or make any public announcement or statement regarding this Agreement or the Joint Operations, it shall not do so unless prior to its release, such Party furnishes all the Parties with a copy of such announcement or statement, and obtains the unanimous approval of the Parties; provided that, notwithstanding any failure to obtain such approval, no Party shall be prohibited from issuing or making any such public announcement or statement if it is necessary to do so in order to comply with the applicable laws, rules or regulations of any government, legal proceedings or stock exchange having jurisdiction over such Party as set forth in Articles 15.1(A)(3) and (7). 20.3 SUCCESSORS AND ASSIGNS Subject to the limitations on transfer contained in Article XII, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties. 20.4 WAIVER No waiver by any Party of any one or more defaults by another Party in the performance of this Agreement shall operate or be construed as a waiver of any future default or defaults by the same Party, whether of a like or of a different character. Except as expressly provided in this Agreement no Party shall be deemed to have waived, released or modified any of its rights under this Agreement unless such Party has expressly stated, in writing, that it does waive, release or modify such right. 20.5 SEVERANCE OF INVALID PROVISIONS If and for so long as any provision of this Agreement shall be deemed to be judged invalid for any reason whatsoever, such invalidity shall not affect the validity or operation of any other provision of this Agreement except only so far as shall be necessary to give effect to the construction of such invalidity, and any such invalid provision shall be deemed severed from this Agreement without affecting the validity of the balance of this Agreement.
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20.6 MODIFICATIONS Except as is provided in Article 20.5, there shall be no modification of this Agreement except by written consent of all Parties. 20.7 HEADINGS The topical headings used in this Agreement are for convenience only and shall not be construed as having any substantive significance or as indicating that all of the provisions of this Agreement relating to any topic are to be found in any particular Article. 20.8 SINGULAR AND PLURAL Reference to the singular includes a reference to the plural and vice versa. 20.9 GENDER Reference to any gender includes a reference to all other genders. 20.10 COUNTERPART EXECUTION This Agreement may be executed in any number of counterparts and each such counterpart shall be deemed an original Agreement for all purposes; provided no Party shall be bound to this Agreement unless and until all Parties have executed a counterpart. For purposes of assembling all counterparts into one document, Operator is authorized to detach the signature page from one or more counterparts and, after signature thereof by the respective Party, attach each signed signature page to a counterpart. 20.11 CONFLICT WITH CONTRACT In the event of any inconsistency between the provisions of the Contract and this Agreement, the provisions of the Contract shall prevail. 20.12 ENTIRETY This Agreement is the entire agreement of the Parties and supersedes all prior understandings and negotiations of the Parties. IN WITNESS of their agreement each Party has caused its duly authorized representative to sign this instrument on the date indicated below such representative's signature. ENRON OIL & GAS INDIA LTD.

By:

/s/ A. KOPECKY A. Kopecky (Print or type name) Title: Vice President Operations Date: 22 Dec 94

RELIANCE INDUSTRIES LIMITED

By:

/s/ AKHIL GUPTA Akhil Gupta (Print or type

name)
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Title: Date:

CEO (Oil & Gas) 22-12-94

OIL & NATURAL GAS CORPORATION LIMITED

By:

/s/ Iswari Datt ISWARI DATT (Print or type name) Title: Director Operations (on leave) Date: 22-12-94

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EXHIBIT A ACCOUNTING PROCEDURE Attached to and made part of the Joint Operating Agreement, hereinafter called the "Agreement," by and between OIL & NATURAL GAS CORPORATION LIMITED, ENRON OIL & GAS INDIA LTD. AND RELIANCE INDUSTRIES LIMITED. SECTION I. GENERAL PROVISIONS 1.1 PURPOSE.

1.1.1 and

The purpose of this Accounting Procedure is to establish equitable methods for determining charges credits applicable to operations under the Agreement which reflect the costs of Joint Operations to the end that no Party shall gain or lose in relation to other Parties.

1.1.2 the

The Parties agree, however, that if the methods prove unfair or inequitable to Operator or Non-Operators, Parties will meet and in good faith endeavor to agree on changes in methods deemed necessary to correct any unfairness or inequity.

1.2 provi

CONFLICT WITH AGREEMENT. In the event of a conflict between the sions of this Accounting Procedure and the provisions of the Agreement to which this Accounting Procedure is attached, the provisions of the Agreement shall prevail.

1.3

DEFINITIONS. The definitions contained in Article I of the Agreement to which this Accounting Procedure is attached shall apply to this Accounting Procedure and have the same meanings when used herein.

Certain terms used herein are defined as follows: "COUNTRY OF OPERATIONS" shall mean India. "MATERIAL" shall mean property, not including real property, acquired and held for use in Joint Operations. 1.4 JOINT ACCOUNT RECORDS AND CURRENCY EXCHANGE.

1.4.1 in

All accounts, records, books, reports and statements shall be maintained on an accrual basis and prepared the English language. The accounts shall be maintained in United States Dollars, which shall be the controlling currency of account for cost recovery, production sharing and participation purposes. Metric units and Barrels shall be employed for measurements required under the Contract. Operator shall maintain accounts and records in Indian Rupees also.

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1.4.2

Operator shall maintain accounting records pertaining to Joint Operations in accordance with generally accepted accounting practices used in the petroleum industry and any applicable statutory obligations of the Country of Operations as well as

international

the provisions of this Contract and the Agreement. 1.4.3 For translation purposes between United States Dollars and India Rupees or any other currency, the previous month's average of the daily means of the buy and selling rates of exchange as quoted by the State Bank of India (or any other financial body as may be mutually agreed between the Parties) shall be used for the month in which the revenues, costs, expenditures, receipts or income are recorded. However, in the case of any single non-United States Dollar transaction in excess of the equivalent of One Hundred Thousand States Dollars (US$100,000), the conversion into United States Dollars shall be performed on the basis of the average of the applicable exchange rates for the Day on which the transaction occurred. 1.4.4 credited Any currency exchange gains or losses shall be or charged to the Joint Account, except as otherwise specified in this Accounting Procedure. 1.4.5 This Accounting Procedure shall apply, mutatis mutandis, to Exclusive Operations in the same manner that it applies to Joint Operations; provided, that the charges and credits applicable to Consenting Parties shall be distinguished by an Exclusive Operation Account. For the purpose of determining and calculating the remuneration of the Consenting Parties, including the premiums for Exclusive Operations, the costs and expenditures shall be expressed in U.S. currency (irrespective of the currency in which the expenditure was incurred).

United

however,

1.5 STATEMENTS AND BILLINGS.

1.5.1 Day

Unless otherwise agreed by the Parties, Operator shall submit monthly to each Party, on or before the 25th of each month, statements of the costs and

expenditures incurred during the prior month, indicating by appropriate classification the nature thereof and the portion of such costs charged to each of the Parties.
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These statements shall contain the following information: advances of funds setting forth the currencies received from each Party the share of each Party in total expenditures on a cash and accrual basis the current account cash balance of each Party summary of costs, credits, and expenditures on a rent month, year-to-date, and inception-to-date basis or other periodic basis, as agreed by the Parties for each line item of the approved Work Program and Budget unusual charges and credits in excess of U.S. dollars one hundred thousand (U.S.$100,000.00) and all adjustments arising out of audit shall be detailed.

cur

1.5.2

Operator shall, upon request, furnish a description of the accounting classifications used by it. Amounts included in the statements and billings shall be expressed in U.S. currency and reconciled to the currencies advanced. Other currency equivalents may be presented as agreed between the Parties. Each Party shall be responsible for preparing its own accounting and tax reports to meet the Country of Operations and other country requirements. Operator, the extent that the information is reasonably

1.5.3

1.5.4

to available from the Joint Account records, will provide in a timely manner Non-Operators with the necessary statements to facilitate the discharge of such responsibility. 1.5.5 The billing statement is to be accompanied by billing schedules which shall be schedules dividing such expenditure and income into main classifications of expenditure as indicated by approved budget and AFEs issued. The billing schedules shall also show cumulative totals of all payments linked to AFEs and budget categories and receipts.

1.6

PAYMENTS AND ADVANCES. 1.6.1 Upon approval of any Work Program and Budget, if Opera tor so requests, all Parties, including the Operator, shall advance its share of estimated cash requirements for the succeeding month's operations. Each such cash call shall be equal to the Operator's estimate of the money to be spent in the currencies required to
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perform

its duties under the approved Work Program and Budget during the month concerned. For informational purposes the cash call shall contain an estimate of the funds required for the succeeding two (2) months. All such cash calls shall be related to the progress/activities achieved and to planned progress/activities to be achieved during the period concerned. 1.6.2 Each such cash call, detailed by major budget categories and AFEs (where applicable), shall be made in writing and delivered to all Non-Operators not less than fifteen (15) Days before the payment due date. Except as otherwise provided in Section 1.6.4, the due date for payment of such advances shall be set by Operator but shall be no sooner than the first Day of the month for which the advances are required. If, and only if, a Non-Operator believes that the cash call or a portion thereof is not as per the approved Work Program and Budget and AFE (where applicable), the Party may inform its view to all Parties within five (5) Business Days of the receipt of such cash call. Operator may issue a revised cash call. If no revision is issued, payment to the Operator shall be made by the due date as follows: as to the Non-Operator who raised the dispute, the non- disputed amount; and as to other Parties, the amount as determined by such Party's original cash call prior to the dispute, plus a portion of the disputed amount determined by the ratio of each such Party's Participating Interest to the sum of all Participating Interests of the Parties who did not dispute the cash call within the said five (5) Business Days. Notwithstanding the provisions of Article 8.9, the amount in dispute shall be paid date by the disputing Party by the due date to an interest bearing joint escrow account where such funds will be held until the matter in dispute has been resolved. The issue arising out of such disputed cash call shall be resolved as soon as practicable by any appropriate means including, but not limited to, discussing the issue in the next Operating Committee meeting so as to assist in resolving the matter, failing which, the matter may be submitted to arbitration by any Party and the arbitrator shall determine appropriate distribution of the escrow account, plus, if appropriate, penal interest specified in Article 8.1. 1.6.3 Each Non-Operator shall remit its share of the full amount of each such cash call to Operator on or before the due date, in the currencies requested which must freely convertible or any other currencies acceptable to Operator, and at a bank designated by Operator for
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Business

be

the purpose of Joint Operations. If currency provided by a Non-Operator is other than the requested currency, then the entire cost of converting to the requested currency shall be charged to that Non-Operator. Nothing herein shall relieve any Non- Operator from the obligation to provide immediately available funds, in full, by the due date. 1.6.4 Should Operator be required to pay any sums of money for the Joint Operations as per the approved Work Program and Budget which were unforeseen at the time providing the Non-Operators with said estimates of its requirements, the Operator may make a written request of the Non-Operators for special advances covering the Non-Operators' share of such payments. Each such Non-Operator shall make its proportional special advances within ten (10) Business Days after receipt of such notice. 1.6.5 When the total of cash calls for any month is one million U.S. dollars (U.S.$1,000,000.00) or less, each Party, including the Operator, shall advance its share thereof in accordance with this Section 1.6. When the total cash requirements exceed the aforesaid amount, each Party, including the Operator, shall advance its share of the estimated funds required in three (3) installments of amounts to be specified by the Operator, the first installment to be paid not later than the first Business Day of the month for which the advance is required and the second installment to be paid not later than the tenth Day of the month for which the advance is required or if such Day is not a Business Day, then the following Business Day and the third installment to be paid not later than the twentieth Day of the month for which the advance is required or if such Day is not a Business Day, then following Business Day. The third installment can be adjusted by the Operator by notifying the Parties, including the Operator, of the adjusted amount no later than the fifteenth Day of the month for which the advance is required. 1.6.6 If a Non-Operator's advances exceed its share of cash expenditures, succeeding month's cash requirements, after such determination, shall be reduced A Non- Operator may request that its excess advances be refunded. Operator shall make such refund within ten (10) Business Days after receipt of the Non-Operator's request provided that the amount is in excess of the cash requirements for the month of such determination. If the Operator does not make such refund within ten (10) Business Days, then the Operator shall pay each
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of

the

accordingly.

Party requesting a refund the difference between the Agreed Interest Rate and the interest earned on the Joint Account. 1.6.7 If Non-Operator's advances are less than its share of cash expenditures, the deficiency shall, at Operator's option, be added to subsequent cash advance requirements or be paid by Non-Operator within eight (8) Business Days following the receipt of Operator's billing to Non-Operator for such deficiency. Along notice of payment due, the Operator shall provide details supporting that the Non- Operator's advance is less than its share of cash expenditures.

with

1.6.8 interest-bearing

Any interest received by Operator from accounts containing funds received from the Parties shall be credited to the Parties. The interest earned will be allocated to the Parties on an equitable basis taking into consideration date of funding by each

Party to the accounts in proportion to the total funding into the account. A monthly statement summarizing receipts, disbursements, transfers to each joint bank account and beginning and ending balances thereof shall be provided by the Operator to the Parties. 1.6.9 Work Program and Budget shall be made on or before the due date. If these payments are not received by the due date the unpaid balance shall bear and accrue interest from the due date until the payment is received by the Operator at the Agreed Interest Rate. For the purpose of determining the unpaid balance and interest owed, Operator shall translate to U.S. currency all amounts owed in other currencies using the currency exchange rate readily available to Operator at the close of the last banking Day prior to the due date for the unpaid balance as quoted by the applicable authority identified in Section 1.4.3. 1.6.10 have the right, at any time and from time to time, to convert the funds advanced or any part thereof to other currencies to the extent that such currencies are then required for operations. The cost of any such conversion shall be charged to the Joint Account. However, such conversions should be avoided as far as practical. 1.6.11 Operator shall endeavor to maintain funds held in bank accounts for the Joint Account at a level consistent
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Payments of cash calls or billings as per approved

Subject to governmental regulation, Operator shall

with that required for the prudent conduct of Joint Operations. 1.7 ADJUSTMENTS. Payments of any advances or billings shall not prejudice the right of any Non-Operator to protest or question the correctness thereof; provided, however, all bills and statements ren dered to Non-Operators by Operator during any Financial Year shall conclusively be presumed to be true and correct after twenty-four (24) months following the end of such Financial Year, unless within the said twenty-four (24) month period a Non-Operator takes written exception thereto and makes claim on Operator for adjustment. on the part of a Non-Operator to make claim on Operator for adjustment within such period shall establish the correctness thereof and preclude the filing of exceptions thereto or making claims for adjustment thereon. No adjustment favorable to Operator shall be made unless it is made within the same prescribed period. The provisions of this paragraph shall not prevent adjustments resulting from a physical inventory of the Property as provided for in Section VI. The Operator shall be allowed to make adjustments to the Joint Account after such twenty-four (24) month period if these adjustments result from audit exceptions outside of this agreement, third party claims, or Government requirements. Any such adjustments shall be subject to audit within the time period specified in Section 1.8.1. 1.8 AUDITS. 1.8.1 A Non-Operator, upon at least sixty (60) Days advance notice in writing to Operator and all other Non-Operators, shall have the right to audit the Joint Accounts and records of Operator relating to the accounting hereunder for any Financial Year within the twenty-four (24) month period following the end of Financial Year. The cost of each such audit shall be borne by Non-Operators conducting the audit. It is provided, however, that Non- Operators must take written exception to and make claim upon the Operator for all discrepancies disclosed by said audit within said twenty-four (24) month period. Where there are two or more Non-Operators, the Non-Operators shall make every reasonable effort to conduct joint or simultaneous audits in a manner which will result in a minimum of inconvenience to the Operator. Operator and Non-Operators shall make every effort to resolve any claim resulting from an audit within a reasonable period of time. A Non-Operator may audit the records of an Affiliate of Operator relating to that Affiliate's charges. The provisions of this Accounting Procedure shall apply mutatis mutandis to such audits. 1.8.2 Any information obtained by a Non-Operator under the provisions of this Section 1.8 which does not relate
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Failure

such

directly to the Joint Operations shall be kept confidential and shall not be disclosed to any party, except as would otherwise be permitted by Article 15.1(A)(3) and (9) of the Agreement. 1.8.3 The Operator is required by Contract to employ a qualified independent firm of internationally recognized chartered accountants registered in India audit the Contract Account Books and records of Operator relating to the accounting hereunder, the cost thereof shall be a charge against the Joint Account, and a copy of the accounting reports and audit report shall be furnished to each Party within ninety (90) days of the close of a Financial Year. 1.9 ALLOCATIONS. If it becomes necessary to allocate any common costs or expenditures to or between Joint Operations and any other operations, such allocation shall be made on an equitable basis in accordance with international accounting standards. Upon request, Operator shall furnish a description of its allocation procedures pertaining to these costs and expenditures. A Non-Operator may Operating Committee to review such allocation basis and Operating Committee may decide a revision to the allocation, failing which, the matter may be referred to a sole expert or arbitration.

to

cause

SECTION II. DIRECT CHARGES

Operator shall charge the Joint Account with all costs and expenditures incurred in connection with Joint Operations. It is also understood that charges for services normally provided by an Operator such as those contemplated in Section 2.4.2.2 which are provided by Operator's Affiliates shall reflect the cost to the Affiliate, excluding profit, for performing such services, except as otherwise provided in Section 2.4.2 and Section 2.4.2.3 if selected. The costs and expenditures will be recorded as required for the settlement of accounts between the Parties hereto in connection with the rights and obligations under this Agreement and for purposes of complying with Country of Operations and United States tax laws. Without in any way limiting the generality of the foregoing, chargeable costs and expenditures shall include: 2.1 LICENSES, PERMITS, ETC. All costs, if any, attributable to the acquisition, maintenance, renewal or relinquishment of licenses, permits, contractual and/or surface rights acquired for Joint Operations and bonuses paid in accordance with the Contract when paid by Operator in accordance
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with the provisions of the Agreement. 2.2 LABOR AND ASSOCIATED COSTS. 2.2.1 OPERATOR'S LOCALLY RECRUITED EMPLOYEES BASED IN INDIA. Costs of all Operator's locally recruited employees who are directly engaged in the conduct of Petroleum Operations under the Contract in India. Such costs shall include the costs of employee benefits and Government benefits for employees and levies imposed on the Operator as an employer, transportation and relocation costs within India of the employee and such members of the employee's family (limited to spouse and dependent children) as required by law or customary practice in India. If such employees are engaged in other activities in India, in addition to Petroleum Operations, the cost of such employees shall be apportioned on a time sheet basis according to sound and acceptable accounting and costing principles. 2.2.2 ASSIGNED PERSONNEL. Costs of salaries and wages, including bonuses, of the Operator's employees directly and necessarily engaged in the conduct of the Petroleum Operations under the Contract, whether temporarily or permanently assigned, irrespective of the location of such employees, it being understood that in the case of those personnel only a portion of whose time is wholly dedicated to Petroleum Operations under the Contract, only that pro rata portion of applicable salaries, wages and other costs, as specified in Sections 2.2.3, 2.2.4, 2.2.5, 2.2.6 and 2.2.7 shall be charged and the basis of such pro rata allocation shall be specified. 2.2.3 housing and other customary allowances applicable to the salaries and wages chargeable under Section 2.2.2 above. 2.2.4 Expenses or contributions made pursuant to assessments or obligations imposed under the laws of India which are applicable to the Operator's cost of salaries and wages chargeable under Section 2.2.2 above. The Operator's cost of established plans for group life insurance, hospitalization, pension, retirement and other benefit plans of a like nature customarily granted to the Operator's employees provided, however, that such costs are in accordance with generally accepted standards in the international petroleum industry, applicable to salaries and wages
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The Operator's costs regarding holiday, vacation, sickness and disability benefits and living and

2.2.5 employees'

chargeable to petroleum operations under Section 2.2.2 above. 2.2.6 Personal Income taxes where and when they are paid by the Operator to the Government of India for the employee, in accordance with the Contractor's standard personnel policies. Reasonable transportation and travel expenses of employees of the Operator, including those made for travel and relocation of the expatriate employees, including their dependent family and personal effects, assigned to India whose salaries and wages are chargeable to petroleum operations under Section Actual transportation expenses of personnel transferred to petroleum operations from their country of origin and/or relocation to their country of origin expenses shall be charged to the petroleum operations. 2.2.8 Transportation cost as used in this Section shall mean the cost of freight and passenger service and any accountable incidental expenditures related to travel and authorized under Operator's standard personnel policies. Operator shall ensure that all expenditures related to transportation costs are equitably allocated to the activities which have benefited from the personnel concerned. 2.3 TRANSPORTATION COSTS. The reasonable cost of transportation of equipment, materials and supplies within India and from outside India to India necessary for the conduct of petroleum operations under the Contract, including, but not limited to, directly related costs such as unloading charges, dock fees and inland and ocean freight charges. 2.4 CHARGES FOR SERVICES. 2.4.1 THIRD PARTIES. The actual costs of contract services, services of professional consultants, utilities and other services necessary for the conduct of petroleum operations under the Contract performed by third parties other than an Affiliate of the Operator, provided that the transactions resulting in such costs are undertaken pursuant to arms length transactions. 2.4.2 AFFILIATES OF OPERATOR. 2.4.2.1 PROFESSIONAL AND ADMINISTRATIVE SERVICES AND EXPENSES. Cost of professional and 78 administrative services provided by any Affiliate for the
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2.2.7

2.2.2.

transfer

direct benefit of petroleum operations, including, but not limited to, services provided by the produc tion, exploration, legal, financial, insurance, accounting and computer services divisions other than those covered by Section 2.4.2.2 which Operator may use in lieu of having its own employees. Charges shall be equal to the actual cost of providing their services, shall not include any element of profit and shall not be any higher than the most favorable prices charged by the Affiliate to third parties for comparable services under similar terms and conditions elsewhere and will be fair and reasonable in the light of prevailing international oil industry practice and experience. 2.4.2.2 SCIENTIFIC OR TECHNICAL PERSONNEL. Cost of scientific or technical personnel services provided by any Affiliate of Operator for the direct benefit of petroleum operations, which cost shall be charged on a cost of service basis without element of profit. Charges therefor shall not exceed charges for comparable services currently provided by outside technical service organizations of comparable qualifications. Unless the work to be done by such personnel is covered by an approved budget and Work Programme, Operator shall not authorize work by such personnel without approval of the Management Committee. 2.4.2.3 Equipment, facilities and property owned and furnished by the Operator's Affiliates, at rates commensurate with the cost of ownership and operation provided, however, that such rates shall not exceed those currently prevailing for the supply of like equipment, facilities and property on comparable terms in the area where the petroleum operations are being conducted. The equipment and facilities referred to herein shall exclude major investment items such as (but not limited to) drilling rigs, producing platforms, oil treating facilities, oil and gas loading and transportation systems, storage and terminal facilities and other major facilities, rates for which shall be subject to separate agreement with the Government.

2.5

COMMUNICATIONS. Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems including satellite, radio and microwave facilities between the Contract Area and the Operator's base facility, offices, helicopter bases, port and railway yards.
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2.6

OFFICE, SHORE BASES AND MISCELLANEOUS FACILITIES. Net cost to Operator of establishing, maintaining and operating any office, sub-office, shore base facility, warehouse, housing or other facility directly serving the petroleum operations. If any such facility services contract areas other than the Contract Area, or

any business other than petroleum operations, the net costs thereof shall be allocated on an equitable and consistent basis.

2.7

ENVIRONMENTAL STUDIES AND PROTECTION. Costs incurred in conducting the environmental impact studies for

the Contract Area, and in taking environmental protection measures pursuant to the terms of the Contract.

2.8. INSURANCE. Premiums paid for insurance required by law, the Contract or the Agreement to be carried for the benefit of the Joint Operations. 2.9. DAMAGES AND LOSSES TO PROPERTY.

2.9.1

All costs or expenditures necessary to replace or repair damages or losses incurred by fire, flood, storm, theft, accident, or any other cause. Operator shall furnish Non- Operators written notice of damages or losses incurred in excess of Fifty Thousand U.S. Dollars (U.S.$50,000) as soon as practical after of the same has been received by Operator. All losses in excess of Fifty Thousand U.S. Dollars (U.S.$50,000) shall be listed separately in the monthly statement of costs and expenditures.

report

2.9.2. carried for

Credits for settlements received from insurance for the benefit of Joint Operations and from others losses or damages to Joint Property or Materials. Each Party shall be credited with its Participating

Interest share thereof except where such receipts are derived from insurance purchased by Operator for less than all Parties in which event such proceeds shall be credited to those Parties for whom the insurance was purchased in the proportion of their respective contributions toward the insurance coverage. 2.9.3. Expenditures incurred in the settlement of all losses, claims, damages, judgements and other expenses for the benefit of Joint Operations.
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2.10 LITIGATION AND LEGAL EXPENSES.

2.10.1

Legal services necessary or expedient for the protection of the Joint Operations, and all costs and expenses of litigation, arbitration or other alternative dispute resolution procedure, including reasonable attorneys' fees and expenses, together with all judgments obtained against the Parties or any of them arising from the Joint Operations. If the Parties hereunder shall so agree, actions or claims affecting the Joint Operations hereunder may be handled by the legal staff of one or any of the hereto; and a charge commensurate with the reasonable costs of providing and furnishing such services rendered may be made against the Joint Account, but no such charges shall be made until approved by the Parties.

2.10.2.

Parties

2.11

TAXES AND DUTIES. All taxes, duties, assessments and governmental charges, of every kind and nature, assessed or levied upon or in connection with the Joint Operations, other than any that are measured by or based upon the revenues, income and net worth of a Party. If Operator or as a result of the Agreement, amount of such an Affiliate is subject to income or withholding tax services performed at cost for the operations under its charges for such services may be increased by the taxes incurred (grossed up).

2.12

OTHER EXPENDITURES. Any other costs and expenditures incurred by the Operator for the necessary and proper conduct of the Joint Operations in accordance with approved Work Programs and Budgets and not covered in this Section II or in Section III.

SECTION III. INDIRECT CHARGES

3.1

Operator shall charge the Joint Account monthly for the cost of indirect services and related office costs of Operator and its Affiliates not otherwise provided in this Accounting Procedure. No cost or expenditure included under Section II shall be included or duplicated under this Section III. Indirect services and related office costs of Operator and its Affiliates outside the Country of Operations include but are not limited to the cost of the following functions which are of benefit to the Joint Operations:
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Executive, Administrative, & Managerial Treasury and Financial Services Tax and Legal Human Resources Insurance Accounting and Internal Control Employee Training and Medical Safety and Security Budgeting and Forecasting Communications 3.2 to-Date") under Section 3.1 above shall be a percentage of the Year- to-Date Parties' total direct expenditures, charged to the Joint Account, The charge for the period beginning with the Financial Year through the end of the period covered by Operator's invoice ("Year-

calculated on the following scale (U.S. Dollars): ANNUAL EXPENDITURES

One percent (1%) of expenditures 3.3 The expenditures used to calculate the monthly indirect charge shall not include the indirect charge (calculated either as a percentage of expenditures or as a minimum monthly charge), rentals on surface rights acquired and maintained for the Joint Account, guarantee deposits, concession acquisition costs, bonuses paid in accordance with the Contract, royalties and taxes paid under the Contract, settlement of claims, proceeds from the sale of assets (in cluding division in kind) amounting to more than U.S.$10,000 per transaction, and similar items mutually agreed upon by the Parties. Credits arising from any government subsidy payments and disposi tion of Joint Account property shall not be deducted from total expenditures in determining such charge. 3.4 practice, these charges are found to be insufficient or excessive. SECTION IV. ACQUISITION OF MATERIAL AND EQUIPMENT 4.1 MATERIALS AND EQUIPMENT. 4.1.1 GENERAL. So far as is practicable and consistent with efficient and economical operation, only such material shall be purchased or furnished by the Operator for use in the petroleum operations as may be required for use in the reasonably foreseeable future and the accumulation of
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The indirect charges provided for in this Section III may be amended periodically by mutual agreement between the Parties if, in

surplus stocks shall be avoided to the extent possible. 4.1.2 WARRANTY. In the case of defective material or equipment, any adjustment received by the Operator from the suppliers or manufacturers or their agents in respect of any warranty on material or equipment shall be credited to the accounts under the Agreement. 4.1.3 VALUE OF MATERIALS CHARGED TO THE ACCOUNTS UNDER THE CONTRACT. 4.1.3.1 Except as otherwise provided in subparagraph 4.1.2, materials purchased by the Operator and used 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, customs duties, consular fees, other items chargeable against imported material and, where applicable, handling and transportation costs from point of importation to warehouse or operating site, and these costs shall not exceed those currently prevailing in normal arms length transactions on the open market. 4.1.3.2 Material purchased from or sold to Affiliates or transferred to or from activities of the Operator other than petroleum operations under the Contract. 4.1.3.2.1 new material (hereinafter referred to as condition A) shall be valued at the current international price which shall not exceed the price prevailing in normal arms length transactions on the open market; 4.1.3.2.2 used material which is in sound and serviceable condition and is suitable for reuse without reconditioning (hereinafter referred to as condition B) shall be priced at not more than seventy five percent (75%) of the current price of the above mentioned new materials; 4.1.3.2.3 used material which cannot be classified as condition B, but which, after reconditioning, will be further serviceable for original function as good second-hand condition B material or is serviceable for original function, but substantially not suitable for reconditioning (hereinafter referred to as condition C) shall be priced at not more than
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fifty per cent (50%) of the current price of the new material referred to above as condition A. The cost of reconditioning shall be charged to the reconditioned material, provided that the condition C material value plus the cost of reconditioning does not exceed the value of condition B material. Material which cannot be classified as condition B or condition C shall be priced at a value commensurate with its use. Material involving erection expenditure shall be charged at the applicable condition percentage (referred to above) of the current knocked-down price of new material referred to above as condition A. When the use of material is temporary and its service to the Petroleum Operations does not justify the reduction in price in relation to materials referred to above as conditions B and C, such material shall be priced on a basis that will result in a net charge to the accounts under the Contract consistent with the value of the service rendered. 4.2 PREMIUM PRICES. Whenever Material is not readily obtainable at prices specified in Section 4.1 of this Section IV because of national emergencies, strikes or other unusual causes over which the Operator has no control, the Operator may charge the Joint Account for the required Material at the Operator's actual cost incurred procuring such Material, in making it suitable for use, and moving it to the Contract Area, provided that notice in writing, including a detailed description of the Material required and the required delivery date, is furnished to Non-Operators of the proposed charge at least 10 Days (or such shorter period as may be specified by Operator) before the Material is projected to be needed for operations and prior to billing Non-Operators for such Material the cost of which exceeds two hundred thousand U.S. shall have the right, Days (or such shorter receiving notice from his share of such Material per the terms of the notice which is suitable for use and acceptable to Operator both as to quality and time of delivery. Such acceptance by Operator shall not be unreasonably withheld. If a Non-Operator fails to properly submit an election notification within the designated period, the Operator is not required to accept Material furnished in kind by that Non-Operator. If the Operator fails to submit proper notification prior to billing Non-Operators for such Material, Operator shall only charge the Joint Account on the basis of the price allowed during a "normal" pricing
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Dollars (U.S. $200,000.00). Each Non-Operator by so electing and notifying Operator within 5 period as may be specified by Operator) after Operator, to furnish in kind all or part of

period in effect at time of movement. If Material furnished is deemed unsuitable for use by the Operator, all costs incurred in disposing of such Material or returning Material to owner shall be borne by the Non-Operator furnishing the same unless otherwise agreed by the Parties.

SECTION V. DISPOSAL OF MATERIALS

5.1

The Operator shall be under no obligation to purchase the interest of Non-Operators in new or used surplus Materials. Operator shall have the right to dispose of Materials but shall advise and secure prior agreement of the Operating Committee of any proposed disposition of Materials having an original cost to the Joint either individually or in the aggregate of Fifty Thousand U.S. Dollars (US$50,000) or more. Credits for Material sold by the Operator shall be made to the Joint Account in the month in which payment is received for the Material. Any Material sold or disposed of under this Section shall be on an "as is, where is" basis without guarantees or warranties of any kind or nature. Costs and expenditures incurred by Operator in the disposition of Materials shall be charged to the Joint Account.

Account

5.2

Division of Materials in kind, if made between Operator and NonOperators, shall be in proportion to their respective interests in such Material. Each Party will thereupon be charged individually with its share of the agreed volume of Material received or receivable by each Party, and corresponding credits will be made by Operator to the Joint Account. Such credits shall appear in the monthly statement of Joint Operations.

SECTION VI. RECORDS AND INVENTORIES OF ASSETS

6.1

RECORDS. 6.1.1 The Operator shall keep and maintain detailed records of property and assets in use for or in connection petroleum operations under the Agreement in accordance with normal practices in exploration and production activities of the international petroleum industry. Such records shall include information on quantities, location and condition of such property and assets,

with

and whether such property or assets are leased or owned.

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6.1.2

The Operator shall furnish annually particulars to the Non-Operator, by notice in writing as provided in the Agreement, of all major assets acquired by the to be used for or in connection with petroleum operations.

Operator

6.2

INVENTORIES. 6.2.1 The Operator shall: 6.2.1.1 not less than once every twelve (12) Months with respect to movable assets take an inventory of the controllable assets used for or in connection with petroleum operations in terms of the Contract and address and deliver such inventory to the non-operators with a statement of the principles upon which valuation of the assets mentioned in such inventory has been based. Controllable assets means those assets the operators submit to detailed record keeping. 6.2.1.2 not less than once every three (3) years with respect to immovable assets, take an inventory of the assets used for or in connection with petroleum operations in terms of the Contract and address and deliver such inventory to the Non- Operators together with a written statement of the principles upon which valuation of the assets mentioned in such inventory has been based. Immovable assets means those assets which are placed in service and have an original cost in excess of Fifty Thousand United States Dollars (US$50,000). 6.2.1.3 Reconciliation of inventory with charges to

the Joint Account shall be made by Operator and the Operator shall furnish to the Non-Operators a copy of the inventory and a priced list of excesses and shortages.

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EXHIBIT "B" DESCRIPTION OF CONTRACT AREA

The area comprising approximately 430 sq. km offshore India identified as Panna Block and the area comprising approximately 777 sq. km offshore India identified as the Mukta Block described herein and shown under map attached as Appendix B-1 and B-2. Longitude and Latitude measurements are as follows: MUKTA (about 100 km Northwest of Bombay) See Appendix B-2.

A. 19 38'00"E B. 19 54'00"E C. 19 54'00"E D. 19 38'00"E

LATITUDE Degrees 27'00"N Degrees 27'00"N Degrees 12'00"N Degrees 12'00"N

LONGITUDE 71 Degrees 71 Degrees 71 Degrees 71 Degrees

PANNA (about 95 km Northwest of Bombay) See Appendix B-1.

A. B. C. D. E.

19 19 19 19 19

LATITUDE Degrees 28'00"N Degrees 28'00"N Degrees 19'30"N Degrees 15'00"N Degrees 15'00"N

71 72 72 72 71

LONGITUDE Degrees 54'00"E Degrees 05'00"E Degrees 05'00"E Degrees 00'00"E Degrees 54'00"E APPENDIX - B1 MAP OF CONTRACT

AREA PANNA BLOCK

WESTERN INDIA OFFSHORE BOMBAY BASIN [MAP AND INSET OF CONTRACT AREA] APPENDIX - B2 MAP OF CONTRACT AREA MUKTA BLOCK

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WESTERN INDIA OFFSHORE BOMBAY BASIN [MAP AND INSET OF CONTRACT AREA]

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EXHIBIT "C" EXAMPLE FROM ENRON OIL & GAS INDIA LTD. CASH CALL FOR: JUNE 1, 199

JUNE AUGUST I. Exploration/Appraisal Costs Geological and Geophysical Core Hole Drilling Exploration Wells Wells A Wells B Facilities Costs Subtotal

JULY

10 10 20 20

X X

40 5

II. Development Costs Development Wells Wells A Wells B Production Facilities Platforms Pipeline/Flow Lines Engineering Studies Service Costs Subtotal

20 20 50 10

40

X X

60 2 3

X X

III Production Costs Lease and Well

IV. General and Administrative Costs

15

V.

Fixed Assets and Deposits Grand Total

X X X ------------------------------190 XX XX 200 (190) ----10

April 1994 Cash Call April 1994 Actual Net Over (Under) Call Total Cash Due June 1, 1994

(10) --180 ====

ONGC EOGIL RIL

40% Share 30% Share 30% Share

US$72 US$54 US$54

NOTE: The cash call for June 1 is expected to be issued on or before May 15. EXHIBIT "D"
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BUDGET FORMAT (FOR EXAMPLE ONLY) ENRON OIL & GAS INDIA LTD. FINANCIAL YEAR 1994/95

I. Exploration/Appraisal Costs *Geological and Geophysical *Core Hole Drilling *Exploration Wells (1) Wells A (Firm; Specifically defined) (2) Wells B (Contingent; Funds provided, but specifics to be approved by Operating Committee) Sub-Total XX II. Costs Wells (Firm; Specifically defined) (Contingent; Funds provided, but specifics to be approved by Operating Committee) *Production Facilities (1) Platforms (a) Firm (b) Contingent; Funds provided, but specifics to be approved by Operating Committee (2) Storage Facilities (3) Terminals (4) Pipelines/Flow Lines *Engineering Studies *Service Costs Sub-Total III. Production Costs *Lease and Well Sub-Total IV. V. General and Administrative Fixed Assets and Deposits Development *Development (1) Wells A (2) Wells B

X X X X

X X

X X

X X X X X --XX

X --XX XX XX

Grand Total Costs XXX NOTE 1: Each line above represents budget line items. Each budget line item shall be supplemented, if appropriate, by explanatory schedules, unquantified examples of which follow as Tables D-1 through D-8, showing magnitude and timing of expenditures and description of the work to be achieved. It is intended that the Operating Committee shall have full authority to reclassify funds from Contingent to Firm. VI. Revenue XXX NOTE 2: Categories III and IV are considered operating cost and are not subject to AFEs, except that some items in category III may require AFEs for workovers as per Article 6.9.
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APPROVALS

For EOGIL _______________________ (signature)

_______________________ (print name and date) For RIL _______________________ (signature)

_______________________ (print name and date) For ONGC _______________________ (signature)

_______________________ (print name and date)

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TABLE D-1 ENRON OIL & GAS INDIA LTD. (FOR APPROVAL) BUDGET AND WORK PROGRAM BUDGET SUMMARY Financial Year 1994/95 (In '000 U.S. Dollars)
ITEM CODE 1994 QTR 2 1994 QTR 3 1994 QTR 4 1995 QTR 1 TOTAL 94/95 FINANCIAL YEAR * REMAIN PROJECT TOTAL PROJECT

DESCRIPTION

I. Exploration/Appraisal Costs Geophysical and Geological Core Hole Drilling Exploration Drilling (Firm Wells) (Contingent Wells) Total Exploration Costs II. Development Costs Development Drilling (Firm Wells) (Contingent Wells) Production Facilities Costs Total Development Costs III. Production Costs IV. General and Administrative V. Fixed Assets and Deposits Total Project Costs VI. Revenue *If X in this column, the item is a Minimum Work Obligation item. NOTE: Categories III and IV are considered operating cost and are not subject to AFEs, except that certain items in category III may require AFEs for workovers as per Article 6.9.

FOR EOGIL _____________________ _____________________ _____________________ _____________________

FOR RIL _____________________

FOR ONGC

_____________________

TABLE D-2 ENRON OIL & GAS INDIA LTD. INFORMATION) BUDGET AND WORK PROGRAM Geophysical and Geological Expense Financial Year 1994/95 (In '000 U.S. Dollars)
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(FOR

TOTAL 94/95 FINANCIAL YEAR ITEM CODE DESCRIPTION 1994 QTR 3 1994 QTR 4 1995 QTR 1 *

95/96 FINANCIAL YEAR

96/97 FINANCIAL YEAR

Geophysical Costs Seismic Survey (Firm) Positioning (Firm) Field Supervision (Firm) Scouting/Chase Boats/Misc. (Firm) Data Processing (See Note) (Firm) Data Reprocessing (Firm) Supervisory/Support Costs (Firm) Technical Service (Firm) Total Geophysical Costs Geological Costs Geochem and Biostrat Analysis (Firm) Core Analysis (Firm) Special Studies and Consultation (Firm) PVT Fluid Analysis (Firm) Supervisory/Support Costs (Firm) Technical Service (Firm) Total Geological Costs Communications Costs (Firm) Total Geophysical and Geological *If X in this column, the item is a Minimum Work Obligation item. TABLE D-3 ENRON OIL & GAS INDIA LTD. (FOR INFORMATION) BUDGET AND WORK PROGRAM Development Drilling (Firm Wells) Financial Year 1994/95 (In '000 U.S. Dollars)
TOTAL 94/95 FINANCIAL YEAR ITEM CODE DESCRIPTION 1994 QTR 3 1994 QTR 4 1995 QTR 1 * 95/96 FINANCIAL YEAR 96/97 FINANCIAL YEAR

Drilling (Firm wells) Drilling and Completion Intangibles Drilling and Completion Tangibles Drilling (Contingent wells) Total Drilling Shore Base (1) (Firm) Communications Expense (2) (Firm)
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Supervisory/Support Staff (Firm) Total Drilling/Operations Costs *If X in this column, the item is a Minimum Work Obligation item. NOTE: (1) Lease costs only of $ /day (2) Monthly communications expense allocated as follows: Drilling Construction Exploration G&A (3) Inventory costs included in Fixed Assets Additional Note: Specifics to be added which would clearly delineate each individual "Firm" well proposed. A separate page following this format would be provided for "Contingent" wells for which funds are proposed but technical specifications are not available until a future Operating Committee meeting. TABLE D-4 ENRON OIL & GAS INDIA LTD. (FOR INFORMATION) BUDGET AND WORK PROGRAM Production Facilities Costs Financial Year 1994/95
(In '000 U.S. Dollars) ITEM CODE 1994 QTR 3 1994 QTR 4 1995 QTR 1 TOTAL 94/95 FINANCIAL YEAR * 95/96 FINANCIAL YEAR 96/97 FINANCIAL YEAR

DESCRIPTION

PANNA FIELD DEVELOPMENT CCP Jacket (Contingent) CCP Deck (Contingent) Platform PF (Contingent) Platform PG (Contingent) WH Decks (Contingent) Pipeline (Contingent) Living Quarters/Platform (Contingent) Flare Tripod Structure (Contingent) Total Panna/Mukta Development TAPTI FIELD DEVELOPMENT Preliminary Engineering (Firm) Platform STB (Firm) Platform STC (Firm) Platform STF (Firm) TPP Jacket (Firm) TPP Deck/Bridge (Firm) Pipeline (Firm) Total Tapti Development Supervisory/Support Costs (Firm) Technical Services (Firm) TOTAL PRODUCTION FACILITIES
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*If X in this column, the item is a Minimum Work Obligation item. TABLE D-5 ENRON OIL & GAS INDIA LTD. (FOR INFORMATION) BUDGET AND WORK PROGRAM Production Costs Financial Year 1994/95 (In '000 U.S. Dollars)
TOTAL 94/95 FINANCIAL YEAR ITEM CODE DESCRIPTION 1994 QTR 3 1994 QTR 4 1995 QTR 1 * 95/96 FINANCIAL YEAR 96/97 FINANCIAL YEAR

Panna/Mukta EPS FSO PA PB PQ PE MA Sub-Total PPA PQ PC PF PG Sub-Total Total Panna/Mukta (Firm) Tapti TPP, STB, STC, STF (Firm) Total Tapti Communications (Firm) Supervision and Support (Firm) Technical Services (Firm) Total Production Costs *If X in this column, the item is a Minimum Work Obligation item. TABLE D-6 ENRON OIL & GAS INDIA LTD. (FOR INFORMATION) BUDGET AND WORK PROGRAM General and Administrative Expense Financial Year 1994/95 (In '000 U.S. Dollars)
TOTAL 94/95 96/97 ITEM FINANCIAL CODE DESCRIPTION YEAR 1994 QTR 3 1994 QTR 4 1995 QTR 1 FINANCIAL YEAR * 95/96 FINANCIAL YEAR

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Salaries and Benefits Expat Salary and Benefits National Salary and Benefits Total Salaries and Benefits (Firm) Other G&A Moving Costs Travel and Entertainment Subscriptions and Memberships Office Rental Telephone and Telecommunications Utilities Repair and Maintenance Security Office Supplies Legal and Accounting Insurance Technical Services Technical Publications, Books, Maps Other Outside Services Bank Fees Training Total Other G&A (Firm) Total General and Administrative *If X in this column, the item is a Minimum Work Obligation item. NOTE: Other G&A costs apply to all other departments accumulating costs not budgeted elsewhere. vii TABLE D-7 ENRON OIL & GAS INDIA LTD. (FOR INFORMATION) BUDGET AND WORK PROGRAM Fixed Assets and Deposits Financial Year 1994/95 (In '000 U.S. Dollars)
TOTAL 94/95 96/97 ITEM FINANCIAL CODE YEAR 1994 DESCRIPTION QTR 3 1994 QTR 4 1995 QTR 1 FINANCIAL YEAR * 95/96 FINANCIAL YEAR

Office Furniture/Fixtures Office Furniture Office Equipment Drafting Equipment Computer Equipment Communication Equipment Expat Housing Furniture/Appliances Other Leasehold Improvements Total Furniture/Fixture/Equipment (Firm) Motor Vehicles Inventory Warehouse and Yard Deposits Office Expat Housing/Apartments Warehouse
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Telephone, Fax, Other Total Deposits/Prepaids (Firm) Total Fixed Assets and Deposits *If X in this column, the item is a Minimum Work Obligation item. TABLE D-8 ENRON OIL & GAS INDIA LTD. (FOR INFORMATION) BUDGET AND WORK PROGRAM Revenue Financial Year 1994/95 (In '000 U.S. Dollars)
ITEM CODE 1994 QTR 3 1994 QTR 4 1995 QTR 1 TOTAL 94/95 FINANCIAL YEAR * 95/96 FINANCIAL YEAR 96/97 FINANCIAL YEAR

DESCRIPTION

Revenues Oil Production Gas Production Other Income Total Revenues

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EXHIBIT "E" DATA TO BE PROVIDED TO NON-OPERATORS Operator shall provide the following data to Non-Operators: A. DAILY PROGRESS REPORTS 1. Daily drilling progress report for each well which shall include the brief description of work performed, the interval drilled, the type and depth of the formation penetrated, the size and landed depth of any casing landed and cementation details thereof, the results of any tests made and any problems encountered. 2. Daily production report giving field-wise information on the oil, gas, condensate and water produced, number of wells flowing, the quantity of produced oil and gas handed over for custody transfer, available data describing quality of the crude transferred (including, as available, gravity, water content, salinity, pour point for oil and dew point and calorific value), H2S content of gas handed over as available, and any lighterage details as and when it takes place. 3. Daily cash statements. 4. Water injection reports, if any, giving quantity and quality of water injected, number of wells/strings on injection, wellhead injection pressures, etc. 5. Workover and well servicing reports covering the details of workover operations and well stimulations/activation operations (well-wise). 6. Construction reports covering the details of the activities, if any, carried out at offshore for installation of well platforms, pipelines, process platforms and other activities with details of barges deployed, etc. B. OTHER PERIODIC REPORTS Other reports will cover the following aspects and will be provided at frequencies (monthly, quarterly or otherwise) as appropriate: 1. Exploration: Status of various surveys carried out vis-a-vis plan, data acquisition and data processing details vs. plan, any discovery made with details of the test data of the discovery well zone-wise. 2. Drilling: (a) Summary report on each well drilled after drilling is concluded. (b) Cumulative drilling meterage (both development and exploratory) achieved during the month against plan (wellwise), idle and productive time of rigs, details of the material consumption (casing, mud chemicals and other well completion equipments). 3. Production: (a) Cumulative production of oil, gas, condensate, water and water injection including, as available, field-wise, layer- wise and well-wise actual results vs. plan of production/injection. Cumulative quantity of crude oil, condensate and gas sold. Party-wise share of the sold oil, gas and condensate. (b) (i) The quantity of gas internally consumed and flared, details of material consumption for various production activities (chemicals, tubulars, completion equipment, etc.). (ii) Average quantity of produced crude oil (if applicable), gas, effluent discharge and water injected. (iii) Status reports on major/critical equipments/facilities and maintenance thereof. (c) Monthly test data of the wells. (d) Daily ullage of tanker at SBM (if applicable). (e) Daily Report on deployment of personnel on board.

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4. Developmental/Construction Activities: Major construction/development activities in progress. Status of progress of these activities with respect to schedule. 5. Capital and operating expenditure against plan (to be reported quarterly containing information on monthly and year-to-date expenditures). 6. Copies of various well logs and surveys as they become available. 7. Reports of DST (including basic data), core analysis and any other special studies conducted as they become available. 8. Well completion and work-over reports as they become available. 9. Copies of all geological, geochemical, petrophysical and geophysical data/reports and, when finalized, maps prepared by the Operator or by the subcontractor except the magnetic tapes which shall be stored by the Operator and made available for inspection and/or copying at the sole expense of the non-operating Parties requesting same. 10. Copies of reservoir management reports including field and well performance reports and reservoir studies reports and estimate reports as they become available. 11. Reports on sub-sea soil surveys, environmental surveys, sub-sea pipelines and risers inspection, reports on repair and maintenance of sub-sea pipeline and risers as they become available. 12. Any emergency shutdown of operations affecting oil/gas production/dispatch, drilling operations, etc., must be reported as soon as practicable on telephone followed by telex, facsimile, etc., giving the details of effect on production/drilling and the likely duration of shutdown. A normalization report also to be sent when the operations resume and become normal. 13. Reports on all incidents of: pipeline and riser leakage/failure, oil spills, fire, any structural failures, blow-out, explosion, sabotage, other accidents involving loss of property.life, etc., strikes/riots affecting operations/production, etc., should be sent as soon as practicable by the Operator to the non-operating Parties, Government and other agencies such as Oil Industries Safety Directorate ("OISD"), Director General Hydrocarbon, Oil Co- ordination Committee ("OCC"), Offshore Defense Advisory Group ("ODAG") and other statutory bodies whichever is applicable, on telephone followed by telex/facsimile giving the details. 14. Fortnightly cash balance report. C. INFORMATION, DATA, CONFIDENTIALITY, INSPECTION AND SECURITY The Contractor shall, promptly after they become available make available to the Government in its offices all data obtained as a result of petroleum operations under the Contract including, but not limited to, geological, geophysical, geochemical, petrophysical, engineering, well logs, maps, magnetic tapes, cores and production data as well as all interpretative and derivative data, including reports, analyses, interpretations and evaluation prepared in final form in respect of petroleum operations (hereinafter referred to as ("Data"). Data shall be the property of the Government, provided however, that the Contractor shall have the right to make use of such Data, free of cost, for the purpose of petroleum operations under this Agreement as provided herein.

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GRAPHICAL CONTENT APPENDIX Appendix - B1 Map of Contract Area - Panna Block Appendix - B2 Map of Contract Area - Mukta Block

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EXHIBIT 10.51 PRODUCTION SHARING CONTRACT AMONG THE GOVERNMENT OF INDIA AND OIL & NATURAL GAS CORPORATION LIMITED AND RELIANCE INDUSTRIES LIMITED AND ENRON OIL & GAS INDIA LTD. WITH RESPECT TO CONTRACT AREA IDENTIFIED AS PANNA AND MUKTA FIELDS

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TABLE OF CONTENTS ARTICLE CONTENTS Preamble Definitions Duration Relinquishment Work Programme Management Committee Operatorship and Operating Agreement General Rights and Obligations of the Parties Government Assistance Discovery, Development and Production Unit Development Measurement of Petroleum Protection of the Environment Recovery of Costs Production Sharing of Petroleum between Contractor and Government Taxes, Royalties, Rentals, etc. Payment Customs Duties Domestic Supply, Sale, Disposal and Export of Crude Oil Valuation of Oil Currency and Exchange Control Provisions Natural Gas Employment, Training and Transfer of Technology Local Goods and Services Insurance and Indemnification Records, Reports, Accounts and Audit Information, Data, Confidentiality, Inspection and Security Title to Petroleum, Data and Assets Assignment of Interest Guarantee Termination of Contract Force Majeure Applicable Law and Language of the Contract Sole Expert, Conciliation and Arbitration Entire Agreement, Amendments, Waiver and Miscellaneous Certificates Notices

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. APPENDICES: Appendix A Appendix B Appendix C

Description of Contract Area Map of Contract Area Accounting Procedure to Production Sharing Contract Calculation of the Investment Multiple for Production Sharing Purposes Form of Financial and Performance

Appendix D

Appendix E Guarantee

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Appendix F Appendix G

Equipment Development Commitment Specified by the Companies Production Profile of the Panna and Mukta Fields

Appendix H

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This Contract made and entered into as of the 22nd day of December 1994 by and among: THE PRESIDENT OF INDIA, acting through the Joint Secretary (Exploration), Ministry of Petroleum and Natural Gas (hereinafter referred as Government);

AND OIL & NATURAL GAS CORPORATION LIMITED (ONGC), a body corporate established under the provisions of the Companies Act, 1956, which expression shall include its successors and such assigns as are permitted under Article 28 hereof acting through its duly authorized Chairman & Managing Director; AND RELIANCE INDUSTRIES LTD. ("RIL"), a body corporate established under the laws of India, which expression shall include its 35 successors and such assigns as are permitted under Article 28 hereof acting through its duly authorized Chief Executive Officer (Oil & Gas); AND ENRON OIL & GAS INDIA LTD. ("EOGIL"), a body corporate established under the laws of the Cayman Islands, which expression shall include its successors and such assigns as are permitted under Article 28 hereof acting through its duly authorized (Vice) President; WITNESSETH: WHEREAS 1. By virtue of Article 297 of the Constitution of India, Petroleum in its natural state in the Territorial Waters and the Continental Shelf of India is vested in the Union of India; 2. The Territorial Waters, Continental Shelf, Exclusive Economic Zone And Other Maritime Zones Act, 1976 (No. 80 of 1976) provides for the grant of a Lease or letter of authority by the Government to explore and exploit the resources of the Continental Shelf; 3. The Oil Fields (Regulation and Development) Act, 1948, (53 of 1948) (hereinafter referred to as "the Act") and the Petroleum and Natural Gas Rules, 1959, made thereunder (hereinafter referred to as "the Rules") make provision inter alia for the regulation of Petroleum Operations and the grant of petroleum exploration licenses and mining leases for exploration and development of Petroleum in India; 4. The Act and the Rules provide for the grant by the Government of mining leases in respect of the Territorial Waters and the Continental Shelf, and the Contractor is being duly granted a mining lease to carry out Petroleum Operations in that area offshore identified as Panna and Mukta Fields, more particularly described in Appendices A and B; 5. The Government desires that the Petroleum resources which may exist in the Contract Area be discovered and exploited with the utmost expedition in the overall interest of India in accordance with sound international petroleum industry practices; 6. The Government is satisfied that it is in the public interest to enter into this Contract on terms different from those specified in Section 12 of the Oil Fields (Regulations and Development) Act, 1948, and the Government is entering into this Agreement on the terms and conditions specified herein. 7. EOGIL and RIL have represented that they have, or will acquire and make available, the necessary financial and technical resources and the technical and industrial competence and experience necessary for proper discharge and/or performance of all obligations required to be performed under this Contract in accordance with good international petroleum industry practices and will provide guarantees as required in Article 29 for the due performance of their undertakings hereunder;

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8. The Parties desire to enter into this Contract with respect to the Contract Area referred to in Appendices A and B on the terms and conditions herein set forth. NOW, THEREFORE, in consideration of the premises and covenants and conditions herein contained, IT IS HEREBY AGREED between the Parties as follows: 2 ARTICLE 1 DEFINITIONS

In this Contract, unless the context requires otherwise, the following terms shall have the meaning ascribed to them hereunder: 1.1 "Accounting Procedure" means the principles and procedures of accounting set out in Appendix C. "Affiliate" means a company that directly or indirectly controls is controlled by a Party to this Contract or a company which directly or indirectly controls or is controlled by a company which controls a Party to this Contract, it being understood that "control" means ownership by one company of more than fifty percent (50%) of the voting securities of the other company, or the power to direct, administer and dictate policies of the other company even where the voting securities held by such company exercising such effective control in that other company is less than fifty percent (50%) and the term "controlled" shall have a corresponding meaning. 1.3 "Appendix" means an Appendix attached to this Contract and made a part hereof. "Appraisal Programme" means a programme, approved by the Committee for the appraisal of an Existing or New Discovery of Petroleum in the Contract Area for the purpose of delineating the Petroleum Reservoirs to which the Discovery relates in terms of thickness and lateral extent and determining the characteristics thereof and the quantity and quality of recoverable Petroleum therein. 1.5 "Appraisal Well" means a Well drilled within the Contract Area pursuant to an approved Appraisal Programme. "Arms Length Sales" means sales of Petroleum made freely on the open international market, in freely convertible currencies, between willing and unrelated sellers and buyers and in which such buyers and sellers have no contractual or other relationship, directly or indirectly, or any common or joint interest as is reasonably likely to influence selling prices and shall, inter alia, exclude sales (whether direct or indirect, through brokers otherwise) involving Affiliates, sales between entities comprising the Contractor, sales between governments and government-owned entities, counter trades, restricted or distress sales, sales involving barter arrangements and generally any transactions
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1.2 or

1.4 Management

1.6

or

motivated in whole or in part by considerations other than normal commercial practices. 1.7 "Article" means an article of this Contract and the term "Articles" means more than one Article. 3 1.8 "Associated Natural Gas" or "ANG" means Natural Gas occurring in association with Crude Oil either as free Gas or in solution, if such Crude Oil can by itself be commercially produced. "Barrel" means a quantity or unit equal to 158.9074 litres (forty-two (42) United States gallons) liquid measure, at a temperature of sixty (60) degrees Fahrenheit (15.56 degrees Centigrade) under one atmosphere of pressure (14.7 psia). "Basement" means any igneous or metamorphic rock, or rock or any stratum of such nature, in and below which the geological or physical characteristics of the rock sequence do not have the properties necessary for the accumulation of Petroleum in commercial quantities and which reflects the maximum depth at which any such accumulation can be reasonably expected in accordance with the knowledge generally accepted in the international petroleum industry. 1.11 "Calendar Month" means any of the twelve (12) months of the Calendar Year unless specified otherwise. "Calendar Quarter" means a period of three consecutive Calendar Months commencing on the first day of January, April, July and October of each Calendar Year. "Calendar Year" means a period of twelve consecutive months according to the Gregorian calendar commencing with the first day of January and ending with the thirty-first day of December. "Commercial Discovery" means a Discovery which, when produced, is likely to yield a reasonable profit on the funds invested in Petroleum Operations, after deduction of Contract Costs, and which has been declared a Commercial Discovery in accordance with the provisions of Article 9 and/or Article 21, after consideration of all pertinent operating and financial data such as recoverable reserves, sustainable production levels, estimated development and production expenditures, prevailing prices and other relevant technical and economic factors according to generally accepted practices in the international petroleum industry. "Commercial Production" means production of Crude Oil or Natural Gas or both from a Field within the Contract Area and delivery of the same at the relevant Delivery Point under a programme of regular production and sale. "Company" means either EOGIL or RIL. "Companies" means EOGIL and RIL.
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1.9

1.10 structure

1.12

1.13

1.14

1.15

1.16 1.17

1.18

"Condensate" means those low vapour pressure hydrocarbons obtained from Natural Gas through condensation or extraction 4 and refers solely to those hydrocarbons that are liquid at normal surface temperature and pressure conditions (provided that in the event Condensate is produced from an Oil Field and is segregated and transported separately to the Delivery Point, then the provisions of this Contract shall apply to such Condensate as if

it were Crude Oil.) 1.19 "Contract" means this agreement and the Appendices attached hereto and made a part hereof and any amendments made thereto pursuant to the terms hereof. "Contract Area" means the area described in Appendix A and delineated on the map attached as Appendix B, or any portion of area remaining after relinquishment or surrender from time to time pursuant to the terms of this Contract. 1.21 "Contract Costs" means Exploration Costs, Development Costs, Production costs, and all other costs related to Petroleum Operations as set forth in Section 3 of the Accounting Procedure. "Contract Year" means a period of twelve consecutive months from the Effective Date or from the anniversary of the Effective Date. 1.23 1.24 Petroleum "Contractor" means EOGIL, RIL and ONGC. "Cost Petroleum" means the portion of the total volume of produced and saved from the Contract Area which the Contractor is entitled to take from the Contract Area in a particular period for the recovery of Contract Costs as provided in Article 13. 1.25 "Cost Recovery Limit" shall have the meaning given in Article 13.1.2. "Crude Oil" means crude mineral oil, asphalt, ozokerite and all kinds of hydrocarbons and bitumens, both in solid and in liquid form, in their natural state or obtained from Natural Gas by condensation or extraction, including distillate and Condensate when commingled with the heavier hydrocarbons and delivered as a blend at the Delivery Point but excluding verified Natural Gas. "Delivery Point" means, except as otherwise herein provided or as may be otherwise agreed between the Government and the Contractor, the point at which Petroleum reaches the upstream weld of the outlet flange of the delivery facility, either offshore or onshore and different Delivery Points may be established for purposes of sales to the Government, export or domestic sales. "Development Area" means that part of the Contract Area corresponding to the area of an Oil Field or Gas Field delineated
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1.20 the

1.22 counted

1.26

1.27

1.28

in simple geometric shape, together with a 5 reasonable margin of additional area surrounding the Field consistent with international petroleum industry practice and approved by the Management Committee or the Government, as the case may be. 1.29 "Development Costs" means those costs and expenditures incurred in carrying out Development Operations, as classified and defined in Section 2 of the Accounting Procedure and allowed to be recovered in terms of Section 3 thereof. "Development Operations" means operations conducted in accordance with the Development Plan and shall include, but not be limited the purchase, shipment or storage of equipment and materials used in developing Petroleum accumulations, the drilling, completion, Recompletion and testing of Development Wells, the drilling, completion and Recompletion of Wells for Gas or water injection, the laying of gathering lines, the installation of offshore platforms and installations, the installation, hook up and commissioning of separators, tankage, pumps, artificial lifting and other producing and injection facilities required to produce, process and transport Petroleum into main oil storage or Gas processing facilities, either onshore or offshore, including the laying of pipelines within or outside the Contract Area, storage and Delivery Point or Points, the installation of storage or Gas processing facilities, the installation of export and loading facilities and other facilities required for development and production of the Petroleum accumulations and for the delivery of Crude Oil and/or Gas at the Delivery Point(s) and also including incidental operations not specifically referred to herein as required for the most efficient and economic development and production of the Petroleum accumulations in accordance with good international petroleum industry practices. 1.31 "Development Plan" means a plan containing proposals required under Article 9 or Article 21. "Development Well" means a Well drilled, deepened, completed, or Recompleted after the date of approval of the Development Plan pursuant to Development Operations or Production Operations for purposes of producing Petroleum, increasing production, sustaining production or accelerating extraction of Petroleum including production Wells, injection Wells and dry Wells. 1.33 "Discovery" means the finding, during Exploration Operations, of a deposit of Petroleum not previously known to have existed, which can be recovered at the surface in a flow measurable by conventional petroleum industry testing methods, including an Existing Discovery and a New Discovery. 6
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1.30 to,

1.32

the

1.34

"Discovery Area" means that part of the Contract Area about which, based upon Discovery and the results obtained from a Well or Wells drilled in such part, both the Government and the Contractor are the opinion that Petroleum exists and is likely to be produced in commercial quantities.

of

1.35

"Effective Date" means the date on which this Contract is executed. "Environmental Clearance" means permission granted in writing by the Government to the Contractor to perform all activities necessary and appropriate to conduct Petroleum Operations subject to conditions specified with regard to protection of the environment and minimizing Environmental Damage. "Environmental Damage" means soil erosion, removal of vegetation, destruction of wildlife, pollution of groundwater or surface land contamination, air pollution, noise pollution, bush fire, disruption to water supplies, to natural drainage or natural flow of rivers or streams, damage to archaeological, palaeontological and cultural sites and shall include any damage or injury to, or destruction of, soil or water in their physical aspects together with vegetation associated therewith, aquatic or terrestrial mammals, fish, avifauna or any plant or animal life whether in the sea or in any other water or on, in or under land provided such damage is in violation of legislation relating to the protection

1.36

1.37 water,

of the environment. 1.38 1.39 "Excess ANG" shall have the meaning given in Article 21.4. "Existing Discovery" means a Discovery made by ONGC before the Effective Date and accepted by the Parties as a Commercial Discovery. "Exploration Costs" means those costs and expenditures incurred in carrying out Exploration Operations, as classified and defined in Section 2 of the Accounting Procedure and allowed to be recovered in terms of Section 3 thereof. "Exploration Operations" means operations conducted in the Area pursuant to this Contract in searching for Petroleum or in the course of an Appraisal Programme and shall include but not be limited to aerial, geological, geophysical, geochemical, palaeontological, palynological, topographical and seismic surveys, analysis, studies and their interpretation, investigations relating to the subsurface geology including structure test drilling, stratigraphic test drilling, drilling of Exploration Wells or Appraisal Wells and other related activities such as testing, surveying, drill site preparation and all work necessarily connected therewith that is conducted in connection with Petroleum exploration.
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1.40

1.41 Contract

7 1.42 "Exploration Well" means a Well drilled for the purpose of searching for undiscovered Petroleum accumulations on any geological entity (be it of structural, stratigraphic, facies or pressure nature) to at least a depth or stratigraphic level specified in the Work Programme. "Field" means an Oil Field or a Gas Field in the Contract Area in respect of which a Development Plan has been duly approved in accordance with Article 9 or Article 21 hereof. "Financial Year" means the period from the first day of April through the thirty-first day of March of the following Calendar Year. "Foreign Company" means a Company within the meaning of Section of the Companies Act, 1956, as amended from time to time. 1.46 1.47 "Gas" means Natural Gas. "Gas Field" means an area within the Contract Area consisting of a single Gas Reservoir or multiple Gas Reservoirs all grouped on or related to the same individual geological structure or stratigraphic conditions, designated by the Contractor and by the Government or Management Committee, as the case may be, (to include the maximum area of potential productivity in the Contract Area in a simple geometric shape) in respect of which a Commercial Discovery has been declared or a Development Plan has been approved in accordance with Article 9 or Article 21 hereof. 1.48 "Investment" shall have the meaning assigned in paragraph 3 of Appendix D. "Investment Multiple" means the ratio of accumulated Net Cash Income to accumulated Investment in the Contract Area, earned by the Companies, as determined in accordance with Appendix D. "LIBOR" means the London Inter-Bank Offering Rate for six-month deposits of United States Dollars as quoted by the London office the Bank of America (or such other Bank as the Parties may agree) for the day or days in question. 1.51 "Lessee" means any person or body corporate, including the Contractor, which holds a mining lease under the Petroleum and Natural Gas Rules, 1959, for the purpose of carrying out Petroleum Operations in the Contract Area and their successors and permitted assigns. "Management Committee" means the committee constituted pursuant to Article 5 hereof. "Minimum Work Obligation" means the Work Programme related 8
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1.43

1.44

1.45 591

approved

1.49

1.50 of

1.52

1.53

to those items specified in Appendix G as approved by the Management Committee. 1.54 "Natural Gas" means wet Gas, dry Gas, all other gaseous hydrocarbons, and all substances contained therein, including sulphur and helium, which are produced from Oil or Gas Wells, excluding those condensed or extracted liquid hydrocarbons that liquid at normal temperature and pressure conditions, and including the residue Gas remaining after the condensation or extraction of liquid hydrocarbons from Gas. 1.55 "Net Cash Income" shall have the meaning assigned in paragraph 2 of Appendix D. "New Discovery" means a Discovery made after the Effective Date. "Non Associated Natural Gas" or "NANG" means Natural Gas which is produced either without association with Crude Oil or in association with Crude Oil which by itself cannot be commercially produced. "Oil" means "Crude Oil". "Oil Field" means an area within the Contract Area consisting of a single Oil Reservoir or multiple Oil Reservoirs all grouped on or related to the same individual geological structure, or stratigraphic conditions, designated by the Contractor and by the Government or the Management Committee, as the case may be (to include the maximum area of potential productivity in the Contract Area in a simple geometric shape) in respect of which a Commercial Discovery has been declared and a Development Plan has been approved in accordance with Article 9 hereof and a reference to an Oil Field shall include a reference to the production of Associated Natural Gas from that Oil Field. 1.60 "Operating Agreement" means the Joint Operating Agreement entered into by the Parties constituting Contractor in accordance with Article 6, with respect to the conduct of Petroleum Operations. "Operating Committee" means the committee established by that name in the Operating Agreement. "Operator" means the Party so designated in Article 6. "Participating Interest" means the percentage of participation of the constituents of the Contractor at any given time in the rights and obligations under this Contract. Initially the Participating

are

1.56

1.57

1.58 1.59

approved

1.61

1.62 1.63

Interest of the constituents of Contractor are as follows: 9 1. ONGC 40% 2. RIL 30%
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3. EOGIL 30%

1.64

"Parties" means the Parties signatory to this Contract including their successors and permitted assigns under this Contract and the term "Party" means any of the Parties. "Petroleum" means Crude Oil and/or Natural Gas existing in their natural condition. "Petroleum Operations" means, as the context may require, Exploration Operations, Development Operations or Production Operations or any combination of such operations, including, but not limited to, collection of seismic information, drilling and completion and Recompletion of Wells, construction, operation and maintenance of all necessary facilities, plugging and abandonment of Wells, environmental protection, transportation, storage, sale or disposition of Petroleum to the Delivery Point, Site and all other incidental operations or activities as may be necessary.

1.65

1.66

Restoration

1.67

"Production Costs" means those costs and expenditures incurred in carrying out Production Operations as classified and defined in Section 2 of the Accounting Procedure and allowed to be recovered in terms of Section 3 thereof. "Production Operations" means all operations conducted for the purpose of producing Petroleum from the Contract Area after the commencement of production from the Contract Area, including the operation and maintenance of all necessary facilities therefor. "Profit Petroleum" means all Petroleum produced and saved from the Contract Area in a particular period as reduced by Cost Petroleum and calculated as provided in Article 14. "Recompletion" means an operation whereby a completion in one zone is abandoned in order to attempt a completion in a different zone within the existing wellbore. "Reservoir" means a naturally occurring discrete accumulation of Petroleum. "Section" means a section of the Accounting Procedure. "Self-Sufficiency" means, in relation to any Financial Year, that the volume of Crude Oil and Crude Oil equivalent of Petroleum products exported from India during that Financial Year either equals or exceeds the volume of Crude Oil and Crude Oil equivalent of Petroleum products imported into India during the same Year.

1.68

1.69

1.70

1.71

1.72 1.73

Financial

1.74

"Site Restoration" shall mean all activities required to 10 return a site to its state as of the Effective Date pursuant to

the Contractor's environmental impact study or to render a site

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compatible with its intended after-use (to the extent reasonable) after cessation of Petroleum Operations in relation thereto and shall include, where appropriate, proper abandonment of Wells or other facilities, removal of equipment and structures (whether installed before or after the Effective Date), and debris, establishment of compatible contours and drainage, replacement of top soil, revegetation, slope stabilization, infilling of excavations or any other appropriate actions in the circumstances. 1.75 "Subcontractor" means any company or person contracted by the Operator to provide services with respect to the Petroleum Operations. "Well" means a borehole, made by drilling in the course of Petroleum Operations, but does not include a seismic shot hole. "Work Programme" means all the plans formulated for the performance of the Petroleum Operations. "Year" means Financial Year. 11 ARTICLE 2 DURATION 2.1 The term of this Contract shall be for a five (25) years from the Effective Date, is terminated earlier in accordance with be extended on such terms and conditions agreed by the Parties hereto. 12 ARTICLE 3 RELINQUISHMENT 3.1 an area for which a Development Plan has been approved. Contractor shall give the Government written notice of relinquishments thirty (30) days prior to the end of any Calendar Year. 3.2 Relinquishment of less than all of the Contract Area shall be in blocks of not less than one hundred square kilometres (100 sq. kms.) and be of such shape and location as the Government may deem appropriate for enabling effective exploration and exploitation of such area. Relinquishment of all or a part of the Contract Area or of the Contract shall not be construed as absolving the Contractor of any liability undertaken or incurred by the Contractor in respect of the Contract Area prior to the date of such relinquishment or termination. 13 ARTICLE 4 WORK PROGRAMME 4.1 The Contractor shall commence Petroleum Operations not later than
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1.76

1.77

1.78

period of twentyunless the Contract its terms, but may as may be mutually

The Contractor may, with the approval of the Management Committee, voluntarily relinquish a portion of the Contract Area other than

3.3 termination

six (6) months from the Effective Date. 4.2 As soon as possible after the Effective Date, in respect of the period ending with the last day of the Financial Year in which the Effective Date falls and thereafter ninety (90) days before commencement of each following Financial Year, the Contractor submit to the Management Committee, through the Operating Committee, the Work Programmes and budgets relating to Petroleum Operations, including the Minimum Work Obligations, to be carried out during the ensuing Financial Year. 4.3 approved The Contractor may propose amendments to the details of an Work Programme and budget in the light of the then existing circumstances and shall submit to the Management Committee, through the Operating Committee, modifications or revisions to the Work Programme and budgets. 14 ARTICLE 5 MANAGEMENT COMMITTEE 5.1 For the purpose of proper and expeditious performance of Petroleum Operations under the provisions of this Contract, there shall be constituted a committee to be called the Management Committee. The Management Committee shall consist of four (4) members, one member nominated by and representing Government and one (1) member nominated by and representing each constituent of the Contractor. The member nominated by ONGC shall act as chairman. 5.3 A representative of the Operator acting as the convenor shall call the meetings of the Management Committee. Government and the Contractor may nominate alternate members with full authority to act in the absence and on behalf of the members nominated under Article 5.2 and may, at any time, nominate another member or alternate member to replace any member nominated earlier by notice to other members of the Management Committee. A quorum of the Management Committee shall consist of three (3) members. The following matters shall be submitted to the Management Committee for approval: (a) annual Work Programmes and budgets and any modifications or revisions thereto, as proposed by the Operating Committee, for Exploration Operations, Development Operations and/or Production Operations; proposals for an Appraisal Programme, the declaration of New Discovery as a Commercial Discovery and the approval of Development Plans as may be required under this Contract, or revisions or additions to an Appraisal
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shall

5.2 (1)

5.4

5.5

5.6

(b) a

Programme or a Development Plan; (c) (d) (e) delineation of a Field and a Development Area; appointment of auditors; collaboration with lessees or contractors of other areas; claims or settlement of claims for or on behalf of or against the Contractor in excess of limits specified in the Operating Agreement or fixed by the Management Committee from time to time; any proposed mortgage, charge or encumbrance on petroleum assets, petroleum reserves or production of 15 Petroleum; (h) any other matter required by the terms of this Contract to be submitted for the approval of the Management Committee; any other matter which the Contractor or the Operating Committee decides to submit to it.

(f)

(g)

(i)

5.7

The Management Committee shall not take any decision without obtaining prior approval of the Government, where such approval is required under this Contract. The Management Committee shall meet at least once every three (3) months or more frequently at the request of any member. Operator shall convene each meeting by notifying the members at least eight (28) days prior to such meeting (or a shorter period of notice if the members unanimously so agree) of the time and place of such meeting and the purpose thereof and shall include in such notice a provisional agenda for such meeting. The Operator shall

5.8

twenty

be responsible for processing the final agenda for such meeting and the agenda shall include all items of business requested by the members to be included, provided such requests are received by the Operator at least ten (10) days prior to the date fixed for the meeting. The Operator shall forward the agenda to the members at least nine (9) days prior to the date fixed for the meeting. Matters not included in the agenda may be taken up at the meeting by any member with the unanimous consent of all the members. 5.9 The Chairman, and in his absence any other member nominated by ONGC, shall preside over the meetings of the Management Committee. The Operator shall appoint one of the members nominated by the constituents of the Contractor as secretary to the Management Committee with responsibility, inter alia, for preparation of the minutes of every meeting in the English language and provision to every member of the Management Committee with two (2) copies of minutes not later than twenty-eight (28) days after the date of
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5.10

the

the meeting. 5.11 of their approval of the minutes by putting their signatures on one copy of the minutes and returning the same to the Operator or by indicating such approval to the Operator by telex, cable, or facsimile, with copies to the other members. Any member may suggest any modification, amendment or addition to the minutes by telex, cable or facsimile to the Operator and other members or by indicating such suggestions when returning the copy of the minutes to the Operator. If the Operator or any other member does not agree with the modification, amendment or addition to the 16 minutes suggested by any member, the matter shall be brought to the attention of the other members and resubmitted to the Management Committee for approval at the next meeting and the minutes shall stand approved as to all other matters. If a member fails to appropriately respond within the aforesaid twenty-one (21) day period as herein provided, the minutes shall be deemed approved by such member. 5.12 the Management Committee. 5.13 All matters requiring the approval of the Management Committee shall be approved by a vote of three (3) or more members of the Management Committee one (1) of whom shall be the Government representative. 17 ARTICLE 6 OPERATORSHIP AND OPERATING AGREEMENT 6.1 6.2 EOGIL shall be the Operator for purposes of this Contract. No change in operatorship shall be effected without the consent of the Government, which consent shall not be unreasonably withheld. The operating functions required of the Contractor under this Contract shall be performed by the Operator on behalf of all constituents of the Contractor subject to, and in accordance with, the terms and provisions of this Contract, and generally accepted international petroleum industry practice. The constituents of the Contractor shall execute a mutually agreed Operating Agreement. The Agreement shall be consistent with the provisions of this Contract and shall provide for, among other things: (a) the appointment, resignation, removal and
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Within twenty-one (21) days of the receipt of the minutes of a meeting, members shall notify the Operator and the other members

The meetings of the Management Committee shall be held in New Delhi, India unless otherwise mutually agreed by the members of

6.3

6.4

responsibilities of the Operator;

(b) the establishment of an Operating Committee; (c) functions of the Operating Committee taking into account the provisions of the Contract, procedures for decision making, frequency and place of meetings; and (d) contribution to costs, default, sole risk, disposal of petroleum and assignment as between the parties to the Operating Agreement. 18 ARTICLE 7 GENERAL RIGHTS AND OBLIGATIONS OF THE PARTIES

7.1

Subject to the provisions of this Contract, the Contractor shall have, but not be limited to, the following rights: (a) the exclusive right during the term hereof to carry out Petroleum Operations in the Contract Area and to recover costs and expenses as provided in this Contract; the right to use, free of charge, such quantities of Petroleum produced from any Field as are reasonably required for conducting Petroleum Operations in the Contract Area in accordance with generally accepted practices in the international petroleum industry; the right to lay, build, construct or install pipelines, roads, bridges, ferries, aerodromes, landing fields, radio telephones, satellite communications and related communication and infrastructure facilities and exercise other ancillary rights as may be reasonably necessary for the conduct of Petroleum Operations subject to such approvals as may be required, which shall not be unreasonably withheld, under the applicable laws and/or regulations in force from time to time for the regulation and control thereof; the right to have an expatriate work force as required and necessary together with their required personal effects; the right to flare Gas temporarily when and as necessary, provided the Operator shall give notice thereof to the Government within forty-eight (48) hours of the start of such flaring and the issue shall be discussed in the next meeting of the Management Committee; the right to use all wells, equipment and facilities installed as of the Effective Date in the Contract Area ("Assets") free of any additional cost or charges or encumbrances and assignment of such Assets to Operator on behalf of the Contractor;

(b)

(c)

(d)

(e)

(f)

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(g) 7.2

such other rights as are specified in this Contract.

The Government reserves the right to itself, or to grant to the Lessee or others, the right to prospect for and mine minerals or substances other than Petroleum within the Contract Area; however, that if after the Effective Date, the Lessee or others

provided, are issued rights, or the Government proceeds directly to prospect for and mine in the Contract Area for any minerals or substances other than 19 Petroleum, the Contractor shall use reasonable efforts to avoid obstruction to or interference with such operations within the Contract Area and, in either case, the Government shall use reasonable efforts to ensure that operations carried out do not obstruct or unduly interfere with Petroleum Operations in the Contract Area. In the event of any conflict, Petroleum Operations shall take preference. 7.3 The Contractor shall: (a) except as otherwise expressly provided in this Contract, conduct all Petroleum Operations at its sole risk, cost and expense and provide all funds necessary for the conduct of Petroleum Operations including funds for the purchase or lease of equipment, materials or supplies required for Petroleum Operations as well as for making payments to employees and Subcontractors; conduct all Petroleum Operations within the Contract Area diligently, expeditiously, efficiently and in a safe and workmanlike manner in accordance with good international petroleum industry practice pursuant to the approved Work Programmes; ensure provision of all information, data, samples etc. which the Contractor may be required to furnish under the applicable laws; ensure that all equipment, materials, supplies, plant and installations used for Petroleum Operations comply with generally accepted standards in the international petroleum industry and are of proper construction and in good working order; (e) in the preparation and implementation of Work Programmes and in the conduct of Petroleum Operations, follow good international petroleum industry practices with such degree of diligence and prudence reasonably and exercised by experienced parties engaged in a similar activity under similar circumstances and conditions; (f) after the designation of a Field and a Development Area, pursuant to this Contract, forthwith proceed to take all necessary action for prompt and orderly development of
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(b)

(c)

(d)

kept

ordinarily

the

Field and the Development Area and for the production of Petroleum in accordance with the terms of this Contract; (g) appoint a technically competent and sufficiently experienced representative, and, in his absence, a suitably qualified replacement therefor, who shall be resident in India and who shall have full authority to take such steps as may be necessary to implement this Contract and whose names shall, on appointment within 20 ninety (90) days after commencement of the first Contract Year, be made known to the Government; (h) provide acceptable working conditions, living accommodation and access to medical attention and nursing care in the Contract Area for all personnel employed in Petroleum Operations and extend these benefits to other persons who are engaged in or assisting in the conduct of Petroleum Operations in the Contract Area; be always mindful of the rights and interests of India in the conduct of Petroleum Operations;

(i)

7.4

The infrastructure such as pipelines as may be developed/established by the Contractor within the country may, to the extent capacity is available, be available to the Government any other entity upon payment of compensation which shall include, but not be limited to, cost of operation, repair, maintenance, interest and profit. The Government and any other entity using any of Contractor's facilities shall indemnify and hold harmless Contractor from and against any and all loss, damage or injury arising out of or connected with such use.

or

21 ARTICLE 8 GOVERNMENT ASSISTANCE

8.1

Upon application in the prescribed manner, and subject to compliance with applicable laws and relevant procedures, the Government will without any cost to itself: (a) provide the right of ingress and egress from the Area and any facilities used in Petroleum Operations, wherever located, and which may be within their control; use their good offices, when necessary, to assist Contractor in procurement of facilities and services required for execution of Petroleum Operations including necessary approvals, permits, consents, authorisations, visas, work permits, licenses, rights of way, easement, surface rights and security protection, required pursuant to this Contract and
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Contract

(b)

(c)

(d)

(e)

which may be available from resources within the Government's control; use their good offices to assist in identifying and making available necessary priorities for obtaining local goods and services; in the event that onshore facilities are required outside the Contract Area for Petroleum Operations including, but not limited to, storage, loading and processing facilities, pipelines and offices, use their good offices in assisting the Contractor to obtain from the authorities of the state government in the state in which such facilities are required, such licenses, permits, authorizations, consents, security protection, surface rights and easements as are required for the construction and operation of the said facilities by the Contractor; in the event there is no economical passage other than through national parks, sanctuaries, mangroves, wetlands of national importance, biosphere reserves or other biologically sensitive areas, assist in obtaining the prior written permission of the concerned authorities.

8.2

ONGC shall provide data, if any, related to the Contract Area to the Contractor which has not been previously provided. Environmental Clearance(s), if any, at the Effective Date shall assigned to EOGIL without obligation to remediate or correct any prior commission of omission by ONGC, but obligations, after the Effective Date, shall be binding on Contractor.

8.3 be

22 ARTICLE 9 DISCOVERY, DEVELOPMENT AND PRODUCTION

9.1

If and when a New Discovery is made within the Contract Area, the Contractor shall: (a) (b) forthwith inform the Government of the Discovery; promptly thereafter, but in no event later than a period of thirty (30) days from the date of such Discovery, furnish to the Government particulars, in writing, of the Discovery; promptly run tests to determine whether the New Discovery is of potential commercial interest and, within a period of sixty (60) days after completion of such tests and analysis of results, submit a report to the Management Committee and the Government containing data obtained from such tests and its analysis and interpretation thereof, together with a written notification to the Government of whether, in the Contractor's opinion, such New Discovery is of
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(c)

potential commercial interest and merits appraisal. 9.2 If, pursuant to Article 9.1(c), the Contractor notifies the Government that a New Discovery is of potential commercial interest, the Contractor shall prepare and submit to the Committee, within one hundred and twenty (120) days of such notification, a proposed Appraisal Programme with a Work Programme and budget to carry out an adequate and effective appraisal of such New Discovery designed to achieve both the following objectives: (a) determine without delay, and, in any event, within the period specified in Article 9.5, whether such New Discovery is a Commercial Discovery; and determine, with reasonable precision, the boundaries of the area to be delineated as a Field.

Management

(b)

9.3

The proposed Appraisal Programme for a New Discovery shall be considered by the Management Committee within forty-five (45) days after submission thereof pursuant to Article 9.2. The Appraisal Programme, together with the Work Programme and budget submitted the Contractor, revised in accordance with any agreed amendments

by or additions thereto, approved by the Management Committee, shall be adopted as the Appraisal Programme and the Contractor shall promptly commence implementation thereof; and the Yearly budget adopted pursuant to Article 4, shall be revised accordingly. Where, in the case of an Existing Discovery, Contractor desires to carry out additional appraisal work, the Contractor shall submit its proposed Appraisal Programme in respect of the Existing Discovery with a Work Programme and budget to the Management Committee for its approval within 23 one hundred twenty (120) days of the Effective Date. 9.4 The Contractor shall, unless otherwise agreed, in respect of a New Discovery of Crude Oil, advise the Management Committee, by notice in writing within a period of twenty-four (24) months from the on which the notice provided for in Article 9.1 was delivered, whether such New Discovery is a Commercial Discovery or not. Such notice shall be accompanied by a report on the New Discovery setting forth all relevant technical and economic data as well as all evaluations, interpretations and analysis of such data and feasibility studies relating to the New Discovery prepared by or for the Contractor, with respect to the Discovery. If the Contractor is of the opinion that Petroleum has been discovered in commercial quantities, it shall propose that the Government or Management Committee, as the case may be, declare the New Discovery as a Commercial Discovery based on the report submitted. In respect of a New Discovery of Gas, the provisions of Article 21 shall apply.
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date

9.5

The Management Committee shall, within forty-five (45) days of the date of the notice referred to in Article 9.4, consider the proposal of the Contractor and request any other additional information it may reasonably require so as to reach a decision on whether or not to declare the New Discovery as a Commercial Discovery. Such decision shall be made within the later of (a) ninety (90) days from the date of notice referred to in Article or (b) ninety (90) days of receipt of such other information as

9.4 may be reasonably required under this Article 9.5. In the case of an Existing Discovery, Contractor shall within ninety (90) days of the Effective Date propose a Development Plan following the plan brought out in Appendix G, intended to achieve the production profile brought out in Appendix H, containing the detailed information required in Article 9.6, with supporting budget. Where a Development Plan is so agreed it shall be the approved Development Plan pursuant to Article 9 hereof.

9.6

If a New Discovery is declared commercial the Contractor shall submit to the Management Committee, a comprehensive plan for the development of the Commercial Discovery within two hundred (200) days of the declaration of the Discovery as a Commercial Such plan shall contain detailed proposals by the Contractor for the construction, establishment and operation of all facilities

Discovery.

and services for and incidental to the recovery, storage and transportation of the Petroleum from the proposed Development Area to the Delivery Point together with all data and supporting

information including but not limited to: (a) Description of the nature and characteristics of the 24 Reservoir, data, statistics, interpretations, and conclusions on all aspects of the geology, reservoir evaluation, petroleum engineering factors, reservoir models, estimates of reserves in place, possible production magnitude, nature and ratio of Petroleum fluids and analysis of producible Petroleum; (b) Outlines of the development project and/or alternative development projects, if any, describing the production facilities to be installed and the number of wells to be drilled under such development project and/or alternative development projects, if any; (c) Estimate of the rate of production to be established and projection of the possible sustained rate of production in accordance with generally accepted international petroleum industry practice under such development project and/or alternative development project, if any, which will ensure that the area does not suffer an excessive rate of decline of production or an excessive loss of reservoir pressure; (d) estimates of Development Costs and Production Costs under such development project and/or alternative development projects, if any;

(e)

Contractor's recommendations as to the particular project that it would prefer, if any;

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(f)

Work Programme and budget for Development and Production Operations; anticipated adverse impact on the environment and measures to be taken for prevention or minimization thereof and for general protection of the environment in conduct of operations; and production profiles, financial / commercial analysis of the project proposal.

(g)

(h)

9.7

Any proposed Development Plan submitted by the Contractor pursuant to Articles 9.5 and/or 9.6 will be approved by the Management Committee with such amendments and modifications as may be agreed upon by the Contractor, within seventy-five (75) days of of the Development Plan, which approval shall not be unreasonably withheld. If such a Development Plan has not been approved by the Management Committee within the seventy-five (75) day period, the Contractor shall have the right to submit such plan directly to

submission

the Government for approval, which approval shall not be unreasonably withheld. The submission will be answered within sixty (60) days of receipt. 9.8 The Management Committee shall obtain such approvals from 25 the Government as may be required, except where this Contract provides that the Contractor may obtain such approvals directly. 9.9 Oil If the Management Committee fails to declare a New Discovery of to be commercial while the Contractor consider that it is commercial or the Management Committee fails to declare the New Discovery as a Commercial Discovery within the time limit stipulated in Article 9.5 hereof, the Contractor may declare the New Discovery as a Commercial Discovery and submit development and production plans in respect of the Discovery to the Management Committee as per the provisions of Article 9.6 and after such plans have been approved by the Management Committee, the Contractor shall, acting solely, provide the entire Development Costs and undertake development of the Oil Field. If, however, the Field turns out to be non-commercial, the entire Development Cost of the Field shall be borne solely by the Contractor and shall not be recoverable as Cost Petroleum from any other Field or Contract Area but shall be recoverable solely from such Field. 9.10 In the event that the Government considers a New Discovery to be commercial but the Contractor considers the same as non-commercial, the Government shall give notice to the Contractor to that effect and thereafter the Field relating to such New Discovery shall be excluded from the Contract Area for all purposes. In this event, the Contractor shall have no claim on the production from such
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Field. 9.11 Work Programmes and budgets for Development and Production Operations shall be submitted to the Management Committee, as soon as possible after the designation of a Development Area and thereafter not later than 31st December each Calendar Year in respect of the Financial Year immediately following. The Management Committee, when considering any Work Programme and budget, may require the Contractor to prepare an estimate of potential production to be achieved through the implementation of the programme and budget for each of the three (3) Financial Years following the Financial Year to which the Work Programme and relate. If major changes in Financial Year to Financial Year estimates of potential production are required, these shall be based on concrete evidence necessitating such changes. 9.13 Not later than the fifteenth (15) day of January each Calendar Year, in respect of the Financial Year immediately following, the Contractor shall determine the "Programme Quantity". The Programme Quantity for any Financial Year shall be the maximum quantity of Petroleum based on Contractor's estimates, as approved by the Management Committee, which can be produced from a Field with sound international petroleum industry practices and 26 minimizing unit production cost, taking into account the capacity of the producing Wells, gathering lines, separators, storage capacity and other production facilities available for use during the relevant Financial Year, as well as the transportation facilities up to the Delivery Point. 9.14 Proposed revisions to the details of a Development Plan or an annual Work Programme or budget in respect of Development and Production Operations shall, for good cause and if the circumstances so justify, be submitted to the Management Committee for approval, through the Operating Committee.

9.12

budget

consistent

27 ARTICLE 10 UNIT DEVELOPMENT

10.1

If a Reservoir in a New Discovery Area is situated partly within the Contract Area and partly in an area in India over which other parties have a contract or license/lease to conduct Petroleum Operations, the Government may, for securing the most effective recovery of Petroleum from such Reservoir, by notice in writing to the Contractor, require that the Contractor: (a) collaborate and agree with such other parties on the joint development of the Reservoir;
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(b)

submit such agreement between the Contractor and such other parties to the Government for approval; and prepare a plan for such joint development of the Reservoir, within one hundred and eighty (180) days of approval of the agreement referred to in (b) above.

(c) the

10.2

If no plan is submitted within the period specified in Article 10.1(c) or such longer period as the Contractor and other parties may agree or, if such plan as submitted is not acceptable to the Government and the parties cannot agree on amendments to the proposed joint development plan, the Government may cause to be prepared, at the expense of the Contractor and the other parties referred to in Article 10.1, a plan for such joint development consistent with generally accepted practices in the international petroleum industry which shall take into consideration any plans and presentations made by the Contractor and the aforementioned other parties. If the Parties are unable to agree on the plan for joint development, then any of them may refer the matter to a sole for final determination pursuant to Article 33, provided that the Contractor may in case of any disagreement on the issue of joint development or the proposed joint development plan, or within

10.3 expert

sixty (60) days of determination by a sole expert, notify the Management Committee that it elects to surrender its rights in the New Discovery Area in lieu of participation in a joint development. 10.4 the plan as finally adopted shall be the approved joint development plan and the Contractor shall comply with the terms of the Development Plan as if the Commercial Discovery is established. 10.5 The provisions of Articles 10.1, 10.2, 10.3 and 10.4 shall apply MUTATIS MUTANDIS to a New Discovery of a Reservoir located partly within the Contract Area, which, although not equivalent to a Commercial Discovery if developed alone, 28 would be a Commercial Discovery if developed together with that part of the Reservoir which extends outside the Contract Area to areas subject to contract or given on license/lease for Petroleum Operations by other parties. 10.6 If a New Discovery is situated partly within the Contract Area and partly outside the Contract Area, the area outside the Contract Area over which, at the time of the making of the New Discovery by the Contractor, no production sharing contract similar to this Contract has been granted or is under negotiation and/or no license/lease to conduct petroleum operations has been granted, Government will favourably consider the extension of the Contract Area to include the entire area of the Reservoir if so requested by
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If a proposed joint development plan is agreed and adopted by the parties, or adopted following determination by the sole expert,

the

the Contractor. 29 ARTICLE 11 MEASUREMENT OF PETROLEUM 11.1 Field The volume and quality of Petroleum produced and saved from a shall be measured by methods and appliances generally accepted and customarily used in generally accepted international petroleum industry practice. 11.2 The Government may, at all reasonable times, inspect and test the appliances used for measuring the volume and determining the quality of Petroleum, provided that any such inspection or testing shall be carried out in such a manner so as not to unduly with Petroleum Operations. 11.3 Before commencement of production in a Field, except for the Fields which are producing as of the Effective Date, the Parties shall mutually agree on: (a) methods to be employed to optimize the measurement of volumes of Petroleum; the point at which Petroleum shall be measured and the respective shares allocated to the Parties in accordance with the terms of this Contract; the frequency of inspections and testing of measurement appliances and relevant procedures relating thereto; and the consequences of a determination of an error in measurement.

interfere

(b)

(c)

(d)

In the case of existing Fields, this Article 11.3 shall be given force as soon as practicable after the Effective Date, but in any case, not later than one hundred eighty (180) days after the Effective Date. 11.4 of The Contractor shall undertake to measure the volume and quality the Petroleum produced and saved from a Field at the agreed measurement point consistent with generally accepted practices in the international petroleum industry. The Contractor shall not make any alteration in the agreed method or procedures for measurement or to any of the approved appliances used for the purpose without the written consent of the Government. 11.5 The Contractor shall give the Government timely notice of its intention to conduct calibration operations or any agreed alteration for such operations and the Government shall have the right to be present and observe, either directly or through authorized representatives, such operations.

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30 ARTICLE 12 PROTECTION OF THE ENVIRONMENT

12.1

The Government and the Contractor recognise that Petroleum Operations will cause some impact on the environment in the Contract Area. Accordingly, in performance of the Contract, the Contractor shall conduct its Petroleum Operations with due regard to concerns with respect to protection of the environment and conservation of natural resources. In the furtherance of any laws, regulations and rules promulgated by the Government, the shall: (a) employ generally accepted industrial standards, including as required, advanced techniques, practices and methods operation for the prevention of Environmental Damage in conducting its Petroleum Operations; (b) take necessary and adequate steps to prevent Damage and, where some adverse impact on the environment is unavoidable, to minimize such damage and the consequential effects thereof on property and people; and (c) adhere to the guidelines, limitations or restrictions, if any, imposed by Environmental Clearance as applicable on the Effective Date and as such Environmental Clearance be revised, expanded or replaced as a result of Contractor's application(s) duly submitted after the Effective Date.

Contractor

of

Environmental

may

12.2 provisions

If the Contractor fails to substantially comply with the of Article 12.1 or materially contravenes any relevant law, and such failure or contravention results in substantial Environmental Damage, the Contractor shall forthwith take all necessary and reasonable measures to remedy the failure and the effects thereof.

12.3

If the Government has, on reasonable grounds, reason to believe that any works or installations erected by the Contractor or any operations conducted by the Contractor are endangering or may endanger persons or any property of any person, or are causing avoidable pollution, or are harming fauna and flora or the environment to a degree which is unlawful, the Government may, pursuant to applicable law, require the Contractor to take measures within such reasonable period as may be determined by the Government and, if appropriate, repair such damage. The Government may, pursuant to applicable law, require the Contractor to discontinue Petroleum Operations in whole or in part until the Contractor has taken such action.

remedial

12.4

The Contractor shall, within one hundred twenty (120) days of the
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Effective Date, cause a person or persons with special knowledge on environmental matters, approved by the 31 Government, to carry out an environmental impact study in order: (a) to determine, at the time of the study, the prevailing situation relating to the environment, human beings and local communities, the wildlife and marine life in the Contract Area and in the adjoining or neighbouring areas; and to establish the likely effect on the environment, human beings and local communities, the wildlife and marine in the Contract Area and in the adjoining or neighbouring areas in consequence of the relevant phase of Petroleum Operations to be conducted under this Contract. 12.5 The Contractor shall ensure that: (a) Petroleum Operations are conducted in an environmentally acceptable and safe manner consistent with good international petroleum industry practice and that such Petroleum Operations are properly monitored; the pertinent completed environmental impact studies are made available to its employees and to its Subcontractors to develop adequate and proper awareness of the measures and methods of environmental protection to be used in carrying out the Petroleum Operations; and the contracts entered into between the Contractor and its Subcontractors relating to its Petroleum Operations shall include the provisions stipulated herein and any established measures and methods for the implementation the Contractor's obligations in relation to the environment under this Contract. 12.6 The Contractor shall, prior to conducting any drilling activities, prepare and submit for review by the Government contingency plans for dealing with oil spills, fires, accidents and emergencies, designed to achieve rapid and effective emergency response. The plans referred to above shall be discussed with the Government and concerns expressed shall be taken into account. 12.6.1 In the event of an emergency, accident, oil spill or fire arising from Petroleum Operations affecting the environment, the Contractor shall forthwith notify the Government and shall promptly implement the relevant contingency plan and perform such Site Restoration as may be necessary. In the event of any other emergency or accident arising from the Petroleum Operations affecting
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(b) life

(b)

(c)

of

12.6.2

32 the environment, the Contractor shall take such action as may be prudent and necessary in accordance with good international petroleum industry practice in such circumstances. 12.7 In the event that the Contractor fails to take necessary action to comply with any of the terms contained in Article 12.5 and Article 12.6 within a reasonable period specified by the Government, the Government, after giving the Contractor reasonable notice in the circumstances, may take any action which may be necessary to compliance with such terms and recover from the Contractor, immediately after having taken such action, all costs and expenditures incurred in connection with such action together with such interest as may be determined in accordance with Section 1.7 of Appendix C of this Contract. 12.8 Contractor shall notify the Government upon determination by it that the estimated remaining recoverable reserves of any Field net of operating costs equal two and one-half (2 1/2) times the estimated abandonment cost whereupon the Government shall, within sixty (60) days, take control of the Field and the abandonment obligation or, failing which, the Contractor may then proceed to recover the abandonment cost from the remaining production and abandon such Field. Any and all costs incurred by Contractor pursuant to this Article shall be cost recoverable including, but not limited to, sinking funds established for abandonment. The responsibility of the Contractor for the environment hereunder shall be limited to damage to the environment which: (a) occurs after the date of the environmental impact assessment ("EIA") made to establish the benchmark condition. The EIA will be conducted as soon after the Effective Date as is reasonably possible; results from an act or omission of Contractor in violation of existing law; and notwithstanding the above, Contractor shall be for any damage to the environment because of any evidence of Oil spill, blow-out, fire, etc., during the course of Joint Operations from the Effective Date.

ensure

12.9

12.10

(b)

(c) responsible

33 ARTICLE 13 RECOVERY OF COSTS

13.1

The Contractor shall be entitled to recover Contract Costs

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out of the total volume of Petroleum produced and saved from the Contract Area in each Financial Year in accordance with the provisions of this Article, and, in respect of sole risk or exclusive operations, Article VII of the Operating Agreement. 13.1.1 Development Costs incurred by the Contractor in the Contract Area shall be aggregated, and the Contractor shall be entitled to recover out of Cost Petroleum the aggregate of such Development Costs at the rate of one hundred percent (100%) per annum, provided, however, that, subject to remaining provisions of this Article 13.1, the Contractor shall not, for the purposes only of determining the volume of Petroleum to which Contractor shall be entitled under Article 13.1 as Cost Petroleum, claim as Contract Costs Contractor's Development Costs incurred after the Effective Date in connection with Development Operations under the Development Plan for Panna and Mukta Fields (as those Fields are determined in the Development Plan first approved by the Management Committee) which exceed Contractor's Cost Recovery Limit (as hereinafter defined). 13.1.2 For the purposes of this Article 13.1, Contractor's "Cost Recovery Limit" means costs incurred after the Effective Date relating to the construction and/or establishment of such facilities as are necessary to produce, process, store and transport Petroleum from within the Existing Discoveries, in order to enable Oil production of thirty-eight thousand three hundred barrels per day (38,300 BOPD) in accordance with the Development Plan for the Panna and Mukta Fields. Such costs shall include costs incurred in relation to those items illustrated in Appendix G and matters in connection therewith. Appendix G, Annex G-1, further describes Companies' development concept based on an assumed project start date of 1st July, 1993, and Parties understand and agree that the schedules and activities contained in such assessment shall be revised, subject to Management Committee approval, by the Contractor in Contractor's Development Plan first submitted pursuant to this Contract. The Parties agree that for the purposes of this Article 13.1 the Contractor's Cost Recovery Limit shall be the sum of Five Hundred Seventy-seven Million Five Hundred Thousand U.S. Dollars (US$577,500,000). 34 13.1.3 The Parties acknowledge that the amount representing Contractor's Cost Recovery Limit has
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the

been agreed by Contractor on the basis of the following assumptions and/or factors and/or information: (a) Included in calculations for the Cost Recovery Limit are costs relating to Gas compression offshore required for delivering Gas into ONGC's pipeline; excluded from the Cost Recovery Limit are Site Restoration and exploration or appraisal drilling; the Cost Recovery Limit does not include any costs for the development of any satellite Fields; the Contractor being able to obtain all necessary approvals (including Government and state government approvals) to enable Contractor to carry out the Development Operations contemplated by the Development Plan for the Panna and Mukta Fields in accordance with the timing set out in such plan; the data relating to the Contract Area provided by ONGC from time to time prior the Effective Date inclusive of the data package pertaining to the Contract Area prepared by ONGC and made available for inspection and purchase by the Companies pursuant to the Government's "Notice Inviting Offers for Joint Ventures to Develop Medium- Sized Oil and Gas Field in India, 1992"; (e) to the availability and cost of materials and services in the international petroleum industry in constant 1993 United States Dollars; (f) the range of physical reservoir characteristics in respect of the Oil and Gas Fields comprising the Existing Discoveries not being materially different from the ranges for such characteristics revealed in the data referred to in Article 13.1.3(d) on which Companies based their assessment as described in Annex G-1 to Appendix G; (g) with regard to onshore facilities not included in the Cost Recovery Limit as per Articles 13.1.3(a) and 13.1.4(a), ONGC and Companies will determine a fee,terms and
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(b)

(c)

(d) to

international market conditions relating

as

35 conditions for the referenced facilities, which fee shall be determined by an internationally recognized expert in the field, who shall be selected by two members of the Operating Committee from a group of three internationally recognized experts selected by ONGC and the cost of the facilities shall be cost recoverable and not subject to the Cost Recovery Limit; and (h) no capital investment of a material nature is required on the Equipment contained in Appendix F.

13.1.4

Having regard, inter alia, to the matters referred to in Article 13.1.3, the Parties agree as follows: (a) Included in calculations for the Cost Recovery Limit are costs relating to Gas compression offshore required for delivering Gas into ONGC's pipeline excluded from the Cost Recovery Limit are water injection; Site Restoration and exploration or appraisal drilling and capital investment, if any, of a material nature, on the Equipment contained in Exhibit F shall not be subject to the Cost Recovery Limit; (b) the costs of developing the reserves potential reserves and/or satellite Fields referred to in Article 13.1.3(b) shall not be subject to the Cost Recovery Limit, notwithstanding that the development, within the Contract Area, of such reserves and/or potential reserves and/or satellite Fields may include shared flowlines, injection lines, Gas-lift lines and other facilities with those constructed as part of the Development Plan for the Panna and Mukta Fields;

system;

and/or

(c) in the event that the Contractor's Cost Recovery Limit is exceeded as a result of: (i) delays in carrying out the Development Operations referred to in Article 13.1.3(c) due to a delay in obtaining any necessary approval;

(ii)
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Development Plan for the Panna and Mukta Fields 36 necessitated by Contractor's review of data provided, if any, to the Companies by the Government and/or ONGC after the Effective Date where the Companies are able to establish that had such data been available prior to the Effective Date then the Companies, acting reasonably, would have included such changes in the Development Plan for the Panna and Mukta Fields; (iii) a material change to the international market conditions referred to in Article

13.1.3(e); (iv) a variation to the Development Plan for the Panna and Mukta Fields approved by the Committee; or (v) an event of force majeure as provided in Article 31; capital investments of a nature, reasonably required as at the Effective Date on the Equipment shown in Appendix F; then the Management Committee shall, at the request of the Operator, in a meeting convened under Article 5.8, promptly consider what, if any, increase should be made to the Contractor's Cost Recovery Limit to fairly reflect the circumstances in question PROVIDED THAT in the case of delays referred to in Article 13.1.3(c) the Management Committee shall not be obligated to consider any increase where, and to the extent that, such delay has been caused by the Companies' failure to act in a diligent manner. 13.1.5 In the event that:
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Management

(vi) material

(a)

there is any dispute between the Parties whether or to what extent a circumstance referred to in Article 13.1.4(c) has or resulted in the Contractor's Cost Recovery Limit being exceeded; or

arisen

(b) agree

the Management Committee is unable to whether an increase should be made to the Contractor's Cost Recovery Limit or is unable to agree on the amount of any such increase; 37

then, at any time after thirty (30) days from the date of the Management Committee meeting referred to in Article 13.1.4(c), any Party shall be at liberty to refer the matter to arbitration in accordance with the provisions of Article 33. 13.1.6 Costs incurred by the Companies prior to the Effective Date hereof which have been approved by the Government, in writing, shall be cost recoverable for purposes hereof after approval of the Management Committee.

13.2 of

Exploration Costs (if any) incurred by the Contractor in respect the Contract Area up to the date of Commercial Production of Petroleum from the Contract Area shall be aggregated, and the Contractor shall be entitled to recover the aggregate of such Exploration Costs out of the Cost Petroleum from the Contract Area at the rate of one hundred percent (100%) per annum of such Exploration Costs beginning from the date of such Commercial Production.

13.3 has

The Contractor shall be entitled to recover out of the Cost Petroleum from the Contract Area the Exploration Costs which it incurred in that Contract Area in any Financial Year after the

date of Commercial Production from the Contract Area at the rate of one hundred percent (100%) per annum of such Exploration Costs beginning from the date such Exploration Costs are incurred. 13.4 the quantity of Petroleum produced, saved and sold from the Contract Area, in the relevant year, provided that such Exploration Costs once recovered shall not be allowable for recovery against any other contract area. 13.5 Development Costs incurred by the Contractor in the Contract Area up to the date of Commercial Production from the Contract Area shall be aggregated, and the Contractor shall be entitled to recover out of the Cost Petroleum from that Contract Area the
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The Contractor shall be entitled to recover Exploration Costs as provided in Articles 13.2 and 13.3 in relation to the values of

aggregate of such Development Costs at the rate of one hundred percent (100%) per annum of such Development Costs beginning from the date of such Commercial Production from the Contract Area. 13.6 The Contractor shall be entitled to recover out of the Cost Petroleum produced from the Contract Area the Development Costs which it has incurred on such Contract Area after the date of Commercial Production from the Contract Area at the rate of one hundred percent (100%) per annum of such Development Costs beginning from the date such Development Costs are incurred. The Contractor shall be entitled to recover in full during any Financial Year the Production Costs incurred in the 38 Contract Area out of the Cost Petroleum. 13.8 If during any Financial Year the Cost Petroleum is not sufficient to enable the Contractor to recover in full the Contract Costs due for recovery in that Financial Year in accordance with the provisions of Articles 13.1 through 13.7, then, subject to the provisions of Article 13.1: a) recovery shall first be made of the Production Costs; and recovery shall next be made of the Exploration Costs; and recovery shall then be made of the Development Costs.

13.7

b)

c)

The unrecovered portions of Contract Costs shall be carried forward to the following Financial Year and the Contractor shall be entitled to recover such Costs in such Financial Year or the subsequent Financial Years as if such costs were due for recovery in that Financial Year, or the succeeding Financial Years, until the unrecovered costs have been fully recovered out of Cost Petroleum from the Contract Area. 13.9 For the purposes of this Article, as well as Article 14, costs, receipts and income shall be converted into production unit equivalents, and vice versa, using the relevant prices established pursuant to Article 19 for Crude Oil and Article 21 for Natural Gas. Pending completion of the calculations required to establish definitively the Contractor's entitlement to Cost Petroleum from the Contract Area in any Financial Year, the Contractor shall take delivery, provisionally, of volumes of Crude Oil and/or Natural representing its estimated Cost Petroleum entitlement calculated with reference to estimated production quantities, costs and prices for the Contract Area as established by the Contractor and approved by the Management Committee. Such provisional determination of Cost Petroleum shall be made every quarter on a cumulative basis.
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13.10

Gas

Within sixty days of the end of each Financial Year, a final calculation of the Contractor's entitlement to Cost Petroleum, based on actual production quantities, costs and prices for the entire Financial Year, shall be undertaken and any necessary adjustments to the Cost Petroleum entitlement shall be agreed upon between the Government and the Contractor and made as soon as practicable thereafter. 13.11 by Nothing herein contained shall provide for the recovery of costs ONGC which were incurred prior to the Effective Date.

39 ARTICLE 14 PRODUCTION SHARING OF PETROLEUM BETWEEN CONTRACTOR AND GOVERNMENT

14.1

The Contractor and the Government shall share in the Profit Petroleum from the Contract Area in accordance with the provisions of this Article. The share of Profit Petroleum, in any Financial Year, shall be calculated for the Contract Area on the basis of Investment Multiple actually achieved by the Companies at the end of the preceding Financial Year for the Contract Area as provided in Appendix D.

the

14.2

Profit Petroleum 14.2.1 When the Investment Multiple of the Companies at the end of any Financial Year is less than two (2.0), the Government shall be entitled to take and receive five percent (5%) and the Contractor shall be entitled to take and receive ninety-five percent (95%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year. When the Investment Multiple of the Companies at the end of any Financial Year in respect of any Contract Area is equal to or more than two (2.0) but is less than two and one-half (2.5), the Government shall be entitled to take and receive fifteen percent (15%) and the Contractor shall be entitled to take and receive eighty-five percent (85%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year. When the Investment Multiple of the Companies at the end of any Financial Year in respect of the Contract Area is equal to or more than two and one-half (2.5) but is less than three (3.0), the Government shall be entitled to take and receive twenty-five percent (25%) and the Contractor
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14.2.2

14.2.3

shall be entitled to take and receive seventyfive percent (75%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year. 14.2.4 When the Investment Multiple of the Companies at the end of any Financial Year in respect of the Contract Area is equal to or more than three (3.0) but is less than three and one-half (3.5), the Government shall be entitled to take and receive forty percent (40%) and the Contractor shall be entitled to take and receive sixty percent (60%) of the total Profit Petroleum from the Contract Area with effect from the start of 40 the succeeding Financial Year. 14.2.4 When the Investment Multiple of the Companies at the end of any Financial Year in respect of the Contract Area is equal to or more than three and one-half (3.5), the Government shall be entitled to take and receive fifty percent (50%) and the Contractor shall be entitled to take and receive fifty percent (50%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year.

14.3

The value of the Companies' Investment Multiple at the end of any Financial Year in respect of the Contract Area shall be calculated in the manner provided for, and on the basis of net cash flows specified, in Appendix D to this Contract. However, the volume of Profit Petroleum to be shared between the Government and the Contractor shall be determined for each quarter on a cumulative basis. As regards the period from the Effective Date through the end of the first full Financial Year, in view of the vagaries of short-term financial records and to assure equitable calculation the Investment Multiple based on reasonable historical records,

of the Investment Multiple calculated at the end of the first full Financial Year shall be applied retroactively to the Effective Date, and until the actual value can be determined, the provisional Investment Multiple for that period shall be calculated on the basis of Contractor's estimate of revenues and expenditures as provided in the Development Plan. Pending finalization of accounts, delivery of Profit Petroleum shall be taken by the Government and the Contractor on the basis of provisional estimated figures of Contract Costs, production, prices, receipts, income and any other income or allowable deductions and on the basis of the value of the Investment Multiple achieved at the end of the preceding Financial Year. All such provisional estimates shall be finally approved by the Management Committee but are deemed valid until such time as the Management Committee reaches a decision or a decision is rendered under Article 33. When it is necessary to convert monetary
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units into physical units of production equivalents or vice versa, the price or prices determined pursuant to Articles 19 and 21 for Crude Oil and Natural Gas, respectively, shall be used. Within sixty (60) days of the end of each Financial Year, a final calculation of Profit Petroleum based on actual costs, quantities, prices and income for the entire Financial Year shall be undertaken and any necessary adjustments to the sharing of Profit Petroleum shall be agreed upon between the Government and the Contractor and made as soon as is practicable thereafter. 14.4 The Profit Petroleum due to the Contractor in any Financial Year from the Contract Area shall be divided between the Parties constituting the Contractor in proportion to their 41 respective Participating Interests.

42 ARTICLE 15 TAXES, ROYALTIES, RENTALS, ETC.

15.1

The Companies and the operations under this Contract shall be subject to all fiscal legislation in India, except where, pursuant to any authority granted under any applicable law, they are exempt wholly or partly from the application of the provisions of a particular law or as otherwise provided herein.

15.2.1

For the purpose of computing profits or gains of the business consisting of and prospecting for or extraction or production of Petroleum, there shall be made in lieu of the allowances under the Income Tax Act, 1961, such allowances as are specified

admissible in this Agreement pursuant to Section 42 in relation to: (a) expenditure by way of infructuous or abortive exploration expenses in respect of any area surrendered prior to the beginning of Commercial Production; and after the beginning of commercial production, to expenditure incurred, whether before or after such Commercial Production, in respect of drilling or exploration activities or services or in respect of physical assets used in that connection.

(b)

15.2.2

Payments made by the Companies pursuant to Article 16 shall be deductible for income tax purpose in the year in which payment is made by the Companies, as permissible under Section 42 of the Income Tax Act, 1961.

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15.3.1 allowed

In respect of matters not covered above, deduction shall be in accordance with other provisions of Income Tax Act, 1961, and the rules framed thereunder.

15.3.2

The revenue from the Business consisting of Petroleum Operations shall be determined in accordance with Article 19 for its Participating Interest share of Crude Oil saved and sold, or otherwise disposed of, from each Field and from any revenue realized on the sale of ANG or NANG referred to in Article 21 as well as any other gains or receipts from Petroleum Operations as reduced by the deductions as specified within this Article, and, except as herein provided, all the provisions of the Income Tax Act, 1961, shall apply. 43 The following terms used in Section 42 of the Income Tax Act, and Articles 15.2 and 15.3 shall have the meanings corresponding

15.4 1961, to

the terms used in this Contract and defined in Article 1 as

follows: (a) "Previous Year" means the year as defined in Section 2(34) of the Income Tax Act, 1961. (b) The other terms used herein and not defined in the Income Tax Act, 1961 shall have the meaning therein ascribed in Article 1.

15.5

Except for income tax as otherwise provided in this Article, the Government covenants to the Companies that the Companies shall not be liable to the Government for payment of: (a) any taxes calculated by reference to income from or sale of Petroleum; or any customs or excise duties, export duties or any other statutory charge on the import or re-export of machinery, plant, equipment, materials or supplies imported by or on behalf of Contractor or its subcontractors solely and exclusively for use in Petroleum Operations.

(b)

Any such payment, if the Companies are made liable shall be reimbursed by the Government.

15.6.1

The constituents of the Contractor shall be liable to pay royalties and cess on their Participating Interest share of Crude Oil and Natural Gas saved and sold in accordance with the provisions of this Agreement. The royalty on Oil saved and sold will be paid at Rs. 481 per metric ton and cess on Oil saved and sold will be paid at Rs. 900 per metric ton. Royalty on Gas saved and sold will be paid at ten percent (10%) of the value at wellhead. No cess shall be payable on Gas or Condensate or other Natural Gas liquids produced in association with Gas. Royalty and cess shall not exceed the
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herein above amounts throughout the term of the Contract. Royalty and cess shall be payable in Indian Rupees. Any such additional payment shall be made by the Government.

15.6.2 not

All payments (except income tax) made by Contractor or its constituents as applicable under appropriate law including, but limited to, taxes whether levied by the Central Government or

state government, or any other local or statutory authority, royalties, cess, levies, duties, rentals, lease rent, license fees, export duties, 44 countervailing duties, provision for sinking fund for environmental or abandonment costs, or any other charges whatsoever, directly attributable to Petroleum Operations shall be cost recoverable.

15.7

If any change in or to any Indian law, rule or regulation by any authority dealing with income tax or other corporate tax, export/import tax, customs duty, or tax imposed upon Petroleum or dependent on the value of Petroleum (including Royalty and cess) results in a material change to the economic benefits accruing to any of the Parties to this Contract after the Effective Date, the Parties shall consult promptly to make necessary revisions and adjustments to the Contract in order to maintain such expected benefits to each of the Parties.

45 ARTICLE 16 PAYMENT

16.1

The Companies shall pay to ONGC in consideration of the right to commence and carry out exploration and drilling activities in the Contract Area, pursuant to and in accordance with the Notice Inviting Offers for Joint Ventures to Develop Medium Size Oil and Gas Fields in India- 1992 and the bid submitted in response thereto, as follows: (a) within two (2) days following the Effective Date, excluding days on which the banks in India or the United States are closed, Three Million Six Hundred Thousand United States Dollars (US$3,600,000). EOGIL shall pay One Million Eight Hundred Thousand United States Dollars (US$1,800,000) and RIL shall pay One Million Eight Hundred Thousand United States Dollars (US$1,800,000). ONGC's bank wire transfer instructions are as follows: ACCOUNT NUMBER: 01 00000 3054 OIL & NATURAL GAS CORPORATION LIMITED STATE BANK OF INDIA, OVERSEAS BRANCH
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VIJAYA BUILDING, BARAKHAMBA ROAD, NEW DELHI, INDIA 110 001 (b) When and if the hereinafter set forth production quantities are reached, the Companies will within fifteen (15) days following such attainment pay ONGC in with the following schedule: (i) cumulative production of fifty million barrels of Oil; (ii) cumulative production of one hundred million barrels of Oil; and (iii) Another Fifteen Million United States Dollars (US$15,000,000) after achieving a cumulative production of two hundred million barrels of Oil. Another Nine Million United States Dollars (US$9,000,000) after achieving a Another Six Million United States Dollars (US$6,000,000) after achieving a

accordance

16.2

Cumulative production shall, for purposes of this Article, mean Oil produced. Each Company shall pay its share of the payment in the proportion that it received Petroleum.

16.3

46 ARTICLE 17 CUSTOMS DUTIES

17.1

Machinery, plant, equipment, materials and supplies imported by a Contractor or its Subcontractors for use in Petroleum Operations shall be exempted from customs duties subject to compliance with procedures, if any, as may be determined pursuant to applicable customs duty legislation, Article 23 and the terms herein specified. Contractor shall, from time to time and as required, submit to the Government a list of Subcontractors who are engaged by it for the purpose of obtaining the various categories of items pursuant to the conduct of Petroleum Operations and who may claim exemptions hereunder. In order to qualify for the exemption from customs duties as provided for in Article 17.1, all imported items for which duty exemption is being claimed shall be certified, by a representative of the Contractor, to be imported under the terms of this Contract for use in carrying out Petroleum Operations and shall be
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17.2

17.3

certified by a representative of the Government to be eligible for such exemption pursuant to the terms of the Contract. In order to expedite such exemption, Contractor may submit a certified list of qualified items up to sixty (60) days in advance of anticipated import. 17.4 The Government shall have the right to inspect the records and documents of the physical item or items for which an exemption is or has been provided under Article 17.1 to determine that such or items are being or have been imported for the purpose for which the exemption was granted. The Government shall also be entitled to inspect such physical items wherever located to ensure that such items are being used or held for the purpose herein specified and any item not being so used shall immediately become subject to payment of the applicable customs duties. 17.5 imported items which are no longer required for Petroleum Operations, subject to applicable laws governing customs duties and sale or disposal of such items. 47 ARTICLE 18 DOMESTIC SUPPLY, SALE, DISPOSAL AND EXPORT OF CRUDE OIL 18.1 Until such time as the total availability to the Government and government companies of Crude Oil from all Petroleum production activities in India meets the total national demand, as determined by the Government, each constituent of the Contractor shall be required to offer to the Government or its nominee all of the Contractor's entitlement to Crude Oil from each Field in order to assist in satisfying the national demand, provided, however, that nothing contained in any contract entered into by the Contractor for the supply, sale or disposal of Petroleum, with any nominee of the Government pursuant to this Contract shall in any manner abrogate the obligation of the Government contained herein. Pursuant to Article 18.1 and subject to Articles 18.4 and 18.6, each constituent of Contractor shall offer to sell to the Government (or its nominee) its total Participating Interest share of Crude Oil to which it is entitled under Articles 13 and 14 at the price determined in accordance with Article 19 for sales to Government and the Government shall have the option to purchase whole or any portion thereof at the said price. 18.3 The aforementioned offer shall be made by each constituent of Contractor, in writing, at least six (6) months preceding the Financial Year in which the sale is to be made, specifying the estimated quantities and grade of Crude Oil being offered (based upon estimates which shall be adjusted within ninety (90) days of the end of each Financial Year on the basis of actual quantities produced and saved). The Government shall exercise its option to purchase, in writing, not later than ninety days (90) preceding
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item

Subject to Article 27, the Contractor and its Subcontractors may sell or otherwise transfer in India or sell for export all

18.2

the

the Financial Year in respect of which the sale is to be made, specifying the quantity and grade of Crude Oil which it elects to take in the ensuing year. Failure by the Government to give such notice within the period specified shall be conclusively deemed an election to take all of the Crude Oil offered (adjusted as provided herein) in the ensuing Financial Year. Notwithstanding the above, during the first six (6) months commencing with the Effective Date of this Contract, notices cited in Article 18.3 shall be given as soon as practicable and are deemed to satisfy the notice obligations of this Article 18.3. 18.4 If, during any Financial Year, India attains Self-Sufficiency, the Government shall promptly thereafter, but in no event later than the end of that Financial Year, so advise the Contractor by notice. In such event, as from the end of the first quarter of the following Financial Year, or such earlier date as the Parties may 48 mutually agree, Government's option to purchase shall be suspended and each constituent of Contractor shall have the right to lift and export their Participating Interest share of Crude Oil until such time, if any, as Self-Sufficiency shall have ceased to exist. If Self-Sufficiency ceases to exist during a Financial Year, the Government shall recover its option to purchase under Article 18.2 in respect of the following Financial Year by giving notice thereof to the Contractor as provided in Article 18.3. 18.5 All payments in respect of sales to the Government pursuant to provisions of this Article 18 shall be made by the Government within the period for credit applicable in the calculation of the price pursuant to Article 19. If no time frame for credit is applicable in such calculation, payment shall be made within forty five (45) days from the date the invoice is delivered to the Government. Contractor shall submit a monthly invoice to the Government for the quantity of Crude Oil delivered. Payment shall be made in United States Dollars by bank wire to the credit of the Foreign Company's designated account with a bank within or outside India. All amounts unpaid by the Government by the due date shall, from the due date, bear interest calculated on a day-to-day basis at the LIBOR plus one percentage (1%) point from the due date compounded daily until paid. If full payment is not received by Contractor when due as provided in Article 18.5, the Contractor shall, at any time thereafter, notify the Government of the default and, unless such default is remedied within fifteen (15) days from the date of the notice, the Contractor shall have the right, unless otherwise agreed, upon written notice to the Government and without prejudice to the Contractor's right to recover all costs, charges, expenses and losses, incurred by the Contractor: a) to suspend the Government's option to purchase under Article 18.2 and transport the Petroleum to any onshore
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written

18.6

facility and sell as each constituent of Contractor may in its absolute discretion deem fit; b) without prejudice to the foregoing, to freely lift, sell and export all its Participating Interest share of Crude Oil subject to the destination restrictions specified in Article 18.7, until the Government has paid the due amount plus interest as provided herein; if the payment plus interest is not received by the Contractor within one hundred and eighty (180) days from the date the payment was due, to receive and export the Government's share of Profit Oil until such time as either Government has paid all amounts due plus interest, or the value, based on the price as determined in accordance with Article 19, of Government's share of Profit Oil so sold is equal to all amounts due 49 plus interest, whichever first occurs; provided, however, that if the Government makes a payment to the Contractor after the Contractor has commenced sale of Government's share of Profit Oil and such payment together with the value of Government's share of Profit Oil sold (based on the price determined in accordance with Article 19) exceeds the amount due plus interest, necessary adjustment shall be carried out to refund to the Government forthwith the excess amount received by the Contractor. 18.7 elected not to purchase pursuant to this Article 18 subject to Government's generally applicable destination restrictions to countries with which the Government, for policy reasons, has severed or restricted trade. 18.8 than one Field), and thereafter no less than sixty (60) days before the commencement of each Financial Year, the Contractor shall cause to be prepared and submitted to the Parties a production forecast setting out the total quantity of Crude Oil that it estimates can be produced from a Field during the succeeding year, based on the maximum efficient rate of recovery of Crude Oil from that Field in accordance with good petroleum industry practice. No later than thirty (30) days prior to the commencement of each Calendar Quarter, the Contractor shall advise its estimate of production for the succeeding Calendar Quarter and shall endeavour to produce the forecast quantity for each Calendar Quarter. Notwithstanding the above, during the first six (6) months commencing with the Effective Date of this Contract, notices cited
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c)

The Contractor shall be entitled to freely lift, sell and export any Crude Oil which the Government is unable to take or has

No later than sixty (60) days prior to the commencement of production in a Field (or Fields where production is from more

in Article 18.8 shall be given as soon as practicable and are deemed to satisfy the notice obligations of this Article 18.8. 18.9 Each Party comprising the Contractor shall, throughout the term of this Contract, have the right to separately take in kind and dispose of all its share of Cost Petroleum and Profit Petroleum shall have the obligation to lift the Cost Petroleum and Profit Petroleum on a current basis and in such quantities so as not to cause a restriction of production or inconvenience to the other Parties. 18.10 The Government shall, throughout the term of this Contract, have the right to separately take in kind and dispose of its share of Profit Petroleum and of such portion of the Contractor's share of Petroleum as is purchased by the Government pursuant to Article subject to Article 18.6 and shall have the obligation to lift all of the Oil on a current basis and in such quantities so as not to cause a 50 restriction of production or inconvenience to the other Parties. Subject to Force Majeure, any Party with an obligation to lift Oil and failing to do so shall compensate the other Parties for any loss of revenue due to such failure and will, at its own cost and risk, be liable for all incident expenses, including demurrage, if any. 18.11 and For the purpose of implementing the provisions of Articles 18.9 18.10, a Crude Oil lifting procedure shall be agreed upon by the Parties as soon as practicable but no later than two (2) months after the Effective Date of this Contract. Such lifting procedure shall include, but not necessarily be limited to: (a) a procedure for notification by the Operator to the Government, and to each Party comprising the Contractor, of projected Crude Oil production; a procedure for notification by the Government, and by each Party comprising the Contractor, to the Operator, of its expected offtake and the consequences of inability or failure to offtake.

and

18,

(b)

51 ARTICLE 19 VALUATION OF OIL

19.1

For the purpose of this Contract, the value of Crude Oil shall be based on the price determined as provided herein. A price for Crude Oil shall be determined for each Calendar Month or such other period as the Parties may agree (hereinafter
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to as "the Delivery Period") in terms of United States Dollars per Barrel, FOB Delivery Point for Crude Oil produced and sold or otherwise disposed of from each Contract Area, for each Delivery Period, in accordance with the appropriate basis for that type of sale or disposal specified below. 19.3 In the event that some or all of Contractor's total sales of Crude Oil during a Delivery Period are made to third parties in Arms Length Sales, all sales so made shall be valued at the weighted average of the prices actually received by Contractor, calculated by dividing the total receipts from all such sales FOB the Point by the total number of Barrels of the Crude Oil sold in such sales. 19.3.1 In the event that a portion of such third party Arms Length Sales are made on a basis other than an FOB basis as herein specified, the portion shall be valued at the prices equivalent to the prices FOB the Delivery point for such sales determined by deducting all costs (such as transportation, demurrage, loss of Crude Oil in transit and similar costs) incurred downstream of the Delivery Point, and the prices so determined shall be deemed to be the actual prices received for the purpose of calculation of the weighted average of the prices for all third party Arms Length Sales for the Delivery Period. Each constituent of Contractor shall separately submit to the Government, within fifteen (15) days of the end of each Delivery Period, a report containing the actual prices obtained in their respective Arms Length Sales to third parties of any Crude Oil. Such reports shall distinguish between term sales and spot sales and itemize volumes, customers, prices received and credit terms, and the constituent of the Contractor shall allow the Government to examine the relevant sales contracts.

Delivery

19.3.2

19.4

In the event that some or all of a constituent of Contractor's total sales of Crude Oil during a Calendar Month are made to the Government, the price of all sales so made shall, unless otherwise agreed between the Parties, be determined on the basis of either the FOB selling price per Barrel of one or more crude oils which, at the time of 52 calculation, are being freely and actively traded in the international market and are similar in characteristics and

quality to the Crude Oil and/or Condensate in respect of which the price is being determined, such FOB selling price to be ascertained from Platt's Crude Oil Market Wire daily publication ("Platt's"), or the spot market for the same crude oils ascertained in the same manner, whichever price, in the opinion of the Parties, more truly
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reflects the current value of such crude oils. For any Calendar Month in which sales take place, the price shall be the arithmetic average price per Barrel determined by calculating the average for the preceding Calendar Month of the mean of the high and low FOB or spot prices for each day of the crude oil(s) selected for comparison adjusted for differences in the Crude Oil and the crude oil(s) being compared for quality, transportation costs, delivery time, quantity, payment terms, the market area into which the Crude Oil is being sold, other contract terms to the extent known and other relevant factors. In the event that Platt's ceases to be published or is not published for a period of thirty (30) consecutive days, the Parties shall agree on an alternative daily publication. 19.4.1 Notwithstanding anything herein otherwise provided, the price paid for such sales shall be, in any Calendar Month,the FOB selling price for a Marker Crude ("Marker Crude") which shall be (DTD) on a United States Dollar per Barrel basis less US$0.10 per Barrel. 19.4.2 The Marker Crude price will be based on the previous Calendar Month's average of the daily low and high quotations of Marker Crude as published by Platts' Market wire. The average is to be calculated up to three (3) decimals to arrive at a United States Dollar per Barrel price, which will be applicable for the month of supply. The Government and/or its nominee shall pay any and all sales tax payable on the sale of Oil to the Government or its nominee. The Government and/or its nominee shall enter a Crude Oil sales agreement with the Constituents of the Contractor which shall contain terms and conditions normally contained in international Crude Oil sales agreements of a similar nature. 19.5 In the event that in any Delivery Period some but not all of a constituent of Contractor's sales of Crude Oil from the Contract Area are made to the Government or a Government company and some but not all of a constituent of Contractor's sales of Crude Oil from the Contract Area are 53 made to third parties in Arms Length Sales and the price as established in accordance with Article 19.4 differs by more than one percent (1%) from the price as determined in accordance with Article 19.3 for the same Delivery Period, the Parties shall meet, upon notice from any Party, to determine if the prices established for the relevant Delivery Period for sales to the Government should be adjusted taking into account third party Arms Length Sales made
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Brent

19.4.3

19.4.4 into

by a constituent of Contractor of the same or similar Crude Oil from the relevant Field or other fields and published information in respect of other genuine third party Arms Length Sales of the same or similar crude oil for that Delivery Period. Until the matter of an adjustment for the relevant Delivery Period is finally determined , the price as established in accordance with this Article will apply for that Delivery Period. Any adjustment, if necessary, will be made within thirty (30) days from the date the adjustment for that Delivery Period is finally determined. 19.6 A constituent of Contractor shall determine the relevant prices in accordance with this Article and the calculation, basis of calculation and the price determined shall be supplied to the Government and shall be subject to agreement by the Government before it is finally determined. Pending final determination, the last established price, if any, for the Crude Oil shall be used. In the event that the Parties fail to reach agreement on any concerning selection of the crude oil(s) for comparison, the calculation, the basis of, or mechanism for the calculation of the prices, the prices arrived at, the adjustment of any price or generally about the manner in which the prices are determined according to the provisions of this Article within thirty (30) days, or such longer period as may be mutually agreed between the parties, from the date of commencement of Commercial Production or the end of each Delivery Period thereafter, any Party may refer the matter or matters in issue for final determination by a sole expert appointed as provided in Article 33. 19.7.1 Within ten (10) days of the said appointment, the Parties shall provide the expert with all information they deem necessary or as the expert may reasonably require. Within fifteen (15) days from the date of his appointment, the expert shall report to the Parties on the issue(s) referred to him for determination, applying the criteria or mechanism set forth herein and indicate his decision thereon to be applicable for the relevant Delivery Period for Crude Oil and such decision shall be accepted as final and binding by the Parties. 54 Except for the adjustment referred to in Article 19.5, any price or pricing mechanism agreed by the Parties pursuant to the provisions of this Article shall not be changed retroactively.

19.7 matter

19.7.2

19.7.3

19.8

Any sale or disposal to Affiliates or other sale or disposal of Crude Oil produced from a Field, other than to the Government or Government companies or to third parties in Arms Length Sales, in any Delivery Period, shall be valued on the same basis as sales to the Government or a Government company. In the event of such a
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sale or disposal by a Company, such Company shall submit to the Government, within fifteen (15) days of the end of each Delivery Period, all relevant information concerning such sales or disposals. 19.9 In the event that in any Delivery Period there is more than one type of sales referred to in Articles 19.3, 19.4 and 19.8, then, for the purpose of calculating Cost Petroleum and Profit Petroleum entitlement pursuant to Articles 13 and 14, a single price per Barrel of Crude Oil for all the sales for the relevant Delivery Period shall be used. Such single price shall be the weighted average of the prices determined for each type of sale, weighted the respective volumes of Crude Oil sold in each type of sale in the relevant Delivery Period. 19.10 In this Article the term "Government" shall include any other agency or nominee of the Government to whom Crude Oil is to be sold. The provisions specified above for the determination of the price of sales of Crude Oil shall apply mutatis mutandis to Condensates. The Parties shall meet annually, or sooner upon notice served by any Party on the others, to review the list of selected Crude Oils or the mechanism established pursuant to this Article 19 in light of any new facts since the date of selection of such Crude Oils or establishment of such mechanism and to determine what adjustment (if any) should be made to the said selection or mechanism by mutual agreement of the Parties.

by

19.11

19.12

55 ARTICLE 20 CURRENCY AND EXCHANGE CONTROL PROVISIONS

20.1

Subject to the provisions herein, and to compliance with the relevant provisions of the laws of general application in India governing currency and foreign exchange and related administrative instructions and procedures issued thereunder on a non-discriminatory basis, each Foreign Company comprising the Contractor shall, during the term of this Contract have the right to: (a) repatriate funds relating to Petroleum Operations abroad, in United States Dollars or any other freely convertible currency acceptable to the Government and the Foreign Company; receive, retain and use abroad the proceeds of any export sales of Petroleum under the contract; open, maintain and operate bank accounts with reputable banks, both inside and outside India, for the purpose of this Contract;
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(b)

(c)

(d)

freely import, through normal banking channels, funds necessary for carrying out the Petroleum Operations; convert into foreign exchange and repatriate sums imported pursuant to (d) above in excess (if any) of its requirements; and make payments of interest and principal outside of India for purchases, services and loans obtained abroad without the requirement that funds used in making such payments must come from or originate in India.

(e)

(f)

Provided however, that repatriation pursuant to sub-paragraphs (a) and (e) and payments pursuant to sub-paragraph (f) shall be subject to the provisions of any treaties or bilateral arrangements between the Government and any country with respect to payments to that country. 20.2 The rates of exchange for the purchase and sale of currency by the Contractor shall be the prevailing rates of general application determined by the State Bank of India or such other financial body as may be mutually agreed by the Parties and in accordance with prevailing currency and exchange regulations and, for accounting purposes under this Contract, these rates shall apply as provided in Section 1.6 of Appendix C. Domestic Companies shall be subject to the relevant provisions of the applicable laws in India governing currency and foreign exchange and related administrative instructions and procedures issued thereunder. 56 ARTICLE 21 NATURAL GAS 21.1 to Petroleum Operations and produced from the Contract Area. Accordingly, any proposal by the Contractor relating to Discovery and production of Natural Gas from the Contract Area shall be made in the context of the Government's policy for the utilisation of Natural Gas and shall take into account the objectives of the Government to develop its resources in the most efficient manner and to promote conservation measures. 21.2 Contractor shall have the right to use Natural Gas produced from the Contract Area for the purpose of Petroleum Operations including, but not limited to, reinjection for pressure in the Oil Fields, Gas lifting and power generation. 21.3 For the purpose of sales to the domestic market pursuant to this Article 21, the Delivery Point shall be the Delivery Point set forth in the Gas sales contract entered into by the Contractor. ASSOCIATED NATURAL GAS (ANG)
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20.3

Subject to Article 21.2, the Indian domestic market shall have the first call on the utilisation of Natural Gas discovered pursuant

maintenance

21.4

21.4.1

In the event that a New Discovery of Crude Oil contains ANG, Contractor shall declare in the proposal for the declaration of the New Discovery as a Commercial Discovery as specified in Article 9, whether (and by what amount) the estimated production of ANG is anticipated to exceed the quantities of ANG which will be used in accordance with Article 21.2 (hereinafter referred to as "the Excess ANG"). In such event the Contractor shall indicate whether, on the basis of the available data and information, it has reasonable grounds for believing that the Excess ANG could be commercially exploited in accordance with the terms of this Contract along with the Commercial Production of the Crude Oil from the Oil Field, and whether the Contractor intends to so exploit the Excess ANG. Based on the principle of full utilization and minimum flaring of ANG, a proposed development plan for an Oil Field (or Oil Fields), shall, to the extent economically reasonable, include a plan for utilisation of the ANG from the Existing Discovery and New Discovery, including estimated quantities to be flared, reinjected, and to be used for Petroleum Operations; and, if the Contractor proposes to commercially exploit the Excess ANG for sale in the domestic market in 57 accordance with Government's policy, or elsewhere, the proposed plans for such exploitation. If an Existing Discovery is determined to possess Excess ANG, and such Existing Discovery is producing or capable of producing as of the Effective Date of this Contract, Contractor is granted the right to flare, without penalty or limitation, such Excess ANG until Gas transportation facilities, if any, can be

21.4.2

provided for, and such right shall be extended to such future time or times as such Gas transportation facilities may become unavailable or their capacity would restrict or limit production of Crude Oil. Government will use its good offices to effect early reduction and/or elimination of such flaring by causing Gas transportation to be made available at reasonable rates if a proposal to that effect is proposed by Contractor or a Company and approved by the Management Committee. 21.4.3 If the Contractor wishes to exploit the Excess ANG (whether from an Existing or New Discovery), such ANG shall first be offered for sale to the
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Government (or its nominee) in writing in accordance with the terms of this Contract. On receipt of such offer, the Government (or its nominee) shall, within three (3) months of the date of receipt thereof, notify the Contractor, in writing, whether or not it wishes to exercise its option to purchase the Excess ANG. 21.4.4 If the Government exercises its option to purchase the Excess ANG as provided in Article 21.4.3: (a) notice exercising the option, a date, within two (2) years of the date of the Contractor's offer, for commencement of purchase of the Excess ANG; (b) within six (6) months of the date of notification of the exercise of the Government's option pursuant to Article 21.4.3., the Contractor and the Government (or its nominee) shall agree on the terms for the sale to Government (or its of the Excess ANG. 21.4.5 If the Government does not exercise its option to purchase the Excess ANG the Contractor shall be 58 free to explore markets for the commercial exploitation of the Excess ANG. 21.4.6 Where the Contractor is of the view that Excess ANG cannot be commercially exploited, and chooses not to exploit ANG, or is unable to find a market for the Excess ANG pursuant to Article 21.4.5, Government shall be entitled to take and utilise such Excess ANG. 21.4.7 If the Government elects to take the Excess ANG as provided in Article 21.4.6: (a) free of cost, at the downstream flange of the Gas/Oil separation facilities; (b) the Government or its nominee shall bear all costs including gathering, treating, processing and transporting costs beyond the downstream flange of the Gas/Oil separation facilities; the delivery of such Excess ANG shall be
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the Government shall indicate in the

nominee)

the

the Contractor shall deliver such Excess ANG to the Government (or its nominee)

(c)

subject to procedures to be agreed between the Government or its nominee and the Contractor prior to such delivery, such procedures to include matters relating to timing of off-take of such Excess ANG, which procedures shall not, in any way, restrict Oil production. 21.4.8 Excess ANG which is not commercially exploited by the Contractor, or taken by the Government or its nominee pursuant to this Article 21, shall be returned to the subsurface structure or flared where such flaring is approved in the Development Plan, which approval shall not be unreasonably withheld, for the relevant Oil Field or where reinjection is uneconomical or inadvisable in accordance with good reservoir engineering practices. Where the Contractor is of the view that there is economic merit in flaring Gas in the absence of a Gas transmission system or during such time as the pipeline is inoperable or lacks capacity to take all available Gas, Contractor shall have the right to flare Gas. In any such event, Contractor shall notify the Management Committee within forty-eight (48) hours to obtain its approval for continuing operations. 59 21.4.10 As soon as practicable after the New Discovery referred to in Article 21.4.1 or the submission to the Government of the proposal for the declaration of the New Discovery as a Commercial Discovery as therein specified, the Contractor and the Government or its nominee shall meet to discuss the sale and/or disposal of any ANG discovered with a view to giving effect to the provisions of this Article 21 in a timely manner. Notwithstanding the above, during the first six (6) months commencing with the Effective Date of this Contract, notices cited in Article 21.4 be given as soon as practicable and are deemed to satisfy the notice obligations of this Article 21.4.

21.4.9

21.4.11

shall

21.5 NON ASSOCIATED NATURAL GAS (NANG)

21.5.1

In the event of a New Discovery of NANG, the Contractor shall promptly report such New Discovery to the Management Committee and the provisions of Articles 9.1 and 9.2 shall apply. The remaining provisions of Article 9 would apply
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to the New Discovery and development of NANG only in so far as they are not inconsistent with the provisions of Articles 21.5.1 to 21.5.13. 21.5.2 If, pursuant to Article 9.1, the Contractor gives notification that a New Discovery is of potential commercial interest, the Contractor shall submit to the Management Committee, within one (1) Calendar Year from the date of notification of the above New Discovery, the proposed Appraisal Programme, including a Work Programme and budget to carry out an adequate and effective appraisal of such New Discovery, to determine (i) without delay, whether such New Discovery is a Commercial Discovery and (ii) with reasonable precision, the boundaries of the area to be delineated as a Field. Such programme shall be supported by all relevant data such as Well data, Contractor's best estimate of reserve range and production potential and shall indicate the date of commencement of the proposed Appraisal Programme. Where in the case of an Existing Discovery, Contractor desires to carry out additional appraisal work, the Contractor shall submit its proposed Appraisal Programme with a Work Programme and budget to the Management Committee within one hundred twenty (120) days of the Effective Date for approval. The proposed Appraisal Programme for an Existing Discovery or a New Discovery shall be considered 60 by the Management Committee within sixty (60) days of its submission by the Contractor and the programme together with the Work Programme and budget submitted by the Contractor revised in accordance with any agreed amendments or additions thereto approved by the Management Committee, shall be adopted as the Appraisal Programme and the Contractor shall promptly proceed with implementation of such programme. 21.5.4. If on the basis of the results of the Appraisal Programme, the Contractor is of the opinion that NANG has been discovered in commercial quantities, it shall submit to the Management Committee, as soon as practicable but not later than five (5) years from the date of notification of the aforementioned New Discovery, a proposal for the declaration of the New Discovery as a Commercial Discovery. Such proposal shall take into account the Government's policies on Gas utilisation and propose alternative options (if any) for use or consumption of the NANG and be supported by, inter alia, technical and economic data, evaluations, interpretations and analyses
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21.5.3

of such data, feasibility studies relating to the New Discovery prepared by or on behalf of the Contractor and other relevant information. 21.5.5 In the case of a New Discovery, simultaneously with the Contractor's Appraisal Programme, Government and the Contractor shall seek to reach an agreement on the development, production, processing, utilisation and sale of the NANG, in the context of Article 21.1, within thirty-six (36) months of the date of notification of the Discovery referred to in Article 21.5. If no proposal is submitted to the Management Committee by the Contractor within five (5) years from the date of notification of such New Discovery, the Contractor shall relinquish its rights to develop such New Discovery and the area relating to such New Discovery shall be excluded from the Contract Area. Where the Contractor has submitted a proposal for the declaration of a New Discovery as a Commercial Discovery, the Management Committee shall consider the proposal of the Contractor with reference to commercial utilisation of the NANG in the domestic market or elsewhere and in the context of Government's policy on Gas utilisation and the chain of activities required to bring the NANG from the Delivery Point to 61 potential consumers in the domestic market or elsewhere. The Management Committee may, within ninety (90) days, request that the Contractor submit any additional information on the New Discovery and the related Appraisal Programme that it may reasonably require to facilitate a decision on whether or not to declare the New Discovery as a Commercial Discovery.

21.5.6

21.5.7

The Management Committee shall make a decision regarding the declaration of a New Discovery as a Commercial Discovery within the latter of: (a) one hundred eighty (180) days of receipt such proposal; or (b) one hundred eighty (180) days of receipt the additional information referred to above.

of

of

21.5.8

If the Management Committee, with the approval of

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the Government, declares a New Discovery a Commercial Discovery, such declaration shall be accompanied by an indication of the probable date(s) by when the market(s) would be ready to receive the Gas and an estimate of the quantities of Gas that could be so utilised. The Contractor, in such an event, shall, within One (1) Calendar Year of the declaration of the New Discovery as a Commercial Discovery, submit a Development Plan for the development of the Gas Field to the Management Committee for its approval. Such plan shall be supported by all relevant information including, inter alia, the information required in Article 9.6. In the case of an Existing Discovery, Contractor shall within ninety (90) days of the Effective Date propose a Development Plan following the plan brought out in Appendix G, intended to achieve the production profile brought out in Appendix H, containing the detailed information required in Article 9.6, with supporting budget and the Management Committee shall render its decision regarding such proposal within thirty (30) days of such submittal. Where a Development Plan is so agreed, it shall be an approved Development Plan pursuant to this Article. 62 21.5.9 If the Development Plan has not been approved by the Management Committee within one hundred and eighty (180) days of its submission, the Contractor shall have the right to submit such plan or plans directly to the Government for approval, within sixty (60) days of the expiry of the time provided to the Management Committee to approve the plan or plans. The Government shall respond to the submission within ninety (90) days of receipt thereof. If the Government rejects the Contractor's proposed plan or plans, the Government shall state in writing the reasons for such rejection and the Contractor shall have the right to resubmit, within sixty (60) days of written notice of such rejection, such plan or plans duly amended to meet the Government's objections thereto. Such right of resubmission of each proposed plan or plans shall be exercisable by the Contractor only once. If the Parties are unable to agree, any Party shall have the right to submit the matter to arbitration. If no such plan or plans is/are submitted to the Government within the aforesaid period, the Contractor shall relinquish its right to develop such Gas Field and such Gas Field shall be excluded from the Contract Area.

21.5.10

If the Management Committee is unable to agree on the declaration of a New Discovery as a Commercial Discovery within the time limit
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prescribed in Article 21.5.7, the Contractor, or any of its constituents, shall be entitled to submit such proposal directly to the Government for approval. In such event, the Contractor, or any of its constituents, shall also submit a comprehensive plan or plans for development of such New Discovery, which shall detail the proposed Development Plan for utilisation of the NANG produced in the domestic market giving, inter alia, the data specified in Article 21.5.8. The proposal for declaration of the New Discovery as a Commercial Discovery as well as the proposed Development Plan shall be submitted to the Government within one hundred and eighty (180) days of the expiry of the time given to the Management Committee to reach a decision on the proposal for declaration of the New Discovery as a Commercial Discovery and Government shall respond to the said submission within one hundred 63 twenty (120) days of its receipt. If the Government disapproves the proposed plan or plans, the Government shall for such disapproval shall have the right (60) days, such plan meet the Government's objections thereto. Such right of resubmission of each proposed plan or plans shall be exercisable by the Contractor only once. In the event the Government does not approve such plan or plans, any Party shall have the right to submit the matter to arbitration. If no such plan (plans) is (are) submitted to the Government within the aforesaid period, the Contractor shall relinquish its rights to develop such Gas Field and such Gas Field shall be excluded from the Contract Area. state in writing the reasons and the concerned Parties to resubmit, within sixty or plans duly amended to

21.5.11

In the event the Management Committee , or Government, as the case may be, approves the Contractor's proposal for declaration of the New Discovery as a Commercial Discovery and also the comprehensive plan or plans for development of such New Discovery and for the utilisation of NANG produced in the domestic market, the Gas Field shall be promptly developed by the Contractor in accordance with the approved plan which shall be the Development Plan for the Field.

21.5.12

In the event the Contractor does not commence

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development of a New Discovery within ten (10) years from the date of completion of the first Discovery Well, the Contractor shall relinquish its rights to develop such New Discovery and the area relating to such New Discovery shall be excluded from the Contract Area.

21.5.13

The price of the ANG and NANG produced from the Oil or Gas Field for use in India shall be specified in the Gas sales contract, which shall be in accordance with the provisions of this Article 21.5.13, between the Contractor and the nominee of the Government. (a) Unless the context otherwise requires, the following words and terms wherever and whenever used or appearing in this 64 Article 21.5.13 shall have the following meaning: (i) "British Thermal Unit" or "BTU" means the amount of energy required to raise the of one (1) pound (avoirdupois)

temperature of pure water, at sixty degrees (60(degree)) Fahrenheit, one degree (1(degree)) Fahrenheit at an absolute pressure of 14.73 pounds per square inch. (ii) "Buyer" means the Government of India or as Authority of India Limited ("GAIL"). "Deliverability" means the of the maximum aggregate rate of all wells in the Contract Area or the maximum delivery capacity of the processing facility, subject to generally accepted international petroleum industry practices. (iv) "Delivery Point" means the upstream weld at the underwater connection between Seller'spipeline and ONGC's underwater Gas transmission line or lines which transport Gas the Bassein Field to the Hazira area.
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(iii) lesser

from

(v)

"Maximum Delivery Pressure" has the meaning set forth in Article 21.5.13(c). "MMBTU" means one million (1,000,000) BTU's on a net heating value basis.

(vi)

(vii) "Seller" means Contractor. (b) The Seller agrees to produce and deliver, on a daily basis, to the Buyer one hundred percent (100%) of the Deliverability of ANG and NANG and Condensate delivered therewith at the Delivery Point and the Buyer, provided the Gas and Condensate are made available and tendered for delivery by the Seller, agrees to take and purchase, on a daily basis, one hundred percent (100%) of the Deliverability of ANG and NANG and Condensate delivered therewith, provided, however, that Seller, at Seller's sole discretion, subject to generally accepted operator practices in the international petroleum industry, may adjust deliveries to provide for necessary maintenance, service and testing. Buyer may request that Seller vary deliveries to accommodate similar circumstances in the 65 Buyer's operation and Seller's approval shall not be unreasonably withheld. Communications procedures shall be mutually agreed in the Gas sales contract in accordance with internationally accepted industry standards. (c) The Gas and Condensate sold hereunder shall be separated into Gas and Condensate at the offshore processing facility, measured separately, and recombined and delivered at the Delivery Point at the operating pressure of the Buyer's owned or contracted pipeline up to a maximum pressure ("Maximum Delivery Pressure") of one thousand (1000) psig. (d) Subject to the provisions hereof, the Buyer shall pay the Seller for each MMBTU of Gas delivered hereunder, or for each MMBTU of Gas for which the Buyer is obligated to pay hereunder, a price calculated as follows: The Base Price ("Base Price") in United States Dollars (US$) per MMBTU is fixed on the basis of ninety-nine percent (99%) of a Low Sulfur Fuel Oil Basket ("LSFO Basket") calculated as the average of the daily mean value for low and high prices of fuel oil taking into account equal parts of: (1) bulk residual fuel oil, containing one percent (1%) sulfur, quoted for barges at Northwest Europe, (Barges, FOB Rotterdam); and (2) bulk residual fuel oil, containing one percent (1%) sulfur, quoted for Mediterranean, basis Italy, (Cargoes, FOB Med, basis Italy); and (3) a theoretical blend of residual fuel oil composed of Singapore Cargoes made up of seventy-four percent (74%) of LSWR-SR 0.3%, (three-tenths percent (0.3%) sulfur), and twenty-six percent (26%) of HSFO 180, three and one-half percent (3.5%) sulfur, viscosity 180 centistokes. The Base Price is calculated on the basis of the arithmetic average of the monthly values of the prices of the listed products as published in Platt's Oilgram Price Report for the eighteen (18) months of May, 1992 through October, 1993, inclusive. (These values are derived from the mean of the daily 66 ranges on days the postings are published to give a monthly value.) For the purpose of this Contract, Base Price will be equal to $ 2.32/MMBTU.
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The price of Gas for each MMBTU for each Calendar Quarter thereafter shall be determined by the following formula: Price = Base Price x (A/B)

Where: A = a value calculated for the HS/LSFO Basket, defined in this Article 21.5.13 (d), evaluated the twelve (12) months preceding the Calendar Quarter using the method for averaging as described for calculating the Base Price, and B = A value calculated for the HS/LSFO Basket, evaluate for the twelve (12) months April 1993 through March 1994.

for

The High Sulfur/Low Sulfur Fuel Oil Basket ("HS/LSFO Basket") is valued as equal parts of: (1) bulk residual fuel oil, containing one percent (1%) sulphur, quoted for Mediterranean, basis Italy, (Cargoes, FOB Med, basis Italy); and (2) bulk residual fuel oil, containing one percent (1%) sulfur, quoted for Northwest Europe Cargoes, CIF, basis ARA, (Cargoes CIF NWE, Basis ARA), and (3) bulk residual fuel oil, Singapore Cargoes, containing three and one-half percent (3.5%) sulfur, viscosity 180 centistokes, (Singapore HSFO, 180 cst), and (4) bulk residual fuel oil, Cargoes, FOB Arab Gulf, viscosity 180 centistokes, (Arab Gulf, FOB HSFO 180 cst) using the method for averaging as described for calculating the Base Price. The Floor Price ("Floor Price") shall be ninety percent (90%) of the monthly values of 67 the prices of the LSFO Basket as published in Platt's Oilgram Price Report for the eighteen (18) months of May, 1992 through October, 1993, inclusive. (These values are derived from the mean of the daily ranges on days the postings are published to give a monthly value.) For the purpose of this Contract, Floor Price will be equal to $ 2.11/MMBTU. Notwithstanding results of the calculations for price as shown in this Article 21.5.13 (d), the actual price shall in no event be less than a Floor Price ("Floor Price") which is calculated as US$2.11/MMBTU, nor more than a Ceiling ("Ceiling") of the Floor Price plus US$1.00/MMBTU, provided that after seven (7) years from the Effective Date, the Seller shall have the option to revise the Ceiling to one hundred fifty percent (150%) of ninety percent (90%) of the same or equivalent basket of
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fuel oils used in calculating the Base Price averaged over the immediately preceeding eighteen (18) months. Parties agree to convert US$/barrel prices for fuel oil as published in Platt's Oilgram to US$/MMBTU using a factor of 6.28. If Platt's Oilgram is no longer published, an alternate publication shall be mutually agreed upon. (e) Parties acknowledge that Gas is to be eceived by GAIL at Hazira downstream of separation and sweetening facilities owned and operated by ONGC. In order to compensate ONGC for cost of ownership and operations of these facilities, Contractor shall make payments to ONGC on the basis of the costs fixed on an incremental basis by an internationally recognised expert who shall be selected by two members of the Operating Committee from a panel of three internationally recognised experts selected by ONGC. In case there is no agreement between the Companies and ONGC on the advice tendered, the matter shall be referred to Government. The decision of Government shall be final and binding on all the Parties.

21.5.14 by

Nothing contained in any contract entered into the Contractor for the supply, sale or disposal 68 of Gas, with any nominee of the Government shall in any manner abrogate the obligation of the Government contained herein.

21.5.15

The Government and/or its nominee shall pay any and all sales tax payable on the sale of Gas to the Government or its nominee. 69

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70 ARTICLE 22 EMPLOYMENT, TRAINING AND TRANSFER OF TECHNOLOGY

22.1

Without prejudice to the right of the Contractor to select and employ personnel in numbers and with the qualifications as, in the opinion of the Contractor, are required for carrying out Petroleum Operations in a safe, cost effective and efficient manner, the Contractor shall, to the maximum extent reasonably possible, employ, and require the Operator and Subcontractors to employ, citizens of India having appropriate qualifications and taking into account the experience required and the level and nature of the Petroleum Operations.

experience,

22.2 management

Contractor shall offer up to two (2) man months per year of on-the-job training and practical experience in skilled, and executive positions of their ongoing Petroleum Operations to Indian nationals of the Government's choice.

22.3

Contractor shall associate and involve mutually agreed numbers of

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citizens of India designated by the Government, which shall in no event exceed three (3) people at any one time, in the technological aspects of the then ongoing Petroleum Operations for up to two man months per year. Such aspects shall include: (a) seismic data acquisition, processing and interpretation; computerized formation evaluation using well logs; computerized analysis of geological data for basin analysis; laboratory core analysis; reservoir simulation and modelling; geochemistry, including analytical methods, source rock studies, hydrocarbon generation, modelling; measurement-while-drilling techniques; stimulation of wells; production engineering including, optimization methods for surface and subsurface facilities (e.g. NODAL analysis and implementation); reservoir engineering and management including gas and water injection; enhanced oil recovery techniques; 71 (l) (m) (n) (o) 22.4 by whether owned by itself, any of its Affiliates or a third party, of a proprietary nature. 22.5 At the request of the Government the Contractor shall separately endeavour to negotiate, in good faith, technical assistance agreements with the Government setting forth the terms by which each constituent of the Contractor may render technical assistance and make available commercially proven technical information of a proprietary nature for use in India by the Government. The issues to be addressed in negotiating such technical assistance
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(b) (c)

(d) (e) (f)

(g) (h) (i)

(j)

(k)

gas production technology; pipeline technology; well design and drilling technology; design of offshore facilities.

Except as herein provided, no Party shall be obliged to disclose virtue of this Article 22 any data, process or information,

agreements

shall include, but not be limited to, licensing issues, royalty conditions, confidentiality restrictions, liabilities, costs and method of payment. 72 ARTICLE 23 LOCAL GOODS AND SERVICES 23.1 In the conduct of Petroleum Operations, the Contractor shall: (a) give preference to the purchase and use of goods manufactured, produced or supplied in India provided that such goods are available on terms equal to or better than imported goods with respect to timing of delivery, and quantity required, price and other terms; (b) employ Indian Subcontractors having the required skills or expertise, to the extent reasonably possible, in so far as their services are available on comparable standards with those obtained elsewhere and at competitive prices and on competitive terms; provided that where no such Subcontractors are available, preference shall be given to non-Indian Subcontractors who utilise Indian goods to the maximum extent possible subject however to the proviso in paragraph (a) above; cooperate to the extent possible and without financial obligation with domestic companies in India to enable to develop skills and technology to service the petroleum industry; (d) ensure that provisions in terms of paragraphs (a) to (c) above are contained in contracts between the Operator and its Subcontractors.

quality

(c) them

23.2

The Contractor shall establish appropriate procedures, including tender procedures, for the acquisition of goods and services which shall ensure that suppliers and Subcontractors in India are given adequate opportunity to compete for the supply of goods and services. The tender procedures shall include, inter alia, the financial amounts or value of contracts which will be awarded on the basis of selective bidding or open competitive bidding, the procedures for such bidding, and the exceptions to bidding in of emergency.

cases

23.3

Within one hundred and twenty (120) days after the end of each Calendar Year, the Contractor shall provide the Government with a report outlining its achievements in utilising Indian resources during that Calendar Year. In this Article "goods" means equipment, materials and supplies. 73 ARTICLE 24 INSURANCE AND INDEMNIFICATION
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23.4

24.1

INSURANCE 24.1.1 The Contractor shall, during the term of this Contract, obtain and maintain insurance coverage for and in relation to Petroleum Operations for such amount and against such risks in accordance with generally accepted international operating practices as are set forth herein, and shall furnish to the Government certificates evidencing that such coverage is in effect. Such insurance policies shall include the Government as additional insured and shall waive subrogation against the Government. The insurance shall, without prejudice to the generality of the foregoing, cover: (a) Loss or damage to all installations, equipment and other assets for so long as they are used in or in connection with Petroleum Operations; provided, however, Contractor fails to insure any such installation, equipment or assets, it

if

shall replace any loss thereof or repair any damage caused thereto; (b) Loss, damage or injury caused by pollution in the course of or as a result of Petroleum Operations; Loss or damage to property or bodily suffered by any third party in the course of or as a result of Petroleum Operations for which the Contractor may be liable; (d) With respect to Petroleum Operations offshore, the cost of removing wrecks and cleaning up operations following any accident in the course of or as a result Contractor's Petroleum Operations; (e) The Contractor's and/or Operator's liability to its employees engaged in Petroleum Operations.

(c) injury

of

24.1.2 to

The Contractor shall require its Subcontractors obtain and maintain insurance against the risks referred to in Article 24.1.1 relating mutatis mutandis to such Subcontractors. 74

24.2

INDEMNITY The Contractor shall indemnify, defend and hold the Government harmless against all claims, losses and damages of any nature
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whatsoever, including without limitation, claims for loss or damage to property or injury or death to persons caused by or resulting from any Petroleum Operations conducted by or on behalf of the Contractor. 24.3 but not by way of limitation, claims for loss or damage to property or injury or death to persons or Environmental Damage caused by or resulting from and attributable to any operations in the nature of Petroleum Operations conducted by or on behalf of ONGC or failure to comply with any Environmental Clearance(s) prior to the Effective Date. 75 ARTICLE 25 RECORDS, REPORTS, ACCOUNTS AND AUDIT 25.1 The Contractor shall prepare and maintain at an office in India accurate and current books, records, reports and accounts of its activities for and in connection with Petroleum Operations so as present a fair, clear and accurate record of all its activities, expenditures and receipts. The Contractor shall also keep representative samples of cores and cuttings. 25.2 Based on generally accepted and recognised accounting principles and modern petroleum industry practices, records, books, accounts and accounting procedures in respect of Petroleum Operations shall be maintained on behalf of the Contractor by the Operator, at its business office in India. The annual audit of accounts shall be carried out on behalf of the Contractor by a qualified, independent firm of internationally recognised chartered accountants, registered in India and selected by the Contractor. Accounts, together with the auditor's report thereon, shall be submitted to the Parties for approval not later than the thirtieth (30th) day of September following the Financial Year. The Government shall have the right to audit the accounting of the Contractor in respect of Petroleum Operations as provided in the Accounting Procedure. 25.6 The accounting and auditing provisions and procedures specified in this Contract are without prejudice to any other requirements imposed by any statute in India, including, without limitation, specific requirements of the statues relating to taxation of companies. 25.7 For the purpose of any audit referred to in Article 25.5, the Operator or the Contractor shall make available to the auditor all such books, records, accounts and other documents and information as may be reasonably required by the auditor during normal
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ONGC shall indemnify and hold the Companies harmless against all claims, losses and damages of any nature whatsoever, including,

to

25.3

25.4

25.5 records

any

business hours. 76 ARTICLE 26 INFORMATION, DATA, CONFIDENTIALITY, INSPECTION AND SECURITY 26.1 The Contractor shall, promptly after they become available, make available to the Government in its offices all data obtained as a result of Petroleum Operations under the Contract including, but not limited to, geological, geophysical, geochemical, petrophysical, engineering, well logs, maps, magnetic tapes, cores and production data as well as all interpretative and derivative data, including reports, analyses, interpretations and evaluations prepared in respect of Petroleum Operations (hereinafter referred to as "Data"). Data shall be the property of the Government, provided however, that the Contractor shall have the right to make use of such Data, free of cost, for the purpose of Petroleum Operations under this Contract as provided herein. Contractor shall keep the Government currently advised of all developments taking place during the course of Petroleum and shall furnish the Government with such progress reports containing full and accurate information relating to Petroleum Operations (on a periodic basis) as the Government may reasonably require, provided that this obligation shall not extend to proprietary technology. Without prejudice to the generality of the foregoing, the Contractor shall submit regular statements and reports relating to Petroleum Operations as provided in Appendix C. Contractor shall meet with the Government at a mutually convenient location to present the results of all geological and geophysical work carried out as well as the results of all engineering and drilling operations as soon as practical after such Data becomes available to the Contractor. 26.3 All Data, information and reports obtained or prepared by, for or on behalf of, the Contractor pursuant to this Contract shall be treated as confidential and, subject to the provisions the Parties shall not disclose the contents thereof to any third party without the consent in writing of the other Parties. 26.4 The obligation specified in Article 26.3 shall not operate so as to prevent disclosure: (a) to Affiliates, Contractors, or Subcontractors for the purpose of Petroleum Operations; to employees, professional consultants, advisers, data processing centres and laboratories, where required, for the performance of functions in connection with Petroleum Operations for any Party comprising the Contractor; to banks or other financial institutions, in connection with Petroleum Operations; 77
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26.2 Operations

hereinbelow,

(b)

(c)

(d)

to bona fide intending assignees or transferees of an interest hereunder of a Party comprising the Contractor or in connection with a sale of stock of a Party comprising the Contractor; to the extent required by any applicable law or in connection with any legal proceedings or by the regulations of any stock exchange upon which the shares a Party comprising Contractor are quoted;

(e)

of

(f)

to Government departments for, or in connection with, the preparation by or on behalf of the Government of statistical reports with respect to Petroleum Operations, or in connection with the administration of this Contract or any relevant law or for any purpose connected with Petroleum Operations; by a Party with respect to any Data or information which, without disclosure by such Party, is generally known to the public.

(g)

26.5

Any Data, information or reports disclosed by the Parties comprising the Contractor to any person other than pursuant to Article 26.4 (a), (b) and (g) shall be disclosed on the terms that such Data, information or reports shall be treated as confidential by the recipient. Prompt notice of disclosures made by the Contractor pursuant to Article 26.5 shall be given to the Government. Any Data, information and reports relating to the Contract Area, which, in the opinion of the Government, might have significance connection with offers by the Government exploration programme to be conducted by area, may be disclosed by the Government conditions to be agreed upon between the Contractor. of open acreage or an a third party in another for such purposes on Government and the

26.6 in

26.7

Where an area ceases to be part of the Contract Area, the Contractor shall continue to treat Data and information with respect to the area as confidential and shall deliver to the Government copies or originals of all Data and information in its possession with respect to the area. The Government shall, have the right to freely use the Data and information thereafter.

however,

26.8

The Government shall, at all reasonable times, through duly authorised representatives, be entitled to observe Petroleum Operations and to inspect all assets, books, records, reports, accounts, contracts, samples and Data kept by the Contractor or Operator in respect of Petroleum Operations under the Contract, provided, however, that the Contractor shall not be required to disclose any proprietary technology. The duly authorised representatives shall be given reasonable assistance by the Contractor for such functions and the Contractor shall afford such 78
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the

representatives all facilities and privileges afforded to its own personnel in the field including the use of office space and housing, free of charge. The representatives shall be entitled to make a reasonable number of surveys, measurements, drawings, tests and copies of documents, take samples, and make a reasonable use of the equipment and instruments of the Contractor provided that such functions shall not unduly interfere with the Contractor's Petroleum Operations. 26.9 Contractor shall give reasonable advance notice to the Government, or to any other authority designated by the Government for such purpose, of its programme of conducting surveys by aircraft or by ships, indicating, inter alia, the name of the survey to be conducted, approximate extent of the area to be covered, the duration of the survey, the commencement date, and the name of the airport or port from which the survey aircraft or ship will commence its voyage. The Government, or the authority designated by the Government for such purpose, shall have the right to inspect any aircraft or ship used by the Contractor or a Subcontractor carrying out any survey or other operations in the Contract Area and shall have the right to put on board such aircraft or ship Government officers in such number as may reasonably be necessary to ensure compliance by the Contractor or the Subcontractor with the security requirements of India. Expatriate employees and Subcontractors shall, for national security purposes, be subject to the approval of the Government, such approval not to be unreasonably withheld.

26.10

26.11

79 ARTICLE 27 TITLE TO PETROLEUM, DATA AND ASSETS

27.1 produced

The Government is the sole owner of Petroleum underlying the Contract Area and shall remain the sole owner of Petroleum pursuant to the provisions of this Contract except that part of Crude Oil or Gas the title whereof has passed to each constituent of the Contractor or any other person in accordance with the provisions of this Contract.

27.2

Title to Crude Oil and/or Gas to which each constituent of the Contractor is entitled under this Contract, and title to Crude Oil and/or Gas sold to Government or its nominee by the constituents the Contractor shall pass to the relevant Party, or as the case

of may be, to Government or its nominee at the Delivery Point. Contractor shall be responsible for all costs and risks prior to the Delivery Point and each Party shall be responsible for all costs and risks associated with such Party's share after the Delivery Point. Where the Government or its nominee purchases all or some of the
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Contractor's share of Crude Oil or Condensate, the Government or its nominee shall be responsible for all costs and risks in respect of the amount purchased, after the Delivery Point. 27.3 Title to all Data specified in Article 26 shall be vested in the Government and the Contractor shall have the right of use thereof as therein provided. Assets in place or contracted for use in or on the Contract Area purchased by the Contractor for use in Petroleum Operations shall be owned by the Parties comprising Contractor in proportion to their Participating Interest provided that the Government, or its nominee, shall have the right to require vesting of full title and ownership including abandonment obligations, if any, in it, free cost, charge and encumbrances, of any or all assets, whether fixed or movable, acquired and owned by the Contractor for use in Petroleum Operations inside or outside the Contract Area, except assets required by a Party for ongoing operations in the nature of Petroleum Operations in India, such right to be exercisable by the Government, or its nominee, upon expiry or earlier termination of the Contract. 27.5 of all assets acquired for Petroleum Operations for keeping them in good repair, order and working condition at all times, and the costs thereof shall be recoverable as Contract Costs in accordance with Appendix C. 27.6 So long as this Contract remains in force, the Contractor shall, free of any charge for the purpose of carrying out Petroleum Operations hereunder, have the exclusive use of 80 the assets which have become or are the property of the Government including, without limitation, those identified in Appendix F except that the Sagar Laxmi shall be released to ONGC as soon as alternate facilities are available, but not later than thirty (30) months after the Effective Date unless agreed otherwise by the Parties. During the period Contractor is using the Sagar Laxmi Contractor shall pay to ONGC, as rental, a price to be based upon a mutually agreed daily rate. The daily rate shall be determined in accordance with competitive prices for like type of service. In the event the daily rate cannot be mutually agreed upon it shall be determined by an internationally recognized expert in the field selected by two members of the Operating Committee from a group of three internationally recognized experts selected by ONGC. If the parties do not agree, the Government shall make the determination. Contractor shall be responsible in accordance with international petroleum standards for proper maintenance, insurance and safety

27.4

of

27.7

Equipment and assets no longer required for Petroleum Operations shall first be offered free of cost, charge and encumbrance to the Government, or its nominee, and, if not required by the
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Government,

or its nominee, will be so indicated in writing within thirty (30) days of such offer. Failure to so indicate will be deemed to be a rejection of the offer by the Government.

27.8

Assets not acquired by the Government, or its nominee, may be sold or otherwise disposed of subject to the terms of this Contract. 81 ARTICLE 28 ASSIGNMENT OF INTEREST

28.1

Subject to the terms of this Article and other terms of this Contract, any Party comprising the Contractor may assign, or transfer, a part or all of its Participating Interest, with the prior written consent of the Government, which consent shall not unreasonably withheld, provided that the Government is satisfied that: (a) the prospective assignee or transferee has the financial standing, technical competence, capacity and ability to meet its obligations hereunder, and is willing to provide an unconditional undertaking to assume its Participating Interest share of obligations and to provide a guarantee in respect thereof as provided in the Contract. the prospective assignee or transferee is not a company incorporated in a country with which the Government, for policy reasons, has restricted trade or business; the prospective assignor or transferor and assignee or transferee respectively are willing to comply with any reasonable conditions of the Government as may be necessary in the circumstances with a view to ensuring performance under the Contract; and the assignment or transfer will not adversely affect the performance or obligations under this Contract or be contrary to the interests of India.

be

(b)

(c)

(d)

28.2 shall

An application by a Company for consent to assign or transfer be accompanied by all relevant information concerning the proposed assignment or transfer including detailed information on the proposed assignee or transferee and its shareholding and corporate structure, as was earlier required from the Companies constituting the Contractor, the terms of the proposed assignment or transfer and the unconditional undertaking referred to in Article 28.1(a) above. The applicant shall also submit such information relating

to the prospective assignee or transferee of the assignment or transfer as the Government may reasonably require to enable proper consideration and disposal of the application. 28.3 No assignment or transfer shall be effective until the approval of the Government is received, which approval may be given by the Government on such terms as it may deem fit. Upon assignment or transfer of its interest in this Contract, the assignor or
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transferor shall be released and discharged from its obligations hereunder only to the extent that such obligations are assumed by the assignee or transferee with the approval of the Government. 82 28.4 The assignor shall clearly state in its deed of assignment, that the assignee shall be liable for all future obligations, under the Contract, to the extent of assignment. Upon prior notice to the Contractor, the Government may assign or transfer all or any part of its rights and interest under this Contract to any Government company wholly or partly owned by the Government and authorised by the Government to explore for and exploit Petroleum in the Contract Area. Upon prior notice to the Government, a Company may assign or transfer all or any part of rights and interest under this Contract to an Affiliate subject to Article 6.2 and the parent company guarantee shall apply. 28.6 An assignment or transfer shall not be made so as to reduce the Participating Interest of a constituent of the Contractor, at any time, to less than ten percent (10%) of the total Participating Interest of all the constituents of the Contractor, except where the Government may, in special circumstances, so permit. Nothing herein contained shall prohibit a Company in the normal course of business from pledging its Participating Interest share for purposes of financing, such as a mortgage, charge or encumbrance on Petroleum assets or production of Petroleum at its own risk, cost and responsibility. The Contractor shall provide Government with fifteen (15) days prior written notice before entering into any such financing arrangements. 28.8 of No assignment or pledge under this Article shall have the effect decreasing the benefits accruing to Government under this Contract in any manner whatsoever. 83 ARTICLE 29 GUARANTEE 29.1 Each of the Companies shall deliver to the Government on the Effective Date of this Contract: (a) performance of all obligations under the Contract, in the case of EOGIL from a parent company of good financial standing acceptable to the Government, in favour of the Government, in the form and substance set out in Appendix E; (b) a legal opinion from its legal advisors, in a form satisfactory to the Government, to the effect that the aforesaid guarantee has been duly signed and delivered on behalf of the guarantors with due authority and is
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28.5

its

28.7

the

a financial and performance guarantee, for the

legally

valid and enforceable and binding upon them. 29.2 If any of the documents referred to in Article 29.1 are not delivered within the period specified herein, this Contract may be cancelled by the Government upon ninety (90) days written notice its intention to do so. 29.3 Notwithstanding any change in the composition or shareholding of the parent company furnishing the guarantees herein, it shall, under no circumstances, be absolved of its obligations contained the guarantees provided pursuant to this Article.

of

in

84 ARTICLE 30 TERMINATION OF CONTRACT

30.1

This Contract may, subject to the provisions hereinbelow and Article 31, be terminated by the Government without any financial liability upon giving ninety (90) days written notice of its intention to do so in the following circumstances, namely, that a Company : (a) has knowingly submitted any false statement to the Government in any manner which was a material consideration in the execution of this Contract; or has intentionally and knowingly extracted or authorised the extraction of any mineral not authorised to be extracted by the Contract or without the authority of the Government except such extractions as may be unavoidable as a result of operations conducted hereunder in accordance with generally accepted international petroleum industry practice which, when so extracted, were immediately notified to the Government; or is adjudged bankrupt by a competent court or enters into any agreement or scheme of composition with its creditors or takes advantage of any law for the benefit of debtors; or has passed a resolution to apply to a competent court for liquidation of the Company unless the liquidation is for the purpose of amalgamation or reconstruction of which Government has been given notice and the Government is satisfied that the Company's performance under this Contract would not be adversely affected thereby and has given its approval thereto; or (e) has assigned any interest in the Contract without the prior consent of the Government as provided in Article 28; or
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(b)

(c)

(d)

the

(f)

fails to make any monetary payment required by law or under this Contract by the due date or within the specified period after the due date; or fails to comply with or contravenes the provisions of this Contract in a material particular; or fails to comply with any final determination or award made by a sole expert or arbitrators pursuant to Article 33; or has been served a notice of cancellation pursuant to Article 29.2.

(g)

(h)

(i)

PROVIDED THAT 85 where the Contractor comprises two or more Companies, the Government shall not exercise its rights of termination pursuant to Article 30.1, on the occurrence, in relation to one or more, but not all, of the Companies, of an event entitling the Government to terminate the Contract, if any other Company or Companies constituting the Contractor satisfies the Government that it, or they, is/are willing and would be able to carry out the obligations of the Contractor. 30.2 This Contract may also be terminated by the Government on giving the requisite notice specified above if the events specified in Article 30.1 (c) and (d) occur with respect to a company which has given a guarantee pursuant to Article 29 subject, however, to Article 30.3. If the circumstances that give rise to the right of termination under Article 30.1 (f) or (g) or Article 29.2 are remedied by the Contractor within the ninety (90) day period or such extended period as may be granted by the Government, following the notice the Government's intention to terminate the Contract as aforesaid, such termination shall not become effective.

30.3

of

30.4 in 33,

If the circumstance or circumstances that would otherwise result termination are the subject matter of proceedings under Article then termination shall not take place so long as such proceedings continue and thereafter may only take place when and if consistent with the arbitral award.

30.5

On termination of this Contract, for any reason whatsoever, the rights and obligations of the Contractor shall cease but such termination shall not affect any rights of any Party which may accrued or any obligations undertaken, or incurred, pursuant to this Contract, by Government or the Contractor or any Party comprising the Contractor and not discharged by the Contractor or
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have

the Party prior to the date of termination. 30.6 In the event of termination pursuant to Articles 30.1 or 30.2: (a) the Government may require the Contractor, for a period not exceeding one hundred and eighty (180) days from the date of termination, to continue, for the account and at the cost of the Government, Crude Oil or Natural Gas production activities until the right to continue such production has been transferred to another entity; A Foreign Company, which is a constituent of the Contractor, shall, subject to the provisions hereof, have the right to remove and export all its property which has not vested in the Government provided that in the event that ownership of any property is in doubt, 86 or disputed, such property shall not be exported unless and until the doubt or dispute has been settled in favour of the Foreign Company.

(b)

87 ARTICLE 31 FORCE MAJEURE

31.1

Performance by any Party hereto of any of its obligations under this Contract, or in fulfilling any condition of any lease granted to such Party, or any lease issued thereunder, shall, except for the payment of monies due under this Contract or under the Act and the Rules or any law, be suspended or excused if, and to the that, such non-performance or delay in performance is caused by Force Majeure as defined in this Article.

extent

31.2

For the purpose of this Contract, the term Force Majeure means any cause or event, other than the unavailability of funds, whether similar to or different from those enumerated herein, beyond the reasonable control of, and unanticipated or unforeseeable by, and not brought about at the instance of the Party claiming to be affected by such event, or which, if anticipated or foreseeable, could not be avoided or provided for, and which has caused the non-performance or delay in performance. Without limitation to the generality of the foregoing, the term Force Majeure shall include natural phenomena or calamities, earthquakes, typhoons, fires, declared or undeclared, hostilities, invasions, blockades, riots, insurrection and civil disturbances.

wars

31.3

Where a Party is claiming suspension of its obligations on account of Force Majeure, it shall promptly, but in no case later than seven (7) days after the occurrence of the event of Force Majeure, notify the other Parties in writing giving full particulars of the
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Force Majeure, the estimated duration thereof, the obligations affected and the reasons for its suspension. 31.4 A Party claiming Force Majeure shall exercise reasonable diligence to seek to overcome the Force Majeure event and to mitigate the effects thereof on the performance of its obligations under this Contract provided, however, that the settlement of strikes or differences with employees shall be within the discretion of the Party having the difficulty. The Party affected shall promptly notify the other Parties as soon as the Force Majeure event has been removed and no longer prevents it from complying with the obligations which have been suspended and shall thereafter resume compliance with such obligations as soon as possible. The period work commitment or this Contract may be extended by such additional period as may be agreed by the Parties. 31.5 Notwithstanding anything contained herein, if an event of Force Majeure occurs and is likely to continue for a period in excess of thirty (30) days, the Parties shall meet to discuss the consequences of the Force Majeure and the course of action to be taken to mitigate the effects thereof or to be adopted in the circumstances.

of

88 ARTICLE 32 APPLICABLE LAW AND LANGUAGE OF THE CONTRACT

32.1

Subject to the provisions of Article 33.12, this Contract shall be governed and interpreted in accordance with the laws of India. Nothing in this Contract shall entitle the Government or the Contractor to exercise the rights, privileges and powers conferred upon it by this Contract in a manner which will contravene the of India.

32.2

laws

32.3

The English language shall be the language of this Contract and shall be used in arbitral proceedings. All communication, hearings or visual materials or documents relating to this Contract shall in English. 89 ARTICLE 33 SOLE EXPERT, CONCILIATION AND ARBITRATION

be

33.1

The Parties shall use their best efforts to settle amicably all disputes, differences or claims arising out of or in connection with any of the terms and conditions of this Contract or the interpretation or performance thereof.
2003.

concerning

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33.2 matters

Except for matters which, by the terms of this Contract, the Parties have agreed to refer to a sole expert and any other which the Parties may agree to so refer, any dispute, difference

or claim arising between the Parties hereunder which cannot be settled amicably may be submitted by any Party to arbitration pursuant to Article 33.3. Such sole expert shall be an independent and impartial person of international standing with relevant qualifications and experience appointed by agreement between the Parties. Any sole expert appointed shall be acting as an expert and not as an arbitrator and the decision of the sole expert on matters referred to him shall be final and binding on the Parties and not subject to arbitration. If the Parties are unable to agree on a sole expert, the disputed subject matter may be referred to arbitration. 33.3 Subject to the provisions herein, any unresolved dispute, difference or claim which cannot be settled amicably within a reasonable time may, except for those referred to in Article 33.2, be submitted to an arbitral tribunal for final decision as hereinafter provided. The arbitral tribunal shall consist of three arbitrators. The or Parties instituting the arbitration shall appoint one arbitrator and the Party or Parties responding shall appoint another arbitrator and both Parties shall so advise the other Parties. The two arbitrators appointed by the Parties shall appoint the third arbitrator. 33.5 Any Party may, after appointing an arbitrator, request the other Party(ies) in writing to appoint the second arbitrator. If such other Party fails to appoint an arbitrator within forty-five (45) days of receipt of the written request to do so, such arbitrator may, at the request of the first Party, be appointed by the Secretary General of the Permanent Court of Arbitration at the Hague, within forty-five (45) days of the date of receipt of such request, from amongst persons who are not nationals of the country of any of the Parties to the arbitration proceedings. If the two arbitrators appointed by the Parties fail to agree on the appointment of the third arbitrator within thirty (30) days of the appointment of the second arbitrator and if the Parties do not otherwise agree, the Secretary General of the Permanent Court of Arbitration at the Hague 90 may, at the request of either Party and in consultation with both, appoint the third arbitrator who shall not be a national of the country of any Party. 33.7 If any of the arbitrators fails or is unable to act, his successor shall be appointed in the manner set out in this Article as if he was the first appointment.
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33.4 Party

33.6

33.8

The decision of the arbitration tribunal and, in the case of difference among the arbitrators, the decision of the majority, shall be final and binding upon the Parties. Arbitration proceedings shall be conducted in accordance with the arbitration rules of the United Nations Commission on Trade Law (UNCITRAL) of 1985 except that in the event of any conflict between these rules and the provisions of this Article

33.9 International

33, the provisions of this Article 33 shall govern. 33.10 The right to arbitrate disputes and claims under this Contract shall survive the termination of this Contract. Prior to submitting a dispute to arbitration, a Party may submit the matter for conciliation under the UNCITRAL conciliation rules by mutual agreement of the Parties. If the Parties fail to agree a conciliator (or conciliators) in accordance with the rules, the matter may be submitted for arbitration. No arbitration proceedings shall be instituted while conciliation proceedings are pending and such proceedings shall be concluded within sixty (60) days. 33.12 The venue of conciliation or arbitration proceedings pursuant to this Article, unless the Parties otherwise agree, shall be London, England and shall be conducted in the English language. The arbitration agreement contained in this Article 33 shall be governed by the laws of England. Insofar as practicable, the Parties shall continue to implement the terms of this Contract notwithstanding the initiation of arbitral proceedings and any pending claim or dispute. The fees and expenses of a sole expert or conciliator appointed by the Parties shall be borne equally by the Parties. Assessment of the costs of arbitration including incidental expenses and liability for the payment thereof shall be at the discretion of arbitrators. 91 ARTICLE 34 ENTIRE AGREEMENT, AMENDMENTS, WAIVER AND MISCELLANEOUS 34.1 This Contract supersedes and replaces any previous agreement or understanding between the Parties, whether oral or written, on the subject matter hereof, prior to the Effective Date of this Contract. This Contract shall not be amended, modified, varied or supplemented in any respect except by an instrument in writing signed by all the Parties, which shall state the date upon which the amendment or modification shall become effective. No waiver by any Party of any one or more obligations or defaults by any other Party in the performance of this Contract shall operate or be construed as a waiver of any other obligations or defaults whether of a like or of a different character.
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33.11

on

33.13

the

34.2

34.3

34.4

The provisions of this Contract shall inure to the benefit of and be binding upon the Parties and their permitted assigns and successors in interest. In the event of any conflict between any provisions in the main body of this Contract and any provision in the Appendices, the provision in the main body shall prevail. The headings of this Contract are for convenience of reference and shall not be taken into account in interpreting the terms of this Contract. 92 ARTICLE 35 CERTIFICATES

34.5

34.6 only

35.1 by

A Company shall furnish, prior to execution of this Contract, a duly authorised copy of a resolution properly and legally passed the Board of Directors of the Company specifying the person authorised to execute this Contract along with a Certificate duly signed by the Secretary or an Assistant Secretary of the Company under its seal in this regard and to the effect that the Company has the power and authority to enter into this Contract and to perform its obligations thereunder and has taken all necessary action to authorise the execution, delivery and performance of the Contract. 93 ARTICLE 36 NOTICES

36.1

All notices, statements, and other communications to be given, submitted or made hereunder by any Party to another shall be sufficiently given if given in writing in the English language and sent by registered post, postage paid, or by telegram, telex, facsimile, radio or cable, to the address or addresses of the Party or Parties as follows: a) To the President of India through the Secretary to the Government of India Ministry of Petroleum and Natural Gas Shastri Bhavan Dr. Rajendra Prasad Marg New Delhi 110 001, India Attention: Joint Secretary Facsimile No. : 91-11-384-787 The Secretary Oil & Natural Tower II, 8th 124 Connaught New Delhi 110 Facsimile No.

other

b)

Gas Corporation Limited Floor, Jeevan Bharati Circus 001, India : 91-11-331-6413

c)

Reliance Industries Limited Maker Chambers IV, 3rd Floor 222 Nariman Point
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Bombay 400 021 INDIA Attention: Chief Executive Officer Oil & Gas Facsimile No. : 022-204-2268 d) Enron Oil & Gas India Ltd. Amiya Apartments, 1st Floor 63A Linking Road, Santa Cruz (W) Bombay 400 054 INDIA Attention: Managing Director Facsimile No.: 011-91-22-604-9119 with a copy to: Enron Oil & Gas India Ltd. 1400 Smith Street Houston, Texas 77002, U.S.A. Attention: Vice President, Operations Facsimile No. : 713-646-8115 36.2 when Notices when given in terms of Article 36.1 shall be effective delivered if offered at the address of the other Parties as under Article 36.1 during business hours on working days and, if received outside business hours, on the next following working day. 36.3 Any Party may, by reasonable notice as provided hereunder to 94 the other Parties, change its address and other particulars for notice purpose. IN WITNESS WHEREOF, the representatives of the Parties to

this Contract being duly authorised have hereunto set their hands and have executed these presents this 22 day of December 1994. Signed for and on behalf of the President of India By NAJERB JR. In the presence of V. RAMANI Signed for and on behalf of Oil & Natural Gas Corporation Limited By S. K. MANGLIK In the presence of R. N. DESAI Signed for and on behalf of Reliance Industries Limited By AKHIL GUPTA In the presence of Ba La SAGRAMANIA Signed for and on behalf of Enron Oil & Gas India Ltd. By J. A. KOPECKY In the presence of
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E. J. VANDERMARK 95

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APPENDIX A DESCRIPTION OF CONTRACT AREA The area comprising approximately 430 sq. km offshore India identified as Panna Block and the area comprising approximately 777 sq. km offshore India identified as the Mukta Block described herein and shown under map attached as Appendix B-1 and B- 2. Longitude and Latitude measurements are as follows: MUKTA (about 100 km Northwest of Bombay) See Appendix B-2.

A. 38'00"E B. 54'00"E C. 54'00"E D. 38'00"E

LATITUDE 19 degrees 27'00"N 19 degrees 27'00"N 19 degrees 12'00"N 19 degrees 12'00"N

LONGITUDE 71 degrees 71 degrees 71 degrees 71 degrees

PANNA (about 95 km Northwest of Bombay) See Appendix B-1.

LATITUDE A. B. C. D. E. 19(degree)28'00"N 19(degree)28'00"N 19(degree)19'30"N 19(degree)15'00"N 19(degree)15'00"N 96

LONGITUDE 71(degree)54'00"E 72(degree)05'00"E 72(degree)05'00"E 72(degree)00'00"E 71(degree)54'00"E

APPENDIX B-1 MAP OF CONTRACT AREA PANNA BLOCK

WESTERN INDIA OFFSHORE BOMBAY BASIN 97A APPENDIX B-2 MAP OF CONTRACT AREA MUKTA BLOCK WESTERN INDIA OFFSHORE BOMBAY BASIN 97B

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APPENDIX C ACCOUNTING PROCEDURE TO PRODUCTION SHARING CONTRACT BETWEEN THE GOVERNMENT OF INDIA AND ONGC/RIL/EOGIL 98

TABLE OF CONTENTS SECTIONS SECTION 1: 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 SECTION 2: 2.1 2.2 2.3 2.4 2.5 2.6 SECTION 3: 3.1 CONTENT GENERAL PROVISIONS Purpose Definitions Inconsistency Documentation and Statements to be Submitted by the Contractor Language and Units of Account Currency Exchange Rates Payments Arms Length Transactions Audit and Inspection Rights of the Government Revision of Accounting Procedure CLASSIFICATION, DEFINITION AND ALLOCATION OF COSTS AND EXPENDITURES Segregation of Costs Exploration Costs Development Costs Production Costs Service Costs General and Administrative Costs COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL INCOME OF THE CONTRACTOR Costs Recoverable and Allowable Without Further Approval of the Government 3.1.1 Surface Rights 3.1.2 Labor & Associated Costs 3.1.3 Transportation Costs 3.1.4 Charges for Services (a) Third Party Contracts (b) Affiliated Company Contracts 3.1.5 Communications 3.1.6 Office, Shore Bases and Miscellaneous Facilities 3.1.7 Environmental Studies and Protection 3.1.8 Materials and Equipment (a) General
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3.2 3.3 3.4 3.5

(b) Warranty (c) Value of Materials Charged to the Account 3.1.9 Duties, Fees and Other Charges 3.1.10 Insurance and Losses 3.1.11 Legal Expenses 3.1.12 Training Costs 3.1.13 General and Administrative Costs Costs Not Recoverable and Not Allowable under the Contract Other Costs Recoverable and Allowable Incidental Income and Credits Non-Duplication of Charges and Credits 99

SECTION 4: 4.1 4.2 SECTION 5:

RECORDS AND INVENTORIES OF ASSETS Records Inventories PRODUCTION STATEMENT AND ROYALTY AND CESS STATEMENT VALUE OF PRODUCTION AND PRICING STATEMENT STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS COST RECOVERY STATEMENT PRODUCTION SHARING STATEMENT END OF YEAR STATEMENT BUDGET STATEMENT 100 ACCOUNTING PROCEDURE SECTION 1 GENERAL PROVISIONS

SECTION 6: SECTION 7: SECTION 8: SECTION 9: SECTION 10: SECTION 11:

1.1

PURPOSE Generally, the purpose of this Accounting Procedure is to set out principles and procedures of accounting which will enable the Government of India to monitor effectively the Contractor's costs, expenditures, production and income so that the Government's entitlement to Profit Petroleum, royalty, cess, etc., as well as Contractor's entitlement to Cost Petroleum and Profit Petroleum

can be accurately determined pursuant to the terms of the Contract. More specifically, the purpose of the Accounting Procedure is to: classify costs and expenditures and to define which costs and expenditures shall be allowable for cost recovery, production sharing and participation purposes; specify the manner in which the Contractor's accounts shall be prepared and approved.
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This Accounting Procedure is intended to apply to the provisions of the Contract and is without prejudice to the computation of income tax under applicable provisions of the Income Tax Act, 1961, as amended. 1.2 DEFINITIONS For purposes of this Accounting Procedure, the terms used herein which are defined in the Contract shall have the same meaning when used in this Accounting Procedure. 1.3 INCONSISTENCY In the event of any inconsistency or conflict between the provisions of this Accounting Procedure and the other provisions of the Contract, the other provisions of the Contract shall prevail. 1.4 DOCUMENTATION AND STATEMENTS TO BE SUBMITTED BY THE CONTRACTOR 1.4.1 Within thirty (30) days of the Effective Date of the Contract, the Contractor shall submit to and discuss with the Government a proposed outline of charts of accounts, operating records and reports, which outline shall reflect each of the categories and sub-categories of costs and income specified in Sections 2 and 3 and shall be in accordance with generally accepted standards and recognized accounting systems and consistent with normal petroleum industry practice and procedures 101 for joint venture operations. Within ninety (90) days of receiving the above submission, the Government shall either provide written notification of its approval of the proposal or request, in writing, revisions to the proposal. Within one hundred and eighty (180) days from the Effective Date of the Contract, the Contractor and the Government shall agree on the outline of charts of accounts, records and reports which shall also describe the basis of the accounting system and procedures to be developed and used under this Contract. Following such agreement, the Contractor shall expeditiously prepare and provide the Government with formal copies of the comprehensive charts of accounts, records and reports and allow the Government to examine the manuals and to review procedures which are, and shall be, observed under the Contract.
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1.4.2

Notwithstanding the generality of the foregoing, the Contractor shall make regular Statements relating to the Petroleum Operations as follows : (i) Production Statement and Royalty and Cess Statement (see Section 5 of this Accounting Procedure) Value of Production and Pricing Statement (see Section 6 of this Accounting Procedure) Statement of Costs, Expenditures and Receipts (see Section 7 of this Accounting Procedure) Cost Recovery Statement (see Section 8 of this Accounting Procedure) Production Sharing Statement (see Section 9 of this Accounting

(ii)

(iii)

(iv)

(v) Procedure) (vi)

End of Year Statement (see Section 10 of this Accounting Procedure) Budget Statement (see Section 11 of this Accounting Procedure)

(vii)

1.4.3 India

All reports and statements shall be prepared in accordance with the Contract and the laws of and, where there are no relevant provisions in either of these, in accordance with generally accepted practices in the international petroleum 102 industry.

1.4.4

Each of the entities constituting the Contractor shall be responsible for maintaining its own accounting records in order to comply with all legal requirements and to support all returns or any other accounting reports required by any Government authority in relation to the Petroleum Operations. However, for the purposes of giving effect to this Accounting Procedure, the Contractor shall appoint, and notify the Government in writing thereof, one of the Parties constituting Contractor who shall be responsible for maintaining, at its business office in India, on behalf of the Contractor, all the accounts of the Petroleum Operations in accordance with the provisions of the Accounting Procedure and the Contract.

1.5

LANGUAGE AND UNITS OF ACCOUNT

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All accounts, records, books, reports and statements shall be maintained on an accrual basis and prepared in the English language. The accounts shall be maintained in United States Dollars, which shall be the controlling currency of account for cost recovery, production sharing and participation purposes. Metric units and Barrels shall be employed for measurements required under the Contract. Where necessary for clarification, the Contractor may also maintain accounts and records in other languages, currencies and units. Following any new discovery of Petroleum the Parties shall meet to establish specific principles and procedures for identifying all costs, expenditures, receipts and income with respect to the Contract Area. 1.6 CURRENCY EXCHANGE RATES 1.6.1 For translation purposes between United States Dollars and Indian Rupees or any other currency, the previous month's average of the daily means of the buying and selling rates of exchange as quoted by the State Bank of India (or any other financial body as may be mutually agreed between the Parties) shall be used for the month in which the revenues, costs, expenditures, receipts or income are recorded. However, in the case of any single non-US Dollar transaction in excess of the equivalent of one hundred thousand US Dollars (US$100,000), the conversion into US Dollars shall be performed on the basis of the average of the applicable exchange rates for the day on which the transaction occurred. Any realized or unrealized gains or losses from the exchange of currency in respect of Petroleum Operations shall be credited or charged to the accounts. A record of the exchange rates used in converting Indian Rupees or any other currencies 103 into United States Dollars as specified in Section 1.6.1 shall be maintained by the Contractor and shall be identified in the relevant statements required to be submitted by the Contractor in accordance with Section 1.4.2. 1.7 PAYMENTS 1.7.1 Subject to the foreign exchange laws and regulations prevailing from time to time, all payments between the Parties shall, unless otherwise agreed, be in United States Dollars and shall be made through a bank designated by each receiving Party. Unless otherwise specified, all sums due under Contract shall be paid within forty-five (45) days from the date on which the obligation to pay was
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1.6.2

1.7.2 the

incurred. 1.7.3 Unless otherwise specified, all sums due by one Party to the other under the Contract during any month shall, for each day such sums are overdue during such month, bear interest compounded daily at the applicable LIBOR plus one percentage (1%) point.

1.8

ARMS LENGTH TRANSACTIONS Unless otherwise specifically provided for in the Contract, all transactions giving rise to revenues, costs or expenditures which will be credited or charged to the accounts prepared, maintained

or submitted hereunder shall be conducted at arms length or on such a basis as will assure that all such revenues, costs or expenditures will be equal to or better than, as the case may be, would result from a transaction conducted at arms length on a competitive basis with third parties. For the purposes of clarification, this means revenues would be equal to or higher and costs would be equal to or lower. 1.9 AUDIT AND INSPECTION RIGHTS OF THE GOVERNMENT 1.9.1 Without prejudice to statutory rights, the Government, upon at least ninety (90) days advance written notice to the Contractor, shall have the right to inspect and audit, during normal business hours , all records and documents supporting costs, expenditures, expenses, receipts and income, such as Contractor's accounts, books, records, invoices, cash vouchers, debit notes, price lists or similar documentation with respect to the Petroleum Operations conducted hereunder in each Financial Year, within two (2) years (or such longer period 104 as may be required in exceptional circumstances) from the end of such Financial Year. 1.9.2 The Government may undertake the conduct of the audit either through its own representatives or through a qualified firm of recognized international chartered accountants, registered India, appointed for the purpose by the Government. 1.9.3 In conducting the audit, the Government or its auditors shall be entitled to examine and verify, at reasonable times, all charges and credits relating to Contractor's activities under the Contract and all books of account, accounting entries, material records and inventories, vouchers, payrolls, invoices and any other documents, correspondence and records considered
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in

necessary by the Government to audit and verify the charges and credits. The auditors shall also have the right, in connection with such audit, to visit and inspect, at reasonable times, all sites, plants, facilities, warehouses and offices of the Contractor directly or indirectly serving the Petroleum Operations, and to physically examine other property, facilities and stocks used in Petroleum Operations, wherever located and to question personnel associated with those operations. Where the Government requires verification of charges made by an Affiliate, the Government shall have the right to obtain an audit certificate from an internationally recognized firm of public accountants acceptable to both the Government and the Contractor, which may be the Contractor's statutory auditor. Any and all such costs shall be for the Government's account. 1.9.4 Any audit exceptions shall be made by the Government in writing and notified to the Contractor within one hundred and twenty (120) days following completion of the audit in question. The Contractor shall answer any notice of exception under Section 1.9.4 within one hundred and twenty (120) days of the receipt of such notice. Where the Contractor has, after the one hundred and twenty (120) days, failed to answer a notice of exception, the exception shall prevail. All agreed adjustments resulting from an audit all adjustments required by prevailing exceptions shall be promptly made in the Contractor's accounts and any consequential 105 adjustments to the Government's entitlement to Petroleum shall be made as promptly as practicable. 1.9.7 If the Contractor and the Government are unable to reach final agreement on proposed audit adjustments, either Party may refer any dispute thereon to a sole expert as provided for in the Contract. So long as any issues are outstanding with respect to an audit, the Contractor shall maintain the relevant documents and permit inspection thereof until the issue is resolved.

1.9.5

1.9.6 and

1.10

REVISION OF THE ACCOUNTING PROCEDURE 1.10.1 By mutual agreement between the Government and Contractor, this Accounting Procedure may be revised from time to time, in writing, signed by
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the

the Parties, stating the date upon which the amendments shall become effective. 106 SECTION 2 CLASSIFICATION, DEFINITION AND ALLOCATION OF COSTS AND EXPENDITURES 2.1 SEGREGATION OF COSTS Costs shall be segregated in accordance with the purposes for which such expenditures are made. All costs and expenditures allowable under Section 3, relating to Petroleum Operations, shall be classified, defined and allocated as set out below in this Section. Expenditure records shall be maintained in such a way as to enable proper allocation. 2.2 EXPLORATION COSTS Exploration Costs are all 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, part of the Contract Area, including expenditures incurred in respect of: 2.2.1 Aerial, geophysical, geochemical, palaeontological, geological, topographical and seismic surveys, analyses and studies and their interpretation. Core hole drilling and water well drilling. Labor, materials, supplies and services used in drilling Wells with the object of finding Petroleum or in drilling Appraisal Wells provided that if such Wells are completed as producing Wells, the costs of completion thereof shall be classified as Development Costs. Facilities used solely in support of the purposes described in Sections 2.2.1, 2.2.2 and 2.2.3 above, including access roads, all separately identified. Any Service Costs and General and Administrative Costs directly incurred on exploration activities and identifiable as such and a portion of the remaining Service Costs and General and Administrative Costs allocated to Exploration Operations determined by the proportionate share of total Contract Costs (excluding General and Administrative Costs and Service Costs) represented by all other Exploration Costs. Geological and geophysical information purchased or acquired in connection with Exploration Operations.
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2.2.2 2.2.3

2.2.4

2.2.5

2.2.6

107 2.2.7 Any other expenditure incurred in the search for Petroleum not covered under Sections 2.3 or 2.4.

2.3

DEVELOPMENT COSTS

Development Costs are all direct and allocated indirect expenditures incurred with respect to the development of the Contract Area including expenditures incurred on account of:

2.3.1

Drilling Development Wells, whether these Wells are dry or producing and drilling Wells for the injection of water or Gas to enhance recovery of Petroleum and Recompletion or working over of existing or service wells. Purchase, installation or construction of production, transport and storage facilities for production of Petroleum from a Field, such as pipelines, flow lines, production and treatment units, wellhead equipment, subsurface equipment, enhanced recovery systems, offshore and onshore platforms, export terminals and piers, harbours and related facilities and access roads for production activities. Engineering and design studies for facilities referred to in Section 2.3.2. Any Service Costs, joint Development Plans and General and Administrative Costs directly incurred in Development Operations and identifiable as such and a portion of the remaining Service Costs and General and Administrative Costs allocated to development activities, determined by the proportionate share of total Contract Costs (excluding General and Administrative Costs and Service Costs) represented by all other Development Costs.

2.3.2

2.3.3

2.3.4

2.4

PRODUCTION COSTS 2.4.1 Production Costs are expenditures incurred on Production Operations in respect of the Contract Area after the start of production from the Field (which are other than Exploration and Development Costs). The balance of General and Administrative Costs and Service Costs not allocated to Exploration Costs or Development Costs shall be allocated to Production Costs. Production Costs shall include costs for completion of Exploration Wells by way of installation of casing or equipment or otherwise or for the purpose of bringing a Well into use as a producing Well or as a Well for the injection
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2.4.2

108 of water or Gas to enhance recovery of Petroleum and Recompletion or working over of existing or service wells. 2.5 SERVICE COSTS Service Costs are direct and indirect expenditures incurred in support of Petroleum Operations in the Contract Area, including expenditures on insurance, environmental protection, warehouses, piers, marine vessels, vehicles, motorized rolling equipment, aircraft, fire and security stations, workshops, water and sewerage plants, power plants, housing, community and recreational facilities and furniture and tools and equipment used in these activities. Service Costs in any Year shall include the costs incurred in such Year to purchase and/or construct the facilities as well as the annual costs of maintaining and operating the same, each to be identified separately. All Service Costs shall be regularly allocated as specified in Sections 2.2.5, 2.3.4 and 2.4 to Exploration Costs, Development Costs and Production Costs and shall be separately shown under each of these categories. Where Service Costs are made in respect of shared facilities, the basis of allocation of costs to Petroleum Operations hereunder shall be on the basis of gross expenditures. 2.6 GENERAL AND ADMINISTRATIVE COSTS General and Administrative Costs are expenditures incurred on general administration and management primarily and principally related to Petroleum Operations in or in connection with the Contract Area, and shall include: 2.6.1 main office, field office and general administrative expenditures in India, including supervisory, accounting and employee relations services; an annual overhead charge for services rendered by the parent company or an Affiliate of the Operator outside India to support and manage Petroleum Operations under the Contract, and for staff advice and assistance including financial, legal, accounting and employee relations services, but excluding any remuneration for services charged separately under this Accounting Procedure calculated on the basis of one percent (1%) of expenditures. The expenditures used to calculate the monthly indirect charge shall not include the indirect charge (calculated either as a percentage of expenditures or as a minimum monthly charge), rentals on surface rights acquired and maintained for the joint account, guarantee deposits, 109
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2.6.2

2.6.3

concession acquisition costs, bonuses paid in accordance with the Contract, royalties, value added taxes and taxes paid under the Contract, settlement of claims, proceeds from the sale of assets (including division in kind) amounting to more than US$10,000 per transaction, and similar items mutually agreed upon by the parties. Credits arising from any government subsidy payment and disposition of joint account property shall not be deducted from total expenditures in determining such charge. 2.6.4 The indirect charges provided for in this Section may be amended periodically by mutual agreement between the Parties if, in practice, these are found to be insufficient or excessive. 110 SECTION 3 COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL INCOME OF THE CONTRACTOR 3.1 COSTS RECOVERABLE AND ALLOWABLE WITHOUT FURTHER APPROVAL OF THE GOVERNMENT. Costs incurred by the Contractor on Petroleum Operations pursuant to the Contract as classified under the headings referred to in Section 2 shall be allowable for the purposes of the Contract except to the extent provided in Section 3.2 or elsewhere in this Accounting Procedure, and subject to audit as provided for herein. 3.1.1 Surface Rights All direct costs necessary for the acquisition, renewal or relinquishment of surface rights acquired and maintained in force for the purposes of the Contract except as provided in Section 3.1.9. Why expected? How applicable? 3.1.2 Labor and Associated Costs (a) recruited employees who are directly engaged in the conduct of Petroleum Operations under the Contract in India. Such costs shall include the costs of employee benefits and Government benefits for employees and levies imposed on the Contractor as an employer, transportation and relocation costs within India of the employee and such members of the employee's family (limited to spouse and dependent children) as required by law or customary practice in
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charges

Costs of all Contractor's locally

India. If such employees are engaged in other activities in India, in addition to Petroleum Operations, the cost of such employees shall be apportioned on a time sheet basis according to sound and acceptable accounting principles. (b) Assigned Personnel Costs of salaries and wages, including bonuses, of the Contractor's employees directly and necessarily engaged in the conduct of the Petroleum Operations under the Contract, whether temporarily or permanently assigned, irrespective of the location of such employees, it being understood that in the case of those personnel only a portion of whose time is wholly dedicated to Petroleum Operations under the Contract, only that pro rata portion of applicable salaries, wages 111 and other costs, as specified in Sections 3.1.2(c), (d), (e)and (f) shall be charged and the basis of such pro rata allocation shall be specified. (c) Expenses or contributions made pursuant to assessments or obligations imposed under the laws of India which are applicable to the Contractor's cost of salaries and wages. The Contractor's cost of established plans for employees' group life insurance, hospitalization, pension, retirement and other benefit plans of a like nature customarily granted to the Contractor's employees provided, however, that such costs are in accordance with generally accepted standards in the international petroleum industry, applicable to salaries and wages chargeable to Petroleum Operations under Section 3.1.2(b) above. Personal Income taxes where and when they are paid by the Contractor to the Government of India for the employee, in accordance with the Contractor's standard personnel policies. Reasonable transportation and travel expenses of employees of the Contractor, including those made for travel and relocation of the expatriate employees, including their dependent family and personal effects, assigned to India whose salaries and wages are chargeable to
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(d)

(e)

(f)

Petroleum Operations under Section 3.1.2(b). Actual transportation expenses of personnel transferred to Petroleum Operations from their country of origin and/or relocation to their country of origin shall be charged to the Petroleum Operations. Where such transfer or relocation is to or from a country other than the country of origin there shall be no reimbursement. Transportation cost as used in this Section shall mean the cost of freight and passenger service and any accountable incidental expenditures related to transfer travel and authorized under Contractor's standard personnel policies. Contractor shall ensure that all expenditures related to transportation costs are equitably allocated to the activities which have benefited from the personnel concerned. 112 3.1.3 Transportation Costs The reasonable cost of transportation of equipment, materials and supplies within India and from outside India to India necessary for the conduct of Petroleum Operations under the Contract, including, but not limited to, directly related costs such as unloading charges, dock fees and inland and ocean freight charges. 3.1.4 Charges for Services (a) Third Party Contracts The actual costs of contract services, services of professional consultants, utilities and other services necessary for the conduct of Petroleum Operations under the Contract performed by third parties other than an Affiliate of the Contractor, provided that the transactions resulting in such costs are undertaken pursuant to Section 1.8 of this Accounting Procedure. (b) Affiliated Company Contracts (i) Professional and Administrative Services and Expenses Cost of professional and administrative services
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provided by any Affiliate for the direct benefit of Petroleum Operations, including, but not limited to, services provided by the production, exploration, legal, financial, insurance, accounting and computer services divisions other than those covered by Section 3.1.4(b)(ii) which Contractor may use in lieu of having its own employees. Charges shall be equal to the actual cost of providing their services, shall not include any element of profit and shall not be any higher than the most favorable prices charged by the Affiliate to third parties for comparable services under similar terms and conditions elsewhere and will be fair and reasonable in the light of prevailing international petroleum industry practice and experience. 113 (ii) Scientific or Technical Personnel Cost of scientific or technical personnel services provided by any Affiliate of Contractor for the direct benefit of Petroleum Operations, which cost shall be charged on a cost of service basis. Charges therefor shall not exceed charges for comparable services currently provided by outside technical service organizations of comparable qualifications. Unless the work to be done by such personnel is covered by an approved Work Programme and Budget, Operator shall not authorize work by such personnel without approval of the Management Committee. (c) Equipment, facilities and property owned and furnished by the Contractor's Affiliates, at rates commensurate with the cost of ownership and operation provided, however, that such rates shall not exceed
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those currently prevailing for the supply of like equipment, facilities and property on comparable terms in the area where the Petroleum Operations are being conducted. The equipment and facilities referred to herein shall exclude major investment items such as (but not limited to) drilling rigs, producing platforms, oil treating facilities, oil and gas loading and transportation systems, storage and terminal facilities and other major facilities, rates for which shall be subject to separate agreement with the Government. 3.1.5 Communications Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems including satellite, radio and microwave facilities between the Contract Area and the Contractor's base facility, offices, helicopter bases, port and railway yards. 3.1.6 Office, Shore Bases and Miscellaneous Facilities Net cost to Contractor of establishing, maintaining and operating any office, sub-office, shore base facility, warehouse, housing or other facility directly serving the Petroleum Operations. If any such facility services contract 114 areas other than the Contract Area, or any business other than Petroleum Operations, the net costs thereof shall be allocated on an equitable and consistent basis. 3.1.7 Environmental Studies and Protection Costs incurred in conducting the environmental impact studies for the Contract Area, and in taking environmental protection measures pursuant to the terms of the Contract. 3.1.8 Materials and Equipment (a) General So far as is practicable and consistent with efficient and economical operation, only such material shall be purchased or furnished by the Contractor for use in the Petroleum Operations as may be required for
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use in the reasonably foreseeable future and the accumulation of surplus stocks shall be avoided to the extent possible. Material and equipment held in inventory shall only be charged to the accounts when such material is removed from inventory and used in Petroleum Operations. Contractor shall be allowed to recover interest at the LIBOR rate plus one percent (1%) for reasonable inventories it carries. Costs shall be charged to the accounting records and books based on the average cost method. (b) Warranty In the case of defective material or equipment, any adjustment received by the Contractor from the suppliers or manufacturers or their agents in respect of any warranty on material or equipment shall be credited to the accounts under the Contract. (c) Value of Materials Charged to the Accounts Under the Contract. (i) Except as otherwise provided in subparagraph (b), materials purchased by the Contractor and used in the Petroleum 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 115 supply and point of shipment, freight to port of destination, insurance, taxes, customs duties, consular fees, other items chargeable against imported material and, where applicable , handling and transportation costs from point of importation to or from warehouse or operating site, and these costs shall not exceed those currently prevailing in normal arms length transactions on the open market.
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Operations

(ii) to

Material purchased from or sold Affiliates or transferred to or from activities of the Contractor other than Petroleum Operations under the Contract:

(aa)

new material (hereinafter referred to as condition A) shall be valued at the current international price which shall not exceed the price prevailing in normal arms length transactions on the open market; used material which is in sound and serviceable condition and suitable for reuse without reconditioning (hereinafter referred to as condition B) shall be priced at not more

(bb) is

than seventy-five percent (75%) of the current price of the above mentioned new materials; (cc) used material which cannot be classified as condition B, but which, after reconditioning, will be further serviceable for original function as good second-hand condition B or is serviceable for original function, but substantially not suitable for reconditioning (hereinafter referred to as condition C) shall be priced at not more than fifty per cent (50%) of the current price of the new material referred to above as condition A. The cost of reconditioning shall be charged to the reconditioned material, provided that the condition C material value plus the cost of 116 reconditioning does not exceed the value of condition B material. Material which cannot be classified as condition B or condition C shall be priced at a value commensurate with its use.
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material

Material involving erection expenditure shall be charged at the applicable condition percentage (referred to above) of the current knocked-down price of new material referred to above as condition A. When the use of material is temporary and its service to the Petroleum Operations does not justify the reduction in price in relation to materials referred to above as conditions B and C, such material shall be priced on a basis that will result in a net charge to the accounts under the Contract consistent with the value of the service rendered. 3.1.9 Duties, Fees and Other Charges Any duties, levies, fees, charges and any other assessments levied by any governmental or taxing authority in connection with the Contractor's activities under the Contract and paid directly by the Contractor except corporate income tax payable by the constituents of the Contractor. If Operator or its Affiliate is subject to income or withholding tax as a result of service performed at cost for Petroleum Operations under the Agreement, its charges for such services may be increased by the amount of such taxes incurred ("grossed up"), provided such charges have not been otherwise recovered or a tax credit received. 3.1.10 Insurance and Losses Insurance premia and costs incurred for insurance required by law or pursuant to Article 24 of the Contract, provided that such insurance is customary, affords prudent protection against risk and is at a premium no higher than that charged on a competitive basis by insurance companies which are not Affiliates. Actual costs and losses incurred shall be allowable to the extent not made good by insurance. Such costs may include, but are not limited to, repair and replacement of property resulting from damages or losses incurred by fire, flood, storm, theft, accident or such other cause.

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117 3.1.11 Legal Expenses All reasonable costs and expenses resulting from the handling, investigating, asserting, defending, or settling of any claim or legal action 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 Petroleum Operations under the Contract, or sums paid in respect of legal services necessary for the protection of the joint interest of Government and the Contractor, shall be allowable. Such expenditures shall include attorney's fees, court costs, costs of investigation and procurement of evidence and amounts paid in settlement or satisfaction of any such litigation and claims provided such costs are not covered elsewhere in the Accounting Procedure. Where legal services are rendered in such matters by salaried or regularly retained lawyers of the Contractor or an Affiliate, such compensation shall be included instead under Sections 3.1.2 or 3.1.4(b)(i) above as applicable. 3.1.12 Training Costs All costs and expenses incurred by the Contractor in training as is required under Article 22 of the Contract. 3.1.13 General and Administrative Costs

The costs described in Section 2.6.1 and the charge described in Section 2.6.2 of this Accounting Procedure. 3.2 COSTS NOT RECOVERABLE AND NOT ALLOWABLE UNDER THE CONTRACT The following costs and expenses shall not be recoverable or allowable (whether directly as such or indirectly as part of any other charges or expenses) for cost recovery and production sharing purposes under the Contract: (i) costs and charges incurred before the Effective Date including costs in respect of preparation, signature or ratification of this Contract except as otherwise provided in Article 13.1;
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(ii)

expenditures in respect of any financial transaction to negotiate, float or otherwise obtain or secure funds for Petroleum Operations including, but not limited to, interest, commission, brokerage and fees related to such 118 transactions, and exchange losses on loans or other financing;

(iii)

costs of marketing or transportation of Petroleum beyond the Delivery Point; expenditures incurred in obtaining, furnishing maintaining the guarantees required under the Contract and any other amounts spent on indemnities with regard to non-fulfillment of contractual obligations;

(iv) and

(v)

attorney's fees and other costs and charges in connection with arbitration proceedings and sole expert determination pursuant to the Contract; fines and penalties imposed by courts of law of the Republic of India; donations and contributions; expenditures for the creation of any partnership or joint venture arrangement; amounts paid with respect to non-fulfillment of contractual obligations; costs incurred as a result of failure to insure where insurance is required pursuant to the Contract; costs and expenditures incurred as a result of wilful misconduct or gross negligence of the Contractor's supervisory personnel; payments pursuant to Article 16 of the Contract.

(vi)

(vii) (viii)

(ix)

(x)

(xi)

(xii) 3.3

OTHER COSTS RECOVERABLE AND ALLOWABLE. Any other costs and expenditures not included in Section 3.1 or

3.2 of this Accounting Procedure but which have been incurred by the Contractor for the necessary and proper conduct of Petroleum Operations pursuant to an approved Work Programme and Budget. 3.4 INCIDENTAL INCOME AND CREDITS All incidental income and proceeds received from Petroleum Operations under the Contract, including but not limited to the items listed below, shall be credited to the accounts under the Contract and shall be taken into account for cost recovery,
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production sharing and participation purposes in the manner described in Articles 13 and 14 of the Contract: (i) The proceeds of any insurance or claim or 119 judicial awards in connection with Petroleum Operations under the Contract or any assets charged to the accounts under the Contract where such operations or assets have been insured and the premia charged to the accounts under the Contract; (ii) Revenue received from third parties for the use of property or assets, the cost of which has been charged to the accounts under the Contract; Any adjustment received by the Contractor from suppliers/manufacturers or their agents in connection with defective material, the cost of which was previously charged by the Contractor to the accounts under the Contract; (iv) Rentals, refunds or other credits received by the Contractor which apply to any charge which has been made to the accounts under the Contract; Prices originally charged to the accounts under the Contract for materials subsequently exported from the Republic of India without being used in Petroleum Operations under the Contract; Proceeds from the sale or exchange by the Contractor of plant or facilities from a Field, the acquisition costs of which have been charged to the accounts under the Contract for the relevant Field; Legal costs charged to the accounts under Section 3.1.11 of this Accounting Procedure and subsequently recovered by the Contractor.

(iii) the

(v)

(vi)

(vii)

3.5

NON-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 Contract.

120 SECTION 4 RECORDS AND INVENTORIES OF ASSETS

4.1

RECORDS
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4.1.1

The Contractor shall keep and maintain detailed records of property and assets in use for or in connection with Petroleum Operations under the Contract in accordance with normal practices in exploration and production activities of the international petroleum industry. Such records shall include information on quantities, location and condition of such property and assets, and whether such property or assets are leased or owned. The Contractor shall furnish annually particulars to the Government, by notice in writing as provided in the Contract, of all major assets acquired by the Contractor to be used for or in connection with Petroleum Operations.

4.1.2

4.2

INVENTORIES 4.2.1 The Contractor shall: (a) not less than once every twelve (12) Calendar Months with respect to movable assets take an inventory of the controllable assets used for or in connection with Petroleum Operations in terms of the Contract and address and deliver such inventory to the Government with a statement of the principles upon which valuation of the assets mentioned in such inventory has been based. assets means those assets the Operator shall submit to detailed record keeping. (b) not less than once every three (3) years with respect to immovable assets, take an inventory of the assets used for or in connection with Petroleum Operations in terms of the Contract and address and deliver such inventory to the Government together with a written statement of the principles upon which valuation of the assets mentioned in such inventory has based. Immovable assets means those assets which are placed in service and have an original cost in excess of Fifty Thousand United States Dollars (US$50,000). 4.2.2 The Contractor shall give the Government at least thirty (30) days notice in writing in the manner provided for in the Contract of its intention to take the inventory referred to in Section 4.2.1 121 and the Government shall have the right to be represented when such inventory is taken. 4.2.3 When an assignment of rights under the Contract
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Controllable

been

takes place, a special inventory shall be taken by the Contractor at the request of the assignee provided that the cost of such inventory is borne by the assignee and paid to the Contractor. 4.2.4 In order to give effect to Article 27 of the Contract, the Contractor shall provide the Government with a comprehensive list of all relevant assets when requested by the Government to do so.

122 SECTION 5 PRODUCTION STATEMENT AND ROYALTY AND CESS STATEMENT

5.1

From the date of first production, after the Effective Date, of Petroleum from the Contract Area, the Contractor shall submit a Production Statement for each Calendar Month to Government showing the following information separately for each producing field and in aggregate for the Contract Area: 5.1.1 5.1.2 The quantity of Crude Oil produced and saved. The quality and characteristics of such Crude Oil produced and saved. The quantity of Associated Natural Gas and Non Associated Natural Gas produced and saved. The quality, characteristics and composition of such Natural Gas produced and saved. The quantities of Crude Oil and Natural Gas used for the purposes of carrying on drilling and Production Operations and pumping to field storage, as well as quantities reinjected. The quantities of Crude Oil and Natural Gas unavoidably lost. The quantities of Natural Gas flared and vented. The size of Petroleum stocks held on the first day of the Calendar Month in question. The size of Petroleum stocks held on the last day of the Calendar Month in question. The quantities of Natural Gas reinjected into the Petroleum Reservoir. The number of days in the Calendar Month during which Petroleum was produced from each Field. The Gas/Oil ratio for each Field for the relevant
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5.1.3

5.1.4

5.1.5

5.1.6

5.1.7 5.1.8

5.1.9

5.1.10

5.1.11

5.1.12

Calendar Month. 5.1.13 The water/Oil ratio for each Field for the relevant Calendar Month, if available.

5.2

All quantities shown in this Statement shall be expressed in both volumetric terms (barrels of oil and cubic metres of gas) and in weight (metric tonnes). The Government may direct in writing that the Contractor include other particulars relating to the production of Petroleum in its Production Statement, and the Contractor 123

5.3

shall to the extent possible comply with such direction. 5.4 submitted The Production Statement for each Calendar Month shall be to Government no later than ten (10) days after the end of such Calendar Month for Oil and the immediately succeeding Calendar Month for Gas. 5.5 The Contractor shall, for the purposes of Article 15, submit a statement to Government providing the calculation of the amount of royalty and cess, separately, paid with respect to each Calendar Month for each producing Field and in aggregate for the Contract Area. The statement shall show the following information: 5.5.1 The quantity of Crude Oil and Condensate produced and saved. The quantity of ANG and NANG produced and saved. The amount of royalty and cess, separately, paid on Crude Oil and Condensate produced, saved and sold and the particulars of the calculation thereof. The amount of royalty paid on ANG and NANG and the particulars of the calculation thereof.

5.5.2 5.5.3

5.5.4

5.6

The Royalty and Cess Statement for each Calendar Month shall be submitted to Government no later than twenty-one (21) days after the end of such Calendar Month for Oil and the most recently available Calendar Month for Gas.

124 SECTION 6 VALUE OF PRODUCTION AND PRICING STATEMENT

6.1

The Contractor shall prepare a Statement providing calculations of the value of Crude Oil produced and saved during each Calendar Month. This Statement shall contain the following information:
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6.1.1

The quantities, prices and receipts realized by the Contractor as a result of sales of Crude Oil to third parties (with any sales to Government being separately identified) made during the Calendar Month in question. The quantities, prices and receipts realized therefor by the Contractor as a result of sales Crude Oil made during the Calendar Month in question, other than to third parties.

6.1.2 of

6.1.3 without

The quantities of Crude Oil appropriated by the Contractor to refining or other processing otherwise being disposed of in the form of Crude Oil.

6.1.4

The value of stocks of Crude Oil on the first day of the Calendar Month in question. The value of stocks of Crude Oil on the last day of the Calendar Month in question. The percentage volume of total sales of Crude Oil made by the Contractor during the Calendar Month that are Arms Length Sales to third parties. Information available to the Contractor, in so far as required for the purposes of Article 19 of the Contract, concerning the prices of competitive crude oils produced by the main petroleum producing and exporting countries including contract prices, discounts and premia, and prices obtained on the spot markets.

6.1.5

6.1.6

6.1.7

6.2

The Contractor shall prepare a statement providing calculations of the value of ANG and NANG produced and sold during each Calendar Month for the most recently available Calendar Month. This Statement shall contain all information of the type specified in Section 6.1 for Crude Oil as is applicable to Gas and such other relevant information as may be required by the Government. The Statements required pursuant to Sections 6.1 and 6.2 shall include a detailed breakdown of the calculation of the prices of Crude Oil, Associated Natural Gas and Non Associated Natural Gas. 125 The Value of Production and Pricing Statement for each Calendar Month shall be submitted to Government not later than twenty-one (21) days after the end of such Calendar Month for Oil and the recently available Calendar Month for Gas.

6.3

6.4

most

126
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SECTION 7 STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS

7.1 Contract.

The Contractor shall prepare with respect to each Calendar Quarter a Statement of Costs, Expenditures and Receipts under the The statement shall distinguish between Exploration costs, Development Costs and Production Costs and shall separately identify all significant items of costs and expenditure as

itemized in Section 3 of this Accounting Procedure within these categories. The statement of receipts shall distinguish between income from the sale of Petroleum and incidental income of the sort itemized in Section 3.4 of this Accounting Procedure. If the Government is not satisfied with the categories, it shall be entitled to request a more detailed breakdown. The Statement shall show the following: 7.1.1 Actual costs, expenditures and receipts for the Calendar Quarter in question. Cumulative costs, expenditures and receipts for the Year in question. Latest forecast of cumulative costs, expenditures and receipts at the Year end. Variations between budget forecast and latest forecast and explanations thereof.

7.1.2

7.1.3

7.1.4

7.2

The Statement of Costs, Expenditure and Receipts of each Calendar Quarter shall be submitted to Government not later than sixty (60) days after the end of such Calendar Quarter.

127 SECTION 8 COST RECOVERY STATEMENT

8.1

The Contractor shall prepare with respect to each Calendar Quarter a Cost Recovery Statement containing the following information: 8.1.1 Unrecovered Contract Costs carried forward from the previous Calendar Quarter, if any. Contract costs for the Calendar Quarter in question. Total Contract Costs for the Calendar Quarter in question (Section 8.1.1 plus Section 8.1.2). Quantity and value of Cost Petroleum taken and disposed of by the Contractor for the Calendar Quarter in question.
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8.1.2

8.1.3

8.1.4

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8.1.5

Contract Costs recovered during the Calendar Quarter in question. Total cumulative amount of Contract Costs recovered up to the end of the Calendar Quarter in question. Amount of Contract Costs to be carried forward into the next Calendar Quarter.

8.1.6

8.1.7

8.2

Where necessary and possible, the information to be provided under Section 8.1 shall be identified separately Field by Field and also separately for Crude Oil, Associated Natural Gas and Non Natural Gas.

Associated

8.3

The cost recovery information required pursuant to Subsection 8.1 above shall be presented in sufficient detail so as to enable Government to identify how the cost of assets are being recovered. The Cost Recovery Statement for each Calendar Quarter shall be submitted to Government not later than sixty (60) days after the end of such Calendar Quarter.

8.4

128 SECTION 9 PRODUCTION SHARING STATEMENT

9.1

The Contractor shall prepare with respect to each Calendar Quarter a Production Sharing Statement containing the following information: 9.1.1 The calculation of the applicable net cash flows as defined in Appendix D for the Calendar Quarter in question. The Investment Multiple applicable in the Calendar Quarter in question. Based on Section 9.1.2 and Article 14, the appropriate percentages of Profit Petroleum, if any, for the Government and Contractor in the Calendar Quarter in question. The total amount of Profit Petroleum, if any, to be shared between the Government and Contractor the Calendar Quarter in question. 9.1.5 Based on Sections 9.1.3 and 9.1.4, the amount of Profit Petroleum due to the Government and Contractor as well as to each constituent of the Contractor in the Calendar Quarter in question. The actual amounts of Petroleum taken by the
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9.1.2

9.1.3

9.1.4 in

9.1.6

Government and Contractor as well as by each constituent of the Contractor during the Calendar Quarter in question to satisfy their entitlement pursuant to Section 9.1.5. 9.1.7 Adjustments to be made, if any, in future Calendar Quarters in the respective amounts of Profit Petroleum due to the Government and Contractor as well as to each constituent of the Contractor on account of any differences between the amounts specified in Sections 9.1.5 and 9.1.6, as well as any cumulative adjustments outstanding from previous Calendar Quarters.

9.2 and

Where necessary and if possible, the information to be provided under Section 9.1 shall be identified separately for each Field also separately for Crude Oil as distinct from Natural Gas.

9.3

The Production Sharing Statement shall be submitted to Government not later than sixty (60) days after the end of such Calendar Quarter. 129 SECTION 10 END OF FINANCIAL YEAR STATEMENT

10.1

The Contractor shall prepare a definitive End of Year Statement. The statement shall contain aggregated information in the same format as required in the Production Statement and Royalty and Statement, Value of Production and Pricing Statement, Statement of Costs, Expenditure & Receipts, Cost Recovery Statement and Production Sharing Statement, but shall be based on actual quantities of Petroleum produced, income received and costs and expenditures incurred. Based upon this Statement, any adjustments that are necessary shall be made to the transactions concerned under the Contract.

Cess

10.2

The End of Year Statement for each year shall be submitted to Government within ninety (90) days of the end of such Year.

130 SECTION 11 BUDGET STATEMENT

11.1

The Contractor shall prepare a Budget Statement for each Year. This statement shall distinguish between budgeted Exploration Costs, Development Costs and Production Costs and shall show the following: 11.1.1 Forecast costs, expenditures and receipts for the Year in question. A schedule showing the most important individual items of total costs, expenditures and receipts
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11.1.2

for the Year. 11.2 the Year provided that in the case of the Year in which the Effective Date falls, the Budget Statement shall be submitted within ninety (90) days of the Effective Date. The Budget Statement shall be submitted to Government with respect to each Year not less than ninety (90) days before the start of

131

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APPENDIX D CALCULATION OF THE INVESTMENT MULTIPLE FOR PRODUCTION SHARING PURPOSES 1. In accordance with the provisions of Article 14, the share of the Government and the Contractor respectively of Profit Petroleum from the Contract Area in any Financial Year shall be determined by the Investment Multiple earned by the Companies from the Contract Area at the end of the preceding Financial Year. These measures of profitability shall be calculated on the basis of the appropriate net cash flows as specified in this Appendix D. INVESTMENT MULTIPLE 2. The "Net Cash Income" of the Companies from the Contract Area in any particular Financial Year is the aggregate value for the year of the following: (i) Cost Petroleum entitlement of the Companies as provided in Article 13; PLUS (ii) Profit Petroleum entitlement of the Companies as provided in Article 14; PLUS (iii) incidental income of the Companies of the type specified in Section 3.4 of the Accounting Procedure arising from Petroleum Operations and apportioned to the Contract Area; LESS (iv) the Companies' share of all Production Costs and royalty/cess payments incurred on or in the Contract Area; LESS (v) the notional income tax, determined in accordance with paragraph 7 of this Appendix, payable by the Companies on profits and gains from the Contract Area. 3. The "Investment" made by the Companies in the Contract Area in any particular Financial Year is the aggregate value for the year of: (i) Exploration Costs incurred by the Companies in the Contract Area and apportioned to the Contract Area in the same proportion that said Costs were recovered pursuant to Articles 13.2 and 13.3. 132 PLUS (ii) Development Costs incurred by the Companies in the Contract Area. 4. For the purposes of the calculation of the Investment Multiple, Costs or expenditures which are not allowable as provided in the Accounting Procedure shall be excluded from Contract Costs and be disregarded. 5. The Investment Multiple ratio earned by the Companies as at the end of any Financial Year from the Contract Area shall be calculated by dividing the aggregate value of the addition of each of the annual Net Cash Incomes (accumulated, without interest, up to and including that Financial Year starting from the Financial Year in which Production Costs were first incurred or production first arose after the Effective Date on or in the Contract Area) by the aggregate value of the addition of each of the annual Investments (accumulated, without interest, up to and including that Financial Year starting from the Financial Year in which Exploration and Developments Costs were first incurred). 6. Profit Petroleum from the Contract Area in any Financial Year shall be shared between the Government and the Contractor in accordance with the value of the Investment Multiple earned by the Companies as at the end of the previous Financial Year pursuant to Articles 14.2, 14.3 and 14.4. GENERAL

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7. In determining the amount of notional income tax to be deducted in the applicable cash flows specified in paragraph 2 of this Appendix, a notional income tax liability in respect of the Contract Area shall be determined for each Company, as if the conduct of Petroleum Operations by the Company in the Contract Area constituted the sole business of the Company and as if the provisions of the Income Tax Act, 1961, with respect to the computation of income tax at a fifty percent (50%) rate applicable to Petroleum Operations on the basis of the income and deductions provided for in Article 15 of this Contract were accordingly applicable separately to the Contract Area, disregarding any income, allowances, deductions, losses or set-off of losses from any other Contract Area or business of the Company. 8. Sample Calculation is attached in Appendix "D-1". 133

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APPENDIX "D-1" INVESTMENT MULTIPLE CALCULATION - EXAMPLE PROBLEM The following example is intended to demonstrate the calculation and impact of the Investment Multiple. The figures shown would be for the Companies and are fictitious in this example for demonstration purposes. The investment multiple is calculated individually for the Companies. RIL OR EOGIL Investment Multiple at beginning of Financial Year 11 Profit Oil Shares at beginning of 24.00% Financial Year 11 US$ MILLIONS A Cumulative Net Cash Income at beginning of Financial Year 11 + Cost Petroleum in Financial Year 11 + Profit Petroleum in Financial Year 11 + Incidental Income in Financial Year 11 - Production Costs in Financial Year 11 - Oil Royalty and Cess in Financial Year 11 - Gas Royalty in Financial Year 11 - Notional Income Tax in Financial Year 11 B = Cumulative Net Cash Income at end of Financial Year 11 C + + + = Cumulative Investment at beginning of Financial Year 11 Exploration Costs in Financial Year 11 Development Costs in Financial Year 11 Service Costs in Financial Year 11 Cumulative Investment at end of Financial Year 11 1.96

100.00 10.00 1.00 .00 .60 1.57 0.41 2.00 106.42

51.00 0.30 1.50 0.00 52.80

Investment Multiple at beginning of Financial Year 12 = (B / D) Profit Oil Shares at beginning of 18.00% Financial Year 12

2.02

Since the Investment Multiple is calculated to be greater than 2.0 at the beginning of Financial Year 12, the Profit Petroleum share to be received by RIL or EOGIL falls from 24% to 18% at the inception of Financial Year 12. In the event that the Investment Multiple were found to exceed 2.0 during the financial close of Financial Year 11, the Contractor may have received excess Profit Petroleum during the first sixty (60) days of Financial Year 12. In this case, the quantity of excess Profit Petroleum will be calculated and the accounts will be settled by adjustment to entitlements within sixty (60) days of the following year (year twelve). 134

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APPENDIX E FORM OF FINANCIAL AND PERFORMANCE GUARANTEE (to be furnished pursuant to Article 29 of the Contract) WHEREAS ENRON EXPLORATION COMPANY, a Company duly organized and existing under the laws of Delaware, U.S.A., having its registered office at 1400 Smith Street, Houston, Texas, U.S.A., (hereinafter referred to as "the Guarantor" which expression shall include its successors and assigns) is the indirect owner of 100% of the capital stock of ENRON OIL & GAS INDIA LIMITED ("Company") and direct owner of its parent company; and WHEREAS Company is signatory to a Production Sharing Contract of even date of this guarantee in respect of an Offshore area identified as Panna and Mukta Blocks (hereinafter referred to as "the Contract") made between the Government of India (hereinafter referred to as "the Government"), Company, RELIANCE INDUSTRIES LIMITED and OIL & NATURAL GAS CORPORATION LIMITED (hereinafter referred to as "Contractor" which expression shall include its successors and permitted assigns); and WHEREAS the Guarantor wishes to guarantee the performance of Company or its Affiliate Assignee under the Contract as required by the terms of the Contract; NOW, THEREFORE, this Deed hereby provides as follows: 1. The Guarantor hereby unconditionally and irrevocably guarantees to the Government that it will make available, or cause to be made available, to Company or any other directly or indirectly owned Affiliate of Company to which any part or all of Company's rights or interest under the Contract may subsequently be assigned ('Affiliate Assignee'), to ensure that Company or any Affiliate Assignee can carry out its work commitment as set forth in the Contract. 2. The Guarantor further unconditionally and irrevocably guarantees to the Government reasonable compliance by Company or any Affiliate Assignee, of any obligations of Company or any Affiliate Assignee under the Contract. 3. The Guarantor hereby undertakes to the Government that if Company, or any Affiliate Assignee, shall, in any respect, fail to perform its work commitments under the Contract or commit any material breach of such obligations, then the Guarantor shall fulfill or cause to be fulfilled the obligations in place of Company or any Affiliate Assignee, and will indemnify the Government against all actual losses, damages, costs, expenses, or otherwise which may result directly from such failure to perform or breach on the part of Company. In no event shall Guarantor be liable for any special consequential, indirect, incidental or punitive damages of any kind or character, including, but not limited to, loss of profits or revenues, loss of product or loss of use arising out of or related to a material breach by Company of its obligations under the Contract. 4. This guarantee shall take effect from the Effective Date and shall remain in full force and effect for the duration of the Contract and thereafter until no sum remains payable by Company, or its Affiliate Assignee, under the Contract or as a result of any decision or award made by any expert or arbitration tribunal thereunder. 5. This guarantee shall not be affected by any change in the Articles of Association and by-laws of Company or the Guarantor or in any instrument 135 establishing the Licensee. 6. The liabilities of the Guarantor shall not be discharged or affected by (a) any time indulgence, waiver or consent given to Company; (b) any amendment to the Contract or to any security or other guarantee or indemnity to which Company has agreed; (c) the enforcement or waiver of any terms of the Contract or of any security, other guarantee or indemnity; or (d) the dissolution, amalgamation, reconstruction or reorganization of Company. 7. This guarantee shall be governed by and construed in accordance with the laws of India. IN WITNESS WHEREOF the Guarantor, through its duly authorized representatives, has caused its seal to be duly affixed hereto and this guarantee to be duly executed the _____________ day of _________ 1994. The seal of ___________ was hereto duly affixed by ___________this_____ day of ________ 1994 in accordance with its by-laws and this guarantee was duly signed by ________________ and ______________________ as required by the said by-laws.

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- ------------------------------------------Secretary

Vice President

Witness:

- ----------------------136

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APPENDIX F EQUIPMENT

The development plan, illustrated in Figure G-1 is based on the assumption that ONGC has provided at the Effective Date, as represented in data and information heretofore provided by ONGC, certain structures and facilities. All Equipment specified below, including that not yet installed, shall be provided at ONGC's cost and risk. The following facilities have been installed and placed into service by ONGC as of 1st August, 1993: - 1 well platform PA - 8 wells (PA-1, PA-2, PA-3, PA-4, PA-5, PA-6, PA-7, PA-8) - Early Production System ("EPS") jack-up rig SAGAR LAXMI, including production systems and all fixtures and appurtenances - Tanker loading system, loading buoy and appurtenances - PB, PD, PE (jackets only) installed; well fluid line connecting each to EPS 23 development wells drilled in PB, PD, PE - MA well platform - 8 development wells drilled in MA - 14" well fluid pipeline connects MA to Panna EPS - Interconnecting Flowlines and Pipelines The following facilities were assumed by the Companies to be installed and commissioned by ONGC prior to the Effective Date and Companies' estimate of project cost does not include the following (ONGC's schedule for installation as represented to Companies is also shown): PB Deck and Facilities - Fourth Quarter 1993 PD Deck and Facilities - First Quarter 1994 PE Deck and Facilities - Second Quarter 1994 MA Deck and Facilities - First Quarter 1994 137

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APPENDIX G DEVELOPMENT COMMITMENT SPECIFIED BY THE COMPANIES The development plan, illustrated in Figure G-1 is based on the assumption that ONGC has provided at the Effective Date, as represented in data and information heretofore provided by ONGC, certain structures and facilities. The development of the Fields is proposed to be completed by Contractor through its activities under this Contract. The following describes what facilities, platforms and wells are provided by ONGC prior to the Effective Date. The following facilities have been installed and placed into service by ONGC: - 1 well platform PA - 8 wells (PA-1, PA-2, PA-3, PA-4, PA-5, PA-6, PA-7, PA-8) - Early Production System, "EPS" (jack-up) - Tanker loading system (via SBM) - PB, PD, PE (jackets only) installed; well fluid line connecting each to EPS - 23 development wells drilled in PB, PD, PE - MA well platform - 8 development wells drilled in MA - 14" well fluid pipeline connects MA to Panna EPS The following facilities were assumed by the Companies to be installed and commissioned by ONGC prior to the Effective Date and Companies' estimate of project cost does not include the following (ONGC's schedule for installation as represented to Companies is also shown): PB Deck and Facilities - Fourth Quarter 1993 PD Deck and Facilities - First Quarter 1994 PE Deck and Facilities - Second Quarter 1994 MA Deck and Facilities - First Quarter 1994 Drill two horizontal wells from PD - Second half 1993 Drill two horizontal wells from PE Second half 1993 Complete two horizontal wells from PE - Second half 1993 The following work, intended to complete the development plan contemplated, is included in Companies plan and only these facilities and wells are subject to the Cost Recovery Limit as defined in Article 13: Panna - Drill two horizontal wells from PD - Drill two horizontal sections in two suspended wells on PE and complete same - Fabricate and install PC and PF jackets - Fabricate (or refurbish) and install PC and PF deck packages - Drill nine horizontal wells from PC - Drill nine horizontal wells from PF - Fabricate and install PPA and PQ 138 - Lay necessary well fluid, gaslift and free gas lines - Lay sour gas export line from PPA to proposed ONGC 42" pipeline - Acquire 850 km of 2-D seismic data - Drill two exploratory wells - Geophysical, geological and engineering studies Mukta - Fabricate and install MB jacket - Fabricate (or refurbish) and install MB deck package - Drill six directional wells from MB - Lay MB-MA well fluid line - Lay PPA-MA-MB gaslift line - Drill two exploratory wells - Geophysical, geological and engineering studies Reprocess and interpret the 1988-89 3-D survey and usable data from the 1991 SBS 2- D survey Annex G-1 shows Companies' development concept based on an assumed project start date of 1st July, 1993. 139

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APPENDIX G ANNEXURE G-1 TECHNICAL INFORMATION The following analysis is based on information presented by GOI which has not been independently verified. Hence, the information given here is without warranty, although we believe it to be accurate. We have accounted for relevant technical details provided in the Docket and Data Package. These technical data are subject to different interpretations and may not necessarily lead to unique results. VIIA TECHNICAL INFORMATION FOR PANNA FIELD (a,b,c) 1. LOCATION The 430 square kilometers Panna block is located in the Offshore Bombay basin of India about 50 km east of the giant Bombay High field. Panna field is a large culmination that occurs where the west-plunging axis of the Heera-Bassein structural block intersects the western flank of the fault-bound north-south trending Central Graben (FIGURE VIIA-1). 2. STRATIGRAPHY Commercial hydrocarbons are trapped in porous and permeable shoal carbonate reservoirs of the Bassein B zone (Middle Eocene) and A zone (Early Oligocene). The B zone consists of over 300 meters of porous algal and fusillinid packstones and grainstones. It is the primary oil reservoir in Panna with up to 27 meters of oil column and 25 meters of gas. The B zone overlies shales and thin sandstones of the Early Eocene-Paleocene Basal Clastics formation which have yielded some interesting but apparently subcommercial tests of oil and gas. The top of the B-zone is an unconformable surface overlain by 10 to 15 meters of thin shales and argillaceous limestones called the Tight zone. The Tight zone grades upward into the A zone. It consists of 50 to 60 meters of interbedded tight and porous wackestones and packstones which are in turn overlain by alternating shales and tight limestones of the upper Bassein formation. The A zone is primarily a gas reservoir with upwards of 75 meters of gas column. Mappable seismic reflectors occur at the top A zone (H3A) and top B zone (H3B) (FIGURE VIIA-2). 3. STRUCTURE ONGC structure maps on the B and A zones are shown in FIGURES VIIA-3 and 4. A EEC/RIL seismic time map on the H3B reflector is exhibited in FIGURE VIIA-5. Comparison of the time map with the cited B zone structure map reveals similarities in the general structural aspects of Panna field including a large broad low-relief SE structure which was tested by the BS-1,3,6 and 8 exploration wells; a high-relief WNW structure penetrated in a flank position by the BN-1 development well; and another high-relief NW structure that was also penetrated in a flank position by the BS-5 exploration well. Both the BN-1 and BS-5 wells have indicated log pay but neither was production tested. The time map exhibits numerous NW-SE oriented faults with upwards of 100 meters of throw on the eastern margin of the field and lesser amounts of the 5 to 20 meters range in the field proper where they appear to control the cited high-relief "pop-up" structures. The seismic section, BS-425A, located on FIGURE VIIA-6 reveals the nature of the faults along a WNW-ESE transect (FIGURE VIIA-7). Although all appear to have normal throw, their similar orientation and cross sectional geometry suggest a possible transtensional wrench component. This is supported by the smaller conjugate ENE-WSW faults that lie en-echelon along the larger fault trends. The large SE structure currently under development by ONGC is considered as the Base-Case reserve target in this proposal. It will be referred to by platform designation as the "PA-PF" structure. The two smaller high-relief structures are considered as upside Success Case targets whose development would be contingent on the successful outcome of a work program detailed later in this document. They are referred to as the "PG" and "PH" structures as shown in FIGURE VIIA-3 which exhibits a conceptual development scheme overlay to the B zone structure. 4. RESERVOIR CHARACTERIZATION Core studies indicate that both the A and B zones have been subjected to sea-level lowering and emergence which brought about diagenetic dissolution and general enhancement of porosity and permeability (FIGURES VIIA-8,9). Hydrocarbon fluid contacts appear to be extremely consistent throughout the greater field area. The W-E diagrammatic cross section of FIGURE VIIA-10 demonstrates the cross cutting nature of the fluid levels through formational boundaries. Well performance data suggest strong pressure support from an active water drive mechanism associated with the massive B zone
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aquifer. Dissolution-enhanced vertical permeability and the cited small-scale faults are interpreted to have locally breached the sealing capacity of the Tight zone between the A and B zones. Therefore, concurrent production of B zone oil and A zone gas is not advised, especially in the early life of the field. Detailed petrophysical analysis was done on straight-hole exploration wells with complete modern log suites including BS-5, BS-6 and BS-8. TABLE VIIA-1 lists the petrophysical input parameters utilized for the density porosity and Archie water saturation calculations. The oil/free-water contact was observed at 1760 meters subsea in analysed wells. Similarly, the gas/oil contact consistently occurred at 1733 meters subsea as defined by RFT and log analysis data. In the B zone, up to 50 meters of the upper hydrocarbon-bearing interval has average density porosity of 29% while the middle and lower water-wet portions exhibit an average density porosity of 20%. For the A zone, only higher porosity beds were counted as pay with an average of 13 meters net out of 55 gross and 23% density porosity. Petrophysical analysis of the B Zone indicates that there is a distinct zonation of the hydrocarbon interval as depicted on the type log in FIGURE VIIA-11. These zones include the following:

ZONE BASE ELEVATION(m) --------------------------Free Gas Free Oil Moveable Oil Residual Oil

SUBSEA

1733 1746* 1751* 1760

* Surfaces vary 1-2 meters as a function of reservoir quality 5. VOLUMETRIC RESERVE CALCULATIONS Volumetric input parameters, depict the maximum, minimum and most likely values of area under closure, net pay thickness, porosity and water saturation for each hydrocarbon zone of the A and B intervals. Volumetric parameters for the Base Case "PA-PF" structure are listed in TABLE VII(d) i. The Success Case for "PG" and "PH" is set forth in TABLE VII(d) ii. It bears noting that the distinction of the various hydrocarbon zones in the A interval are generally inferred from production tests of the BS-4, BS-9 and PBM-2 exploration wells. Determination of the cited hydrocarbon zones is inhibited by A zone's poorer reservoir quality and interbedded nature. Fluid properties of A and B zones are listed in TABLE VIIA-2. Of note is the residual oil (ROS) and gas (RGS) saturation values of 40% and 45% respectively. The assumed average value for ROS of 40%, which is common for carbonate reservoirs, compares with values of 32% - 37% from data provided in the data package for the highest-quality reservoir samples. The high RGS value of 45% is consistent with the strong water-drive model where reservoir pressure drawdown remains relatively low through the field's productive life. The methodology for volumetric calculations utilizes the B zone and A zone structure maps to determine the area and resulting rock volume of each cited hydrocarbon zone in the respective A and B intervals. Average values for pay, porosity, hydrocarbon saturation were then utilized to calculate oil and gas in place. Recoverable reserves were calculated by subtracting ROS and RGS from the hydrocarbon saturation of the respective zones and assuming a sweep efficiency for the natural water drive as follows:

A zone 70% A zone 60% B zone 95% B zone 60%

(gas) sweep efficiency (oil) sweep efficiency (gas) sweep efficiency (oil) sweep efficiency

= = = =

Although calculated, no A zone recoverable oil reserves were included in the Base or Success Cases because the oil occurs in a rim
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around the outer perimeter of the field where it is beyond reach with the envisioned development scheme that targets B zone oil and A zone gas reserves. Comparison of volume per unit area calculations (e.g. MMt/square kilometers) indicate that the A zone oil reservoir requires 5X the area of the B zone oil reservoir to yield an equivalent volume of recoverable reserves. Stated another way, for a given drainage area, the A zone will yield 20% of the reserves delivered by the B zone. FIGURE VIIA-12 shows the recoverable reserve uncertainty for the base case PA-PF structure expressed as a log normal distribution on a log probability scale. It indicates the following range:

PROBABILITY >or = ----------(%) meters) Minimum Most Likely Maximum 90 50 10

RECOVERABLE Oil ----------(MMt)

RECOVERABLE Gas ----------(MMM cubic

12.1 16.2 22.4

7.25 10.00 13.88

The most likely reserve range was utilized in the Base Case development plan and production profile. Comparison of the oil inplace for the B zone and recoverable B zone oil indicates a recovery factor of 23.8%. Gas recovery for the A and B zones is 27.3%. This low gas recovery is a function of the relatively high percentage of solution gas to total gas volume (33.6%) and the relatively poor A zone reservoir quality and high residual gas saturation assumed for the water drive model. Detailed reserves by zone are listed in TABLES VIIA-(e)i for the base case, TABLE VIIA-(e)ii for the upside reserves and TABLE VIIA-(e)iii for the combined "Success case". (d,e) PANNA PARAMETERS AND RESERVES Please refer to TABLES VII A-(d)i, (d)ii, (e)i, (e)ii, (e)iii (f) PLANS FOR UTILIZATION OF GAS - PANNA 1. The natural water drive characteristics of the Panna field are well substantiated and therefore, no gas re-injection for pressure maintenance is necessary. Instead, all effort will be made to avoid flaring any gas volumes other than as necessary for optimum oil production. It should be recognised that under some development scenarios increased gas flaring will result from unavailability of the GOI-owned gas transmission line. GOI approval for such temporary flaring is presumed and is a condition of this bid. 2. The need for gas lifting of producing wells is not an immediate concern due to the flow capability of the producing wells. Adequate gas lift gas is available and facilities to gather, compress and distribute for either sale or gas lift is planned. 3. Upon the installation of either a processing platform or other means of compression and dehydration, gas sales will begin (expected no later than July, 1995). 4. Flaring until gas processing facilities are installed will be minimised by flaring only gas associated with oil production. 5. The proposed gas transportation option is a connection to the planned 42-inch ONGC gas pipeline to Hazira. The connecting pipeline will be built by the Bidder as part of the cost-recoverable work program. VIIB. TECHNICAL INFORMATION FOR MUKTA FIELD (a,b,c) 1. LOCATION The 777 square kilometers Mukta block is located in the offshore Bombay basin of India about 25 km east of the giant Bombay High field and 25 km west of Panna field. It contains a complex of relatively small structures that are positioned on the axial crest of the west-plunging Heera-Bassein structural block. The Mukta block lies approximately midway between two major NW-SE structural elements that cut the Heera-Bassein nose. These include the Bombay High fault to the west and the Central Graben to the east (FIGURE VIIB-1). The numerous mapped structures of the block have been geographically subdivided into three structural blocks or
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areas by ONGC called B-57, B-19 and B-126. The B-57 and B-19 areas are jointly called Mukta field. FIGURE VIIB-2 highlights the significant structural closures and defines the B-57 seismic 3-D map area in red. 2. STRATIGRAPHY Commercial hydrocarbons are trapped in multiple porous and permeable shoal carbonate reservoirs of the Bassein B zone (Middle Eocene) and sandstones of the underlying Early Eocene-Paleocene Basal Clastics formation. The Bassen A zone (Early Oligocene) has tested high rates of gas and condensate in several exploration wells but exhibits low porosity and is considered to have limited reserve potential. The B zone consists of 200 to 250 meters of tight mudstones and pelletal wackestones interbedded with porous algal and fusillinid packstones and grainstones. The impermeable lithologies form effective seals for three major reservoir intervals called B upper, B middle and B lower. No free water level was observed in the porous B zones suggesting oil columns in excess of 70 meters. However, significant water tests from apparent pay zones indicate that much of the oil saturation is residual. The B zone overlies the Basal Clastics formation which consists of 25 to 35 meters of shale underlain by 25 to 40 meters of porous and permeable sandstone. Hydrocarbon columns appear to be in the range of 10 to 20 meters with a well defined oil/ free-water contact. The top of the B-zone is an unconformable surface overlain by 5 to 10 meters of thin shales and argillaceous limestones called the Tight zone. The Tight zone grades upwards into the A zone. It consists of 40 to 50 meters of low-porosity pelletal wackestones which are in turn overlain by alternating shales and tight limestones of the upper Bassein formation. The A zone is considered to be a marginal gas reservoir and was not quantified in this evaluation. Mappable seismic reflectors occur at the top A zone (H3A), top B zone (H3B) and top Basal Clastics (H4) (FIGURE VIIA-2). 3. STRUCTURE FIGURE VIIB-3 is an ONGC structure map on top of the B zone in the B-57 and B-19 area. The map is based on 2-D seismic data and exhibits a series of interpreted NE-SW faults that separate and trap B upper oil pools with columns up to 85 meters in thickness. A generally-SW-NE diagrammatic cross section through the mapped area depicts the interpretation (FIGURE VIIB-4). It demonstrates the sealing nature of the faults and thick multiple hydrocarbons. The seismic section, BS-423, located in FIGURE VIIB-5, reveals the structural aspects of the same area shown in FIGURE VIIB-3 following a WNW-ESE transect oriented normal to the cited fault trend (FIGURE VIIB-6) and subparallel to the cross section of FIGURE VIIB-4. At the approximate top of the Bassein (H3), shown in blue, the section clearly shows a moderate relief structure on the east side that corresponds to the position of the B-57-1 and B-57-12 exploration wells and MA development platform. Another low-relief structure can be seen on the western side which occurs in the B-126 area. The one critical aspect of the previous interpretation that is not supported by this hard data is any evidence of faulting in the Bassein interval. FIGURE VIIB-8 is a depth structure map on top B zone in the B-57 area. It was interpreted from a recent vintage 3-D seismic survey by ONGC. It basically covers the same area as the previous 2-D interpretation (FIGURE VIIB-3) and is mapped at the same structural level. Areas of structural closure have been colored orange. The two interpretations are radically different. The 3-D map shows no faults in support of the hard seismic data (FIGURE VIIB-7) and depicts relatively small closures on a SW plunging structural nose. The most significant structure with approximately 30 meters of relief is the MA platform structure which also agrees with the cited hard seismic data. From review of the data package and communications with ONGC representatives in the negotiating sessions, it is the understanding of EEC/RIL that reserves quoted by ONGC for the Mukta field do not reflect the recent 3-D interpretation and are based on the cited 2-D interpretation designed to account for the apparent large oil columns. Based on the compelling evidence of the 3-D interpretation, it is the position of EEC/RIL that the MA structure is the only quantifiable feature available for a base case analysis at this time. The subsequent volumetric evaluation of the MA structure utilizes the ONGC 3-D B zone structure map and detailed log analysis to derive base case reserves. The upside case assumes two appraisal tests of features that are exactly 50% of the size of the MA structure with one success and one dry. 4. RESERVOIR CHARACTERIZATION Core studies indicate that the B zone reservoirs have roughly half of the porosity and a fraction of the matrix permeability observed in the neighboring Panna block. The Mukta area appears to have been the site of a lower-energy environment of deposition in comparison to Panna. The sequence exhibits alternating low-energy finer-grained carbonate and moderate-energy pelletal to fussillinid wackestones, packstones and grainstones. Core descriptions indicate that like Panna, the A and B zones have been subjected to sea-level lowering and emergence which brought about diagenetic dissolution and general enhancement of porosity and permeability. This secondary macro-porosity and permeability seem to be critical to the excellent fluid flow rates exhibited in both the exploration and development wells in the block. The occurrence of multiple tight and porous zones in the B interval suggests cyclic emergence of a restricted shallow marine platform
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environment. The stratigraphic thinning of the Bassein formation at Mukta relative to Panna, 225 versus 325 meters, indicates that the Mukta area was possibly in a higher paleostructural position during Bassein deposition. It is located on the landward side of the Bombay High structural block which is devoid of Bassein age sediments. These observations suggest that the currently west-plunging Heera-Bassein nose may have undergone structural rotation from a previously east-plunging position with stratigraphic thinning and pinchout of Bassein reservoirs on to the Bombay High block. This paleostructural and stratigraphic setting provides the mechanism for the trapping of a large volume of hydrocarbons in the Mukta area prior to structural rotation in to its current setting. FIGURES VIIB-7 through 11 show production test results by zone overlain on the appropriate 3-D structure map for the B-57 area. A similar set of production overlays are shown in FIGURES VIIB-12 to 15 on the 2-D ONGC structure maps of the B-126 area. There are 3 water free gas tests of the A zone in the block which are localized on defined structural closures in the north-east B-57 area in wells B-57-1, 2 and 7 (FIGURES VIIB-7 and 12). Poor or wet A zone tests were recorded in the remainder of the area. The B upper and B middle zones are the two most prolific intervals in the block with 8 water free oil tests each. The B upper tested rates up to 1900 BOPD and the B middle reported a maximum rate of 2083 BOPD from the BS-57-1. The better tests occur on defined structural closures in the B-57 and B-126 areas with the exception of well B-57-10 which tested water free rates of 408 and 1455 BOPD respectively from the B upper and middle zones. The well is located on a small WSW-plunging nose with no apparent closure implying a stratigraphic component to the trapping mechanism. However, it bears noting that other wells located on the regional SW-plunging nose that runs diagonally through the B-57 map area are wet or have tested high water cuts including B-57-5, 6, 17 and 18 (FIGURES VIIB-8, 9, 13, 14). The most structurally controlled interval in the Mukta block is the B lower zone. It has three significant water free oil tests in the block. Both the B-57-1 and 12 wells in the MA structure tested high rates of up to 2314 BOPD (FIGURE VIIB-10). Also the structurally highest mapped well in the B-126 area, B-126-1, reported an excellent rate of 2286 BOPD (FIGURE VIIB-15). It is the understanding of EEC/RIL that the MA platform was positioned and the subsequent 8 development wells were drilled on the basis of the cited 2-D interpretation in the B-57 area (FIGURE VIIB-3). An important point to make is that the 3-D map matches extremely well with the results of the completions in the B lower zone. Wells MA-1, 5, 6 and 7 are clearly at the edge of closure and tested water or had high water cut except MA 7 which was not tested and has not been completed. Another well (MA-2?) that was completed as a producer has quit flowing (due to water encroachment?) leaving only three currently producing wells. These results indicate that the 3-D maps are reliable and that the B lower zone reservoir may have at least a partial water drive mechanism. The pressure drawdown observed in the development wells has been interpreted by ONGC as evidence for a depletion drive mechanism. It is the position of EEC/RIL that accurate bottom hole pressure monitoring and remediation of cement/mechanical problems is required before accurate determination of drive mechanism and reservoir modeling can be done. This would provide the basis for any future pressure maintenance or waterflood operations. The Basal Clastics sandstone reservoirs have yielded significant tests in 3 wells in the B-57 area (B-57-6, 12,18) and B-126 area (B-126-2,4,5) respectively with rates up to 1540 BOPD (FIGURE B-16). A certain degree of stratigraphic trapping seems to be occurring in non-closed areas (FIGURES VIIB-11,15). This indicates reserves may be difficult to quantify and conversely that all future exploration and development wells should evaluate this interesting interval. All development wells proposed in the Mukta base development plan are scheduled to be Basal Clastics tests. Detailed petrophysical analysis was done on straight-hole exploration wells with complete modern log suites. TABLE VIIB-1 lists the petrophysical input parameters utilised for the density porosity and Waxman-Smit water saturation calculations of the B zone reservoirs and Archie water saturation calculations for Basal clastics. FIGURE VIIB-17 is a cross plot of BQV versus Porosity with an interpreted trend line that provides an algorithum tying clay conductance effects into the log analysis through the Waxman-Smit water saturation model. Petrophysical analysis of the B zone indicates that there is a distinct zonation of the hydrocarbon interval as depicted on the type log in FIGURE VIIB-18. These zones include the following :

ZONE BASE RANGE -----------------------------Free Oil Moveable Oil Residual Oil

WATER SATURATION

15 to 30% 31 to 59% 60 to 100%

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FIGURE VIIB-19 is a capillary pressure curve from a typical Mukta B zone reservoir. It demonstrates that for water saturations of 20% or less, oil columns of more than 100 meters are required to displace the water from the low permeability matrix. It is clear from the 3-D mapping that the largest closures at Mukta have around 30 meters of relief as seen at the location of the type log of well B-57-12. Clearly, none of the free oil zones exceed 30 meters of thickness in the type log example nor do they in other exploration wells examined. This observation combined with the presence of ubiquitous residual oil saturation and lack of free water level in the Bassein reservoirs supports the cited hypothesis of a large accumulation that has been later breached or tilted leaving oil behind in existing smaller structures and stratigraphic traps. The large oil colums of a major accumulation would be required to achieve the free oil saturations seen today and explain the top to bottom residual oil saturation of the Bassein B zones. FIGURE VIIB-20 is a diagrammatic Resistivity Index versus Water Saturation plot. It provides an explanation of the effects on log analysis of a breached or waterflooded reservoir. The straight line represents the water drainage cycle of a normal reservoir that has been filled with hydrocarbons over the course of geologic time. In essence, oil has displaced water. The arcuate imbibition cycle line represents a breached or flood reservoir where oil has been displaced by water. The saturation exponent "N" is derived from the slope of the lines. Clearly, for a given resistivity, the resulting water saturation calculated would be much higher if the reservoir was following the imbibition cycle rather than the water drainage cycle. It is concluded that much of the original thick oil columns mapped by ONGC and disappointing wet tests of apparent pay zones are a product of this breached reservoir phenomena. Restricting pay counts to the free oil zones provides a realistic minimum case and gives the analyst a conservative approximation of oil column height. Inclusion of the moveable pay provides a maximum case. 5. VOLUMETRIC RESERVE CALCULATIONS Volumetric input parameters, listed in TABLE VIIB-(d), depict the maximum, minimum and average values of area under closure, net pay thickness, porosity and water saturation for each hydrocarbon zone for the B upper, middle, lower and Basal Clastic intervals. Fluid properties of the B zones and Basal Clastics are listed in TABLE VIIB-2. Of note is the residual oil (ROS) saturation value of 40% which is the same used at Panna. The methodology for volumetric calculations of the base case MA structure utilizes the B upper zone structure map to determine the area and resulting rock volume of each cited hydrocarbon zone in the respective B zones and Basal Clastics intervals. Values for pay, porosity, and hydrocarbon saturation derived from analysis of the B-57-1 and 12 wells and utilized to estimate oil and gas in place. Recoverable reserves were calculated by subtracting ROS from the hydrocarbon saturation of the respective zones and assuming a sweep efficiency for partial water drive of 60%. Oil in place was calculated using only the Moveable and Free oil zones. FIGURE VIIB-21 shows the recoverable reserve uncertainty for the base case MA-MB structure expressed as a log normal distribution on a log probability scale. It indicates the following range :

PROBABILITY >or = ----------(%) meters)

RECOVERABLE OIL ----------(MMt)

RECOVERABLE GAS ----------(MMM cubic

Minimum Most likely Maximum

90 50 10

4.1 5.3 6.7

0.46 1.85 3.57

The base case most-likely reserves represents an average between the maximum case which combines moveable and free oil zone reserves and a minimum case of free oil zone reserves only. Gas reserves occur as solution gas and show a wide range from a maximum value derived from total oil in place assuming a severe depletion pressure draw down of the reservoir to a minimum based on pressure supported water drive mechanism and straight GOR based volume related to oil produced. Comparison of oil in place for the B zone and recoverable oil indicates a most likely case recovery factor of 17.2%. Gas recovery is 51.8% reflecting the partial water drive/depletion drive model assumed for the reservoir. Reserves for the base case are listed in TABLE VII B-(e)i. The upside is assumed to be 50% of the Base Case reserves. The Success Case is a combination of the two as follows:
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CASE meters) ---Base Upside Success

RECOVERABLE OIL (MMt) ----------5.37 2.68 8.05

RECOVERABLE GAS (MMM cubic ----------1.85 0.93 2.78

(d,e) MUKTA PARAMETERS AND RESERVES Please refer to TABLES VIIB-(d)i, (e)i and (e)ii. (f) PLANS FOR UTILIZATION OF GAS - MUKTA (i) A study is needed to justify water-injection pressure maintenance. No gas re-injection is contemplated. (ii) After the MA permanent deck is installed at Mukta, appropriate testing will be undertaken to determine the timing for gas lift gas installation. Given the water production observed, the need for gas lifting at some point is considered likely and provisions for this eventuality have been made in the Base Case work program. (iii) Apart from the gas requirement for internal use such as power-generation and technical flaring, the bulk of the gas will be available for sale after dehydration and compression. (iv) During the producing life of the field efforts will be continuously made to minimise flaring. Flaring of associated gas is presumed, without GOI restriction, until the gas sales line is commissioned. (v) After hookup, gas not used in operation will be sold via Panna facilities. (g) MONITORING SYSTEMS & RESERVOIR MANAGEMENT 1 MONITORING SYSTEM Production of all fluids will be monitored on a well by well basis, as well as on an aggregate basis as required by standard oil/gas field practices. For effective operational control these production rates will be recorded on a daily basis. For fiscal purposes, production will be aggregated and reported monthly. An appropriate, state of the art well testing system will be installed at each unit. The field will be monitored locally at platforms and remotely from the shore base. EEC/RIL intend to operate the satellite platforms unmanned to the extent possible and to use computer-assisted operations to monitor ongoing performance. 2 RESERVOIR MANAGEMENT Reservoir Management will be carried out through conventional surface as well as down hole monitoring systems, such as bottom hole pressure surveys, production testing and well deliverability testing at prescribed intervals. This data will be analysed at regular intervals, but at least once a year to study the reservoir performance and to ascertain the reservoir drive mechanism. The operations will be adjusted to maximize economic recovery. It is envisioned that a suitable mathematical model will be used and updated as and when required. VIII PROPOSED PANNA/MUKTA WORK PROGRAMME (a) CONCEPTUAL DEVELOPMENT PLAN Data Package material provided by GOI demonstrates a significant potential for increased reserves at Panna/Mukta in the event of exploration success(the Success Case). Described below is a staged development scheme in which Stage I provides a building block towards the expansion needed in the Success Case. The Success Case arises in the event of positive results from exploratory wells included in the EEC/RIL firm work commitment. The fully developed Success Case is described first so that the integrated, building-block nature of Stage I is apparent. The firm work programme bid by EEC/RIL commits to all items needed for Stage I(the Base
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Case); we are dedicated to full Success Case development in the event of exploration success. The risk of such exploration work precludes a firm commitment to additional platforms, pipelines and development wells until the additional reserves are conclusively demonstrated. 1 SUCCESS CASE DEVELOPMENT (29.5 MMt or 224 MMBO remaining recoverable oil reserves) EEC/RIL are proposing four exploratory wells as part of the firm work programme. We believe, because of exploratory wells previously drilled in the Panna G and H areas, that both of these areas are likely to contain commercially viable accumulations. In addition, several Mukta area wells have shown encouraging results. As a result, we assume that one of the two exploratory tests proposed at Mukta will also yield a commercially viable develop the Panna/Mukta fields will require (See FIGURE VIII-1): - 8 Well platforms at Panna - 3 Well platforms at Mukta - 1 Common 45,000 BOPD processing facility (INCLUDING LIVING QUARTERS) - 1 Inter-field (Mukta-Panna) well fluid pipeline and gas lift line (POSSIBLY ALSO A WATER FLOOD LINE) - 84 Development wells - 1 Export gas line EEC/RIL are capable of developing a highly accelerated production schedule but, to do so, require the full support and cooperation of GOI. 2. BASE CASE DEVELOPMENT (155 MMBO or 20.4 MMT or remaining recoverable oil reserves) This case corresponds to RIL/EEC's committed work programme and is not a reflection of our expectations, which are reflected in the Success Case. The extensive drilling campaign conducted by ONGC has demonstrated the viability of developing a large area on Panna and supports the installation of one additional platform at Mukta. The development plan and schedule are illustrated in FIGURES VIII-2, VIII-3 and includes: - 6 Well platforms at Panna - 2 Well platforms at Mukta - 1 Common 45,000 BOPD processing facility and living quarters. - 1 Interfield (Mukta-Panna) well fluid pipeline and gas lifline (POSSIBLY ALSO A WATERFLOOD LINE) - 67 Development wells - 4 Exploratory wells - 1 Export gas line The Base Case assumes that a sour gas export line will be laid from PPA to an interconnect on the proposed ONGC 42-inch sour gas line and that the 42-inch line will be available no later than April 1, 1995. 3 ACCELERATED DEVELOPMENT A limited, unique window of opportunity could exist wherein EEC/RIL may acquire an existing, operating 40,000 BOPD Floating Production System (FPS) capable of a significant acceleration of the availability of processing at a major cost saving to GOI/EEC/RIL. This approach would have positive early cash flow implications to all concerned and obviously enhances the value of the project to a major degree (See FIGURE VIII-4). Uncertainty about securing the facility preclude bidding the project based on acquiring the unit. However, EEC/RIL commit to a "Best Efforts" ("Reasonable Endeavours") attempt to acquire the unit if GOI will commit by July 26, 1993 to awarding the requested blocks to EEC/RIL. (b) PANNA/MUKTA WORK DEVELOPMENT Since Panna/Mukta development has started, a baseline must be established so that the transition from ONGC to EEC/RIL is clearly defined. Accordingly, following are sections defining status of the development, specifying ONGC activities which we presume will be completed and then future work which EEC/RIL commit to undertake. 1. STATUS AS OF JULY 1, 1993 The following facilities have been installed and placed into service by ONGC: - 1 Well platform PA - 8 Wells (PA-1, PA-2, PA-3, PA-4, PA-5, PA-6, PA-7, PA-8) - Early Production System, "EPS" (Jack-up) - Tanker Loading via SBM - PB, PD, PE (Jackets only) installed; well fluid line connecting each to EPS. - 23 Development wells drilled in PB, PD, PE.
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- MA (Jacket only) installed. - 8 Development wells drilled in MA - 14" well fluid pipeline connects MA to Panna EPS. We understand that The Panna EPS is currently processing approximately 13,000 BOPD derived from the PA, PB, PD, PE and MA platforms against a design capacity of 10,000 BOPD. Production rates and bottomhole pressures for individual wells on the PB, PD, PE and MA platforms cannot currently be measured due to the temporary decks. Efforts are being made to balance reservoir withdrawals areally and to minimise gas production, all of which is being flared. 2. WORK PLANNED AND COMMITTED BY ONGC We understand that ONGC has work in progress on certain projects related to ongoing Panna/Mukta development. In formulating the bid, EEC/RIL have assumed that ONGC will design, fabricate and install permanent decks and facilities for the PB, PD, PE and MA jackets at its own cost. The bid assumes that the decks and facilities will be installed and commissioned according to the following schedule: PB - fourth quarter, 1993; PD - first quarter, 1994; PE - second quarter 1994, MA - first quarter 1994. Early installation of these deck packages is considered imperative to monitor and optimise reservoir performance. EEC/RIL would be willing to negotiate the following alternatives to the above: - EEC/RIL assumption of responsibility for fabrication of one or more of the deck packages currently under construction - EEC/RIL would prefer to manage the deck installation - EEC/RIL would be willing to locate, purchase and refurbish used deck packages or fabricate new deck packages to substitute for those under fabrication by ONGC, if this does not result in any delay in project timing. We understand that ONGC has committed to drilling two horizontal wells from PD and two horizontal wells plus two horizontal completions from PE in the second half of 1993. The bid assumes that EEC/RIL will have the option, but not the obligation, to accept assignment of any or all drilling rig, service and supply contracts and will perform the work at GOI/EEC/RIL expense (subject to cost recovery). WORK TO ACHIEVE BASE CASE DEVELOPMENT EEC/RIL are committed to proceeding with the Base Case development. EEC/RIL plan to pursue a very aggressive development schedule (FIGURE VIII-3) which can only be achieved with the active assistance of ONGC and GOI authorities. 3. WORK PLAN OFFERED AND COMMITTED BY EEC/RIL PANNA - Drill two horizontal wells from PD - Drill two horizontal wells from PE - Complete two horizontal wells from PE - Fabricate and install PC and PF jackets - Fabricate (or refurbish) and install PC and PF deck packages - Drill nine horizontal wells from PC - Drill nine horizontal wells from PF - Fabricate and install PPA and PQ - Lay necessary well fluid, gaslift and free gas lines - Lay sour gas export line from PPA to proposed ONGC 42-inch pipeline - Drill two exploratory wells Geophysical, geological and engineering studies. MUKTA - Fabricate and install MB jacket - Fabricate (or refurbish) and install MB deck package - Drill six directional wells from MB - Lay MB-MA wellfluid line - Lay PPA-MA-MB gaslift line - Drill two exploratory wells - Geophysical, geological and engineering studies Please note that a second EPS is included in the Base Case development plan. However, a firm commitment has not been made since the economics are marginal (if new construction is required) and highly sensitive to project timing and EPS cost. (c) DEVELOPMENT WORK COMMITMENT EEC/RIL will immediately begin, the design and fabrication of a jacket and deck for location PC. If available, a used deck will be acquired and refurbished; otherwise, a new deck will be fabricated (EEC/RIL plan to install used decks wherever possible to minimise costs). A new nine-slot jacket will be fabricated for PC. At the time of jacket installation, nine conductors will be driven. As soon as the
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PC jacket is installed and drilling on PD and PE is completed, the rig will be moved to PC and nine horizontal wells will be drilled. EEC/RIL plan to employ a single rig to drill all Panna horizontal wells to take advantage of the associated learning curve to minimise drilling time and cost. After drilling is completed, the rig will be moved to PF and the deck will be installed on PC. Production will commence from PC as soon as a well fluid line is installed. Drilling prior to deck installation on PC will allow production to be significantly accelerated due to the lead time required to prepare the deck package. Nine horizontal wells will also be drilled from PF. However, in this case, the deck package will be available and installed prior to drilling. This approach has the advantages of allowing produce-while-drilling operations to accelerate production and raising the wellheads further above the splash zone. Work will commence immediately on the design and fabrication of a new jacket for MB. Six directional wells will be drilled from MB and should be completed at the time the MB deck package becomes available (pre-monsoon 1995). Production will ensue after the installation of the deck package and a wellfluid line from MB to MA is installed. Work will commence immediately on the design and fabrication of a new 45,000 BOPD production processing jacket and deck (PPA) as described below: FUNCTIONAL/DESIGN BASIS - Production and Test Manifolds - Production and Test Separation - Gas Compression - Gas Dehydration - Chemical Injection (Corrosion Inhibition) - Produced Water Treatment, Disposal - Power Generation - Safety systems - Fire Protection - Utilities STRUCTURAL BASIS - 8-Pile - 86'x160' Deck - Structural Redundancy - Earthquake Zone IV Design PPA is expected to be available for installation pre-monsoon 1995. Work will also commence immediately on design and fabrication of a separate 100-man quarters platform (PQ). Although not currently in the Base Case development plan, studies will be conducted to ascertain the merit of combining PPA and PQ. In addition, the desirability of a manifolding platform (PLM), possibly combined with PQ, will be investigated. A manifolding platform may be justified given the large number of lines associated with the producing platforms, riser loads on PA and the future connections and disconnections associated with the Sagar Laxmi (EPS-I), the second early production system (EPS-II) and the PPA. Work will begin immediately to secure a jack-up suitable for conversion (preferably already converted) for service as a second early production system (EPS-II) of 10,000 BOPD capacity. If such a unit can be secured at a cost and within a time frame that project economics are enhanced, it will be implemented. Installation of EPS-II would occur post-monsoon 1994 and would allow Panna/Mukta production processing capacity to be expanded to 20,000 BOPD at the beginning of 1995. EPS-II will allow considerable acceleration of oil production prior to the commissioning of PPA. In addition, the Sagar Laxmi and EPS-II can be retained temporarily after the installation of PPA to process as much as 65,000 BOPD in the event production exceeds expectations or the Success Case is achieved. Although EEC/RIL have included the installation of EPS-II in discussion, additional economic analysis will be conducted to confirm that the acceleration of oil production justifies the additional expense. The need for future gas lift and free gas lines is anticipated. The lines will be installed when required by field performance and when convenient in terms of lay barge utilisation. A long gas lift line from PPA to MA and MB will almost certainly be required, whereas a free gas line should be unnecessary. Preliminary EEC/RIL studies indicate that a significant possibility of communication between the Panna A-zone and B-zone exists. As a result, EEC/RIL intend to defer production from the A-zone gascap to maximise oil recovery. However, although every effort will be made to minimise gas production, elevated gas-oil ratios are inevitable given the thin oil column and free gas lines may become necessary prior to gascap blowdown.

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The Base Case assumes that a gas export line may be laid from PPA to a connection with the proposed 42-inch ONGC gas pipeline to Hazira. It is assumed that line installation would occur pre-monsoon 1995 with resulting gas sales in July, 1995, that 100% of Panna/Mukta gas will be taken and that oil production will not be restricted by gas flaring considerations. As an alternative not considered in the Base Case, EEC/RIL is studying the possibility of constructing a sour gas pipeline to the Bombay area and constructing onshore sweetening plant. EEC/RIL assume that suitable shore base facilities (including dock space, yard space, warehousing, communications) will be made available for lease to support Panna/Mukta operations. (d) EXPLORATION WORK COMMITMENT Two exploratory wells will be drilled at Panna and two at Mukta. These wells will be drilled as soon as possible by either of the two rigs after firm locations are established and when the development drilling schedule allows.The wells must be drilled early enough to allow timely jacket and deck commitments to be made in the event of success to ensure minimum delay in the development program. Details of the program are as follows : PANNA SEISMIC - Reprocess and interpret all usable data in concession Commitment : 850 +/- km DRILLING - Drill and evaluate 2300 +/- meter delineation tests. Penetrate base of Basal Clastics (Paleocene-Early Eocene) below B Zone (middle Eocene) limestone. Maintain options to test, complete and suspend at mudline if results warrant. Commitment : 2 wells POTENTIAL RESERVES Based upon the assumption that both of the above mentioned delineation tests are successful, inplace and recoverable reserves are provided in TABLE VIIA-(e). For this purpose, we have assumed that the tests will be on Panna structures PG and PH (FIGURE VIIA-3). However, after reprocessing and interpreting seismic (SEE ABOVE WORK COMMITMENT), the best two structures will be selected and drilled. MUKTA SEISMIC - Reprocess and interpret the 1988-89 3D survey (150 sq.km, 4100 +/- line km) and all usable data from 1991 SBS 2D survey (750 +/- km). Commitment : Processing and interpretation as noted above. DRILLING - Drill and evaluate two 2300 +/- meter delineation tests. Penetrate to base of Basal Clastics (Paleocene-Early Eocene) below B Zone (middle Eocene) limestone. Maintain options to test, complete and suspend at mudline if results warrant. Commitment : 2 wells POTENTIAL RESERVES Based upon the assumption that one of the above mentioned delineation tests is successful, inplace and recoverable reserves are expected to increase by 50% those provided in TABLE VIIB-(e)ii. After reprocessing and interpreting seismic (SEE ABOVE WORK COMMITMENT) the best two prospects will be selected and drilled. f) OTHER COMMITMENTS EEC/RIL have committed to a Base Case development plan based upon data packages prepared by GOI. Upon contract signature, it is assumed that all relevant information will be provided to EEC/RIL and that key ONGC personnel will be made available to allow optimization of the development plan. Based upon this information, EEC/RIL will perform the following technical work the results of which will be shared with GOI. PANNA The Panna field oil accumulation is relatively thin and lies between an active aquifer and a gascap. Optimum oil recovery will be achieved by minimising gascap gas production thereby minimising movement of the oil bank into the gascap (which results in
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unrecoverable residual oil saturations in the gascap) and maintaining reservoir energy. EEC/RIL believe that the added expense of drilling horizontal wells will be more than made up by the increase in productivity index such completions will achieve. EEC/RIL intend to conduct single well simulations to determine the optimum completion interval placement with respect to the fluid contacts, optimum production rate and optimum horizontal completion length. The results of detailed geological modeling, PVT analysis, petrophysical analysis and well performance studies will be used to prepare a 3-D full-field reservoir simulation model for the Panna field. The model will be used to optimise areal well placement and platform locations. Analysis of fluid contact movements and areal balancing of withdrawals will be conducted. The model will be used to forecast fluid production rates and pressure changes and will be used to determine the optimum time for gas cap blowdown. History matching will be complicated by the lack of individual well data concerning PB, PD and PE and by the lack of current gas production measurements. Drilling and completion studies will be conducted to minimise costs and formation damage. EEC/RIL are experienced in the drilling of horizontal wells and hope to meet or exceed ONGC performance. In particular, we believe that great improvements in current cementing and formation damage control practices can be made. MUKTA The drive mechanism controlling the lower B Zone reservoir performance cannot be conclusively determined at present since the temporary deck at MA precludes individual well testing and bottomhole pressure measurements. One of the MA wells has ceased to produce, probably due to water production, and significant water production is occurring from one or more of the remaining wells. In addition, flowing wellhead pressures are declining. Based upon this evidence, as well as geological considerations, we currently assume that the reservoir is producing with a partial water drive. Early installation of the permanent MA deck is considered vital to allow well testing and bottomhole pressure measurement to identify the drive mechanism. Once appropriate data has been collected, reservoir engineering studies will be conducted (probably 3-D reservoir simulation) to optimise the development plan. Due to the observed water production, gas-lifting will almost certainly be required and is therefore included in the Base Case commitment. Waterflood facilities and pipelines are not included in the Base Case commitment since the necessity of water injection has not been established, however, PPA will include deck space and utilities to allow for subsequent addition of injection facilities if justified. The requirements for water injection facilities will be identified shortly after testing the MA wells and measuring bottomhole pressures. The risk of premature water breakthrough and poor sweep efficiency in the naturally fractured reservoir must also be assessed. Pressure transient analysis will probably be used to confirm well interference and analyze dual porosity behavior. If these preliminary studies indicate that waterflooding might be beneficial, a pilot waterflood using one of the EPS units at MA could be conducted. If the above studies indicate that waterflooding is economically viable, EEC/RIL will proceed to install the necessary infrastructure. The MA wells penetrate four reservoirs which appear to be effectively sealed from each other. EEC/RIL therefore intend to drill directional wells from MB to penetrate multiple pays. Engineering studies will be conducted to optimise the completion design and depletion plan - single completions, single completions with sliding sleeve or tubing selectives or dual completions. As the reservoir mechanism becomes better understood, horizontal drilling applications may become evident. g) PANNA/MUKTA FACILITIES Systems analysis (nodal analysis) will be conducted to optimise surface and subsurface equipment design and operation.

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Appendix-3 WORK PROGRAM COMMITTED BY EEC/RIL PANNA o Drill and complete two horizontal wells from PD o Drill and complete two horizontal wells from PE o Complete two horizontal wells from PE o Fabricate and install PC and PF jackets o Fabricate (or refurbish) and install PC and PF deck packages o Drill nine horizontal wells from PC o Drill nine horizontal well from PF o Fabricate and install PPA and PQ o Lay necessary well fluid, gaslift and free gas lines o Lay sour gas export line from PPA to proposed ONGC 42-inch pipeline o Drill two exploratory wells o Geophysical, geological and engineering studies MUKTA o Fabricate and install MB jacket o Fabricate (or refurbish) and install MB deck package o Drill six directional wells from MB o Lay MB-MA wellfluid line o Lay PPA-MA-MB gaslift line o Geophysical, geological and engineering studies

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APPENDIX H ESTIMATED PRODUCTION PROFILE OF THE PANNA AND MUKTA FIELDS

YEAR METERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Oil (THOUSAND BARRELS PER YEAR) 1098 1098 3285 6256 13922 12693 10954 9516 8735 7913 7179 6549 5997 5511 7655 6502 5579 4899 4407 3792 3260 2834 2355 1986 1695

Gas (MILLION CUBIC PER YEAR) 0 0 100 201 566 521 456 402 493 484 479 473 470 467 527 521 513 507 549 581 564 552 354 232 159

140

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GRAPHICAL CONTENT APPENDIX

Appendix Appendix Appendix Figure Figure Figure Figure Figure Figure Figure Figure Figure

- B1 - B2 G G-1 VIIA-1 VIIA-2 VIIA-3 VIIA-4 VIIA-5 VIIA-6 VIIA-7 VIIA-8

Map of Contract Area - Panna Block Map of Contract Area - Mukta Block Panna and Mukta Field Development Base Case Reserves Regional Seismic Map on Early Eocene Top (H4) - Panna Field Generalised Stratigraphy - Panna Field Structure Contour Map on Top of B Zone - Panna Field Structure Contour Map on Top of A Zone - Panna Field Time Structure Map H3B - Panna Field Scheme of Seismic Profiles - Panna Field REA Bombay High INE BS-425A (Migrated) - Panna Field B-Schematic View of Ground Water System and Development/ Destruction of Porosity in "B" Zone (Middle Eocene) - Panna Field A-Schemiatic View of Ground Water System and Development/ Destruction of Porosity in "A" Zone (Early Oligocene) Field Geological Section Across Panna Field Regional Map at H4 Level Isochron Map at the Top of Basal Clastics (H4) - Mukta and B 126 Fields Structure Map on Top of B-Upper Reservoir - Mukta Field Geological Section Across Mukta and B 126 Fields Scheme of Seismic Profiles Area Bombay High Line BS-423 Panna/Mukta Development Schedule Revised Base Case Isochron Map at the Top of A-Zone (H3A) - Mukta Field (Based on 3D Data) Structure Map on B-Upper Top - Mukta Field (Based on 3D B Upper Zone - Production Test Results Structure Map on B-Upper Top - Mukta Field (Based on 3D B Middle Zone - Production Test Results Structure Map on B-Upper Top - Mukta Field (Based on 3D B Lower Zone - Production Test Results Isochron Map at the Top of Basal Clastics (H4) - Mukta Field (Based on 3D Data) Structure Contour Map at the Top of B-Upper - B 126 Field A Zone - Production Test Results Structure Contour Map at the Top of B-Upper - B 126 Field B Upper Zone - Production Test Results Structure Contour Map at the Top of B-Upper - B 126 Field B Middle Zone - Production Test Results Structure Contour Map at the Top of B-Upper - B 126 Field B Lower Zone - Production Test Results Structure Contour Map at the Top of B-Upper - B 126 Field Basal Clastrics - Production Test Results Clay Conductance - Mukta Field Type Log - Mukta Field Capillary Pressure (Centrifuge) Data - Mukta Field I-SW Plot

Figure VIIA-9 Panna Figure VIIA-10 Figure VIIB-1 Figure VIIB-2 Figure Figure Figure Figure Figure Figure VIIB-3 VIIB-4 VIIB-5 VIIB-6 VIII-3 VIIB-7

Figure VIIB-8 Data) Figure VIIB-9 Data) Figure VIIB-10 Data) Figure VIIB-11 Figure VIIB-12 Figure VIIB-13 Figure VIIB-14 Figure VIIB-15 Figure VIIB-16 Figure Figure Figure Figure VIIB-17 VIIB-18 VIIB-19 VIIB-20

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EXHIBIT 10.52 ENRON Oil & Gas International, Inc. P. O. Box 4672 Houston, Texas 77210-4672 (713) 853-6161 Telex 765443 Answerback: ENRONCORP December 18, 1994 Secretary of the Government of India Ministry of Petroleum and Natural Gas Shastri Bhavan New Delhi 110 001 INDIA Gentlemen: Based upon my review of the records of Enron Oil & Gas International, Inc. I have determined that the guarantees issued by it in favor of the Government, pursuant to Article Twenty-nine of two certain Production Sharing Contracts of even date, are legally valid and enforceable. Very truly yours, E. J. Vandermark Legal Advisor

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EXHIBIT 10.53 CERTIFICATE ENRON OIL & GAS INDIA LTD., formerly known as ENRON INDIA EXPLORATION COMPANY, pursuant to its articles of incorporation and by-laws, has, by the unanimous consent of its directors, authorized its chairman, directors, secretary, assistant secretary, proper officers and its counsel (any one of them acting alone), to negotiate production sharing contracts for the Tapti, Panna and Mukta Fields, offshore India, and to execute, deliver and perform for, in the name of and on behalf of ENRON OIL & GAS INDIA LTD. Dated this 22nd day of December 1994.

/S/ E. J. VANDERMARK E. J. Vandermark Assistant Secretary

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EXHIBIT 10.54 FINANCIAL AND PERFORMANCE GUARANTEE WHEREAS ENRON OIL & GAS INTERNATIONAL, INC., a duly organized and existing under the laws of Delaware, U.S.A., having its registered office at 1400 Smith Street, Houston, Texas, U.S.A., (hereinafter referred to as "the Guarantor" which expression shall include its successors and assigns) is the indirect owner of 100% of the capital stock of ENRON OIL & GAS INDIA LIMITED ("Company") and direct owner of its parent company; and WHEREAS Company is signatory to a Production Sharing Contract of even date of this guarantee in respect of an Offshore area identified as Tapti Block (hereinafter referred to as "the Contract") made between the Government of India (hereinafter referred to as "the Government"), Company, RELIANCE INDUSTRIES LIMITED and OIL & NATURAL GAS CORPORATION LIMITED (hereinafter referred to as "Contractor" which expression shall include its successors and permitted assigns); and WHEREAS the Guarantor wishes to guarantee the performance of Company or its Affiliate Assignee under the Contract as required by the terms of the Contract; NOW, THEREFORE, this Deed hereby provides as follows: 1. The Guarantor hereby unconditionally and irrevocably guarantees to the Government that it will make available, or cause to be made available, to Company or any other directly or indirectly owned Affiliate of Company to which any part or all of Company's rights or interest under the Contract may subsequently be assigned ('Affiliate Assignee'), to ensure that Company or any Affiliate Assignee can carry out its work commitment as set forth in the Contract. 2. The Guarantor further unconditionally and irrevocably guarantees to the Government reasonable compliance by Company or any Affiliate Assignee, of any obligations of Company or any Affiliate Assignee under the Contract. 3. The Guarantor hereby undertakes to the Government that if Company, or any Affiliate Assignee, shall, in any respect, fail to perform its work commitments under the Contract or commit any material breach of such obligations, then the Guarantor shall fulfill or cause to be fulfilled the obligations in place of Company or any Affiliate Assignee, and will indemnify the Government against all actual losses, damages, costs, expenses, or otherwise which may result directly from such failure to perform or breach on the part of Company. In no event shall Guarantor be liable for any special consequential, indirect, incidental or punitive damages of any kind or character, including, but not limited to, loss of profits or revenues, loss of product or loss of use arising out of or related to a material breach by Company of its obligations under the Contract. 4. This guarantee shall take effect from the Effective Date and shall remain in full force and effect for the duration of the Contract and thereafter until no sum remains payable by Company, or its Affiliate Assignee, under the Contract or as a result of any decision or award made by any expert or arbitration tribunal thereunder. 5. This guarantee shall not be affected by any change in the Articles of Association and by-laws of Company or the Guarantor or in any instrument establishing the Licensee. 6. The liabilities of the Guarantor shall not be discharged or affected by (a) any time indulgence, waiver or consent given to Company; (b) any amendment to the Contract or to any security or other guarantee or indemnity to which Company has agreed; (c) the enforcement or waiver of any terms of the Contract or of any security, other guarantee or indemnity; or (d) the dissolution, amalgamation, reconstruction or reorganization of Company. 7. This guarantee shall be governed by and construed in accord- ance with the laws of India. IN WITNESS WHEREOF the Guarantor, through its duly authorized representatives, has caused its seal to be duly affixed hereto and this guarantee to be duly executed the 22nd day of December 1994. The seal of Enron Oil & Gas International, Inc. was hereto duly affixed by E. J. Vandermark this 22nd day of December 1994 in accordance with its by-laws and this guarantee was duly signed by J. P. Kopecky and E.J. Vandermark as required by the said by-laws.

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/S/ E. J. VANDERMARK E. J. Vandermark Assistant Secretary President

/S/ J. A. KOPECKY J. A. Kopecky Vice

Witness: 2

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EXHIBIT 10.55 JOINT OPERATING AGREEMENT AMONG OIL & NATURAL GAS CORPORATION LIMITED AND ENRON OIL & GAS INDIA LTD. AND RELIANCE INDUSTRIES LIMITED WITH RESPECT TO CONTRACT AREA IDENTIFIED AS MID-TAPTI AND SOUTH-TAPTI GAS FIELDS

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TABLE OF CONTENTS ARTICLE PAGE I 1 II 5 III 6 6 3.2 6 IV 6 4.1 6 4.2 6 4.3 8 4.4 8 4.5 8 4.6 9 4.7 9 4.8 10 4.9 11 4.10 11 4.11 11 V 12 5.1 12 5.2 12 5.3 13 5.4 13 5.5 13 5.6 13 5.7 14 5.8 14 5.9 14
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Definitions ................................................. Effective Date and Term...................................... Participating Interest....................................... 3.1 Participating Interest................................. Ownership, Obligations and Liabilities.................

Operator..................................................... Designation of Operator................................ Rights and Duties of Operator.......................... Employees of Operator.................................. Information Supplied by Operator....................... Settlement of Claims and Lawsuits...................... Liability of Operator.................................. Insurance Obtained by Operator......................... Commingling of Funds................................... Resignation of Operator................................ Removal of Operator.................................... Appointment of Successor...............................

Operating Committee.......................................... Establishment of Operating Committee................... Powers and Duties of Operating Committee............... Authority to Vote...................................... Subcommittees.......................................... Notice of Meeting...................................... Contents of Meeting Notice............................. Location and Frequency of Meetings..................... Operator's Duties for Meetings......................... Voting Procedure.......................................

5.10 14 5.11 14 5.12 14 5.13 15 VI 16 6.1 16 6.2 16 6.3 16 6.4 17 6.5 17 6.6 18 6.7 18 6.8 19 6.9 20 6.10 21 6.11 21 6.12 22 6.13 22 6.14 22 VII 22 7.1 22 7.2 22 7.3 23 7.4 24 7.5 25 7.6 26 7.7 26 7.8 27 7.9

Record of Votes........................................ Minutes................................................ Voting by Notice....................................... Effect of Vote.........................................

Work Programs and Budgets.................................... Preparation of Work Program and Budget................. Adoption of Work Program and Budget and Submission to Management Committee..................... Subdivision of Work Program and Budget Items and Transfers............................. Fulfillment of Minimum Work Obligations................ Exploration and Appraisal.............................. Development of New Discovery........................... Itemization of Expenditures............................ Contract Awards........................................ Authorization for Expenditure ("AFE") Procedure........ Supplementary AFEs..................................... Approval of AFEs....................................... Approval of AFE Not to be Unreasonably Withheld........ Overexpenditures of Work Programs and Budgets.......... Work Program and Budget for Initial Period.............

Operations By Less Than All Parties.......................... Limitation on Applicability............................ Procedure to Propose Exclusive Operations.............. Responsibility for Exclusive Operations................ Consequences of Exclusive Operations................... Premium to Participate in Exclusive Operations......... Order of Preference of Operations...................... Stand-By Costs......................................... Special Considerations Regarding Deepening and Sidetracking............................. Miscellaneous..........................................
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28 VIII 29 8.1 29 8.2 29 8.3 29 8.4 30 8.5 31 8.6 31 8.7 32 8.8 32 8.9 32 8.10 32 IX 32 9.1 32 9.2 33 9.3 34 X 34 10.1 34 10.2 34 XI 35 11.1 35 XII 35 12.1 35 12.2 36 XIII 36 13.1 36 13.2 36 13.3 37 13.4 37 13.5 37 13.6 Assignment.............................................
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Default...................................................... Default and Notice..................................... Operating Committee Meetings and Data.................. Allocation of Defaulted Accounts....................... Transfer of Interest................................... Continuation of Interest............................... Abandonment............................................ Sale of Hydrocarbons................................... No Right of Set Off.................................... Minor Default.......................................... Reinstatement of Rights................................

Disposition of Production.................................... Right and Obligation to Take in Kind................... Offtake Agreement for Crude Oil........................ Separate Agreement for Natural Gas.....................

Abandonment of Wells......................................... Abandonment of Wells Drilled as Joint Operations....... Abandonment of Exclusive Operations....................

Surrender.................................................... Surrender..............................................

Transfer of Interest or Rights............................... Obligations............................................ Rights.................................................

Withdrawal from Agreement by Transfer or Assignment.......... Right of Withdrawal.................................... Partial or Complete Withdrawal......................... Voting................................................. Obligations and Liabilities............................ Emergency..............................................

37 13.7 37 13.8 37 13.9 38 XIV 38 14.1 38 14.2 38 XV 38 15.1 38 15.2 39 15.3 39 15.4 39 XVI 39 16.1 39 16.2 40 XVII 40 XVIII 41 41 18.2 41 XIX 42 19.1 42 19.2 42 19.3 42 19.4 42 XX 43 20.1 43 20.2 43 20.3 43 20.4 43 20.5 44 20.6 Modifications..........................................
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Approvals.............................................. Abandonment Security................................... Withdrawal or Abandonment by all Parties...............

Relationship of Parties and Tax.............................. Relationship of Parties................................ Tax....................................................

Confidential Information - Proprietary Technology............ Confidential Information............................... Continuing Obligations................................. Proprietary Technology................................. Trades.................................................

Force Majeure................................................ Obligations............................................ Definition of Force Majeure............................

Notices...................................................... Applicable Law and Dispute Resolution........................ 18.1 Applicable Law......................................... Dispute Resolution.....................................

Allocation of Cost Recovery Rights........................... Allocation of Total Production......................... Allocation of Cost Petroleum........................... Allocation of Profit Petroleum......................... Allocation of Excess Cost Petroleum....................

General Provisions........................................... Conflicts of Interest.................................. Public Announcements................................... Successors and Assigns................................. Waiver................................................. Severance of Invalid Provisions........................

44 20.7 44 20.8 44 20.9 44 20.10 Counterpart Execution.................................. 44 20.11 Conflict with Contract................................. 44 20.12 Entirety............................................... 44 Signature Page......................................... 44 Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit "A" "B" "C" "D" "D-1" "D-2" "D-3" "D-4" "D-5" "D-6" "D-7" "D-8" "E" Accounting Procedure Description of Contract Area Example Budget Format - Budget Summary - Geophysical and Geological Expense - Development Drilling (Firm Wells) - Production Facilities Costs - Production Costs - General and Administrative Expense - Fixed Assets and Deposits - Revenue Data to be Provided to Non-Operators Gender................................................. Singular and Plural.................................... Headings...............................................

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JOINT OPERATING AGREEMENT THIS AGREEMENT is made as of the Effective Date among OIL & NATURAL GAS CORPORATION LIMITED, having its registered office at Tower II, 8th Floor, Jeevan Bharti, 124 Connaught Circus, New Delhi, 110 001, India, a company incorporated in India (hereinafter referred to as "ONGC"); ENRON OIL & GAS INDIA LTD., a company incorporated in the Cayman Islands, having its registered office at 1400 Smith Street, Houston, Texas, 77002, U.S.A. (hereinafter referred to as "EOGIL"), a wholly owned subsidiary of ENRON EXPLORATION COMPANY; and RELIANCE INDUSTRIES LIMITED, a company incorporated in India, having its registered office at 3rd Floor, Maker Chamber IV, 222 Nariman Point, Bombay, 400 021, India (hereinafter referred to as "RIL"). The companies named above may sometimes individually be referred to as "Party" and collectively as the "Parties". WITNESSETH: WHEREAS, the Parties have entered into a Production Sharing Contract (the "Contract") with the Government of India (hereinafter referred to as "Government") covering certain areas located offshore India known as the Mid-Tapti and South-Tapti Gas Fields, referred to as the "Contract Area", and more particularly described in Exhibit B to this Agreement; and WHEREAS, the Parties desire to define their respective rights and obligations with respect to their operations under the Contract. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements and obligations set out below and to be performed, the Parties agree as follows: ARTICLE I - DEFINITIONS As used in this Agreement, the following words and terms shall have the meaning ascribed to them below:

1.1

ACCOUNTING PROCEDURE means the rules, provisions and conditions set forth and contained in Exhibit A to this Agreement. AFE means an authorization for expenditure pursuant to Article 6.9. AFFILIATE means a company that directly or indirectly controls or is controlled by a Party to this Agreement or a company which directly indirectly controls or is controlled by a company which controls a Party to this Agreement, it being understood that "control" means ownership by one company of more than fifty percent (50%) of the voting securities of the other company, or the power to direct, administer and dictate policies of the other company even where the voting securities held by such company exercising such effective control in that other company is less than fifty percent (50%) and

1.2 1.3 or

the term "controlled" shall have a corresponding meaning. 1.4 at AGREED INTEREST RATE means interest, compounded on a monthly basis, the rate per annum equal to the one (1) month term, LIBOR rate for U.S. dollar deposits, as published by THE WALL STREET JOURNAL or if not published, then by the FINANCIAL TIMES OF LONDON, plus fixed amounts as specified in Article 8.1, applicable on the first Business Day prior to the due date of payment and thereafter on the first Business Day of each succeeding one (1) month term. If the aforesaid rate is contrary to any applicable usury law, the rate of interest to be charged shall be the maximum rate permitted by such applicable law. 1.5 AGREEMENT means this Agreement, to this Agreement. together with the Exhibits attached

1.6

APPRAISAL WELL means any well whose purpose at the time of commencement of drilling such well is the determination of the extent
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or the volume of Hydrocarbon reserves contained in a New Discovery or an Existing Discovery. 1.7 BARREL means a quantity consisting of forty-two (42) United States gallons, corrected to a temperature of sixty (60) degrees Fahrenheit under one (1) atmosphere of pressure. BUSINESS DAY means a day on which the banks in India are open for business and carrying out normal business transactions. CALENDAR QUARTER means a period of three (3) months commencing with January 1st and ending on the following March 31st, a period of three (3) months commencing with April 1st and ending on the following June 30th, a period of three (3) months commencing with July 1st and on the following September 30th, or a period of three (3) months commencing with October 1st and ending on the following December 31st according to the Gregorian Calendar. 1.10 the Gregorian Calendar. 1.11 CASH CALL means any request for payment of cash made by the Operator, in accordance with this Agreement, an approved Work Program and Budget, AFEs (wherever applicable) and progress of the work, to the Parties in connection with the Joint Operations. The Cash Call format (Exhibit "C") may be revised by the Operating Committee. CASH PREMIUM means the payment made pursuant to Article 7.5(B) by a Non-Consenting Party to reinstate its rights to participate in an Exclusive Operation. COMMERCIAL DISCOVERY means a Discovery of Petroleum reserves which, when produced, are likely to yield a reasonable profit on the funds invested in petroleum operations, after deduction of Contract costs, and which has been declared a Commercial Discovery in accordance with the provisions of Article 9 and/or Article 21 of the Contract, after consideration of all pertinent operating and financial data such as recoverable reserves, sustainable production levels, estimated development and production expenditures, prevailing prices and other relevant technical and economic factors according to generally accepted practices in the international petroleum industry. COMPLETION means an operation intended to complete a well through the Christmas tree as a producer of Hydrocarbons in one or more Zones, including, but not limited to, the setting of production casing, perforating, stimulating the well and production testing conducted in such operation. COMPLETE and other derivatives shall be construed accordingly. CONSENTING PARTY means a Party who agrees to participate in and pay its share of the cost of an Exclusive Operation. CONTRACT means the Production Sharing Contract dated 22nd DECEMBER 1994 between the Government and the Parties identified in this Agreement and any extension, renewal or amendment thereof agreed to writing by the Parties.
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1.8

1.9

ending

CALENDAR YEAR means a period of twelve (12) months commencing with January 1st and ending on the following December 31st according to

1.12

1.13

1.14

1.15

1.16

in

1.17 perimeter

CONTRACT AREA means as of the Effective Date the area which is described and delineated in Exhibit B to this Agreement. The or perimeters of the Contract Area shall correspond to that area covered by the Contract, as such area may vary from time to time during the term of validity of the Contract.

1.18

COST PETROLEUM means the portion of the total volume of Petroleum produced and saved from the Contract Area which the Contractor is entitled to take from the Contract Area in a particular period for recovery of Contract costs as provided in Article 13 of the Contract.

the

1.19 1.20

DAY means a calendar day unless otherwise specifically provided. DEFAULTING PARTY shall have the meaning ascribed in Article 8.1.

1.21 DEEPENING means an operation whereby a well is drilled to an objective Zone below the deepest Zone in which the well was previously drilled, or below the deepest Zone proposed in the associated AFE, whichever is the deeper. DEEPEN and other derivatives shall be construed accordingly. 1.22 1.23 to DELIVERY POINT shall have the meaning given in the Contract. DEVELOPMENT AREA means that part of the Contract Area corresponding the area of an Oil Field or Gas Field delineated in simple geometric shape, together with a reasonable margin of additional area surrounding the Field consistent with petroleum industry practice and approved by the Management Committee or the Government, as the case may be. 1.24 DEVELOPMENT PLAN means a plan submitted by the Contractor containing proposals required under Article 9 or Article 21 of the Contract for the development of a Commercial Discovery which has been approved by the Management Committee or Government. DEVELOPMENT WELL means a well drilled, deepened, completed or Recompleted after the date of approval of the Development Plan pursuant to development operations or production operations for the purposes of producing Petroleum, increasing production, sustaining production or accelerating extraction of Petroleum including production wells, injection wells and dry wells. DISCOVERY means the finding, during exploration operations, of a deposit of Petroleum not previously known to have existed, which can be recovered at the surface in a flow measurable by conventional petroleum industry testing methods. EFFECTIVE DATE means the date of signing of the Contract by all parties thereto. ENTITLEMENT means a quantity of Hydrocarbons of which a Party has the right and obligation to take delivery pursuant to the Contract or, if applicable, an offtake agreement, and shall be derived from that Party's Participating Interest in the Hydrocarbons produced after
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1.25

1.26

1.27

1.28

adjustment for overlifts and underlifts. 1.29 19.4. 1.30 EXCESS COST PETROLEUM shall have the meaning ascribed in Article

EXCLUSIVE OPERATION means those operations and activities carried out by Operator, pursuant to this Agreement, the costs of which are chargeable to the account of less than all the Parties. EXCLUSIVE WELL means a well drilled pursuant to an Exclusive Operation. EXPLOITATION AREA means the Development Area which is established pursuant to the Contract or if the Contract does not establish an Exploitation Area, then that part of the Contract Area which is delineated in a Development Plan approved as a Joint Operation or as an Exclusive Operation. EXPLOITATION PERIOD means any and all periods of exploitation during which the production and removal of Hydrocarbons is permitted under the Contract. EXPLORATION PERIOD means any and all periods of exploration set out in the Contract. EXPLORATION WELL means a well drilled for the purpose of searching undiscovered Hydrocarbon accumulations on any geological entity (be

1.31

1.32

1.33

1.34

1.35 for it

of structural,stratigraphic, facies or pressure nature) to at least a depth or stratigraphic level specified in the Work Program and Budget. 1.36 FIELD means an Oil Field or a Gas Field in the Contract Area in respect of which a Development Plan has been duly approved in accordance with Article 9 and Article 21 of the Contract. FINANCIAL YEAR means the period from April 1st of the following Calendar Year. through March 31st

1.37

1.38 and

G & G DATA means only geological, geophysical and geochemical data other information that is not obtained through a well bore.

1.39

GAS FIELD means an area within the Contract Area consisting of a single Gas reservoir or multiple Gas reservoirs all grouped on or related to the same individual geological structure or stratigraphic conditions, designated by the Contractor and approved by the Government and/or Management Committee, as the case may be (to the maximum area of potential productivity in the Contract Area in a simple geometric shape) in respect of which a Commercial Discovery

include

has been declared or a Development Plan has been approved in accordance with Article 9 or Article 21 of the Contract. 1.40 GOVERNMENT means the Government of India and/or any state government as the case may be. GROSS NEGLIGENCE means any act or failure to act (whether sole, joint
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1.41

or concurrent) which was intended to cause, or which was in reckless disregard of or wanton indifference to, harmful consequences such Party knew, or should have known, such act or failure would have had on the safety or property of another person or entity, but shall not include any error of judgment or mistake made by such Party in the exercise in good faith of any function, authority or discretion conferred on the Party employing such under this Agreement. 1.42 HYDROCARBONS means all substances including liquid and gaseous hydrocarbons which are subject to and covered by the Contract. JOINT ACCOUNT means the accounts maintained by Operator in accordance with the provisions of this Agreement and of the Accounting Procedure for Joint Operations. JOINT OPERATIONS means those operations and activities carried out by Operator pursuant to this Agreement, the costs of which are to all Parties. 1.45 the Joint Account. 1.46 MANAGEMENT COMMITTEE means the committee constituted pursuant to Article 5 of the Contract. MINIMUM WORK OBLIGATIONS means those items contained in Exhibit "G" the Contract, phased year-wise as determined by the Operating Committee and the Management Committee. 1.48 1.49 NEW DISCOVERY means a Discovery made after the Effective Date. NON-CONSENTING PARTY means a Party who elects not to participate in an Exclusive Operation. NON-OPERATOR(S) than Operator. means the Party or Parties to this Agreement other JOINT PROPERTY means, at any point in time, all wells, facilities, equipment, materials, information, funds and the property held for

1.43

1.44 chargeable

1.47 of

1.50

1.51

OIL FIELD means an area within the Contract Area consisting of a single oil reservoir or multiple oil reservoirs all grouped on or related to the same individual geological structure, or stratigraphic conditions, designated by the Contractor and approved by the Government and/or the Management Committee, as the case may be (to include the maximum area of potential productivity in the Contract Area in a simple geometric shape) in respect of which a Commercial Discovery has been declared and a Development Plan has been approved in accordance with Article 9 of the Contract and a reference to an Field shall include a reference to the production of associated natural gas from that Oil Field.

Oil

1.52

OPERATING COMMITTEE with Article V.

means the committee

constituted in accordance

1.53

OPERATOR means the Party designated or otherwise appointed under Article 4.1 to conduct Joint Operations or any successor appointed pursuant to Article 4.11.
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1.54 each this

PARTICIPATING INTEREST means the undivided percentage interest of Party in the rights and obligations derived from the Contract and Agreement.

1.55

PARTY means any Party to this Agreement and, where the Contract so permits, any respective successors or assigns in accordance with the provisions of this Agreement. PETROLEUM means crude oil and/or natural gas existing in their condition (Hydrocarbons).

1.56 natural

1.57

PETROLEUM COSTS means costs and expenses incurred by the Parties and allowed to be recovered pursuant to the Contract. PLUGGING BACK means a single operation whereby a deeper Zone is abandoned in order to attempt a Completion in a shallower Zone. Plug Back and other derivatives shall be construed accordingly. PRODUCTION COSTS means those costs and expenditures incurred in carrying out production operations as classified and defined in Section 2 of the Accounting Procedure of the Contract and allowed to be recovered in terms of Section 3 thereof. PROFIT PETROLEUM means Petroleum produced and saved from the Contract Area in a particular period as reduced by Cost Petroleum and calculated as provided in Article 14 of the Contract. RECOMPLETION means an operation whereby a Completion in one Zone is abandoned in order to attempt a Completion in a different Zone within the existing wellbore. RECOMPLETE and other derivatives shall be construed accordingly. REWORKING means an operation conducted in the wellbore of a well it is Completed to secure, restore or improve production in a Zone which is currently open to production in the wellbore. Such operations include, but are not limited to, well stimulation operations, wire line operations, hydraulic pump-down operations, water shut off operations, coil tubing operations, but excluding any routine maintenance work. REWORK and other derivatives shall be construed accordingly.

1.58

1.59

1.60

1.51

1.62 after

1.63

SIDETRACKING means the directional control and intentional deviation of a well from vertical so as to change the bottom hole location unless done to straighten the hole or to drill around junk in the or to overcome other mechanical difficulties. Sidetrack and other derivatives shall be construed accordingly.

hole

1.64

SUPERVISORY PERSONNEL means any supervisory employee of a Party who functions as a Party's designated manager or supervisor who is responsible for, or in charge of onsite drilling, construction or production and related operations, or any other field operations. TESTING, with reference to a well, means an operation intended to
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1.65

evaluate the capacity of a Zone to produce Hydrocarbons. TEST and other derivatives shall be construed accordingly. 1.66 WILLFUL MISCONDUCT means in relation to the Operator intentional and conscious or reckless disregard by supervisory or management staff of the Operator of the terms of this Agreement or of good international oil field practice but shall not include any act or omission reasonably required to meet emergency conditions, including without limitation the safeguarding of life, property and Joint Operations or for the avoidance of doubt any error of judgment or mistake made by any director, employee, agent or contractor of Operator in the exercise, in good faith of any function, authority or discretion conferred upon the Operator. WORK PROGRAM AND BUDGET means a work program for Joint Operations and budget therefor, including the production plan, as described and approved in accordance with Article VI and as illustrated in Exhibit "D". Exhibit "D" may be modified by the Operating Committee. ZONE means a stratum of earth containing or thought to contain a common accumulation of Hydrocarbons separately producible from any other common accumulation of Hydrocarbons.

1.67

1.68

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ARTICLE II - EFFECTIVE DATE AND TERM This Agreement shall have effect from the 22nd day of December, 1994 and

shall, subject always to the Parties' continuing obligations under Article XV, continue in effect until the Contract terminates or, otherwise until all materials, equipment and personal property used in connection with the Joint Operations have been removed and disposed of, and final settlement has been made among the Parties. For the avoidance of doubt, portions of this Agreement as described in (A), (B) and (C) below shall remain in effect until: (A) all wells have been properly abandoned in accordance with Article X; and (B) all obligations, claims, arbitrations and lawsuits have been settled or otherwise disposed of in accordance with Article 4.5 and Article XVIII; and (C) the time relating to the protection of confidential information and proprietary technology has expired in accordance with Article XV. The scope and purpose of the Joint Operations are to carry out the petroleum operations as per Contract. As defined in the Contract, petroleum operations means, as the context may require, exploration operations, development operations or production operations or any combination of such operations, including, but not limited to, collection of seismic information, drilling and completion and recompletion of wells, construction, operation and maintenance of all necessary facilities, plugging and abandonment of wells, environmental protection, transportation, storage or disposition of Petroleum to the Delivery Point, site restoration and all other incidental operations or activities as may be necessary. -----*****----ARTICLE III - PARTICIPATING INTEREST 3.1 PARTICIPATING INTEREST (A) The Participating Interests of the Parties as of the Effective Date are: ONGC 40% EOGIL 30% RIL 30% (B) If a Party transfers all or part of its Participating Interest pursuant to the provisions of this Agreement and the Contract, the Participating Interests of the Parties shall be revised accordingly. 3.2 OWNERSHIP, OBLIGATIONS AND LIABILITIES (A) Unless otherwise provided in this Agreement, all the rights and interests in and under the Contract, all Joint Property and any Hydrocarbons produced from the Contract Area shall, subject to the terms of the Contract, be owned by the Parties in accordance with their respective Participating Interests. (B) Unless otherwise provided in this Agreement, the obligations of the Parties under the Contract and all liabilities and expenses incurred by Operator in connection with Joint Operations shall be charged to the Joint Account and all credits to the Joint Account shall be shared by the Parties, as among themselves, in accordance with their respective Participating Interests. (C) Unless otherwise provided in this Agreement, all liabilities incurred by any Party in connection with Joint Operations shall be borne by the Parties in accordance with their respective Participating Interests. (D) Each Party shall pay when due, in accordance with the Accounting Procedure, its Participating Interest share of Joint Account expenses, including cash advances and interest, accrued pursuant to this Agreement. The Accounting Procedure shall govern the accrual and satisfaction of the respective obligations, liabilities and credits among the Parties.
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ARTICLE IV - OPERATOR 4.1 DESIGNATION OF OPERATOR EOGIL is designated as Operator, and agrees to act as an Operator in accordance with the terms and conditions of the Contract and this Agreement, which terms and conditions shall also apply to any successor Operator. 4.2 RIGHTS AND DUTIES OF OPERATOR (A) Subject to the terms and conditions of this Agreement, Operator shall have all of the rights, functions and duties of Operator under the Contract and shall have exclusive charge of and shall conduct all Joint Operations. Operator may employ independent contractors, Affiliates and/or agents in such Joint Operations. Contracts will be awarded pursuant to Article 6.8. (B) In the conduct of Joint Operations, Operator shall: (1) Perform Joint Operations in accordance with the provisions of the Contract, this Agreement and the instructions of the Operating Committee; (2) Conduct all Joint Operations in a diligent, safe and efficient manner in accordance with good and prudent international petroleum industry practices and conservation principles generally followed by the international petroleum industry under similar circumstances; (3) Subject to Article 4.6, neither gain a profit nor suffer a loss as a result of being the Operator in its conduct of Joint Operations; (4) Perform the duties for the Operating Committee set out in Article V, and prepare and submit to the Operating Committee the proposed Work Programmes and Budgets and AFEs as provided in Article VI; (5) Acquire all permits, consents, approvals, surface or other rights that may be required for or in connection with the conduct of Joint Operations; (6) Permit the representatives of any of the Parties to have at all reasonable times and at their own risk and expense reasonable access to the Joint Operations with the right to observe all such Joint Operations and to inspect all Joint Property and to conduct financial audits as provided in the Accounting Procedure. In the case of offshore operations, transportation and accommodations shall be made available from existing facilities if, in the sole discretion of Operator, no additional cost will be incurred by Operator. In addition, provide for two (2) permanent representatives of each of the Non-Operators to have access to the Contract Area and/or to the Joint Operations at all times and provide all facilities including, but not limited to, transportation and offshore accommodations at the cost of the Joint Operations. Such representatives shall look after the interests of Non-Operators/Joint Operation, but shall not interfere with operations; (7) Maintain the Contract in full force and effect. Operator shall promptly pay and discharge all liabilities and expenses incurred in connection with Joint Operations and use its reasonable efforts to keep and maintain the Joint Property free from all liens, charges and encumbrances arising out of Joint Operations; (8) Pay to the Government for the Joint Account, within the periods and in the manner prescribed by the Contract and all applicable laws and regulations, all periodic payments, royalties, taxes, fees and other payments pertaining to Joint Operations, but excluding any taxes measured by the incomes of the Parties; (9) Carry out the obligations of Operator pursuant to the Contract, including, but not limited to, preparing and furnishing such reports, records and information as may be required pursuant to the Contract; (10) Have in accordance with the decisions of the Operating Committee, the exclusive right and obligation to represent the Parties in all dealings with the Government with respect to matters arising under the Contract and Joint Operations. Operator shall notify the other Parties as soon as possible of such meetings. Non-Operators shall have the right to attend such meetings. Nothing contained in this Agreement shall restrict any Party from holding discussions with the Government with respect to any issue peculiar to its particular business interests arising under this Agreement, but in such event such Party shall promptly advise the Parties, if possible, before and in any event promptly after such discussions, provided that such Party shall not be required to divulge to the Parties any matters discussed to the extent the same involve proprietary information on matters not affecting the Parties; and (11) Take all necessary and proper measures for the protection of life, health, the environment and property in the case of an emergency; provided, however, that Operator shall immediately notify the Parties of the details of such emergency and measures.

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(12) Include, to the extent practical, in its contracts with independent contractors and to the extent lawful, provisions which: (a) ensure such contractors can only enforce their contracts against Operator; (b) permit Operator, on behalf of itself and Non-Operators, to enforce contractual indemnities against, and recover losses and damages suffered by them (insofar as recovered under their contracts) from such contractors; and (c) require such contractors to take insurance required by Article 4.7(F). (13) Carry out all Petroleum operations as per the standard offshore safety practices following the environmental/mining regulations/statutory laws. (14) Provide liaison between field operations and gas/oil purchasers and transporters. 4.3 EMPLOYEES OF OPERATOR Subject to the Contract and this Agreement, Operator shall determine the number of employees, the selection of such employees, the hours of work and the compensation to be paid to all such employees in connection with Joint Operations. Operator shall employ only such employees, agents and contractors as are reasonably necessary to conduct Joint Operations. 4.4 INFORMATION SUPPLIED BY OPERATOR (A) Operator shall provide Non-Operators the following data and reports as they are currently produced or compiled from the Joint Operations as well as the reports listed in Exhibit "E": (1) Copies of all logs or surveys; (2) Daily drilling progress reports; (3) Copies of all drill stem tests and core analysis reports; (4) Copies of the plugging reports; (5) Engineering studies, development schedules and annual progress reports on development projects; (6) Field and well performance reports, including reservoir studies; (7) Copies of all reports and data relating to Joint Operations furnished by Operator to the Government, except magnetic tapes which shall be stored by Operator and made available for inspection and/or copying at the sole expense of the Non-Operator requesting same; (8) Other reports as frequently as is justified by the activities or as instructed by the Operating Committee; and (9) Subject to Article 15.3, such additional information for Non-Operators as they or any of them may request, provided that the requesting Party or Parties pay the costs of preparation of such information and that the preparation of such information will not unduly burden Operator's administrative and technical personnel. Only Non-Operators who pay such costs shall receive such additional information. (B) Operator shall give Non-Operators access at all reasonable times to all other data acquired in the conduct of Joint Operations. Any Non-Operator may make copies of such other data at its sole expense. (C) ONGC shall provide all of the information identified above and currently in its possession relating to the Contract Area to the Operator upon payment of mutually agreed costs. 4.5 SETTLEMENT OF CLAIMS AND LAWSUITS (A) Operator shall promptly notify the Parties of any and all material claims or suits and such other claims and suits as the Operating Committee may direct which arise out of Joint Operations or relate in any way to Joint Operations. Operator shall represent the Parties and defend or oppose the claim or suit. Operator may in its sole discretion compromise or settle any such claim or suit or any related series of claims or suits for an amount not to exceed the equivalent of U.S. dollars fifty thousand (US$50,000) exclusive of legal fees. Operator shall obtain the approval and direction of the Operating Committee on amounts in excess of the above stated amount. Each
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Non-Operator shall have the right to be represented by its counsel at its expense in the settlement, compromise or defense of such claims or suits. (B) Any Non-Operator shall promptly notify the other Parties of any claim made against such Non-Operator by a third party relating to or which may affect the Joint Operations and insofar as such claim relates to or affects the Joint Operations such Non-Operator shall defend or settle the same in accordance with any directions given by the Operating Committee and such costs, expenses and damages as are payable pursuant to such defense or settlement shall be for the Joint Account. (C) Notwithstanding Article 4.5(A) and Article 4.5(B), each Party shall have the right to participate in any such pursuit, prosecution, defense or settlement conducted in accordance with Article 4.5(A) and/or Article 4.5(B) at its sole cost and expense; provided always that no Party may settle its Participating Interest share of any claim without first satisfying the Operating Committee that it can do so without prejudicing the interests of the Joint Operations. 4.6 LIABILITY OF OPERATOR (A) Except as set out in this Article 4.6, the Party designated as Operator shall bear no cost, expense or liability resulting from performing the duties and functions of the Operator. Nothing in this Article shall, however, be deemed to relieve the Party designated as Operator from any cost, expense or liability for its Participating Interest share of Joint Operations. (B) The Parties shall be liable in proportion to their Participating Interests and shall defend and indemnify Operator, Non-Operator and their agents, employees, officers and directors (the "Indemnitees") from any and all costs, expenses (including reasonable attorneys' fees) and liabilities incident to claims, demands or causes of action of every kind and character brought by or on behalf of any person or entity for damage to or loss of property or the environment, or for injury to, illness or death of any person or entity, which damage, loss, injury, illness or death arises out of or is incident to any act or failure to act by Indemnitees in the conduct of or in connection with Joint Operations regardless of the cause of such damage, loss, injury, illness or death and even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), Gross Negligence, strict liability or other legal fault of Operator or Non-Operator (or any such Affiliate performing services for Operator or Non-Operator pursuant to Sections 2.4.2 and 3 of the Accounting Procedure); provided that if any Supervisory or management Personnel of Operator or Non-Operator or any such Affiliates, engage in Gross Negligence and/or Willful Misconduct that proximately causes the Parties to incur cost, expense or liability for such damage, loss, injury, illness or death, then Operator or Non-Operator, as the case may be, shall bear all such costs, expenses and liabilities. 4.7 INSURANCE OBTAINED BY OPERATOR (A) Operator shall procure and maintain or cause to be procured and maintained for the Joint Account all insurance in the types and amounts required by the Contract and applicable laws, rules and regulations. (B) Operator shall obtain such further insurance, at competitive rates, as the Operating Committee may from time to time require. (C) Any Party may elect not to participate in the insurance to be procured under Article 4.7(B) provided such Party: (1) gives prompt written notice to that effect to Operator; (2) does nothing which may interfere with Operator's negotiations for such insurance for the other Parties; and (3) obtains and maintains such insurance (in respect of which an annual certificate of adequate coverage from a reputable insurance broker shall be sufficient evidence) or other evidence of financial responsibility which fully covers its Participating Interest share of the risks that would be covered by the insurance procured under Article 4.7 (B), and which the Operating Committee may determine to be acceptable. No such determination of acceptability shall in any way absolve a non-participating Party from its obligation to meet each cash call including any cash call in respect of damages and losses and/or the costs of remedying the same in accordance with the terms of this Agreement. If such Party obtains other insurance, such insurance shall contain a waiver of subrogation in favor of all the other Parties, but only in respect of their interests under this Agreement. (D) The cost of insurance in which all the Parties are participating shall be for the Joint Account and the cost of insurance in which less than all the Parties are participating shall be charged to the Parties participating in proportion to their respective Participating Interests. (E) Operator shall, in respect of all insurance obtained pursuant to this Article: (1) promptly inform the participating Parties when such insurance is obtained and supply them with copies of the relevant policies when the same are issued;
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(2) arrange for the participating Parties, according to their respective Participating Interests, to be named as co-insureds on the relevant policies with waivers of subrogation in favor of all the Parties; and (3) duly file all claims and take all necessary and proper steps to collect any proceeds and credit any proceeds to the participating Parties in proportion to their respective Participating Interests. (F) Operator shall use its reasonable efforts to require all contractors performing work in respect of Joint Operations to obtain and maintain any and all insurance in the types and amounts required by any applicable laws, rules and regulations or any decision of the Operating Committee and shall use its reasonable efforts to require all such contractors to name the Parties as additional insureds on contractor's insurance policies or to obtain from their insurers waivers of all rights or recourse against Operator and Non-Operators. 4.8 COMMINGLING OF FUNDS Operator shall not commingle with its funds the monies which it receives for the Joint Account pursuant to this Agreement. The Operator shall account to the Non-Operators for the monies of a Non-Operator advanced or paid to Operator, whether for the conduct of Joint Operations or as proceeds from the sale of production under this Agreement. Such monies shall be applied only to their intended use and shall in no way be deemed to be funds belonging to Operator. The Operator shall open and maintain dedicated current and/or deposit accounts in respect of funds in Indian Rupees, United States Dollars and/or any other currency at a bank or banks in India, the United States or elsewhere, in order to deposit and hold funds on behalf of the Parties exclusively for Joint Operations. Where possible, such accounts shall be interest bearing. Upon opening a bank account, the Operator shall notify the Non-Operators the name and address of the bank and the account number. Any changes thereafter should be promptly notified by the Operator to the Non-Operators. 4.9 RESIGNATION OF OPERATOR Subject to Article 4.11, Operator may resign as Operator at any time after completion of the Minimum Work Obligation, unless the Parties agree to an earlier date, by so notifying the other Parties at least one hundred and twenty (120) Days prior to the effective date of such resignation. 4.10 REMOVAL OF OPERATOR (A) Subject to Article 4.11, Operator shall be removed upon receipt of notice from any Non-Operator if: (1) An order is made by a court or an effective resolution is passed for the dissolution, liquidation, winding up, or reorganization of Operator; (2) Operator dissolves, liquidates or terminates its corporate existence; (3) Operator becomes insolvent, bankrupt or makes an assignment for the benefit of creditors; or (4) A receiver is appointed for a substantial part of Operator's assets. (5) Operator, together with any Affiliate of Operator, is or becomes the holder of a Participating Interest of less then twenty percent (20%). (6) There is a direct or indirect change in control of Operator (other than a transfer of control to an Affiliate of Operator). For purposes of this Article control means the ownership directly or indirectly of more than fifty percent (50%). (B) Subject to Article 4.11, Operator may be removed by the decision of the Non-Operators if Operator has committed a material breach of this Agreement which Operator has failed to rectify within ninety (90) Days of receipt of a notice from Non-Operators detailing the alleged breach. Any decision of Non-Operators to give notice of breach to Operator or to remove Operator under this Article 4.10(B) shall be made by an affirmative vote of two (2) or more of the total number of Non-Operators holding a combined Participating Interest of at least fifty percent (50%). Notwithstanding the above, in case of disagreement between the Non-Operators on giving notice to the Operator, any Non-Operator may, with the approval of the Government, give notice to the Operator. 4.11 APPOINTMENT OF SUCCESSOR
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When a change of Operator occurs pursuant to Article 4.9 or Article 4.10: (A) The Operating Committee shall meet as soon as possible to appoint a successor Operator pursuant to the voting procedure of Article 5.9. However, no Party may be appointed successor Operator against its will. (B) If the Operator disputes commission of or failure to rectify a material breach alleged pursuant to Article 4.10(B) and proceedings are initiated pursuant to Article XVIII, no successor Operator may be appointed pending the conclusion or abandonment of such proceedings provided, however, if the arbitrators determine that the Joint Operations are likely to suffer material and/or irreparable harm, they shall have the right to issue an interim order suspending the Operator and appointing a successor Operator. (C) If an Operator is removed neither Operator nor any Affiliate of Operator shall have the right to vote for itself on the appointment of a successor Operator, nor be considered as a candidate for the successor Operator. (D) A resigning or removed Operator shall be compensated out of the Joint Account for its reasonable expenses directly related to its resignation or removal, except in the case of Article 4.10. (E) The Operating Committee shall arrange for the taking of an independent inventory of all Joint Property and Hydrocarbons, and an audit of the books and records of the removed or resigned Operator. Such inventory and audit shall be completed, if possible, no later than the effective date of the change of Operator. The liabilities and expenses of such inventory and audit shall be charged to the Joint Account. (F) The resignation or removal of Operator and its replacement by the successor Operator shall not become effective prior to receipt of any necessary governmental approvals. (G) Upon the effective date of the resignation or removal, the successor Operator shall succeed to all duties, rights and authority prescribed for Operator. The former Operator shall transfer to the successor Operator custody of all Joint Property, books of account, records and other documents maintained by Operator pertaining to the Contract Area and to Joint Operations. Upon delivery of the above-described property and data, the former Operator shall be released and discharged from all obligations and liabilities as Operator accruing after such date. -----*****----ARTICLE V - OPERATING COMMITTEE 5.1 ESTABLISHMENT OF OPERATING COMMITTEE To provide for the overall supervision and direction of Joint Operations, there is established an Operating Committee composed of representatives of each Party holding a Participating Interest. Each Party shall appoint one (1) representative and one (1) alternate representative to serve on the Operating Committee. Each Party shall as soon as possible after the date of this Agreement give notice in writing to the other Parties of the name and address of its representative and alternate representative to serve on the Operating Committee. Each Party shall have the right to change its representative and alternate at any time by giving proper notice to such effect to the other Parties. 5.2 POWERS AND DUTIES OF OPERATING COMMITTEE The Operating Committee shall have power and duty to authorize and supervise Joint Operations that are necessary or desirable to fulfill the Contract and properly explore and exploit the Contract Area in accordance with this Agreement and in a manner appropriate in the circumstances. The Operating Committee is the coordinating body for the direction, control and administration of the Joint Operations. The principal functions of the Operating Committee shall be: (A) To establish policies from time to time governing various aspects or activities of the Joint Operations. (B) To review, approve and revise annual exploration Work Programs and corresponding budgets, as proposed by the Operator. (C) To review reports on Joint Operations conducted in the Contract Area including the status of all existing facilities, safety, environmental aspects and equipment availability. (D) To review and approve any proposal for the appraisal of an area. (E) To review, revise and approve Work Programs and Budgets for petroleum operations as defined in the Contract and as proposed
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by the Operator. (F) To review and approve Exploration, Appraisal and Development Wells and locations (including locations for wells required for any purposes whatsoever), and transfer of exploitation objectives, Reworking and abandonment of wells. (G) To review and approve well stimulation programs. (H) To review and determine the area to be relinquished, if any. (I) To approve appointment of contractors for carrying out any petroleum operations by Operator beyond the authority vested in the Operator under this Agreement. (J) To review and approve such other matters with respect to petroleum operations in the Contract Area as may be referred to the Operating Committee by any member of the Operating Committee. (K) To refer to the Management Committee and/or the Government whenever applicable matters which require advice or approval of the Management Committee and/or the Government pursuant to the Contract. (L) To review summary operating costs. 5.3 AUTHORITY TO VOTE (A) The representative of a Party, or in his absence his alternate representative, shall be authorized to represent and bind such Party with respect to any matter which is within the powers of the Operating Committee and is properly brought before the Operating Committee. Each such representative shall have a vote equal to the Participating Interest of the Party such person represents. Each alternate representative shall be entitled to attend all Operating Committee meetings but shall have no vote at such meetings except in the absence of the representative for whom he is the alternate. In addition to the representative and alternate representative, each Party may also bring to any Operating Committee meetings such technical and other advisors as it may deem appropriate. (B) Any representative shall be entitled, if either he or his alternate is unable to attend a meeting, to cast his vote by telex or facsimile transmission received prior to the time that the vote is taken in the course of the meeting. (C) Any representative may by notice to all other representatives, appoint a representative of another Party who consents to such appointment as its proxy to attend a meeting and to exercise the appointing representative's right to vote at that meeting whether as directed by the appointing representative or otherwise. A representative appointed as a proxy and attending a meeting may be present in two (2) separate capacities and may vote accordingly. 5.4 SUBCOMMITTEES The Operating Committee may establish such subcommittees, including technical subcommittees, as the Operating Committee may deem appropriate. The functions of such subcommittees shall be in an advisory capacity or as otherwise determined unanimously by the Parties. 5.5 NOTICE OF MEETING (A) Operator may call a meeting of the Operating Committee by giving notice to the Parties at least fifteen (15) Days in advance of such meeting. (B) Any Non-Operator may request a meeting of the Operating Committee by giving proper notice to all the other Parties. Upon receiving such request, Operator shall call such meeting for a date not less than fifteen (15) Days nor more than twenty (20) Days after receipt of the request. (C) The notice periods above may be waived at the request of Operator or any Non-Operator with the unanimous consent of all the Parties. In the event of a likely material adverse financial impact to the Joint Operation, no Party may unreasonably withhold waiving the notice period. 5.6 CONTENTS OF MEETING NOTICE (A) Each notice of a meeting of the Operating Committee as provided by Operator shall contain: (1) The date, time and location of the meeting; and
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(2) An agenda of the matters and proposals to be considered and/or voted upon. (B) A Party, by notice to the other Parties given not less than seven (7) Days prior to a meeting, may add additional matters to the agenda for a meeting. (C) On the request of a Party, and with the unanimous consent of all Parties, the Operating Committee may consider at a meeting a proposal not contained in such meeting agenda. 5.7 LOCATION AND FREQUENCY OF MEETINGS All meetings of the Operating Committee shall be held in Bombay, India, or elsewhere as may be decided by the Operating Committee. The Operating Committee shall meet at least once each two (2) months during the first six (6) months following the Effective Date unless otherwise agreed. Thereafter, the Operating Committee shall meet once every three (3) months unless otherwise agreed. 5.8 OPERATOR'S DUTIES FOR MEETINGS (A) With respect to meetings of the Operating Committee and any subcommittee, Operator's duties shall include, but not be limited to: (1) Timely preparation and distribution of the agenda; (2) Organization and conduct of the meeting; and (3) Preparation of a written record or minutes of each meeting. (B) Operator shall have the right to appoint the chairman of the Operating Committee and all subcommittees. 5.9 VOTING PROCEDURE Except as otherwise expressly provided in this Agreement, all decisions, approvals and other actions of the Operating Committee on all proposals coming before it under this Agreement shall be decided by the affirmative vote of the Parties then having collectively one hundred percent (100%) of the Participating Interests. In the event the Operating Committee cannot agree upon a Work Program and Budget relating to the Minimum Work Obligation, the matter shall be referred to the Management Committee by any Party for review and decision. The Management Committee shall decide such issue within twenty (20) Days or as otherwise mutually agreed. If all of the Parties do not agree with the Management Committee decision, the Parties in agreement shall be entitled to proceed in accordance with Article VII hereof. If the Management Committee cannot agree, the matter shall be referred to arbitration or a sole expert. 5.10 RECORD OF VOTES The chairman of the Operating Committee shall appoint a secretary who shall make a record of each proposal voted on and the results of such voting at each Operating Committee meeting. Each representative shall sign and be provided a copy of such record at the end of such meeting and it shall be considered the final record of the decisions of the Operating Committee. 5.11 MINUTES The secretary shall provide each Party with a copy of the minutes of the Operating Committee meeting within ten (10) Days after the end of the meeting. Each Party shall have ten (10) Days after receipt of such minutes to give notice of its objections to the minutes to the secretary. A failure to give notice specifying objection to such minutes within said ten (10) Day period shall be deemed to be approval of such minutes. In any event, the votes recorded under Article 5.10 shall take precedence over the minutes described above. 5.12 VOTING BY NOTICE (A) In lieu of a meeting, Operator may submit any proposal for a decision of the Operating Committee by giving each representative proper notice describing the proposal so submitted. Each Party shall communicate its vote by proper notice to Operator and the other Parties within one of the following appropriate time periods after receipt of Operator's notice: (1) Twenty-four (24) hours in the case of operations which involve the use of a drilling rig that is standing by in the Contract Area. (2) Thirty (30) Days in the case of all other proposals. (3) Thirty (30) Days in the case of an AFE or supplemental AFE if submitted pursuant to Article 6.9(A).
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(B) Except in the case of Article 5.12(A)(1), any Non-Operator may by notice delivered to all Parties within twenty (20) Days of receipt of Operator's notice request that the proposal be decided at a meeting rather than by notice. In such an event, that proposal shall be decided at a meeting duly called for that purpose. (C) Except as provided in Article X, any Party failing to communicate its vote in a timely manner shall be deemed to have voted against such proposal. (D) If a meeting is not requested, then at the expiration of the appropriate time period, Operator shall give each Party a confirmation notice stating the tabulation and results of the vote. 5.13 EFFECT OF VOTE All decisions taken by the Operating Committee pursuant to this Article, shall be conclusive and binding on all the Parties, except that: (A) If pursuant to this Article, a Joint Operation has been properly proposed to the Operating Committee and the Operating Committee has not approved such proposal in a timely manner, then any Party shall have the right for the appropriate period specified below to propose in accordance with Article VII, an Exclusive Operation involving operations essentially the same as those proposed for such Joint Operation. No Exclusive Operation shall be conducted which conflicts with a Joint Operation. (1) For proposals involving the use of a drilling rig that is standing by in the Contract Area, such right shall be exercisable for twenty-four (24) hours after the time specified in Article 5.12(A)(1) has expired. (2) For proposals to develop a Discovery, such right shall be exercisable for ten (10) Days after the date the Operating Committee was required to consider such proposal pursuant to Article 5.6 or Article 5.12; (3) For all other proposals, such right shall be exercisable for five (5) Days after the date the Operating Committee was required to consider such proposal pursuant to Article 5.6 or Article 5.12. (B) If a Party voted against any proposal to be conducted as an Exclusive Operation pursuant to Article VII, then such Party shall have the right not to participate in the operation contemplated by such approval. Any such Party wishing to exercise its right of non-consent must give notice of non-consent to all other Parties within five (5) Days (or within twenty-four (24) hours if the drilling rig to be used in such operation is standing by in the Contract Area) following Operating Committee approval of such proposal. The Parties that were not entitled to give or did not give notice of non-consent shall be Consenting Parties as to the operation contemplated by the Operating Committee approval, and shall conduct such operation as an Exclusive Operation under Article VII. Any Party that gave notice of non-consent shall be a Non-Consenting Party as to such Exclusive Operation. (C) If the Consenting Parties to an Exclusive Operation under Article 5.13(A) or Article 5.13(B) concur, then the Operating Committee may, at any time, pursuant to this Article, reconsider and approve, decide or take action on any proposal that the Operating Committee declined to approve earlier, or modify or revoke an earlier approval, decision or action. (D) Once a Joint Operation for the drilling, Deepening, Testing, Sidetracking, Plugging Back, Completing, Recompleting, Reworking or plugging of a well, has been approved and commenced, such operation shall not be discontinued without the consent of the Operating Committee; provided, however, that such operation may be discontinued, if: (1) an impenetrable substance or other condition in the hole is encountered which in the reasonable judgment of Operator, after consultation with the Non-Operators, causes the continuation of such operation to be impractical; or (2) other circumstances occur which in the reasonable judgment of Operator causes the continuation of such operation to be unwarranted and after notice the Operating Committee within the period required under Article 5.12(A)(1) approves discontinuing such operation. On the occurrence of either of the events listed under Article 5.13(D)(1) or Article 5.13(D)(2), Operator shall promptly notify the Parties with all available details that such operation is being discontinued pursuant to the foregoing, and any Party shall have the right to propose in accordance with Article VII an Exclusive Operation to continue such operation. ARTICLE VI - WORK PROGRAMS AND BUDGETS In the conduct of Joint Operations, Operator shall perform Joint Operations in accordance with the provisions of the Contract, this
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Agreement and the instructions of the Operating Committee and conduct all Joint Operations in a diligent, safe and efficient manner in accordance with international petroleum industry practices and conservation principles generally followed by the international petroleum industry under similar circumstances. 6.1 PREPARATION OF WORK PROGRAM AND BUDGET Subject to Article 6.14, on or before the first (1st) Day of November of each Year, the Operator shall submit to the Parties a recommended Work Program and Budget containing the Minimum Work Obligation for the Contract Area for the subsequent Financial Year as per Exhibit "D". At the same time as that Financial Year's Work Program and Budget is submitted, a provisional Work Program and Budget containing the Minimum Work Obligation for the next succeeding Financial Year shall be presented by the Operator. 6.2 ADOPTION OF WORK PROGRAM AND BUDGET AND SUBMISSION TO MANAGEMENT COMMITTEE Subject to Article 6.14, on or before the first (1st) of December of each year, the Operating Committee shall agree upon and adopt a Work Program and Budget for the subsequent Financial Year. At the time of agreeing upon and adopting a Work Program and Budget, the Operating Committee shall provisionally consider, but not act upon or adopt, a Work Program and Budget for the next succeeding Financial Year. As soon as possible after the adoption of a Work Program and Budget, Operator shall provide a copy thereof to each Party. The Operator shall timely submit such Work Programs and Budgets to the Management Committee as required pursuant to Articles 4.2 and 5.6 of the Contract. Any proposed revision of a Work Program and Budget submitted to the Operating Committee shall be considered by the Operating committee within twenty-eight (28) Days after its submission and, to the extent same is approved, shall be submitted by the Operator for consideration by the Management Committee pursuant to Article 4.3 of the Contract. 6.3 SUBDIVISION OF WORK PROGRAM AND BUDGET AND BUDGET ITEMS AND TRANSFERS Each Work Program and Budget shall be subdivided, as illustrated in Exhibit "D", to include three (3) major functional categories: Exploration and Appraisal, Development and Production; and each of those categories shall be further subdivided into subcategories consisting of one or more individual projects/programmed activities. Purchases of materials and supply inventory not specifically made for a designated project/programmed activity shall be budgeted as a separate item. Each individual project/programmed activity shall be identified as either "Firm" or "Contingent" depending upon the degree of complete details furnished at the time of presentation of the Work Program and Budget. (A) For a project to be considered "Firm" within the budget, it will require program description, objectives and cost estimate along with the basis therefor, sufficiently complete and in such detail as to allow thorough evaluation of the project. (B) Projects which do not meet the requirements of Article 6.3(A) at the time the Work Program and Budget is approved by the Operating Committee may also be included in the Work Program and Budget for approval in principle and such projects shall be considered "Contingent". Such projects shall not be implemented without approval of the Operating Committee except as provided in this Article 6.3(B). Any project or group of projects shall be transferred from Contingent to Firm upon approval of the Operating Committee. From time to time throughout the Financial Year, the Operator shall endeavour to provide further specific information necessary for the Operating Committee to evaluate Contingent projects for the purpose of such transfer. Upon receipt of such information, Parties may not unreasonably withhold approval for the transfer of a project from the Contingent to the Firm category. In the event the Operating Committee is unable to agree, the matter shall be submitted by any Party to the Management Committee for approval. A project not in the Minimum Work Obligation which fails to obtain Operating Committee approval for transfer may be transferred by any Party provided that Party is prepared to undertake the project as an Exclusive Operation pursuant to Article VII. 6.4 FULFILLMENT OF MINIMUM WORK OBLIGATION Parties shall not unreasonably withhold approval of the projects/programmed activities covered in the annual Work Program and Budget as Minimum Work Obligations or at least that part of such Minimum Work Obligations required to be carried out to maintain the Contract in force. In case of failure of the Operating Committee to approve the Work Program and Budget related to projects/programmed activities included under Minimum Work Obligations, any Party may refer the issue to the Management Committee for approval. 6.5 EXPLORATION AND APPRAISAL Parties acknowledge and agree that neither exploration nor appraisal work may be conducted within any Field which is so designated as of the Effective Date. (A) Notwithstanding the foregoing, Exploration and/or Appraisal Wells may be proposed without limitation as to location, provided, however, that if such location is within a Development Area, such well shall not be commenced without prior approval of the Operating Committee. In the event such well within the Development Area includes an objective Zone which is the stratigraphic equivalent of the
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Zone or Zones included in the Field and the location is outside the Field, then, provided that production from such Zone does not interfere with production from the Zone/Zones developed or to be developed in the Field, Operating Committee approval shall not be unreasonably withheld. (B) If the proposed Work Program and Budget includes an Exploration Well and/or Appraisal Well, the budget approval shall include the cost of drilling, completing and testing such Exploration/Appraisal Well. For this purpose the Operator shall provide necessary details/information required for the Operating Committee to assess the need/desirability of such Exploration/Appraisal Well. (C) If a New Discovery is made, Operator shall deliver any notice of New Discovery required under the Contract and shall, as soon as possible, submit to the Parties a report containing available details concerning the New Discovery and Operator's recommendation as to whether the New Discovery merits appraisal. The Operating Committee shall meet and decide within forty-five (45) Days whether the New Discovery merits appraisal. If the Operating Committee determines that the New Discovery merits appraisal, Operator, within thirty (30) Days, shall deliver to the Parties a proposed Work Program and Budget for the appraisal of the New Discovery. Within twenty (20) Days of such delivery, or earlier if necessary to meet any applicable deadline under the Contract, the Operating Committee shall meet to consider, modify and then either approve or reject the appraisal Work Program and Budget. If the appraisal Work Program and Budget is approved by the Operating Committee, Operator shall take such steps as may be required under the Contract to secure approval of the appraisal Work Program and Budget by the Management Committee and/or the Government, whichever is applicable. In the event the Management Committee and/or the Government, whichever is applicable, requires changes in the appraisal Work Program and Budget,the matter shall be resubmitted to the Operating Committee for further consideration. (D) Any Party desiring to propose a Completion attempt, or an alternative Completion attempt, must do so within the time period provided in Article 5.12(A)(1) by notifying all other Parties. The Operator shall prepare the AFE for such Completion costs and provide same to the Parties. 6.6 DEVELOPMENT OF NEW DISCOVERY (A) If the Operating Committee determines that a Discovery may be commercial, the Operator shall, as soon as practicable, but not later than ninety (90) Days after completing the appraisal referred to in Article 6.5(C), deliver to the Parties a Development Plan together with the Work Program and Budget for the remainder of the Financial Year and a provisional Work Program and Budget for the next succeeding Financial Year along with annual projections for the remainder of the development of the New Discovery. The Work Programs and Budgets proposed by the Operator shall contain, inter alia: (1) Details of the proposed work to be undertaken, personnel required and expenditures to be incurred, including the timing of same, on a Financial Year basis; (2) An estimated date for the commencement of production; (3) A delineation of the proposed Exploitation Area; and (4) Any other information requested by the Operating Committee. (B) After receipt of the Development Plan, or earlier if necessary to meet any applicable deadline under the Contract, the Operating Committee shall meet to consider, modify and then either approve or reject within ninety (90) Days the Development Plan and the Work Program and Budget for the remainder of the Financial Year for the development submitted by Operator. If the Development Plan is approved by the Operating Committee, Operator shall, as soon as possible, deliver any notice of Commercial Discovery required under the Contract and take such other steps as may be required under the Contract to secure approval of the Development Plan by the Management Committee and/or Government, whichever is applicable. In the event the Management Committee and/or Government, whichever is applicable, requires changes in the Development Plan, the matter shall be resubmitted to the Operating Committee for further consideration. If the Development Plan is approved, such work shall be incorporated into and form part of the annual Work Programs and Budgets. 6.7 ITEMIZATION OF EXPENDITURES (A) During the preparation of the proposed Work Programs and Budgets and Development Plans contemplated in this Article, Operator shall consult with the Operating Committee regarding the contents of such Work Programs and Budgets and Development Plans. (B) Each Work Program and Budget and Development Plan submitted by Operator shall contain an itemized estimate of the costs of Joint Operations and all other expenditures to be made for the Joint Account during the Financial Year in question. (C) The Work Program and Budget shall designate the portion or portions of the Contract Area in which Joint Operations itemized in
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such Work Program and Budget are to be conducted and shall specify the kind and extent of such operations in such detail as the Operating Committee may deem suitable. 6.8 CONTRACT AWARDS (A) Operator shall award, except for an award to an Affiliate, each contract for Joint Operations on the following basis (the amounts stated are in thousands of U.S. dollars):

PROCEDURE A C Applicable to Exploration, Appraisal, Development and Production Operations

PROCEDURE B

PROCEDURE

$100 to $500

$500 to $3,000

$3,000

Operator shall not award a contract exceeding US$20,000 to an Affiliate without prior approval of the Operating Committee, provided, however, that the service agreement under which EOGIL secures technical, administrative and related support subject to Sections 2.4.2 and 3.1 of Exhibit "A", Accounting Procedure, shall not be subject to the provisions of this Article 6.8. For contracts valued less than the lower limit of Procedure A, Operator shall award the contract to the best qualified contractor as determined in accordance with Operator's purchasing policies set forth in EOGIL's purchasing policy and procedure, Number 9401. Operator shall inform the Non-Operators of such awards every month. PROCEDURE A Operator shall: (1) Provide the Parties with a list of all the entities approved by the Operating Committee as per Article 6.8(C) for the applicable category of the contract, along with other entities, if any, from whom the Operator proposes to invite tender; (2) Add to such list entities whom a Party requests to be added within five (5) Business Days of receipt of such list; (3) If and when any Party so requests, Operator shall evaluate any entity listed in (1) and (2) above to assure that entity is qualified as based on the qualification criteria agreed in accordance with Article 6.8(B), to perform under the contract; (4) Complete the tendering process within a reasonable period of time; (5) Circulate to all Parties a comparative bid analysis stating Operator's choice of the entity for award of contract. Provide also reasons for such choice in case entity chosen is not the lowest bidder; (6) Inform all the Parties of the entities to whom the contract has been awarded; and (7) Upon the request of a Party, provide such Party with a copy of the final version of the contract awarded. PROCEDURE B Operator shall: (1) Provide the Parties with a list of all the entities approved by the Operating Committee as per Article 6.8(C) for the applicable category of the contract, along with other entities, if any, from whom the Operator proposes to invite tender; (2) Add to such list entities whom a Party requests to be added within five (5) Business Days of receipt of such list; (3) If and when any Party so requests, Operator shall evaluate any entity listed in (1) and (2) above to assure that entity is qualified as based on the qualification criteria agreed in accordance with Article 6.8(B), to perform under the contract; (4) Complete the tendering process within a reasonable period of time;
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(5) Circulate to all Parties a comparative bid analysis stating Operator's choice of the entity for award of contract. Provide also reasons for such choice in case the entity chosen is not the lowest bidder. If the bid selected is not the lowest bid, obtain prior approval of the Operating Committee for award of contract; (6) Award the contract accordingly and inform all the Parties of the entities to whom the contract has been awarded; and (7) Upon the request of a Party, provide such Party with a copy of the final version of the contract awarded. PROCEDURE C Operator shall: (1) Publish invitations for parties to pre-qualify for the proposed contract in one (1) daily national India newspaper, provide to Non-Operators a list of responding parties and an analysis of their qualifications for the contract being contemplated, and include those who qualify, as per the pre-qualification criteria approved as per Article 6.8(B), in the list of entities whom Operator proposes to invite to tender for the said contract; (2) Provide the Parties with a total list of all the entities selected as (1) above and all the entities approved by the Operating Committee as per Article 6.8(C) for the applicable category of the contract, along with other entities, if any, from whom the Operator proposes to invite tender; (3) Add to such list entities whom a Party requests to be added within five (5) Business Days of receipt of such list; (4) If and when any Party so requests, Operator shall evaluate any entity listed in (2) and (3) above to assure that entity is qualified as based on the qualification criteria agreed in accordance with Article 6.8(B), to perform under the contract; (5) Prepare and dispatch the tender documents to the entities on the list as aforesaid and to Non-Operators; (6) After the expiration of the period allowed for tendering, consider and analyze the details of all bids received; (7) Prepare and circulate to the Parties a comparative bid analysis, stating Operator's recommendation as to the entity to whom the contract should be awarded, the reasons therefor, and the technical, commercial and contractual terms to be agreed upon; (8) Obtain the approval of the Operating Committee to the recommended bid. However, failing Operating Committee approval, any Party may refer the issue to Management Committee for decision; and (9) Award the contract accordingly and upon the request of a Party, provide such Party with a copy of the final version of the contract. (B) A set of vendor qualification criteria for each major category of vendor shall be proposed by the Operator and approved by the Operating Committee within thirty (30) Days of its submittal. In the event the Operating Committee fails to approve vendor qualification criteria within thirty (30) Days of the date the same is first submitted by the Operator, the matter shall be referred to the Management Committee for decision. The Operating Committee may revise the qualification criteria. (C) It is anticipated that, in order to expedite Joint Operations, contracts will be awarded to qualified vendors who are identified as approved vendors as to specified activities, supplies and/or work as per the applicable Agreement procedure. A list of such approved vendors shall first be established as follows: Operator shall: (1) Provide the Parties with a list of the entities whom Operator proposes to invite to tender for contracts; and (2) Add to such list entities whom a Party requests to be added within fourteen (14) Days of receipt of such list; and obtain approval of the Operating Committee within thirty (30) Days of its submittal to the Operating Committee by the Operator. Such list shall thereafter be maintained by the Operator. The Operating Committee may add to or delete vendors from such list. 6.9 AUTHORIZATION FOR EXPENDITURE ("AFE") PROCEDURE (A) Prior to incurring any commitment or expenditure which exceeds the expenditure guidelines specified in this Article 6.9, Operator shall send to each Non-Operator an AFE containing Operator's best estimate of the total funds required to carry out such work, the
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estimated timing of expenditures, and any other necessary supportive information. The Operator shall send to each Non-Operator an AFE containing the information specified above for the following: (1) Each project involving seismic acquisition and processing; (2) Each Exploration and Appraisal Well; (3) Each Development Well or group of Development Wells; (4) Deepening of any well below original total depth, involving exploratory footage; (5) Workovers or Reworking a well costing in excess of US$200,000 for any well, including deepening into development Zones; (6) Each platform or group of platforms; (7) Each subsea pipeline/major pipeline; (8) Equipping of Wells exceeding One Hundred Thousand U.S. Dollars (US$100,000) if not already included in an AFE. Equipping of wells includes generally the purchase and installation of equipment and material for lifting, heating, storing and otherwise handling production; (9) Individual construction projects and equipment not already included in an AFE, exceeding One Hundred Thousand U.S. Dollars (US$100,000) each; (10) Commitments for purchases of advance materials for projects not yet approved shall be aggregated and included in an AFE covering a Calendar Quarter; (11) Any other project/programmed expenditure not included above in this Article 6.9 estimated to be in excess of One Hundred Fifty Thousand U.S. Dollars (US$150,000). (B) The restrictions contained in this Article shall be without prejudice to Operator's rights to make expenditures as set out in Article 4.2(B)(11) and Article 13.5. (C) Parties agree that, except as otherwise provided in Article 6.9(A)(5), operating costs and deposits as further specified below in this Article 6.9(C) shall not require AFEs. Such costs shall be reported as against the appropriate budget line item and variances from the budgeted amounts shall be reviewed by the Operating Committee. Operating cost means costs and expenditures of a recurring nature, incurred after the commencement of production in the operation and maintenance of property and necessary for production and handling of produced Petroleum. Costs of a similar nature incurred prior to production commencement shall be provided for in the appropriate AFE(s) in accordance with Article 6.9(A)(1) through (A)(9). Deposits mean non-recurring refundable or adjustable payments toward security/ surety including, but not limited to, expatriate employee housing and office building rental deposits. Operating costs are categorized and detailed as Production Costs [except that workovers or Reworking a well shall be subject to Article 6.9(A)(5)]and general and administrative costs, which costs are contained in categories III and IV of Exhibit "D", Work Program and Budget. Deposits are listed in the "Deposit" section of category V of Exhibit "D". 6.10 SUPPLEMENTARY AFES Operator shall submit a supplemental AFE for approval when it is anticipated that an AFE will be overexpended by more than ten percent (10%), which approval shall not be unreasonably withheld. 6.11 APPROVAL OF AFES Except as herein otherwise provided, Operator shall be required to obtain approval of an AFE prior to undertaking the work. AFE approval shall be confirmed by returning a signed copy of the AFE to the Operator. Parties shall respond to requests for approval of AFEs within fourteen (14) Days of receipt. A failure to respond to an AFE within this time period shall be deemed an approval of such AFE. 6.12 APPROVAL OF AFE NOT TO BE UNREASONABLY WITHHELD After approval of the Work Program and Budget by the Operating Committee and the Management Committee, no Party may withhold approval of an AFE for any project contained in the Firm budget category unless there is a material variance between the AFE and the project so approved.

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6.13 OVEREXPENDITURES OF WORK PROGRAMS AND BUDGETS Cumulative total of all overexpenditures for a Financial Year shall not exceed five percent (5%) of the total Work Program and Budget as currently approved. 6.14 WORK PROGRAM AND BUDGET FOR INITIAL PERIOD The Development Plan together with the corresponding Work Program and Budget for the period ending 31 March 1996 ("Initial Period") shall be submitted to the Operating Committee for approval as soon as possible following the Effective Date. The Operating Committee shall approve the Development Plan and corresponding Work Program and Budget within thirty (30) Days and as soon as practicable thereafter, the Operator shall submit same to the Management Committee. In the event the Operating Committee is unable to approve the Work Program and Budget for the Initial Period by the due date specified in this Article 6.14, any Party may refer the matter to the Management Committee for decision. ARTICLE VII - OPERATIONS BY LESS THAN ALL PARTIES 7.1 LIMITATION ON APPLICABILITY (A) Subject to the Contract, any operation beyond the Minimum Work Obligation can be proposed as a Joint Operation. In the event of difference of opinion among the Parties for taking the operation as Joint Operation, the same may be conducted as Exclusive Operation by the willing Parties subject to provisions of Article VII. All operations shall be conducted as Joint Operations under Article V, or as Exclusive Operations under this Article. No Exploration Well or Appraisal Well which is an Exclusive Well may be Completed in any Field which is so designated as of the Effective Date. If a proposal for an Exploration Well/Appraisal Well for Zones other than those in the Field leads to an Exclusive Operation and such well is located in the Development Area of a Field but outside the Field which is so designated as of the Effective Date, then, in such case, each Non-Consenting Party/Parties shall have a right to place a representative at the site during drilling, Completion and testing and recompleting and Reworking of such a well. No Exclusive Operation shall be conducted which conflicts with Joint Operations. Determination as to whether or not a conflict exists shall be made by the unanimous vote of the Operating committee. If the Operating Committee cannot agree, the matter can be referred to a sole expert or arbitration. (B) Except as otherwise herein provided, operations which are required to fulfill the Minimum Work Obligations must be proposed and conducted as Joint Operations under Article V, and shall not be proposed or conducted as Exclusive Operations under this Article. (C) No Party may propose or conduct an Exclusive Operation under this Article, unless and until such Party has properly exercised its right to propose an Exclusive Operation pursuant to Article 5.13, or is entitled to conduct an Exclusive Operation pursuant to Article X. 7.2 PROCEDURE TO PROPOSE EXCLUSIVE OPERATIONS (A) Subject to Article 7.1, if any Party proposes to conduct an Exclusive Operation, such Party shall give notice of the proposed operation to all Parties, other than Parties who have relinquished their Participating Interest in the Exploitation Area in which the proposed operation is to be conducted. Such notice shall specify that such operation is proposed as an Exclusive Operation, the work to be performed, the location, the objectives, and estimated cost of such operation. (B) Any Party entitled to receive such notice shall have the right to participate in the proposed operation. (1) For proposals to Deepen, Test, Complete, Sidetrack, Plug Back, Recomplete or Rework involving the use of a drilling rig that is standing by in the Contract Area, any such Party wishing to exercise such right must so notify Operator within twenty-four (24) hours after receipt of the notice proposing the Exclusive Operation. (2) For proposals to develop a Discovery, any Party wishing to exercise such right must so notify the Party proposing to develop within twenty (20) Days after receipt of the notice proposing the Exclusive Operation. (3) For all other proposals, any such Party wishing to exercise such right must so notify Operator within ten (10) Days after receipt of the notice proposing the Exclusive Operation; (C) Failure of a Party to whom a proposal notice is delivered to properly reply within the period specified above shall constitute an election by that Party not to participate in the proposed operation. (D) If all Parties properly exercise their rights to participate, then the proposed operation shall be conducted as a Joint Operation. The Operator shall commence such Joint Operation as promptly as practicable and conduct it with due diligence.

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(E) If less than all Parties entitled to receive such proposal notice properly exercise their rights to participate, then: (1) The Party proposing the Exclusive Operation, together with any other Consenting Parties, shall have the right exercisable for the applicable notice period set out in Article 7.2(B), to instruct Operator (subject to Article 7.9(G)) to conduct the Exclusive Operation. (2) If the Exclusive Operation is conducted, the Consenting Parties shall bear the sole liability and expense of such Exclusive Operation in a fraction, the numerator of which is such Consenting Party's Participating Interest as stated in Article 3.1(A) and the denominator of which is the aggregate of the Participating Interests of the Consenting Parties as stated in Article 3.1(A), or in such other proportion totaling one hundred percent (100%) of such liability and expense as the Consenting Parties may agree. (3) If such Exclusive Operation has not been commenced within ninety (90) Days (excluding any extension specifically agreed by all Parties or allowed by the force majeure provisions of Article XVI), the right to conduct such Exclusive Operation shall terminate. If any Party still desires to conduct such Exclusive Operation, written notice proposing such operation must be resubmitted to the Parties in accordance with Article V, as if no proposal to conduct an Exclusive Operation had been previously made. 7.3 RESPONSIBILITY FOR EXCLUSIVE OPERATIONS (A) The Consenting Parties shall bear in accordance with the Participating Interests agreed under Article 7.2(E) the entire cost and liability of conducting an Exclusive Operation and shall indemnify the Non-Consenting Parties from any and all costs and liabilities incurred incident to such Exclusive Operation (including but not limited to all costs, expenses or liabilities for environmental, consequential, punitive or any other similar indirect damages or losses arising from business interruption, reservoir or formation damage, inability to produce petroleum, loss of profits, pollution control and environmental amelioration or rehabilitation) and shall keep the Contract Area free and clear of all liens and encumbrances of every kind created by or arising from such Exclusive Operation. (B) Notwithstanding Article 7.3(A), each Party shall continue to bear its Participating Interest share of the cost and liability incident to the operations in which it participated, including but not limited to plugging and abandoning and restoring the surface location, but only to the extent those costs were not increased by the Exclusive Operation. 7.4 CONSEQUENCES OF EXCLUSIVE OPERATIONS (A) With regard to any Exclusive Operation, for so long as a Non-Consenting Party has the option to re-instate the rights it relinquished under Article 7.4(B) below, such Non-Consenting Party shall be entitled to have access concurrently with the Consenting Parties, to all data and other information relating to such Exclusive Operation, other than G & G Data obtained in an Exclusive Operation. If a Non-Consenting Party desires to receive and acquire the right to use such G & G Data, then such Non-Consenting Party shall have the right to do so by paying to the Consenting Parties its Participating Interest share as set out in Article 3.1(A) of the cost incurred in obtaining such G & G Data. (B) With regard to any Exclusive Operation and subject to Article 7.4(C) and Article 7.8 below, each Non-Consenting Party shall be deemed to have relinquished to the Consenting Parties, and the Consenting Parties shall be deemed to own, in proportion to their respective Participating Interests in the Exclusive Operation: (1) All of each such Non-Consenting Party's right to participate in further operations on any Discovery made in the course of such Exclusive Operation; and (2) All of each such Non-Consenting Party's right pursuant to the Contract to take and dispose of Hydrocarbons produced and saved: (a) From the well in which such Exclusive Operation was conducted, and (b) From any wells drilled to appraise or develop a Discovery. (C) A Non-Consenting Party shall have the following and only the following options to reinstate the rights it relinquished pursuant to Article 7.4(B): (1) If the Consenting Parties decide to appraise a Discovery made in the course of an Exclusive Operation, the Consenting Parties shall submit to each Non-Consenting Party the approved appraisal program. For thirty (30) Days (or forty-eight (48) hours if the drilling rig which is to be used in such appraisal program is standing by in the Contract Area) from receipt of such appraisal program, each Non-Consenting Party shall have the option to reinstate the rights it relinquished pursuant to Article 7.4(B) and to participate in such appraisal program. The Non-Consenting Party may exercise such option by notifying Operator within the period specified above that such Non-Consenting Party agrees to bear its Participating Interest share of the expense and liability of such appraisal program, to pay
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the lump sum amount as set out in Article 7.5(A) and to pay the Cash Premium as set out in Article 7.5(B). (2) If the Consenting Parties decide to develop a Discovery made or appraised in the course of an Exclusive Operation, the Consenting Parties shall submit to the Non-Consenting Parties a Development Plan substantially in the form intended to be submitted to the Government under the Contract. For sixty (60) Days from receipt of such Development Plan or such lesser period of time prescribed by the Contract, each Non-Consenting Party shall have the option to reinstate the rights it relinquished pursuant to Article 7.4(B) and to participate in such Development Plan. The Non-Consenting Party may exercise such option by notifying the Party proposing to act as Operator for such Development Plan within the period specified above that such Non-Consenting Party agrees to bear its Participating Interest share of the liability and expense of such Development Plan and such future operating and producing costs, to pay the lump sum amount as set out in Article 7.5(A) and to pay the Cash Premium as set out in Article 7.5(B). (D) If a Non-Consenting Party does not properly and in a timely manner exercise such option, including paying in a timely manner in accordance with Article 7.5, all lump sum amounts and Cash Premiums, if any, due to the Consenting Parties, such Non-Consenting Party shall have forfeited the options as set out in Article 7.4(C) and the right to participate in the proposed program, unless such program, plan or operation is materially modified or expanded. (E) A Non-Consenting Party shall become a Consenting Party with regard to an Exclusive Operation at such time as the Non-Consenting Party gives proper notice pursuant to Article 7.4(C); provided that such Non-Consenting Party shall in no way be deemed to be entitled to any lump sum amount Cash Premium paid incident to such Exclusive Operation. The Participating Interest of such Non-Consenting Party in such Exclusive Operation shall be its Participating Interest set out in Article 3.1(A). The Consenting Parties shall contribute in proportion to their respective Participating Interests in such Exclusive Operation, the Participating Interest of the Non-Consenting Party. If all Parties participate in the proposed operation, then such operation shall be conducted as a Joint Operation pursuant to Article V. (F) If after the expiry of the period in which a Non-Consenting Party may exercise its option to participate in a Development Plan, the Consenting Parties desire to proceed with the said Development Plan, the Party chosen by the Consenting Parties to act as Operator for such development, shall give notice to the Government under the appropriate provision of the Contract requesting a meeting to advise the Government that the Consenting Parties consider the Discovery to be a Commercial Discovery. Following such meeting such Operator for such development shall apply for an Exploitation Area. Unless the Development Plan is materially modified or expanded prior to the commencement of operations under such plan, each Non-Consenting Party to such Development Plan shall not participate in such Exploitation Area covering such development and shall forfeit all interest in such Exploitation Area. Such Non-Consenting Party shall be deemed to have withdrawn from this Agreement to the extent it relates to such Exploitation Area, even if the Development Plan is modified or expanded subsequent to the commencement of operations under such Development Plan. 7.5 PREMIUM TO PARTICIPATE IN EXCLUSIVE OPERATIONS (A) Within thirty (30) Days of the exercise of its option under Article 7.4(C), each such Non-Consenting Party shall pay in immediately available funds to the Consenting Parties who took the risk of such Exclusive Operations in proportion to their respective Participating Interests in such Exclusive Operations a lump sum amount payable in the currency designated by such Consenting Parties. Such lump sum amount shall be equal to such Non-Consenting Party's Participating Interest share of all liabilities and expenses, including overhead, that were incurred in Exclusive Operations relating to the Discovery, or well, as the case may be, in which the Non-Consenting Party desires to reinstate the rights it relinquished pursuant to Article 7.4(B), and that were not previously paid by such Non-Consenting Party. (B) In addition to Article 7.5(A), if a Cash Premium is due, then within thirty (30) Days of the exercise of its option under Article 7.4(C) each such Non-Consenting Party shall pay in immediately available funds, in the currency designated by the Consenting Parties who took the risk of such Exclusive Operations, to such Consenting Parties in proportion to their respective Participating Interests a Cash Premium equal to the total of: (1) Two hundred percent (200%) of such Non-Consenting Party's Participating Interest share of all liabilities and expenses, including overhead, that were incurred in any Exclusive Operations relating to the obtaining of the portion of the G & G Data which pertains to the Discovery, and that were not previously paid by such Non-Consenting Party; plus (2) Eight hundred percent (800%) of such Non-Consenting Party's Participating Interest share of all liabilities and expenses, including overhead, that were incurred in any Exclusive Operations relating to the drilling, Deepening, Testing, Completing, Sidetracking, Plugging Back, Recompleting and Reworking of the Exploration Well which made the Discovery in which the Non-Consenting Party desires to reinstate the rights it relinquished pursuant to Article 7.4(B), and that were not previously paid by such Non-Consenting Party; plus

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(3) Five hundred percent (500%) of the Non-Consenting Party's Participating Interest share of all liabilities and expenses, including overhead, that were incurred in any Exclusive Operations relating to the drilling, Deepening, Testing, Completing, Sidetracking, Plugging Back, Recompleting and Reworking of the Appraisal Well(s) which delineated the Discovery in which the Non-Consenting Party desires to reinstate the rights it relinquished pursuant to Article 7.4(B), and that were not previously paid by such Non-Consenting Party. 7.6 ORDER OF PREFERENCE OF OPERATIONS (A) Except as otherwise specifically provided in this Agreement, if any Party desires to propose the conduct of an operation that will conflict with an existing proposal for an Exclusive Operation, such Party shall have the right exercisable for five (5) Days, or twenty-four (24) hours if the drilling rig to be used is standing by in the Contract Area, from receipt of the proposal for the Exclusive Operation, to deliver to all Parties entitled to participate in the proposed operation such Party's alternative proposal. Such alternative proposal shall contain the information required under Article 7.2(A). (B) Each Party receiving such proposals shall elect by delivery of notice to Operator within the appropriate response period set out in Article 7.2(B) to participate in one of the competing proposals. Any Party not notifying Operator within the response period shall be deemed not to have voted. (C) The proposal receiving the largest aggregate Participating Interest vote shall have priority over all other competing proposals. In the case of a tie vote, the Operator shall choose among the proposals receiving the largest aggregate Participating Interest vote. Operator shall deliver notice of such result to all Parties entitled to participate in the operation within five (5) Days of the end of the response period, or twenty-four (24) hours if the drilling rig to be used is standing by in the Contract Area. (D) Each Party shall then have two (2) Days (or twenty-four (24) hours if the drilling rig to be used is standing by in the Contract Area) from receipt of such notice to elect by delivery of notice to Operator whether such Party will participate in such Exclusive Operation, or will relinquish its interest pursuant to Article 7.4(B). Failure by a Party to deliver such notice within such period shall be deemed an election not to participate in the prevailing proposal. 7.7 STAND BY COSTS (A) When an operation has been performed, all tests have been conducted and the results of such tests furnished to the Parties, stand by costs incurred pending response to any Party's notice proposing an Exclusive Operation for Deepening, Testing, Sidetracking, Completing, Plugging Back, Recompleting, Reworking or other further operation in such well (including the period required under Article 7.6 to resolve competing proposals) shall be charged and borne as part of the operation just completed. Stand by costs incurred subsequent to all Parties responding, or expiration of the response time permitted, whichever first occurs, shall be charged to and borne by the Parties proposing the Exclusive Operation in proportion to their Participating Interests, regardless of whether such Exclusive Operation is actually conducted. (B) If a further operation is proposed while the drilling rig to be utilized is on location, any Party may request and receive up to five (5) additional Days after expiration of the applicable response period specified in Article 7.2(B) within which to respond by notifying Operator that such Party agrees to bear all stand by costs and other costs incurred during such extended response period. Operator may require such Party to pay the estimated stand by time in advance as a condition to extending the response period. If more than one Party requests such additional time to respond to the notice, stand by costs shall be allocated between such Parties on a Day-to-Day basis in proportion to their Participating Interests. 7.8 SPECIAL CONSIDERATION REGARDING DEEPENING AND SIDETRACKING (A) An Exclusive Well shall not be deepened or sidetracked without first affording the Non-Consenting Parties in accordance with this Article the opportunity to participate in such operation. (B) In the event any Consenting Party desires to Deepen or Sidetrack an Exclusive Well, such Party shall initiate the procedure contemplated by Article 7.2. If a Deepening or Sidetracking operation is approved pursuant to such provisions, and if any Non-Consenting Party to the Exclusive Well elects to participate in such Deepening or Sidetracking operation, the payment, if any, pursuant to Article 7.5 of such Non-Consenting Party shall be calculated based on the following liabilities and expenses: (1) If the proposal is to Deepen or Sidetrack and is made prior to the Completion of such well as a Commercial Discovery, then payment shall be based on such Non-Consenting Party's Participating Interest share of the liabilities and expenses incurred in connection with drilling the Exclusive Well from the surface to the depth previously drilled which such Non-Consenting Party would have paid had such Non-Consenting Party agreed to participate in such Exclusive Well, plus the Non-Consenting Party's Participating Interest share of the liabilities and expenses of Deepening or Sidetracking and of participating in any further operations on such Exclusive Well in
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accordance with the other provisions of this Agreement; provided, however, all liabilities and expenses for Testing and Completing or attempting Completion of the well incurred by Consenting Parties prior to the commencement of actual operations to Deepen or Sidetrack beyond the depth previously drilled shall be for the sole account of Consenting Parties in the proportion their Participating Interest bears to the aggregate of their Participating Interests. (2) If the proposal is to Deepen or Sidetrack and is made for an Exclusive Well that has been previously Completed as a Commercial Discovery, but is no longer producing, then payment shall be based on the Non-Consenting Party's Participating Interest share of all costs of drilling and Completing said well from the surface to the depth previously drilled, calculated in the manner provided in Article 7.8(B)(1), less those costs recouped by the Consenting Parties from the sale of production from such Exclusive Well, plus the Non-Consenting Party's Participating Interest share of all costs of re-entering said well, plus the Non-Consenting Party's proportionate part (based on the percentage of the Exclusive Well such Non-Consenting Party would have owned had it previously participated in such Exclusive Well) of the costs of salvable materials and equipment remaining in the hole and salvable surface equipment used in connection with such well shall be determined in accordance with the Accounting Procedure. If at the time such Deepening or Sidetracking operation is conducted the Consenting Parties have recouped from the Exclusive Well the amount calculated pursuant to Article 7.5, then a Non-Consenting Party may participate in the Deepening or Sidetracking of the Exclusive Well with no payment for liabilities and expenses incurred prior to re-entering the well for Deepening or Sidetracking. 7.9 MISCELLANEOUS (A) Each Exclusive Operation shall be carried out by the Operator on behalf of and at the expense of the Consenting Parties. For Exclusive Operations, the Consenting Parties shall act as the Operating Committee, subject to the provisions of this Agreement applied mutatis mutandis to such Exclusive Operation and subject to the terms and conditions of the Contract. (B) The computation of liabilities and expenses incurred in Exclusive Operations, including the liabilities and expenses of Operator for conducting such operations, shall be made in accordance with the principles set out in the Accounting Procedure. (C) Operator shall maintain separate books, financial records and accounts for Exclusive Operations which shall be subject to the same rights of audit and examination as the Joint Account and related records, all as provided in the Accounting Procedure. Said rights of audit and examination shall extend to each of the Consenting Parties and each of the Non-Consenting Parties so long as the latter are, or may be, entitled to elect to participate in such operations. (D) Operator, if it is not a Consenting Party and it is conducting an Exclusive Operation for the Consenting Parties, shall be entitled to request cash advances and shall not be required to use its own funds to pay any cost and expense and shall not be obliged to commence or continue Exclusive Operations until cash advances requested have been made, and the Accounting Procedure shall apply to Operator in respect of any Exclusive Operations conducted by it. (E) Should the submission of a Development Plan be approved in accordance with Article 5.9, or should any Party propose a development in accordance with Article VII, with either proposal not calling for the conduct of additional appraisal drilling, and should any Party wish to drill an additional Appraisal Well prior to development, then the Party proposing the Appraisal Well as an Exclusive Operation shall be entitled to proceed first, but without the right to future reimbursement of costs or to any Premium, pursuant to Article 7.5. If, as the result of drilling such Appraisal Well as an Exclusive Operation, the Party proposing to apply for an Exploitation Area decides to not develop the reservoir, then each Non-Consenting Party who voted in favor of such Development Plan prior to the drilling of such Appraisal Well shall pay to the Consenting Party the amount such Non-Consenting Party would have paid had such Appraisal Well been drilled as a Joint Operation. (F) In the case of any Exclusive Operation for Deepening, Testing, Completing, Sidetracking, Plugging Back, Recompleting or Reworking, the Consenting Parties shall be permitted to use, free of cost, all casing, tubing and other equipment in the well, that is not needed for Joint Operations, but the ownership of all such equipment shall remain unchanged. On abandonment of a well after such Exclusive Operation, the Consenting Parties shall account for all such equipment to the Parties who shall receive their respective Participating Interest shares, in value, less cost of salvage. (G) If the Operator is a Non-Consenting Party to an Exclusive Operation to develop a new Discovery, then subject to obtaining any necessary Government approval the Operator may resign, but in any event shall resign on the request of the Consenting Parties, as Operator for the Exploitation Area for such Discovery and the Consenting Parties shall select a Party to serve as Operator. ARTICLE VIII - DEFAULT 8.1 DEFAULT AND NOTICE Any Party that fails to pay when due its Participating Interest share of Joint Account expenses including cash advances and interest, if any, accrued pursuant to this Agreement, subject to Section 1.6.2, (a "Defaulting Party") shall be in default under this Agreement.
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Operator, or any other Party in the case of the default of Operator, shall promptly give written notice of such default to such Party and each of the non-defaulting Parties, but not later than the third Business Day from the due date. If the Operator is in default, it shall issue notice to the other Parties on the third Business Day after the due date. The amount not paid by the Defaulting Party shall bear interest from the date due until paid in full. Interest "Agreed Interest Rate" will be calculated using the rates specified below: From due date through fifth Business Day, interest is LIBOR + 0.5 From sixth through thirtieth Business Day, interest is LIBOR + 1.5 From thirty-first through forty-sixth Business Day, interest is LIBOR + 3.0 Beyond forty-sixth Business Day, interest is LIBOR + 5.0 8.2 OPERATING COMMITTEE MEETINGS AND DATA After any default has continued for thirty (30) Business Days from the date of written notice of default under Article 8.1, and for as long thereafter as the Defaulting Party remains in default on any payment due under this Agreement, the Defaulting Party shall not be entitled to vote on any matter coming before the Operating Committee during the period such default continues. Unless agreed otherwise by the non-defaulting Parties, the voting interest of each non-defaulting Party shall be in the proportion which its Participating Interest bears to the total of the Participating Interest of all the non-defaulting Parties. Any matters requiring unanimous vote of the Parties shall be deemed to exclude the Defaulting Party. Notwithstanding the foregoing, the Defaulting Party shall be deemed to have approved, and shall join with the non-defaulting Parties in taking any action to maintain and preserve the Contract. 8.3 ALLOCATION OF DEFAULTED ACCOUNTS (A) Operator shall, either at the time of giving notice of default as provided in Article 8.1, or by separate notice, notify each non-defaulting Party of the sum of money it is to pay as its portion (such portion being in the ratio that each non-defaulting Party's Participating Interest bears to the Participating Interests of all non-defaulting Parties) of such amount in default. Each non-defaulting Party shall, if such default continues, pay Operator, within ten (10) Business Days after receipt of such notice, its share of the amount which the Defaulting Party failed to pay. If any non-defaulting Party fails to pay its share of the amount in default as aforesaid, such non-defaulting Party shall thereupon be in default and shall be a Defaulting Party subject to the provisions of this Article. The non-defaulting Parties which pay the amount owed by any Defaulting Party shall be entitled to receive their respective share of the principal and interest payable by such Defaulting Party pursuant to Article 8.1. (B) The total of all amounts paid by the non-defaulting Parties for the Defaulting Party, together with interest accrued on such amounts shall constitute a debt due and owing by the Defaulting Party to the non-defaulting Parties in proportion to such amounts paid. In addition, the non-defaulting Parties may in the manner contemplated by this Article, satisfy such debt (together with interest) and may accrue an amount equal to the Defaulting Party's Participating Interest share of the estimated cost to abandon any Joint Property. (C) A Defaulting Party may remedy its default by paying to Operator the total amount due, together with interest calculated as provided in Article 8.1, at any time prior to a transfer of its interest pursuant to Article 8.4, and, upon receipt of such payment, Operator shall remit to each non-defaulting Party its proportionate share of such amount. (D) The rights granted to each non-defaulting Party pursuant to this Article shall be in addition to and not in substitution for any other rights or remedies which each non-defaulting Party may have at law or equity or pursuant to the other provisions of this Agreement. 8.4 TRANSFER OF INTEREST (A) For thirty (30) Days after each failure by the Defaulting Party to remedy its default by the ninetieth (90th) Day following notice of default without prejudice to any other rights of the non-defaulting Parties to recover the amounts paid for the Defaulting Party, together with interest accrued on such amount, each non-defaulting Party shall have the option to give notice to the Defaulting Party requiring the Defaulting Party to transfer, as specified in Article 8.4(E), its interest to the non-defaulting Parties. To that end if any of the non-defaulting Parties so elect, the Defaulting Party shall be deemed to have transferred and to have empowered the electing non-defaulting Parties to execute on said Defaulting Party's behalf any documents required to effect a transfer of all of its right, title and beneficial interest in and under this Agreement and the Contract and in all wells and Joint Property to the electing non-defaulting Parties. If requested, each Party shall execute a Power of Attorney in the form prescribed by the Operating Committee. The Defaulting Party shall, without delay following any request from the non-defaulting Parties, do any and all acts required to be done by applicable law or regulation in order to render such transfer legally valid, including, without limitation, the obtaining of all governmental consents and approvals, and shall execute any and all documents and take such other actions as may be necessary in order to effect prompt and valid transfer of the interests described above, free of all liens and encumbrances. In the event all Government approvals are not timely obtained, the Defaulting Party shall hold its Participating Interest in trust for such non-defaulting Parties who elected to assume such
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Defaulting Party's Participating Interest. (B) In the absence of an agreement among the non-defaulting Parties to the contrary, any such transfer to the non-defaulting Parties shall be in the proportion that the non-defaulting Parties have paid the amounts due from the Defaulting Party. (C) Subject to Article 12.1(C), on the effective date of transfer of all its Participating Interest, the Defaulting Party shall forthwith cease to be a Party to this Agreement to the extent of the Participating Interest so transferred. The acceptance or non-acceptance by a non-defaulting Party of any portion of a Defaulting Party's Participating Interest shall be without prejudice to any rights or remedies such non-defaulting Parties have to recover the outstanding debts (including interest) owed by the Defaulting Party. (D) Notwithstanding the above, if pursuant to any mutual agreement between any of the Parties, one of the Parties makes an additional contribution on behalf of another Party, the same will not be treated as a Default of the other Party under this Agreement and Contract. Such contribution shall not change the Participating Interest of the Parties. (E) In the event that the default continues for more than ninety (90) days (the "Default Period") and the Defaulting Party does not pay the amount in default plus accrued interest by the end of such time, a proportion of the Participating Interest of such Defaulting Party shall, at the sole election of the Non-Defaulting Parties who wish to acquire such interest, be forfeited to such Non-Defaulting Parties to reflect the ratio that the cumulative contributions of the Defaulting Party bears to the total cumulative contributions of all the Parties to Joint Operations costs, so that following such forfeiture the remaining Participating Interest of the Defaulting Party as a proportion of the total Participating Interests of all the Parties is equal to the said ratio. Following such forfeiture, the reduced Participating Interest of the Defaulting Party shall be in accordance with the following formula: A = B/C where: A = the reduced Participating Interest of the Defaulting Party, and B = the total contributions to Joint Operations costs of the Defaulting Party up to but not including the amount in default, and C = the total contributions to Joint Operations costs of all the Parties up to and including the amount in default. Such forfeiture will not restore the Defaulting Party's powers and rights forfeited under Article 8.2 until such Defaulting Party has paid, in full, the first Cash Call following the date of such forfeiture. The Defaulting Party shall execute such documents as are necessary to transfer its Participating Interest at its sole cost. Notwithstanding the provisions of this Article, in the event that as a result of a forfeiture by the Defaulting Party of a part of its Participating Interest pursuant to the provisions of this Article, the remaining Participating Interest the Defaulting Party falls below ten percent (10%) the Non-Defaulting Parties shall assume such Participating Interest of the Defaulting Party in proportion to their Participating Interest or in such other proportion as may be agreed by them. The Defaulting Party shall execute such documents as are necessary to transfer its remaining Participating Interest at its sole cost. 8.5 CONTINUATION OF INTEREST If within thirty (30) Days after each failure by the Defaulting Party to remedy its default by the ninetieth (90th) Day following notice of default the non-defaulting Parties elect to not acquire the Defaulting Party's Participating Interest as provided in Article 8.4 and to continue to bear the Defaulting Party's Participating Interest share of liabilities and expenses, then the non-defaulting Parties shall accumulate all such liabilities and expenses as a debt pursuant to Article 8, but the Defaulting Party shall continue to be a Party subject to Article 8.2 and Article 8.7. If Operator disposes of any Joint Property or any other credit or adjustment is made to the Joint Account, or if Operator sells any of the Defaulting Party's Participating Interest share of Hydrocarbons, then, in respect of the Defaulting Party's Participating Interest share of the proceeds of such disposal, credit or adjustment or sale, Operator shall be entitled to retain and to set off the same against all amounts, together with interest accrued on such amount, due and owing from the Defaulting Party plus an accrued amount equal to the Defaulting Party's Participating Interest share of the estimated cost to abandon any Joint Property. Any surplus remaining after setting off the same as aforesaid shall be paid promptly to the Defaulting Party. 8.6 ABANDONMENT If, within thirty (30) Days after the failure by the Defaulting Party to remedy its default by the ninetieth (90th) Day as aforesaid, no non-defaulting Party elects to acquire the Defaulting Party's Participating Interest as provided in Article 8.4, or to bear the Defaulting Party's Participating Interest share of liabilities and expenses as provided in Article 8.5, then no transfer shall be made and Joint Operations shall be abandoned subject to any necessary consents and notices being given and each Party, including the Defaulting
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Party shall pay its Participating Interest share of all costs of abandoning and relinquishing the Contract. If abandonment occurs as aforesaid, all monies paid by the non-defaulting Parties for the Defaulting Party pursuant to Article 8.3, together with interest accrued on such amount, shall remain a debt due and owing by the Defaulting Party. 8.7 SALE OF HYDROCARBONS Notwithstanding anything here else contained in this Agreement, if a Party defaults after the commencement of commercial production and has not remedied the default by the ninetieth (90th) Day as aforesaid, then, during the continuance of such default, the Defaulting Party shall not be entitled to its Participating Interest share of Hydrocarbons which shall vest in and be the property of the non-defaulting Parties, and Operator shall be authorized to sell such Hydrocarbons at the best price obtainable under the circumstances, and, after deducting all costs, charges and expenses incurred by Operator in connection with such sale, pay the proceeds proportionately to the non-defaulting Parties, which proceeds shall be credited against all monies advanced pursuant to Article 8.3, together with interest accrued thereon. Any surplus remaining shall be paid to the Defaulting Party, and any deficiency shall remain a debt due from the Defaulting Party to the non-defaulting Parties. As soon as the deficiency is satisfied, the Defaulting Party's rights shall be restored. 8.8 NO RIGHT OF SET OFF Each Party acknowledges and accepts that a fundamental principle of this Agreement is that each Party pays its Participating Interest share of all amounts due under this Agreement as and when required. Accordingly, any Party which becomes a Defaulting Party undertakes that, in respect of either any exercise by the non-defaulting Parties of any rights under or the application of any of the provisions of this Article, such Party shall not raise by way of set off or invoke as a defense, whether in law or equity, any failure to pay amounts due and owing under this Agreement or any alleged or unliquidated claim that such Party may have against Operator or any Non-Operator, whether such claim arises under this Agreement or otherwise. Such Party further undertakes not to raise by way of defense, whether in law or in equity, that the nature or the amount of the remedies granted to the non-defaulting Parties is unreasonable or excessive. 8.9 MINOR DEFAULT Notwithstanding the provisions of this Article 8, Articles 8.2 and 8.4 shall have no effect provided the total amount of funds in default is less than One Million United States Dollars (US$1,000,000). 8.10 REINSTATEMENT OF RIGHTS In the event that the default is found to be in error, either through arbitration or otherwise, the Defaulting Party's rights shall be reinstated as determined by the arbitrators or, if not subjected to arbitration, as otherwise found to be reasonably appropriate. ARTICLE IX - DISPOSITION OF PRODUCTION 9.1 RIGHT AND OBLIGATION TO TAKE IN KIND Except as otherwise provided in this Article, each Party shall have the right and obligation to own, take in kind and separately dispose of its Participating Interest share of total production available to the Parties pursuant to the Contract from any Exploitation Area in such quantities and in accordance with such procedures as may be set forth in the offtake agreement referred to in Article 9.2 or in the special arrangements for natural gas referred to in Article 9.3. If Government is party to the offtake agreement, then the Parties shall endeavor to obtain its agreement to the principles set forth in this Article. 9.2 OFFTAKE AGREEMENT FOR CRUDE OIL If crude oil is to be produced from an Exploitation Area, the Parties shall in good faith, negotiate and conclude the terms of an agreement to cover the offtake of crude oil produced under the Contract. The Government may, if necessary and practicable, also be party to the offtake agreement. This offtake agreement shall, to the extent consistent with the Contract, make provision for: (A) The delivery point, at which title and risk of loss of Participating Interest shares of crude oil shall pass to the Parties interested (or as the Parties may otherwise agree); (B) Operator's regular periodic advice to the Parties of estimates of total available production for succeeding periods, Participating Interest shares, and grades of crude oil for as far ahead as is necessary for Operator and the Parties to plan offtake arrangements. Such advice shall also cover for each grade of crude oil total available production and deliveries for the preceding period, inventory and overlifts and underlifts;

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(C) Nomination by the Parties to Operator of acceptance of their Participating Interest share of total available production for the succeeding period. Such nominations shall in any one period be for each Party's entire Participating Interest share arising during that period subject to operational tolerances and agreed minimum economic cargo sizes or as the Parties may otherwise agree; (D) Elimination of overlifts and underlifts; (E) If offshore loading or a shore terminal for vessel loading is involved, risks regarding acceptability of tankers, demurrage and (if applicable) availability of berths; (F) Distribution to the Parties of Entitlements to ensure, to the extent Parties take delivery of their Entitlements in proportion to the accrual of such Entitlements, that each Party shall receive currently Entitlements of grades, gravities and qualities of Hydrocarbons similar to Hydrocarbons received by each other Party. (G) To the extent that distribution of Entitlements on such basis is impracticable due to availability of facilities and minimum cargo sizes, a method of making periodic adjustments; and (H) The option and the right of the other Parties to sell an Entitlement which a Party fails to nominate for acceptance pursuant to (C) above or of which a Party fails to take delivery, in accordance with applicable agreed procedures, provided that such failure either constitutes a breach of Operator's or Parties' obligations under the terms of the Contract, or is likely to result in the curtailment or shut-in of production. Such sales shall be made only to the limited extent necessary to avoid disruption in Joint Operations. Operator shall give all Parties as much notice as is practicable of such situation and that a sale option has arisen. Any sale shall be of the unnominated or undelivered Entitlement as the case may be and for reasonable periods of time as are consistent with the minimum needs of the industry and in no event to exceed twelve (12) months. The right of sale shall be revocable at will subject to any prior contractual commitments. Sales to non-affiliated third parties shall be for the realized price f.o.b. the delivery point. Sales to any of the Parties or their Affiliates shall be at current market value f.o.b. the delivery point. The Party arranging the sale shall pay to the Party whose Entitlement is involved the above price after deduction of all costs, including storage costs, incurred in respect of such sale and a marketing fee of an agreed percentage of the applicable price less deductions, reflecting actual costs of disposal at immediate notice. Current market value shall be the value of the Entitlement in international markets (unless the Entitlement was required to be delivered into the Government's domestic market, in which case it shall be the value therein) between a willing buyer and a willing seller and shall be agreed between the two Parties concerned, or failing agreement, determined by an expert to be appointed in accordance with procedures set forth in the offtake agreement. 9.3 SEPARATE AGREEMENT FOR NATURAL GAS The Parties recognize that it may be necessary for the Parties to enter into special arrangements for the disposal of the natural gas, which are consistent with the Development Plan and subject to the terms of the Contract. ARTICLE X - ABANDONMENT OF WELLS 10.1 ABANDONMENT OF WELLS DRILLED AS JOINT OPERATIONS (A) Any well which has been drilled as a Joint Operation and which is proposed to be plugged and abandoned shall not be plugged and abandoned without the consent of all Parties. (B) Should any such Party fail to reply within the period prescribed in Article 5.12(A)(1) or Article 5.12(A)(2), whichever is applicable, after delivery of notice of the Operator's proposal to plug and abandon such well, such Party shall be deemed to have consented to the proposed abandonment. If all the Parties consent to abandonment, such well shall be plugged and abandoned in accordance with applicable regulations and at the cost, risk and expense of the Parties who participated in the cost of drilling such well. (C) If there is a disagreement amongst the Parties regarding the abandonment of such well, those wishing to continue operations shall assume financial responsibility over the well and shall be deemed to be Consenting Parties conducting an Exclusive Operation pursuant to Article VII. In the case of a producing well, the Consenting Parties shall be entitled to continue producing only from the Zone open to production at the time they assumed responsibility for the well. (D) Consenting Parties taking over a well as provided above shall tender to each of the Non-Consenting Parties such Non-Consenting Parties' Participating Interest share of the value of the well's salvable material and equipment, determined in accordance with the Accounting Procedure, less the estimated cost of salvaging and the estimated cost of plugging and abandoning as of the date the Consenting Party assumed responsibility for the well; provided, however, that in the event the estimated cost of plugging and abandoning and the estimated cost of salvaging are higher than the value of the well's salvable material and equipment, each of the abandoning Parties shall continue to be liable pursuant to Article 7.3(B) for their respective Participating Interest shares of the estimated excess cost.
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(E) Each Non-Consenting Party shall be deemed to have relinquished to the Consenting Parties in proportion to their Participating Interests all of its interest in the wellbore of a produced well and related equipment in accordance with Article 7.4(B), insofar and only insofar as such interest covers the right to obtain production from that wellbore in the Zone then open to production. (F) Subject to Article 7.9(G), Operator shall continue to operate a produced well for the account of the Consenting Parties at the rates and charges contemplated by this Agreement, plus any additional cost and charges which may arise as the result of the separate allocation of interest in such well. 10.2 ABANDONMENT OF EXCLUSIVE OPERATIONS This Article shall apply mutatis mutandis to the abandonment of an Exclusive Well or any well in which an Exclusive Operation has been conducted; provided that no well shall be permanently plugged and abandoned unless and until all Parties having the right to conduct further operations in such well have been notified of the proposed abandonment and afforded the opportunity to elect to take over the well in accordance with the provisions of this Article X. ARTICLE XI - SURRENDER 11.1 SURRENDER (A) If the Contract requires the Parties to surrender any portion of the Contract Area, Operator shall advise the Operating Committee of such requirement at least one hundred and twenty (120) Days in advance of the earlier of the date for filing irrevocable notice of such surrender or the date of such surrender. Prior to the end of such period, the Operating Committee shall determine pursuant to Article V, the size and shape of the surrendered area, consistent with the requirements of the Contract. If no proposal attains the support of one hundred percent (100%) of the Participating Interests, then the proposal receiving the largest aggregate Participating Interest vote shall be adopted. The Parties shall execute any and all documents and take such other actions as may be necessary to effect the surrender. Each Party renounces all claims and causes of action against Operator and any other Parties on account of any area surrendered in accordance with the foregoing but against its recommendation if Hydrocarbons are subsequently discovered under the surrendered area. (B) A surrender of all or any part of the Contract Area which is not required by the Contract shall require the unanimous consent of the Parties. ARTICLE XII - TRANSFER OF INTEREST OR RIGHTS 12.1 OBLIGATIONS (A) Subject always to the requirements of the Contract, the transfer of all or part of a Party's Participating Interest shall be effective only if it satisfies the terms and conditions of this Article. (B) Except in the case of a Party transferring all of its Participating Interest, no transfer shall be made by any Party which results in the transferor or the transferee holding a Participating Interest of less than ten percent (10%) or holding any Interest other than a Participating Interest in the Contract, the Contract Area and this Agreement. (C) The transferring Party shall, notwithstanding the transfer, be liable to the other Parties for any obligations, financial or otherwise, which have vested, matured or accrued under the provision of the Contract or this Agreement prior to such transfer. Such obligations shall include, without limitation, any proposed expenditure approved by the Operating Committee, prior to the transferring Party notifying the other Parties of its proposed transfer. (D) The transferee shall have no rights in and under the Contract, the Contract Area or this Agreement unless and until it obtains any necessary Government approval and expressly undertakes in writing to perform the obligations of the transferor under the Contract and this Agreement in respect of the Participating Interest being transferred, to the satisfaction of the Parties and furnishes any guarantees required by the Government or the Contract. (E) The transferee shall have no rights in and under the Contract, the Contract Area or this Agreement unless each Party has consented in writing to such transfer, which consent shall be denied only if such transferee fails to establish to the reasonable satisfaction of each Party its financial or technical capability to perform its obligations under the Contract and this Agreement. (F) Nothing contained in this Article shall prevent a Party from mortgaging, pledging, charging or otherwise encumbering all or part of its interest in the Contract Area in and under this Agreement for the purpose of security relating to finance provided that:

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(1) such Party shall remain liable for all obligations relating to such interest; (2) the encumbrance shall be subject to the approval of the Management Committee and any necessary approval under the Contract and be expressly subordinated to the rights of the other Parties under this Agreement; and (3) such Party shall ensure that any such mortgage, pledge, charge or encumbrance shall be expressed to be without prejudice to the provisions of this Agreement. (G) In the event a Party receives an offer to purchase all or a part of its Participating Interest, it shall so notify the other Parties and they shall have the right for a period of ten (10) days to make an offer. If a Party elects to sell all or a part of its Participating Interest, it shall so notify the other Parties upon offering the Participating Interest for sale. 12.2 RIGHTS Each Party shall have the right, subject to the provisions of Article 12.1, to freely transfer its Participating Interest. ARTICLE XIII - WITHDRAWAL FROM AGREEMENT BY TRANSFER OR ASSIGNMENT 13.1 RIGHT OF WITHDRAWAL (A) Subject to the provisions of the Contract and this Article, any Party may withdraw from this Agreement and the Contract by giving notice to all other Parties stating its decision to withdraw and specifying a proposed effective date of withdrawal which shall be at least sixty (60) Days, but not more than one hundred eighty (180) Days after the date of such notice. Such notice shall be unconditional and irrevocable when given. (B) Notwithstanding Article 13.1(A) a Party shall not have the right to withdraw from this Agreement and the Contract until the Minimum Work Obligation set forth in the Contract has been fulfilled. However, if the Operating Committee or any Party decides to accept new Minimum Work Obligations under the Contract, a Party that voted against such decision shall not be prevented from withdrawing; provided that such Party delivers notice of its withdrawal to all Parties within thirty (30) Days of such vote and fully satisfies its outstanding Minimum Work Obligation, if any. (C) Subject to Articles 13.1(A) and (B) and Article 13.5, the effective date of withdrawal for a withdrawing Party shall be the later of: (1) The date proposed in the notice of withdrawal; or (2) The date that the withdrawing Party has fulfilled its obligations under this Article. 13.2 PARTIAL OR COMPLETE WITHDRAWAL (A) Within thirty (30) Days of receipt of each withdrawing Party's notification, each of the other Parties may also give notice that it desires to withdraw from this Agreement and the Contract. Should all Parties give notice of withdrawal, the Parties shall proceed to abandon the Contract Area and terminate the Contract and this Agreement. If less than all of the Parties give such notice of withdrawal, then the withdrawing Parties shall take all steps to withdraw from the Contract and this Agreement on the earliest possible date and execute and deliver all necessary instruments and documents to assign their Participating Interest to the Parties which are not withdrawing, without any compensation whatsoever, in accordance with the provisions of Article 13.6. (B) If any part of the withdrawing Party's Participating Interest remains unclaimed after sixty (60) Days from the date of the first notice of withdrawal, the Parties shall be deemed to have decided to withdraw from the Contract and this Agreement, unless at least one Party agrees to accept the unclaimed Participating Interest. (C) Any Party withdrawing under this Article shall withdraw from all exploration activities under the Contract, but not from any Exploitation Area, Commercial Discovery, or Discovery whether appraised or not, made prior to such withdrawal. Such withdrawing Party shall retain its rights in the Joint Property but only insofar as they relate to any Exploitation Area, Commercial Discovery or Discovery whether appraised or not, and shall abandon all other rights in the Joint Property. 13.3 VOTING After giving its notification of withdrawal, a Party shall not be entitled to vote on any matters coming before the Operating Committee, other than matters for which such Party has financial responsibility.

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13.4

OBLIGATIONS AND LIABILITIES (A) A withdrawing Party, prior to its withdrawal, shall satisfy all obligations and liabilities it has incurred or attributable to it prior to its withdrawal, including, without limitation, any expenditures budgeted and/or approved by the Operating Committee to its written notification of withdrawal (development projects included), and any liability for acts, occurrences or circumstances taking place or existing prior to its withdrawal. Furthermore, any liens, charges and other encumbrances which the withdrawing Party placed on such Party's Participating Interest prior to its withdrawal shall be fully satisfied or released, at the withdrawing Party's expense, prior to its withdrawal. A Party's withdrawal shall not relieve it from liability to the non-withdrawing Parties with respect to any obligations or liabilities attributable to the withdrawing Party which are not identified or identifiable at the time of withdrawal. (B) Notwithstanding the foregoing, a Party shall not be liable for any operations or expenditures it voted against if it sends notification of its withdrawal within five (5) Days (or within twenty-four (24) hours if the drilling rig to be used in such operation is standing by on the Contract Area) of the Operating Committee vote approving such operation or expenditure, nor shall such Party be liable for any operations or expenditures approved by the Operating Committee, excluding those approved pursuant to Article 13.5, after notice has been given pursuant to Article 13.1.

prior

13.5 EMERGENCY A Party's notification of withdrawal shall not become effective if prior to the proposed date of withdrawal a well goes out of control or a fire, blowout, sabotage or other emergency occurs. The notification of withdrawal shall become effective only after the emergency has been contained and the withdrawing Party has paid, or has provided security satisfactory to the Parties, for its Participating Interest share of the costs of such emergency. 13.6 ASSIGNMENT A withdrawing Party shall assign its Participating Interest to each of the non-withdrawing Parties which shall be allocated to them in the proportion which each of their Participating Interests (prior to the withdrawal) bears to the total Participating Interests of all the non-withdrawing Parties (prior to the withdrawal), unless the non-withdrawing Parties agree otherwise. The expenses associated with the withdrawal and assignments shall be borne by the withdrawing Party. 13.7 APPROVALS A withdrawing Party shall promptly join in such actions as may be necessary or desirable to obtain any Government approvals required in connection with the withdrawal and assignments, and any penalties or expenses incurred by the Parties in connection with such withdrawal shall be borne by the withdrawing Party. 13.8 ABANDONMENT SECURITY (A) A withdrawing Party shall provide Security satisfactory to the other Parties to satisfy any such obligations or liabilities which were approved or accrued prior to notice of withdrawal, but which become due after its withdrawal, including, without limitation, Security to cover the costs of an abandonment, if applicable. (B) Failure to provide Security shall constitute default under this Agreement.
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(C) "Security" means a standby letter of credit issued by a bank or an on demand bond issued by a corporation, such bank or corporation having a credit rating indicating it has sufficient worth to pay its obligations in all reasonably foreseeable circumstances, or, failing the provision of either of those, cash contributed to a secure fund administered by independent trustees and invested in short term securities. 13.9 WITHDRAWAL OR ABANDONMENT BY ALL PARTIES In the event all Parties decide to withdraw or are required to do so pursuant to this Article, the Parties agree that they shall be bound by the terms and conditions of this Agreement and the Contract for so long as may be necessary to wind up the affairs of the Parties with the Government, to satisfy any requirements of applicable law and facilitate the sale, disposition or abandonment of property or interests held by the Joint Account. ARTICLE XIV - RELATIONSHIP OF PARTIES AND TAX 14.1 RELATIONSHIP OF PARTIES Unless otherwise specified, the rights, duties, obligations and liabilities of the Parties under this Agreement shall be individual, not joint or collective. It is not the intention of the Parties to create, nor shall this Agreement be deemed or construed to create a mining or other partnership, joint venture, association or trust, or as authorizing any Party to act as an agent, servant or employee for any other Party for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each other under this Agreement, the Parties shall not be considered fiduciaries except as expressly provided in this Agreement. 14.2 TAX Each Party shall be responsible for reporting and discharging its own tax measured by the income of the Party and the satisfaction of such Party's share of all contract obligations under the Contract and under this Agreement. Each Party shall protect, defend and indemnify each other Party from any and all loss, cost or liability arising from a failure or refusal to report and discharge such taxes or satisfy such obligations. ARTICLE XV - CONFIDENTIAL INFORMATION PROPRIETARY TECHNOLOGY 15.1 CONFIDENTIAL INFORMATION (A) Subject to the provisions of the Contract, the Parties agree that all information and data acquired or obtained by any Party in respect of Joint Operations shall be considered confidential and shall be kept confidential and not be disclosed during the term of the Contract and for a period of one (1) year after expiration of the Contract to any person or entity not a Party to this Agreement, except: (1) To an Affiliate, in connection with Petroleum Operations, provided such Affiliate maintains confidentiality as provided in this Article; (2) To a governmental agency or other entity when required by the Contract; (3) To the extent such data and information is required to be furnished in compliance with any applicable laws or regulations, or pursuant to any legal proceedings or because of any order of any court binding upon a Party; (4) Subject to Article 15.1(B), to potential contractors, contractors, consultants and attorneys employed by any Party where disclosure of such data or information is essential to such contractor's, consultant's or attorney's work; (5) Subject to Article 15.1(B), to a bona fide prospective transferee of a Party's Participating Interest (including an entity with whom a Party or its Affiliates is conducting bona fide negotiations directed toward a merger, consolidation or the sale of a majority of its or an Affiliate's shares); (6) Subject to Article 15.1(B), to a bank or other financial institution to the extent appropriate to a Party arranging for funding for its obligations under this Agreement; (7) To the extent such data and information must be disclosed pursuant to any rules or requirements of any government or stock exchange having jurisdiction over such Party, or its Affiliates; provided that if any Party desires to disclose information in an annual or periodic report to its or its Affiliates' shareholders and to the public and such disclosure is not required pursuant to any rules or requirements of any government or stock exchange, then such Party shall comply with Article 20.2;
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(8) To its respective employees for the purposes of Joint Operations, subject to each Party taking customary precautions to ensure such data and information is kept confidential; (9) Where any data or information which, through no fault of a Party, becomes a part of the public domain. (B) Disclosure as pursuant to Article 15.1(A)(4), (5), and (6) shall not be made unless prior to such disclosure the disclosing Party has obtained a written undertaking from the recipient party to keep the data and information strictly confidential and not to use or disclose the data and information except for the express purpose for which disclosure is to be made. 15.2 CONTINUING OBLIGATIONS Any Party ceasing to own a Participating Interest during the term of this Agreement shall nonetheless remain bound by the obligations of confidentiality and any disputes shall be resolved in accordance with Article XVIII. 15.3 PROPRIETARY TECHNOLOGY (A) Nothing in this Agreement shall require a Party to divulge proprietary technology to the other Parties; provided that where the cost of development of proprietary technology has been charged to the Joint Account, such proprietary technology shall be disclosed to all Parties bearing a portion of such cost and may be used by such Party or its Affiliates in other operations. Operator will not charge for the use of its proprietary technology. Operator will use reasonable efforts to keep Non-Operators informed of the use of the proprietary technology. (B) Non-Operators shall have access to basic field data obtained through Operator's utilization of proprietary technology and to final maps, data and information resulting from such utilization, with entitlement to copies of such basic final data, maps and information as provided for in this Agreement. 15.4 TRADES Notwithstanding the foregoing provisions of this Article, Operator may, with approval of the Management Committee, make data trades for the benefit of the Parties, with any data, the cost of which has been charged to the Joint Account, so obtained to be furnished to all Parties. In such event, Operator must enter into an undertaking with any third party to such trade to keep such information confidential. ARTICLE XVI - FORCE MAJEURE 16.1 OBLIGATIONS If as a result of Force Majeure any Party is rendered unable, wholly or in part, to carry out its obligations under this Agreement, other than the obligation to pay any amounts due or to furnish security, then the obligations of the Party giving such notice, so far as and to the extent that the obligations are affected by such Force Majeure, shall be suspended during the continuance of any inability so caused, but for no longer period. The Party claiming Force Majeure shall notify the other Parties of the Force Majeure situation within seven (7) days, unless prevented from so doing, after the occurrence of the facts relied on and shall keep all Parties informed of all significant developments. Such notice shall give particulars establishing the event of Force Majeure, and also estimate the period of time which said Party will probably require to remedy the Force Majeure. The affected Party shall use all reasonable diligence to remove or overcome the Force Majeure situation as quickly as possible in an economic manner, but shall not be obligated to settle any labor dispute except on terms acceptable to it and all such disputes shall be handled within the sole discretion of the affected Party. 16.2 DEFINITION OF FORCE MAJEURE (A) For the purpose of this Agreement, the term Force Majeure means any cause or event, other than the unavailability of funds, whether similar to or different from those enumerated herein, beyond the reasonable control of, and unanticipated and unforeseeable by, and not brought about at the instance of the Party claiming to be affected by such event, or which, if anticipated or foreseeable, could not be avoided or provided for and which has caused the non-performance or delay in performance. Without limitation to the generality of the foregoing, the term Force Majeure shall include natural phenomena or calamities, earthquakes, typhoons, fires, wars declared or undeclared, hostilities, invasion, blockades and civil disturbances. (B) Where a Party is prevented from exercising any rights or performing any obligations under this Agreement due to Force Majeure, the time for the performance of the obligations affected thereby and for performance of any obligation or the exercise of any right dependent thereon, and the term of this Agreement, may be extended by such additional period as may be agreed by the Parties.

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(C) Notwithstanding anything contained hereinabove, if any event of Force Majeure occurs and is likely to continue for a period in excess of thirty (30) days, the Parties shall meet to discuss the consequences of the Force Majeure and the course of action to be taken to mitigate the effects thereof or to be adopted in the circumstances. ARTICLE XVII - NOTICES Except as otherwise specifically provided, all notices authorized or required between the Parties by any of the provisions of this Agreement, shall be in writing, in English and delivered in person or by registered mail or by courier service or by any electronic means of transmitting written communications which provides confirmation of complete transmission, with the date and time, and addressed to such Parties as designated below. The originating notice given under any provision of this Agreement shall be deemed delivered only when received by the Party to whom such notice is directed, and the time for such Party to deliver any notice in response to such originating notice shall run from the date the originating notice is received. The second or any responsive notice shall be deemed delivered when received. "Received" for purposes of this Article with respect to written notice delivered pursuant to this Agreement shall be actual delivery of the notice to the address of the Party to be notified specified in accordance with this Article. Each Party shall have the right to change its address at any time and/or designate that copies of all such notices be directed to another person at another address, by giving written notice thereof to all other Parties. Any notice to be provided hereunder shall be deemed to be received by the sending Party upon delivery of such notice to the other Parties. Operator shall, in the event of its failure to meet cash calls or make timely payments when due to the Non-Operators, be deemed to have received notice as if it had been timely sent to Operator. Enron Oil & Gas India Ltd. Amiya Apartments, 1st Floor 63A Linking Road, Santa Cruz (W) Bombay 400 054, INDIA Attention: Managing Director Telecopy: 91-22-604-9119 Oil & Natural Gas Corporation Limited Tower II, 8th Floor, Jeevan Bharati 124 Connaught Circus New Delhi 110001, INDIA Attention: General Manager Telecopy: 91-11-331-6413 Reliance Industries Limited Maker Chambers IV, 3rd Floor 222 Nariman Point Bombay 400021, INDIA Attention: Chief Executive Officer Oil & Gas Telecopy: 022-2042268 ARTICLE XVIII - APPLICABLE LAW AND DISPUTE RESOLUTION 18.1 APPLICABLE LAW This Agreement shall be governed by, construed, interpreted and applied in accordance with the laws of India. 18.2 DISPUTE RESOLUTION (A) Disputes and claims, if any, arising out of or relating to this Agreement or the interpretation or performance of provisions of any of the Articles of this Agreement and which cannot be settled amicably within a reasonable time may be submitted to the decision of a sole expert timely selected by the Operating Committee or a board of arbitrators. (B) The board of arbitrators shall consist of three (3) arbitrators. (C) The Party or Parties instituting the arbitration shall appoint one arbitrator and the Party or Parties responding shall appoint another arbitrator and both Parties shall so advise the other Parties. The two (2) arbitrators appointed by the Parties shall appoint the third arbitrator. (D) If the responding Party or Parties fails to appoint an arbitrator within thirty (30) Days of the receipt of the written request to do so, such arbitrator may, at the request of the first Party, be appointed by the Secretary General of the Permanent Court of Arbitration at
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The Hague, which arbitrator shall not be the national of the country of either Party. (E) If the two (2) arbitrators fail to agree on the appointment of the third arbitrator within thirty (30) days of the appointment of the second arbitrator and if the Parties do not otherwise agree,the Secretary General of the Permanent Court of Arbitration at the Hague may, at the request of either Party and in consultation with both, appoint the third arbitrator who shall not be a national of the country of either Party. (F) If any arbitrator fails or is unable to act, his successor shall be appointed in the manner set out in this Article as if he was the first appointment. (G) The decision of the board of arbitrators, and in case of difference amongst the arbitrators, the decision of the majority shall be final and binding upon the Parties. Such decision may be entered into the Indian court having jurisdiction thereof. (H) Arbitration proceedings shall be in accordance with the arbitration rules of the United Nations Commission on International Trade Laws ("UNCITRAL") of 1985 except that in the event of any conflict between these rules and the provisions of Article 18, the provisions of Article 18 shall govern. (I) The venue of arbitration shall be in London, England and shall be conducted in the English language. The arbitration agreement contained in this Article 18 shall be governed by the laws of England. (J) Assessment of costs of arbitration including incidental expenses and liability for the payment thereof shall be at the discretion of the arbitrators. (K) The right to arbitrate disputes and claims under this Agreement shall survive the termination of this Agreement. (L) The arbitrators shall make reasoned award. (M) The sole expert, if any, shall be an independent and impartial person of international standing with relevant qualifications and experience appointed by agreement between the Parties. Any sole expert appointed shall be acting as an expert and not as an arbitrator and the decision of the sole expert on matters referred to him shall be final and binding on the Parties and not subject to arbitration. If the Parties are unable to agree on a sole expert, the disputed subject matter may be referred to arbitration. (N) The fees and expenses of a sole expert appointed by the Parties shall be borne equally by the Parties. ARTICLE XIX - ALLOCATION OF COST RECOVERY RIGHTS 19.1 ALLOCATION OF TOTAL PRODUCTION For the purposes of recovery of Petroleum Costs, the total quantity of Hydrocarbons which are produced and saved from all Development Areas in a Calendar Quarter and to which the Parties are entitled under the Contract shall be designated as either Cost Petroleum or Profit Petroleum. Such Cost Petroleum and Profit Petroleum shall be allocated among the Development Areas in proportion to each Development Area's total quantity of Hydrocarbons produced and saved in such Calendar Quarter with adjustments in quantities to reflect the differences in value if different qualities of Hydrocarbons are produced, segregated and sold separately. 19.2 ALLOCATION OF COST PETROLEUM Cost Petroleum allocated to each Development Area pursuant to Article 19.1 shall be allocated to the Parties in proportion to their respective Participating Interests in each such Development Area to the extent required to recover in the sequence incurred all Petroleum Costs which are specifically attributable to each such Development Area and which are recoverable in such Calendar Quarter. 19.3 ALLOCATION OF PROFIT PETROLEUM Profit Petroleum allocated to each Development Area pursuant to Article 19.1, if any, shall be allocated among the Parties in proportion to their respective Participating Interests in each such Development Area. 19.4 ALLOCATION OF EXCESS COST PETROLEUM Subject to the Contract, to the extent that the value, determined in accordance with Article 9.2(H), of the Cost Petroleum allocated to each Development Area pursuant to Article 19.1 exceeds the Petroleum Costs which were specifically attributable to each such
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Development Area and which were recovered pursuant to Article 19.2, the excess ("Excess Cost Petroleum") shall be allocated as follows: (A) First, a percentage (equal to the percentage of Profit Petroleum, if any, to which the Parties would have been entitled during such Calendar Quarter if the Contract applied separately to each such Development Area) of the Excess Cost Petroleum shall be allocated among the Parties in proportion to their respective Participating Interests in each such Development Area; (B) Second, the Excess Cost Petroleum that is not allocated pursuant to Article 19.4(A) shall be allocated among the Parties in proportion to their respective Participating Interests as set out in Article 3.1(A) in order to recover in the sequence incurred any Petroleum Costs which were incurred in the conduct of Joint Operations and which are recoverable in such Calendar Quarter; and (C) Third, the Excess Cost Petroleum that is not allocated pursuant to Article 19.4(A) or Article 19.4(B) shall be allocated among the Parties in proportion to their respective Participating Interests in each Exclusive Operation in order to recover in the sequence incurred any Petroleum Costs which were incurred in the conduct of Exclusive Operations and which are recoverable in such Calendar Quarter. ARTICLE XX - GENERAL PROVISIONS 20.1 CONFLICTS OF INTEREST (A) Each Party undertakes that it shall avoid any conflict of interest between its own interests (including the interests of Affiliates) and the interests of the other Parties in dealing with suppliers, customers and all other organizations or individuals doing or seeking to do business with the Parties in connection with activities contemplated under this Agreement. (B) The provisions of the preceding paragraph shall not apply to: (1) A Party's performance which is in accordance with the local preference laws or policies of the host government; or (2) A Party's acquisition of products or services from an Affiliate, or the sale thereof to an Affiliate, made in accordance with rules and procedures established by the Operating Committee. (C) Each Party shall conduct all of its activities pursuant to this Agreement and the Contract in compliance with all laws, rules and regulations applicable to such Party. Each of the Parties warrants that it has not made and will not make, with respect of the matters provided for hereunder, any payments, loans, gifts or promises of payments, loans or gifts, directly or indirectly to or for the use or benefit of any official or employee of the Government or to or for the use of any political party. Each Party shall respond promptly, and in reasonable detail, to any Notice from any other Party or the auditors pertaining to the above stated warranty and shall furnish documentary support for such response upon request from such Party. 20.2 PUBLIC ANNOUNCEMENTS (A) Operator shall be responsible for the preparation and release of all public announcements and statements regarding this Agreement or the Joint Operations; provided that, no public announcement or statement shall be issued or made unless prior to its release all the Parties have been furnished with a copy of such statement or announcement and the unanimous approval of the Parties has been obtained. Where a public announcement or statement becomes necessary or desirable because of danger to or loss of life, damage to property or pollution as a result of activities arising under this Agreement, Operator is authorized to issue and make such announcement or statement without prior approval of the Parties, but shall promptly furnish all the Parties with a copy of such announcement or statement. (B) If a Party wishes to issue or make any public announcement or statement regarding this Agreement or the Joint Operations, it shall not do so unless prior to its release, such Party furnishes all the Parties with a copy of such announcement or statement, and obtains the unanimous approval of the Parties; provided that, notwithstanding any failure to obtain such approval, no Party shall be prohibited from issuing or making any such public announcement or statement if it is necessary to do so in order to comply with the applicable laws, rules or regulations of any government, legal proceedings or stock exchange having jurisdiction over such Party as set forth in Articles 15.1(A)(3) and (7). 20.3 SUCCESSORS AND ASSIGNS Subject to the limitations on transfer contained in Article XII, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties. 20.4 WAIVER

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No waiver by any Party of any one or more defaults by another Party in the performance of this Agreement shall operate or be construed as a waiver of any future default or defaults by the same Party, whether of a like or of a different character. Except as expressly provided in this Agreement no Party shall be deemed to have waived, released or modified any of its rights under this Agreement unless such Party has expressly stated, in writing, that it does waive, release or modify such right. 20.5 SEVERANCE OF INVALID PROVISIONS If and for so long as any provision of this Agreement shall be deemed to be judged invalid for any reason whatsoever, such invalidity shall not affect the validity or operation of any other provision of this Agreement except only so far as shall be necessary to give effect to the construction of such invalidity, and any such invalid provision shall be deemed severed from this Agreement without affecting the validity of the balance of this Agreement. 20.6 MODIFICATIONS Except as is provided in Article 20.5, there shall be no modification of this Agreement except by written consent of all Parties. 20.7 HEADINGS The topical headings used in this Agreement are for convenience only and shall not be construed as having any substantive significance or as indicating that all of the provisions of this Agreement relating to any topic are to be found in any particular Article. 20.8 SINGULAR AND PLURAL Reference to the singular includes a reference to the plural and vice versa. 20.9 GENDER Reference to any gender includes a reference to all other genders. 20.10 COUNTERPART EXECUTION This Agreement may be executed in any number of counterparts and each such counterpart shall be deemed an original Agreement for all purposes; provided no Party shall be bound to this Agreement unless and until all Parties have executed a counterpart. For purposes of assembling all counterparts into one document, Operator is authorized to detach the signature page from one or more counterparts and, after signature thereof by the respective Party, attach each signed signature page to a counterpart. 20.11 CONFLICT WITH CONTRACT In the event of any inconsistency between the provisions of the Contract and this Agreement, the provisions of the Contract shall prevail. 20.12 ENTIRETY This Agreement is the entire agreement of the Parties and supersedes all prior understandings and negotiations of the Parties. IN WITNESS of their agreement each Party has caused its duly authorized representative to sign this instrument on the date indicated below such representative's signature. ENRON OIL & GAS INDIA LTD.

By:

/S/ A. KOPECKY A. Kopecky (Print or type name) Title: Vice President Operations Date: 22 Dec 94

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RELIANCE INDUSTRIES LIMITED

By:

/S/ AKHIL GUPTA Akhil Gupta (Print or type

name) Title: CEO (oil & gas) Date: 22-12-94

OIL & NATURAL GAS CORPORATION LIMITED

By:

/S/ ISHWARI DATT Ishwari Datt (Print or type name) Title: Director (ops) (on leave) Date: 22-12-94

-----*****-----

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EXHIBIT "A" ACCOUNTING PROCEDURE Attached to and made part of the Joint Operating Agreement, hereinafter called the "Agreement," by and between OIL & NATURAL GAS CORPORATION LIMITED, ENRON OIL & GAS INDIA LTD. and RELIANCE INDUSTRIES LIMITED. SECTION I. GENERAL PROVISIONS 1.1 PURPOSE.

1.1.1

The purpose of this Accounting Procedure is to establish equitable methods for determining charges and credits applicable to operations under the Agreement which reflect the costs of Joint Operations to the end that no Party shall gain or lose in relation to other Parties. 1.1.2 The Parties agree, however, that if the methods prove unfair or inequitable to Operator or Non-Operators, the Parties will meet and in good faith endeavor to agree on changes in methods necessary to correct any unfairness or inequity.

deemed

1.2 CONFLICT WITH AGREEMENT. In the event of a conflict between the provisions of this Accounting Procedure and the provisions of the Agreement to which this Accounting Procedure is attached, the provisions of the Agreement shall prevail. 1.3 DEFINITIONS. The definitions contained in Article I of the Agreement to which this Accounting Procedure is attached shall apply to this Accounting Procedure and have the same meanings when used herein. Certain terms used herein are defined as follows: "COUNTRY OF OPERATIONS" shall mean India. "MATERIAL" shall mean property, not including real property, acquired and held for use in Joint Operations. 1.4 JOINT ACCOUNT RECORDS AND CURRENCY EXCHANGE.

1.4.1

All accounts, records, books, reports and statements shall be maintained on an accrual basis and prepared in the English language. The accounts shall be maintained in United States Dollars, which shall be the controlling currency of account for cost recovery, production sharing and participation purposes. Metric units and Barrels shall be employed for measurements required under the Contract. Operator shall maintain accounts records in Indian Rupees also.

and

1.4.2

Operator shall maintain accounting records pertaining to Joint Operations in accordance with generally accepted accounting practices used in the international petroleum industry and any applicable statutory obligations of the Country of Operations as well as the provisions of this Contract and the Agreement. For translation purposes between United States Dollars and India Rupees or any other currency, the previous month's average of

1.4.3 the

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daily means of the buy and selling rates of exchange as quoted by the State Bank of India (or any other financial body as may be mutually agreed between the Parties) shall be used for the month in which the revenues, costs, expenditures, receipts or income are recorded. However, in the case of any single non-United States Dollar transaction in excess of the equivalent of One Hundred Thousand United States Dollars (US$100,000), the conversion into United States Dollars shall be performed on the basis of the average of the applicable exchange rates for the Day on which the transaction occurred. 1.4.4 Any currency exchange gains or losses shall be credited or charged to the Joint Account, except as otherwise specified in this Accounting Procedure.

1.4.5

This Accounting Procedure shall apply, mutatis mutandis, to Exclusive Operations in the same manner that it applies to Joint Operations; provided, however, that the charges and credits applicable to Consenting Parties shall be distinguished by an Exclusive Operation Account. For the purpose of determining and calculating the remuneration of the Consenting Parties, including the premiums for Exclusive Operations, the costs and expenditures shall be expressed in U.S. currency (irrespective of the currency in which the expenditure was incurred).

1.5 STATEMENTS AND BILLINGS.

1.5.1

Unless otherwise agreed by the Parties, Operator shall submit monthly to each Party, on or before the 25th Day of each month, statements of the costs and expenditures incurred during the prior month, indicating by appropriate classification the nature thereof and the portion of such costs charged to each of the Parties. These statements shall contain the following information: - advances of funds setting forth the currencies received from each Party - the share of each Party in total expenditures on a cash and accrual basis - the current account cash balance of each Party - summary of costs, credits, and expenditures on a current month, year-to-date, and inception-to-date basis or other periodic basis, as agreed by the Parties for each line item of the approved Work Program and Budget - unusual charges and credits in excess of U.S. dollars one hundred thousand (U.S.$100,000.00) and all adjustments
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arising out of audit shall be detailed. 1.5.2 Operator shall, upon request, furnish a description of the accounting classifications used by it. Amounts included in the statements and billings shall be expressed in U.S. currency and reconciled to the currencies advanced. Other currency equivalents may be presented as agreed between the Parties. Each Party shall be responsible for preparing its own accounting and tax reports to meet the Country of Operations and other country requirements. Operator, to the extent that the information is reasonably available from the Joint Account records, will provide in a timely manner Non-Operators with the necessary statements to facilitate the discharge of such responsibility. The billing statement is to be accompanied by billing schedules which shall be schedules dividing such expenditure and income into main classifications of expenditure as indicated by budget and AFEs issued. The billing schedules shall also show cumulative totals of all payments linked to AFEs and budget categories and receipts.

1.5.3

1.5.4

1.5.5

approved

1.6 PAYMENTS AND ADVANCES.

1.6.1

Upon approval of any Work Program and Budget, if Operator so requests, all Parties, including the Operator, shall advance its share of estimated cash requirements for the succeeding month's operations. Each such cash call shall be equal to the Operator's estimate of the money to be spent in the currencies required to perform its duties under the approved Work Program and Budget during the month concerned. For informational purposes the cash call shall contain an estimate of the funds required for the succeeding two (2) months. All such cash calls shall be related to the progress/activities achieved and to planned progress/activities to be achieved during the period concerned. Each such cash call, detailed by major budget categories and (where applicable), shall be made in writing and delivered to

1.6.2 AFEs all

Non-Operators not less than fifteen (15) Days before the payment due date. Except as otherwise provided in Section 1.6.4, the due date for payment of such advances shall be set by Operator but shall be no sooner than the first Business Day of the month for which the advances are required. If, and only if, a Non-Operator believes that the cash call or a portion thereof is not as per the approved Work Program and Budget and AFE (where applicable), the Party may inform its view to all Parties within five (5) Business Days of the receipt of such cash call. Operator may issue a revised cash call. If no revision is issued, payment to the Operator shall be made by the
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due date as follows: as to the Non-Operator who raised the dispute, the non-disputed amount; and as to other Parties, the amount as determined by such Party's original cash call prior to the dispute, plus a portion of the disputed amount determined by the ratio of each such Party's Participating Interest to the sum of all Participating Interests of the Parties who did not dispute the cash call within the said five (5) Business Days. Notwithstanding the provisions of Article 8.9, the amount in dispute shall be paid by the disputing Party by the due date to an interest bearing joint escrow account where such funds will be held until the matter in dispute has been resolved. The issue arising out of such disputed cash call shall be resolved as soon as practicable by any appropriate means including, but not limited to, discussing the issue in the next Operating Committee meeting so as to assist in resolving the matter, failing which, the matter may be submitted to arbitration by any Party and the arbitrator shall determine appropriate distribution of the escrow account, plus, if appropriate, penal interest specified in Article 8.1. 1.6.3 the currencies requested which must be freely convertible or any other currencies acceptable to Operator, and at a bank designated by Operator for the purpose of Joint Operations. If currency provided by a Non-Operator is other than the requested currency, then the entire cost of converting to the requested currency shall be charged to that Non-Operator. Nothing herein shall relieve any Non-Operator from the obligation to provide immediately available funds, in full, by the due date. 1.6.4 Should Operator be required to pay any sums of money for the Joint Operations as per the approved Work Program and Budget which were unforeseen at the time of providing the Non-Operators with said estimates of its requirements, the Operator may make a written request of the Non-Operators for special advances covering the Non-Operators' share of such payments. Each such Non-Operator shall make its proportional special advances within ten (10) Business Days after receipt of such notice. When the total of cash calls for any month is one million U.S. dollars (U.S.$1,000,000.00) or less, each Party, including the Operator, shall advance its share thereof in accordance with Section 1.6. When the total cash requirements exceed the aforesaid amount, each Party, including the Operator, shall advance its share of the estimated funds required in three (3) installments of amounts to be specified by the Operator, the first installment to be paid not later than the first Business Day of the month for which the advance is required and the second installment to be paid not later than the tenth Day of the month for which the advance is required or if such Day is not a Business Day, then the following Business Day and the third installment to be paid not later than the twentieth Day of the
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Each Non-Operator shall remit its share of the full amount of each such cash call to Operator on or before the due date, in

1.6.5

this

month for which the advance is required or if such Day is not a Business Day, then the following Business Day. The third installment can be adjusted by the Operator by notifying the Parties, including the Operator, of the adjusted amount no later than the fifteenth Day of the month for which the advance is required. 1.6.6 If a Non-Operator's advances exceed its share of cash expenditures, succeeding month's cash requirements, after such determination, shall be reduced accordingly. A Non-Operator may request that its excess advances be refunded. Operator shall such refund within ten (10) Business Days after receipt of the Non-Operator's request provided that the amount is in excess of the cash requirements for the month of such determination. If the Operator does not make such refund within ten (10) Business Days, then the Operator shall pay each Party requesting a refund the difference between the Agreed Interest Rate and the interest earned on the Joint Account. 1.6.7 If Non-Operator's advances are less than its share of cash expenditures, the deficiency shall, at Operator's option, be added to subsequent cash advance requirements or be paid by Non-Operator within eight (8) Business Days following the of Operator's billing to Non-Operator for such deficiency. Along with notice of payment due, the Operator shall provide details supporting that the Non-Operator's advance is less than its share of cash expenditures. 1.6.8 Any interest received by Operator from interest-bearing accounts containing funds received from the Parties shall be credited to the Parties. The interest earned will be allocated to the

make

receipt

Parties on an equitable basis taking into consideration date of funding by each Party to the accounts in proportion to the total funding into the account. A monthly statement summarizing receipts, disbursements, transfers to each joint bank account and beginning and ending balances thereof shall be provided by the Operator to the Parties. 1.6.9 Payments of cash calls or billings as per approved Work Program and Budget shall be made on or before the due date. If these payments are not received by the due date the unpaid balance shall bear and accrue interest from the due date until the payment is received by the Operator at the Agreed Interest Rate. For the purpose of determining the unpaid balance and interest owed, Operator shall translate to U.S. currency all amounts owed in other currencies using the currency exchange rate readily available to Operator at the close of the last banking Day prior to the due date for the unpaid balance as quoted by the applicable authority identified in Section 1.4.3. Subject to governmental regulation, Operator shall have the right, at any time and from time to time, to convert the funds advanced or any part thereof to other currencies to the extent
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1.6.10

that such currencies are then required for operations. The cost of any such conversion shall be charged to the Joint Account. However, such conversions should be avoided as far as practical. 1.6.11 Operator shall endeavor to maintain funds held in bank accounts for the Joint Account at a level consistent with that required for the prudent conduct of Joint Operations.

1.7 ADJUSTMENTS. Payments of any advances or billings shall not prejudice the right of any Non-Operator to protest or question the correctness thereof; provided, however, all bills and statements rendered to Non-Operators by Operator during any Financial Year shall conclusively be presumed to be true and correct after twenty-four (24) months following the end of such Financial Year, unless within the said twenty-four (24) month period a Non-Operator takes written exception thereto and makes claim on Operator for adjustment. Failure on the part of a Non-Operator to make claim on Operator for adjustment within such period shall establish the correctness thereof and preclude the filing of exceptions thereto or making claims for adjustment thereon. No adjustment favorable to Operator shall be made unless it is made within the same prescribed period. The provisions of this paragraph shall not prevent adjustments resulting from a physical inventory of the Property as provided for in Section VI. The Operator shall be allowed to make adjustments to the Joint Account after such twenty-four (24) month period if these adjustments result from audit exceptions outside of this agreement, third party claims, or Government requirements. Any such adjustments shall be subject to audit within the time period specified in Section 1.8.1. 1.8 AUDITS.

1.8.1

A Non-Operator, upon at least sixty (60) Days advance notice in writing to Operator and all other Non-Operators, shall have the right to audit the Joint Accounts and records of Operator relating to the accounting hereunder for any Financial Year within the twenty-four (24) month period following the end of such Financial Year. The cost of each such audit shall be borne by Non-Operators conducting the audit. It is provided, however, that Non-Operators must take written exception to and make claim upon the Operator for all discrepancies disclosed by said audit within said twenty-four (24) month period. Where there are two

or more Non-Operators, the Non-Operators shall make every reasonable effort to conduct joint or simultaneous audits in a manner which will result in a minimum of inconvenience to the Operator. Operator and Non-Operators shall make every effort to resolve any claim resulting from an audit within a reasonable period of time. A Non-Operator may audit the records of an Affiliate of Operator relating to that Affiliate's charges. The provisions of this Accounting Procedure shall apply mutatis mutandis to such audits. 1.8.2 Any information obtained by a Non-Operator under the provisions of this Section 1.8 which does not relate directly to the Joint Operations shall be kept confidential and shall not be disclosed to any party, except as would otherwise be permitted by Article 15.1(A)(3) and (9) of the Agreement. The Operator is required by Contract to employ a qualified independent firm of internationally recognized chartered accountants registered in India to audit the Contract Account
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1.8.3

Books and records of Operator relating to the accounting hereunder, the cost thereof shall be a charge against the Joint Account, and a copy of the accounting reports and audit report shall be furnished to each Party within ninety (90) days of the close of a Financial Year.

1.9 ALLOCATIONS. If it becomes necessary to allocate any common costs or expenditures to or between Joint Operations and any other operations, such allocation shall be made on an equitable basis in accordance with international accounting standards. Upon request, Operator shall furnish a description of its allocation procedures pertaining to these costs and expenditures. A Non-Operator may cause Operating Committee to review such allocation basis and Operating Committee may decide a revision to the allocation, failing which, the matter may be referred to a sole expert or arbitration. -----*****----SECTION II. DIRECT CHARGES Operator shall charge the Joint Account with all costs and expenditures incurred in connection with Joint Operations. It is also understood that charges for services normally provided by an Operator such as those contemplated in Section 2.4.2.2 which are provided by Operator's Affiliates shall reflect the cost to the Affiliate, excluding profit, for performing such services, except as otherwise provided in Section 2.4.2 and Section 2.4.2.3 if selected. The costs and expenditures will be recorded as required for the settlement of accounts between the Parties hereto in connection with the rights and obligations under this Agreement and for purposes of complying with Country of Operations and United States tax laws. Without in any way limiting the generality of the foregoing, chargeable costs and expenditures shall include: 2.1 LICENSES, PERMITS, ETC. All costs, if any, attributable to the acquisition, maintenance, renewal or relinquishment of licenses, permits, contractual and/or surface rights acquired for Joint Operations and bonuses paid in accordance with the Contract when paid by Operator in accordance with the provisions of the Agreement. 2.2 LABOR AND ASSOCIATED COSTS.

2.2.1

OPERATOR'S LOCALLY RECRUITED EMPLOYEES BASED IN INDIA. Costs of all Operator's locally recruited employees who are directly engaged in the conduct of Petroleum Operations under

the Contract in India. Such costs shall include the costs of employee benefits and Government benefits for employees and levies imposed on the Operator as an employer, transportation and relocation costs within India of the employee and such members of the employee's family (limited to spouse and dependent children) as required by law or customary practice in India. If such employees are engaged in other activities in India, in addition to Petroleum Operations, the cost of such employees shall be apportioned on a time sheet basis according to sound and acceptable accounting and costing principles. 2.2.2 ASSIGNED PERSONNEL.

Costs of salaries and wages, including bonuses, of the Operator's

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employees directly and necessarily engaged in the conduct of the Petroleum Operations under the Contract, whether temporarily or permanently assigned, irrespective of the location of such employees, it being understood that in the case of those personnel only a portion of whose time is wholly dedicated to Petroleum Operations under the Contract, only that pro rata portion of applicable salaries, wages and other costs, as specified in Sections 2.2.3, 2.2.4, 2.2.5, 2.2.6 and 2.2.7 shall be charged and the basis of such pro rata allocation shall be specified. 2.2.3 The Operator's costs regarding holiday, vacation, sickness and disability benefits and living and housing and other customary allowances applicable to the salaries and wages chargeable under Section 2.2.2 above. Expenses or contributions made pursuant to assessments or obligations imposed under the laws of India which are applicable to the Operator's cost of salaries and wages chargeable under Section 2.2.2 above.

2.2.4

2.2.5

The Operator's cost of established plans for employees' group life insurance, hospitalization, pension, retirement and other benefit plans of a like nature customarily granted to the Operator's employees provided, however, that such costs are in accordance with generally accepted standards in the international petroleum industry, applicable to salaries and wages chargeable to petroleum operations under Section 2.2.2 above. 2.2.6 Personal Income taxes where and when they are paid by the Operator to the Government of India for the employee, in accordance with the Contractor's standard personnel policies. Reasonable transportation and travel expenses of employees of Operator, including those made for travel and relocation of the expatriate employees, including their dependent family and personal effects, assigned to India whose salaries and wages are chargeable to petroleum operations under Section 2.2.2. Actual transportation expenses of personnel transferred to petroleum operations from their country of origin and/or relocation to their country of origin expenses shall be charged to the petroleum operations. 2.2.8 Transportation cost as used in this Section shall mean the cost of freight and passenger service and any accountable incidental expenditures related to transfer travel and authorized under Operator's standard personnel policies. Operator shall ensure that all expenditures related to transportation costs are equitably allocated to the activities which have benefited from the personnel concerned.

2.2.7 the

2.3 TRANSPORTATION COSTS. The reasonable cost of transportation of equipment, materials and supplies within India and from outside India to India necessary for the conduct of petroleum operations under the Contract, including, but not limited to, directly related costs such as unloading charges,
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dock fees and inland and ocean freight charges.

2.4

CHARGES FOR SERVICES. 2.4.1 THIRD PARTIES. The actual costs of contract services, services of professional consultants, utilities and other services necessary for the conduct of petroleum operations under the Contract performed by third parties other than an Affiliate of the Operator, provided that the transactions resulting in such costs are undertaken pursuant to arms length transactions. 2.4.2 AFFILIATES OF OPERATOR. 2.4.2.1 PROFESSIONAL AND ADMINISTRATIVE SERVICES AND EXPENSES. Cost of professional and administrative services

provided by any Affiliate for the direct benefit of petroleum operations, including, but not limited to, services provided by the production, exploration, legal, financial, insurance, accounting and computer services divisions other than those covered by Section 2.4.2.2 which Operator may use in lieu of having its own employees. Charges shall be equal to the actual cost of providing their services, shall not include any element of profit and shall not be any higher than the most favorable prices charged by the Affiliate to third parties for comparable services under similar terms and conditions elsewhere and will be fair and reasonable in the light of prevailing international oil industry practice and experience. 2.4.2.2 SCIENTIFIC OR TECHNICAL PERSONNEL. Cost of scientific or technical personnel services provided by any Affiliate of Operator for the direct benefit of petroleum operations, which cost shall be charged on a cost of service basis without element of profit. Charges therefor shall not exceed charges for comparable services currently provided by outside technical service organizations of comparable qualifications. Unless the work to be done by such personnel is covered by an approved budget and Work Programme, Operator shall not authorize work by such personnel without approval of the Management Committee. 2.4.2.3 Equipment, facilities and property owned and furnished by the Operator's Affiliates, at rates commensurate with the cost of ownership and operation provided, however, that such rates shall not exceed those currently prevailing for the supply of like equipment, facilities and property on comparable terms in the area where the petroleum operations are being conducted. The equipment and facilities referred to herein shall exclude major
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investment items such as (but not limited to) drilling rigs, producing platforms, oil treating facilities, oil and gas loading and transportation systems, storage and terminal facilities and other major facilities, rates for which shall be subject to separate agreement with the Government.

2.5 COMMUNICATIONS. Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems including satellite, radio and microwave facilities between the Contract Area and the Operator's base facility, offices, helicopter bases, port and railway yards. 2.6 OFFICE, SHORE BASES AND MISCELLANEOUS FACILITIES. Net cost to Operator of establishing, maintaining and operating any office, sub-office, shore base facility, warehouse, housing or other facility directly serving the petroleum operations. If any such facility services contract areas other than the Contract Area, or any business other than petroleum operations, the net costs thereof shall be allocated on an equitable and consistent basis. 2.7 ENVIRONMENTAL STUDIES AND PROTECTION. Costs incurred in conducting the environmental impact studies for the Contract Area, and in taking environmental protection measures pursuant to the terms of the Contract. 2.8. INSURANCE. Premiums paid for insurance required by law, the Contract or the Agreement to be carried for the benefit of the Joint Operations. 2.9. DAMAGES AND LOSSES TO PROPERTY.

2.9.1 any

All costs or expenditures necessary to replace or repair damages or losses incurred by fire, flood, storm, theft, accident, or other cause. Operator shall furnish Non-Operators written notice of damages or losses incurred in excess of Fifty Thousand U.S. Dollars (U.S.$50,000) as soon as practical after report of the same has been received by Operator. All losses in excess of

Fifty Thousand U.S. Dollars (U.S.$50,000) shall be listed separately in the monthly statement of costs and expenditures. 2.9.2. damages to Joint Property or Materials. Each Party shall be credited with its Participating Interest share thereof except where such receipts are derived from insurance purchased by Operator for less than all Parties in which event such proceeds shall be credited to those Parties for whom the insurance was purchased in the proportion of their respective contributions toward the insurance coverage. 2.9.3. Expenditures incurred in the settlement of all losses, claims,
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Credits for settlements received from insurance carried for the benefit of Joint Operations and from others for losses or

damages, judgements and other expenses for the benefit of Joint Operations. 2.10 LITIGATION AND LEGAL EXPENSES. 2.10.1 Legal services necessary or expedient for the protection of the Joint Operations, and all costs and expenses of litigation, arbitration or other alternative dispute resolution procedure, including reasonable attorneys' fees and expenses, together with all judgments obtained against the Parties or any of them from the Joint Operations. 2.10.2. If the Parties hereunder shall so agree, actions or claims affecting the Joint Operations hereunder may be handled by the legal staff of one or any of the Parties hereto; and a charge commensurate with the reasonable costs of providing and furnishing such services rendered may be made against the Joint Account, but no such charges shall be made until approved by the Parties. 2.11 TAXES AND DUTIES. All taxes, duties, assessments and governmental charges, of every kind and nature, assessed or levied upon or in connection with the Joint Operations, other than any that are measured by or based upon the revenues, income and net worth of a Party. If Operator or an Affiliate is subject to income or withholding tax as a result of services performed at cost for the operations under the Agreement, its charges for such services may be increased by the amount of such taxes incurred (grossed up). 2.12 OTHER EXPENDITURES. Any other costs and expenditures incurred by the Operator for the necessary and proper conduct of the Joint Operations in accordance with approved Work Programs and Budgets and not covered in this Section II or in Section III.

arising

-----*****----SECTION III. INDIRECT CHARGES 3.1 Operator shall charge the Joint Account monthly for the cost of indirect services and related office costs of Operator and its Affiliates not otherwise provided in this Accounting Procedure. No cost or expenditure included under Section II shall be included or duplicated under this Section III. Indirect services and related office costs of Operator and its Affiliates outside the Country of Operations include but are not limited to the cost of the following functions which are of benefit to the Joint Operations: Executive, Administrative, & Managerial Treasury and Financial Services Tax and Legal Human Resources Insurance Accounting and Internal Control Employee Training and Medical Safety and Security Budgeting and Forecasting Communications
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3.2 The charge for the period beginning with the Financial Year through the end of the period covered by Operator's invoice ("Year-to-Date") under Section 3.1 above shall be a percentage of the Year-to-Date Parties' total direct expenditures, charged to the Joint Account, calculated on the following scale (U.S. Dollars): ANNUAL EXPENDITURES One percent (1%) of expenditures 3.3 The expenditures used to calculate the monthly indirect charge shall not include the indirect charge (calculated either as a percentage of expenditures or as a minimum monthly charge), rentals on surface rights acquired and maintained for the Joint Account, guarantee deposits, concession acquisition costs, bonuses paid in accordance with the Contract, royalties and taxes paid under the Contract, settlement of claims, proceeds from the sale of assets (including division in kind) amounting to more than U.S.$10,000 per transaction, and similar items mutually agreed upon by the Parties. Credits arising from any government subsidy payments and disposition of Joint Account property shall not be deducted from total expenditures in determining such charge. 3.4 The indirect charges provided for in this Section III may be amended periodically by mutual agreement between the Parties if, in practice, these charges are found to be insufficient or excessive. SECTION IV. ACQUISITION OF MATERIAL AND EQUIPMENT 4.1 MATERIALS AND EQUIPMENT.

4.1.1

GENERAL. So far as is practicable and consistent with efficient and economical operation, only such material shall be purchased or furnished by the Operator for use in the petroleum operations as may be required for use in the reasonably foreseeable future and the accumulation of surplus stocks shall be avoided to the

extent possible. 4.1.2 WARRANTY. In the case of defective material or equipment, any adjustment received by the Operator from the suppliers or manufacturers or their agents in respect of any warranty on material or equipment shall be credited to the accounts under the Agreement. 4.1.3 VALUE OF MATERIALS CHARGED TO THE ACCOUNTS UNDER THE CONTRACT. 4.1.3.1 Except as otherwise provided in subparagraph 4.1.2, materials purchased by the Operator and used 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 between point of supply and point of shipment, freight to port of destination, insurance, taxes, customs duties, consular fees, other items chargeable against imported material and, where applicable, handling and transportation costs from point of importation to warehouse or operating site, and these costs shall not exceed those currently prevailing in normal arms length
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charges

transactions on the open market. 4.1.3.2 Material purchased from or sold to Affiliates or transferred to or from activities of the Operator other than petroleum operations under the Contract. 4.1.3.2.1 new material (hereinafter referred to as condition A) shall be valued at the current international price which shall not exceed the price prevailing in normal arms length transactions on the open market; used material which is in sound and serviceable condition and is suitable for reuse without reconditioning (hereinafter referred to as condition B) shall be priced at not more than seventy five percent (75%) of the current price of the above mentioned new materials; used material which cannot be classified as condition B, but which, after will be further serviceable for original function as good second-hand condition B material or is serviceable for original function, but substantially not suitable for reconditioning (hereinafter referred to as condition C) shall be priced at not more than fifty per cent (50%) of the current price of the new material referred to above as condition A. The cost of reconditioning shall be charged to the reconditioned material, provided that the condition C material value plus the cost of reconditioning does not exceed the value of condition B material. Material which cannot be classified as condition B or condition C shall be priced at a value commensurate with its use. Material involving erection expenditure shall be charged at the applicable condition percentage (referred to above) of the current knocked-down price of new material referred to above as condition A. When the use of material is temporary and its service to the Petroleum Operations does not justify the reduction in price in relation to materials referred to above as conditions B and C, such material shall be priced on a basis that will result in a net charge to the accounts under the Contract consistent with the value of the service rendered.

4.1.3.2.2

4.1.3.2.3 reconditioning,

4.2 PREMIUM PRICES.

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Whenever Material is not readily obtainable at prices specified in Section 4.1 of this Section IV because of national emergencies, strikes or other unusual causes over which the Operator has no control, the Operator may charge the Joint Account for the required Material at the Operator's actual cost incurred procuring such Material, in making it suitable for use, and moving it to the Contract Area, provided that notice in writing, including a detailed description of the Material required and the required delivery date, is furnished to Non-Operators of the proposed charge at least 10 Days (or such shorter period as may be specified by Operator) before the Material is projected to be needed for operations and prior to billing Non-Operators for such Material the cost of which exceeds two hundred thousand U.S. Dollars (U.S. $200,000.00). Each Non-Operator shall have the right, by so electing and notifying Operator within 5 Days (or such shorter period as may be specified by Operator) after receiving notice from Operator, to furnish in kind all or part of his share of such Material per the terms of the notice which is suitable for use and acceptable to Operator both as to quality and time of delivery. Such acceptance by Operator shall not be unreasonably withheld. If a Non-Operator fails to properly submit an election notification within the designated period, the Operator is not required to accept Material furnished in kind by that Non-Operator. If the Operator fails to submit proper notification prior to billing Non-Operators for such Material, Operator shall only charge the Joint Account on the basis of the price allowed during a "normal" pricing period in effect at time of movement. If Material furnished is deemed unsuitable for use by the Operator, all costs incurred in disposing of such Material or returning Material to owner shall be borne by the Non-Operator furnishing the same unless otherwise agreed by the Parties. -----*****----SECTION V. DISPOSAL OF MATERIALS 5.1 The Operator shall be under no obligation to purchase the interest of Non-Operators in new or used surplus Materials. Operator shall have the right to dispose of Materials but shall advise and secure prior agreement of the Operating Committee of any proposed disposition of Materials having an original cost to the Joint Account either individually or in the aggregate of Fifty Thousand U.S. Dollars (US$50,000) or more. Credits for Material sold by the Operator shall be made to the Joint Account in the month in which payment is received for the Material. Any Material sold or disposed of under this Section shall be on an "as is, where is" basis without guarantees or warranties of any kind or nature. Costs and expenditures incurred by Operator in the disposition of Materials shall be charged to the Joint Account. 5.2 Division of Materials in kind, if made between Operator and Non-Operators, shall be in proportion to their respective interests in such Material. Each Party will thereupon be charged individually with its share of the agreed volume of Material received or receivable by each Party, and corresponding credits will be made by Operator to the Joint Account. Such credits shall appear in the monthly statement of Joint Operations. -----*****---SECTION VI. RECORDS AND INVENTORIES OF ASSETS 6.1 RECORDS.

6.1.1 The Operator shall keep and maintain detailed records of property and assets in use for or in connection with petroleum operations under the Agreement in accordance with normal practices in exploration and production activities of the international petroleum industry. Such records shall include information on quantities, location and condition of such property and assets, and whether such property or assets are leased or owned. 6.1.2 The Operator shall furnish annually particulars to the Non-Operator, by notice in writing as provided in the Agreement, of all major assets acquired by the Operator to be used for or connection with petroleum operations.
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6.2 INVENTORIES.

6.2.1

The Operator shall: 6.2.1.1 not less than once every twelve (12) Months with to movable assets take an inventory of the controllable assets used for or in connection with petroleum operations in terms of the Contract and address and deliver such inventory to the non-operators with a statement of the principles upon which valuation of the assets mentioned in such inventory has been based. Controllable assets means those assets the operators submit to detailed record keeping. 6.2.1.2 not less than once every three (3) years with respect immovable assets, take an inventory of the assets used for or in connection with petroleum operations in terms of the Contract and address and deliver such inventory to the Non-Operators together with a written statement of the principles upon which valuation of the assets mentioned in such inventory has been based. Immovable assets means those assets which are placed in service and have an original cost in excess of Fifty Thousand United States Dollars (US$50,000). 6.2.1.3 Reconciliation of inventory with charges to the Joint Account shall be made by Operator and the Operator furnish to the Non-Operators a copy of the inventory

respect

to

shall and a priced list of excesses and shortages.

-----*****----EXHIBIT "B" DESCRIPTION OF CONTRACT AREA The area comprising approximately 1471 sq. km offshore India identified as Tapti Block described herein and shown under map attached as Figure B-1. Longitude and Latitude measurements are as follows:

LATITUDE A. B. C. D. E. 20 20 20 20 20 50'00"N 50'00"N 35'00"N 20'00"N 20'00"N

LONGITUDE 71 72 72 71 71 49'00"E 08'00"E 08'00"E 53'00"E 49'00"E

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-----*****----APPENDIX B MAP OF CONTRACT AREA TAPTI BLOCK FIGURE B1

WESTERN INDIA OFFSHORE BOMBAY BASIN [MAP AND INSERT OF CONTRACT AREA]

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EXHIBIT "C" EXAMPLE FROM ENRON OIL & GAS INDIA LTD. CASH CALL FOR: JUNE 1, 199

JUNE AUGUST I. X Core Hole Drilling Exploration Wells Wells A Wells B Facilities Costs X Subtotal II. Development Costs Development Wells Wells A Wells B X Production Facilities Platforms Pipeline/Flow Lines Engineering Studies X Service Costs X Subtotal III. Production Costs Lease and Well X IV. X V. X General and Administrative Costs 3 50 10 10 20 20 Exploration/Appraisal Costs Geological and Geophysical

JULY

10 X

40 5

20 20 40

60 2 X

15

Fixed Assets and Deposits

Grand Total XX April 1994 Cash Call April 1994 Actual Net Over (Under) Call Total Cash Due June 1, 1994 200 (190) ---10

190

XX

(10) ---180 ====

ONGC 40% Share

US$72

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EOGIL 30% Share US$54 RIL 30% Share US$54 NOTE: The cash call for June 1 is expected to be issued on or before May 15. -----*****----EXHIBIT "D" BUDGET FORMAT (FOR EXAMPLE ONLY) ENRON OIL & GAS INDIA LTD. FINANCIAL YEAR 1994/95 I. Exploration/Appraisal Costs Geological and Geophysical Core Hole Drilling Exploration Wells (1) Wells A (Firm; Specifically defined) (2) Wells B (Contingent; Funds provided, but specifics to be approved by Operating Committee) Sub-Total XX II. Development Costs Development Wells (1) Wells A (Firm; Specifically defined) (2) Wells B (Contingent; Funds provided, but specifics to be approved by Operating Committee) Production Facilities (1) Platforms (a) Firm (b) Contingent; Funds provided, but specifics to be approved by Operating Committee (2) Storage Facilities (3) Terminals (4) Pipelines/Flow Lines Engineering Studies Service Costs Sub-Total X X X X

X X

X X

X X X X X

XX == III. Production Costs Lease and Well Sub-Total XXX ===

IV. General and Administrative XX V. Fixed Assets and Deposits XX

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Grand Total Costs XXX

NOTE 1: Each line above represents budget line items. Each budget line item shall be supplemented, if appropriate, by explanatory schedules, unquantified examples of which follow as Tables D-1 through D-8, showing magnitude and timing of expenditures and description of the work to be achieved. It is intended that the Operating Committee shall have full authority to reclassify funds from Contingent to Firm. VI. Revenue XXX NOTE 2: Categories III and IV are considered operating cost and are not subject to AFEs, except that some items in category III may require AFEs for workovers as per Article 6.9. APPROVALS

For EOGIL

____________________ (signature) ____________________ (print name and

date) For RIL ____________________ (signature) ____________________ (print name and date) For ONGC ____________________ (signature) ____________________ (print name and date)

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TABLE D-1 ENRON OIL & GAS INDIA LTD. (FOR APPROVAL) BUDGET AND WORK PROGRAM BUDGET SUMMARY Financial Year 1994/95 (In '000 U.S. Dollars)
ITEM TOTAL CODE PROJECT 1994 DESCRIPTION QTR 2 1994 QTR 3 1994 QTR 4 1995 QTR 1 TOTAL 94/95 FINANCIAL YEAR * REMAIN PROJECT

I. Exploration/Appraisal Costs Geophysical and Geological Core Hole Drilling Exploration Drilling (Firm Wells) (Contingent Wells) Total Exploration Costs II. Development Costs Development Drilling (Firm Wells) (Contingent Wells) Production Facilities Costs Total Development Costs III. Production Costs IV. General and Administrative V. Fixed Assets and Deposits Total Project Costs VI. Revenue *If in this column, the item is a Minimum Work Obligation item. NOTE: Categories III and IV are considered operating cost and are not subject to AFEs, except that certain items in category III may require AFEs for workovers as per Article 6.9.

FOR EOGIL __________________ __________________

FOR RIL _____________________ _____________________ TABLE D-2 ENRON OIL & GAS INDIA LTD.

FOR ONGC ____________________ ____________________

(FOR

INFORMATION) BUDGET AND WORK PROGRAM Geophysical and Geological Expense Financial Year 1994/95
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(In '000 U.S. Dollars)

ITEM CODE 1994 QTR 3 1994 QTR 4 1995 QTR 1 TOTAL 94/95 FINANCIAL YEAR * 95/96 FINANCIAL YEAR 96/97 FINANCIAL YEAR

DESCRIPTION

Geophysical Costs Seismic Survey (Firm) Positioning (Firm) Field Supervision (Firm) Scouting/Chase Boats/Misc. (Firm) Data Processing (See Note) (Firm) Data Reprocessing (Firm) Supervisory/Support Costs (Firm) Technical Service (Firm) Total Geophysical Costs Geological Costs Geochem and Biostrat Analysis (Firm) Core Analysis (Firm) Special Studies and Consultation (Firm) PVT Fluid Analysis (Firm) Supervisory/Support Costs (Firm) Technical Service (Firm) Total Geological Costs Communications Costs (Firm) Total Geophysical and Geological *If in this column, the item is a Minimum Work Obligation item. TABLE D-3 ENRON OIL & GAS INDIA LTD. (FOR INFORMATION) BUDGET AND WORK PROGRAM Development Drilling (Firm Wells) Financial Year 1994/95 (In '000 U.S. Dollars)
ITEM CODE 1994 QTR 3 1994 QTR 4 1995 QTR 1 TOTAL 94/95 FINANCIAL YEAR * 95/96 FINANCIAL YEAR 96/97 FINANCIAL YEAR

DESCRIPTION Drilling (Firm wells) Drilling and Completion Intangibles Drilling and Completion Tangibles Drilling (Contingent wells) Total Drilling Shore Base (1) (Firm) Communications Expense (2) (Firm) Supervisory/Support Staff (Firm) Total Drilling/Operations Costs

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*If

in this column, the item is a Minimum Work Obligation item.

NOTE: (1) Lease costs only of $ /day (2) Monthly communications expense allocated as follows: Drilling Construction Exploration G&A

Additional Note: Specifics to be added which would clearly delineate each individual "Firm" well proposed. A separate page following this format would be provided for "Contingent" wells for which funds are proposed but technical specifications are not available until a future Operating Committee meeting.

(3) Inventory costs included in Fixed Assets

TABLE D-4 ENRON OIL & GAS INDIA LTD. (FOR INFORMATION) BUDGET AND WORK PROGRAM Production Facilities Costs Financial Year 1994/95
(In '000 U.S. Dollars) ITEM CODE 1994 QTR 3 1994 QTR 4 1995 QTR 1 TOTAL 94/95 FINANCIAL YEAR * 95/96 FINANCIAL YEAR 96/97 FINANCIAL YEAR

DESCRIPTION

PANNA FIELD DEVELOPMENT CCP Jacket (Contingent) CCP Deck (Contingent) Platform PF (Contingent) Platform PG (Contingent) WH Decks (Contingent) Pipeline (Contingent) Living Quarters/Platform (Contingent) Flare Tripod Structure (Contingent) Total Panna/Mukta Development TAPTI FIELD DEVELOPMENT Preliminary Engineering (Firm) Platform STB (Firm) Platform STC (Firm) Platform STF (Firm) TPP Jacket (Firm) TPP Deck/Bridge (Firm) Pipeline (Firm) Total Tapti Development Supervisory/Support Costs (Firm) Technical Services (Firm) TOTAL PRODUCTION FACILITIES *If in this column, the item is a Minimum Work Obligation item. TABLE D-5 ENRON OIL & GAS INDIA LTD (FOR INFORMATION) BUDGET AND WORK PROGRAM Production Costs Financial Year 1994/95 (In '000 U.S. Dollars)
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ITEM CODE

DESCRIPTION

1994 QTR 3

1994 QTR 4

1995 QTR 1

TOTAL 94/95 FINANCIAL YEAR *

95/96 FINANCIAL YEAR

96/97 FINANCIAL YEAR

Panna/Mukta EPS FSO PA PB PQ PE MA Sub-Total PPA PQ PC PF PG Sub-Total Total Panna/Mukta (Firm) Tapti TPP, STB, STC, STF (Firm) Total Tapti Communications (Firm) Supervision and Support (Firm) Technical Services (Firm) Total Production Costs *If in this column, the item is a Minimum Work Obligation item. TABLE D-6 ENRON OIL & GAS INDIA LTD. (FOR INFORMATION) BUDGET AND WORK PROGRAM General and Administrative Expense Financial Year 1994/95 (In '000 U.S. Dollars)
ITEM CODE 1994 QTR 3 1994 QTR 4 1995 QTR 1 TOTAL 94/95 FINANCIAL YEAR * 95/96 FINANCIAL YEAR 96/97 FINANCIAL YEAR

DESCRIPTION

Salaries and Benefits Expat Salary and Benefits National Salary and Benefits Total Salaries and Benefits (Firm) Other G&A Moving Costs
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Travel and Entertainment Subscriptions and Memberships Office Rental Telephone and Telecommunications Utilities Repair and Maintenance Security Office Supplies Legal and Accounting Insurance Technical Services Technical Publications, Books, Maps Other Outside Services Bank Fees Training Total Other G&A (Firm) Total General and Administrative *If in this column, the item is a Minimum Work Obligation item. NOTE: Other G&A costs apply to all other departments accumulating costs not budgeted elsewhere. TABLE D-7 ENRON OIL & GAS INDIA LTD. (FOR INFORMATION) BUDGET AND WORK PROGRAM Fixed Assets and Deposits Financial Year 1994/95 (In '000 U.S. Dollars)
ITEM CODE 1994 QTR 3 1994 QTR 4 1995 QTR 1 TOTAL 94/95 FINANCIAL YEAR * 95/96 FINANCIAL YEAR 96/97 FINANCIAL YEAR

DESCRIPTION

Office Furniture/Fixtures Office Furniture Office Equipment Drafting Equipment Computer Equipment Communication Equipment Expat Housing Furniture/Appliances Other Leasehold Improvements Total Furniture/Fixture/Equipment (Firm) Motor Vehicles Inventory Warehouse and Yard Deposits Office Expat Housing/Apartments Warehouse Telephone, Fax, Other Total Deposits/Prepaids (Firm)

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Total Fixed Assets and Deposits *If in this column, the item is a Minimum Work Obligation item. TABLE D-8 ENRON OIL & GAS INDIA LTD. (FOR INFORMATION) BUDGET AND WORK PROGRAM Revenue Financial Year 1994/95 (In '000 U.S. Dollars)
ITEM CODE 1994 QTR 3 1994 QTR 4 1995 QTR 1 TOTAL 94/95 FINANCIAL YEAR 95/96 FINANCIAL YEAR 96/97 FINANCIAL YEAR

DESCRIPTION

Revenues Oil Production Gas Production Other Income Total Revenues -----*****-----

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EXHIBIT "E" DATA TO BE PROVIDED TO NON-OPERATORS Operator shall provide the following data to Non-Operators: A. DAILY PROGRESS REPORTS 1. Daily drilling progress report for each well which shall include the brief description of work performed, the interval drilled, the type and depth of the formation penetrated, the size and landed depth of any casing landed and cementation details thereof, the results of any tests made and any problems encountered. 2. Daily production report giving field-wise information on the oil, gas, condensate and water produced, number of wells flowing, the quantity of produced oil and gas handed over for custody transfer, available data describing quality of the crude transferred (including, as available, gravity, water content, salinity, pour point for oil and dew point and calorific value), H2S content of gas handed over as available, and any lighterage details as and when it takes place. 3. Daily cash statements. 4. Water injection reports, if any, giving quantity and quality of water injected, number of wells/strings on injection, wellhead injection pressures, etc. 5. Workover and well servicing reports covering the details of workover operations and well stimulations/activation operations (well-wise). 6. Construction reports covering the details of the activities, if any, carried out at offshore for installation of well platforms, pipelines, process platforms and other activities with details of barges deployed, etc. B. OTHER PERIODIC REPORTS Other reports will cover the following aspects and will be provided at frequencies (monthly, quarterly or otherwise) as appropriate: 1. Exploration: Status of various surveys carried out vis-a-vis plan, data acquisition and data processing details vs. plan, any discovery made with details of the test data of the discovery well zone-wise. 2. Drilling: (a) Summary report on each well drilled after drilling is concluded. (b) Cumulative drilling meterage (both development and exploratory) achieved during the month against plan (wellwise), idle and productive time of rigs, details of the material consumption (casing, mud chemicals and other well completion equipments). 3. Production: (a) Cumulative production of oil, gas, condensate, water and water injection including, as available, field-wise, layer-wise and well-wise actual results vs. plan of production/injection. Cumulative quantity of crude oil, condensate and gas sold. Party-wise share of the sold oil, gas and condensate. (b) (i) The quantity of gas internally consumed and flared, details of material consumption for various production activities (chemicals, tubulars, completion equipment, etc.). (ii) Average quantity of produced crude oil (if applicable), gas, effluent discharge and water injected. (iii) Status reports on major/critical equipments/facilities and maintenance thereof. (c) Monthly test data of the wells. (d) Daily ullage of tanker at SBM (if applicable). (e) Daily Report on deployment of personnel on board. 4. Developmental/Construction Activities: Major construction/development activities in progress. Status of progress of these
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activities with respect to schedule. 5. Capital and operating expenditure against plan (to be reported quarterly containing information on monthly and year-to-date expenditures). 6. Copies of various well logs and surveys as they become available. 7. Reports of DST (including basic data), core analysis and any other special studies conducted as they become available. 8. Well completion and work-over reports as they become available. 9. Copies of all geological, geochemical, petrophysical and geophysical data/reports and, when finalized, maps prepared by the Operator or by the subcontractor except the magnetic tapes which shall be stored by the Operator and made available for inspection and/or copying at the sole expense of the non-operating Parties requesting same. 10. Copies of reservoir management reports including field and well performance reports and reservoir studies reports and estimate reports as they become available. 11. Reports on sub-sea soil surveys, environmental surveys, sub-sea pipelines and risers inspection, reports on repair and maintenance of sub-sea pipeline and risers as they become available. 12. Any emergency shutdown of operations affecting oil/gas production/dispatch, drilling operations, etc., must be reported as soon as practicable on telephone followed by telex, facsimile, etc., giving the details of effect on production/drilling and the likely duration of shutdown. A normalization report also to be sent when the operations resume and become normal. 13. Reports on all incidents of: pipeline and riser leakage/failure, oil spills, fire, any structural failures, blow-out, explosion, sabotage, other accidents involving loss of property.life, etc., strikes/riots affecting operations/production, etc., should be sent as soon as practicable by the Operator to the non-operating Parties, Government and other agencies such as Oil Industries Safety Directorate ("OISD"), Director General Hydrocarbon, Oil Co-ordination Committee ("OCC"), Offshore Defense Advisory Group ("ODAG") and other statutory bodies whichever is applicable, on telephone followed by telex/facsimile giving the details. 14. Fortnightly cash balance report. C. INFORMATION, DATA, CONFIDENTIALITY, INSPECTION AND SECURITY The Contractor shall, promptly after they become available make available to the Government in its offices all data obtained as a result of petroleum operations under the Contract including, but not limited to, geological, geophysical, geochemical, petrophysical, engineering, well logs, maps, magnetic tapes, cores and production data as well as all interpretative and derivative data, including reports, analyses, interpretations and evaluation prepared in final form in respect of petroleum operations (hereinafter referred to as ("Data"). Data shall be the property of the Government, provided however, that the Contractor shall have the right to make use of such Data, free of cost, for the purpose of petroleum operations under this Agreement as provided herein. -----*****----GRAPHICAL CONTENT APPENDIX Appendix - B Figure B-1 Map of Contract Area - Tapti Block

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EXHIBIT 10.56 PRODUCTION SHARING CONTRACT AMONG THE GOVERNMENT OF INDIA AND OIL & NATURAL GAS CORPORATION LIMITED AND RELIANCE INDUSTRIES LIMITED AND ENRON OIL & GAS INDIA LTD. WITH RESPECT TO CONTRACT AREA IDENTIFIED AS MID AND SOUTH TAPTI FIELD

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TABLE OF CONTENTS ARTICLE CONTENTS Preamble Definitions Duration Relinquishment Work Programme Management Committee Operatorship and Operating Agreement General Rights and Obligations of the Parties Government Assistance Discovery, Development and Production Unit Development Measurement of Petroleum Protection of the Environment Recovery of Costs Production Sharing of Petroleum between Contractor and Government Taxes, Royalties, Rentals, etc. Payment Customs Duties Domestic Supply, Sale, Disposal and Export of Crude Oil Valuation of Oil Currency and Exchange Control Provisions Natural Gas Employment, Training and Transfer of Technology Local Goods and Services Insurance and Indemnification Records, Reports, Accounts and Audit Information, Data, Confidentiality, Inspection and Security Title to Petroleum, Data and Assets Assignment of Interest Guarantee Termination of Contract Force Majeure Applicable Law and Language of the Contract Sole Expert, Conciliation and Arbitration Entire Agreement, Amendments, Waiver and Miscellaneous Certificates Notices

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. APPENDICES: Appendix A Appendix B Appendix C Appendix D Appendix E Appendix F Appendix G Appendix H Appendix I

Description of Contract Area Map of Contract Area Accounting Procedure to Production Sharing Contract Calculation of the Investment Multiple for Production Sharing Purposes Form of Financial and Performance Guarantee Equipment Development Commitment Specified by the Companies Production Profile of the Mid and South Tapti Fields Payment for Use of Onshore Plant
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-----*****----This Contract made and entered into as of the 22nd day of December 1994 by and among: THE PRESIDENT OF INDIA, acting through the the Joint Secretary (Exploration), Ministry of Petroleum and Natural Gas (hereinafter referred as Government);

AND OIL & NATURAL GAS CORPORATION LIMITED (ONGC), a body corporate established under the provisions of the Companies Act, 1956, which expression shall include its successors and such assigns as are permitted under Article 28 hereof acting through its duly authorized Chairman & Managing Director; AND RELIANCE INDUSTRIES LTD. ("RIL"), a body corporate established under the laws of India, which expression shall include its successors and such assigns as are permitted under Article 28 hereof acting through its duly authorized Chief Executive Officer (Oil & Gas) AND ENRON OIL & GAS INDIA LTD. ("EOGIL"), a body corporate established under the laws of the Cayman Islands, which expression shall include its successors and such assigns as are permitted under Article 28 hereof acting through its duly authorized (Vice) President; WITNESSETH: WHEREAS 1. By virtue of Article 297 of the Constitution of India, Petroleum in its natural state in the Territorial Waters and the Continental Shelf of India is vested in the Union of India; 2. The Territorial Waters, Continental Shelf, Exclusive Economic Zone And Other Maritime Zones Act, 1976 (No. 80 of 1976) provides for the grant of a Lease or letter of authority by the Government to explore and exploit the resources of the Continental Shelf; 3. The Oil Fields (Regulation and Development) Act, 1948, (53 of 1948) (hereinafter referred to as "the Act") and the Petroleum and Natural Gas Rules, 1959, made thereunder (hereinafter referred to as "the Rules") make provision inter alia for the regulation of Petroleum Operations and the grant of petroleum exploration licenses and mining leases for exploration and development of Petroleum in India; 4. The Act and the Rules provide for the grant by the Government of mining leases in respect of the Territorial Waters and the Continental Shelf, and the Contractor is being duly granted a mining lease to carry out Petroleum Operations in that area offshore identified as Mid and South Tapti Field, more particularly described in Appendices A and B; 5. The Government desires that the Petroleum resources which may exist in the Contract Area be discovered and exploited with the utmost expedition in the overall interest of India in accordance with sound international petroleum industry practices; 6. The Government is satisfied that it is in the public interest to enter into this Contract on terms different from those specified in Section 12 of the Oil Fields (Regulations and Development) Act, 1948, and the Government is entering into this Agreement on the terms and conditions specified herein. 7. EOGIL and RIL have represented that they have, or will acquire and make available, the necessary financial and technical resources and the technical and industrial competence and experience necessary for proper discharge and/or performance of all obligations required to be performed under this Contract in accordance with good international petroleum industry practices and will provide guarantees as required in Article 29 for the due performance of their undertakings hereunder; 8. The Parties desire to enter into this Contract with respect to the Contract Area referred to in Appendices A and B on the terms and conditions herein set forth.

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NOW, THEREFORE, in consideration of the premises and covenants and conditions herein contained, IT IS HEREBY AGREED between the Parties as follows: -----*****----2 ARTICLE 1 DEFINITIONS

In this Contract, unless the context requires otherwise, the following terms shall have the meaning ascribed to them hereunder: 1.1 "Accounting Procedure" means the principles and procedures of accounting set out in Appendix C. "Affiliate" means a company that directly or indirectly controls or is controlled by a Party to this Contract or a company which directly or indirectly controls or is controlled by a company which controls a Party to this Contract, it being understood that "control" means ownership by one company of more than fifty percent (50%) of the securities of the other company, or the power to direct, administer and dictate policies of the other company even where the voting securities held by such company exercising such effective control in that other company is less than fifty percent (50%) and the term "controlled" shall have a corresponding meaning. 1.3 "Appendix" means an Appendix attached to this Contract and made a part hereof. "Appraisal Programme" means a programme, approved by the Management Committee for the appraisal of an Existing or New Discovery of Petroleum in the Contract Area for the purpose of delineating the Petroleum Reservoirs to which the Discovery relates in terms of thickness and lateral extent and determining the characteristics thereof and the quantity and quality of recoverable Petroleum therein.

1.2

voting

1.4

1.5 "Appraisal Well" means a Well drilled within the Contract Area pursuant to an approved Appraisal Programme. 1.6 willing and unrelated sellers and buyers and in which such buyers and sellers have no contractual or other relationship, directly or indirectly, or any common or joint interest as is reasonably likely to influence selling prices and shall, inter alia, exclude sales (whether direct or indirect, through brokers or otherwise) involving Affiliates, sales between entities comprising the Contractor, sales between governments and government-owned entities, counter trades, restricted or distress sales, sales involving barter arrangements and generally any transactions motivated in whole or in part by considerations other than normal commercial practices. 1.7 "Article" means an Article of this Contract and the term
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"Arms Length Sales" means sales of Petroleum made freely on the open international market, in freely convertible currencies, between

"Articles" means more than one Article. 3 1.8 "Associated Natural Gas" or "ANG" means Natural Gas occurring in association with Crude Oil either as free gas or in solution, if such Crude Oil can by itself be commercially produced.

1.9

"Barrel" means a quantity or unit equal to 158.9074 litres (forty-two (42) United States gallons) liquid measure, at a temperature of sixty (60) degrees Fahrenheit (15.56 degrees Centigrade) under one atmosphere of pressure (14.7 psia). 1.10 "Basement" means any igneous or metamorphic rock, or rock or any stratum of such nature, in and below which the geological structure or physical characteristics of the rock sequence do not have the properties necessary for the accumulation of Petroleum in commercial quantities and which reflects the maximum depth at which any such accumulation can be reasonably expected in accordance with the knowledge generally accepted in the international petroleum industry. "Calendar Month" means any of the twelve (12) months of the Calendar Year unless specified otherwise. "Calendar Quarter" means a period of three consecutive Calendar Months commencing on the first day of January, April, July and October of Calendar Year. 1.13 "Calendar Year" means a period of twelve consecutive months according to the Gregorian calendar commencing with the first day of January and ending with the thirty-first day of December. "Commercial Discovery" means a Discovery which, when produced, is likely to yield a reasonable profit on the funds invested in Petroleum Operations, after deduction of Contract Costs, and which has been declared a Commercial Discovery in accordance with the provisions of Article 9 and/or Article 21, after consideration of all pertinent operating and financial data such as recoverable reserves, sustainable production levels, estimated development and production expenditures, prevailing prices and other relevant technical and economic factors according to generally accepted practices in the international petroleum industry. "Commercial Production" means production of Crude Oil or Natural Gas both from a Field within the Contract Area and delivery of the same at the relevant Delivery Point under a programme of regular production and sale. 1.16 1.17 1.18 "Company" means either EOGIL or RIL. "Companies" means EOGIL and RIL. "Condensate" means those low vapour pressure hydrocarbons obtained from Natural Gas through condensation or extraction 4
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1.11

1.12 each

1.14

1.15 or

and refers solely to those hydrocarbons that are liquid at normal surface temperature and pressure conditions (provided that in the event Condensate is produced from an Oil Field and is segregated and transported separately to the Delivery Point, then the provisions of this Contract shall apply to such Condensate as if it were Crude Oil.) 1.19 "Contract" means this agreement and the Appendices attached hereto and made a part hereof and any amendments made thereto pursuant to the terms hereof. "Contract Area" means the area described in Appendix A and delineated on the map attached as Appendix B, or any portion of the area after relinquishment or surrender from time to time pursuant to the terms of this Contract. 1.21 "Contract Costs" means Exploration Costs, Development Costs, Production costs, and all other costs related to Petroleum Operations as set forth in Section 3 of the Accounting Procedure. 1.22 "Contract Year" means a period of twelve consecutive months counted from the Effective Date or from the anniversary of the Effective Date. "Contractor" means EOGIL, RIL and ONGC. "Cost Petroleum" means the portion of the total volume of Petroleum produced and saved from the Contract Area which the Contractor is entitled to take from the Contract Area in a particular period for the recovery of Contract Costs as provided in Article 13. "Cost Recovery Limit" shall have the meaning given in Article 13.1.2. "Crude Oil" means crude mineral oil, asphalt, ozokerite and all kinds of hydrocarbons and bitumens, both in solid and in liquid form, in their natural state or obtained from Natural Gas by condensation or extraction, including distillate and Condensate when commingled with the heavier hydrocarbons and delivered as a blend at the Delivery but excluding verified Natural Gas. 1.27 "Delivery Point" means, except as otherwise herein provided or as may be otherwise agreed between the Government and the Contractor, the point at which Petroleum reaches the upstream weld of the outlet of the delivery facility, either offshore or onshore and different Delivery Points may be established for purposes of sales to the Government, export or domestic sales. 1.28 geometric shape, together with a 5
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1.20 remaining

1.23 1.24

1.25

1.26

Point

flange

"Development Area" means that part of the Contract Area corresponding to the area of an Oil Field or Gas Field delineated in simple

reasonable margin of additional area surrounding the Field consistent with international petroleum industry practice and approved by the Management Committee or the Government, as the case may be. 1.29 "Development Costs" means those costs and expenditures incurred in carrying out Development Operations, as classified and defined in Section 2 of the Accounting Procedure and allowed to be recovered in terms of Section 3 thereof.

1.30

"Development Operations" means operations conducted in accordance with the Development Plan and shall include, but not be limited to, the purchase, shipment or storage of equipment and materials used in developing Petroleum accumulations, the drilling, completion, Recompletion and testing of Development Wells, the drilling, completion and Recompletion of Wells for Gas or water injection, the laying of gathering lines, the installation of offshore platforms and installations, the installation, hook up and commissioning of separators, tankage, pumps, artificial lifting and other producing and injection facilities required to produce, process and transport Petroleum into main oil storage or Gas processing facilities, either onshore or offshore, including the laying of pipelines within or outside the Contract Area, storage and Delivery Point or Points, the installation of storage or Gas processing facilities, the installation of export and loading facilities and other facilities required for development and production of the Petroleum accumulations and for the delivery of Crude Oil and/or Gas at the Delivery Point(s) and also including incidental operations not specifically referred to herein as required for the most efficient and economic development and production of the Petroleum accumulations in accordance with good international petroleum industry practices. 1.31 "Development Plan" means a plan containing proposals required under Article 9 or Article 21. "Development Well" means a Well drilled, deepened, completed, or Recompleted after the date of approval of the Development Plan to Development Operations or Production Operations for the purposes of producing Petroleum, increasing production, sustaining production or accelerating extraction of Petroleum including production Wells, injection Wells and dry Wells. 1.33 be recovered at the surface in a flow measurable by conventional petroleum industry testing methods, including an Existing Discovery and a New Discovery. 6 1.34 "Discovery Area" means that part of the Contract Area about which, based upon Discovery and the results obtained from a Well or Wells drilled in such part, both the Government and the Contractor are of opinion that Petroleum exists and is likely to be produced in commercial quantities.
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1.32 pursuant

"Discovery" means the finding, during Exploration Operations, of a deposit of Petroleum not previously known to have existed, which can

the

1.35

"Effective Date" means the date on which executed.

this Contract

is

1.36

"Environmental Clearance" means permission granted in writing by the Government to the Contractor to perform all activities necessary and appropriate to conduct Petroleum Operations subject to conditions specified with regard to protection of the environment and minimizing Environmental Damage. "Environmental Damage" means soil erosion, removal of vegetation, destruction of wildlife, pollution of groundwater or surface water, land contamination, air pollution, noise pollution, bush fire, disruption to water supplies, to natural drainage or natural flow of rivers or streams, damage to archaeological, palaeontological and cultural sites and shall include any damage or injury to, or destruction of, soil or water in their physical aspects together with vegetation associated therewith, aquatic or terrestrial mammals, fish, avifauna or any plant or animal life whether in the sea or in any water or on, in or under land provided such damage is in violation of legislation relating to the protection of the environment.

1.37

other

1.38 1.39

"Excess ANG" shall have the meaning given in Article 21.4. "Existing Discovery" means a Discovery made by ONGC before the Effective Date and accepted by the Parties as a Commercial Discovery. "Exploration Costs" means those costs and expenditures incurred in carrying out Exploration Operations, as classified and defined in Section 2 of the Accounting Procedure and allowed to be recovered in terms of Section 3 thereof. "Exploration Operations" means operations conducted in the Contract Area pursuant to this Contract in searching for Petroleum or in the course of an Appraisal Programme and shall include but not be limited to aerial, geological, geophysical, geochemical, palaeontological, palynological, topographical and seismic surveys, analysis, studies their interpretation, investigations relating to the subsurface

1.40

1.41

and geology including structure test drilling, stratigraphic test drilling, drilling of Exploration Wells or Appraisal Wells and other related activities such as testing, surveying, drill site preparation and all work necessarily connected therewith that is conducted in connection with Petroleum exploration. 7 1.42 "Exploration Well" means a Well drilled for the purpose of searching for undiscovered Petroleum accumulations on any geological entity (be it of structural, stratigraphic, facies or pressure nature) to at a depth or stratigraphic level specified in the Work Programme. 1.43 "Field" means an Oil Field or a Gas Field in the Contract Area in respect of which a Development Plan has been duly approved in accordance with Article 9 or Article 21 hereof.
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least

1.44

"Financial Year" means the period from the first day of April through the thirty-first day of March of the following Calendar Year. "Foreign Company" means a Company within the meaning of Section 591 of the Companies Act, 1956, as amended from time to time. "Gas" means Natural Gas.

1.45

1.46 1.47

"Gas Field" means an area within the Contract Area consisting of a single Gas Reservoir or multiple Gas Reservoirs all grouped on or related to the same individual geological structure or stratigraphic conditions, designated by the Contractor and approved by the Government or Management Committee, as the case may be, (to include the maximum area of potential productivity in the Contract Area in a simple geometric shape) in respect of which a Commercial Discovery has been declared or a Development Plan has been approved in accordance with Article 9 or Article 21 hereof. 1.48 "Investment" shall have the meaning assigned in paragraph 3 of Appendix D. "Investment Multiple" means the ratio of accumulated Net Cash Income accumulated Investment in the Contract Area, earned by the Companies, as determined in accordance with Appendix D. 1.50 the Bank of America (or such other Bank as the Parties may agree) for the day or days in question. 1.51 "Lessee" means any person or body corporate, including the Contractor, which holds a mining lease under the Petroleum and Natural Gas Rules, 1959, for the purpose of carrying out Petroleum Operations in the Contract Area and their successors and permitted assigns. "Management Committee" means the committee constituted pursuant to Article 5 hereof. 8 1.53 "Minimum Work Obligation" means the Work Programme related to those items specified in Appendix G as approved by the Management Committee. "Natural Gas" means wet Gas, dry Gas, all other gaseous hydrocarbons, and all substances contained therein, including sulphur and helium, which are produced from Oil or Gas Wells, excluding those condensed or extracted liquid hydrocarbons that are liquid at normal temperature pressure conditions, and including the residue Gas remaining after the condensation or extraction of liquid hydrocarbons from Gas. 1.55 "Net Cash Income" shall have the meaning assigned in paragraph 2 of Appendix D. "New Discovery" means a Discovery made after the Effective Date.
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1.49 to

"LIBOR" means the London Inter-Bank Offering Rate for six-month deposits of United States Dollars as quoted by the London office of

1.52

1.54

and

1.56

1.57

"Non Associated Natural Gas" or "NANG" means Natural Gas which is produced either without association with Crude Oil or in association with Crude Oil which by itself cannot be commercially produced. "Oil" means "Crude Oil".

1.58 1.59

"Oil Field" means an area within the Contract Area consisting of a single Oil Reservoir or multiple Oil Reservoirs all grouped on or related to the same individual geological structure, or stratigraphic conditions, designated by the Contractor and approved by the Government or the Management Committee, as the case may be (to include the maximum area of potential productivity in the Contract Area in a simple geometric shape) in respect of which a Commercial Discovery has been declared and a Development Plan has been approved in accordance with Article 9 hereof and a reference to an Oil Field shall include a reference to the production of Associated Natural Gas from that Oil Field. 1.60 "Operating Agreement" means the Joint Operating Agreement entered into by the Parties constituting Contractor in accordance with Article 6, with respect to the conduct of Petroleum Operations. "Operating Committee" means the committee established by that name in the Operating Agreement. "Operator" means the Party so designated in Article 6. "Participating Interest" means the percentage of participation of the constituents of the Contractor at any given time in the rights and obligations under this Contract. Initially the Participating Interest

1.61

1.62 1.63

of the constituents of Contractor are as follows: 9 1. ONGC 40% 2. RIL 30% 3. EOGIL 30%

1.64

"Parties" means the Parties signatory to this Contract including their successors and permitted assigns under this Contract and the term "Party" means any of the Parties. "Petroleum" means Crude Oil and/or Natural Gas existing in their natural condition. "Petroleum Operations" means, as the context may require, Exploration Operations, Development Operations or Production Operations or any combination of such operations, including, but not limited to, collection of seismic information, drilling and completion and Recompletion of Wells, construction, operation and maintenance of all necessary facilities, plugging and abandonment of Wells, environmental protection, transportation, storage, sale or disposition of Petroleum to the Delivery Point, Site Restoration and all other incidental operations or activities as may be necessary.
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1.65

1.66

1.67 Section

"Production Costs" means those costs and expenditures incurred in carrying out Production Operations as classified and defined in 2 of the Accounting Procedure and allowed to be recovered in terms of Section 3 thereof.

1.68 of

"Production Operations" means all operations conducted for the purpose of producing Petroleum from the Contract Area after the commencement production from the Contract Area, including the operation and maintenance of all necessary facilities therefor.

1.69

"Profit Petroleum" means all Petroleum produced and saved from the Contract Area in a particular period as reduced by Cost Petroleum and calculated as provided in Article 14. "Recompletion" means an operation whereby a completion in one zone is abandoned in order to attempt a completion in a different zone within the existing wellbore. "Reservoir" means a naturally occurring discrete accumulation of Petroleum. "Section" means a section of the Accounting Procedure. "Self-Sufficiency" means, in relation to any Financial Year, that the volume of Crude Oil and Crude Oil equivalent of Petroleum products exported from India during that Financial Year either equals or the volume of Crude Oil and Crude Oil equivalent of Petroleum products imported into India during the same Financial Year. 10

1.70

1.71

1.72 1.73

exceeds

1.74

"Site Restoration" shall mean all activities required to return a site to its state as of the Effective Date pursuant to the Contractor's environmental impact study or to render a site compatible with its intended after-use (to the extent reasonable) after cessation of Petroleum Operations in relation thereto and shall include, where appropriate, proper abandonment of Wells or other facilities, removal of equipment and structures (whether installed before or after the Effective Date), and debris, establishment of compatible contours and drainage, replacement of top soil, revegetation, slope stabilization, infilling of excavations or any other appropriate actions in the circumstances. "Subcontractor" means any company or person contracted by the Operator to provide services with respect to the Petroleum Operations. "Well" means a borehole, made by drilling in the course of Petroleum Operations, but does not include a seismic shot hole. "Work Programme" means all the plans formulated for the performance of the Petroleum Operations. "Year" means Financial Year.

1.75

1.76

1.77

1.78

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-----*****----11 ARTICLE 2 DURATION 2.1 The term of this Contract shall be for a period of twenty-five (25) years from the Effective Date, unless the Contract is terminated earlier in accordance with its terms, but may be extended on such terms and conditions as may be mutually agreed by the Parties hereto. -----*****----12 ARTICLE 3 RELINQUISHMENT 3.1 The Contractor may, with the approval of the Management Committee, voluntarily relinquish a portion of the Contract Area other than an area for which a Development Plan has been approved. Contractor shall give the Government written notice of relinquishments thirty (30) days prior to the end of any Calendar Year. 3.2 Relinquishment of less than all of the Contract Area shall be in blocks of not less than one hundred square kilometres (100 sq. kms.) and be of such shape and location as the Government may deem appropriate for enabling effective exploration and exploitation of such area. 3.3 Relinquishment of all or a part of the Contract Area or termination of the Contract shall not be construed as absolving the Contractor of any liability undertaken or incurred by the Contractor in respect of the Contract Area prior to the date of such relinquishment or termination. -----*****----13 ARTICLE 4 WORK PROGRAMME 4.1 The Contractor shall commence Petroleum Operations not later than six (6) months from the Effective Date. 4.2 As soon as possible after the Effective Date, in respect of the period ending with the last day of the Financial Year in which the Effective Date falls and thereafter ninety (90) days before commencement of each following Financial Year, the Contractor shall submit to the Management Committee, through the Operating Committee, the Work Programmes and budgets relating to Petroleum Operations, including the Minimum Work Obligations, to be carried out during the ensuing Financial Year. 4.3 The Contractor may propose amendments to the details of an approved Work Programme and budget in the light of the then existing circumstances and shall submit to the Management Committee, through the Operating Committee, modifications or revisions to the Work Programme and budgets. -----*****----14 ARTICLE 5 MANAGEMENT COMMITTEE 5.1 For the purpose of proper and expeditious performance of Petroleum Operations under the provisions of this Contract, there shall be constituted a committee to be called the Management Committee.

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5.2 The Management Committee shall consist of four (4) members, one (1) member nominated by and representing Government and one (1) member nominated by and representing each constituent of the Contractor. The member nominated by ONGC shall act as chairman. 5.3 A representative of the Operator acting as the convenor shall call the meetings of the Management Committee. 5.4 Government and the Contractor may nominate alternate members with full authority to act in the absence and on behalf of the members nominated under Article 5.2 and may, at any time, nominate another member or alternate member to replace any member nominated earlier by notice to other members of the Management Committee. 5.5 A quorum of the Management Committee shall consist of three (3) members. 5.6 The following matters shall be submitted to the Management Committee for approval: (a) annual Work Programmes and budgets and any modifications or revisions thereto, as proposed by the Operating Committee, for Exploration Operations, Development Operations and/or Production Operations; (b) proposals for an Appraisal Programme, the declaration of a New Discovery as a Commercial Discovery and the approval of Development Plans as may be required under this Contract, or revisions or additions to an Appraisal Programme or a Development Plan; (c) delineation of a Field and a Development Area; (d) appointment of auditors; (e) collaboration with lessees or contractors of other areas; (f) claims or settlement of claims for or on behalf of or against the Contractor in excess of limits specified in the Operating Agreement or fixed by the Management Committee from time to time; 15 (g) any proposed mortgage, charge or encumbrance on petroleum assets, petroleum reserves or production of Petroleum; (h) any other matter required by the terms of this Contract to be submitted for the approval of the Management Committee; (i) any other matter which the Contractor or the Operating Committee decides to submit to it.

5.7 under

The Management Committee shall not take any decision without obtaining prior approval of the Government, where such approval is required this Contract.

5.8

The Management Committee shall meet at least once every three (3) months or more frequently at the request of any member. Operator shall convene each meeting by notifying the members at least twenty eight (28) days prior to such meeting (or a shorter period of notice if the members unanimously so agree) of the time and place of such meeting the purpose thereof and shall include in such notice a provisional agenda for such meeting. The Operator shall be responsible for processing the final agenda for such meeting and the agenda shall include all items of business requested by the members to be included, provided such requests are received by the Operator at least ten (10) days prior to the date fixed for the meeting. The Operator shall forward the agenda to the members at least nine (9) days prior to the date fixed for the meeting. Matters not included in the agenda may be taken up at the meeting by any member with the unanimous consent of

and

all the members.

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5.9

The Chairman, and in his absence any other member nominated by ONGC, shall preside over the meetings of the Management Committee. The Operator shall appoint one of the members nominated by the constituents of the Contractor as secretary to the Management with responsibility, inter alia, for preparation of the minutes of every meeting in the English language and provision to every member of the Management Committee with two (2) copies of the minutes not later than twenty-eight (28) days after the date of the meeting.

5.10 Committee

5.11 Within twenty-one (21) days of the receipt of the minutes of a meeting, members shall notify the Operator and the other members of their approval of the minutes by putting their signatures on one copy of the minutes and returning the same to the Operator or by indicating such approval to the Operator by telex, cable, or facsimile, with copies to the other members. Any member may suggest any modification, amendment or addition to the minutes by telex, cable or facsimile to the Operator and other members or by indicating such suggestions when returning the copy of the minutes to 16 the Operator. If the Operator or any other member does not agree with the modification, amendment or addition to the minutes suggested by any member, the matter shall be brought to the attention of the other members and resubmitted to the Management Committee for approval at the next meeting and the minutes shall stand approved as to all other matters. If a member fails to appropriately respond within the aforesaid twenty-one (21) day period as herein provided, the minutes shall be deemed approved by such member. 5.12 The meetings of the Management Committee shall be held in New Delhi, India unless otherwise mutually agreed by the members of the Management Committee. 5.13 be All matters requiring the approval of the Management Committee shall approved by a vote of three (3) or more members of the Management Committee one (1) of whom shall be the Government representative.

-----*****----17 ARTICLE 6 OPERATORSHIP AND OPERATING AGREEMENT 6.1 EOGIL shall be the Operator for purposes of this Contract. 6.2 No change in operatorship shall be effected without the consent of the Government, which consent shall not be unreasonably withheld.
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6.3 The operating functions required of the Contractor under this Contract shall be performed by the Operator on behalf of all constituents of the Contractor subject to, and in accordance with, the terms and provisions of this Contract, and generally accepted international petroleum industry practice. 6.4 The constituents of the Contractor shall execute a mutually agreed Operating Agreement. The Agreement shall be consistent with the provisions of this Contract and shall provide for, among other things: (a) the appointment, resignation, removal and responsibilities of the Operator; (b) the establishment of an Operating Committee; (c) functions of the Operating Committee taking into account the provisions of the Contract, procedures for decision making, frequency and place of meetings; and (d) contribution to costs, default, sole risk, disposal of petroleum and assignment as between the parties to the Operating Agreement. -----*****----18 ARTICLE 7 GENERAL RIGHTS AND OBLIGATIONS OF THE PARTIES 7.1 Subject to the provisions of this Contract, the Contractor shall have, but not be limited to, the following rights: (a) the exclusive right during the term hereof to carry out Petroleum Operations in the Contract Area and to recover costs and expenses as provided in this Contract; (b) the right to use, free of charge, such quantities of Petroleum produced from any Field as are reasonably required for conducting Petroleum Operations in the Contract Area in accordance with generally accepted practices in the international petroleum industry; (c) the right to lay, build, construct or install pipelines, roads, bridges, ferries, aerodromes, landing fields, radio telephones, satellite communications and related communication and infrastructure facilities and exercise other ancillary rights as may be reasonably necessary for the conduct of Petroleum Operations subject to such approvals as may be required, which shall not be unreasonably withheld, under the applicable laws and/or regulations in force from time to time for the regulation and control thereof; (d) the right to have an expatriate work force as required and necessary together with their required personal effects; (e) the right to flare Gas temporarily when and as necessary, provided the Operator shall give notice thereof to the Government within forty-eight (48) hours of the start of such flaring and the issue shall be discussed in the next meeting of the Management Committee; (f) the right to use all wells, equipment and facilities installed as of the Effective Date in the Contract Area ("Assets") free of any additional cost or charges or encumbrances and assignment of such Assets to Operator on behalf of the Contractor; (g) such other rights as are specified in this Contract. 7.2 The Government reserves the right to itself, or to grant to the Lessee or others the right, to prospect for and mine minerals or substances other than Petroleum within the Contract Area; provided, however, that if after the Effective Date, the Lessee or others are issued rights, or the Government proceeds directly to prospect for and mine in the Contract Area for any minerals or substances other than 19 Petroleum, the Contractor shall use reasonable efforts to avoid obstruction to or interference with such operations within the Contract Area and, in either case, the Government shall use reasonable efforts to ensure that operations carried out do not obstruct or unduly interfere with Petroleum Operations in the Contract Area. In the event of any conflict, Petroleum Operations shall take preference. 7.3 The Contractor shall: (a) except as otherwise expressly provided in this Contract, conduct all Petroleum Operations at its sole risk, cost and expense and
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provide all funds necessary for the conduct of Petroleum Operations including funds for the purchase or lease of equipment, materials or supplies required for Petroleum Operations as well as for making payments to employees and Subcontractors; (b) conduct all Petroleum Operations within the Contract Area diligently, expeditiously, efficiently and in a safe and workmanlike manner in accordance with good international petroleum industry practice pursuant to the approved Work Programmes; (c) ensure provision of all information, data, samples etc. which the Contractor may be required to furnish under the applicable laws; (d) ensure that all equipment, materials, supplies, plant and installations used for Petroleum Operations comply with generally accepted standards in the international petroleum industry and are of proper construction and kept in good working order; (e) in the preparation and implementation of Work Programmes and in the conduct of Petroleum Operations, follow good international petroleum industry practices with such degree of diligence and prudence reasonably and ordinarily exercised by experienced parties engaged in a similar activity under similar circumstances and conditions; (f) after the designation of a Field and a Development Area, pursuant to this Contract, forthwith proceed to take all necessary action for prompt and orderly development of the Field and the Development Area and for the production of Petroleum in accordance with the terms of this Contract; (g) appoint a technically competent and sufficiently experienced representative, and, in his absence, a suitably qualified replacement therefor, who shall be resident in India and who shall have full authority to take such steps as may be necessary to implement this Contract and whose names shall, on appointment within 20 ninety (90) days after commencement of the first Contract Year, be made known to the Government; (h) provide acceptable working conditions, living accommodation and access to medical attention and nursing care in the Contract Area for all personnel employed in Petroleum Operations and extend these benefits to other persons who are engaged in or assisting in the conduct of Petroleum Operations in the Contract Area; (i) be always mindful of the rights and interests of India in the conduct of Petroleum Operations; 7.4 The infrastructure such as pipelines as may be developed/established by the Contractor within the country may, to the extent capacity is available, be available to the Government or any other entity upon payment of compensation which shall include, but not be limited to, cost of operation, repair, maintenance, interest and profit. The Government and any other entity using any of Contractor's facilities shall indemnify and hold harmless Contractor from and against any and all loss, damage or injury arising out of or connected with such use. -----*****----21 ARTICLE 8 GOVERNMENT ASSISTANCE 8.1 Upon application in the prescribed manner, and subject to compliance with applicable laws and relevant procedures, the Government will without any cost to itself: (a) provide the right of ingress and egress from the Contract Area and any facilities used in Petroleum Operations, wherever located, and which may be within their control; (b) use their good offices, when necessary, to assist Contractor in procurement of facilities and services required for execution of Petroleum Operations including necessary approvals, permits, consents, authorisations, visas, work permits, licenses, rights of way, easement, surface rights and security protection, required pursuant to this Contract and which may be available from resources within the Government's control; (c) use their good offices to assist in identifying and making available necessary priorities for obtaining local goods and services; (d) in the event that onshore facilities are required outside the Contract Area for Petroleum Operations including, but not limited to, storage, loading and processing facilities, pipelines and offices, use their good offices in assisting the Contractor to obtain from the
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authorities of the state government in the state in which such facilities are required, such licenses, permits, authorizations, consents, security protection, surface rights and easements as are required for the construction and operation of the said facilities by the Contractor; (e) in the event there is no economical passage other than through national parks, sanctuaries, mangroves, wetlands of national importance, biosphere reserves or other biologically sensitive areas, assist in obtaining the prior written permission of the concerned authorities. 8.2 ONGC shall provide data, if any, related to the Contract Area to the Contractor which has not been previously provided. -----*****----22 ARTICLE 9 DISCOVERY, DEVELOPMENT AND PRODUCTION 9.1 If and when a New Discovery is made within the Contract Area, the Contractor shall: (a) forthwith inform the Government of the Discovery; (b) promptly thereafter, but in no event later than a period of thirty (30) days from the date of such Discovery, furnish to the Government particulars, in writing, of the Discovery; (c) promptly run tests to determine whether the New Discovery is of potential commercial interest and, within a period of sixty (60) days after completion of such tests and analysis of results, submit a report to the Management Committee and the Government containing data obtained from such tests and its analysis and interpretation thereof, together with a written notification to the Government of whether, in the Contractor's opinion, such New Discovery is of potential commercial interest and merits appraisal. 9.2 If, pursuant to Article 9.1(c), the Contractor notifies the Government that a New Discovery is of potential commercial interest, the Contractor shall prepare and submit to the Management Committee, within one hundred and twenty (120) days of such notification, a proposed Appraisal Programme with a Work Programme and budget to carry out an adequate and effective appraisal of such New Discovery designed to achieve both the following objectives: (a) determine without delay, and, in any event, within the period specified in Article 9.5, whether such New Discovery is a Commercial Discovery; and (b) determine, with reasonable precision, the boundaries of the area to be delineated as a Field. 9.3 The proposed Appraisal Programme for a New Discovery shall be considered by the Management Committee within forty-five (45) days after submission thereof pursuant to Article 9.2. The Appraisal Programme, together with the Work Programme and budget submitted by the Contractor, revised in accordance with any agreed amendments or additions thereto, approved by the Management Committee, shall be adopted as the Appraisal Programme and the Contractor shall promptly commence implementation thereof; and the Yearly budget adopted pursuant to Article 4, shall be revised accordingly. Where, in the case of an Existing Discovery, Contractor desires to carry out additional appraisal work, the Contractor shall submit its proposed Appraisal Programme in respect of the Existing Discovery with a Work Programme and 23 budget to the Management Committee for its approval within one hundred twenty (120) days of the Effective Date. 9.4 The Contractor shall, unless otherwise agreed, in respect of a New Discovery of Crude Oil, advise the Management Committee, by notice in writing within a period of twenty-four (24) months from the date on which the notice provided for in Article 9.1 was delivered, whether such New Discovery is a Commercial Discovery or not. Such notice shall be accompanied by a report on the New Discovery setting forth all relevant technical and economic data as well as all evaluations, interpretations and analysis of such data and feasibility studies relating to the New Discovery prepared by or for the Contractor, with respect to the Discovery. If the Contractor is of the opinion that Petroleum has been discovered in commercial quantities, it shall propose that the Government or Management Committee, as the case may be, declare the New Discovery as a Commercial Discovery based on the report submitted. In respect of a New Discovery of Gas, the provisions of Article 21 shall apply. 9.5 The Management Committee shall, within forty-five (45) days of the date of the notice referred to in Article 9.4, consider the
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proposal of the Contractor and request any other additional information it may reasonably require so as to reach a decision on whether or not to declare the New Discovery as a Commercial Discovery. Such decision shall be made within the later of (a) ninety (90) days from the date of notice referred to in Article 9.4 or (b) ninety (90) days of receipt of such other information as may be reasonably required under this Article 9.5. In the case of an Existing Discovery, Contractor shall within ninety (90) days of the Effective Date propose a Development Plan following the plan brought out in Appendix G, intended to achieve the production profile brought out in Appendix H, containing the detailed information required in Article 9.6, with supporting budget. Where a Development Plan is so agreed it shall be the approved Development Plan pursuant to Article 9 hereof. 9.6 If a New Discovery is declared commercial the Contractor shall submit to the Management Committee, a comprehensive plan for the development of the Commercial Discovery within two hundred (200) days of the declaration of the Discovery as a Commercial Discovery. Such plan shall contain detailed proposals by the Contractor for the construction, establishment and operation of all facilities and services for and incidental to the recovery, storage and transportation of the Petroleum from the proposed Development Area to the Delivery Point together with all data and supporting information including but not limited to: 24 (a) Description of the nature and characteristics of the Reservoir, data, statistics, interpretations, and conclusions on all aspects of the geology, reservoir evaluation, petroleum engineering factors, reservoir models, estimates of reserves in place, possible production magnitude, nature and ratio of Petroleum fluids and analysis of producible Petroleum; (b) Outlines of the development project and/or alternative development projects, if any, describing the production facilities to be installed and the number of wells to be drilled under such development project and/or alternative development projects, if any; (c) Estimate of the rate of production to be established and projection of the possible sustained rate of production in accordance with generally accepted international petroleum industry practice under such development project and/or alternative development project, if any, which will ensure that the area does not suffer an excessive rate of decline of production or an excessive loss of reservoir pressure; (d) estimates of Development Costs and Production Costs under such development project and/or alternative development projects, if any; (e) Contractor's recommendations as to the particular project that it would prefer, if any; (f) Work Programme and budget for Development and Production Operations; (g) anticipated adverse impact on the environment and measures to be taken for prevention or minimization thereof and for general protection of the environment in conduct of operations; and (h) production profiles, financial/commercial analysis of the project proposal.

9.7

Any proposed Development Plan submitted by the Contractor pursuant to Articles 9.5 and/or 9.6 will be approved by the Management Committee with such amendments and modifications as may be agreed upon by the Contractor, within seventy-five (75) days of submission of the Development Plan, which approval shall not be unreasonably withheld. such a Development Plan has not been approved by the Management Committee within the seventy-five (75) day period, the Contractor

If

shall have the right to submit such plan directly to the Government for approval, which approval shall not be unreasonably withheld. The submission will be answered within sixty (60) days of receipt. 25 9.8 that the Contractor may obtain such approvals directly.
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The Management Committee shall obtain such approvals from the Government as may be required, except where this Contract provides

9.9

If the Management Committee fails to declare a New Discovery of Oil to be commercial while the Contractor consider that it is commercial or the Management Committee fails to declare the New Discovery as a Commercial Discovery within the time limit stipulated in Article 9.5 hereof, the Contractor may declare the New Discovery as a Commercial Discovery and submit development and production plans in respect of Discovery to the Management Committee as per the provisions of Article 9.6 and after such plans have been approved by the Management Committee, the Contractor shall, acting solely,provide the entire Development Costs and undertake development of the Oil Field. If, however, the Field turns out to be non-commercial, the entire Development Cost of the Field shall be borne solely by the Contractor and shall not be recoverable as Cost Petroleum from any other Field or Contract Area but shall be recoverable solely from such Field.

the

9.10 the

In the event that the Government considers a New Discovery to be commercial but the Contractor considers the same as non-commercial, Government shall give notice to the Contractor to that effect and thereafter the Field relating to such New Discovery shall be excluded from the Contract Area for all purposes. In this event, the Contractor shall have no claim on the production from such Field.

9.11

Work Programmes and budgets for Development and Production Operations shall be submitted to the Management Committee, as soon as possible after the designation of a Development Area and thereafter not later than 31st December each Calendar Year in respect of the Financial Year immediately following. The Management Committee, when considering any Work Programme and budget, may require the Contractor to prepare an estimate of potential production to be achieved through the implementation of the programme and budget for each of the three (3) Financial Years following the Financial Year to which the Work Programme and budget relate. If major changes in Financial Year to Financial Year estimates of potential production are required, these shall be based on concrete evidence necessitating such changes. Not later than the fifteenth (15) day of January each Calendar Year, respect of the Financial Year immediately following, the Contractor shall determine the "Programme Quantity". The Programme Quantity for any Financial Year shall be the maximum quantity of Petroleum based on Contractor's estimates, as approved by the Management Committee, which can be produced from a Field consistent 26 with sound international petroleum industry practices and minimizing unit production cost, taking into account the capacity of the

9.12

9.13 in

producing Wells, gathering lines, separators, storage capacity and other production facilities available for use during the relevant Financial Year, as well as the transportation facilities up to the Delivery Point. 9.14 Proposed revisions to the details of a Development Plan or an annual Work Programme or budget in respect of Development and Production
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Operations shall, for good cause and if the circumstances so justify, be submitted to the Management Committee for approval, through the Operating Committee.

-----*****----27 ARTICLE 10 UNIT DEVELOPMENT

10.1

If a Reservoir in a New Discovery Area is situated partly within the Contract Area and partly in an area in India over which other parties have a contract or license/lease to conduct Petroleum Operations, the Government may, for securing the most effective recovery of Petroleum from such Reservoir, by notice in writing to the Contractor, require that the Contractor: (a) collaborate and agree with such other parties on the joint development of the Reservoir; submit such agreement between the Contractor and such other parties to the Government for approval; and prepare a plan for such joint development of the Reservoir, within one hundred and eighty (180) days of the approval of the agreement referred to in (b) above.

(b)

(c)

10.2 or,

If no plan is submitted within the period specified in Article 10.1(c) or such longer period as the Contractor and other parties may agree if such plan as submitted is not acceptable to the Government and the parties cannot agree on amendments to the proposed joint development plan, the Government may cause to be prepared, at the expense of the Contractor and the other parties referred to in Article 10.1, a plan for such joint development consistent with generally accepted

practices in the international petroleum industry which shall take into consideration any plans and presentations made by the Contractor and the aforementioned other parties. 10.3 If the Parties are unable to agree on the plan for joint development, then any of them may refer the matter to a sole expert for final determination pursuant to Article 33, provided that the Contractor may in case of any disagreement on the issue of joint development or the proposed joint development plan, or within sixty (60) days of determination by a sole expert, notify the Management Committee that elects to surrender its rights in the New Discovery Area in lieu of participation in a joint development. 10.4 If a proposed joint development plan is agreed and adopted by the parties, or adopted following determination by the sole expert, the plan as finally adopted shall be the approved joint development plan and the Contractor shall comply with the terms of the Development Plan as if the Commercial Discovery is established.
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it

10.5

The provisions of Articles 10.1, 10.2, 10.3 and 10.4 shall apply MUTATIS MUTANDIS to a New Discovery of a Reservoir located partly within the Contract Area, which, although not equivalent to a Commercial Discovery if developed alone, 28 would be a Commercial Discovery if developed together with that part

of the Reservoir which extends outside the Contract Area to areas subject to contract or given on license/lease for Petroleum Operations by other parties. 10.6 If a New Discovery is situated partly within the Contract Area and partly outside the Contract Area, the area outside the Contract Area over which, at the time of the making of the New Discovery by the Contractor, no production sharing contract similar to this Contract been granted or is under negotiation and/or no license/lease to conduct petroleum operations has been granted, the Government will favourably consider the extension of the Contract Area to include the entire area of the Reservoir if so requested by the Contractor.

has

-----*****----29 ARTICLE 11 MEASUREMENT OF PETROLEUM

11.1

The volume and quality of Petroleum produced and saved from a Field shall be measured by methods and appliances generally accepted and customarily used in generally accepted international petroleum practice.

industry

11.2 of

The Government may, at all reasonable times, inspect and test the appliances used for measuring the volume and determining the quality Petroleum, provided that any such inspection or testing shall be carried out in such a manner so as not to unduly interfere with Petroleum Operations.

11.3

Before commencement of production in a Field, the Parties shall mutually agree on: (a) methods to be employed to optimize the measurement of volumes of Petroleum; the point at which Petroleum shall be measured and the shares allocated to the Parties in accordance with the terms of this Contract;
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(b) respective

(c)

the frequency of inspections and testing of measurement appliances and relevant procedures relating thereto; and the consequences of a determination of an error in measurement.

(d)

11.4 the

The Contractor shall undertake to measure the volume and quality of

Petroleum produced and saved from a Field at the agreed measurement point consistent with generally accepted practices in the international petroleum industry. The Contractor shall not make any alteration in the agreed method or procedures for measurement or to any of the approved appliances used for the purpose without the written consent of the Government. 11.5 The Contractor shall give the Government timely notice of its intention to conduct calibration operations or any agreed alteration for such operations and the Government shall have the right to be present and observe, either directly or through authorized representatives, such operations.

-----*****----30 ARTICLE 12 PROTECTION OF THE ENVIRONMENT

12.1

The Government and the Contractor recognise that Petroleum Operations will cause some impact on the environment in the Contract Area. Accordingly, in performance of the Contract, the Contractor shall conduct its Petroleum Operations with due regard to concerns with respect to protection of the environment and conservation of natural resources. In the furtherance of any laws, regulations and rules promulgated by the Government, the Contractor shall: (a) employ generally accepted industrial standards, including as required, advanced techniques, practices and methods of for the prevention of Environmental Damage in conducting its Petroleum Operations; (b) take necessary and adequate steps to prevent Environmental and, where some adverse impact on the environment is

operation

Damage unavoidable, to minimize such damage and the consequential effects thereof on property and people; and (c) adhere to the guidelines, limitations or restrictions, if any,
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imposed by Environmental Clearance as applicable on the Effective Date and as such Environmental Clearance may be revised, expanded or replaced as a result of Contractor's application(s) duly submitted after the Effective Date. 12.2 If the Contractor fails to substantially comply with the provisions of Article 12.1 or materially contravenes any relevant law, and such failure or contravention results in substantial Environmental Damage, the Contractor shall forthwith take all necessary and reasonable measures to remedy the failure and the effects thereof. If the Government has, on reasonable grounds, reason to believe that any works or installations erected by the Contractor or any operations conducted by the Contractor are endangering or may endanger persons or any property of any person, or are causing avoidable pollution, or are harming fauna and flora or the environment to a degree which is unlawful, the Government may, pursuant to applicable law, require the Contractor to take remedial measures within such reasonable period as may be determined by the Government and, if appropriate, repair such damage. The Government may, pursuant to applicable law, require the Contractor to discontinue Petroleum Operations in whole or in part until the Contractor has taken such action. The Contractor shall, within one hundred twenty (120) days of the Effective Date, cause a person or persons with special knowledge on environmental matters, approved by the 31 Government, to carry out an environmental impact study in order: (a) to determine, at the time of the study, the prevailing situation relating to the environment, human beings and local communities, the wildlife and marine life in the Contract Area and in the adjoining or neighbouring areas; and to establish the likely effect on the environment, human beings and local communities, the wildlife and marine life in the Contract Area and in the adjoining or neighbouring areas in consequence of the relevant phase of Petroleum Operations to be conducted under this Contract.

12.3

12.4

(b)

12.5

The Contractor shall ensure that: (a) Petroleum Operations are conducted in an environmentally acceptable and safe manner consistent with good international petroleum industry practice and that such Petroleum Operations are properly monitored; the pertinent completed environmental impact studies are made available to its employees and to its Subcontractors to develop adequate and proper awareness of the measures and methods of environmental protection to be used in carrying out the Operations; and (c) the contracts entered into between the Contractor and its Subcontractors relating to its Petroleum Operations shall
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(b)

Petroleum

include the provisions stipulated herein and any established measures and methods for the implementation of the Contractor's obligations in relation to the environment under this Contract. 12.6 The Contractor shall, prior to conducting any drilling activities, prepare and submit for review by the Government contingency plans for dealing with oil spills, fires, accidents and emergencies, designed to achieve rapid and effective emergency response. The plans referred to above shall be discussed with the Government and concerns expressed shall be taken into account. 12.6.1 In the event of an emergency, accident, oil spill or fire arising from Petroleum Operations affecting the environment, the Contractor shall forthwith notify the Government and shall promptly implement the relevant contingency plan and perform such Site Restoration as may be necessary. In the event of any other emergency or accident arising from the Petroleum Operations affecting 32 the environment, the Contractor shall take such action as may be prudent and necessary in accordance with good international petroleum industry practice in such circumstances. 12.7 12.6 within a reasonable period specified by the Government, the Government, after giving the Contractor reasonable notice in the circumstances, may take any action which may be necessary to ensure compliance with such terms and recover from the Contractor, immediately after having taken such action, all costs and expenditures incurred in connection with such action together with such interest as may be determined in accordance with Section 1.7 of Appendix C of this Contract. 12.8 Contractor shall notify the Government upon determination by it that the estimated remaining recoverable reserves of any Field net of operating costs equal two and one-half (2 1/2) times the estimated abandonment cost whereupon the Government shall, within sixty (60) days, take control of the Field and the abandonment obligation or, failing which, the Contractor may then proceed to recover the abandonment cost from the remaining production and abandon such Field. Any and all costs incurred by Contractor pursuant to this Article be cost recoverable including, but not limited to, sinking funds established for abandonment. 12.10 The responsibility of the Contractor for the environment hereunder shall be limited to damage to the environment which:
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12.6.2

In the event that the Contractor fails to take necessary action to comply with any of the terms contained in Article 12.5 and Article

12.9 shall

(a)

occurs after the date of the environmental impact assessment ("EIA") made to establish the benchmark condition. The EIA will be conducted as soon after the Effective Date as is reasonably possible; results from an act or omission of Contractor in violation of existing law; and notwithstanding the above, Contractor shall be responsible for any damage to the environment because of any evidence of Oil spill, blow-out, fire, etc., during the course of Joint Operations from the Effective Date.

(b)

(c)

-----*****----33 ARTICLE 13 RECOVERY OF COSTS

13.1

The Contractor shall be entitled to recover Contract Costs out of the total volume of Petroleum produced and saved from the Contract Area in each Financial Year in accordance with the provisions of this Article, and, in respect of sole risk or exclusive operations, Article VII of the Operating Agreement. 13.1.1 Development Costs incurred by the Contractor in the Contract Area shall be aggregated, and the Contractor be entitled to recover out of Cost Petroleum the aggregate of such Development Costs at the rate of one hundred percent (100%) per annum, provided, however, that, subject to the remaining provisions of this Article 13.1, the Contractor shall not, for the purposes only of determining the volume of Petroleum to which Contractor shall be entitled under Article 13.1 as Cost Petroleum, claim as Contract Costs Contractor's Development Costs incurred after the Effective Date in connection with Development Operations under the Development Plan for midand south-Tapti Fields (as those Fields are determined in the Development Plan first approved by the Management Committee) which exceed Contractor's Cost Recovery Limit (as hereinafter defined). 13.1.2 For the purposes of this Article 13.1, Contractor's "Cost Recovery Limit" means costs incurred after the Effective Date relating to the construction and/or establishment of such facilities as are necessary to produce, process, store and transport Petroleum from within the Existing Discoveries, in order to enable Gas production of 4.2 million cubic metres per day in accordance with the Development Plan for the midand south-Tapti Fields. Such costs shall include costs incurred in relation to those items illustrated in Appendix "G", including the 30
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shall

additional infill wells, and matters in connection therewith. Appendix G further describes Companies' development concept based on an assumed project start date of July 1, 1993, and Parties understand and agree that the schedules and activities contained in such assessment shall be revised, subject to Management Committee approval, by the Contractor in Contractor's Development Plan first submitted pursuant to this Contract. The Parties agree that for the purposes of this Article 13.1 the Contractor's Cost Recovery Limit shall be the sum of Five Hundred Forty-five Million U.S. Dollars (US$545,000,000). 34 13.1.3 The Parties acknowledge that the amount representing Contractor's Cost Recovery Limit has been agreed by Contractor on the basis of the following assumptions factors and/or information:

and/or

(a)

Included in calculations for the Cost Recovery Limit are costs relating to Gas compression offshore required for delivering Gas into GAIL's pipeline system and an onshore pig trap; excluded from the Recovery Limit are Site Restoration and exploration

Cost or appraisal drilling; (b) for the development of any satellite Fields; (c) the Contractor being able to obtain all necessary approvals (including Government and state government approvals) to enable Contractor to carry out the Development Operations contemplated by the Plan for the mid- and south-Tapti Fields in accordance with the timing set out in such plan; (d) the data relating to the Contract Area provided by ONGC from time to time prior to the Effective Date inclusive of the data package pertaining to the Contract Area prepared by ONGC and made available for inspection and purchase by the Companies pursuant to the Government's "Notice Inviting Offers for Joint Ventures to Develop Medium- Sized Oil and Gas Field India, 1992"; (e) international market conditions relating to the availability and cost of materials and services in
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the Cost Recovery Limit does not include any costs

Development

in

the international petroleum industry in constant 1993 United States Dollars; (f) the range of physical reservoir characteristics in respect of the Oil and Gas Fields comprising the Existing Discoveries not being materially different from the ranges for such characteristics as revealed in the data referred to in Article 13.1.3(d)on which Companies based their assessment as described in G-1 to Appendix G; and 35 (g) Companies' development concept contemplated use of existing ONGC-owned facilities for reseparation and handling of Condensate and Gas upon it's arrival at Hazira. ONGC and Companies will determine payment, terms and conditions for the use of processing and treating facilities owned by ONGC, which payment be based on the principles detailed in Appendix I, or alternatively the Contractor install the necessary facilities, the cost of which shall be cost recoverable and not subject to the Cost Recovery Limit.

Annex

shall

13.1.4

Having regard, inter alia, to the matters referred to in Article 13.1.3, the Parties agree as follows:

(a)

Included in calculations for the Cost Recovery Limit are costs relating to Gas compression offshore required for delivering Gas into GAIL's pipeline system and an onshore pig trap; excluded from the Recovery Limit are Site Restoration and exploration

Cost or appraisal drilling; (b) the costs of developing the reserves and/or potential reserves and/or satellite Fields referred to in Article 13.1.3(b) shall not be subject to the Cost Recovery Limit, notwithstanding that the development, within the Contract Area, of such reserves and/or potential reserves and/or satellite Fields may shared flowlines, injection lines, Gas-lift lines and other facilities with those constructed as part of the Development Plan for the mid- and south-Tapti Fields; (c) Limit is exceeded as a result of: (i) delays in carrying out the Development Operations referred to in Article 13.1.3(c)
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include

in the event that the Contractor's Cost Recovery

due to a delay in obtaining any necessary approval; (ii) for the mid- and south-Tapti Fields necessitated by Contractor's review of data provided, if any, to the Companies by the Government and/or ONGC after the Effective Date 36 available prior to the Effective Date then the Companies, acting reasonably, would have included such changes in the Development Plan for the mid- and south-Tapti Fields; (iii) a material change to the international market conditions referred to in Article 13.1.3(e); a variation to the Development Plan for the mid- and south-Tapti Fields approved by the Management Committee; or an event of force majeure as provided in Article 31; material changes to the Development Plan

(iv)

(v)

then the Management Committee shall, at the request of the Operator, in a meeting convened under Article 5.8, promptly consider what, if any, increase should be made to the Contractor's Cost Recovery Limit to fairly reflect the circumstances in question PROVIDED THAT in the case of delays referred to in Article 13.1.3(c) the Management Committee shall not be obligated to consider any increase where, and to the extent that, such delay has been caused by the Companies' failure to act in a diligent manner. 13.1.5 In the event that: (a) to what extent a circumstance referred to in Article 13.1.4(c) has arisen or resulted in the Contractor's Cost Recovery Limit being exceeded; or (b) an increase should be made to the Contractor's Cost Recovery Limit or is unable to agree on the amount of any such increase; then, at any time after thirty (30) days from the date of
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there is any dispute between the Parties whether or

the Management Committee is unable to agree whether

the Management Committee meeting referred to in Article 13.1.4(c), any Party shall be at liberty to refer the matter to arbitration in accordance with the provisions of Article 33. 13.1.6 Date hereof which have been approved by the Government, in writing, shall be cost recoverable for purposes hereof after approval of the Management Committee. 37 13.2 the from the Contract Area shall be aggregated, and the Contractor shall be entitled to recover the aggregate of such Exploration Costs out of the Cost Petroleum from the Contract Area at the rate of one hundred percent (100%) per annum of such Exploration Costs beginning from the date of such Commercial Production. 13.3 The Contractor shall be entitled to recover out of the Cost Petroleum from the Contract Area the Exploration Costs which it has incurred in that Contract Area in any Financial Year after the date of Commercial Production from the Contract Area at the rate of one hundred percent (100%) per annum of such Exploration Costs beginning from the date Exploration Costs are incurred. 13.4 The Contractor shall be entitled to recover Exploration Costs as provided in Articles 13.2 and 13.3 in relation to the values of the quantity of Petroleum produced, saved and sold from the Contract Area, in the relevant year, provided that such Exploration Costs once recovered shall not be allowable for recovery against any other contract area. Development Costs incurred by the Contractor in the Contract Area up the date of Commercial Production from the Contract Area shall be aggregated, and the Contractor shall be entitled to recover out of the Cost Petroleum from that Contract Area the aggregate of such Development Costs at the rate of one hundred percent (100%) per annum of such Development Costs beginning from the date of such Commercial Production from the Contract Area. 13.6 The Contractor shall be entitled to recover out of the Cost Petroleum produced from the Contract Area the Development Costs which it has incurred on such Contract Area after the date of Commercial Production from the Contract Area at the rate of one hundred percent (100%) per annum of such Development Costs beginning from the date such Development Costs are incurred. The Contractor shall be entitled to recover in full during any Financial Year the Production Costs incurred in the Contract Area out of the Cost Petroleum. If during any Financial Year the Cost Petroleum is not sufficient to enable the Contractor to recover in full the Contract Costs due for
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Costs incurred by the Companies prior to the Effective

Exploration Costs (if any) incurred by the Contractor in respect of Contract Area up to the date of Commercial Production of Petroleum

such

13.5 to

13.7

13.8

recovery in that Financial Year in accordance with the provisions of Articles 13.1 through 13.7, then, subject to the provisions of Article

13.1: a) recovery shall first be made of the Production Costs; and 38 b) recovery shall next be made of the Exploration Costs; and c) recovery shall then be made of the Development Costs.

The unrecovered portions of Contract Costs shall be carried forward to the following Financial Year and the Contractor shall be entitled to recover such Costs in such Financial Year or the subsequent Financial Years as if such costs were due for recovery in that Financial Year, or the succeeding Financial Years, until the unrecovered costs have been fully recovered out of Cost Petroleum from the Contract Area. 13.9 For the purposes of this Article, as well as Article 14, costs, receipts and income shall be converted into production unit equivalents, and vice versa, using the relevant prices established pursuant to Article 19 for Crude Oil and Article 21 for Natural Gas. Pending completion of the calculations required to establish definitively the Contractor's entitlement to Cost Petroleum from the Contract Area in any Financial Year, the Contractor shall take delivery, provisionally, of volumes of Crude Oil and/or Natural Gas representing its estimated Cost Petroleum entitlement calculated with reference to estimated production quantities, costs and prices for the Contract Area as established by the Contractor and approved by the Management Committee. Such provisional determination of Cost Petroleum shall be made every quarter on a cumulative basis. Within sixty days

13.10

of the end of each Financial Year, a final calculation of the Contractor's entitlement to Cost Petroleum, based on actual production quantities, costs and prices for the entire Financial Year, shall be undertaken and any necessary adjustments to the Cost Petroleum entitlement shall be agreed upon between the Government and the Contractor and made as soon as practicable thereafter. 13.11 Nothing herein contained shall provide for the recovery of costs by ONGC which were incurred prior to the Effective Date.

-----*****----39 ARTICLE 14 PRODUCTION SHARING OF PETROLEUM BETWEEN

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CONTRACTOR AND GOVERNMENT

14.1

The Contractor and the Government shall share in the Profit Petroleum from the Contract Area in accordance with the provisions of this Article. The share of Profit Petroleum, in any Financial Year, shall calculated for the Contract Area on the basis of the Investment Multiple actually achieved by the Companies at the end of the

be

preceding Financial Year for the Contract Area as provided in Appendix D. 14.2 Profit Petroleum 14.2.1 of any Financial Year is less than two (2.0), the Government shall be entitled to take and receive twenty percent (20%) and the Contractor shall be entitled to take and receive eighty percent (80%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year. 14.2.2 of any Financial Year in respect of any Contract Area is equal to or more than two (2.0) but is less than two and one-half (2.5), the Government shall be entitled to take and receive forty percent (40%) and the Contractor shall be entitled to take and receive sixty percent (60%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year. 14.2.3 of any Financial Year in respect of the Contract Area is equal to or more than two and one-half (2.5) but is less than three and one- half (3.5), the Government shall be entitled to take and receive forty-five percent (45%) and the Contractor shall be entitled to take and receive fifty-five percent (55%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year. 14.2.4 of any Financial Year in respect of the Contract Area is equal to or more than three and one-half (3.5), the Government shall be entitled to take and receive fifty percent (50%) and the Contractor shall be entitled to take and receive
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When the Investment Multiple of the Companies at the end

When the Investment Multiple of the Companies at the end

When the Investment Multiple of the Companies at the end

When the Investment Multiple of the Companies at the end

fifty percent (50%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year. 40 14.3 The value of the Companies' Investment Multiple at the end of any Financial Year in respect of the Contract Area shall be calculated in the manner provided for, and on the basis of net cash flows specified, in Appendix D to this Contract. However, the volume of Profit

Petroleum to be shared between the Government and the Contractor shall be determined for each quarter on a cumulative basis. Pending finalization of accounts, delivery of Profit Petroleum shall be taken by the Government and the Contractor on the basis of provisional estimated figures of Contract Costs, production, prices, receipts, income and any other income or allowable deductions and on the basis of the value of the Investment Multiple achieved at the end of the preceding Financial Year. All such provisional estimates shall be approved by the Management Committee. When it is necessary to convert monetary units into physical units of production equivalents or vice versa, the price or prices determined pursuant to Articles 19 and 21 for Crude Oil and Natural Gas, respectively, shall be used. Within sixty (60) days of the end of each Financial Year, a final calculation of Profit Petroleum based on actual costs, quantities, prices and income for the entire Financial Year shall be undertaken and any necessary adjustments to the sharing of Profit Petroleum shall be agreed upon between the Government and the Contractor and made as soon as is practicable thereafter. 14.4 the Contractor in proportion to their respective Participating Interests. The Profit Petroleum due to the Contractor in any Financial Year from the Contract Area shall be divided between the Parties constituting

-----*****----41 ARTICLE 15 TAXES, ROYALTIES, RENTALS, ETC.

15.1

The Companies and the operations under this Contract shall be subject to all fiscal legislation of India, except where, pursuant to any authority granted under any applicable law, they are exempt wholly or partly from the application of the provisions of a particular law or otherwise provided herein. 15.2.1 For the purpose of computing profits or gains of the business consisting of the prospecting for or extraction
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as

or
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production of Petroleum, there shall be made in lieu of the allowances admissible under the Income Tax Act, 1961, such allowances as are specified in this Agreement pursuant to Section 42 in relation to: (a) expenditure exploration surrendered Production; by way of infructuous or abortive expenses in respect of any area prior to the beginning of Commercial and

(b)

after the beginning of commercial production, to expenditure incurred, whether before or after such Commercial Production, in respect of drilling or exploration activities or services or in respect of physical assets used in that connection.

15.2.2 shall

Payments made by the Companies pursuant to Article 16 be deductible for income tax purpose in the year in which payment is made by the Companies, as permissible under Section 42 of the Income Tax Act, 1961.

15.3.1 be

In respect of matters not covered above, deduction shall allowed in accordance with other provisions of Income Tax Act, 1961, and the rules framed thereunder.

15.3.2

The revenue from the Business consisting of Petroleum Operations shall be determined in accordance with Article 19 for its Participating Interest share of Crude Oil saved and sold, or otherwise disposed of, from each Field and from any revenue realized on the sale of ANG or NANG referred to in Article 21 as well as any other gains or receipts from Petroleum Operations as reduced by the deductions as specified within this Article, and, except herein provided, all the provisions of the Income Tax Act, 1961, shall apply. 42

as

15.4 and

The following terms used in Section 42 of the Income Tax Act, 1961, Articles 15.2 and 15.3 shall have the meanings corresponding to the terms used in this Contract and defined in Article 1 as follows: (a) "Previous Year" means the year as defined in Section 2(34) of Income Tax Act, 1961. (b) The other terms used herein and not defined in the Income Tax, 1961 shall have the meaning therein ascribed in Article 1.

the

15.5

Except for income tax as otherwise provided in this Article, the Government covenants to the Companies that the Companies shall not be liable for payment of: (a) any taxes calculated by reference to income from or sale of Petroleum; or any customs or excise duties, export duties or any other
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(b)

statutory charge on the import or re-export of machinery, plant, equipment, materials or supplies imported by or on behalf of Contractor or its subcontractors solely and exclusively for use in Petroleum Operations. Any such payments, if the Companies are made liable shall be reimbursed by the Government. 15.6.1 of Crude Oil and Natural Gas saved and sold in accordance with the provisions of this Agreement. The royalty on Oil saved and sold will be paid at Rs. 481 per metric ton and cess on Oil saved and sold will be paid at Rs. 900 per metric ton. Royalty on Gas saved and sold will be paid at ten percent (10%) of the value at wellhead. No cess shall be payable in respect of Gas. Royalty and cess shall not exceed the herein above amounts throughout the term of the Contract. Royalty and cess shall be payable in Indian Rupees. Any such additional payment shall be made by the Government. 15.6.2 including, but not limited to, taxes whether levied by the Central Government or state government, or any other local or statutory authority, royalties, cess, levies, duties, rentals, lease rent, license fees, export duties, 43 countervailing duties, provision for sinking fund for environmental or abandonment costs, or any other charges whatsoever, directly attributable to Petroleum Operations. 15.8 If any change in or to any Indian law, rule or regulation by any authority results in a material change to the economic benefits accruing to any of the Parties to this Contract after the Effective Date, the Parties shall consult promptly to make necessary revisions and adjustments to the Contract in order to maintain such expected benefits to each of the Parties. All payments (except income tax) made by Contractor or its constituents as applicable under appropriate law The constituents of the Contractor shall be liable to pay royalties and cess on their Participating Interest share

-----*****----44 ARTICLE 16 PAYMENT

16.1

The Companies shall pay to ONGC in consideration of the right to commence and carry out exploration and drilling activities in the Contract Area, pursuant to and in accordance with the Notice Inviting
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Offers for Joint Ventures to Develop Medium Sized Oil and Gas Fields in India-1992 and the bid submitted in response thereto, as follows: (a) within two (2) days following the Effective Date, excluding days on which the banks in India or the United States are closed, Twenty-one Million United States Dollars (US$21,000,000). EOGIL shall pay Ten Million Five Hundred Thousand United States Dollars (US$10,500,000) and RIL shall pay Ten Million Five Hundred Thousand United States Dollars (US$10,500,000). ONGC's bank wire transfer instructions are as follows: ACCOUNT NUMBER: 01 00000 3054 OIL & NATURAL GAS CORPORATION LIMITED STATE BANK OF INDIA, OVERSEAS BRANCH VIJAYA BUILDING, BARAKHAMBA ROAD, NEW DELHI, INDIA 110 001 (b) When and if the hereinafter set forth production quantities are reached, the Companies will within fifteen (15) days following such attainment pay ONGC in accordance with the following schedule: (i) Another Six Million United States Dollars (US$6,000,000) after achieving a cumulative production of five billion cubic meters of Gas; Another Nine Million United States Dollars (US$9,000,000) after achieving a cumulative production of ten billion cubic meters of Gas; and Another Fifteen Million United States Dollars (US$15,000,000) after achieving a cumulative production of fifteen billion cubic meters of Gas.

(ii)

(iii)

16.2

Cumulative production shall, for purposes of this Article, mean Gas produced, saved and sold. Each Company shall pay its share of the payment in the proportion that it received Petroleum.

16.3

-----*****----45 ARTICLE 17 CUSTOMS DUTIES

17.1

Machinery, plant, equipment, materials and supplies imported by a Contractor or its Subcontractors for use in Petroleum Operations shall be exempted from customs duties subject to compliance with procedures, if any, as may be determined pursuant to applicable customs duty
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legislation, Article 23 and the terms herein specified. 17.2 Contractor Government purpose of conduct of hereunder. 17.3 shall, from time to time and as required, submit to the a list of Subcontractors who are engaged by it for the obtaining the various categories of items pursuant to the Petroleum Operations and who may claim exemptions

In order to qualify for the exemption from customs duties as provided for in Article 17.1, all imported items for which duty exemption is being claimed shall be certified, by a representative of the Contractor, to be imported under the terms of this Contract for use in carrying out Petroleum Operations and shall be certified by a representative of the Government to be eligible for such exemption pursuant to the terms of the Contract. In order to expedite such exemption, Contractor may submit a certified list of qualified items to sixty (60) days in advance of anticipated import.

up

17.4

The Government shall have the right to inspect the records and documents of the physical item or items for which an exemption is or has been provided under Article 17.1 to determine that such item or items are being or have been imported for the purpose for which the exemption was granted. The Government shall also be entitled to such physical items wherever located to ensure that such items are being used or held for the purpose herein specified and any item not being so used shall immediately become subject to payment of the applicable customs duties.

inspect

17.5

Subject to Article 27, the Contractor and its Subcontractors may sell or otherwise transfer in India or sell for export all imported items which are no longer required for Petroleum Operations, subject to applicable laws governing customs duties and sale or disposal of such items.

-----*****----46 ARTICLE 18 DOMESTIC SUPPLY, SALE, DISPOSAL AND EXPORT OF CRUDE OIL

18.1

Until such time as the total availability to the Government and government companies of Crude Oil from all Petroleum production activities in India meets the total national demand, as determined by the Government, each constituent of Contractor shall be required to offer to the Government or its nominee all of the Contractor's entitlement to Crude Oil from each Field in order to assist in satisfying the national demand, provided, however, that nothing contained in any contract entered into by the Contractor for the supply, sale or disposal of Petroleum, with any nominee of the Government pursuant to this Contract shall in any manner abrogate the obligation of the Government contained herein.
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18.2 its

Pursuant to Article 18.1 and subject to Articles 18.4 and 18.6, each constituent of Contractor shall offer to sell to the Government (or nominee) its total Participating Interest share of Crude Oil to which it is entitled under Articles 13 and 14 at the price determined in accordance with Article 19 for sales to Government and the Government shall have the option to purchase the whole or any portion thereof at the said price.

18.3 Financial

The aforementioned offer shall be made by each constituent of Contractor, in writing, at least six (6) months preceding the Year in which the sale is to be made, specifying the estimated quantities and grade of Crude Oil being offered (based upon estimates which shall be adjusted within ninety (90) days of the end of each Financial Year on the basis of actual quantities produced and saved). The Government shall exercise its option to purchase, in writing, not later than ninety days (90) preceding the Financial Year in respect of which the sale is to be made, specifying the quantity and grade of Crude Oil which it elects to take in the ensuing year. Failure by the Government to give such notice within the period specified shall be conclusively deemed an election to take all of the Crude Oil offered (adjusted as provided herein) in the ensuing Financial Year.

18.4

If, during any Financial Year, India attains Self-Sufficiency, the Government shall promptly thereafter, but in no event later than the end of that Financial Year, so advise the Contractor by written In such event, as from the end of the first quarter of the following Financial Year, or such earlier date as the Parties may mutually

notice.

agree, Government's option to purchase shall be suspended and each constituent of Contractor shall have the right to lift and export its Participating Interest share of Crude Oil until such time, if any, as Self-Sufficiency shall have ceased to exist. If Self-Sufficiency ceases to exist during a Financial Year, the Government shall recover its 47 option to purchase under Article 18.2 in respect of the following Financial Year by giving notice thereof to the Contractor as provided in Article 18.3. 18.5 All payments in respect of sales to the Government pursuant to provisions of this Article 18 shall be made by the Government within the period for credit applicable in the calculation of the price pursuant to Article 19. If no time frame for credit is applicable in such calculation, payment shall be made within forty five (45) days from the date the invoice is delivered to the Government. Contractor shall submit a monthly invoice to the Government for the quantity of Crude Oil delivered. Payment shall be made in United States Dollars by bank wire to the credit of the Foreign Company's designated account with a bank within or outside India. All amounts unpaid by the Government by the due date shall, from the due date, bear interest calculated on a day-to-day basis at the LIBOR plus one percentage (1%) point from the due date compounded daily until paid.
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18.6

If full payment is not received by Contractor when due as provided in Article 18.5, the Contractor shall, at any time thereafter, notify the Government of the default and, unless such default is remedied within fifteen (15) days from the date of the notice, the Contractor shall have the right, unless otherwise agreed, upon written notice to the Government and without prejudice to the Contractor's right to recover all costs, charges, expenses and losses, incurred by the Contractor: a) to suspend the Government's option to purchase under Article 18.2 and transport the Petroleum to any onshore facility and sell as each constituent of Contractor may in its absolute discretion deem fit; without prejudice to the foregoing, to freely lift, sell and export all its Participating Interest share of Crude Oil subject to the destination restrictions specified in Article 18.7, until the Government has paid the due amount plus interest as provided herein; if the payment plus interest is not received by the Contractor within one hundred and eighty (180) days from the date the payment was due, to receive and export the Government's share of Profit Oil until such time as either Government has paid all amounts due plus interest, or the value, based on the price as determined in accordance with Article 19, of Government's share of Profit Oil so sold is equal to all amounts due plus interest, whichever first occurs; provided, however, that if the Government makes a payment to the Contractor after the Contractor has commenced sale of Government's share of Profit Oil and such payment together with the value of Government's share of Profit Oil sold (based on the price determined in accordance 48 with Article 19) exceeds the amount due plus interest, necessary adjustment shall be carried out to refund to the Government forthwith the excess amount received by the Contractor.

b)

c)

18.7

The Contractor shall be entitled to freely lift, sell and export any Crude Oil which the Government is unable to take or has elected not to purchase pursuant to this Article 18 subject to Government's generally applicable destination restrictions to countries with which the Government, for policy reasons, has severed or restricted trade. No later than sixty (60) days prior to the commencement of production in a Field (or Fields where production is from more than one Field), and thereafter no less than sixty (60) days before the commencement of each Financial Year, the Contractor shall cause to be prepared and submitted to the Parties a production forecast setting out the total quantity of Crude Oil that it estimates can be produced from a Field during the succeeding year, based on the maximum efficient rate of recovery of Crude Oil from that Field in accordance with good industry practice. No later than thirty (30) days prior to the commencement of each Calendar Quarter, the Contractor shall advise its estimate of production for the succeeding Calendar Quarter and shall endeavour to produce the forecast quantity for each Calendar Quarter.
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18.8

petroleum

18.9 this

Each Party comprising the Contractor shall, throughout the term of Contract, have the right to separately take in kind and dispose of all its share of Cost Petroleum and Profit Petroleum and shall have the obligation to lift the Cost Petroleum and Profit Petroleum on a

current basis and in such quantities so as not to cause a restriction of production or inconvenience to the other Parties. 18.10 The Government shall, throughout the term of this Contract, have the right to separately take in kind and dispose of its share of Profit Petroleum and of such portion of the Contractor's share of Petroleum is purchased by the Government pursuant to Article 18, subject to Article 18.6 and shall have the obligation to lift all of the Oil on a current basis and in such quantities so as not to cause a restriction of production or inconvenience to the other Parties. 18.11 For the purpose of 18.10, a Crude Oil Parties as soon as the Effective Date implementing the provisions of Articles 18.9 and lifting procedure shall be agreed upon by the practicable but no later than two (2) months after of this Contract. Such lifting procedure shall

as

include, but not necessarily be limited to: 49 (a) a procedure for notification by the Operator to the Government, and to each Party comprising the Contractor, of projected Crude Oil production; (b) a procedure for notification by the Government, and by each Party comprising the Contractor, to the Operator, of its expected offtake and the consequences of inability or failure to offtake. -----*****----50 ARTICLE 19 VALUATION OF OIL

19.1 based

For the purpose of this Contract, the value of Crude Oil shall be on the price determined as provided herein.

19.2

A price for Crude Oil shall be determined for each Calendar Month or such other period as the Parties may agree (hereinafter referred to as "the Delivery Period") in terms of United States Dollars per Barrel, FOB Delivery Point for Crude Oil produced and sold or otherwise disposed of from each Contract Area, for each Delivery Period, in accordance with the appropriate basis for that type of sale or specified below.

disposal

19.3

In the event that some or all of Contractor's total sales of Crude Oil during a Delivery Period are made to third parties in Arms Length Sales, all sales so made shall be valued at the weighted average of

the
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prices actually received by Contractor, calculated by dividing the total receipts from all such sales FOB the Delivery Point by the total number of Barrels of the Crude Oil sold in such sales. 19.3.1 In the event that a portion of such third party Arms Length Sales are made on a basis other than an FOB basis as herein specified, the portion shall be valued at the prices equivalent to the prices FOB the Delivery point for such sales determined by deducting all costs (such as transportation, demurrage, loss of Crude Oil in transit and similar costs) incurred downstream of the Delivery Point, and the prices so determined shall be deemed to be the actual prices received for the purpose of calculation of the weighted average of the prices for all third party Arms Length Sales for the Delivery Period. Each constituent of Contractor shall separately submit to the Government, within fifteen (15) days of the end of each Delivery Period, a report containing the actual prices obtained in their respective Arms Length Sales to third parties of any Crude Oil. Such reports shall distinguish between term sales and spot sales and itemize volumes, customers, prices received and credit terms, and the constituent of the Contractor shall allow the Government to examine the relevant sales contracts.

19.3.2

19.4

In the event that some or all of a constituent of Contractor's total sales of Crude Oil during a Calendar Month are made to the Government, the price of all sales so made shall, unless otherwise agreed between the Parties, be determined on the basis of either the FOB selling per Barrel of one or more crude oils which, at the time of 51 calculation, are being freely and actively traded in the international market and are similar in characteristics and quality to the Crude Oil and/or Condensate in respect of which the price is being determined, such FOB selling price to be ascertained from Platt's Crude Oil Market Wire daily publication ("Platt's"), or the spot market for the same crude oils ascertained in the same manner, whichever price, in the opinion of the Parties, more truly reflects the current value of such crude oils. For any Calendar Month in which sales take place, the

price

price shall be the arithmetic average price per Barrel determined by calculating the average for the preceding Calendar Month of the mean of the high and low FOB or spot prices for each day of the crude oil(s) selected for comparison adjusted for differences in the Crude Oil and the crude oil(s) being compared for quality, transportation costs, delivery time, quantity, payment terms, the market area into which the Crude Oil is being sold, other contract terms to the extent known and other relevant factors. In the event that Platt's ceases to be published or is not published for a period of thirty (30) consecutive days, the Parties shall agree on an alternative daily publication.
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19.4.1

Notwithstanding anything herein otherwise provided, the price paid for such sales shall be, in any Calendar Month,the FOB selling price for a Marker Crude ("Marker Crude") which shall be Brent (DTD) on a United States Dollar per Barrel basis less US$0.10 per Barrel. The Marker Crude price will be based on the previous Calendar Month's average of the daily low and high quotations of Marker Crude as published by Platts' Market wire. The average is to be calculated up to three (3) decimals to arrive at a United States Dollar per Barrel price, which will be applicable for the month of supply. The Government and/or its nominee shall pay any and all sales tax payable on the sale of Oil to the Government or its nominee. The Government and/or its nominee shall enter into a Crude Oil sales agreement with the Constituents of the which shall contain terms and conditions normally

19.4.2

19.4.3

19.4.4 Contractor contained

in international Crude Oil sales agreements of a similar nature. 19.5 In the event that in any Delivery Period some but not all of a constituent of Contractor's sales of Crude Oil from the Contract Area are made to the Government or a Government company and some but not of a constituent of Contractor's sales of Crude Oil from the Contract Area are 52 made to third parties in Arms Length Sales and the price as established in accordance with Article 19.4 differs by more than one percent (1%) from the price as determined in accordance with Article 19.3 for the same Delivery Period, the Parties shall meet, upon notice from any Party, to determine if the prices established for the relevant Delivery Period for sales to the Government should be adjusted taking into account third party Arms Length Sales made by a constituent of Contractor of the same or similar Crude Oil from the relevant Field or other fields and published information in respect of other genuine third party Arms Length Sales of the same or similar crude oil for that Delivery Period. Until the matter of an adjustment for the relevant Delivery Period is finally determined , the price as established in accordance with this Article will apply for that Delivery Period. Any adjustment, if necessary, will be made within thirty (30) days from the date the adjustment for that Delivery Period is finally determined. 19.6 A constituent of Contractor shall determine the relevant prices in accordance with this Article and the calculation, basis of calculation and the price determined shall be supplied to the Government and shall be subject to agreement by the Government before it is finally determined. Pending final determination, the last established price,
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all

if any, for the Crude Oil shall be used. 19.7 In the event that the Parties fail to reach agreement on any matter concerning selection of the crude oil(s) for comparison, the calculation, the basis of, or mechanism for the calculation of the prices, the prices arrived at, the adjustment of any price or about the manner in which the prices are determined according to the provisions of this Article within thirty (30) days, or such longer period as may be mutually agreed between the parties, from the date of commencement of Commercial Production or the end of each Delivery Period thereafter, any Party may refer the matter or matters in issue for final determination by a sole expert appointed as provided in Article 33. 19.7.1 Within ten (10) days of the said appointment, the Parties shall provide the expert with all information they deem necessary or as the expert may reasonably require. Within fifteen (15) days from the date of his appointment, the expert shall report to the Parties on the issue(s) referred to him for determination, applying the criteria or mechanism set forth herein and indicate his decision thereon to be applicable for the relevant Delivery Period for Crude Oil and such decision shall be accepted as final and binding by the Parties. 53 19.7.3 Except for the adjustment referred to in Article 19.5, any price or pricing mechanism agreed by the Parties pursuant to the provisions of this Article shall not be changed retroactively.

generally

19.7.2

19.8

Any sale or disposal to Affiliates or other sale or disposal of Crude Oil produced from a Field, other than to the Government or Government companies or to third parties in Arms Length Sales, in any Delivery Period, shall be valued on the same basis as sales to the Government a Government company. In the event of such a sale or disposal by a Company, such Company shall submit to the Government, within fifteen (15) days of the end of each Delivery Period, all relevant information concerning such sales or disposals.

or

19.9 of

In the event that in any Delivery Period there is more than one type sales referred to in Articles 19.3, 19.4 and 19.8, then, for the purpose of calculating Cost Petroleum and Profit Petroleum entitlement pursuant to Articles 13 and 14, a single price per Barrel of Crude Oil for all the sales for the relevant Delivery Period shall be used. Such single price shall be the weighted average of the prices determined

for each type of sale, weighted by the respective volumes of Crude Oil sold in each type of sale in the relevant Delivery Period.
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19.10 or

In this Article the term "Government" shall include any other agency nominee of the Government to whom Crude Oil is to be sold.

19.11

The provisions specified above for the determination of the price of sales of Crude Oil shall apply mutatis mutandis to Condensates. The Parties shall meet annually, or sooner upon notice served by any Party on the others, to review the list of selected Crude Oils or the mechanism established pursuant to this Article 19 in light of any new facts since the date of selection of such Crude Oils or establishment of such mechanism and to determine what adjustment (if any) should be made to the said selection or mechanism by mutual agreement of the Parties.

19.12

------*****----54 ARTICLE 20 CURRENCY AND EXCHANGE CONTROL PROVISIONS

20.1

Subject to the provisions herein, and to compliance with the relevant provisions of the laws of general application in India governing currency and foreign exchange and related administrative instructions and procedures issued thereunder on a non-discriminatory basis, each Foreign Company comprising the Contractor shall, during the term of this Contract have the right to: (a) repatriate funds relating to Petroleum Operations abroad, in United States Dollars or any other freely convertible currency acceptable to the Government and the Foreign Company; receive, retain and use abroad the proceeds of any export sales of Petroleum under the contract; open, maintain and operate bank accounts with reputable banks, both inside and outside India, for the purpose of this Contract; freely import, through normal banking channels, funds necessary for carrying out the Petroleum Operations; convert into foreign exchange and repatriate sums imported pursuant to (d) above in excess (if any) of its requirements; and make payments of interest and principal outside of India for purchases, services and loans obtained abroad without the requirement that funds used in making such payments must come from or originate in India.

(b)

(c)

(d)

(e)

(f)

Provided however, that repatriation pursuant to sub-paragraphs (a) and (e) and payments pursuant to sub-paragraph (f) shall be subject to the provisions of any treaties or bilateral arrangements between the Government and any country with respect to payments to that country.
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20.2

The rates of exchange for the purchase and sale of currency by the Contractor shall be the prevailing rates of general application determined by the State Bank of India or such other financial body as may be mutually agreed by the Parties and in accordance with prevailing currency and exchange regulations and, for accounting purposes under this Contract, these rates shall apply as provided in Section 1.6 of Appendix C. 20.3 Domestic Companies shall be subject to the relevant provisions of the applicable laws in India governing currency and foreign exchange and related administrative instructions and procedures issued thereunder.

-----*****----55 ARTICLE 21 NATURAL GAS

21.1

Subject to Article 21.2, the Indian domestic market shall have the first call on the utilisation of Natural Gas discovered pursuant to Petroleum Operations and produced from the Contract Area. Accordingly, any proposal by the Contractor relating to Discovery and production of Natural Gas from the Contract Area shall be made in the context of the Government's policy for the utilisation of Natural Gas and shall take into account the objectives of the Government to develop its resources in the most efficient manner and to promote conservation measures. Contractor shall have the right to use Natural Gas produced from the Contract Area for the purpose of Petroleum Operations including, but not limited to, reinjection for pressure maintenance in the Oil Gas lifting and power generation.

21.2

Fields,

21.3 in

For the purpose of sales to the domestic market pursuant to this Article 21, the Delivery Point shall be the Delivery Point set forth the Gas sales contract entered into by the Contractor.

21.4

ASSOCIATED NATURAL GAS (ANG) 21.4.1 In the event that a New Discovery of Crude Oil contains ANG, Contractor shall declare in the proposal for the declaration of the New Discovery as a Commercial Discovery as specified in Article 9, whether (and by what amount) the estimated production of ANG is anticipated to exceed the quantities of ANG which will be used in accordance with Article 21.2 (hereinafter referred to as "the Excess ANG"). In such event the Contractor shall indicate whether, on the basis of the available data and information, it has reasonable grounds for believing that the Excess ANG could be commercially exploited in accordance with the terms of this Contract along
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with the Commercial Production of the Crude Oil from the Oil Field, and whether the Contractor intends to so exploit the Excess ANG. 21.4.2 Based on the principle of full utilization and minimum flaring of ANG, a proposed development plan for an Oil Field (or Oil Fields), shall, to the extent economically reasonable, include a plan for utilisation of the ANG from the Existing Discovery and New Discovery, including estimated quantities to be flared, reinjected, and to be used for Petroleum Operations; and, if the Contractor proposes to commercially exploit the Excess ANG for sale in the domestic market in 56 accordance with Government's policy, or elsewhere, the proposed plans for such exploitation. 21.4.3 If the Contractor wishes to exploit the Excess ANG (whether from an Existing or New Discovery), such ANG shall first be offered for sale to the Government (or its nominee) in writing in accordance with the terms of this Contract. On receipt of such offer, the Government (or its nominee) shall, within three (3) months of the date of receipt thereof, notify the Contractor, in writing, whether or not it wishes to exercise its option to purchase the Excess ANG. If the Government exercises its option to purchase the Excess ANG as provided in Article 21.4.3: (a) exercising the option, a date, within two (2) years of the date of the Contractor's offer, for commencement of purchase of the Excess ANG; (b) within six (6) months of the date of notification of the exercise of the Government's option pursuant to Article 21.4.3., the Contractor and the Government its nominee) shall agree on the terms for the sale to Government (or its nominee) of the Excess ANG. 21.4.5 If the Government does not exercise its option to purchase the Excess ANG the Contractor shall be free to explore markets for the commercial exploitation of the Excess ANG. Where the Contractor is of the view that Excess ANG cannot be commercially exploited, and chooses not to exploit ANG, or is unable to find a market for the Excess ANG pursuant to Article 21.4.5, the Government shall be entitled to and utilise such Excess ANG.
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21.4.4

the Government shall indicate in the notice

(or

21.4.6

take

21.4.7

If the Government elects to take the Excess ANG as provided in Article 21.4.6: the Contractor shall deliver such Excess ANG to the Government (or its nominee) free of cost, at the flange of the Gas/Oil separation facilities;

(a) downstream

(b)

the Government or its nominee shall bear all costs including gathering, treating, processing 57 and transporting costs beyond the downstream flange of the Gas/Oil separation facilities;

(c)

the delivery of such Excess ANG shall be subject to procedures to be agreed between the Government or its nominee and the Contractor prior to such delivery, such procedures to include matters relating to timing of off-take of such Excess ANG, which procedures shall not, any way, restrict Oil production.

in

21.4.8

Excess ANG which is not commercially exploited by the Contractor, or taken by the Government or its nominee pursuant to this Article 21, shall be returned to the subsurface structure or flared where such flaring is approved in the Development Plan, which approval shall not be unreasonably withheld, for the relevant Oil Field or where reinjection is uneconomical or inadvisable in accordance with good reservoir engineering practices. Where the Contractor is of the view that there is economic merit in flaring Gas in the absence of a Gas transmission system or during such time as the pipeline is inoperable or lacks capacity to take all available Gas, Contractor shall have the right to flare Gas. In any such event, Contractor shall notify the Management Committee within forty-eight (48) hours to obtain its approval for continuing operations. As soon as practicable after the New Discovery referred to in Article 21.4.1 or the submission to the Government of the proposal for the declaration of the New Discovery as a Commercial Discovery as therein specified, the Contractor and the Government or its nominee shall meet to discuss the sale and/or disposal of any ANG discovered with a view to giving effect to the provisions of this Article 21 in a timely manner.

21.4.9

21.4.10

21.5

NON ASSOCIATED NATURAL GAS (NANG) 21.5.1 In the event of a New Discovery of NANG, the Contractor shall promptly report such New Discovery to the Management Committee and the
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provisions of Articles 9.1 and 9.2 shall apply. The remaining provisions of Article 9 would apply to the New Discovery and development of NANG only in so far as they are not inconsistent with the provisions of Articles 21.5.1 to 21.5.13. 21.5.2 If, pursuant to Article 9.1, the Contractor gives notification that a New Discovery is of potential 58 commercial interest, the Contractor shall submit to the Management Committee, within one (1) Calendar Year from the date of notification of the above New Discovery, the proposed Appraisal Programme, including a Work Programme and budget to carry out an adequate and effective appraisal of such New Discovery, to determine (i) without delay, whether such New Discovery is a Commercial Discovery and (ii) with reasonable precision, the boundaries of the area to be delineated as a Field. Such programme shall be supported by all relevant data such as Well data, Contractor's best estimate of reserve range and production potential and shall indicate the date of commencement of the proposed Appraisal Programme. Where in the case of an Existing Discovery, Contractor desires to carry out additional appraisal work, the Contractor shall submit its proposed Appraisal Programme with a Work Programme and budget to the Management Committee within one hundred twenty (120) days of the Effective Date for approval. 21.5.3 The proposed Appraisal Programme for an Existing Discovery or a New Discovery shall be considered by the Management Committee within sixty (60) days of its submission by the Contractor and the programme together with the Work Programme and budget submitted by the Contractor revised in accordance with any agreed amendments or additions thereto approved by the Management Committee, shall be adopted as the Appraisal Programme and the Contractor shall promptly proceed with implementation of such programme. If on the basis of the results of the Appraisal Programme, the Contractor is of the opinion that NANG has been discovered in commercial quantities, it shall submit to the Management Committee, as soon as practicable but not later than five (5) years from the date of notification of the aforementioned New Discovery, a proposal for the declaration of the New Discovery as a Commercial Discovery. Such proposal shall take into account the Government's policies on Gas utilisation and propose alternative options (if any) for use or consumption of the NANG and be supported by, inter alia, technical and economic data, evaluations, interpretations and analyses of such data, feasibility studies relating to the New Discovery prepared by or on behalf of the
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21.5.4.

Contractor and other relevant information. 21.5.5 In the case of a New Discovery, simultaneously with the Contractor's Appraisal Programme, 59 Government and the Contractor shall seek to reach an agreement on the development, production, processing, utilisation and sale of the NANG, in the context of Article 21.1, within thirty-six (36) months of the date of notification of the Discovery referred to in Article 21.5. If no proposal is submitted to the Management Committee by the Contractor within five (5) years from the date of notification of such New Discovery, the Contractor shall relinquish its rights to develop such New Discovery and the area relating to such New Discovery shall be excluded from the Contract Area. 21.5.6 Where the Contractor has submitted a proposal for the declaration of a New Discovery as a Commercial Discovery, the Management Committee shall consider the proposal of the Contractor with reference to commercial utilisation of the NANG in the domestic market or elsewhere and in the context of Government's policy on Gas utilisation and the chain of activities required to bring the NANG from the Delivery Point to potential consumers in the domestic market or elsewhere. The Management Committee may, within ninety (90) days, request that the Contractor submit any additional information on the New Discovery and the related Appraisal Programme that it may reasonably require to facilitate a decision on whether or not to declare the New Discovery as a Commercial Discovery. The Management Committee shall make a decision regarding the declaration of a New Discovery as a Commercial Discovery within the latter of: (a) one hundred eighty (180) days of receipt of such proposal; or one hundred eighty (180) days of receipt of the additional information referred to above.

21.5.7

(b)

21.5.8

If the Management Committee, with the approval of the Government, declares a New Discovery a Commercial Discovery, such declaration shall be accompanied by an indication of the probable date(s) by when the market(s) would be ready to receive the Gas and an estimate of the quantities of Gas that could be so utilised. The Contractor, in such an event, shall, within One (1) Calendar Year of the declaration of the New Discovery as a Commercial Discovery, submit a Development Plan for the development of the Gas
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Field to the Management Committee for its approval. Such plan shall be supported by all 60 relevant information including, inter alia, the information required in Article 9.6. In the case of an Existing Discovery, Contractor shall within ninety (90) days of the Effective Date propose a Development Plan following the plan brought out in Appendix G, intended to achieve the production profile brought out in Appendix H, containing the detailed information required in Article 9.6, with supporting budget and the Management Committee shall render its decision regarding such proposal within thirty (30) days of such submittal. Where a Development Plan is so agreed, it shall be an approved Development Plan pursuant to this Article. 21.5.9 If the Development Plan has not been approved by the Management Committee within one hundred and eighty (180) days of its submission, the Contractor shall have the right to submit such plan or plans directly to the Government for approval, within sixty (60) days of the expiry of the time provided to the Management Committee to approve the plan or plans. The Government shall respond to the submission within ninety (90) days of receipt thereof. If the Government rejects the Contractor's proposed plan or plans, the Government shall state in writing the reasons for such rejection and the Contractor shall have the right to resubmit, within sixty (60) days of written notice of such rejection, such plan or plans duly amended to meet the Government's objections thereto. Such right of resubmission of each proposed plan or plans shall be exercisable by the Contractor only once. If the Parties are unable to agree, any Party shall have the right to submit the matter to arbitration. If no such plan or plans is/are submitted to the Government within the aforesaid period, the Contractor shall relinquish its right to develop such Gas Field and such Gas Field shall be excluded from the Contract Area. If the Management Committee is unable to agree on the declaration of a New Discovery as a Commercial Discovery within the time limit prescribed in Article 21.5.7, the Contractor, or any of its constituents, shall be entitled to submit such proposal directly to the Government for approval. In such event, the Contractor, or any of its constituents, shall also submit a comprehensive plan or plans for development of such New Discovery, which shall detail the proposed Development Plan for utilisation of the 61
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21.5.10

NANG produced in the domestic market giving, inter alia, the data specified in Article 21.5.8. The proposal for declaration of the New Discovery as a Commercial Discovery as well as the proposed Development Plan shall be submitted to the Government within one hundred and eighty (180) days of the expiry of the time given to the Management Committee to reach a decision on the proposal for declaration of the New Discovery as a Commercial Discovery and Government shall respond to the said submission within one hundred twenty (120) days of its receipt. If the Government disapproves the proposed plan or plans, the Government shall state in writing the reasons for such disapproval and the concerned Parties shall have the right to resubmit, within sixty (60) days, such plan or plans duly amended to meet the Government's objections thereto. Such right of resubmission of each proposed plan or plans shall be exercisable by the Contractor only once. In the event the Government does not approve such plan or plans, any Party shall have the right to submit the matter to arbitration. If no such plan (plans) is (are) submitted to the Government within the aforesaid period, the Contractor shall relinquish its rights to develop such Gas Field and such Gas Field shall be excluded from the Contract Area. 21.5.11 In the event the Management Committee , or Government, as the case may be, approves the Contractor's proposal for declaration of the New Discovery as a Commercial Discovery and also the comprehensive plan or plans for development of such New Discovery and for the utilisation of NANG produced in the domestic market, the Gas Field shall be promptly developed by the Contractor in accordance with the approved plan which shall be the Development Plan for the Field. In the event the Contractor does not commence development of a New Discovery within ten (10) years from the date of completion of the first Discovery Well, the Contractor shall relinquish its rights to develop such New Discovery and the area relating to such New Discovery shall be excluded from the Contract Area. The price of the ANG and NANG produced from the Oil or Gas Field for use in India shall be specified in the Gas sales contract, which shall be in accordance with the provisions of this Article 21.5.13, between the Contractor and the nominee of the Government. 62 (a) Unless the context otherwise requires, the following words and terms wherever and whenever used or appearing in this Article 21.5.13 shall have the following meaning:
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21.5.12

21.5.13

(i) amount

"British Thermal Unit" or "BTU" means the of energy required to raise the temperature of one (1) pound (avoirdupois) of pure water, at sixty degrees (60(degree)) Fahrenheit, one degree (1(degree)) Fahrenheit at an absolute pressure of 14.73 pounds per square inch.

(ii)

"Buyer" means the Government of India or its nominee. "Deliverability" means the lesser of the aggregate rate of all wells in the Contract

(iii) maximum Area

or the maximum delivery capacity of the processing facility, subject to generally accepted international petroleum industry practices. (iv) the Seller's onshore Gas receiving facility in the Hazira area and at the upstream weld of the connection to the Buyer's pipeline in the Hazira area. (v) "Maximum Delivery Pressure" has the meaning set forth in Article 21.5.13(c). "MMBTU" means one million (1,000,000) BTU's on a net heating value basis. "Seller" means Contractor. "Delivery Point" means a point downstream of

(vi)

(vii)

(b)

The Seller agrees to produce and deliver, on a daily basis, to the Buyer one hundred percent (100%) of the Deliverability of ANG and NANG at the Delivery Point and the Buyer, provided the Gas is made available and tendered for delivery by the Seller, agrees to take and purchase, on a daily basis, one hundred percent (100%) of the Deliverability of ANG and NANG provided, however, that Seller, at Seller's sole discretion, subject to generally accepted operator practices in the international petroleum industry, may adjust deliveries to provide for necessary maintenance, service and testing. Buyer may 63 request that Seller vary deliveries to accommodate similar circumstances in the Buyer's operation and Seller's approval shall not be unreasonably withheld. Communications procedures shall be mutually agreed in the Gas sales contract in accordance with internationally accepted industry standards.
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(c)

The Gas sold hereunder shall be delivered at the Delivery Point in the Hazira area at the operating pressure of the Buyer's owned or contracted pipeline up to a maximum pressure ("Maximum Delivery of one thousand (1000) psig.

Pressure")

(d)

Subject to the provisions hereof, the Buyer shall pay the Seller for each MMBTU of Gas delivered hereunder, or for each MMBTU of Gas for which the Buyer is obligated to pay hereunder, a price calculated as follows: The Base Price ("Base Price") in United States

Dollars (US$) per MMBTU is fixed on the basis of ninety-nine percent (99%) of a Low Sulfur Fuel Oil Basket ("LSFO Basket") calculated as the average of the daily mean value for low and high prices of fuel oil taking into account equal parts of: (1) bulk residual fuel oil, containing one percent (1%) sulfur, quoted for barges at Northwest Europe, (Barges, FOB Rotterdam); and bulk residual fuel oil, containing one percent (1%) sulfur, quoted for Mediterranean, basis Italy, (Cargoes, FOB Med, basis Italy); and a theoretical blend of residual fuel oil composed of Singapore Cargoes made up of seventy-four percent (74%) of LSWR-SR 0.3%, (three-tenths percent (0.3%) sulfur), and twenty-six percent (26%) of HSFO 180, three and one-half percent (3.5%) sulfur, viscosity 180 centistokes. The Base Price is calculated on the basis of the arithmetic average of the monthly values of the prices of the listed products as published in Platt's Oilgram Price Report for the eighteen (18) months of May, 1992 through October, 1993, inclusive. (These values 64 are derived from the mean of the daily ranges on days the postings are published to give a monthly value.) For the purpose of this Contract, Base Price will be equal to $2.32/MMBTU. The price of Gas for each MMBTU for each Calendar Quarter thereafter shall be determined by the following formula:
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(2)

(3)

Price = Base Price x (A/B) Where: A = a value calculated for the HS/LSFO Basket, defined in this Article 21.5.13 (d), evaluated for the twelve (12) months preceding the Calendar Quarter using the method for averaging as described for calculating the Base Price, and B = A value calculated for the HS/LSFO Basket, evaluated for the twelve (12) months April 1993 through March 1994. The High Sulfur/Low Sulfur Fuel Oil Basket ("HS/LSFO Basket") is valued as equal parts of: (1) bulk residual fuel oil, containing one percent (1%) sulfur, quoted for Mediterranean, basis Italy, (Cargoes, FOB Med, basis Italy); and (2) percent (1%) sulfur, quoted for Northwest Europe Cargoes, CIF, basis ARA, (Cargoes CIF NWE, Basis ARA), and (3) bulk residual fuel oil, Singapore Cargoes, containing three and one-half percent (3.5%) sulfur, viscosity 180 centistokes, (Singapore HSFO, 180 cst), and bulk residual fuel oil, Cargoes, FOB Arab Gulf, viscosity 180 centistokes, (Arab Gulf, FOB HSFO 180 cst) bulk residual fuel oil, containing one

(4)

using the method for averaging as described for calculating the Base Price. The Floor Price ("Floor Price") shall be ninety percent (90%) of the monthly values of the prices of the LSFO Basket as published in Platt's Oilgram Price Report for the eighteen 65 (18) months of May, 1992 through October, inclusive. (These values are derived from the daily ranges on days the postings are give a monthly value.) For the purpose of Contract, Floor Price will be equal to $2.11/MMBTU. Notwithstanding results of the calculations for price as shown in this Article 21.5.13 (d), the actual price shall in no event be less than a Floor Price ("Floor Price") which is calculated as US$2.11/MMBTU, nor more
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1993, the mean of published to this

than a Ceiling ("Ceiling") of the Floor Price plus US$1.00/MMBTU, provided that after seven (7) years from the Date of first delivery, the Seller shall have the option to revise the Ceiling to one hundred fifty percent (150%) of ninety percent (90%) of the same or equivalent basket of fuel oils used in calculating the Base Price averaged over the immediately preceeding eighteen (18) months. Parties agree to convert US$/barrel prices for fuel oil as published in Platt's Oilgram to US$/MMBTU using a factor of 6.28. If Platt's Oilgram is no longer published, an alternate publication shall be mutually agreed upon. 21.5.14 Nothing contained in any contract entered into by the Contractor for the supply, sale or disposal of Gas, with any nominee of the Government shall in any manner abrogate the obligation of the Government contained herein. The Government and/or its nominee shall pay any and all sales tax payable on the sale of Gas to the Government or its nominee.

21.5.15

-----*****----66 ARTICLE 22 EMPLOYMENT, TRAINING AND TRANSFER OF TECHNOLOGY

22.1

Without prejudice to the right of the Contractor to select and employ personnel in numbers and with the qualifications as, in the opinion of the Contractor, are required for carrying out Petroleum Operations in safe, cost effective and efficient manner, the Contractor shall, to

a the maximum extent reasonably possible, employ, and require the Operator and Subcontractors to employ, citizens of India having appropriate qualifications and experience, taking into account the experience required and the level and nature of the Petroleum Operations. 22.2 Contractor shall offer up to two (2) man months per year of on-the-job training and practical experience in skilled, management and executive positions of their ongoing Petroleum Operations to Indian nationals of the Government's choice. Contractor shall associate and involve mutually agreed numbers of citizens of India designated by the Government, which shall in no exceed three (3) people at any one time, in the technological aspects of the then ongoing Petroleum Operations for up to two man months per year. Such aspects shall include:
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22.3 event

EDGAR Online, Inc.

(a)

seismic data acquisition, processing and interpretation;

(b) computerized formation evaluation using well logs; (c) computerized analysis of geological data for basin analysis; (d) laboratory core analysis; (e) reservoir simulation and modelling; (f) geochemistry, including analytical methods, source rock studies, hydrocarbon generation, modelling; (g) measurement-while-drilling techniques; (h) stimulation of wells; (i) production engineering including, optimization methods for surface and subsurface facilities (e.g. NODAL analysis and implementation); (j) reservoir engineering and management including gas and water injection; (k) enhanced oil recovery techniques; 67 (l) gas production technology; (m) pipeline technology; (n) well design and drilling technology; (o) design of offshore facilities.

22.4

Except as herein provided, no Party shall be obliged to disclose by virtue of this Article 22 any data, process or information, whether owned by itself, any of its Affiliates or a third party, of a proprietary nature. At the request of the Government the Contractor shall separately endeavour to negotiate, in good faith, technical assistance agreements with the Government setting forth the terms by which each constituent of the Contractor may render technical assistance and make available commercially proven technical information of a proprietary nature for use in India by the Government. The issues to be addressed in negotiating such technical assistance agreements shall include, but be limited to, licensing issues, royalty conditions, confidentiality restrictions, liabilities, costs and method of payment.

22.5

not

-----*****----68
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ARTICLE 23 LOCAL GOODS AND SERVICES

23.1

In the conduct of Petroleum Operations, the Contractor shall: (a) give preference to the purchase and use of goods manufactured, produced or supplied in India provided that such goods are available on terms equal to or better than imported goods with respect to timing of delivery, quality and quantity required, price and other terms; employ Indian Subcontractors having the required skills or expertise, to the extent reasonably possible, in so far as their services are available on comparable standards with those obtained elsewhere and at competitive prices and on competitive terms; provided that where no such Subcontractors are available, preference shall be given to non-Indian Subcontractors who utilise Indian goods to the maximum extent possible subject however to the proviso in paragraph (a) above; cooperate to the extent possible and without financial with domestic companies in India to enable them to develop

(b)

(c) obligation skills

and technology to service the petroleum industry; (d) ensure that provisions in terms of paragraphs (a) to (c) above are contained in contracts between the Operator and its Subcontractors.

23.2 tender

The Contractor shall establish appropriate procedures, including procedures, for the acquisition of goods and services which shall ensure that suppliers and Subcontractors in India are given adequate opportunity to compete for the supply of goods and services. The

tender procedures shall include, inter alia, the financial amounts or value of contracts which will be awarded on the basis of selective bidding or open competitive bidding, the procedures for such bidding, and the exceptions to bidding in cases of emergency. 23.3 Within one hundred and twenty (120) days after the end of each Calendar Year, the Contractor shall provide the Government with a report outlining its achievements in utilising Indian resources during that Calendar Year. 23.4 In this Article "goods" means equipment, materials and supplies. -----*****----69 ARTICLE 24 INSURANCE AND INDEMNIFICATION
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24.1

INSURANCE 24.1.1 The Contractor shall, during the term of this Contract, obtain and maintain insurance coverage for and in relation to Petroleum Operations for such amount and against such risks in accordance with generally accepted international operating practices as are set forth herein, and shall furnish to the Government certificates evidencing that such coverage is in effect. Such insurance policies shall include the Government as additional insured and shall waive subrogation against the Government. The insurance shall, without prejudice to the generality of the foregoing, cover: (a) Loss or damage to all installations, equipment and other assets for so long as they are used in or in connection with Petroleum Operations; provided, however, if Contractor fails to insure any such installation, equipment or assets, it shall replace any loss thereof or repair any damage caused thereto; Loss, damage or injury caused by pollution in the course of or as a result of Petroleum Operations; Loss or damage to property or bodily injury suffered by any third party in the course of or as a result of Petroleum Operations for which the Contractor may be liable; With respect to Petroleum Operations offshore, the cost of removing wrecks and cleaning up operations following any accident in the course of or as a of Contractor's Petroleum Operations; (e) The Contractor's and/or Operator's liability to its employees engaged in Petroleum Operations.

(b)

(c)

(d)

result

24.1.2

The Contractor shall require its Subcontractors to obtain and maintain insurance against the risks referred to in Article 24.1.1 relating mutatis mutandis to such Subcontractors. 70

24.2

INDEMNITY The Contractor shall indemnify, defend and hold the Government

harmless against all claims, losses and damages of any nature whatsoever, including without limitation, claims for loss or damage to property or injury or death to persons caused by or resulting from any Petroleum Operations conducted by or on behalf of the Contractor.
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24.3 not

ONGC shall indemnify and hold the Companies harmless against all claims, losses and damages of any nature whatsoever, including, but by way of limitation, claims for loss or damage to property or injury or death to persons or Environmental Damage caused by or resulting

from and attributable to any operations in the nature of Petroleum Operations conducted by or on behalf of ONGC prior to the Effective Date. -----*****-----

71 ARTICLE 25 RECORDS, REPORTS, ACCOUNTS AND AUDIT

25.1

The Contractor shall prepare and maintain at an office in India accurate and current books, records, reports and accounts of its activities for and in connection with Petroleum Operations so as to present a fair, clear and accurate record of all its activities, expenditures and receipts. The Contractor shall also keep representative samples of cores and cuttings. Based on generally accepted and recognised accounting principles and modern petroleum industry practices, records, books, accounts and accounting procedures in respect of Petroleum Operations shall be maintained on behalf of the Contractor by the Operator, at its office in India.

25.2

business

25.3

The annual audit of accounts shall be carried out on behalf of the Contractor by a qualified, independent firm of internationally recognised chartered accountants, registered in India and selected by the Contractor. Accounts, together with the auditor's report thereon, shall be submitted to the Parties for approval not later than the thirtieth (30th) September following the Financial Year. The Government shall have the right to audit the accounting records of the Contractor in respect of Petroleum Operations as provided in the Accounting Procedure. The accounting and auditing provisions and procedures specified in Contract are without prejudice to any other requirements imposed by

25.4

25.5

25.6 this any

statute in India, including, without limitation, any specific requirements of the statues relating to taxation of companies. 25.7 For the purpose of any audit referred to in Article 25.5, the Operator or the Contractor shall make available to the auditor all such books, records, accounts and other documents and information as may be reasonably required by the auditor during normal business hours.
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-----*****----72 ARTICLE 26 INFORMATION, DATA, CONFIDENTIALITY, INSPECTION AND SECURITY

26.1

The Contractor shall, promptly after they become available, make available to the Government in its offices all data obtained as a result of Petroleum Operations under the Contract including, but not limited to, geological, geophysical, geochemical, petrophysical, engineering, well logs, maps, magnetic tapes, cores and production as well as all interpretative and derivative data, including reports, analyses, interpretations and evaluations prepared in respect of Petroleum Operations (hereinafter referred to as "Data"). Data shall

data

be the property of the Government, provided however, that the Contractor shall have the right to make use of such Data, free of cost, for the purpose of Petroleum Operations under this Contract as provided herein. 26.2 and shall furnish the Government with such progress reports containing full and accurate information relating to Petroleum Operations (on a periodic basis) as the Government may reasonably require, provided that this obligation shall not extend to proprietary technology. Without prejudice to the generality of the foregoing, the Contractor shall submit regular statements and reports relating to Petroleum Operations as provided in Appendix C. Contractor shall meet with the Government at a mutually convenient location to present the results of all geological and geophysical work carried out as well as the results of all engineering and drilling operations as soon as practical after such Data becomes available to the Contractor. 26.3 as confidential and, subject to the provisions hereinbelow, the Parties shall not disclose the contents thereof to any third party without the consent in writing of the other Parties. 26.4 The obligation specified in Article 26.3 shall not operate so as to prevent disclosure: (a) to Affiliates, Contractors, or Subcontractors for the purpose of Petroleum Operations; to employees, professional consultants, advisers, data
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Contractor shall keep the Government currently advised of all developments taking place during the course of Petroleum Operations

All Data, information and reports obtained or prepared by, for or on behalf of, the Contractor pursuant to this Contract shall be treated

(b) processing

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centres and laboratories, where required, for the performance of functions in connection with Petroleum Operations for any Party comprising the Contractor; (c) to banks or other financial institutions, in connection with Petroleum Operations;

73 (d) to bona fide intending assignees or transferees of an interest hereunder of a Party comprising the Contractor or in connection with a sale of stock of a Party comprising the Contractor; (e) to the extent required by any applicable law or in connection with any legal proceedings or by the regulations of any stock exchange upon which the shares of a Party comprising Contractor are quoted; (f) to Government departments for, or in connection with, the preparation by or on behalf of the Government of statistical reports with respect to Petroleum Operations, or in connection with the administration of this Contract or any relevant law or for any purpose connected with Petroleum Operations; (g) by a Party with respect to any Data or information which, without disclosure by such Party, is generally known to the public.

26.5

Any Data, information or reports disclosed by the Parties comprising the Contractor to any person other than pursuant to Article 26.4 (a), (b) and (g) shall be disclosed on the terms that such Data, information or reports shall be treated as confidential by the recipient. Prompt notice of disclosures made by the Contractor pursuant to Article 26.5 shall be given to the Government. 26.6 which, Any Data, information and reports relating to the Contract Area,

in the opinion of the Government, might have significance in connection with offers by the Government of open acreage or an exploration programme to be conducted by a third party in another area, may be disclosed by the Government for such purposes on conditions to be agreed upon between the Government and the Contractor. 26.7 Where an area ceases to be part of the Contract Area, the Contractor shall continue to treat Data and information with respect to the area as confidential and shall deliver to the Government copies or of all Data and information in its possession with respect to the area. The Government shall, however, have the right to freely use the Data and information thereafter. 26.8 The Government shall, at all reasonable times, through duly authorised representatives, be entitled to observe Petroleum Operations and to inspect all assets, books, records, reports, accounts, contracts, samples and Data kept by the Contractor or the Operator in respect of Petroleum Operations under the Contract, provided, however, that the Contractor shall not be required to disclose any proprietary technology. The duly authorised representatives shall be given reasonable assistance by the Contractor for such functions and the Contractor shall afford such
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originals

74 representatives all facilities and privileges afforded to its own personnel in the field including the use of office space and housing, free of charge. The representatives shall be entitled to make a reasonable number of surveys, measurements, drawings, tests and copies of documents, take samples, and make a reasonable use of the equipment and instruments of the Contractor provided that such functions shall not unduly interfere with the Contractor's Petroleum Operations. 26.9 Contractor shall give reasonable advance notice to the Government, or to any other authority designated by the Government for such purpose, of its programme of conducting surveys by aircraft or by ships, indicating, inter alia, the name of the survey to be conducted, approximate extent of the area to be covered, the duration of the survey, the commencement date, and the name of the airport or port which the survey aircraft or ship will commence its voyage. 26.10 The Government, or the authority designated by the Government for such purpose, shall have the right to inspect any aircraft or ship used by the Contractor or a Subcontractor carrying out any survey or other operations in the Contract Area and shall have the right to put on board such aircraft or ship Government officers in such number as may reasonably be necessary to ensure compliance by the Contractor or the Subcontractor with the security requirements of India. Expatriate employees and Subcontractors shall, for national security purposes, be subject to the approval of the Government, such approval not to be unreasonably withheld.

from

26.11

-----*****----75 ARTICLE 27 TITLE TO PETROLEUM, DATA AND ASSETS

27.1

The Government is the sole owner of Petroleum underlying the Contract Area and shall remain the sole owner of Petroleum produced pursuant to the provisions of this Contract except that part of Crude Oil or Gas the title whereof has passed to each constituent of the Contractor or any other person in accordance with the provisions of this Contract. Title to Crude Oil and/or Gas to which each constituent of the Contractor is entitled under this Contract, and title to Crude Oil and/or Gas sold to Government or its nominee by the constituents of Contractor shall pass to the relevant Party, or as the case may be, to Government or its nominee at the Delivery Point. Contractor shall be responsible for all costs and risks prior to the Delivery Point and each Party shall be responsible for all costs and risks associated

27.2

the

with such Party's share after the Delivery Point. Where the Government or its nominee purchases all or some of the Contractor's share of Crude
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Oil or Condensate, the Government or its nominee shall be responsible for all costs and risks in respect of the amount purchased, after the Delivery Point. 27.3 Title to all Data specified in Article 26 shall be vested in the Government and the Contractor shall have the right of use thereof as therein provided. Assets in place or contracted for use in or on the Contract Area purchased by the Contractor for use in Petroleum Operations shall be owned by the Parties comprising Contractor in proportion to their Participating Interest provided that the Government, or its nominee, shall have the right to require vesting of full title and ownership including abandonment obligations, if any, in it, free of cost, charge and encumbrances, of any or all assets, whether fixed or movable, acquired and owned by the Contractor for use in Petroleum Operations inside or outside the Contract Area, except assets required by a Party for ongoing operations in the nature of Petroleum Operations in India, such right to be exercisable by the Government, or its nominee, upon expiry or earlier termination of the Contract. Contractor shall be responsible in accordance with international petroleum standards for proper maintenance, insurance and safety of assets acquired for Petroleum Operations for keeping them in good repair, order and working condition at all times, and the costs thereof shall be recoverable as Contract Costs in accordance with Appendix C. 27.6 So long as this Contract remains in force, the Contractor shall, free of any charge for the purpose of carrying out Petroleum Operations hereunder, have the exclusive use of 76 the assets which have become or are the property of the Government including, without limitation, those identified in Appendix F. 27.7 Equipment and assets no longer required for Petroleum Operations shall first be offered free of cost, charge and encumbrance to the Government, or its nominee, and, if not required by the Government, or its nominee, will be so indicated in writing within thirty (30) days such offer. Failure to so indicate will be deemed to be a rejection of the offer by the Government. 27.8 Assets not acquired by the Government, or its nominee, may be sold or otherwise disposed of subject to the terms of this Contract.

27.4

27.5 all

of

-----*****----77 ARTICLE 28 ASSIGNMENT OF INTEREST

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28.1

Subject to the terms of this Article and other terms of this Contract, any Party comprising the Contractor may assign, or transfer, a part or all of its Participating Interest, with the prior written consent of the Government, which consent shall not be unreasonably withheld, provided that the Government is satisfied that: (a) the prospective assignee or transferee has the financial standing, technical competence, capacity and ability to meet its obligations hereunder, and is willing to provide an undertaking to assume its Participating Interest share of obligations and to provide a guarantee in respect thereof as provided in the Contract. (b) the prospective assignee or transferee is not a company incorporated in a country with which the Government, for policy reasons, has restricted trade or business; the prospective assignor or transferor and assignee or respectively are willing to comply with any reasonable

unconditional

(c) transferee conditions

of the Government as may be necessary in the circumstances with a view to ensuring performance under the Contract; and (d) the assignment or transfer will not adversely affect the performance or obligations under this Contract or be contrary to the interests of India.

28.2

An application by a Company for consent to assign or transfer shall be accompanied by all relevant information concerning the proposed assignment or transfer including detailed information on the proposed assignee or transferee and its shareholding and corporate structure, was earlier required from the Companies constituting the Contractor, the terms of the proposed assignment or transfer and the unconditional undertaking referred to in Article 28.1(a) above. The applicant shall also submit such information relating to the prospective assignee or transferee of the assignment or transfer as the Government may reasonably require to enable proper consideration and disposal of the application.

as

28.3

No assignment or transfer shall be effective until the approval of the Government is received, which approval may be given by the Government on such terms as it may deem fit. Upon assignment or transfer of its interest in this Contract, the assignor or transferor shall be and discharged from its obligations hereunder only to the extent that such obligations are assumed by the assignee or transferee with the approval of the Government. 78

released

28.4

The assignor shall clearly state in its deed of assignment, that the assignee shall be liable for all future obligations, under the Contract, to the extent of assignment. Upon prior notice to the Contractor, the Government may assign or
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28.5

transfer all or any part of its rights and interest under this Contract to any Government company wholly or partly owned by the Government and authorised by the Government to explore for and exploit Petroleum in the Contract Area. Upon prior notice to the Government, a Company may assign or transfer all or any part of its rights and interest under this Contract to an Affiliate subject to Article 6.2 and the parent company guarantee shall apply. 28.6 time, to less than ten percent (10%) of the total Participating Interest of all the constituents of the Contractor, except where the Government may, in special circumstances, so permit. 28.7 purposes of financing, such as a mortgage, charge or encumbrance on Petroleum assets or production of Petroleum at its own risk, cost and responsibility. The Contractor shall provide the Government with fifteen (15) days prior written notice before entering into any such financing arrangements 28.8 No assignment or pledge under this Article shall have the effect of decreasing the benefits accruing to Government under this Contract in any manner whatsoever. Nothing herein contained shall prohibit a Company in the normal course of business from pledging its Participating Interest share for An assignment or transfer shall not be made so as to reduce the Participating Interest of a constituent of the Contractor, at any

-----*****----79 ARTICLE 29 GUARANTEE 29.1 Each of the Companies shall deliver to the Government on the Effective Date of this Contract: (a) a financial and performance guarantee, for the performance of all obligations under the Contract, in the case of EOGIL from a parent company of good financial standing acceptable to the Government, in favour of the Government, in the form and substance set out in Appendix E; (b) a legal opinion from its legal advisors, in a form satisfactory to the Government, to the effect that the aforesaid guarantee has been duly signed and delivered on behalf of the guarantors with due authority and is legally valid and enforceable and binding upon them. 29.2 If any of the documents referred to in Article 29.1 are not delivered within the period specified herein, this Contract may be cancelled by the Government upon ninety (90) days written notice of its intention do so. 29.3 Notwithstanding any change in the composition or shareholding of the
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to

parent company furnishing the guarantees herein, it shall, under no circumstances, be absolved of its obligations contained in the guarantees provided pursuant to this Article.

-----*****----80 ARTICLE 30 TERMINATION OF CONTRACT

30.1

This Contract may, subject to the provisions hereinbelow and Article 31, be terminated by the Government without any financial liability upon giving ninety (90) days written notice of its intention to do so in the following circumstances, namely, that a Company : (a) has knowingly submitted any false statement to the Government in any manner which was a material consideration in the execution of this Contract; or has intentionally and knowingly extracted or authorised the extraction of any mineral not authorised to be extracted by the Contract or without the authority of the Government except such extractions as may be unavoidable as a result of operations conducted hereunder in accordance with generally accepted international petroleum industry practice which, when so extracted, were immediately notified to the Government; or is adjudged bankrupt by a competent court or enters into any agreement or scheme of composition with its creditors or takes advantage of any law for the benefit of debtors; or has passed a resolution to apply to a competent court for liquidation of the Company unless the liquidation is for the purpose of amalgamation or reconstruction of which the has been given notice and the Government is satisfied that the Company's performance under this Contract would not be adversely affected thereby and has given its approval thereto; or (e) has assigned any interest in the Contract without the prior consent of the Government as provided in Article 28; or fails to make any monetary payment required by law or under this Contract by the due date or within the specified period after due date; or (g) fails to comply with or contravenes the provisions of this Contract in a material particular; or fails to comply with any final determination or award made by a sole expert or arbitrators pursuant to
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(b)

(c)

(d)

Government

(f) the

(h)

Article 33; or (i) has been served a notice of cancellation pursuant to Article 29.2.

PROVIDED THAT 81 where the Contractor comprises two or more Companies, the Government shall not exercise its rights of termination pursuant to Article 30.1, on the occurrence, in relation to one or more, but not all, of the Companies, of an event entitling the Government to terminate the Contract, if any other Company or Companies constituting the Contractor satisfies the Government that it, or they, is/are willing and would be able to carry out the obligations of the Contractor. 30.2 This Contract may also be terminated by the Government on giving the requisite notice specified above if the events specified in Article 30.1 (c) and (d) occur with respect to a company which has given a guarantee pursuant to Article 29 subject, however, to Article 30.3. If the circumstances that give rise to the right of termination under Article 30.1 (f) or (g) or Article 29.2 are remedied by the Contractor within the ninety (90) day period or such extended period as may be granted by the Government, following the notice of the Government's intention to terminate the Contract as aforesaid, such termination shall not become effective. If the circumstance or circumstances that would otherwise result in termination are the subject matter of proceedings under Article 33, then termination shall not take place so long as such proceedings continue and thereafter may only take place when and if consistent the arbitral award. 30.5 On termination of this Contract, for any reason whatsoever, the rights and obligations of the Contractor shall cease but such termination shall not affect any rights of any Party which may have accrued or any obligations undertaken, or incurred, pursuant to this Contract, by Government or the Contractor or any Party comprising the Contractor not discharged by the Contractor or the Party prior to the date of termination. 30.6 In the event of termination pursuant to Articles 30.1 or 30.2: (a) the Government may require the Contractor, for a period not exceeding one hundred and eighty (180) days from the date of termination, to continue, for the account and at the cost of the Government, Crude Oil or Natural Gas production activities until the right to continue such production has been transferred to another entity; A Foreign Company, which is a constituent of the Contractor, shall, subject to the provisions hereof, have the right to and export all its property which has not vested in the
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30.3

30.4

with

and

(b) remove

Government provided that in the event that ownership of any property is in doubt, 82 or disputed, such property shall not be exported unless and until the doubt or dispute has been settled in favour of the Foreign Company.

-----*****----83 ARTICLE 31 FORCE MAJEURE

31.1

Performance by any Party hereto of any of its obligations under this Contract, or in fulfilling any condition of any lease granted to such Party, or any lease issued thereunder, shall, except for the payment monies due under this Contract or under the Act and the Rules or any law, be suspended or excused if, and to the extent that, such non-performance or delay in performance is caused by Force Majeure as defined in this Article.

of

31.2 similar

For the purpose of this Contract, the term Force Majeure means any cause or event, other than the unavailability of funds, whether to or different from those enumerated herein, beyond the reasonable control of, and unanticipated or unforeseeable by, and not brought about at the instance of the Party claiming to be affected by such event, or which, if anticipated or foreseeable, could not be avoided

or provided for, and which has caused the non-performance or delay in performance. Without limitation to the generality of the foregoing, the term Force Majeure shall include natural phenomena or calamities, earthquakes, typhoons, fires, wars declared or undeclared, hostilities, invasions, blockades, riots, insurrection and civil disturbances. 31.3 Where a Party is claiming suspension of its obligations on account of Force Majeure, it shall promptly, but in no case later than seven (7) days after the occurrence of the event of Force Majeure, notify the other Parties in writing giving full particulars of the Force Majeure, the estimated duration thereof, the obligations affected and the reasons for its suspension. A Party claiming Force Majeure shall exercise reasonable diligence to seek to overcome the Force Majeure event and to mitigate the effects thereof on the performance of its obligations under this Contract provided, however, that the settlement of strikes or differences with employees shall be within the discretion of the Party having the difficulty. The Party affected shall promptly notify the other Parties as soon as the Force Majeure event has been removed and no longer
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31.4

prevents it from complying with the obligations which have been suspended and shall thereafter resume compliance with such obligations as soon as possible. The period of work commitment or this Contract may be extended by such additional period as may be agreed by the Parties. 31.5 Majeure Notwithstanding anything contained herein, if an event of Force occurs and is likely to continue for a period in excess of thirty (30) days, the Parties shall meet to discuss the consequences of the Force Majeure and the course of action to be taken to mitigate the effects thereof or to be adopted in the circumstances.

-----*****----84 ARTICLE 32 APPLICABLE LAW AND LANGUAGE OF THE CONTRACT

32.1

Subject to the provisions of Article 33.12, this Contract shall be governed and interpreted in accordance with the laws of India.

32.2 Nothing in this Contract shall entitle the Government or the Contractor to exercise the rights, privileges and powers conferred upon it by this Contract in a manner which will contravene the laws of India. 32.3 The English language shall be the language of this Contract and shall be used in arbitral proceedings. All communication, hearings or visual materials or documents relating to this Contract shall be in English.

-----*****----85 ARTICLE 33 SOLE EXPERT, CONCILIATION AND ARBITRATION

33.1

The Parties shall use their best efforts to settle amicably all disputes, differences or claims arising out of or in connection with any of the terms and conditions of this Contract or concerning the interpretation or performance thereof. Except for matters which, by the terms of this Contract, the Parties have agreed to refer to a sole expert and any other matters which the Parties may agree to so refer, any dispute, difference or claim between the Parties hereunder which cannot be settled amicably may be submitted by any Party to arbitration pursuant to Article 33.3. Such
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33.2

arising

sole expert shall be an independent and impartial person of international standing with relevant qualifications and experience appointed by agreement between the Parties. Any sole expert appointed shall be acting as an expert and not as an arbitrator and the decision of the sole expert on matters referred to him shall be final and binding on the Parties and not subject to arbitration. If the Parties are unable to agree on a sole expert, the disputed subject matter may be referred to arbitration. 33.3 or Subject to the provisions herein, any unresolved dispute, difference claim which cannot be settled amicably within a reasonable time may, except for those referred to in Article 33.2, be submitted to an arbitral tribunal for final decision as hereinafter provided. 33.4 The arbitral tribunal shall consist of three arbitrators. The Party or Parties instituting the arbitration shall appoint one arbitrator and the Party or Parties responding shall appoint another arbitrator and both Parties shall so advise the other Parties. The two arbitrators appointed by the Parties shall appoint the third arbitrator. Any Party may, after appointing an arbitrator, request the other Party(ies) in writing to appoint the second arbitrator. If such other Party fails to appoint an arbitrator within forty-five (45) days of receipt of the written request to do so, such arbitrator may, at the request of the first Party, be appointed by the Secretary General of the Permanent Court of Arbitration at the Hague, within forty-five days of the date of receipt of such request, from amongst persons who are not nationals of the country of any of the Parties to the arbitration proceedings. 33.6 If the two arbitrators appointed by the Parties fail to agree on the appointment of the third arbitrator within thirty (30) days of the appointment of the second arbitrator and if the Parties do not otherwise agree, the Secretary General of the Permanent Court of Arbitration at the Hague 86 may, at the request of either Party and in consultation with both, appoint the third arbitrator who shall not be a national of the country of any Party. 33.7 If any of the arbitrators fails or is unable to act, his successor shall be appointed in the manner set out in this Article as if he was the first appointment.

33.5

(45)

33.8 The decision of the arbitration tribunal and, in the case of difference among the arbitrators, the decision of the majority, shall be final and binding upon the Parties. 33.9 Arbitration proceedings shall be conducted in accordance with the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL) of 1985 except that in the event of any conflict between these rules and the provisions of this Article 33, the provisions of this Article 33 shall govern.
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33.10

The right to arbitrate disputes and claims under this Contract shall survive the termination of this Contract. Prior to submitting a dispute to arbitration, a Party may submit the matter for conciliation under the UNCITRAL conciliation rules by

33.11 mutual

agreement of the Parties. If the Parties fail to agree on a conciliator (or conciliators) in accordance with the rules, the matter may be submitted for arbitration. No arbitration proceedings shall be instituted while conciliation proceedings are pending and such proceedings shall be concluded within sixty (60) days. 33.12 The venue of conciliation or arbitration proceedings pursuant to this Article, unless the Parties otherwise agree, shall be London, England and shall be conducted in the English language. The arbitration agreement contained in this Article 33 shall be governed by the laws England. Insofar as practicable, the Parties shall continue to implement the terms of this Contract notwithstanding the initiation of arbitral proceedings and any pending claim or dispute. 33.13 The fees and expenses of a sole expert or conciliator appointed by the Parties shall be borne equally by the Parties. Assessment of the costs of arbitration including incidental expenses and liability for the payment thereof shall be at the discretion of the arbitrators.

of

-----*****----87 ARTICLE 34 ENTIRE AGREEMENT, AMENDMENTS, WAIVER AND MISCELLANEOUS

34.1

This Contract supersedes and replaces any previous agreement or understanding between the Parties, whether oral or written, on the subject matter hereof, prior to the Effective Date of this Contract. This Contract shall not be amended, modified, varied or supplemented any respect except by an instrument in writing signed by all the Parties, which shall state the date upon which the amendment or modification shall become effective.

34.2 in

34.3 be

No waiver by any Party of any one or more obligations or defaults by any other Party in the performance of this Contract shall operate or construed as a waiver of any other obligations or defaults whether of

a like or of a different character. 34.4 The provisions of this Contract shall inure to the benefit of and be binding upon the Parties and their permitted assigns and successors in interest.
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34.5 of the

In the event of any conflict between any provisions in the main body this Contract and any provision in the Appendices, the provision in main body shall prevail.

34.6 and

The headings of this Contract are for convenience of reference only shall not be taken into account in interpreting the terms of this Contract.

-----*****----88 ARTICLE 35 CERTIFICATES

35.1

A Company shall furnish, prior to execution of this Contract, a duly authorised copy of a resolution properly and legally passed by the Board of Directors of the Company specifying the person authorised execute this Contract along with a Certificate duly signed by the Secretary or an Assistant Secretary of the Company under its seal in this regard and to the effect that the Company has the power and authority to enter into this Contract and to perform its obligations thereunder and has taken all necessary action to authorise the execution, delivery and performance of the Contract.

to

-----*****----89 ARTICLE 36 NOTICES

36.1

All notices, statements, and other communications to be given, submitted or made hereunder by any Party to another shall be sufficiently given if given in writing in the English language and by registered post, postage paid, or by telegram, telex, facsimile, radio or cable, to the address or addresses of the other Party or Parties as follows: a) To the President of India through the Secretary to the Government of India Ministry of Petroleum and Natural Gas Shastri Bhavan Dr. Rajendra Prasad Marg New Delhi 110 001, India Attention: Joint Secretary Facsimile No. : 91-11-384-787
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sent

b)

The Secretary Oil & Natural Tower II, 8th 124 Connaught New Delhi 110 Facsimile No.

Gas Corporation Limited Floor, Jeevan Bharati Circus 001, India : 91-11-331-6413

c)

Reliance Industries Limited Maker Chambers IV, 3rd Floor 222 Nariman Point Bombay 400 021 INDIA Attention: Chief Executive Officer Oil & Gas

Facsimile No. : 022-204-2268 d) Enron Oil & Gas India Ltd. Amiya Apartments, 1st Floor 63A Linking Road, Santa Cruz (W) Bombay 400 054 INDIA Attention: Managing Director Facsimile No.: 011-91-22-604-9119 with a copy to: Enron Oil & Gas India Ltd. 1400 Smith Street Houston, Texas 77002, U.S.A. Attention: Vice President, Operations Facsimile No. : 713-646-8115 36.2 Notices when given in terms of Article 36.1 shall be effective when delivered if offered at the address of the other Parties as under Article 36.1 during business hours on working days and, if received outside business hours, on the next following working day. 90 36.3 other Any Party may, by reasonable notice as provided hereunder to the Parties, change its address and other particulars for notice purpose.

IN WITNESS WHEREOF, the representatives of the Parties to this Contract being duly authorised have hereunto set their hands and have executed these presents this 22nd day of December 1994. Signed for and on behalf of the

President of India

By /s/ NAJERB JR. Najerb Jr. In the presence of /s/ V. RAMANI

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22-12-94

V. Ramani Signed for and on behalf 22-12-94 of Oil & Natural Gas Corporation Limited By /s/ S. K. MANGLIK S. K. Manglik

In the presence of

/s/ R. N. DESAI 22-12-94 R. N. Desai Signed for and on behalf 22-12-94 of Reliance Industries Limited By /s/ AKHIL GUPTA Akhil Gupta

In the presence of

/s/ BA LA SAGRAMANIA Ba La Sagramania Signed for and on behalf 22-12-94 of Enron Oil & Gas India Ltd. By /s/ J. A. KOPECKY J. A. Kopecky

In the presence of

/s/ E. J. VANDERMARK E. J. Vandermark -----*****-----

91
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APPENDIX A DESCRIPTION OF CONTRACT AREA The area comprising approximately 1471 sq. km offshore India identified as Tapti Block described herein and shown under map attached as Appendix B. Longitude and Latitude measurements are as follows:

LATITUDE A. 20(degree)50'00"N 71(degree)49'00"E B. 20(degree)50'00"N 72(degree)08'00"E C. 20(degree)35'00"N 72(degree)08'00"E D. 20(degree)20'00"N 71(degree)53'00"E E. 20(degree)20'00"N 71(degree)49'00"E

LONGITUDE

-----*****----92 APPENDIX B MAP OF CONTRACT AREA TAPTI BLOCK -----*****----93 APPENDIX C ACCOUNTING PROCEDURE TO PRODUCTION SHARING CONTRACT BETWEEN THE GOVERNMENT OF INDIA AND ONGC/RIL/EOGIL 94

TABLE OF CONTENTS SECTIONS SECTION 1: 1.1 CONTENT GENERAL PROVISIONS Purpose

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1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 SECTION 2: 2.1 2.2 2.3 2.4 2.5 2.6 SECTION 3: 3.1

Definitions Inconsistency Documentation and Statements to be Submitted by the Contractor Language and Units of Account Currency Exchange Rates Payments Arms Length Transactions Audit and Inspection Rights of the Government Revision of Accounting Procedure CLASSIFICATION, DEFINITION AND ALLOCATION OF COSTS AND EXPENDITURES Segregation of Costs Exploration Costs Development Costs Production Costs Service Costs General and Administrative Costs COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL INCOME OF THE CONTRACTOR Costs Recoverable and Allowable Without Further Approval of the Government 3.1.1 Surface Rights 3.1.2 Labor & Associated Costs 3.1.3 Transportation Costs 3.1.4 Charges for Services (a) Third Party Contracts (b) Affiliated Company Contracts 3.1.5 Communications 3.1.6 Office, Shore Bases and Miscellaneous Facilities 3.1.7 Environmental Studies and Protection 3.1.8 Materials and Equipment (a) General (b) Warranty (c) Value of Materials Charged the Account 3.1.9 Duties, Fees and Other Charges 3.1.10 Insurance and Losses 3.1.11 Legal Expenses 3.1.12 Training Costs 3.1.13 General and Administrative Costs Costs Not Recoverable and Not Allowable under the Contract Other Costs Recoverable and Allowable Incidental Income and Credits Non-Duplication of Charges and Credits 95

to

3.2 3.3 3.4 3.5

SECTION 4: 4.1 4.2 SECTION 5:

RECORDS AND INVENTORIES OF ASSETS Records Inventories PRODUCTION STATEMENT AND ROYALTY AND CESS STATEMENT
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SECTION 6: SECTION 7: SECTION 8: SECTION 9: SECTION 10: SECTION 11:

VALUE OF PRODUCTION AND PRICING STATEMENT STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS COST RECOVERY STATEMENT PRODUCTION SHARING STATEMENT END OF YEAR STATEMENT BUDGET STATEMENT

-----*****----96 ACCOUNTING PROCEDURE SECTION 1 GENERAL PROVISIONS 1.1 PURPOSE Generally, the purpose of this Accounting Procedure is to set out principles and procedures of accounting which will enable the Government of India to monitor effectively the Contractor's costs, expenditures, production and income so that the Government's entitlement to Profit Petroleum, royalty, cess, etc., as well as Contractor's entitlement to Cost Petroleum and Profit Petroleum can be accurately determined pursuant to the terms of the Contract. More specifically, the purpose of the Accounting Procedure is to: - classify costs and expenditures and to define which costs and expenditures shall be allowable for cost recovery, production sharing and participation purposes; - specify the manner in which the Contractor's accounts shall be prepared and approved. This Accounting Procedure is intended to apply to the provisions of the Contract and is without prejudice to the computation of income tax under applicable provisions of the Income Tax Act, 1961, as amended. 1.2 DEFINITIONS For purposes of this Accounting Procedure, the terms used herein which are defined in the Contract shall have the same meaning when used in this Accounting Procedure. 1.3 INCONSISTENCY In the event of any inconsistency or conflict between the provisions of this Accounting Procedure and the other provisions of the Contract, the other provisions of the Contract shall prevail. 1.4 DOCUMENTATION AND STATEMENTS TO BE SUBMITTED BY THE CONTRACTOR

1.4.1

Within thirty (30) days of the Effective Date of the Contract, the Contractor shall submit to and discuss with the Government a proposed outline of charts of accounts, operating records and reports, which outline shall reflect each of the categories and sub-categories of costs and income specified in Sections 2 and 3 and shall be in accordance with generally accepted standards and recognized accounting systems and consistent with
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97 normal petroleum industry practice and procedures for joint venture operations. Within ninety (90) days of receiving the above submission, the Government shall either provide written notification of its approval of the proposal or request, in writing, revisions to the proposal. Within one hundred and eighty (180) days from the Effective Date of the Contract, the Contractor and the Government shall agree on the outline of charts of accounts, records and reports which shall also describe the basis of the accounting system and procedures to be developed and used under this Contract. Following such agreement, the Contractor shall expeditiously prepare and provide the Government with formal copies of the comprehensive charts of accounts, records and reports and allow the Government to examine the manuals and to review procedures which are, and shall be, observed under the Contract. 1.4.2 Notwithstanding the generality of the foregoing, the Contractor shall make regular Statements relating to the Petroleum Operations as follows : (i) Production Statement and Royalty and Cess Statement (see Section 5 of this Accounting Procedure) Value of Production and Pricing Statement (see Section 6 of this Accounting Procedure) Statement of Costs, Expenditures and Receipts (see Section 7 of this Accounting Procedure) Cost Recovery Statement (see Section 8 of this Accounting Procedure) Production Sharing Statement (see Section 9 of this Accounting Procedure) End of Year Statement (see Section 10 of this Accounting Procedure) Budget Statement (see Section 11 of this Accounting Procedure)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

1.4.3

All reports and statements shall be prepared in accordance with the Contract and the laws of India and, where there are no relevant provisions in either of these, in accordance with generally 98 accepted practices in the international petroleum
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1.4.4

industry. Each of the entities constituting the Contractor shall be responsible for maintaining its own accounting records in order to comply with all legal requirements and to support all returns or any other accounting reports required by any Government authority in relation to the Petroleum Operations. However, for the purposes of giving effect to this Accounting Procedure, the Contractor shall appoint, and notify the Government in writing thereof, one of the Parties constituting Contractor who shall be responsible for maintaining, at its business office in India, on behalf of the Contractor, all the accounts of the Petroleum Operations in accordance with the provisions of the Accounting Procedure and the Contract.

1.5 LANGUAGE AND UNITS OF ACCOUNT All accounts, records, books, reports and statements shall be maintained on an accrual basis and prepared in the English language. The accounts shall be maintained in United States Dollars, which shall be the controlling currency of account for cost recovery, production sharing and participation purposes. Metric units and Barrels shall be employed for measurements required under the Contract. Where necessary for clarification, the Contractor may also maintain accounts and records in other languages, currencies and units. Following any new discovery of Petroleum the Parties shall meet to establish specific principles and procedures for identifying all costs, expenditures, receipts and income with respect to the Contract Area. 1.6 CURRENCY EXCHANGE RATES

1.6.1

1.6.2

For translation purposes between United States Dollars and Indian Rupees or any other currency, the previous month's average of the daily means of the buying and selling rates of exchange as quoted by the State Bank of India (or any other financial body as may be mutually agreed between the Parties) shall be used for the month in which the revenues, costs, expenditures, receipts or income are recorded. However, in the case of any single non-US Dollar transaction in excess of the equivalent of one hundred thousand US Dollars (US$100,000), the conversion into US Dollars shall be performed on the basis of the average of the applicable exchange rates for the day on which the transaction occurred. Any realized or unrealized gains or losses from the exchange of currency in respect of Petroleum Operations shall be credited or charged to the accounts. A record of the exchange rates used in 99 converting Indian Rupees or any other currencies into United States Dollars as specified in Section 1.6.1 shall be maintained by the Contractor and shall be identified in the relevant statements required to be submitted by the Contractor in accordance with Section 1.4.2.

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1.7

PAYMENTS 1.7.1 Subject to the foreign exchange laws and regulations prevailing from time to time, all payments between the Parties shall, unless otherwise agreed, be in United Dollars and shall be made through a bank designated by

States each receiving Party. 1.7.2 Contract shall be paid within forty-five (45) days from the date on which the obligation to pay was incurred. 1.7.3 Unless otherwise specified, all sums due by one Party to the other under the Contract during any month shall, for each day such sums are overdue during such month, bear interest compounded daily at the applicable LIBOR plus one percentage (1%) point. Unless otherwise specified, all sums due under the

1.8 ARMS LENGTH TRANSACTIONS Unless otherwise specifically provided for in the Contract, all transactions giving rise to revenues, costs or expenditures which will be credited or charged to the accounts prepared, maintained or submitted hereunder shall be conducted at arms length or on such a basis as will assure that all such revenues, costs or expenditures will be equal to or better than, as the case may be, would result from a transaction conducted at arms length on a competitive basis with third parties. For the purposes of clarification, this means revenues would be equal to or higher and costs would be equal to or lower. 1.9 AUDIT AND INSPECTION RIGHTS OF THE GOVERNMENT

1.9.1

Without prejudice to statutory rights, the Government, upon at least ninety (90) days advance written notice to the Contractor, shall have the right to inspect and audit, during normal business hours , all records and documents supporting costs, expenditures, expenses, receipts and income, such as Contractor's accounts, books, records, invoices, cash vouchers, debit notes, price lists or similar documentation with respect to the Petroleum Operations conducted hereunder in each Financial 100 Year, within two (2) years (or such longer period as may

be required in exceptional circumstances) from the end of such Financial Year. 1.9.2 The Government may undertake the conduct of the audit either through its own representatives or through a qualified firm of recognized international chartered accountants, registered in India, appointed for the

purpose
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by the Government. 1.9.3 In conducting the audit, the Government or its auditors shall be entitled to examine and verify, at reasonable times, all charges and credits relating to Contractor's activities under the Contract and all books of account, accounting entries, material records and inventories, vouchers, payrolls, invoices and any other documents, correspondence and records considered necessary by the Government to audit and verify the charges and credits. The auditors shall also have the right, in connection with such audit, to visit and inspect, at reasonable times, all sites, plants, facilities, warehouses and offices of the Contractor directly or indirectly serving the Petroleum Operations, and to physically examine other property, facilities and stocks used in Petroleum Operations, wherever located and to question personnel associated with those operations. Where the Government requires verification of charges made by an Affiliate, the Government shall have the right to obtain an audit certificate from an internationally recognized firm of public accountants acceptable to both the Government and the Contractor, which may be the Contractor's statutory auditor. Any and all such costs shall be for the Government's account. Any audit exceptions shall be made by the Government in writing and notified to the Contractor within one hundred and twenty (120) days following completion of the audit in question. The Contractor shall answer any notice of exception under Section 1.9.4 within one hundred and twenty (120) days of the receipt of such notice. Where the Contractor has, the one hundred and twenty (120) days, failed to answer a notice of exception, the exception shall prevail. 1.9.6 All agreed adjustments resulting from an audit and all adjustments required by prevailing exceptions shall be promptly made in the 101 Contractor's accounts and any consequential adjustments to the Government's entitlement to Petroleum shall be made as promptly as practicable. 1.9.7 If the Contractor and the Government are unable to reach final agreement on proposed audit adjustments, either Party may refer any dispute thereon to a sole expert as provided for in the Contract. So long as any issues are outstanding with respect to an audit, the Contractor shall
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1.9.4

1.9.5

after

maintain the relevant documents and permit inspection thereof until the issue is resolved.

1.10 REVISION OF THE ACCOUNTING PROCEDURE

1.10.1

By mutual agreement between the Government and the Contractor, this Accounting Procedure may be revised from time to time, in writing, signed by the Parties, stating the date upon which the amendments shall become

effective.

-----*****----102 SECTION 2 CLASSIFICATION, DEFINITION AND ALLOCATION OF COSTS AND EXPENDITURES 2.1 SEGREGATION OF COSTS Costs shall be segregated in accordance with the purposes for which such expenditures are made. All costs and expenditures allowable under Section 3, relating to Petroleum Operations, shall be classified, defined and allocated as set out below in this Section. Expenditure records shall be maintained in such a way as to enable proper allocation. 2.2 EXPLORATION COSTS Exploration Costs are all 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, part of the Contract Area, including expenditures incurred in respect of:

2.2.1 and

Aerial, geophysical, geochemical, palaeontological, geological, topographical and seismic surveys, analyses studies and their interpretation.

2.2.2 2.2.3

Core hole drilling and water well drilling. Labor, materials, supplies and services used in drilling Wells with the object of finding Petroleum or in drilling Appraisal Wells provided that if such Wells are completed as producing Wells, the costs of completion thereof shall be classified as Development Costs. Facilities used solely in support of the purposes in Sections 2.2.1, 2.2.2 and 2.2.3 above, including access roads, all separately identified.

2.2.4 described

2.2.5

Any Service Costs and General and Administrative Costs directly incurred on exploration activities and identifiable as such and a portion of the remaining Service Costs and General and
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Administrative Costs allocated to Exploration Operations determined by the proportionate share of total Contract Costs (excluding General and Administrative Costs and Service Costs) represented by all other Exploration Costs. 2.2.6 Geological and geophysical information purchased or acquired in connection with Exploration Operations. 103 2.2.7 Any other expenditure incurred in the search for Petroleum not covered under Sections 2.3 or 2.4.

2.3 DEVELOPMENT COSTS Development Costs are all direct and allocated indirect expenditures incurred with respect to the development of the Contract Area including expenditures incurred on account of:

2.3.1 or or

Drilling Development Wells, whether these Wells are dry producing and drilling Wells for the injection of water Gas to enhance recovery of Petroleum and Recompletion or working over of existing or service wells.

2.3.2

Purchase, installation or construction of production, transport and storage facilities for production of Petroleum from a Field, such as pipelines, flow lines, production and treatment units, wellhead equipment, subsurface equipment, enhanced recovery systems, offshore and onshore platforms, export terminals and piers, harbours and related facilities and access roads for production activities. Engineering and design studies for facilities referred to in Section 2.3.2. Any Service Costs, joint Development Plans and General and Administrative Costs directly incurred in Development Operations and identifiable as such and a portion of the remaining Service Costs and General and Administrative Costs allocated to development activities, determined by the proportionate share of total Contract Costs (excluding General and Administrative Costs and Service Costs) represented by all other Development Costs.

2.3.3

2.3.4

2.4 PRODUCTION COSTS

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2.4.1

Production Costs are expenditures incurred on Production Operations in respect of the Contract Area after the start of production from the Field (which are other than Exploration and Development Costs). The balance of General and Administrative Costs and Service Costs not allocated to Exploration Costs or Development Costs shall be allocated to Production Costs. Production Costs shall include costs for completion of Exploration Wells by way of installation of casing or equipment or otherwise or for the purpose of bringing a Well into use as a producing Well or as a Well for the injection 104 of water or Gas to enhance recovery of Petroleum and Recompletion or working over of existing or service

2.4.2

wells.

2.5 SERVICE COSTS Service Costs are direct and indirect expenditures incurred in support of Petroleum Operations in the Contract Area, including expenditures on insurance, environmental protection, warehouses, piers, marine vessels, vehicles, motorized rolling equipment, aircraft, fire and security stations, workshops, water and sewerage plants, power plants, housing, community and recreational facilities and furniture and tools and equipment used in these activities. Service Costs in any Year shall include the costs incurred in such Year to purchase and/or construct the facilities as well as the annual costs of maintaining and operating the same, each to be identified separately. All Service Costs shall be regularly allocated as specified in Sections 2.2.5, 2.3.4 and 2.4 to Exploration Costs, Development Costs and Production Costs and shall be separately shown under each of these categories. Where Service Costs are made in respect of shared facilities, the basis of allocation of costs to Petroleum Operations hereunder shall be on the basis of gross expenditures. 2.6 GENERAL AND ADMINISTRATIVE COSTS General and Administrative Costs are expenditures incurred on general administration and management primarily and principally related to Petroleum Operations in or in connection with the Contract Area, and shall include:

2.6.1

main office, field office and general administrative expenditures in India, including supervisory, accounting and employee relations services; an annual overhead charge for services rendered by the parent company or an Affiliate of the Operator outside India to support and manage Petroleum Operations under the Contract, and for staff advice and assistance including financial, legal, accounting and employee relations services, but excluding any remuneration for services charged separately under this Accounting Procedure calculated on the basis of one percent (1%) of expenditures. The expenditures used to calculate the monthly indirect charge shall not include the indirect charge (calculated
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2.6.2

2.6.3

either as a percentage of expenditures or as a minimum monthly charge), rentals on surface rights acquired and maintained for the joint account, guarantee deposits, 105 concession acquisition costs, bonuses paid in accordance with the Contract, royalties, value added taxes and taxes paid under the Contract, settlement of claims, proceeds from the sale of assets (including division in kind) amounting to more than US$10,000 per transaction, and similar items mutually agreed upon by the parties. 2.6.3 The expenditures used to calculate the monthly indirect charge shall not include the indirect charge (calculated either as a percentage of expenditures or as a minimum monthly charge), rentals on surface rights acquired and maintained for the joint account, guarantee deposits, concession acquisition costs, bonuses paid in accordance with the Contract, royalties, value added taxes and taxes paid under the Contract, settlement of claims, proceeds from the sale of assets (including division in kind) amounting to more than US$10,000 per transaction, and similar items mutually agreed upon by the parties. Credits arising from any government subsidy payment and disposition of joint account property shall not be deducted from total expenditures in determining such charge. 2.6.4 The indirect charges provided for in this Section may be amended periodically by mutual agreement between the Parties if, in practice, these charges are found to be insufficient or excessive.

-----*****----106 SECTION 3 COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL INCOME OF THE CONTRACTOR 3.1 COSTS RECOVERABLE AND ALLOWABLE WITHOUT FURTHER APPROVAL OF THE GOVERNMENT. Costs incurred by the Contractor on Petroleum Operations pursuant to the Contract as classified under the headings referred to in Section 2 shall be allowable for the purposes of the Contract except to the extent provided in Section 3.2 or elsewhere in this Accounting Procedure, and subject to audit as provided for herein.

3.1.1

Surface Rights All direct costs necessary for the acquisition, renewal or relinquishment of surface rights acquired and maintained

in
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force for the purposes of the Contract except as provided in Section 3.1.9. 3.1.2 Labor and Associated Costs (a) Costs of all Contractor's locally recruited employees who are directly engaged in the conduct of Petroleum Operations under the Contract in India. Such costs shall include the costs of employee benefits and Government benefits for employees and levies imposed on the Contractor as an employer, transportation and relocation costs within India of the employee and such members of the employee's family (limited to spouse and dependent children) as required by law or customary practice in India. If such employees are engaged in other activities in India, in addition to Petroleum Operations, the cost of such employees shall be apportioned on a time sheet basis according to sound and acceptable accounting principles. Assigned Personnel Costs of salaries and wages, including bonuses, of the Contractor's employees directly and necessarily engaged in the conduct of the Petroleum Operations under the Contract, whether temporarily or permanently assigned, irrespective of the location of such employees, it being understood that in the case of those personnel only a portion of whose time is wholly dedicated to Petroleum Operations under the Contract, only that 107 pro rata portion of applicable salaries, wages and other costs, as specified in Sections 3.1.2(c), (d), (e)and (f) shall be charged and the basis of such pro rata allocation shall be specified. (c) assessments or obligations imposed under the laws of India which are applicable to the Contractor's cost of salaries and wages. (d) The Contractor's cost of established plans for employees' group life insurance, hospitalization, pension, retirement and other benefit plans of a like nature customarily granted to the Contractor's employees provided, however, that such costs are in accordance with generally accepted
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(b)

Expenses or contributions made pursuant to

standards in the international petroleum industry, applicable to salaries and wages chargeable to Petroleum Operations under Section 3.1.2(b) above. (e) Personal Income taxes where and when they are paid by the Contractor to the Government of India for the employee, in accordance with the Contractor's personnel policies. (f) Reasonable transportation and travel expenses of employees of the Contractor, including those made for travel and relocation of the expatriate employees, including their dependent family and personal effects, assigned to India whose salaries and wages are chargeable to Petroleum Operations under Section 3.1.2(b). Actual transportation expenses of personnel transferred to Petroleum Operations from their country of origin and/or relocation to their country of origin shall be charged to the Petroleum Operations. Where such transfer or relocation is to or from a country other than the country of origin there shall be no reimbursement.

standard

Transportation cost as used in this Section shall mean the cost of freight and passenger service and any accountable incidental expenditures related to transfer travel and authorized under Contractor's standard personnel policies. Contractor shall ensure that all expenditures related to transportation costs are equitably allocated to the activities which have benefited from the personnel concerned. 108 3.1.3 Transportation Costs The reasonable cost of transportation of equipment, materials and supplies within India and from outside India to India necessary for the conduct of Petroleum Operations under the Contract, including, but not limited to, directly related costs such as unloading charges, dock fees and inland and ocean freight charges. 3.1.4 Charges for Services (a) Third Party Contracts The actual costs of contract services, services of professional consultants, utilities and other services necessary for the conduct of Petroleum Operations under the Contract performed by third parties other than an Affiliate of the Contractor, provided that the
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transactions resulting in such costs are undertaken pursuant to Section 1.8 of this Accounting Procedure. (b) Affiliated Company Contracts (i) Professional and Administrative Services and Expenses Cost of professional and administrative services provided by any Affiliate for the direct benefit of Petroleum Operations, including, but not limited to, services provided by the production, exploration, legal, financial, insurance, accounting and computer services divisions other than those covered by Section 3.1.4(b)(ii) which Contractor may use in lieu of having its own employees. Charges shall be equal to the actual cost of providing their services, shall not include any element of profit and shall not be any higher than the most favorable prices charged by the Affiliate to third parties for comparable services under similar terms and conditions elsewhere and will be fair and reasonable in the light of prevailing international petroleum industry practice and experience. (ii) Scientific or Technical Personnel Cost of scientific or technical personnel services provided by any 109 Affiliate of Contractor for the direct benefit of Petroleum Operations, which cost shall be charged on a cost of service basis. Charges therefor shall not exceed charges for comparable services currently provided by outside technical service organizations of comparable qualifications. Unless the work to be done by such personnel is covered by an approved Work Programme and Budget, Operator shall not authorize work by such personnel without approval of the Management Committee. (c) Equipment, facilities and property owned and furnished by the Contractor's Affiliates, at rates commensurate with the cost of ownership and operation provided, however, that such rates shall not exceed those currently prevailing for the supply of like equipment, facilities and property on comparable terms
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in the area where the Petroleum Operations are being conducted. The equipment and facilities referred to herein shall exclude major investment items such as (but not limited to) drilling rigs, producing platforms, oil treating facilities, oil and gas loading and transportation systems, storage and terminal facilities and other major facilities, rates for which shall be subject to separate agreement with the Government. 3.1.5 Communications Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems including satellite, radio and microwave facilities between the Contract Area and the Contractor's base facility, offices, helicopter bases, port and railway yards. 3.1.6 Office, Shore Bases and Miscellaneous Facilities Net cost to Contractor of establishing, maintaining and operating any office, sub-office, shore base facility, warehouse, housing or other facility directly serving the Petroleum Operations. If any such facility services contract areas other than the Contract Area, or any business other than Petroleum Operations, the net costs thereof shall be allocated on an equitable and consistent basis. 110 3.1.7 Environmental Studies and Protection Costs incurred in conducting the environmental impact studies for the Contract Area, and in taking environmental protection measures pursuant to the terms of the Contract. 3.1.8 Materials and Equipment (a) General So far as is practicable and consistent with efficient and economical operation, only such material shall be purchased or furnished by the Contractor for use in the Petroleum Operations as may be required for use in the reasonably foreseeable future and the accumulation of surplus stocks shall be avoided to the extent possible. Material and equipment held in inventory shall only be charged to the accounts when such material is removed from inventory and used in Petroleum Operations. Contractor shall be allowed to recover interest at the LIBOR rate plus one percent (1%) for reasonable inventories it carries. Costs shall be charged to the accounting records and books
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based on the average cost method. (b) Warranty In the case of defective material or equipment, any adjustment received by the Contractor from the suppliers or manufacturers or their agents in respect of any warranty on material or equipment shall be credited to the accounts under the Contract. (c) Value of Materials Charged to the Accounts Under the Contract. (i) Except as otherwise provided in subparagraph (b), materials purchased by the Contractor and used 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, customs duties, consular fees, other items chargeable against imported material and, where applicable , 111 handling and transportation costs from point of importation to or from warehouse or operating site, and these costs shall not exceed those currently prevailing in normal arms length transactions on the open market. (ii) or transferred to or from activities of the Contractor other than Petroleum Operations under the Contract: (aa) new material (hereinafter referred to as condition A) shall be valued at the current international price which shall not exceed the price prevailing in normal arms length transactions on the open market; used material which is in sound and serviceable condition and is suitable for reuse without reconditioning (hereinafter referred to as condition B) shall be priced at not more than seventy-five percent (75%) of the current price of the above mentioned new materials;
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Material purchased from or sold to Affiliates

(bb)

(cc)

used material which cannot be classified as condition B, but which, after reconditioning, will be further serviceable for original function as good second-hand condition B material or is serviceable for original function, but substantially not suitable for reconditioning (hereinafter referred to as condition C) shall be priced at not more than fifty per cent (50%) of the current price of the new material referred to above as condition A.

The cost of reconditioning shall be charged to the reconditioned material, provided that the condition C material value plus the cost of reconditioning does not exceed the value of condition B material. 112 Material which cannot be classified as condition B or condition C shall be priced at a value commensurate with its use. Material involving erection expenditure shall be charged at the applicable condition percentage (referred to above) of the current knocked-down price of new material referred to above as condition A. When the use of material is temporary and its service to the Petroleum Operations does not justify the reduction in price in relation to materials referred to above as conditions B and C, such material shall be priced on a basis that will result in a net charge to the accounts under the Contract consistent with the value of the service rendered. 3.1.9 Duties, Fees and Other Charges Any duties, levies, fees, charges and any other assessments levied by any governmental or taxing authority in connection with the Contractor's activities under the Contract and paid directly by the Contractor except corporate income tax payable by the constituents of the Contractor. If Operator or its Affiliate is subject to income or withholding tax as a result of service performed at cost for Petroleum Operations under the Agreement, its charges for such services may be increased by the amount of such taxes incurred ("grossed up"), provided such charges have not been otherwise recovered or a tax credit received.
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3.1.10

Insurance and Losses Insurance premia and costs incurred for insurance required by law or pursuant to Article 24 of the Contract, provided that such insurance is customary, affords prudent protection against risk and is at a premium no higher than that charged on a competitive basis by insurance companies which are not Affiliates. Actual costs and losses incurred shall be allowable to the extent not made good by insurance. Such costs may include, but are not limited to, repair and replacement of property resulting from damages or losses incurred by fire, flood, storm, theft, accident or such other cause. 113

3.1.11

Legal Expenses All reasonable costs and expenses resulting from the handling, investigating, asserting, defending, or settling of any claim or legal action 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 Petroleum Operations under the Contract, or sums paid in respect of legal services necessary for the protection of the joint interest of Government and the Contractor, shall be allowable. Such expenditures shall include attorney's fees, court costs, costs of investigation and procurement of evidence and amounts paid in settlement or satisfaction of any such litigation and claims provided such costs are not covered elsewhere in the Accounting Procedure. Where legal services are rendered in such matters by salaried or regularly retained lawyers of the Contractor or an Affiliate, such compensation shall be included instead under Sections 3.1.2 or 3.1.4(b)(i) above as applicable. 3.1.12 Training Costs All costs and expenses incurred by the Contractor in training as is required under Article 22 of the Contract. 3.1.13 General and Administrative Costs The costs described in Section 2.6.1 and the charge described in Section 2.6.2 of this Accounting Procedure.

3.2 COSTS NOT RECOVERABLE AND NOT ALLOWABLE UNDER THE CONTRACT The following costs and expenses shall not be recoverable or allowable (whether directly as such or indirectly as part of any other charges or expenses) for cost recovery and production sharing purposes under the Contract: (i) costs and charges incurred before the Effective Date including costs in respect of preparation, signature or ratification of this Contract except as otherwise provided in Article 13.1;
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(ii) expenditures in respect of any financial transaction to negotiate, float or otherwise obtain or secure funds for Petroleum Operations including, but not limited to, interest, commission, brokerage and fees related to such 114 transactions, and exchange losses on loans or other financing; (iii) costs of marketing or transportation of Petroleum beyond the Delivery Point; (iv) expenditures incurred in obtaining, furnishing and maintaining the guarantees required under the Contract and any other amounts spent on indemnities with regard to non-fulfillment of contractual obligations; (v) attorney's fees and other costs and charges in connection with arbitration proceedings and sole expert determination pursuant to the Contract; (vi) fines and penalties imposed by courts of law of the Republic of India; (vii) donations and contributions; (viii) expenditures for the creation of any partnership or joint venture arrangement; (ix) amounts paid with respect to non-fulfillment of contractual obligations; (x) costs incurred as a result of failure to insure where insurance is required pursuant to the Contract; (xi) costs and expenditures incurred as a result of wilful misconduct or gross negligence of the Contractor's supervisory personnel; (xii) payments pursuant to Article 16 of the Contract. 3.3 OTHER COSTS RECOVERABLE AND ALLOWABLE. Any other costs and expenditures not included in Section 3.1 or 3.2 of this Accounting Procedure but which have been incurred by the Contractor for the necessary and proper conduct of Petroleum Operations pursuant to an approved Work Programme and Budget. 3.4 INCIDENTAL INCOME AND CREDITS All incidental income and proceeds received from Petroleum Operations under the Contract, including but not limited to the items listed below, shall be credited to the accounts under the Contract and shall be taken into account for cost recovery, production sharing and participation purposes in the manner described in Articles 13 and 14 of the Contract: 115 (i) The proceeds of any insurance or claim or judicial awards in connection with Petroleum Operations under the Contract or any assets charged to the accounts under the Contract where such operations or assets have been insured and the premia charged to the accounts under the Contract; (ii) Revenue received from third parties for the use of property or assets, the cost of which has been charged to the accounts under the Contract; (iii) 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 by the Contractor to the accounts under the Contract; (iv) Rentals, refunds or other credits received by the Contractor which apply to any charge which has been made to the accounts under the Contract; (v) Prices originally charged to the accounts under the Contract for materials subsequently exported from the Republic of India without being used in Petroleum Operations under the Contract; (vi) Proceeds from the sale or exchange by the Contractor of plant or facilities from a Field, the acquisition costs of which have been charged to the accounts under the Contract for the relevant Field;
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(vii) Legal costs charged to the accounts under Section 3.1.11 of this Accounting Procedure and subsequently recovered by the Contractor. 3.5 NON-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 Contract. -----*****----116 SECTION 4 RECORDS AND INVENTORIES OF ASSETS 4.1 RECORDS

4.1.1

The Contractor shall keep and maintain detailed records of property and assets in use for or in connection with Petroleum Operations under the Contract in accordance with normal practices in exploration and production activities of the international petroleum industry. Such records shall include information on quantities, location and condition of such property and assets, and whether such property or assets are leased or owned. The Contractor shall furnish annually particulars to the Government, by notice in writing as provided in the Contract, of all major assets acquired by the Contractor be used for or in connection with Petroleum Operations.

4.1.2

to 4.2 INVENTORIES 4.2.1 The Contractor shall: (a) not less than once every twelve (12) Calendar Months with respect to movable assets take an inventory of the controllable assets used for or in connection with Petroleum Operations in terms of the Contract and address and deliver such inventory to the Government with a statement of the principles upon which valuation of the assets mentioned in such inventory has been based. Controllable assets means those assets the Operator shall submit to detailed record keeping. not less than once every three (3) years with respect to immovable assets, take an inventory of the assets used for or in connection with Petroleum Operations in terms of the Contract and address and deliver such inventory to the Government together with a written statement of the principles upon which valuation of the assets mentioned in such inventory has been based. Immovable assets means those assets which are placed in
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(b)

service and have an original cost in excess of Fifty Thousand United States Dollars (US$50,000). 4.2.2 The Contractor shall give the Government at least thirty (30) days notice in writing in the manner provided for in the Contract of its intention to take the inventory referred to in Section 4.2.1 117 and the Government shall have the right to be represented when such inventory is taken. 4.2.3 Contractor at the request of the assignee provided that the cost of such inventory is borne by the assignee and paid to the Contractor. 4.2.4 In order to give effect to Article 27 of the Contract, the Contractor shall provide the Government with a comprehensive list of all relevant assets when requested the Government to do so. When an assignment of rights under the Contract takes place, a special inventory shall be taken by the

by

-----*****----118 SECTION 5 PRODUCTION STATEMENT AND ROYALTY AND CESS STATEMENT 5.1 From the date of first production, after the Effective Date, of Petroleum from the Contract Area, the Contractor shall submit a Production Statement for each Calendar Month to Government showing the following information separately for each producing field and in aggregate for the Contract Area:

5.1.1 5.1.2

The quantity of Crude Oil produced and saved. The quality and characteristics of such Crude Oil produced and saved. The quantity of Associated Natural Gas and Non Associated Natural Gas produced and saved. The quality, characteristics and composition of such Natural Gas produced and saved. The quantities of Crude Oil and Natural Gas used for the purposes of carrying on drilling and Production and pumping to field storage, as well as quantities reinjected.

5.1.3

5.1.4

5.1.5 Operations

5.1.6

The quantities of Crude Oil and Natural Gas unavoidably lost.

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5.1.7 5.1.8

The quantities of Natural Gas flared and vented. The size of Petroleum stocks held on the first day of the Calendar Month in question. The size of Petroleum stocks held on the last day of the Calendar Month in question. The quantities of Natural Gas reinjected into the Petroleum Reservoir. The number of days in the Calendar Month during which Petroleum was produced from each Field. The Gas/Oil ratio for each Field for the relevant Calendar Month. The water/Oil ratio for each Field for the relevant Calendar Month, if available.

5.1.9

5.1.10

5.1.11

5.1.12

5.1.13

5.2 All quantities shown in this Statement shall be expressed in both volumetric terms (barrels of oil and cubic metres of gas) and in weight (metric tonnes). 5.3 The Government may direct in writing that the Contractor include other particulars relating to the production of 119 Petroleum in its Production Statement, and the Contractor shall to the extent possible comply with such direction. 5.4 The Production Statement for each Calendar Month shall be submitted to Government no later than ten (10) days after the end of such Calendar Month for Oil and the immediately succeeding Calendar Month for Gas. 5.5 The Contractor shall, for the purposes of Article 15, submit a statement to Government providing the calculation of the amount of royalty and cess, separately, paid with respect to each Calendar Month for each producing Field and in aggregate for the Contract Area. The statement shall show the following information:

5.5.1

The quantity of Crude Oil and Condensate produced and saved. The quantity of ANG and NANG produced and saved. The amount of royalty and cess, separately, paid on Oil and Condensate produced, saved and sold and the particulars of the calculation thereof.

5.5.2 5.5.3 Crude

5.5.4

The amount of royalty paid on ANG and NANG and the particulars of the calculation thereof.

5.6 The Royalty and Cess Statement for each Calendar Month shall be submitted to Government no later than twenty-one (21) days after the end of such Calendar Month for Oil and the most recently available Calendar Month for Gas.

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-----*****----120 SECTION 6 VALUE OF PRODUCTION AND PRICING STATEMENT 6.1 The Contractor shall prepare a Statement providing calculations of the value of Crude Oil produced and saved during each Calendar Month. This Statement shall contain the following information:

6.1.1

The quantities, prices and receipts realized by the Contractor as a result of sales of Crude Oil to third parties (with any sales to Government being separately identified) made during the Calendar Month in question. The quantities, prices and receipts realized therefor by the Contractor as a result of sales of Crude Oil made during the Calendar Month in question, other than to third parties. The quantities of Crude Oil appropriated by the Contractor to refining or other processing without otherwise being disposed of in the form of Crude Oil. The value of stocks of Crude Oil on the first day of the Calendar Month in question. The value of stocks of Crude Oil on the last day of the Calendar Month in question. The percentage volume of total sales of Crude Oil made by the Contractor during the Calendar Month that are Arms Length Sales to third parties. Information available to the Contractor, in so far as required for the purposes of Article 19 of the Contract, concerning the prices of competitive crude oils produced the main petroleum producing and exporting countries including contract prices, discounts and premia, and

6.1.2

6.1.3

6.1.4

6.1.5

6.1.6

6.1.7

by

prices obtained on the spot markets.

6.2 The Contractor shall prepare a statement providing calculations of the value of ANG and NANG produced and sold during each Calendar Month for the most recently available Calendar Month. This Statement shall contain all information of the type specified in Section 6.1 for Crude Oil as is applicable to Gas and such other relevant information as may be required by the Government. 6.3 The Statements required pursuant to Sections 6.1 and 6.2 shall include a detailed breakdown of the calculation of the prices of Crude Oil, Associated Natural Gas and Non Associated Natural Gas. 121 6.4 The Value of Production and Pricing Statement for each Calendar Month shall be submitted to Government not later than twenty-one (21) days after the end of such Calendar Month for Oil and the most recently available Calendar Month for Gas. -----*****-----

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122 SECTION 7 STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS 7.1 The Contractor shall prepare with respect to each Calendar Quarter a Statement of Costs, Expenditures and Receipts under the Contract. The statement shall distinguish between Exploration costs, Development Costs and Production Costs and shall separately identify all significant items of costs and expenditure as itemized in Section 3 of this Accounting Procedure within these categories. The statement of receipts shall distinguish between income from the sale of Petroleum and incidental income of the sort itemized in Section 3.4 of this Accounting Procedure. If the Government is not satisfied with the categories, it shall be entitled to request a more detailed breakdown. The Statement shall show the following:

7.1.1

Actual costs, expenditures and receipts for the Calendar Quarter in question. Cumulative costs, expenditures and receipts for the Year in question.

7.1.2

7.1.3 Latest forecast of cumulative costs, expenditures and receipts at the Year end. 7.1.4 Variations between budget forecast and latest forecast and explanations thereof.

7.2 The Statement of Costs, Expenditure and Receipts of each Calendar Quarter shall be submitted to Government not later than sixty (60) days after the end of such Calendar Quarter. -----*****----123 SECTION 8 COST RECOVERY STATEMENT 8.1 The Contractor shall prepare with respect to each Calendar Quarter a Cost Recovery Statement containing the following information:

8.1.1

Unrecovered Contract Costs carried forward from the previous Calendar Quarter, if any. Contract costs for the Calendar Quarter in question. Total Contract Costs for the Calendar Quarter question (Section 8.1.1 plus Section 8.1.2).

8.1.2

8.1.3 in

8.1.4

Quantity and value of Cost Petroleum taken and disposed of by the Contractor for the Calendar Quarter in question. Contract Costs recovered during the Calendar Quarter in question. Total cumulative amount of Contract Costs recovered up to the end of the Calendar Quarter
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8.1.5

8.1.6

in question. 8.1.7 Amount of Contract Costs to be carried forward into the next Calendar Quarter.

8.2 Where necessary and possible, the information to be provided under Section 8.1 shall be identified separately Field by Field and also separately for Crude Oil, Associated Natural Gas and Non Associated Natural Gas. 8.3 The cost recovery information required pursuant to Subsection 8.1 above shall be presented in sufficient detail so as to enable Government to identify how the cost of assets are being recovered. 8.4 The Cost Recovery Statement for each Calendar Quarter shall be submitted to Government not later than sixty (60) days after the end of such Calendar Quarter. -----*****----124 SECTION 9 PRODUCTION SHARING STATEMENT 9.1 The Contractor shall prepare with respect to each Calendar Quarter a Production Sharing Statement containing the following information:

9.1.1

The calculation of the applicable net cash flows as defined in Appendix D for the Calendar Quarter in question. The Investment Multiple applicable in the Calendar Quarter in question. Based on Section 9.1.2 and Article 14, the appropriate percentages of Profit Petroleum, if any, for the and Contractor in the Calendar Quarter in question.

9.1.2

9.1.3 Government

9.1.4

The total amount of Profit Petroleum, if any, to be shared between the Government and Contractor in the Calendar Quarter in question. Based on Sections 9.1.3 and 9.1.4, the amount of Profit Petroleum due to the Government and Contractor as well as to each constituent of the Contractor in the Calendar Quarter in question. The actual amounts of Petroleum taken by the Government Contractor as well as by each constituent of the

9.1.5

9.1.6 and Contractor

during the Calendar Quarter in question to satisfy their entitlement pursuant to Section 9.1.5. 9.1.7 Adjustments to be made, if any, in future Calendar Quarters in the respective amounts of Profit Petroleum due to the Government and Contractor as well as to each constituent of the
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Contractor on account of any differences between the amounts specified in Sections 9.1.5 and 9.1.6, as well as any cumulative adjustments outstanding from previous Calendar Quarters.

9.2 Where necessary and if possible, the information to be provided under Section 9.1 shall be identified separately for each Field and also separately for Crude Oil as distinct from Natural Gas. 9.3 The Production Sharing Statement shall be submitted to Government not later than sixty (60) days after the end of such Calendar Quarter. -----*****----125 SECTION 10 END OF FINANCIAL YEAR STATEMENT

10.1

The Contractor shall prepare a definitive End of Year Statement. The statement shall contain aggregated information in the same format as required in the Production Statement and Royalty and Cess Statement, Value of Production and Pricing Statement, Statement of Costs, Expenditure & Receipts, Cost Recovery Statement and Production Statement, but shall be based on actual quantities of Petroleum produced, income received and costs and expenditures incurred. Based upon this Statement, any adjustments that are necessary shall be made to the transactions concerned under the Contract.

Sharing

10.2

The End of Year Statement for each year shall be submitted to Government within ninety (90) days of the end of such Year.

-----*****----126 SECTION 11 BUDGET STATEMENT

11.1

The Contractor shall prepare a Budget Statement for each Year. This statement shall distinguish between budgeted Exploration Costs, Development Costs and Production Costs and shall show the following: 11.1.1 Forecast costs, expenditures and receipts for the Year in question. A schedule showing the most important individual items of total costs, expenditures and receipts for the Year.

11.1.2

11.2

The Budget Statement shall be submitted to Government with respect to each Year not less than ninety (90) days before the start of the Year provided that in the case of the Year in which the Effective Date falls, the Budget Statement shall be submitted within ninety (90)
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days of the Effective Date.

-----*****----127 APPENDIX D CALCULATION OF THE INVESTMENT MULTIPLE FOR PRODUCTION SHARING PURPOSES 1. In accordance with the provisions of Article 14, the share of the Government and the Contractor respectively of Profit Petroleum from the Contract Area in any Financial Year shall be determined by the Investment Multiple earned by the Companies from the Contract Area at the end of the preceding Financial Year. These measures of profitability shall be calculated on the basis of the appropriate net cash flows as specified in this Appendix D. INVESTMENT MULTIPLE 2. The "Net Cash Income" of the Companies from the Contract Area in any particular Financial Year is the aggregate value for the year of the following: (i) Cost Petroleum entitlement of the Companies as provided in Article 13; PLUS (ii) Profit Petroleum entitlement of the Companies as provided in Article 14; PLUS (iii) incidental income of the Companies of the type specified in Section 3.4 of the Accounting Procedure arising from Petroleum Operations and apportioned to the Contract Area; LESS (iv) the Companies' share of all Production Costs and royalty/cess payments incurred on or in the Contract Area; LESS (v) the notional income tax, determined in accordance with paragraph 7 of this Appendix, payable by the Companies on profits and gains from the Contract Area. 3. The "Investment" made by the Companies in the Contract Area in any particular Financial Year is the aggregate value for the year of: (i) Exploration Costs incurred by the Companies in the Contract Area and apportioned to the Contract Area in the same proportion that said Costs were recovered pursuant to Articles 13.2 and 13.3. 128 PLUS (ii) Development Costs incurred by the Companies in the Contract Area. 4. For the purposes of the calculation of the Investment Multiple, Costs or expenditures which are not allowable as provided in the Accounting Procedure shall be excluded from Contract Costs and be disregarded. 5. The Investment Multiple ratio earned by the Companies as at the end of any Financial Year from the Contract Area shall be calculated by dividing the aggregate value of the addition of each of the annual Net Cash Incomes (accumulated, without interest, up to and including that Financial Year starting from the Financial Year in which Production Costs were first incurred or production first
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arose after the Effective Date on or in the Contract Area) by the aggregate value of the addition of each of the annual Investments (accumulated, without interest, up to and including that Financial Year starting from the Financial Year in which Exploration and Developments Costs were first incurred). 6. Profit Petroleum from the Contract Area in any Financial Year shall be shared between the Government and the Contractor in accordance with the value of the Investment Multiple earned by the Companies as at the end of the previous Financial Year pursuant to Articles 14.2, 14.3 and 14.4. GENERAL 7. In determining the amount of notional income tax to be deducted in the applicable cash flows specified in paragraph 2 of this Appendix, a notional income tax liability in respect of the Contract Area shall be determined for each Company, as if the conduct of Petroleum Operations by the Company in the Contract Area constituted the sole business of the Company and as if the provisions of the Income Tax Act, 1961, with respect to the computation of income tax at a fifty percent (50%) rate applicable to Petroleum Operations on the basis of the income and deductions provided for in Article 15 of this Contract were accordingly applicable separately to the Contract Area, disregarding any income, allowances, deductions, losses or set-off of losses from any other Contract Area or business of the Company. 8. Sample Calculation is attached in Appendix "D-1". 129 APPENDIX "D-1" INVESTMENT MULTIPLE CALCULATION - EXAMPLE PROBLEM The following example is intended to demonstrate the calculation and impact of the Investment Multiple. The figures shown would be for the Companies and are fictitious in this example for demonstration purposes. The investment multiple is calculated individually for the Companies. RIL OR EOGIL

Investment Multiple at beginning of Financial Year 11 Profit Oil Shares at beginning of Financial Year 11 US$ MILLIONS A Cumulative Net Cash Income at beginning of Financial Year 11 + Cost Petroleum in Financial Year 11 + Profit Petroleum in Financial Year 11 + Incidental Income in Financial Year 11 - Production Costs in Financial Year 11 - Oil Royalty and Cess in Financial Year 11 - Gas Royalty in Financial Year 11 - Notional Income Tax in Financial Year 11 B = Cumulative Net Cash Income at end of Financial Year 11 C + + + = Cumulative Investment at beginning of Financial Year 11 Exploration Costs in Financial Year 11 Development Costs in Financial Year 11 Service Costs in Financial Year 11 Cumulative Investment at end of Financial Year 11 Multiple at beginning of
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1.96 24.00%

100.00 10.00 1.00 .00 .60 1.57 0.41 2.00 106.42

51.00 0.30 1.50 0.00 52.80

Investment

2.02

Financial Year 12 = (B / D) Profit Oil Shares at beginning of Financial Year 12 18.00%

Since the Investment Multiple is calculated to be greater than 2.0 at the beginning of Financial Year 12, the Profit Petroleum share to be received by RIL or EOGIL falls from 24% to 18% at the inception of Financial Year 12. In the event that the Investment Multiple were found to exceed 2.0 during the financial close of Financial Year 11, the Contractor may have received excess Profit Petroleum during the first sixty (60) days of Financial Year 12. In this case, the quantity of excess Profit Petroleum will be calculated and the accounts will be settled by adjustment to entitlements within sixty (60) days of the following year (year twelve). -----*****----130 APPENDIX E FORM OF FINANCIAL AND PERFORMANCE GUARANTEE (to be furnished pursuant to Article 29 of the Contract) WHEREAS ENRON EXPLORATION COMPANY, a Company duly organized and existing under the laws of Delaware, U.S.A., having its registered office at 1400 Smith Street, Houston, Texas, U.S.A., (hereinafter referred to as "the Guarantor" which expression shall include its successors and assigns) is the indirect owner of 100% of the capital stock of ENRON OIL & GAS INDIA LIMITED ("Company") and direct owner of its parent company; and WHEREAS Company is signatory to a Production Sharing Contract of even date of this guarantee in respect of an Offshore area identified as Tapti Block (hereinafter referred to as "the Contract") made between the Government of India (hereinafter referred to as "the Government"), Company, RELIANCE INDUSTRIES LIMITED and OIL & NATURAL GAS CORPORATION LIMITED (hereinafter referred to as "Contractor" which expression shall include its successors and permitted assigns); and WHEREAS the Guarantor wishes to guarantee the performance of Company or its Affiliate Assignee under the Contract as required by the terms of the Contract; NOW, THEREFORE, this Deed hereby provides as follows: 1. The Guarantor hereby unconditionally and irrevocably guarantees to the Government that it will make available, or cause to be made available, to Company or any other directly or indirectly owned Affiliate of Company to which any part or all of Company's rights or interest under the Contract may subsequently be assigned ('Affiliate Assignee'), to ensure that Company or any Affiliate Assignee can carry out its work commitment as set forth in the Contract. 2. The Guarantor further unconditionally and irrevocably guarantees to the Government reasonable compliance by Company or any Affiliate Assignee, of any obligations of Company or any Affiliate Assignee under the Contract. 3. The Guarantor hereby undertakes to the Government that if Company, or any Affiliate Assignee, shall, in any respect, fail to perform its work commitments under the Contract or commit any material breach of such obligations, then the Guarantor shall fulfill or cause to be fulfilled the obligations in place of Company or any Affiliate Assignee, and will indemnify the Government against all actual losses, damages, costs, expenses, or otherwise which may result directly from such failure to perform or breach on the part of Company. In no event shall Guarantor be liable for any special consequential, indirect, incidental or punitive damages of any kind or character, including, but not limited to, loss of profits or revenues, loss of product or loss of use arising out of or related to a 131 material breach by Company of its obligations under the Contract. 4. This guarantee shall take effect from the Effective Date and shall remain in full force and effect for the duration of the Contract and thereafter until no sum remains payable by Company, or its Affiliate Assignee, under the Contract or as a result of any decision or award made by any expert or arbitration tribunal thereunder.
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5. This guarantee shall not be affected by any change in the Articles of Association and by-laws of Company or the Guarantor or in any instrument establishing the Licensee. 6. The liabilities of the Guarantor shall not be discharged or affected by (a) any time indulgence, waiver or consent given to Company; (b) any amendment to the Contract or to any security or other guarantee or indemnity to which Company has agreed; (c) the enforcement or waiver of any terms of the Contract or of any security, other guarantee or indemnity; or (d) the dissolution, amalgamation, reconstruction or reorganization of Company. 7. This guarantee shall be governed by and construed in accordance with the laws of India. IN WITNESS WHEREOF the Guarantor, through its duly authorized representatives, has caused its seal to be duly affixed hereto and this guarantee to be duly executed the __________ day of _________ 1994. The seal of ___________ was hereto duly affixed by ___________this_____ day of ________ 1994 in accordance with its by-laws and this guarantee was duly signed by ________________ and ______________________ as required by the said by-laws.

- ------------------------------------------Secretary Witness:

Vice President

-----*****----132 APPENDIX F EQUIPMENT All Wells drilled by ONGC and associated equipment whether or not plugged and abandoned except that no liabilities or obligations shall accrue to Companies from accepting same unless such liabilities or obligations arise as a result of actions taken after the Effective Date. -----*****----133 APPENDIX G DEVELOPMENT COMMITMENT SPECIFIED BY THE COMPANIES The development plan, illustrated in Figure G-1 includes, but may not be limited to: - 3D reservoir simulation models - 6 well platforms at South Tapti - 4 well platforms at Mid-Tapti - 1 common 5.1 MMm3/day (180 MMCFPD) processing facility and living quarters at Mid-Tapti - Interfield and intrafield pipelines - 1 export gas pipeline - 35 Development Wells (directional from well platforms) - Geophysical, geological and engineering studies - The final configuration of physical facilities will result from optimization studies to which ONGC will contribute their knowledge and information. - If drainage area of the 35 primary development wells is inadequate, an additional 30 (infill) wells may be needed. Infill wells are not a committed work obligation, but are included in the Cost Recovery Limit defined in Article 13.1.2. Annex G-1 shows Companies' development concept based on an assumed project start date of July 1, 1993. -----*****----134

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APPENDIX - G FIGURE G-1

Mid and South Tapti Fields Bombay Offshore Basin [Chart] 135 Appendix G Annex G-1 VIIa. aA. TECHNICAL INFORMATION FOR THE FIELD RESERVE ASSESSMENT Primary objectives in assigning reserves to Mid- and South-Tapti Fields were two fold: First, verify ONGC's reserves, and second, assess potential for an increase and a decrease in reserve base. 1. Verification Methodology Verification was accomplished by adapting reservoir parameters and various fluid boundaries utilized by ONGC in pay maps provided in the "Review of Technological Scheme for Development of Tapti Field" to the Bidders' revised structure map on the H-3 Marker (Exhibit VII-1). This approach incorporated significant effects of a complex and aerially extensive NW-SE extensional fault system into the interpretation of the primary gas pool geometries in Mid- and South-Tapti. Structure maps for the various pools were made for Pay Zones I, II, IX, and XII in Mid-Tapti and Zones I, II, and III in South-Tapti. Values from the ONGC pay hydrocarbon volume maps (Sgoh) were then recontoured to reflect the new structural interpretations. Major stratigraphic boundaries were also incorporated in the associated zonal pay maps. At Mid-tapti, it was necessary to place a generally E-W trending reservoir pinchout to the north because the MT-3 and MT-4 Wells lie below the critical structural spill point at the Pay Zone I and XII levels. A NE-SW trending permeability barrier mapped by ONGC that separates the MT-3 from adjacent wells in Pay Zone XII was modified to include the MT-1 Well in the MT-3 Block. Stratigraphic correlation methods and nomenclature established by ONGC were utilized in this preliminary evaluation. The erratic fluviodeltaic depositional character of the sand bodies and relatively large distances between wells precluded a more detailed stratigraphic correlation scheme without additional seismic/well data. A major disagreement in correlation with ONGC occurs at Pay Zone XII at Mid-Tapti and will be discussed.
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The Bidders are confident that the 3-D seismic survey proposed in the pre-development work plan will prove to be an excellent tool for delineation of porous gas-filled reservoirs through amplitude analysis (DHI). It will also minimize stratigraphic risk prior to field development and improve detailed structural definition. 2. Upside Potential Verification of base reserves in the Tapti Block is considered essential by the Bidders. Upside potentials is also important but not quantifiable in this preliminary evaluation. Hydrocarbon pay volume values calculated by ONGC are conservative based on preliminary log analysis of the MT-1, MT-2, MT-5, C2-5, C2-7 and C2-8 Wells. Average shale-corrected porosity values calculated by the Bidders vary between 22 percent and 30 percent (25 percent average). Gas effect may impart a small positive error in the Bidders' porosity calculation. In Mid-Tapti, average gas saturation porosity values calculated by the Bidders were 67 to 72 percent in MT-1, 64 to 71 percent in MT-2 and 73 to 76 percent in MT-5. These higher gas saturations were calculated utilizing a Waxman-Smit log analysis model assuming cation exchange capacity (CEC) values between 5 to 10 meq/100gms. Petrographic analyses suggested to the Bidders that pervasive clay coating of the sands by a chlorite mineral (chamosite) could cause relatively high CEC's of 10 to 40 meq/100gms. This CEC effect could result in preferential conductivity along the clay linings. This phenomena would increase calculated gas saturations if taken into account. For this reason, the attached contoured Sgoh values are considered to be conservative. Proposed pre-development work will entail a detailed petrophysical analysis of existing rock/log data to derive zone-specific formation evaluation models to determine effective porosity, permeability, and gas saturation parameters. Aside from log analysis, the fluid contacts and stratigraphic limits placed on various Pay Zones have a significant margin for error. Of the seven pools mapped and discussed below by the Bidders, four have a structurally defined limit based on a gas/shale contact (GSC) or lowest known gas (LKG) as defined by the Bidders. The water contact in Pay Zone I at South-Tapti, the largest pool in the block, is based on a water test from a same 20 meters stratigraphically lower than the proven gas productive zone lying immediately below the H-3 marker. Arbitrary stratigraphic limits were required to
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explain the trapping mechanism of Zone I and Zone XII pools at Mid-Tapti. The pools' actual limits on the north side of the field have yet to be defined. aB. PAY ZONE STRUCTURE AND (Sgoh) MAPS

The zones mapped by the Bidders include the following:

ZONE MAP -------------------------I Structure Mid/South-Tapti I Sgoh Mid/South-Tapti II Structure Mid/South-Tapti II Sgoh Mid/South-Tapti III Structure III Sgoh IX Structure IX Sgoh XII Structure XII Sgoh

FIGURE -----VII-2 VII-3 VII-4 VII-5 VII-6 VII-7 VII-8 VII-9 VII-10 VII-11

FIELD

South-Tapti South-Tapti Mid-Tapti Mid-Tapti Mid-Tapti Mid-Tapti

In the following discussion of the various Pay Zones, stratigraphic correlation is based on the distance the pay sand in question lies below the H-3 marker. Zones in different wells with overlapping stratigraphic depth ranges are considered to be equivalent. Zone I is the most aerially extensive pay in the Tapti area occurring in both field areas. At South-Tapti, ONGC placed a gas/water contact at 1807 meters subsea although none of the observed tests of this interval in the C2-2, C2-4, C2-5, C2-6, and C2-7 had water recoveries reported. The C2-6 did test a sand at 1843- 52 meters (1820-1829 meters subsea) which produced water. It occurs 22 meters below the gas bearing Zone I sand at 1820-1825 meters (1797-1802 meters subsea). This provides the only evidence of significant water production in the gross Zone I interval at South-Tapti. The Sgoh map honors this water contact. The numerous cross-cutting faults at South-Tapti were generally not considered to separate the accumulation except to the south at the C2-7 Well and in the north where the high Sgoh values in C2-1, C2-4, and C2-6 are interpreted to be in a separate fault block. At Mid-Tapti the gas/shale contact or lowest known gas (LKG) was placed at a -1650 meters subsea based on the MT-3 Well. Successful tests were reported from MT-1, MT-3, MT-4, and MT-5 Wells. An arbitrary stratigraphic pinchout was placed on the north side of the field because structural spill as mapped occurs at -1610 meters. This limits the productive area to roughly the same size as that mapped by ONGC. An untested fault trap on the west side of the field was contoured using Sgoh values similar to those observed in adjacent wells. Reserves for the untested fault block were risk discounted at 50 percent probability of success (POS) in this and subsequently mapped intervals. Zone II occurs in both field areas but is aerially limited to the south end of South- Tapti with successful tests in the C2-2 and C2-7 Wells. The pool is interpreted to be stratigraphically limited to the north and structurally defined by LKG at -1847 meters in the C2-7 Well. At Mid-Tapti, successful tests were reported in MT-1 and MT-5. The gas/water contact at -1650 meters is thought to be occurs at 1676-1679 meters. The base of the sand is at 1650 meters subsea. MT-2 contains two untested sands at the Zone II stratigraphic level that appear potentially productive (1656-1670, 1672-1676). This was apparently considered by ONGC when assigning a relatively high Sgoh value of 1.47 to the well. Zone III is restricted to the northern half of South-Tapti Field. A stratigraphic limit was placed south of the C2-5 Well and LKG at -1876 meters subsea corresponding to the base of the productive sand at 1896-1903.5 meters in C2-5. Successful tests include the C2-1 and
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C2-5. Successfully tested zones that were not quantified at South-Tapti in this preliminary study include Zones IV and V in C2-8, Zone VIII in C2-1, Zone IX in C2-5, Zone X in C2-6 and C2-8, and Zone XI in C2-2. At Mid-Tapti, Pay Zone IX had a successful test in the MT-5 Well with LKG at -1896 meters subsea. An untested apparent log pay zone occurs in the MT-1 at 1920-1925 meters that is stratigraphically equivalent to the MT-5 producer and was assigned an Sgoh value of 0.168 by ONGC. Zone XII at Mid-Tapti is interpreted to consist of two separate sand bodies that include a mix of ONGC Zones X and XII. In their map of Zone XII, ONGC separates a prolific test (498,273 m(3)/day) at 2046-2055 meters in the MT-3 Well with a permeability barrier from the MT-1, MT-2, MT-4, and MT-5 Wells. The Bidders interpret Zone X in MT-1, which tested at a rate of 446,355 m(3)/day from 1976-1979 and 1984-1987, to be the stratigraphic equivalent of the prolific MT-3 Zone XII. This prolific sand body, informally called Zone XII A is not present in the other Mid-Tapti wells. Approximately 60 meters stratigraphically lower than Zone XII A is another productive sand body called Zone XII B. It has successful tests in the MT-2 and MT-5 Wells but with lower rates of 107,000 and 85,535 m(3)/day, respectively. A significant water recovery in the MT-2 test of 1085 bbl/day caused the Bidders to place a gas/water contact at -2040 meters subsea in Zone XII B. The Sgoh map reflects the difference in pay quality between the two sand bodies and shows a northern stratigraphic limit which is required because of structural spill. Zones not mapped and quantified at Mid-Tapti include Zones XIV and XV in MT- 1. aC. ADDITIONAL PAY ZONES NOT MAPPED BY ONGC In the Bidders' preliminary log analysis, a number of untested potential pay zones were identified. Future work will integrate all log defined potential pay zones with 3-D seismic amplitude analysis and stratigraphic interpretation to provide detailed pay maps. aD. RESERVE PARAMETERS The parameters used for estimating reserves for each interval are believed to be the same parameters employed by ONGC in reserve estimates available in one of the documents in the data room. Preliminary log analysis suggests the possibility for variation, perhaps towards the positive side. This is a high priority item for further investigation during the pre-development study phase.

FIELD HORIZON SATURATION ------------------------------Mid-Tapti I Mid-Tapti II Mid-Tapti IX Mid-Tapti XII South-Tapti I South-Tapti II South-Tapti III aE. RESERVES

NET PAY (m) ------6.1 15.6 2.6 8.6 6.0 17.2 8.7

POROSITY (%) -------18.0 18.0 18.6 21.8 18.5 19.0 21.0

WATER (%)

65 69 60 57 60 45 40

Figure VII-12 is a reserve uncertainty distribution plot on log probability scale for Mid and South Tapti fields combined. It shows the expected reserve range of gas in place in English units for unrisked and risked reserves. For each pay zone, individual fault-defined gas accumulations were risk weighted according to the degree and proximity of well penetrations as described in section B. Calculated reserves were placed at the P 50% or most likely position. Based on alternative log analysis models, the maximum (P 10%) value was determined by increasing porosity 40% (i.e. porosity value of 10% would change to 14%) and decreasing water saturation 40% as well (i.e. Sw of 60% would change to 36%). A summary of the distribution in metric units is listed below:

Probability
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Risked

> or = Place ---------------------Minimum Most Likely Mean Maximum 90 50 42.5 10

Gas in Place (MMMm3) -----------28.32 48.15 50.98 80.71

Gas in (MMMm3)

20.39 36.82 39.65 62.31

Risked mean gas-in-place reserves of 39.65 MMMm3 calculated from the reserve uncertainty distribution, are utilized in the current bid proposal yielding mean recoverable reserves of 31.72 MMMm3. Detailed evaluation of unrisked most-likely reserves by field and pay horizon were risk weighted and assessed an 80% recovery factor to derive recoverable most-likely reserves of 29.46 MMMm3. These were submitted in the March 30,1993 bid proposal as follows: FIELD SAND ORIGINAL RECOVERABLE GAS IN PLACE GAS RESERVES MMMm3 -------5.607 7.240 0.583 11.828 7.518 11.005 4.563 MMMm3 ----------3.490 4.682 0.359 6.694 4.939 6.742 3.009

----------Mid-Tapti Mid-Tapti Mid-Tapti Mid-Tapti South-Tapti South-Tapti South-Tapti

---I II IX XII I II III

The above volumes are before shrinkage from expected condensate liquids recovered during normal production operations. Furthermore, potential reserves exist that cannot be evaluated with the information available. In particular, those associated with successful well tests at levels IV, V, VIII, IX, X and XI in South-Tapti and levels XI and XV in Mid-Tapti. The Bidders expect to quantify this potential during the initial study phase. The cited pay zones that were not quantified by RIL/EEC amount to 20 to 30% of ONGC's total gas in place. Should ONGC's estimate be correct, a success "upside case is included in this proposal to reflect the potential impact of these reserves on the production profile with the addition of up to 10.57 MMMm3 of gas reserves to the base case of 31.72 MMMm3 for a total of 42.29 MMMm3. VIIb. b1. TECHNICAL INFORMATION FOR GREATER TAPTI EXPLORATION CASE Concept Early in the evaluation of the Tapti fields, RIL/EEC became aware of ONGC's continuing efforts to explore and appraise additional gas accumulations in the surrounding gas-prone region of the Surat
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Depression. At RIL/EEC's request, ONGC provided an excellent overview of their efforts and results in the area through a series of meetings in Bombay. This gracious exchange of ideas provided the basis for the proposed exploration case. b2. Location Figure VII-13 is a regional map of the Greater Tapti area. The boundaries of the proposed exploration area were set up to encompass the known limits of the Early Miocene to Early Oligocene reservoir interval proven gas productive at Tapti (Figure VII-14). The proposed coordinates for the Greater Tapti Exploration area are as follows: Corner -----A B C D E A b3. Proposed Area Status Latitude -------------N20(degree)50' N19(degree)50' N19(degree)50' N21(degree)20' N21(degree)10' N20(degree)50' Longitude -------------E71(degree)30' E71(degree)30' E72(degree)50' E72(degree)50' E72(degree)10' E72(degree)10'

It is the intent of RIL/EEC that the Greater Tapti area be considered under the same terms, conditions and contractual obligations agreed for the Tapti block proper. b4. Stratigraphy and Reservoir Characterization Figure VII-15 is a sketch map of the net sand isopach for the Early Miocene-Early Oligocene reservoir interval and associated gas discoveries and prospects. The map is an attempt to demonstrate the interpretation shown to RIL/EEC by ONGC. It exhibits a northerly point source of sand supply that was distributed to the south and southwest in a large lobate delta-like geometry. Examination of over 15 Tapti cores in Bombay by RIL/EEC gave conclusive evidence of a robust tidally-influenced deltaic environment of deposition similar to the modern Irrawady delta (Figure VII-16). Reservoirs occur in three major depositional environments (Figure VII-17). 1. The highest quality reservoirs with good visualorosity and permeability are large distributary channel sands up to 25 meters thick. Modern analogs in the Irrawady delta are 2-6 km wide and 10's of km long. 2. The second most significant reservoirs are aerially extensive delta front/chenier-ridge sands that form Pay Zone I at Mid and South Tapti. They appear to have moderate to fair visual porosity and permeability with significant amounts of entrained clay introduced by burrowing organisms. 3. Fair to poor quality reservoirs consisting of tidal channels, tidal creeks and sandy tidal- delta-plain sands comprise the third and most volumetrically significant portion of the sedimentary section. They lack reservoir properties necessary for commercial completion but may provide significant gas-storage volume to source adjacent channel and delta-front sands. b5. Exploration Activity Exploration activity by ONGC has been focussed on the eastern and southern portions of the sand system shown in Figure VII-15 playing structural and combination structural-stratigraphic traps. Identified structurally-controlled gas discoveries include North Tapti, C-24, C-22 and B-12. Reserves of approximately 6.0 MMMm3 have been reported by ONGC for C-24 and C-22. RIL/EEC understand the broad low-relief B-12 feature has been tested by two wells to date with moderate flow rates of gas in the 100,000 to 200,000 m3 range. Like the cited C-24 and C-22 discoveries, total net sand thickness at B-12 is approximately 30% of that observed in the Tapti fields. The
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more poorly defined combination traps with tested gas consist of SD-4, CA-1, SD-1 and CD-1. An untested high amplitude structure set up by compressional reverse-fault movement is informally called the NE prospect. The feature is located in transitional shallow waters with mudbanks that are emergent at low tide. It requires seismic coverage on it northeast side through expensive non-conventional acquisition methods to establish critical dip. The structure appears to lie in a favorable position within the sand-rich axis of the reservoir system with upwards of 160 meters of possible net sand not unlike that seen in the Tapti field area. b6. Exploration Results Aside from the NE prospect which appears to have risky but high reserve potential, the remaining discoveries were presented by ONGC as somewhat marginal with smaller reserves and generally thinner and poorer reservoir quality sands than Tapti. It appears to RIL/EEC that timely and economic development of these relatively small and scattered accumulations, outboard of the Tapti block, is not feasible without linkage to Tapti infrastructure. RIL/EEC are prepared to design the capacity of the Tapti facilities and pipelines to meet the additional reserve potential of 15 to 35 MMMm3 envisioned for the Greater Tapti area. To insure that rapid exploitation of these discoveries and prospects can occur, RIL/EEC is prepared to offer an immediate three year work commitment entailing an estimated $38 million dollars (U.S.) of expenditure. The plan is detailed in section VIII. To demonstrate the benefits afforded GOI, an Exploration Case reserve is estimated at 25 MMMm3 for existing prospects and discoveries to provide the basis for a production profile that can be layered on the Tapti Base and Success Case Scenarios. F. PLAN FOR UTILIZATION OF GAS The purpose of this application is to exploit the non-associated natural gas reserves in the block. Therefore, except for gas consumption required for operations, all the gas produced and associated condensate fluids will be sold. The Indian Government gas supply/consumption projections include gas from this block. The Bidders desire to produce the natural gas to fulfill the government plan in the anticipated volumes. G. MONITORING SYSTEMS AND RESERVOIR MANAGEMENT 1. Production Monitoring Production will be monitored on an individual well basis and on an aggregate basis consistent with normal good oil field practices. For effective operational control, production rates will be monitored frequently and recorded daily; for fiscal purposes, production will be summarized and reported monthly. We currently envision installation of a well-test system at each well platform; however, full well stream "wet" meters may prove to be a more attractive approach upon further study. Where well tests are used, individual well production will be ascertained by allocation on the basis of actual well producing time at a given choke setting. Key data (e.g., flowing tubing pressure and, if available, wet meter rate) may be radio transmitted to the process platform. 2. Reservoir Management Reservoir management will be carried out through conventional surface and down hole monitoring systems such as bottom hole pressure surveys, production testing and well deliverability testing on a periodic basis. This data will be analyzed at least once a year to establish a record of reservoir performance from which the reservoir drive mechanisms will be established and the operations adjusted accordingly to maximize recovery. It is anticipated that a suitable mathematical reservoir model will be established early in the exploitation stage and that the reservoir performance would be monitored by periodically updating the model with the production and pressure data gathered. The model would also be utilized for the purpose of reporting gas reserves and deliverability projections. A relatively simple single phase, three-dimensional, multi-layered reservoir model is planned. VIIIa. WORK PROGRAM - TAPTI BLOCK A. Base Case Development (30 billion cubic meters recoverable reserves) 1. Seismic Commitment
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Mid Tapti 3D Survey

320 km2 4500 km Inline 50 m Crossline

Interval South Tapti 3D Survey 530 km2 11000 km Inline 50 m Crossline

Interval

The Mid-Tapti 3D survey acquisition would begin in October 1993, assuming execution of the Letter Agreement in July 1993. Acquisition, processing and interpretation will require 6-8 months. The South Tapti 3D acquisition would commence in 1994. 2. Development Commitment The development plan & schedule are illustrated on Figures VIII-1, -2, -3 and include: - 3D reservoir simulation models - 6 well platforms at South Tapti - 4 well platforms at Mid-Tapti - 1 common 5.1 MM3/day processing facility and living quarters at Mid-Tapti - Interfield & intrafield pipelines - 1 export gas pipeline - 35 Development wells(directional from well platforms) - Geophysical, geological and engineering studies - The final configuration of physical facilities will result from optimization studies to which ONGC will contribute their knowledge and information. - If drainage area of the 35 primary development wells is inadequate, an additional 30 (infill) wells may be needed. Infill wells are not a committed work obligation 3. Gas Sales Profiles RIL/EEC expect (but cannot guarantee) that the Base Case development plan will result in the gas sales shown in Figure VIII-4. If the Success Case discussed in Section VII materializes, the sales volumes should range between those indicated in Figure VIII-4 and Figure VIII-5. If volumes available for sale exceed those shown in Figure VIII-4, the modular Base Case development plan will be augmented to accommodate the excess gas production over that contemplated in the Base Case. VIIIb. WORK PROGRAM - GREATER TAPTI AREA A. The RIL/EEC proposal to expand the Tapti block to include the Greater Tapti area defined above under Addendum Section VIIb is advantageous to GOI, ONGC and RIL/EEC for reasons shown on Figure VIII-6. Seismic and Drilling Commitments shown below are in addition to or commitments for the Tapti block (Section VIIIa).

Year Cost ---------------1993-94 $

Activities -----------------------1000 km 2D seismic (primarily in shallow water "transition zonell on "NE" and "North Tapti" prospects. 5 wells 2 wells

Est.

5 MM US

1995 $ 1996 $

25 MM US 8 MM US

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In addition, all usable existing seismic data will be reprocessed and interpreted. The commitment to spend a minimum 38 MM US Dollars in the Greater Tapti Area (outside the currently defined block) during 1993 through 1996 shall be borne by ONGC, RIL and EEC in proportion to their working interest in the Area (currently 40%, 30% and 30% respectively). These and all subsequent expenditures shall be cost recoverable. The project including Tapti block containing Mid and South Tapti plus the area identified in Section VIIb-B shall be considered as one. Given success in the Greater Tapti Area outside the current Tapti block, the Bidders' expectation for addition recoverable reserves is 25 billion cubic meters. Assuming that level of success in the expanded area and the maximum success Case reserves in the current Tapti block, the total Greater Tapti Area production profile is shown on Figure VIII-7. These total reserves, 65 billion cubic meters, represent a maximum and are neither guaranteed nor expected. B. PRODUCTION BUILD UP PHASE (INITIAL FIELD DEVELOPMENT TO REACH A PRODUCTION PLATEAU) The Bidder plans to tailor development work to the gas market. No capital will be expended unless backed by a firm gas purchase commitment. This is true not only for the initial plateau currently contemplated in gas consumption projections, but for production beyond the original plateau if warranted by the results of the study phase. It is anticipated that development will be originally concentrated in the Mid-Tapti area. The development of the second field, or any other field, will follow to the extent required to satisfy the market. Deliverability capacity in excess of the market, approximately 25 percent, will be built into the development plan. Development is anticipated to consist of directional wells drilled form several wellhead platforms. The wells will be drilled with a jack-up rig. Because of sand production, well completions will be designed to maximize flow rates yet minimize sand production. To that extent, gravel pack through several extended perforations is anticipated. Nevertheless, the final design will be consistent with the results of the study phase. The well-head platforms will have testing facilities; they will be unmanned and controlled (monitored) from a central processing platform via a communication/control system. Submarine line network (8" - 12" in diameter) will connect the platforms to the central processing platform. The central processing platform will have gas processing facilities of adequate capacity to handle all the anticipated volumes. Expansion capabilities will be provided for during the initial design of the processing platform. Ability to handle and process condensate fluids and water will be part of the processing package. Water will be disposed of after appropriate treatment to insure that it is environmentally safe and meets any existing specifications in this regard. No gas will be flared except for technical reasons and then only in minimum quantities. After measurement using state-of-the-art gas/liquid metering systems, which independently measures gas and condensate, the gas and condensate products will be transported via a submarine line to a connecting point with the existing Bassein-Hazira pipeline, or the new planned parallel pipeline. The Bidders believe that with early award of the block, with proper planning and with the necessary mechanisms built-in to expedite approvals (single clearance window concept) first production can be achieved early in 1995 and that the first plateau could be achieved in 1996. C. PLATEAU PRODUCTION AND DECLINE PHASE Maintenance of the plateau phase for a period of 15 years is expected to be accomplished by further development drilling and well recompletions into other sands/reservoirs not originally exposed to production. These activities will, as explained earlier for the initial development phase, be tailored to the market demands and contractual obligations. Depending on future market and provided enough reserves are proven to safely back-up additional deliverability, incremental volumes will be added to the original base plateau. The duration of the incremental volumes will depend upon reserves and markets. D. ABANDONMENT PHASE
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At the termination of the PSC period, the wells and facilities will be fully transferred without cost to the designated government agency for further operations. Abandonment of wells for mechanical reasons may occur. Those wells will be abandoned following accepted industry practices. Appendix - 5 COMMITTED DEVELOPMENT WORK PROGRAMME FOR TAPTI BLOCK 1. SEISMIC COMMITMENT

Mid Tapti 3D Survey

320 km2 4500 km Inline 50 m Crossline

Interval South Tapti 3D Survey 530 km2 22000 km Inline 50 m Crossline

Interval

2. DEVELOPMENT COMMITMENT - 3D reservoir simulation models - 6 well platforms at South Tapti - 4 well platforms at Mid-Tapti - 1 common 5.1 MM3/day processing facility and living quarters at Mid-Tapti - Interfield and intrafield pipelines - 1 export gas pipeline to Hazira and onshore reseparation facility - 35 development wells (directional from well platforms) - Geophysical, geological and engineering studies - The final configuration of physical facilities will result from optimization studies to which ONGC will contribute their knowledge and information; work programme may be adjusted accordingly to, for example, reroute the export pipe line to the existing 36" line and possibly eliminate the reseparation facility If drainage area of the 35 primary development wells proves inadequate, an additional 30 (infill) wells may be needed. Infill wells are not a committed work obligation.

Appendix 6 TAPTI ESTIMATED EXPENDITURE YEAR ---1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 CAPEX $MM ----19.5 122.3 75.3 76.4 67.2 0 34 18 0 20 18 22 42.4
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OPEX $MM ----1.1 2.75 8.8 11 12.1 12.1 13.2 13.2 13.2 13.2 13.2 13.2 13.2
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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

0 0 16 4.5 6 0 0 0 0 0 0 0 541.6

13.2 13.2 13.2 13.2 13.2 13.2 13.2 13.2 13.2 13.2 13.2 13.2 298.7 Appendix - 7

(Contd.) TAPTI PRODUCTION PROFILE (4.2 MM m3/day) YEAR ---1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 CONDENSATE SALES MBbL ---------------0 0 526 658 658 658 658 658 658 658 658 658 658 658 658 658 658 572 546 472 350 259 191 152 79 12359 GAS SALES MM m3 --------0 0 1240 1551 1551 1551 1551 1551 1551 1551 1551 1551 1551 1551 1551 1551 1551 1355 1287 1111 825 611 449 360 187 29134

APPENDIX H PRODUCTION PROFILE OF THE MID AND SOUTH TAPTI FIELDS

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YEAR Meters) 1993 1994 1995 1996 1997 1997 1998 1999 2000 2001 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

CONDENSATE SALES (Thousands Barrels)

GAS SALES (Millions Cubic

0 0 0 165 658 658 658 658 658 658 658 658 658 658 658 658 658 658 658 658 572 546 472 350 259 191 152 79

0 0 0 388 1551 1551 1551 1551 1551 1551 1551 1551 1551 1551 1551 1551 1551 1551 1551 1551 1355 1287 1111 825 611 449 360 187

-----*****----APPENDIX I PAYMENT FOR USE OF ONSHORE PLANT Parties acknowledge that Gas is to be received by GAIL at Hazira downstream of receiving and separation facilities owned and operated by ONGC. In order to compensate ONGC for the cost of ownership and operations of these facilities, Contractor shall make payments to ONGC on the basis of the costs fixed on an incremental basis by an internationally recognised expert who shall be selected by two members of the Operating Committee from a panel of three internationally recognised experts selected by ONGC. In case there is no agreement between the Companies and ONGC on the advice tendered, the matter shall be referred to Government. The decision of Government shall be final and binding on all the Parties. GRAPHICAL CONTENT APPENDIX

Appendix - B Appendix G Figure G-1 Basin Figure VII-1 Figure VII-2 Figure VII-3

Map of Contract Area - Tapti Block

Mid and South Tapti Fields Bombay Offshore Mid and South Tapti Fields Structure Map H-3 Seismic Marker Structure Map on Top Pay I Sand Sg0h Map Pay I
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Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure

VII-4 VII-5 VII-6 VII-7 VII-8 VII-9 VII-10 VII-11 VIII-2 VIII-4 VIII-3

Structure Contour Map on Top of Pay II Sand Sg0h Map Pay II Structure Map Pay Level III Sg0h Map Pay Level III Structure May on Pay IX Sg0h May Pay IX Structure Map Pay XII Sg0h Map Pay XII Enron Exploration Project Schedule Details Tapti Production Profile Development Schedule Base Case Enron Exploration Project Schedule Details

Appendix-3

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EXHIBIT 22
ENRON OIL & GAS COMPANY AND SUBSIDIARIES Date of Company Name Incorporation -----------------------Enron Oil & Gas Company ...................................... 06/12/85 Enron Oil & Gas International, Inc. ....................... 05/27/93 EOGI-Trinidad, Inc. .................................... 06/02/93 EOGI Trinidad Company ............................... 06/02/93 Enron Gas & Oil Trinidad Limited ................. 11/04/92 EOGI-Australia, Inc. ................................... 06/02/93 EOGI Australia Company .............................. 06/02/93 Enron Exploration Australia Pty Ltd .............. 11/23/92 EOGI-France, Inc. ...................................... 06/02/93 Enron Exploration France S.A ........................ 11/13/92 EOGI-Russia, Inc. ...................................... 07/29/93 Enron Exploration and Production (Russia) Limited ... 11/09/92 Kuznetsk Exploration and Production Company ...... 10/20/93 EOGI-Kazakhstan, Inc. .................................. 07/29/93 Enron Exploration and Production (Kazakhstan) Limited 02/08/93 Enron Oil & Gas Kazakhstan Ltd ...................... 08/18/94 Enron Exploration Company, South America ............... 08/03/93 Enron Exploration S.A ............................... 12/12/91 EOGI-United Kingdom, Inc. .............................. 07/29/93 EOGI United Kingdom Company B.V ..................... 12/04/81 Enron Oil U.K. Limited ........................... 05/22/90 EOGI-India, Inc. ....................................... 03/17/94 Enron Oil & Gas India Ltd ........................... 06/02/93 EOGI-China, Inc. ....................................... 08/18/94 Enron Oil & Gas China Ltd ........................... 08/19/94 EOGI-Qatar, Inc. ....................................... 09/22/94 Enron Oil & Gas Qatar Ltd ........................... 09/23/94 EOGI-Uzbekistan, Inc. .................................. 01/30/95 Enron Oil & Gas Uzbekistan Ltd ...................... 01/31/95 Enron Oil & Gas Marketing, Inc. ........................... 04/09/90 I N Holdings, Inc. ........................................ 03/13/85 Enron Oil Canada Ltd ................................... 04/01/82 Nilo Operating Company .................................... 04/04/94 Enron Oil & Gas - Carthage, Inc. .......................... 03/21/95 Where Incorporated -----------Delaware Delaware Delaware Cayman Islands Trinidad Delaware Cayman Islands Australia Delaware France Delaware Cyprus Russian Federation Delaware Cyprus Cayman Islands Delaware Argentina Delaware The Netherlands England Delaware Cayman Islands Delaware Cayman Islands Delaware Cayman Islands Delaware Cayman Islands Delaware Delaware Alberta Delaware Delaware

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EXHIBIT 23.1 March 16, 1995 Enron Oil & Gas Company 1400 Smith Street Houston, Texas 77002 Gentlemen: We hereby consent to the references to our firm and to our opinions delivered to Enron Oil & Gas Company, hereinafter referred to as the "Company," relating to our comparison of estimates prepared by us to those furnished to us by the Company of proved oil, condensate, natural gas liquids, and natural gas reserves of certain selected properties owned by the Company as expressed in our letter reports dated January 20, 1993, January 27, 1994, and January 13, 1995, for estimates as of January 1, 1993, January 1, 1994, and January 1, 1995, respectively, to be included in the section "Supplemental Information to Consolidated Financial Statements - Oil and Gas Producing Activities" in the Company's Annual Report on Form 10-K for the year ended December 31, 1994, to be filed with the Securities and Exchange Commission on or about March 22, 1995. We also consent to the inclusion of our letter report, dated January 13, 1995, addressed to the Company as Exhibit (23.2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994, to be filed with the Securities and Exchange Commission. Additionally, we hereby consent to the incorporation by reference of such references to our firm and to our opinions included in the Company's Form 10-K in the Company's previously filed Registration Statement nos. 33-42620, 33-48358, 33-52201, and 33-58103. Very truly yours, DeGOLYER and MacNAUGHTON

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EXHIBIT 23.2 DeGolyer and MacNaughton One Energy Square Dallas, texas 75206 January 13, 1995 Enron Oil & Gas Company 1400 Smith Street Houston, Texas 77002 Gentlemen: Pursuant to your request, we have prepared estimates, as of January 1, 1995, of the proved oil, condensate, natural gas liquids, and natural gas reserves of certain selected properties in the United States and Canada owned by Enron Oil & Gas Company, hereinafter referred to as "Enron." The properties consist of working interests located in the states of New Mexico, Texas, Utah, and Wyoming and in the offshore waters of Texas in the United States and in the province of Saskatchewan in Canada. Our estimates are reported in detail in our "Report as of January 1, 1995 on Proved Reserves of Certain Properties in the United States owned by Enron Oil & Gas Company - Selected Properties" and our "Report as of January 1, 1995 on Proved Reserves of Certain Properties in Canada owned by Enron Oil & Gas Company - Selected Properties," hereinafter collectively referred to as the "Reports." We also have reviewed information provided to us by Enron that it represents to be Enron estimates of the reserves, as of January 1, 1995, for the same properties as those included in the Reports. Proved reserves estimated by us and referred to herein are judged to be economically producible in future years from known reservoirs under existing economic and operating conditions and assuming continuation of current regulatory practices using conventional production methods and equipment. Proved reserves are defined as those that have been proved to a high degree of certainty by reason of actual completion, successful testing, or in certain cases by adequate core analyses and electrical-log interpretation when the producing characteristics of the formation are known from nearby fields. These reserves are defined areally by reasonable geological interpretation of structure and known continuity of oil- or gas-saturated 1 material. This definition is in agreement with the definition of proved reserves prescribed by the Securities and Exchange Commission. Enron represents that its estimates of the proved reserves, as of January 1, 1995, net to its leasehold interests in the properties included in the Reports are as follows:

Oil, Condensate, and Natural Gas Liquids (thousand barrels) - ------------------------------------11,280

Natural Gas (million cubic feet) -------------------1,200,900

Net Equivalent Million Cubic Feet

1,268,580

Note: Net equivalent million cubic feet is based on 1 barrel of oil, condensate, or natural gas liquids being equivalent to 6,000 cubic feet of gas. Enron has advised us, and we have assumed, that its estimates of proved oil, condensate, natural gas liquids, and natural gas reserves are in accordance with the rules and regulations of the Securities and Exchange Commission. Proved reserves estimated by us for the properties included in the Reports, as of January 1, 1995, are as follows:

Oil, Condensate, and Natural Gas Liquids (thousand barrels) - -------------------

Natural Gas (million cubic feet) ------------------- 2003.

Net Equivalent Million Cubic Feet

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-----------------11,721

1,230,633

1,300,959

Note: Net equivalent million cubic feet is based on 1 barrel of oil, condensate, or natural gas liquids being equivalent to 6,000 cubic feet of gas. In making a comparison of the detailed estimates prepared by us and by Enron of the properties involved, we have found differences, both positive and negative, in reserve estimates for individual properties. These differences appear to be compensating to a great extent when considering the reserves of Enron in the properties included in our reports, resulting in overall differences not being substantial. It is our opinion that the reserves estimates prepared by Enron on the properties reviewed by us and referred to above, when compared on the basis of net 2 equivalent million cubic feet of gas, do not differ materially from those prepared by us. Submitted,

/S/ DeGOLYER and MacNAUGHTON DeGOLYER and MacNAUGHTON [SEAL] P.E. /S/ Vernon E. Pringle, Jr., VERNON E. PRINGLE, JR., P.E. Senior Vice President DeGolyer and MacNaughton

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EXHIBIT 23.3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report on the consolidated financial statements of Enron Oil & Gas Company and subsidiaries included in this Form 10-K, into the Company's previously filed Registration Statement File Nos. 33-42620, 33-48358, 33-52201 and 33-58103. ARTHUR ANDERSEN LLP Houston, Texas March 22, 1995

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EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned, as a director of Enron Oil & Gas Company, a Delaware corporation (the "Company"), in connection with the filing by the Company of its Annual Report on Form 10-K for the year ended December 31, 1994, with the Securities and Exchange Commission, does hereby make, constitute and appoint Forrest E. Hoglund, Walter C. Wilson and Angus H. Davis, each of them with full power (any one of them acting alone), as true and lawful attorneys-in-fact and agents, for and on behalf and in the name, place and stead of the undersigned, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto each above-mentioned individual the full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this 14th day of February, 1995. FRED C. ACKMAN

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POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned, as a director of Enron Oil & Gas Company, a Delaware corporation (the "Company"), in connection with the filing by the Company of its Annual Report on Form 10-K for the year ended December 31, 1994, with the Securities and Exchange Commission, does hereby make, constitute and appoint Forrest E. Hoglund, Walter C. Wilson and Angus H. Davis, each of them with full power (any one of them acting alone), as true and lawful attorneys-in-fact and agents, for and on behalf and in the name, place and stead of the undersigned, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto each above-mentioned individual the full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this 14th day of February, 1995. EDWARD RANDALL, III

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POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned, as a director of Enron Oil & Gas Company, a Delaware corporation (the "Company"), in connection with the filing by the Company of its Annual Report on Form 10-K for the year ended December 31, 1994, with the Securities and Exchange Commission, does hereby make, constitute and appoint Forrest E. Hoglund, Walter C. Wilson and Angus H. Davis, each of them with full power (any one of them acting alone), as true and lawful attorneys-in-fact and agents, for and on behalf and in the name, place and stead of the undersigned, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto each above-mentioned individual the full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this 14th day of February, 1995. KENNETH L. LAY

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POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned, as a director of Enron Oil & Gas Company, a Delaware corporation (the "Company"), in connection with the filing by the Company of its Annual Report on Form 10-K for the year ended December 31, 1994, with the Securities and Exchange Commission, does hereby make, constitute and appoint Forrest E. Hoglund, Walter C. Wilson and Angus H. Davis, each of them with full power (any one of them acting alone), as true and lawful attorneys-in-fact and agents, for and on behalf and in the name, place and stead of the undersigned, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto each above-mentioned individual the full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this 14th day of February, 1995. RICHARD D. KINDER

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ARTICLE 5 The Schedule contains summary financial information extracted from the Company's unaudited condensed consolidated financial statements for the year ended December 31, 1994 and is qualified in its entirety by reference to such financial statements. MULTIPLIER: 1000 PERIOD TYPE: 12 MOS FISCAL YEAR END: DEC 31 1994 PERIOD END: DEC 31 1994 CASH: 5,810 SECURITIES: 0 RECEIVABLES: 126,133 ALLOWANCES: 0 INVENTORY: 15,731 CURRENT ASSETS: 156,418 PP&E: 3,015,435 DEPRECIATION: (1,330,624) TOTAL ASSETS: 1,861,867 CURRENT LIABILITIES: 164,601 BONDS: 0 COMMON: 201,600 PREFERRED MANDATORY: 0 PREFERRED: 0 OTHER SE: 841,819 TOTAL LIABILITY AND EQUITY: 1,861,867 SALES: 566,231 TOTAL REVENUES: 625,823 CGS: 0 TOTAL COSTS: 466,182 OTHER EXPENSES: 0 LOSS PROVISION: 0 INTEREST EXPENSE: 8,489 INCOME PRETAX: 153,935 INCOME TAX: 5,937 INCOME CONTINUING: 147,998 DISCONTINUED: 0 EXTRAORDINARY: 0 CHANGES: 0 NET INCOME: 147,998 EPS PRIMARY: 0.93 EPS DILUTED: 0

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End of Filing

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