OPERATING AGREEMENT

THIS AGREEMENT is made the 11th day of July 1991, between the NIGERIAN NATIONAL PETROLEUM
CORPORATION, a body corporate established under the laws of the Federal Republic of Nigeria whose Head
Office is at No. 7 Kofo Abayomi Street, Victoria Island, Lagos, Nigeria (hereinafter called "NNPC")
THE SHELL PETROLEUM DEVELOPMENT COMPANY OF NIGERIA LIMITED, a Company incorporated
under the laws of the Federal Republic of Nigeria and having its registered office at Freeman House, 21/22
Marina Lagos (hereinafter called "SHELL"), NIGERIAN AGIP OIL COMPANY LIMITED, a Company
incorporated under the laws of the Federal Republic of Nigeria having its registered office at No. 9/11 Macarthy
Street, Lagos (hereinafter called "AGIP") and ELF (NIGERIA) LIMITED, a Company incorporated under the
laws of the Federal Republic of Nigeria and having its registered office at No. 35, Kofo Abayomi Street, Victoria
Island, Lagos (hereinafter called "ELF").

WHEREAS:

(i) NNPC and SHELL have, as from 1st day of April 1973, conducted Petroleum Operations under a Joint
Venture in the proportion NNPC 80%, SHELL 20% with SHELL as Operator;

(ii) By a Deed of Assignment made between NNPC and SHELL effective the 1st day of July, 1989 NNPC
assigned to SHELL an undivided ten (10) percent interest in the Joint Venture;

(iii) By a Deed of Assignment made between NNPC and AGIP, effective the 1st day of July, 1989, NNPC
assigned to AGIP an undivided five (5) percent interest in the Joint Venture;

(iv) By a Deed of Assignment made between NNPC and ELF, effective the 1st day of July 1989, NNPC
assigned to ELF an undivided five (5) percent interest in the Joint Venture;

(v) By the aforementioned Deeds of Assignment the Parties hold Participating Interests in the
Concession(s) the Assets and Working Capital (all as hereinafter defined) in the following respective
proportions;

NNPC 60%
SHELL 30%
AGIP 5%
ELF 5%

(vi) Pursuant to the Deeds of Assignment and the Memorandum of Agreement signed by the Parties and
dated the 1st day of August 1989 the Parties desire to provide for the joint exploration, development and
production Operations and the management of the Concession(s) by a designated operator all in
accordance with the terms, provisions and conditions hereinafter set forth;

(vii) The Parties have reached agreement on the general principles which are intended to govern off-take,
scheduling and lifting arrangements as set forth in the Heads of Agreement on Off-take/Scheduling and

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Lifting between NNPC and SHELL effective as of the 22nd day of August 1984 and have recognized the
need to negotiate and reach agreement on a detailed formal arrangement to implement such principles.

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the above premises and of the
mutual covenants of the Parties as hereinafter set forth, the Parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

HEADINGS AND REFERENCES

1.1 DEFINITIONS - In this Agreement, including the recitals, the Schedules and this Article 1, the
following words and phrases shall have the following respective meanings, namely:

1.1.1 "AFE" - means the Authorisation For Expenditure prepared for Operator's use for
expenditures approved under the Budget for Joint Operations.

1.1.2. "Affiliate" or "Affiliated Company" - means

i. in relation to SHELL:

(a) N.V. Koninklijke Nederlandsche Petroleum Maatschappij,

(b) The "Shell" Transport and Training Company, p.l.c. and

(c) any company (other than Shell) which is for the time being directly
or indirectly controlled by N.V. Koninklijke Nederlandsche
Petroleum Maatschappij and The Shell Transport and Trading
Company, p.l.c. or either of them.

For the purpose of this definition, a company is directly controlled by another

company or companies if such other company or companies hold shares carrying in
the aggregate the majority of votes exercisable at a general meeting of the first-
mentioned company; and a particular company is indirectly controlled by a company
or companies (hereinafter called the "parent company or companies") if a series of
companies can be specified, beginning with the parent company of companies and
ending with particular company, so related that each company of the series, except the
parent company or companies, is directly controlled by one or more of the companies
earlier in the series.

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ii. in relation to any Party other than Shell a company or other entity that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control of, or with, the party concerned.

"Control" means ownership of more than 50% of the issued voting stock of a
company entitled to vote or ownership of equivalent rights to determine the
decisions of such company or other entity.

1.1.3. "Agreement" - means this Operating Agreement together with the Schedules and other
attachments thereto as amended from time to time by the Parties' mutual agreement in
accordance with the provisions hereof.

1.1.4. "Assets" - means the fixed and movable assets of the Joint Operations including
without limitation the Concessions, exploration, development, production,
transportation, storage, delivery and export facilities and associated assets including,
but not limited to offices, housing and welfare facilities.

1.1.5. "Available Production" - means the quantity of Petroleum which can be efficiently
and economically produced and saved from the producing wells subject to any
production allowable and or limitations imposed by Government authority or other
technical limitations resulting from Operations.

1.1.6. "Bank Rate" - means, with respect to an amount in default under any provision of this
Agreement:

a) for foreign currency, the London Inter Bank Rate for a three month borrowing
prevailing at the National Westminster Bank in London at 11.00 hours on the date that
payment of the amount in default was due, plus 1% (one percent); and

b) for local currency, the rate for overdrafts, advised by the local bank at which a Joint
Bank Account is maintained, during the period in which the amount in default remains
unpaid.

1.1.7. "Barrel" - means forty two (42) U.S. Gallons, liquid measure, corrected to a
temperature of sixty degrees (60o) Fahrenheit (or equivalent) with pressure at sea
level.

1.1.8. "Budget" - means the budget approved in accordance with clause 2.3 and Subclause
3.2.5 of this Agreement.

1.1.9. "Cash Call" - means the amount in all currencies which Operator estimates a Party
must pay into the Joint Account in any given month to meet such Party’s Participating
Interest Share of the costs and expenditures to be paid for the Joint Account in such

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month, after adjusting for balances or deficits in such bank account as well as any
credit receipts anticipated during such month, all in accordance with clause 6.2 of this
Agreement.

1.1.10. "Cash Call Month" - means the calendar month in which specific costs and
expenditures are to be incurred for the Joint Account.

1.1.11. "Commercial Production Quota" - means the quantity of Petroleum from time to time
fixed or advised by National Petroleum Investments Management Services (NAPIMS)
on behalf of the Honourable Minister of Petroleum Resources as the permissible
quantity that may be produced from the Contract Area on a crude stream basis for a
particular month/quarter.

1.1.12. "Concession(s)" - means the Oil Exploration Licences, if any, the Oil Prospecting
Licences, and the Oil Mining Leases set forth in Schedule "A" hereto (as the same
may be amended from time to time) and any amendments, renewals or extensions
thereof and any right deriving therefrom issued by or on behalf of the Government
authorizing the Parties to explore for, develop and produce Petroleum from or within
the Contract Area.

1.1.13. "Contract Area" - means the area from time to time covered by the Concessions or
any one or more of them comprising the area(s) set forth in Schedule "A" hereto.

1.1.14. "Crude Oil" - means liquid Petroleum which has been treated but not refined and
includes condensates but excludes water and sediments.

1.1.15. "Date of Execution" - means the date set forth in the preamble of this Agreement.

1.1.16 "Dollars" or "US$" - means United States Dollars.

1.1.17. "Effective Date" - means the effective date of this Agreement as specified in Article
18 of this Agreement.

1.1.18. "For the Joint Account" - means for the benefit and risk and at the expense of the
Parties, in accordance with their respective Participating Interest.

1.1.19. "Government" - means the Government of the Federal Republic of Nigeria.

1.1.20. "Joint Bank Account" - means the local and foreign bank accounts, designated
NNPC/SHELL/AGIP/ELF Joint Operations, established, maintained and operated, on
behalf of the Parties, by the Operator for the Joint Operations, into which the Parties
shall deposit, or cause to be deposited, all funds required for the Joint Operations

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pursuant to Operator’s Cash Calls and from which all payments for the Joint Account
shall be effected.

1.1.21. "Joint Operations" - means all operations For the Joint Account.

1.1.22. "Joint Property" - means property held For the Joint Account including Concessions,
Assets and Working Capital.

1.1.23. "Natural Gas" - means all gaseous hydrocarbons produced in association with Crude
Oil or from reservoirs which produce mainly gaseous hydrocarbons.

1.1.24. "Non-Operator" - means the Parties other than the Operator.

1.1.25. "Operating Committee" - means the committee established pursuant to Article 3 of

this Agreement.

1.1.26. "Operator" - means the Party appointed pursuant to Article 2 of this Agreement to
carry out Joint Operations hereunder.

1.1.27. "Participating Interest" - means the undivided percentage interest from time to time
held by the Parties in the Joint Property and rights and obligations under this
Agreement, namely:

sixty percent (60%), in the case of NNPC; and

thirty percent (30%), in the case of SHELL; and
five percent (5%), in the case of AGIP; and
five percent (5%), in the case of ELF.

1.1.28. "Party" - means individually NNPC or SHELL or AGIP or ELF as the context
requires, whereas "Parties" means collectively NNPC, SHELL, AGIP and ELF.

1.1.29. "Petroleum" - means mineral oil (or any related hydrocarbon) or Natural Gas as it
exists in its natural state in strata and does not include coal or bituminous shales or
other stratified deposits from which oil can be extracted by destructive distillation.

1.1.30. "Programme" - means any approved programme of operations under this Agreement.

1.1.31. "Quarter" - means a period of three calendar months ending on March 31st, June 30th,
September 30th, or December 31st in any calendar year or, for accounting procedures,
at 08.00 hrs on the day next following the respective preceding dates.

1.1.32. "Regulations" - means all statutes, laws, rules, orders and regulations affecting Oil
Mining Leases in effect from time to time and made by Government authorities

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having jurisdiction over the Concessions and the Contract Area and over operations
conducted thereon.

1.1.33. "Uniform Accounting Procedure" - means the rules and procedures set forth in
Schedule "B" attached to and forming part of this Agreement.

1.1.34. "Wilful Misconduct" - means in relation to the Operator, an intentional, conscious,

reckless, and wanton disregard of:

(a) any provision of this Agreement; or

(b) any Programme;

but shall not include an intentional and conscious disregard of either (a) or (b) above if
the same is in compliance with the instructions of any Governmental authority or is in
pursuance, in good faith, of a decision of the Operating Committee, or relates to
safeguarding of life, property or Joint Operations, or any error of judgement or
mistake made in the exercise, in good faith, of any function, authority or any
discretion conferred upon the Operator.

1.1.35. "Working Capital" - means the working capital applicable to the Joint Operations
including without limitation, material stocks including those in transit, debts of staff
and other debtors, property rents, concession rents, terminal dues, insurance and other
prepayments and accounts receivable and payable as applicable to the Joint
Operations.

1.2 Schedules

The following Schedules are attached hereto and incorporated in this Agreement:

(a) Schedule "A" which is a description of the Concessions and the Contract Area, as the same
may be amended from time to time;

(b) Schedule "B" which is the Uniform Accounting Procedure;

(c) Schedule "C" which is the Uniform Project Implementation Procedure; and

(d) Schedule "D" which is the Uniform Nomination, Scheduling and Lifting Procedure.

1.3 Schedule Revisions

Operator shall, from time to time, prepare and deliver to each Party appropriate revisions to Schedule
"A".

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1.4. Headings

The headings of the Articles and Clauses herein and any other headings, captions or indices hereto are
inserted for convenience only and shall not affect nor be used in determining, the meaning,
interpretation or construction of the provisions of this Agreement.

1.5. Articles, Clauses, etc.

Unless otherwise expressly stated, references to Articles, Clauses, Subclauses, Paragraphs or

Subparagraphs herein shall mean Articles, Clauses, Subclauses, Paragraphs or Subparagraphs of this
Agreement.

1.6 Gender

This Agreement is to be used and interpreted with all changes of gender and number as required by
context.

1.7 Party Successor/Predecessor

A reference to a Party herein, either by its name or its status with respect to a particular provision of this
Agreement shall be deemed to include a reference to the successor or predecessor in interest of such
Party, as the context may require.

1.8 Calendar Days

Any reference to days herein is a reference to calendar days unless specifically stated otherwise, and
where the phrase "within" or "at least" is used with reference to a specific number of days herein, the
day of receipt of the relevant notice or the day of the relevant meeting, as the case may be, shall be
excluded in determining the relevant time period. In the event the time for doing any act expires on a
Saturday, Sunday or statutory holiday, the time for doing such act shall be extended to the next normal
business day.

1.9 Conflicts

1.9.1 In the event of any conflict or inconsistency between the provisions of the main body
of this Agreement and the Schedules thereto, the provisions of the main body of this
Agreement shall prevail.

1.9.2 In the event of any conflict or inconsistency between the provisions of this Agreement
and the Concessions, the provisions of the Concessions subject to the Regulations
shall govern and the Agreement shall be deemed to be modified accordingly and, as so
modified, the Agreement shall continue in full force and effect.

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1.9.3 The unenforceability or invalidity of any provision of this Agreement for any reason
whatsoever shall not prejudice the enforceability or validity of the rest of this
Agreement or any other provision thereof.

ARTICLE 2

OPERATOR

2.1 Appointment of Operator

SHELL is hereby designated and agrees to act as the Operator of the Concessions and Contract Area
under this Agreement and hereby assumes the duties and obligations of Operator, and shall have the
rights of the Operator hereunder.

2.1.1 The Parties acknowledge that SHELL has been the Operator of the Concessions prior
to the Effective Date. Within six months from the Date of Execution, Non-Operators
may audit or cause the audit of the books and records of the Operator up to the Date of
Execution and to the extent not covered by previous audit carried out by or on behalf
of Non-Operators.
Within nine months from the Date of Execution, Non-Operators shall have the right to
raise any queries arising, if any, as a result of aforesaid audit. Between the ninth and
twelfth months after the Date of Execution, Parties shall use their best endeavours to
resolve all queries arising as a result of this audit. After the expiration of 18 months
from the Date of Execution, all actions of Operator prior to the Date of Execution
shall be deemed to be ratified by Non-Operators except for those actions that are the
subject of unresolved queries which shall be similarly deemed ratified upon their
resolution. The cost of the said audit shall be for the Joint Account.

2.2 Operator’s Right, Powers and Responsibilities

2.2.1 The Operator shall conduct all Joint Operations with utmost good faith and in a good
and workmanlike manner in accordance with good industry practice and the
applicable Regulations shall apply to all operations hereunder.

2.2.2 The Operator or its Affiliate shall not be liable for any loss or damage which results
from Joint Operations unless such loss or damage result from Wilful Misconduct on
the part of its Directors or supervisory staff, PROVIDED, that under no circumstances
shall the Operator or its Affiliates be liable to Non-Operator for reservoir damage or
pollution or for any consequential losses or damages whatsoever or howsoever
occurring including, but not limited to, lost production or lost profits. The above shall
not relieve Operator from exercising utmost diligence in accordance with good oil

SPDC-91-0001 8
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field practice in selecting, training and supervising its employees, contractors and
agents.

2.2.3 The Operator shall consult freely with, and shall make full and frank disclosure to, the
Non-Operators concerning Joint Operations and keep them currently advised of all
matters of importance arising in connection therewith.

2.2.4 Except as otherwise provided in this Agreement or as may be authorized by the

mutual agreement in writing of the Parties, the Operator shall not permit or suffer any
lien or other encumbrance to be filed or to remain against any material, physical
equipment, real or personal property thereon or related thereto, nor against Petroleum
produced and saved as a result of its operations hereunder, unless there is a bona fide
dispute with respect thereto.

2.2.5 The Operator shall select its employees for the purposes of the Joint Operations and
determine their number, qualifications, hours of labour and compensation. Such
employees shall be employees of the Operator and shall not be employees of Non-
Operators. Operator shall employ only such employees as are reasonably necessary to
conduct Joint Operations.

At the meeting of the Operating Committee considering and approving the Work
Programme and Budget in each year, Operator shall submit to the Operating
Committee an organisational chart pertaining to the management and supervisory
positions for the Joint Operations.

During that same meeting Operator shall report to the Operating Committee its actual
implementation of such organisational chart as it had been presented for the previous
year.

2.2.6 The Operator shall have the right to assign and retain such technical, administrative
and supervisory personnel and consultants as may be necessary for the conduct of
Joint Operations, subject to the provisions of the Uniform Accounting Procedure.

2.2.7 The Operator shall, with the written consent of Non-Operators, have authority to enter
into agreements with third parties for use, by the third parties, of facilities of the Joint
Operations, provided that no right or enjoyment of the Non-Operator (particularly as
provided in, but without limitation to, Article 4, Schedule "B" and Schedule "D") is
diminished in any material respect.

2.2.8 The Operator shall have the authority, subject to any limitations or restrictions
imposed by the Operating Committee, to enter into any contract or place any purchase
order, in its own name on behalf of the Joint Account, for the performance of services
or the procurement of facilities, equipment, materials or supplies; provided that:

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(i) in the case of foreign contracts and foreign purchase orders, the cost for
contracts or of purchase orders with third parties shall not exceed
$500,000.00 without prior concurrence of the Operating Committee;

(ii) in the case of local contracts and purchase orders, the cost shall not exceed
N5,000,000.00 without concurrence of the Operating Committee.

The amounts set forth in (i) and (ii) above may be reviewed by the Operating
Committee whenever it becomes apparent to the Parties that such limits are
grossly prejudicial to the Joint Operations.

In the event of a significant change in the exchange rate of Naira to the

Dollar compared to that which existed on the Effective Date, the Operating
Committee may review the limit set forth in (ii).

(iii) such contracts shall be entered into, and such purchase orders shall be placed,
with third parties which in Operator’s opinion are technically and financially
able to perform properly their obligations;

(iv) procedures customary in the oil industry for securing competitive prices shall
prevail unless compelling reasons to the contrary exist;

(v) Operator shall give preference to a contractor that is a company organised

under the laws of Nigeria to the maximum extent possible, provided there is
no significant difference in price or quality between such contractor and other
contractors.

(vi) The above limits and the procedures set forth in Schedule C shall not apply to
purchases made for warehouse replenishment stock not exceeding
$500,000.00 or 5 million Naira nor shall they apply to the purchase of Oil
Country Tubulars not exceeding $1,000,000.00 or -N-10,000,000.00 made in
furtherance of planned drilling programmes. Where there are Naira and
Dollar components of such purchases, both shall not exceed the sum of $1
million dollars or the equivalent of 10 million naira.

2.2.9 The award of contracts and purchase orders shall be in accordance with Uniform
Project Implementation Procedures attached hereto as Schedule "C";

2.2.10 In the award of any contracts, the Operator shall expressly provide for the application
of the Regulations to Operator’s contractors, sub-contractors and agents.

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2.2.11 The Operator shall keep accurate records and books of accounts with respect to the
Joint Operations, which shall be available during normal business hours to Non-
Operator’s authorized representatives. Such records and books shall comply with the
Uniform Accounting Procedure and with due regard to the requirements of the
Regulations.

2.2.12 The Operator shall promptly provide the Non-Operators with copies of all approved
AFE’s when requested by the Non-Operators.

2.2.13 The Operator shall make available to the Non-Operator, the following information and
data:-

(i) all Activities Reports meant for discussion by the Technical Sub-Committee
and all annual Programme Books;

(ii) all volumes of the Reserves Reports on an annual basis;

(iii) monthly drilling and production Activities Reports;

(iv) monthly Reports on Production Wells containing details and reservoirs;

(v) a copy of all quota letters issued by NNPC;

(vi) notification of any changes in production levels which may affect any quota
previously determined by NNPC;

(vii) data for nominations and tanker scheduling as is required under Schedule D
to this Agreement;

(viii) on the special request of a Non-Operator, electrical logs of specific wells and
any other information pertaining to exploration and appraisal wells and
seismic data available to the Operator;

(ix) production forecasts on a monthly basis;

(x) financial data required for cash-calls;

(xi) copies of major contracts for the execution of Joint Operations as may be
requested by Non-Operators;

(xii) such additional reports as Non-Operator may require including a copy of all
reports on technical studies and research conducted or commissioned by

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Operator and its Affiliates in respect of Joint Operations for the Joint
Account.

2.2.14 The Operator shall keep available in Nigeria, for use of the Parties hereto, marked and
sacked samples of all formations encountered and seismic data, until such time as the
Operating Committee authorizes their disposal.

2.2.15 Litigation and settlement of claims in connection with the Concessions, the Contract
Area, or Joint Operations shall be conducted for and on behalf of the Parties by the
Operator pursuant to the direction of the Operating Committee; provided however,
that the Operator shall have authority to settle claims and litigation not exceeding
N500,000.00 (Five Hundred Thousand Naira) or the foreign currency equivalent
without the approval of the Operating Committee in so far as such claims are not
covered by policies of insurance maintained for the Joint Account. The Operator,
however, shall promptly report any such aforesaid settlement to the Operating
Committee. Each Party shall notify the other Party of any process served upon it or of
any process it intends to serve in any action respecting the Concessions, the Contract
Area or any aspect of the Joint Operations. Nothing contained in this Subclause
2.2.15 shall preclude a Party from also acting on its own behalf (and at its own
expense) if, in its opinion, it considers such action advisable or necessary to protect its
particular interest hereunder. However, a Party acting on its own behalf shall not
pursue a course of action contrary to the course of action then being taken for the Joint
Account with respect to such litigation.

2.2.16 All bank transactions in foreign and local currencies shall be made through bank
accounts opened and maintained by the Operator exclusively for the Joint Operations.
The Operator shall verify, obtain and forward to Non-Operators, on a monthly basis,
copies of Joint Bank Accounts statements for the preceding month, accompanied by
copies of relevant reconciling documents, not later than the 21st day of the following
month. Operator shall verify all credits and debits relating to the bank transactions
reported in such statements.

2.2.17 The Operator shall instruct the banks in which the Joint Accounts are held to send,
regularly, copies of the statements of balances in the Joint Bank Accounts directly to
the Non-Operators.

2.2.18 A Joint Petty Cash Account may also be established by the Operator for the Joint
Operations. The Operating Committee shall establish a monetary ceiling, frequency
and manner of reimbursement, and restrictions on occasions for usage, in the event a
Joint Petty Cash Account is established by the Operator.

2.2.19 The Operator shall carry out the decisions of the Operating Committee.

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2.2.20 The Operator shall be responsible, subject to the Budgets, for acquiring any surface
rights and rights-of-way required for the Joint Operations.

2.2.21 The Operator shall obtain legal title to any land purchased, leased or acquired for Joint
Operations in the name of the Parties.

2.3 Time Table for Work Programmes and Budgets

The Operator shall develop and submit to the Chairman of the Operating Committee the proposed work
programmes and budgets required herein. Not later than 28th February of each year, the Chairman of
the Operating Committee shall circulate to all Parties the time table for submission, consideration and
approval of the short term (subsequent year) and directional long term (five years) work programmes
and budgets in accordance with Annex "1" to Schedule "B". The short term and directional long term
programme and budgets shall be provisionally agreed to by the Operating Committee not later than the
31st October, and finally approved not later than 31st December of that year. Such short term and long
term programmes shall include, but not be limited to, targets in reserves, producibility, production and
unit cost per barrel. Notwithstanding the foregoing, the Budgets and Programmes may be amended from
time to time by the Operating Committee and shall provide Operator with a contingency to cover cost
overruns up to ten percent (10%) above the Budget.

2.4 Cessation of Operatorship

2.4.1 The Operator shall cease to be the Operator and shall be removed by the Non-
Operator in any of the following circumstances, namely, if:

(i) (a) the Operator assigns or purports to assign, other than to an Affiliate
pursuant to Clause 19.3 of this Agreement, its general powers and
responsibilities of supervision and management as Operator; or

(b) the Affiliate to whom the Operator has assigned general powers and
responsibilities of supervision and management as Operator ceases to be an
Affiliate of the Operator; or

(c) the Party acting as the Operator (or any Affiliate of the Operator
which is a Party) assigns or otherwise disposes of, other than to an Affiliate,
all its Participating Interest.

(ii) (a) a petition is presented to and agreed to be heard by a court and an

order is made, or an effective resolution is passed or legislation is enacted, for
the dissolution, liquidation or winding up of the Operator; or

(b) the Operator makes assignment for the benefit of creditors; or

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(c) a receiver is appointed or a mortgagee takes possession of the

whole or a material part of the assets or undertakings of the Operator; or

(d) the Operator is proved, pursuant to an award resulting from

Arbitration set up under Clause 14 of this Agreement, to have committed
Wilful Misconduct;

(iii) the Operator becomes insolvent or ceases or threatens to cease to carry on its
business or a major part thereof or a distress, execution or other process is
levied or enforced or sued out upon or against any significant part of the
chattels or property of the Operator and is not discharged within fourteen (14)
days, provided, however, that the Non-Operators are not in breach of this
Agreement; or dissolves, liquidates, becomes insolvent or terminates its
corporate existence (except in the case of a merger or amalgamation), or
makes any assignment for the benefit of creditors; or

(iv) allows any final judgement to be filed without recourse to further appeal
whereby the Operator is required to hold, to dispose of or to convey its entire
Participating Interest, or portion thereof, or for the benefit of a third party.

2.4.2 In the event that the Operator commits any breach of, or fails to observe or perform,
any material obligation on its part contained in this Agreement, and such breach or
failure amounts to Wilful Misconduct, the Operator may also be removed by any of
the Non-Operators holding Participating Interest of at least 60% giving notice in
writing to the Operator, (details of such breach or failure to be specified in the notice)
provided that such removal shall not become effective:

(i) if, within twenty-eight (28) days of receipt of the said notice, the Operator
takes steps to remedy such breach or failure and thereafter, with all due
diligence, remedies the same within such time as is reasonable in all the
circumstances; or

(ii) if the Operator disputes that it has committed such breach or failure and
within twenty-eight (28) days of receipt of the said notice gives notice in
writing to the Non-Operators that it requires the matter to be referred to
arbitration pursuant to Article 14; or

(iii) until ninety (90) days from an arbitration determination that the Operator has
committed such breach or failure; or

(iv) until sixty (60) days from the date of the joint notice given by any of the
Non-Operators to the Operator where the Operator has not referred the

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dispute to arbitration in accordance with Article 14, or has not taken steps to
remedy such breach or failure.

2.4.3 The "Date of Cessation" shall be the date on which the outgoing Operator shall have
complied with the provisions of Subclause 2.8.1 on, or following:

(a) the earlier of the date specified in its notice of resignation or the date on
which either of the Non-Operators or successor Operator assumes the
operatorship responsibility pursuant to Subclause 2.6.1; or

(b) the date:

(i) on which the Non-Operators remove the Operator as a consequence

of the occurrence of any of the acts described in paragraphs (i) to
(iv) of Subclause 2.4.1; or

(ii) ninety (90) days from the date of a final arbitration determination,
under paragraph 2.4.2(iii).

(iii) the date referred to in paragraph 2.4.2 (iv), as applicable.

2.4.4 Anything in this Clause 2.4 notwithstanding, Operator shall not be relieved of
responsibility for Joint Operations until the Date of Cessation.

2.4.5 The Operator shall have no claim against the Non-Operator if Operator is removed as
Operator pursuant to Subclauses 2.4.1 and 2.4.2 but such removal shall be without
prejudice to any rights, obligations or liabilities which accrued during the period when
the Operator acted as such. If the Operator is removed as aforesaid it shall be entitled
to charge to the Joint Account the costs and expenses approved by the Operating
Committee incurred in connection with the change of operatorship. Such approval
shall not be unreasonably withheld.

2.5 Resignation of Operator

2.5.1 The Operator may, at any time, resign its operatorship upon giving six (6) months
prior notice thereof. In the event of any such resignation, the Operator shall not be
relieved of responsibility for Joint Operations until the Date of Cessation.

2.5.2 The resignation of Operator shall be without prejudice to any of Operator’s rights,
obligations or liabilities which accrued during the period when the Operator acted as
such.

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2.5.3 If the Operator resigns as aforesaid it shall be entitled to charge to the Joint Account
the costs and expenses approved by the Operating Committee incurred in connection
with the change of operatorship. Such approval shall not be unreasonably withheld.

2.5.4 Operator's right of resignation as provided in this Clause 2.5 shall be without
prejudice to its right to retain its Participating Interest including such of its rights,
benefits, duties and obligations as are not related to or are not on account of its being
the Operator under this Agreement.

2.6 Appointment of Successor Operator

2.6.1 In the event the Operator resigns, unless the Parties agree to appoint a third party as
Operator, the Parties shall appoint one of the Non-Operators as successor Operator to
take over the Operatorship upon the effective date of Operator’s resignation or any
earlier date as may be mutually agreed by Operator and Non-Operators. In the event
one of the Parties is to become the successor Operator, it shall be entitled to nominate
one of its Affiliates as Operator in lieu of itself whereupon such Affiliate shall be
bound by the provisions of this Agreement with respect to the duties of Operator.
Such Affiliate shall remain as Operator for so long as it is an Affiliate of the successor
Operator unless the Parties otherwise agree. If Parties agree to appoint a third party as
a successor Operator, not being an Affiliate of either Party, such third party shall enter
into an agreement with the Parties to be bound by this Agreement in respect of the
performance of its duties as Operator, prior to commencement of its operatorship.
Thereafter, this Agreement shall apply mutatis mutandis to such third party except as
to any terms relating to remuneration or compensation as may be mutually agreed by
the Parties where Non-Operators or an Affiliate of either Party is not the successor
Operator.

2.6.2 In the event the Operator Is removed pursuant to Subclause 2.4.1 or 2.4.2, one of the
Non-Operators shall become the successor Operator on the Date of Cessation. In the
event that one of the Non-Operators is to become the successor Operator pursuant
hereto, it shall be entitled to appoint an Affiliate of that Non-Operator as Operator in
lieu of itself whereupon such Affiliate shall be bound by the provisions of this
Agreement with respect to the duties of Operator. Such Affiliate shall remain as
Operator for so long as it is an Affiliate of the successor Operator unless the Parties
otherwise agree. The Parties by mutual agreement may also appoint a third party, not
being an Affiliate of either Party, as successor Operator. In such a case, this
Agreement shall apply mutatis mutandis to such third party, except as to any terms
relating to remuneration or compensation paid to such successor Operator, as may be
mutually agreed upon by the Parties. The said third party shall enter into an
agreement with the Parties to be bound by this Agreement in respect of the
performance of its duties as Operator prior to commencement of its operatorship.

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2.7 Change of Operatorship

Shell, Elf and Agip acknowledge NNPC’s right to operate specified portions of the Joint Venture in due
course. Consequently, NNPC wishes to become more actively involved with the responsibilities of the
operatorship in respect of the Joint Operations.

In order to formulate the framework within which NNPC may exercise this right, Parties will agree on a
programme to progress the build-up of NNPC’s operational experience and secure its access to the
necessary technology and technical assistance, as required for the exercise of such responsibilities in a
cost efficient and professional manner acceptable to the Parties. This programme will be reviewed by
the Operating Committee and adjusted from time to time in the light of progress achieved and
experience gained.

2.8 Transfer of Property on Change of Operator

2.8.1 Upon the effective date of Operator’s resignation pursuant to Clause 2.5 or, upon
Operator’s replacement pursuant to Clause 2.4, the outgoing Operator shall deliver
and/or transfer to the successor Operator:

(i) possession of the wells belonging to the Joint Operations;

(ii) possession of all other Joint Property including all equipment, inventories and
funds held For the Joint Account, together with all production, if any, which
has not been delivered in kind;

(iii) possession of pertinent books of account and records maintained for the Joint
Operations; and

(iv) possession of all documents, agreements and other papers relating to the Joint
Operations.

2.8.2 Subject to the provisions of Clause 19.3 and without prejudice to Clause 2.9, the
outgoing Operator, upon delivery of the foregoing, shall be released and discharged
with respect to those obligations and liabilities which accrued prior to the Date of
Cessation. Provided that the Operator shall nevertheless remain liable for any
obligations and liabilities arising solely from its failure to disclose any matters that
ought to have been disclosed to the Non-Operators prior to the Date of Cessation.

2.8.3 All expenses incurred in connection with the change of Operatorship hereunder,
including the deliveries and transfers required by Subclause 2.8.1 shall be for the Joint
Account.

2.9 Audit of Accounts on Change of Operator

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If the Operator resigns pursuant to Clause 2.5, Non-Operators shall, not later than sixty (60) days prior
to the effective date of the change of Operator, cause an audit to be carried out on the books of account
and records of the Joint Operations, for the Joint Account, to the extent not previously audited. If the
Operator ceases to be Operator pursuant to Clause 2.4, the Non-Operators shall cause such an audit to
be carried out as soon as practicable, but not later than 60 days, after the Date of Cessation.

2.10 Disposal of Joint Property by Operator

The Operator shall not, without the written approval of NNPC dispose of, sell, or re-export any Joint
Property of such historic cost exceeding N100,000.00 per unit or batch or such other value as may, from
time to time, be determined by the Operating Committee. Notwithstanding the above provision,
Operator shall furnish the Non-Operator quarterly returns of all items of Joint Property disposed of,
regardless of value.

2.11 Use of a Party's Equipment by Operator

Operator may utilize in Joint Operations, equipment exclusively owned and made available by a Party
and the charges therefor to the Joint Operations shall be as specified in the Accounting Procedure.

2.12 Operator’s Business and Activities Outside The Joint Operations

Where the Operator engages in activities or business outside the Joint Operations, not being a Sole Risk
Operation pursuant to, and as defined in, Article 8 herein, the Operator shall make a prior disclosure to
the Non-Operators of the facilities, assets and personnel, if any, as may be common to the Joint
Operations and such business or activities and the basis for apportioning the common costs relating
thereto, if any, shall be subject to approval of the Operating Committee.

ARTICLE 3

OPERATING COMMITTEE

3.1 ESTABLISHMENT OF OPERATING COMMITTEE AND ITS POWERS AND DUTIES.

An Operating Committee shall be established within thirty (30) days from the Date of Execution for the
purpose of providing orderly overall supervision, control and direction of all matters pertaining to the
Joint Operations. Without limiting the generality of the foregoing, the powers and duties of the
Operating Committee shall include:

(i) the approval, revision, or rejection of all proposed programmes and budgets;

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(ii) the consideration and approval of the recommendations of the Sub-Committees,

referred to in Clause 3.6, in respect of such programs and budgets as they relate to the
selection, scope, timing and locations, and if appropriate, testing, completion,
plugging and abandonment of all wells and facilities for Joint Operations and of any
change in the status of any such wells and facilities;

(iii) the consideration and, subject to the Parties' approval, decision on matters relating to
any addition to, or reduction of, the Contract Area;

(iv) settlement of claims and litigation in excess of Five hundred thousand Naira
(N500,000.00) or the equivalent thereof in other currency, or such other amount as
may, from time to time, be determined by the Operating Committee in so far as such
claims are not covered by policies of insurance maintained for the Joint Account;

(v) the consideration and determination of all matters relating to the general policies,
special studies, research, procedure and methods of the Joint Operations;

(vi) the abandonment and salvage of Joint Property or any portion thereof as provided in
clause 2.10 herein;

(vii) settlement of unresolved audit exceptions arising pursuant to Clause 6.8 of this
Agreement;

(viii) ensuring that the Operator implements the provisions of the Uniform Accounting
Procedure (Schedule "B"), the Uniform Project Implementation Procedure (Schedule
"C"), and the Uniform Nominating Scheduling and Lifting Procedure (Schedule "D")
and all amendments and revisions thereto as agreed by the Parties;

(ix) ensuring that the Operator carries out the decisions of the Operating Committee; and

(x) any other matters relating to Joint Operations which are not under the sole discretion
and control of the Operator in carrying out its duties and functions or are not
elsewhere provided for in this Agreement, excepting those matters reserved to the
Parties in their respective rights.

3.2 Members and Function of the Operating Committee

3.2.1 The Operating Committee shall consist of 12 persons appointed by the Parties as
follows:

NNPC 6
SHELL 4
AGIP 1

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ELF 1

3.2.2 Each Party shall designate by notice in writing to the other Parties, the names of its
representatives to serve as members of the Operating Committee as provided in
Subclause 3.2.1 hereof and their respective alternates, which representatives and
alternates shall be authorised to represent and bind that Party with respect to the
decisions of the Operating Committee. Such notice shall give the names, titles and
addresses of the designated representatives and alternates.

3.2.3 Any representative or alternate designated and appointed to serve on the Operating
Committee may be changed from time to time by his principal designating a new
representative or alternate, and notifying the other Parties in writing not less than ten
(10) days in advance of the effective date of such change.

3.2.4 NNPC shall appoint the Chairman of the Operating Committee and the Operator shall
appoint the Secretary, who need not be a member of the Operating Committee. The
Secretary shall keep minutes of all meetings and records of all actions and decisions of
the Operating Committee. Within fourteen (14) days after each meeting, the Secretary
shall forward drafts of the minutes to the Parties. Within fourteen (14) days thereafter
each Party shall return the minutes with its comments to the Secretary who shall
within fourteen (14) days thereafter forward the final draft to the Parties. The minutes
of each meeting shall be approved by the Operating Committee at the next meeting
and copies thereof shall be furnished to the Parties.

3.2.5 Without prejudice to the generality of Clause 3.1 hereof, the Operating Committee
shall:

(i) consider, revise, approve, or disapprove all programmes and budgets;

(ii) consider and approve the sale or disposal of any items of Joint Property in
accordance with the provisions of the Uniform Accounting Procedure except
for Joint Property that the Operator may dispose of pursuant to Clause 2.10;

(iii) consider and approve the sale or disposal and exchange of information to
third parties other than routine exchange of seismic data and other such data
commonly exchanged within the industry; and

(iv) consider, and determine any other matter relating to the Joint Operations
which may be referred to it by any Party (other than any proposal to amend
this Agreement) or which is otherwise designated under this Agreement for
reference to it.

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3.3 Meetings

3.3.1 Not later than the 28th day of February of each year, the Chairman shall prepare and
forward to the members of the Operating Committee, a Calendar of meetings as
agreed by the Operating Committee for that year.

3.3.2 Unless otherwise agreed by the Parties, the Operating Committee shall meet at the
head office of the Operator once every four (4) calendar months, or at such other
intervals or venue as may be agreed by the Operating Committee and, in addition,
whenever requested by any Party by giving at least twenty one (21) days notice in
writing to each other Party which notice shall specify the matter or matters to be
considered at the meeting; or, when summoned by the Chairman or by the Operator
pursuant to Subclause 6.5.1, as an emergency meeting for which no specified notice
period shall be required. Any other matter may be tabled by any Party by notice given
not less than three (3) business days prior to the scheduled date, advising of additional
matters which that Party desires to be considered at the meeting, which matters shall
also be considered at the meeting. Provided however that any other matter considered
important by any Party may be tabled at the meeting for deliberation.

3.3.3 The quorum for any meeting of the Operating Committee shall consist of a minimum
of four (4) representatives of NNPC and two (2) of SHELL and one (1) representative
each of AGIP and ELF.

3.3.4 The Secretary shall convene all meetings of the Operating Committee other than the
emergency meetings.

3.4 Procedure

3.4.1 Except as may be expressly provided for in this Agreement, the Operating Committee
shall determine and adopt rules to govern its procedures.

3.4.2 Representatives attending a meeting of the Operating Committee may be accompanied

by advisors, and the Chairman may be accompanied by additional experts to the extent
reasonably necessary to assist with the conduct of such meeting. Such advisors and
experts shall not vote or in any way participate in decisions, but may contribute in a
non-binding way to discussions or debates of the Operating Committee.

3.4.3 At the commencement of any meeting of the Operating Committee where there is a
quorum, each Party shall nominate one of its representatives who shall exercise its
voting rights.

3.4.4 Except as otherwise expressly provided in this Agreement all decisions of the
Operating Committee shall be made by the unanimous vote of the Parties and subject

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to Clause 3.5, at a meeting in which a quorum is present. Decisions of the Operating

Committee made pursuant to Subclause 3.5.1 shall also require unanimous vote. In
respect of any vote of the Operating Committee relating to the removal of the
Operator pursuant to the provisions of Article 2.4 hereof the Operator shall not cast
his vote and the decision shall be made by the affirmative vote of one or more of the
Non-Operators holding Participating Interest share of at least 60%.

3.4.5 The Parties shall be bound by, and abide by, each decision of the Operating
Committee duly made in accordance with the provisions of this Agreement.

3.5 Decision Without a Meeting

Any matter which is within the powers and duties of the Operating Committee may be determined by
the Operating Committee without an Operating Committee meeting if such matter is submitted by the
Chairman, on his own initiative or at the request of any Party or, in the case of urgent matters, by the
Operator, by way of notice to all the Parties, provided that the Chairman or the Operator, as the case
may be, includes with such notice, sufficient information regarding the matter to be determined so as to
enable the Parties to make an informed decision with respect to such matter.

3.5.1 Except for urgent matters referred to in Subclause 3.5.2 each Party shall cast its vote
with respect to such matter within twenty eight (28) days of receipt of such notice and
such manner of determination shall be followed unless a Party objects, within fourteen
(14) days of receipt of such notice, to having the matter determined in such manner. If
any Party fails to vote by the expiry of the twenty eight (28) day period for voting, it
shall be deemed to have voted in the affirmative. The Chairman shall promptly advise
the Parties of the results of such vote.

3.5.2 Each Party shall nominate one of its officers as its representative from whom the
Operator may seek binding decisions on urgent matters, such as but without limitation
to ongoing drilling operations, whenever a decision is required, by telephone, telex or
in person and they shall advise each other in writing of the persons so nominated and
any changes thereof.

3.5.3 The decisions made pursuant to this Clause 3.5 shall be recorded in the minutes of the
next scheduled meeting of the Operating Committee, and shall be binding upon the
Parties to the same extent as if the matter had been determined at a meeting of the
Operating Committee.

3.6 Sub-Committees

The Operating Committee shall establish any advisory Sub-Committee as it considers necessary from
time to time such as Exploration, Technical, and Finance/Budget Sub-Committees etc.

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3.6.1 Each Sub-Committee established pursuant to this Clause 3.6 shall be given terms of
reference and shall be subject to such direction and procedures as the Operating
Committee may give or determine.

3.6.2 The Operating Committee shall require the Operator to provide a Chairman for
Technical Sub-Committee established under this Clause 3.6.

3.6.3 The deliberations and recommendations of any Sub-Committee shall be deemed

advisory only and shall become binding or effective upon the Parties only when the
same shall have been accepted pursuant to decision of the Operating Committee
pursuant to Subclause 3.4.4.

ARTICLE 4

GENERAL RIGHTS OF THE PARTIES

4.1 Access

4.1.1 Non-Operators shall have free access, at all reasonable times, to all information
pertaining to the Joint Operations and to wells drilled, production won, saved and
lifted and to the books, records and vouchers relating thereto.

4.1.2 The Operator shall afford Non-Operators free access to the Contract Area at all
reasonable times with the right to observe any and all Joint Operations being
conducted and to inspect all Joint Property therein provided that such right of access
shall not be exercised so as to unreasonably interfere with Joint Operations and
provided that such access shall not be at the expense of the Joint Account but, subject
to the provisions of Article 5 hereof, at the risk of the Non-Operators to the extent not
covered by Joint Account insurance.

4.1.3 The Non-Operators shall always give to the Operator reasonable prior notice of its
intention to exercise its rights under Subclauses 4.1.1 and 4.1.2.

4.1.4 Nothing in this Agreement shall require any Party to divulge proprietary technology to
any other Party. Consequently, the Operator may from time to time utilise its
proprietary technology for the Joint Account in the conduct of the Joint Operations
and may take such reasonable precautions as it deems necessary or desirable to
prevent disclosure of its proprietary technology to others, such as contractors and
agents against such disclosure.

4.2 Technology, Data, Patents and Patent Rights

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Technology, data, proprietary information and inventions, whether patentable or not, and patents based
on such inventions, which arise exclusively out of, and are paid for, by the Joint Operations shall be
jointly owned by the Parties in proportion to their Participating Interest shares or their respective
designee.

4.2.1 Where patentable processes, methods, procedures discoveries, inventions or

equipment ("Patentable Processes") arise exclusively out of the Joint Operations, the
Operator shall apply for, or cause its Affiliate or any third party concerned to apply for
and assign to the Operator, patents and patent rights therefor. Any application for
patents and patent rights shall be in accordance with the instructions of the Operating
Committee and such patents and patent rights when obtained, shall be for the Joint
Account.

4.2.2 The Parties agree to arrange for their employees who make such inventions to provide
the necessary assistance and to sign the necessary documents as required for filing
patent applications and maintaining patents for such inventions.

4.2.3 Each Party shall retain for itself and its Affiliates, an irrevocable, non-exclusive,
licence free of royalty or any other charge to use and have used, in its own operations
throughout the world, all of the aforesaid patents and patent rights including all the
technology, technical knowledge, proprietary information, data, inventions, and
copyrights, arising therefrom.

ARTICLE 5

INSURANCE

5.1 Parties’ Individual Insurance

5.1 Each Party shall at all times while Joint Operations are being conducted, obtain and maintain in respect
of its Participating Interest, (a) insurance with respect to physical damage to property (whether onshore,
offshore or in transit), for full reinstatement value on an All Risks Basis, and (b) well control, subject to
Subclause 5.2.10, to a limit of its Participating Interest Share of US$50,000,000.00. Each Party shall
provide to the other Party, as and when required by such other Party, evidence to establish that such
insurance has been obtained and is being maintained.

5.1.1 The insurance so obtained by each Party shall not prejudice any insurance obtained by
the Operator for the Joint Account, and any such insurance shall include a waiver of
subrogation or otherwise, against the other Party and its Affiliates, directors, servants,
agents and employees.

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5.1.2 The policy shall further provide the other Party with not less than thirty (30) days
prior written notice of cancellation. If such other Party receives such notice of
cancellation and, upon request from the Party receiving the notice of cancellation, the
Party which has taken out such policy:

a) fails to promptly provide to the other Party evidence that alternative

insurance arrangements in respect of the matters covered by the insurance
have been made by such Party to take effect by the effective date of
cancellation of the original policy; or

b) such Party has not produced evidence of payment of the premium required to
maintain such policy in full force and effect,

then the Party receiving the notice of cancellation shall have the right to make
payment of such premium on behalf of the Party in question and/or to renew such
policy. Thereupon the amount of the premium paid and/or the cost of such renewal
plus interest thereon, at the Bank Rate, shall be added by the Operator to the next Cash
Call of the Party who has failed to make the premium payment on, and/or the renewal
of its policy of insurance.

5.2 Joint Account Insurance

5.2 Operator shall, at all times while Joint Operations are conducted, subject to Non-Operators’ approval on
policy terms and conditions, obtain and maintain for itself and Non-Operator and pay for, and charge to
the Joint Operations, insurance in respect of the Joint Property and Joint Operations as follows:

(i) Employer’s Liability Insurance covering each employee engaged in the Joint
Operations where such employee is not covered by Workmen’s Compensation;

(ii) Comprehensive General Third Party Liability and Property Damage Insurance
covering Joint Operations endorsed to include offshore operations, seepage and
pollution to a limit of US$25,000,000.00 or local equivalent;

(iii) Motor Vehicle Liabilities Insurance;

(iv) Aviation Liability to a limit of US$10,000,000.00 or local equivalent;

(v) Charterer’s Legal Liability Insurance to provide coverage arising out of the use of any
chartered barges or vessels;

(vi) Marine insurance; and

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(vii) Any insurance required by any contract entered into by the Operator in furtherance of
Joint Operations including contractor’s All Risk Insurance.

5.2.1 Operator shall obtain and maintain such other insurance as may be determined by the
Operating Committee.

5.2.2 The Insurance carried by the Operator pursuant to Clause 5.2 hereof shall name Non-
Operator as additional or co-insureds and underwriters shall waive all rights of
subrogation in favour of the Non-Operators and their employees.

5.2.3 In the event that Operator fails to take out and maintain any of the insurance policies
provided for in Clause 5.2, being an insurance which Operator is obliged to take out,
the Operator shall be solely responsible for any loss, claims, demands or damages
arising therefrom, except where the Operator has used all reasonable endeavours to
obtain or maintain any such insurance but has been unable to do so and has promptly
notified the Non-Operator.

5.2.4 The Operator shall use its best efforts to require its contractors and subcontractors, if
any, to maintain insurance of such types and in such amounts as the Operator deems
necessary with respect to Joint Operations, provided that such insurance policies shall
include waivers of all rights, by subrogation or otherwise, against the Parties and their
respective Affiliates, directors, servants, agents and employees.

5.2.5 Where applicable, the Operator shall use reasonable efforts to ensure that marine
drilling rigs and work boats used in Joint Operations are insured by the owners of such
vessels on a full form (hull, tackle and machinery) or on an all risks form, that
adequate protection and indemnity, collision and tower’s liability insurance is
maintained by such owners and that such insurance policies include waivers of all
rights, by subrogation or otherwise, against the Parties and their respective Affiliates,
directors, servants, agents and employees.

5.2.6 The Operator shall in respect of all insurance to be obtained pursuant to this Clause
5.2 from the Effective Date and thereafter before the end of each year:

(i) upon notice to the Non-Operators, discuss and obtain the concurrence of the
Non-Operators on premium rates and policy terms and conditions including
but without limitation to deductibles, and insured value;

(ii) promptly notify the Non-Operators of any loss;

(iii) duly file all claims and take all necessary and proper steps to collect any
proceeds and credit them to the Joint Account.

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Notwithstanding any thing contained in this Clause 5.2.6 herein, NNPC may
appoint an Insurance Broker or Brokers to look after its insured interests
hereunder.

5.2.7 The Operator shall, not later than 30 days from the date of the issuance of an
Insurance Policy or renewal of same pursuant to this Agreement, furnish Non-
Operator with true copies of the Policies or renewal endorsements with respect to the
insurance required under Clause 5.2 hereof.

5.2.8 All policies and certificates of insurance obtained and maintained in accordance with
Clauses 5.1 and 5.2 shall state:

(i) the types and amounts of insurance carried;

(ii) the insurance company or companies underwriting the coverages;

(iii) the effective and expiration dates of all policies;

(iv) that each Party shall be given not less than thirty (30) days advance written
notice of any material changes or cancellation of any policy;

(v) that a written waiver of subrogation endorsement in favour of the Party not
carrying the insurance has been attached to all policies of insurance required
under Clause 5.1 hereof; and

(vi) the territorial limits of all policies.

5.2.9 Liability of Operator under Subclause 5.2.3 for failure to take out the insurance
required by Clause 5.2, except where so agreed to by Non-Operators in writing, shall
not be diminished by the provision of the information required under Clause 5.2.8.

5.2.10 The limits of insurance coverage set forth in Clauses 5.1 or 5.2 are meant to be
minimum amounts only. Insurance Policies pursuant to this Article 5 shall be
obtained and maintained, or extended as the case may be, by the relevant Party to such
further limits as the Operating Committee shall determine and advise to the Parties,
based on the scope and risk of planned operations.

5.3 Indemnity

5.3.1 Except as otherwise provided in this Article 5 and in Subclause 2.2.2, any loss or
damage suffered by the Parties from third party claims arising out of the Operator’s
conduct of the Joint Operations shall be for the Joint Account. Any loss, damage, or
costs suffered by the Operator from claims arising out of the Operator’s conduct of the

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Joint Operations and any recovery from insurance provided under Clause 5.2 shall be
for the Joint Account.

5.3.2 If any Party fails to take out and maintain any insurance policy which such Party is
obliged to take out under Clause 5.1, such Party shall hold harmless and indemnify the
other Parties from and against all claims, actions, causes of actions, loss and damage
suffered by such other Party arising out of, or in connection with, such failure.

ARTICLE 6

FUNDING OF JOINT OPERATIONS

6.1 Sharing of Funding

Each Party shall contribute its Participating Interest share of all funds required for the Joint Operations.
All costs and expenses of Programmes and Budgets and all credits with respect to Joint Operations shall
be ascertained, computed and allowed and otherwise accounted for in accordance with the provisions of
the Uniform Accounting Procedure.

6.1.1 The budgets and programmes submitted pursuant to Clause 2.3 shall contain properly
itemized and detailed estimates of the costs of such programmes, which costs shall
include, as separate items:

(i) a charge in an amount to cover administrative and overhead expenses charged

to Operator by Operator’s Affiliates: (a) Shell International Petroleum
Maatschappij and (b) Shell International Petroleum Company Limited and
not charged to the Joint Account under any provision of the Accounting
Procedure (hereinafter called "Head Office Overhead Charge"). Such charge
shall be calculated by applying 2.5 percent to the total capital expenditures
charged to the Joint Account for the relevant year.

(ii) the cost and charges for specific projects or studies carried out for the Joint
Account by Operator’s Affiliates; and

(iii) the costs and charges for specific projects or studies carried out for the Joint
Account by Non-Operators or any of its Affiliates.

6.1.2 The Operator may also submit to the Non-Operators any proposed revision or
additions to the proposed programme and budget.

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6.1.3 The proposed programmes and budgets shall be subject to the consideration, revision
and approval by the Operating Committee. All Programmes and Budgets shall be
subject to revision by the Operating Committee from time to time.

6.1.4 In the case of an accident or other emergency where the Operator takes such action as,
in its judgement, is required for the protection of life and property or the prevention of
pollution, the Operator may incur for the Joint Account all necessary costs, expenses
and commitments in connection therewith. The Operator shall notify Non-Operators
within 48 hours of any such occurrence and as soon as possible thereafter provide a
report of the circumstances, any commitment incurred or to be incurred, and actions
taken.

6.2 Cash Calls

Each Party shall pay its Participating Interest share of all costs and expenditures incurred for the Joint
Account and such payment shall be made in accordance with the following procedure:

6.2.1 The Operator shall, not later than fifteen (15) working days prior to the first day of the
Cash Call Month, submit to each Party:

a) an itemized estimate of such cost and expenditures (hereinafter "Estimated

Expenditures"), as well as an itemized return of the actual expenditures for
the month (hereinafter the "Actual Expenditure Month") which is two months
preceding the Cash Call Month as provided in return 001A of Annex "2" to
Schedule "B" (the total expenditure in any Actual Expenditure Month as set
forth in such return is hereinafter referred to as the "Actual Expenditure" for
such month);

b) an itemization of the cash available or cash deficit in the Joint Bank Account
as the case may be as of such date as well as any credit expected to be
received in the Cash Call Month; and

c) such Party’s Cash Call for that month which shall be its Participating Interest
share of Estimated Expenditures adjusted .by the cash or deficits and credits
in (b) above.

6.2.2 Subject to Subclause 6.2.3 and Clause 6.4, each Party shall pay its respective Cash
Call into the Joint Bank Account not later than the Due Date, which is the first day of
the Cash Call Month.

6.2.3 The Non-Operators may dispute a Cash Call on the basis that Operator’s Estimated
Expenditures for the Cash Call Month exceeds what costs and expenditures should
reasonably be incurred for the Joint Account for that month based on the approved

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Programme and Budget and the total of all Actual Expenditures to date applicable to
such Programme and Budget after adjusting the Budget for any cost overruns
permitted or approved pursuant to the limit permitted pursuant to Clause 2.3 of this
Agreement. In the event that the Non-Operators so dispute any portion of a Cash Call,
the Non-Operators shall give to the Operator a notice in writing specifying the amount
in dispute and the reason therefor not later than eight (8) days from the date of receipt
of such Cash Call. The Non-Operators may not, however, dispute any portion of a
Cash Call required for the protection of life and property or for the prevention of
pollution pursuant to Subclause 6.1.4.

6.2.4 Subject to Clause 6.4, the undisputed portion of the Cash Call shall be paid by the
Non-Operators into the Joint Bank Account not later than the Due Date and the Parties
shall use their best endeavours to resolve the matter on the disputed portion promptly.
Upon settlement, the disputed portion or amount agreed, as the case may be, shall be
paid by the Non-Operators into the Joint Bank Account not later than 10 days from the
date of resolution of the dispute. If the dispute is not settled by the date Non-
Operators receive Operator's itemized return of actual expenditures for the Cash Call
Month with respect to which the dispute arose, as included with the submittal referred
to in Subclause 6.2.1 (a), provided such actual expenditures are in accordance with the
Programme and Budget as adjusted pursuant to the limit permitted pursuant to Clause
2.3 of this Agreement, or are expenses incurred pursuant to Subclause 6.1.4, the Non-
Operators shall pay into the Joint Bank Account, by the Due Date of the next Cash
Call, or shall receive a credit against the amount of such Cash Call, as the case may
be, the difference between:

a) the undisputed portion of the Cash Call with respect to which the dispute
arose and which has already been paid by Non-Operators; and

b) the Actual Expenditure for such Cash Call Month.

6.2.5 Unless otherwise agreed, each Party shall pay its Cash Call entirely in the currency of
the Cash Call.

6.3 Payments for Joint Operating Expenditures

Except as may otherwise be agreed by the Parties, all payments for Joint Operating expenditures shall
be made solely from the Joint Bank Accounts and/or the Joint Petty Cash Account established pursuant
to Subclause 2.2.18 of this Agreement.

6.4 Cash Call Crude

NNPC shall have the option of paying its Cash Call in kind by notifying the Operator, not less than
sixty (60) calendar days prior to the Cash Call Month (hereinafter "Cash Call Crude Notice"), of its

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intention to do so and by assigning to the Operator in such Notice such Party’s right to lift in the Cash
Call Month a portion of its Participating Interest share of the Commercial Production Quota of Crude
Oil for such month equivalent in value to the amount of such Party’s Cash Call (hereinafter the "Cash
Call Portion"). The Operator shall, upon receipt of a Cash Call Notice, promptly provide NNPC with an
estimate of its Cash Call for the Cash Call Month to which the Cash Call Notice applies (the "Cash Call
Estimate"). The purpose of such Cash Call Estimate is to provide a basis for determining the Cash Call
Portion pursuant to Subclause 6.4.1. Any value in excess of the Cash Call shall be credited to NNPC
designated Bank Account.

6.4.1 The value of the lifting shall be agreed by the Parties in accordance with NNPC
Standard Valuation procedure or any other basis agreed by the Parties. Such bases
however, shall not be lower than NNPC pricing for the disposal of its equity share.

6.4.2 The assignment of the Cash Call Portion shall be made by way of the Party in
question specifying in its notice and permitting the Operator to lift, in its stead, a
quantity of liftings which such Party has scheduled or would otherwise schedule for
the Cash Call Month pursuant to Schedule D with nominated quantities at least equal
to the Cash Call Portion. Operator shall apply the proceeds of such liftings to meet
NNPC Cash Call and the excess, if any, shall be paid into a bank account specified by
NNPC upon payment for such Crude Oil by the Operator. If the net proceeds results
in a deficiency, the amount of the deficiency shall be added to NNPC next Cash Call.

6.5 Failure of a Party to Pay or to Provide for Payment of a Cash Call

If a Party fails to provide a notice pursuant to clause 6.4 and fails to meet its cash call by Due Date
specified in clause 6.2.2 such party shall become the defaulting party and the followings shall apply:-

6.5.1 The Operator shall, as soon as practicable, notify the defaulting Party in writing and,
unless otherwise agreed, request an emergency meeting of the Operating Committee
in accordance with the provisions of Subclause 3.3.2 to consider the default situation.
The matter of the default and the remedy thereof shall be discussed in full at, and
constitute the sole agenda of, such a meeting. The decision, if any, of the Operating
Committee regarding the resolution of the default situation shall be binding on the
Parties.

6.5.2 If the defaulting Party remains in default for two (2) months after Due Date the
Operator shall, with the prior approval of the Operating Committee, take necessary
steps to provide or borrow funds to meet the amount in default in accordance with the
decision of the Operating Committee.

6.5.3 Upon a Party becoming a defaulting Party, pursuant to Article 6.5 herein, any non-
defaulting Party, may contribute, in the proportion that its Participating Interest share
bears on funds not contributed by the defaulting Party until such time as the defaulting

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Party has remedied in full its failure of contribution pursuant to the provisions of
Article 6.5 herein. The defaulting Party shall pay interest on the amount in default to
each non-defaulting Party at the Bank Rate, pro rata to the contribution made by such
Party to the funds not contributed by the defaulting Party.

6.5.4 During the continuation of any default, the defaulting Party's Participating Interest
share of any Joint Account credits shall be used to offset the amount due from the
defaulting Party.

6.5.5 In the event a Party remains in default as aforesaid for more than four (4) months, the
Party not in default shall have the right to pursue any remedy accorded it pursuant to
the following or at law. In particular, the Parties not in default shall have the right,
where it is the Operator, to suspend or curtail Joint Operations including those relating
to the defaulting Party’s Participating Interest share of the Commercial Production
Quota to the extent, in their sole opinion, it deems necessary under the circumstances,
and in the case where they are the Non-Operators, to suspend payments of their Cash
Calls; provided, in each case, that the Party not in default first notifies the applicable
Governmental authorities.

6.6 Financial Reports and Returns

Within sixty (60) days from the end of each month, the Operator shall submit to the other Parties a
statement of the accounts for the month in the format provided in the Uniform Accounting Procedure.
Within 60 days from the end of the quarter, and 90 days from the end of the year, respectively, the
Operator shall submit to the other Parties the accounts for the quarter and the year as the case may be, in
the format provided in the Uniform Accounting Procedure. The tax data shall be submitted to both
Parties within 90 days of the end of each year.

6.6.1 In making any returns pursuant to this Clause 6.6, the Operator shall not omit or delete
any item of the Budget without the prior written approval of the Operating Committee.

6.6.2 The Uniform Accounting Procedure may be amended from time to time as may be
mutually agreed, in writing, by the Parties.

6.7 Internal Audits

The Operator shall establish an effective internal audit system in respect of the Joint Operations in
accordance with good management practice in the oil industry. Non-Operators shall have access to all
internal audit reports and replies thereto in respect of the Joint Operations.

6.8 Audits of Joint Account

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The Non-Operator may carry out or cause to be carried out, for its account at all reasonable times during
office hours, periodic audits of the books of account and all records relating to the Joint Operations.

6.8.1 Any discrepancy in the accounts may be queried within thirty six (36) months from
the date of receipt of the accounts by the Non-Operators. This time limitation does not
apply in the case of fraud.

6.8.2 Notwithstanding that the said period of thirty six (36) months may have expired, if
evidence exists that the Operator has been guilty of Wilful Misconduct, the Non-
Operators shall have the right to conduct further audit to the extent required to
investigate such conduct in respect of any earlier periods.

6.9 Form of Audited Accounts

The Operator’s account relating to Joint Operations, as audited by the Operator’s statutory auditors with
respect to a calendar year shall be submitted in the form set out in annexes II and III of Schedule "B" to
the Operating Committee not later than three (3) months after the end of such Calendar year.

ARTICLE 7

PAYMENT TO GOVERNMENT

7.1 Rates, Taxes and Charges

The Operator shall pay, and charge the Joint Account in proportion to each Party’s Participating Interest
for, all rates, rentals, taxes [except royalties and Petroleum Profits Tax ("PPT")] penalties on gas flared
and bank commissions levied by the Central Bank of Nigeria on any aforesaid payments, fees and
charges which may be levied or assessed by, or due and payable to the Government, or any state or local
government, or other sub-division of the Federal Republic of Nigeria (the "Payments") on or with
respect to the respective Participating Interests of the Parties in the Joint Operations provided that such
Payments shall not be made on NNPC’s behalf where the provisions of the Nigerian National Petroleum
Corporation Act 1977, excludes NNPC from liability for certain payments.

7.2 Royalty and PPT Payments

Subject to the provisions of Schedules B and D, each Party shall pay to the Government all Government
royalty and PPT which becomes due and payable with respect to its Participating Interest share of
Petroleum produced or lifted from the Contract Area and each Party shall hold the other Parties
harmless from any liability therefor.

ARTICLE 8

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SOLE RISK OPERATIONS

8.1 Definitions:

8.1 For the purpose of this Article 8:

8.1.1. "Common Costs" - means overhead expenses in respect of operating and maintenance
charges and depreciation on common user assets which are shared by Sole Risk
Operations and Joint Operations.

8.1.2. "Exploratory Well" - means:

a) a well drilled in the Contract Area in an area lying outside the interpreted
closure of any structural or stratigraphic trap on which closure a well has
been drilled which is capable of producing Petroleum, or

b) a well in the Contract Area in any area lying inside the interpreted closure of
any structural or stratigraphic trap, to the extent to which it is deepened or
plugged back to a stratigraphic level different from that to which it had
previously been drilled and found capable of producing Petroleum; or

c) any well that has been agreed by the Parties to be an Exploratory well.

8.1.3. "Non-Sole Risk Party/ies" - means the Parties not participating in a Sole Risk
Operation;

8.1.4. "Production Facilities" - means drilling and/or production platforms and/or

petroleum storage and transportation facilities required to produce and deliver any
Petroleum that may be discovered from an Exploratory Well;

8.1.5. "Proposing Party/ies" - means the Parties giving notice of its intention to conduct a
"Sole Risk Operation" as hereinafter defined;

8.1.6. "Sole Risk Exploratory Well" - means an Exploratory Well drilled by a Sole Risk
Party/ies pursuant to this Article 8.

8.1.7. "Sole Risk Notice" - means a notice given pursuant to Clause 8.4 of a Party’s intention
to conduct a Sole Risk Operation;

8.1.8. "Sole Risk Operation" - means an operation conducted for one or more of the Parties
in accordance with the provisions of this Article 8.

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8.1.9. "Sole Risk Party or Parties" - means the Party or Parties who undertakes to conduct a
Sole Risk Operation pursuant to this Article 8.

8.2 Sole Risk Operations

Subject to Clause 8.3, Sole Risk Operations shall only include and be undertaken in respect of any one
or more of the following activities:

(a) the deepening, side tracking or plugging back of an Exploratory Well;

(b) the drilling of an Exploratory Well including testing and coring programmes;

(c) the drilling of appraisal and development wells and the installation of Production Facilities to
develop a discovery made by a Sole Risk Exploratory Well, provided the purpose of such
Facilities is not otherwise to increase or accelerate production of Petroleum from geological
structures in the Contract Area other than the geological structure on which such Sole Risk
Exploratory Well was drilled; and

(d) any other activity or project agreed by the Parties to be undertaken as a Sole Risk Operation.

8.3. Conditions For Sole Risk Operations

(a) No Sole Risk Operation may be conducted if it would adversely affect Joint Operations or
conflict with all or any part of any current Programme.

(b) No Sole Risk Operation shall be undertaken until:

(i) The Operations comprising the Sole Risk Operation shall first have been proposed in
writing to the Operating Committee in complete form. The aforesaid proposal to be in
complete form shall specify as Joint Operations appropriate details of the operations
such as location of proposed well, scope of geological and geophysical programmes,
proposed depth, itemised estimate of the costs thereof, economic analysis, expected
date of commencement and the expected date of completion;

(ii) The Operating Committee shall have disapproved or be deemed to have disapproved
the proposal, in accordance with the procedures set forth in Article 3.

(c) A Sole Risk Operation for the deepening or sidetracking of an Exploratory Well in course of
drilling may be proposed only if such well has not encountered a discovery and the Parties
have decided to abandon the well following their receipt of all drilling and test results.

8.4 Sole Risk Notice

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Within 12 months after the Operating Committee disagrees with a proposal for Joint Operations or, in
the case of Clause 8.3 (c), within 48 hours after notice from Operator recommending abandonment of
an Exploratory Well, any Party may give to the other Parties a Sole Risk Notice, in writing. The Non-
Proposing Parties shall have one hundred and eighty (180) days, after the receipt of the Sole Risk
Notice, within which to notify the Party giving the Sole Risk Notice whether or not the Non-Proposing
Parties elect to participate in the costs of such Sole Risk Operation, ("Participation Notice"); provided,
however, that in the case of a Sole Risk activity pursuant to Clause 8.3 (c) the period in which to give
Participation Notice shall be forty-eight (48) hours.

8.5 Sole Risk Operation as Joint Operations

If any of the Non-Proposing Parties elect to participate in the proposal which is the subject of a Sole
Risk Notice within the applicable period specified in Clause 8.4, such Sole Risk Operation shall be
carried out by the Operator as Joint Operation and the current Programme shall be deemed to be
amended accordingly.

8.6 Sole Risk Operation

In the event one or more of the Non-Proposing Parties does not elect, within the applicable period
specified in Clause 8.4 to participate in a proposed Sole Risk Operation, the Proposing Party/ies shall be
entitled to carry out the Sole Risk Operation at its/their sole risk, cost and expenditure. Costs and
expenses of the Sole Risk Operation incurred by the Sole Risk Parties shall be computed in accordance
with the principles set out in the Uniform Accounting Procedure, Schedule B.

8.7 Operator of Sole Risk Operation

Notwithstanding that the Operator may not be the Sole Risk Party, the Sole Risk Operation shall,
subject to Subclause 8.7.3 and Clause 8.8, be carried out promptly and diligently by the Operator for the
sole account and benefit of the Sole Risk Party/ies.

8.7.1 Any Sole Risk Operation shall be carried out at the sole risk, cost and expense of, and
under the overall supervision and control, of the Sole Risk Party/ies but otherwise
pursuant to this Agreement.

8.7.2 The Operator shall keep and maintain separate books, records, and accounts
(including bank accounts) with respect to the Sole Risk Operations, including Sole
Risk share of all Common Costs in connection therewith, which shall be subject to the
right of examination and audit by the Sole Risk Party/ies.

8.7.3 The Sole Risk Party/ies shall be obligated to advance the estimated expenditure for the
Sole Risk Operation to the Operator within fifteen (15) days after receipt of the
Operator’s request therefor. The Operator shall not use, or be required to use, Joint

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Account funds or its own funds for the purpose of paying the costs and expenses of
the Sole Risk Operation.

8.8 Commencement of Sole Risk Operation

It is hereby understood and agreed that the Sole Risk Party/ies shall do all things necessary to enable the
Operator on its behalf to commence the Sole Risk Operation within one hundred and eighty (180) days
after expiry of the period specified in Clause 8.4 for giving a Participation Notice in the case of a Sole
Risk Operation under Subclauses 8.2 (a), (b), (c) or (e); or within three hundred and sixty-five (365)
days after expiry of the period specified in Clause 8.4 for giving a Participation Notice in case of
projects under sub-Clause 8.2 (d); or within 48 hours after expiry of the period specified in Clause 8.4
for giving a Participation Notice in case of projects under Subclause 8.3(c). If the Sole Risk Operation
specified in the Sole Risk Notice is not commenced within the period specified in this Clause 8.8 for
reasons attributable to the Proposing Party/ies, then the right of the Proposing Party/ies to carry out the
Sole Risk Operation shall lapse.

8.9 Information Concerning Sole Risk Operation

The Operator shall, in relation to the Sole Risk Operation, furnish to the Parties all information and data
which the Operator is obligated to give the Non-Operators under the terms of this Agreement.

8.10 Election to Participate in Further Work

A Non-Participating Party may at any time, elect to participate in a Sole Risk Operation by paying to
the Sole Risk Party, an amount equal to its Participating Interest share of the cumulative cost and
expenditure of the Sole Risk Operation, incurred as of the date of such election plus 200% thereof ("Re-
entry Penalty"). The whole or any part of the Re-entry Penalty shall be paid in cash in the currency .in
which the Sole Risk costs have been incurred or in kind or both as may be mutually agreed by the
Parties. Following an election and payment as aforesaid, such operations shall be carried out as Joint
Operations.

8.11 Use of Joint Property and Personnel of Operator for Sole Risk Operation

A Sole Risk Party/ies shall be entitled to use Joint Property and personnel of the Operator for Sole Risk
Operations upon terms and conditions agreed by the Parties. Provided however that it is understood that,
at all times, the Joint Operations shall take precedence over the Sole Risk Operation in such use of Joint
Property and Personnel.

8.12 Indemnification of the Non-Participating Party

The Sole Risk Party/ies shall indemnify and hold harmless the Non-Participating Party/ies from all
suits, claims, liens, liabilities, damages, costs, losses and expenses whatsoever directly or indirectly

SPDC-91-0001 37
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caused to Third Parties or incurred by the Non-Participating Party/ies as a result of anything done or
omitted to be done in the course of carrying out the Sole Risk Operation.

8.13 Title to the Sole Risk Operation, Production and Facilities

8.13.1 Subject to Clause 8.10, all property acquired through a Sole Risk Operation, including
data and information, shall be wholly owned by the Sole Risk Party/ies.

8.13.2 In case of a Sole Risk Operation under Clause 8.2 (d) the relevant facilities as well as
any Petroleum produced therefrom, shall be owned by the Sole Risk Party/ies until
such time as the Non-Sole Risk Party/ies has elected to participate in further work
under the Sole Risk Operation pursuant to Clause 8.10.

8.13.3 Notwithstanding the election of a Non-Sole Risk Party/ies to participate in a Sole Risk
Operation involving production of Petroleum discovered as the result of a Sole Risk
Exploratory Well, and the payment by the Non-Sole Risk Party/ies of the amount of
money referred to in Clause 8.10, the Non-Sole Risk Party/ies shall not be entitled to
receive any payment in kind or cash or credit for any Petroleum which was produced
as a result of a discovery from such Exploratory Well prior to the date of such election
and payment. Upon such election and payment however the Non-Sole Risk Party/ies
shall be entitled to its Participating Interest Share of Petroleum produced as a result of
a discovery from such Exploratory Well following such election and payment.

ARTICLE 9

REPORTS AND DEALING WITH THE GOVERNMENT

9.1 Representation of Parties Before Government

9.1 The Operator shall represent the Parties before the Government, or any state government, local
government, or any subdivision thereof, with respect to all matters arising under or relating to the Joint
Operations subject to the requirement that the concurrence of Non-Operators be first had and obtained
with respect to representations on any matters which may materially affect the Non-Operators.

9.2 Reports and Applications

9.2 The Operator for and on behalf of the Parties, shall prepare, file and otherwise handle with the
appropriate Government or its agencies all reports, applications and returns (other than returns relating
to the taxes based on income or profits or to sales tax, but including returns which may be required with
respect to physical equivalent and personal property for tax and other purposes) which may be required
by the Concessions and the Regulations; in particular, the Petroleum (Drilling and Production)
Regulations 1969, as amended.

SPDC-91-0001 38
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9.3 Copies of Reports

9.3 The Operator shall promptly furnish the Non-Operators with copies of reports filed with the
Government pursuant to this Article 9. Nothing set forth in Clauses 9.1 and 9.2 shall prevent Non-
Operators from representing itself/themselves before any of the aforementioned governmental bodies on
matters which are appropriate and necessary. However, the Operator shall be advised of such
representations promptly except for any confidential communications between NNPC and
Governmental bodies.

9.4 Assistance of Non-Operator

9.4 The Non-Operators shall give the Operator whatever assistance may be required to obtain any necessary
governmental approvals and permits necessary to give effect to the terms of this Agreement.

ARTICLE 10

TRAINING AND ASSIGNMENT OF NNPC STAFF

10. Training and Assignment

The Operator shall provide facilities for the training of NNPC personnel in the Joint Operations in
accordance with a training programme and conditions approved by the Parties.

10.1 Such personnel may be trained in Nigeria and/or overseas as may be necessary.

10.2 The Operator shall accept any reasonable proposal for the assignment to Operator of the personnel of
NNPC. Such assignment shall be for such specified duration, duties, terms and conditions as agreed to
by the parties.

ARTICLE 11

RELATION OF THE PARTIES

The rights, duties, obligations and liabilities of the Parties shall be several and not joint or collective; and nothing
herein contained shall ever be construed as creating a partnership of any kind, any association, or a trust, or as
imposing upon any or all Parties any partnership duty, obligation, or liability.

ARTICLE 12

INFORMATION OBTAINED FROM OPERATIONS

With respect to the Contract Area, the Operator shall keep in a safe place in Nigeria all original records acquired
or made in connection with the Joint Operations. All said records and any and all other information without

SPDC-91-0001 39
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limitation, derived from the Joint Operations shall be made available for inspection and copying by the duly
authorised representatives of the Parties. All the information, reports, maps logs, records and other data referred
to in this Article 12 shall be proprietary to the Parties and, as such, shall be held in strict confidence by them and
not divulged in any way without the written consent of all Parties.

12.1 Non-Application of Article 12

12.1 The provisions of this Article 12 shall not apply to disclosure by a Party to its Affiliates, and
information or data required by the Regulations to be furnished to the Government or any other
government of the Federation or their respective agency or agencies.

12.2 Confidentiality

Each Party shall treat all data and information acquired through Joint Operations as confidential and
shall take such precautions as are necessary to prevent disclosure thereof to other parties except;

(i) to the extent any such data and information is required to be furnished in any legal proceedings
under this Agreement or is to be furnished because of any applicable valid legal requirement;

(ii) to the extent any such data and information is disclosed to a third party for the purpose of
negotiating an assignment of interest hereunder, provided such third party executes an
undertaking to keep this information confidential;

(iii) to the extent any such data and information becomes part of public knowledge without
disclosure by either of the Parties;

(iv) as may, in the opinion of legal counsel for a Party or for any Affiliate, be required by law or for
the reasonable protection of such Party or Affiliate or the Directors of such Party or Affiliate;
such disclosure shall be notified to the other Parties before it is made, if possible, and in any
case afterwards.

Subject to appropriate confidentiality agreements executed prior to disclosure all data and information
may be disclosed, to professional consultants and persons and contractors engaged by the Operator, to
the extent required for carrying out Joint Operation.

12.3 Confidentiality After Withdrawal or Assignment

In the event that any Party ceases to hold a Participation Interest such Party shall nevertheless continue
to hold all such data and information confidential.

ARTICLE 13

DISPOSAL OF CRUDE OIL

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13.1 Rights of Parties

Subject to the provisions of Article 6, each Party shall have the right to nominate, lift, and separately
dispose of, its Participating Interest share of Available Production of Petroleum in accordance with the
provisions of, and the procedures set forth in, Schedule D.

13.2 Passing of Title

Title shall pass as soon as Crude Oil passes the flange connecting the Operator's pipeline or other
delivery facilities to the loading vessel’s intake-pipe during delivery operations.

ARTICLE 14

ARBITRATION

14. Arbitration

The Parties agree that if any difference or dispute arises between them concerning the interpretation or
performance of this Agreement and if they fail to settle such difference or dispute upon exercise of due
diligence, then the Party or Parties may serve on the other or others a demand for arbitration. Within
thirty (30) days of such demand being served, each Party involved in the difference or dispute shall
appoint an arbitrator and the arbitrators thus appointed shall within further fifteen (15) days appoint an
impartial arbitrator who shall be of a nationality different from that of the Parties involved in the
difference or dispute or the arbitrators (the nationality of a company being deemed that of the country
under the laws of which, or under the laws of a state of which, it and/or its owner companies are
incorporated) and if the arbitrators do not agree on the appointment of such impartial arbitrator, or if
any Party fails to appoint the arbitrator to be appointed by it, such arbitrator shall be appointed by the
President or Vice-President of the International Court of Justice on the application of any Party involved
in the difference or dispute (notice of the intention to apply having been duly given in writing by the
applicant Party to the other Party or Parties) and, when appointed, the impartial arbitrator shall convene
meetings of the arbitration panel, act as Chairman thereof and decide the difference or dispute should
the arbitrators fail to reach a unanimous decision. When an arbitrator refuses or neglects to act, or is
incapable of acting or dies, a new arbitrator shall be appointed in his place and the above provisions of
appointing arbitrators shall, mutatis mutandis, govern the appointment of any such new arbitrator or
arbitrators. The arbitration rules and procedures shall be binding upon the Parties. The award shall be
delivered within two months after the appointment of the impartial arbitrator or within such extended
period as may be agreed upon by the Parties. The expenses of the arbitration shall be borne by the non-
prevailing Party or Parties. Save as aforesaid, the Arbitration Laws of the Federal Republic of Nigeria
shall apply. The venue of the arbitration shall be Lagos, Nigeria.

ARTICLE 15

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GOVERNING LAW AND INITERPRETATION

15.1 Regulations and Provisions of Concessions

15.1 The Joint Operations shall be governed by the Regulations and the provisions of the Concessions.

15.2 Governing Law

15.2 This Agreement shall be governed by and construed in accordance with the Laws of the Federal
Republic of Nigeria.

15.3 Non-Waiver of Enforcement of Agreement

15.3 The failure of any Party to this Agreement, in any one or more instances, to insist upon performance of
any provisions of this Agreement, or to exercise any of its rights and privileges hereunder, shall not be
construed as a waiver of future enforcement of that provision, right or privilege.

15.4 Change of Regulations

In the event that the Regulations are changed subsequent to the Date of Execution (by amendment, new
enactment, or otherwise) so that the economic or other benefits afforded any Party by virtue of this
Agreement are substantially reduced or impaired, the Parties agree to negotiate such amendments to this
Agreement as are necessary to restore such benefits.

ARTICLE 16

"FORCE MAJEURE"

The obligations of any of the Parties hereunder shall be suspended (other than the obligation to make payments
hereunder) to the extent attributable to Force Majeure.

16.1 Meaning of "Force Majeure"

16.1 In this Article 16 "Force Majeure" means any cause beyond the reasonable control of any of the Parties
including but without limitation to the following: acts of God, blowouts, strikes, lockouts, labour
disputes, acts of the Public Enemy, wars (declared or undeclared), blockades, insurrections, riots, civil
disturbances, epidemics, quarantine restrictions, landslides, lightning, earthquakes, fire, storm, floods,
washouts, explosions, acts or orders of Governments.

16.2 Obligation to Remedy

16.2 Any of the Parties prevented from, or delayed in, complying with its obligations, in whole or in part by
Force Majeure shall endeavour to remedy the cause with all reasonable dispatch; provided, however,

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that the settlement of strikes or lockouts shall, subject to the other terms of this Agreement, be entirely
within the discretion of the Party having the difficulty.

16.3 Notification of Other Parties

16.3 The Party whose ability to perform its obligations is so affected shall promptly notify the other Parties,
and at any rate, not later than twenty-four (24) hours after the start of Force Majeure, stating the cause,
and all Parties shall do all that is reasonably within their powers to remove or assist in, or facilitate, the
removal of such cause or causes.

ARTICLE 17

NOTICE

Unless as otherwise provided herein, any notices and other communications required to be given hereunder shall
be in writing and considered as properly delivered if given to an officer or other representative of a party at the
address set out below or such other address as may be notified, from time to time, to the other Parties.

NNPC

NIGERIAN NATIONAL PETROLEUM CORP.,

NO 7 KOFO ABAYOMI STREET,
VICTORIA ISLAND,
LAGOS,
NIGERIA.

SHELL

THE SHELL PETROLEUM DEVELOPMENT COMPANY OF NIGERIA LIMITED,

FREEMAN HOUSE,
21/22 MARINA,
LAGOS.

AGIP

NIGERIAN AGIP OIL COMPANY LTD.,

9/11 MACARTHY STREET,
P.O.BOX 1268,
LAGOS - NIGERIA.

SPDC-91-0001 43
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ELF

ELF (NIGERIA) LIMITED,

NO. 35, KOFO ABAYOMI STREET,
VICTORIA ISLAND,
LAGOS.

ARTICLE 18

EFFECTIVE DATE AND DURATION OF AGREEMENT

The Effective Date of this Agreement shall be 11.7.91 and, thereafter, it shall continue for so long as any of the
Concessions remain in force and until all Joint Property has been disposed of and final settlement has been made
between the Parties in accordance with their respective Participating Interests.

ARTICLE 19

ASSIGNMENT AND TRANSFER

19.1 Rights to Assign or Transfer

Subject to Clauses 19.2 and 19.3, each Party shall have the right at any time to transfer, in whole or in
part, its Participating Interest including its rights, title, interest, benefits, duties and obligations under
this Agreement, provided however that:

19.1.1 No party may assign or transfer its Participating Interests or any part thereof without the prior
written consent and approval of the other Parties, which consent and approval shall not be
unreasonably withheld;

19.1.2 any assignee or transferee shall be of technical and financial standing sufficient to perform the
duties, obligations and liabilities hereunder to the extent of the interests assigned and any
assignment or transfer shall be in writing and be subject to the terms and provisions of this
Agreement and the assignee or transferee shall in writing to the other Parties assume and agree
to perform or pay, the assignor’s or transferor’s duties, obligations and liabilities hereunder to
the extent of the interests assigned or transferred, and such assignee or transferee shall
automatically become a Party hereto;

19.1.3 subject to the other provisions of this Article 19, the terms, covenants and conditions of this
Agreement shall be binding upon, and shall inure to the benefit of the Parties hereto and their
respective successors and assigns; and said terms, covenants and conditions in so far as they
touch and concern the Concessions, shall be covenants running with the land;

SPDC-91-0001 44
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19.1.4 the assigning or transferring Party shall have fully performed all of its duties and obligations
under this Agreement up to the effective date of the assignment or transfer;

19.1.5 no assignment or transfer may be made that would result in any non-uniformity of Participating
Interests throughout the entire Contract Area.

19.2 Transfer of Interests

19.2 Either Party may, at any time upon notice to the other Parties transfer all or part of its Participating
Interest to an Affiliate of such Party, subject to any necessary Governmental consents.

19.3 Assignment of Operatorship to Operator’s Affiliate

19.3 The Operator may assign its general powers and responsibilities of supervision and management as
Operator pursuant to this Agreement to an Affiliate of the Operator, subject to the prior written consent
of the Non-Operators, first had and obtained which consent shall not be unreasonably withheld. In such
a case, the Operator shall remain liable for all its obligations as Operator.

19.4 Parties’ Preferential Right and Option

19.4 Subject to Clause 19.1 and 19.2, if any Party has received an offer from a third party which it desires to
accept, for the assignment or transfer of its Participating Interest hereunder (the "Transferring Party"), it
shall give the other Party/ies prior right and option in writing to purchase such Participating Interest as
provided in Subclauses 19.4.1 to 19.4.2.

19.4.1 The Transferring Party shall first give notice to the other Parties specifying therein the name
and address of the aforesaid third party and the terms and conditions (including monetary and
other consideration) of the proposed assignment and transfer.

19.4.2 Upon receipt of the notice referred to in Subclause 19.4.1, the other Parties may within thirty
(30) days thereafter, request in writing the assignment and transfer of such Participating
Interest to it, in which event the assignment or transfer shall be made to it on the same or
equivalent terms in the same proportion as their Participating Interests.

19.4.3 Where the other Parties do not request the assignment or transfer of such Participating Interests
as requested in Subclause 19.4.2 above, the Transferring Party may, within a period of one year
thereafter assign or transfer it to the said third party provided that an instrument evidencing
such transfer must be executed by the parties thereto and submitted to the non-Transferring
Parties.

19.5 Effective Date of Transfer

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19.5 No transfer pursuant to Clause 19.2, 19.3 or 19.4 shall be effective or binding upon the Parties until the
first day of the calendar month next following the date upon which the Party transferring to an Affiliate
or a third party furnishes the Parties with:

19.5.1 an executed or photostat copy of an instrument evidencing such transfer, together with any
necessary consent of the requisite Government authorities; and

19.5.2 a written instrument between the Parties and the assignee (in form and content satisfactory to
the Parties) duly executed by the assignee accepting and assuming all of the obligations under
this Agreement in so far as the Participating Interest transferred are concerned.

19.6 Retention of Liability by Transferring Party

19.6 A Party transferring all or part of its Participating Interest to an Affiliate shall, unless the other Parties
otherwise agrees, remain liable to the other Parties for all obligations attaching to the Participating
Interest assigned pursuant to this Article 19 and such obligations shall in addition become the
obligations of the assignee. This requirement may be waived by the Operating Committee if such
Affiliate is of same or better financial standing and competence as the original participating Party and
the assignee has given an unconditional undertaking to assume all obligations of the Party under this
Agreement.

19.7 Pre-Assignment Obligation

19.7 A Party assigning all or part of its Participating Interests to any third party (not being an Affiliate of the
assigning Party), shall remain liable to the other Parties for all obligations attaching to the Participating
Interest assigned pursuant to this Article 19 incurred prior to the effective date of such assignment and
such obligations shall in addition become the obligations of the assignee.

19.8 Obtaining of Government Consents

19.8 The Parties shall promptly join in such reasonable actions as may be necessary or desirable to obtain
any government consent in connection with, and shall execute and deliver any and all documents
reasonably necessary to effect, any such transfer.

19.9 Costs and Expenses

All costs and expenses pertaining to any such assignment shall be the responsibility of the Party
transferring the Participating Interest.

19.10 Encumbrances

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A Party shall in no way whatsoever directly or indirectly encumber or permit or cause to be encumbered
its Participating Interest or its interest in the Joint Property without the express written consent of the
other Parties first had and obtained, which consent shall not be unreasonably withheld.

ARTICLE 20

APPLICATION OF AGREEMENT

The respective Participating Interest of the Parties shall remain uniform throughout the entire Contract Area and
this Agreement shall apply, as one contract, to the Contract Area as a whole and to the Parties.

ARTICLE 21

ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof
and supersedes all prior arrangements, proposals, negotiations and understanding with respect thereto not
expressly set forth herein.

ARTICLE 22

AMENDMENTS

This Agreement shall not be amended, changed, modified, abrogated or superseded except by an agreement in
writing signed by the Parties.

SIGNED AND DELIVERED for and on behalf of

NIGERIAN NATIONAL PETROLEUM CORPORATION

By:..............................................................................................

Name: PROF. JIBRIL AMINU

Designation: Honourable Minister of Petroleum Resources and Chairman, NNPC Board of

Directors

In the presence of:

Name:................................................................

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Signature:..........................................................

Designation:.......................................................

Address:.............................................................

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

SIGNED AND DELIVERED

for and on behalf of THE SHELL PETROLEUM DEVELOPMENT COMPANY OF NIGERIA LIMITED

By: MR. P. B. WATTS.

In the presence of:

Name:....................................................................

Signature:...............................................................

Designation:...........................................................

Address:.................................................................

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

SIGNED AND DELIVERED

for on behalf of NIGERIAN AGIP OIL COMPANY LTD.

By: MR. A. BELOTTI

In the presence of:

Name:....................................................................

Signature:...............................................................

Designation:...........................................................

Address:.................................................................

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

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SIGNED AND DELIVERED

for on behalf of ELF (NIGERIA) LIMITED

By: DR. N. COMTET.

In the presence of:

Name:....................................................................

Signature:...............................................................

Designation:...........................................................

Address:.................................................................

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

SCHEDULE "A"

DESCRIPTION OF THE CONCESSIONS AND THE CONTRACT AREA

This Schedule "A" is attached to and forms part of the Joint Operating Agreement made between Nigerian
National Petroleum Corporation, SHELL, AGIP and ELF, dated 11th day of July 1991.

OIL MINING LEASES

Land Oil Mining Leases Registration Particulars

Nos Page Volume Registry

OML 1 6 6 539 Ibadan
10 10 10 1190 Lagos

OML 4 9 9 539 Ibadan

5 5 1190 Lagos

OML 5 10 10 539 Ibadan

8 8 1190 Lagos

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OML 7 12 12 539 Ibadan

65 65 84 Kaduna
16 16 228 Enugu
15 15 1190 Lagos

OML 11 20 20 228 Enugu

13 13 1190 Lagos

OML 12 21 21 228 Enugu

12 12 1190 Lagos

OML 13 22 22 228 Enugu

11 11 1190 Lagos

OML 14 23 23 228 Enugu

14 14 1190 Lagos

Delta Oil Mining Leases Registration Particulars

Nos Page Volume Registry

OML 15 46 46 228 Enugu

OML 16 47 47 228 Enugu

OML 17 48 48 228 Enugu

OML 18 49 49 228 Enugu

OML 19 50 50 228 Enugu

OML 20 18 18 5 Benin City

51 51 228 Enugu

OML 21 52 52 228 Enugu

OML 22 53 53 228 Enugu

OML 23 54 54 228 Enugu

OML 24 55 55 228 Enugu

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OML 25 56 56 228 Enugu

OML 26 12 12 5 Benin City

OML 27 57 57 228 Enugu

11 11 5 Benin City

OML 28 20 20 5 Benin City

58 58 228 Enugu

OML 29 59 59 228 Enugu

OML 30 8 8 5 Benin City

OML 31 5 5 5 Benin City

60 60 228 Enugu

OML 32 17 17 5 Benin City

61 61 228 Enugu

OML 33 62 62 228 Enugu

OML 34 9 9 5 Benin City

OML 35 19 19 5 Benin City

63 63 228 Enugu

OML 36 7 7 5 Benin City

64 64 228 Enugu

OML 37 65 65 229 Enugu

OML 38 4 4 5 Benin City

OML 39 3 3 5 Benin City

66 66 228 Enugu

OML 40 2 2 5 Benin City

4 4 658 Ibadan

OML 41 6 6 5 Benin City

OML 42 14 14 5 Benin City

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OML 43 15 15 5 Benin City

OML 44 13 13 5 Benin City

OML 45 10 10 5 Benin City

OML 46 67 67 228 Enugu

Offshore Oil Mining Leases Registration Particulars

Nos Page Volume Registry

OML 71 10 10 74 Port Harcourt

OML 72 11 11 74 Port Harcourt

OML 73 12 12 74 Port Harcourt

OML 74 14 14 74 Port Harcourt

OML 76 15 15 74 Port Harcourt

OML 77 17 17 74 Port Harcourt

OML 79 5 5 500 Benin City

OML 81 6 6 500 Benin City

SCHEDULE "B"

UNIFORM ACCOUNTING PROCEDURE

This is Schedule "B" attached to and forming a part of the Joint Operation Agreement made between Nigerian
National Petroleum Corporation, The Shell Petroleum Development Company of Nigeria Limited, Nigerian
Agip Oil Company Ltd., and ELF (Nigeria) Limited dated the 11th day of July 1991 ("the Agreement").

SECTION 1

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DEFINITIONS AND PURPOSE

1.1 Words and phrases defined in Article 1.1 of this Agreement when used herein shall have
the meaning assigned to them therein.

1.2 The purpose of this Uniform Accounting Procedure is to establish equitable methods and
rules for determining and reporting charges and credits applicable to Joint Operations
under this Agreement, to the end that the Operator shall, subject to the provisions of this
Agreement, neither gain nor lose by reason of the fact that it acts as Operator.

SECTION 2

CHARGEABLE COSTS AND EXPENDITURES

The Operator shall charge the Joint Account for all costs and expenses made in connection with the conduct of
Joint Operations. Such costs shall include, but not be limited to:

2.1 Concession Payments

All direct costs necessary to acquire and to maintain rights to the Concessions or to acquire and to
maintain such permits as are required for the Joint Operations.

2.2 Labour and Related Costs

Salaries and wages, including bonuses, of employees of the Operator who are directly engaged in the
conduct of Joint Operations, whether temporarily or permanently assigned, irrespective of the location
of such employees. The costs of salaries and wages referred to herein shall include, without limitation,
the costs of employee benefits, customary allowances and personal expenses incurred under the
Operator's practice and policy, and amounts imposed by applicable Governmental authorities, which are
applicable to such employees. These costs and expenses shall include:

2.2.1 Cost of established plans for employee group life insurance, hospitalization, pension,
retirement, savings and other benefits plan;

2.2.2 Cost of holidays, vacations, sickness and disability benefits;

2.2.3 Cost of living, housing and other customary allowances;

2.2.4 Reasonable personal expenses which are reimbursable under the Operator’s standard personnel
policies;

2.2.5 Obligations imposed by Government authorities;

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2.2.6 Cost of transportation of employees, other than as provided in paragraph 2.3 below, as required
in the conduct of Joint Operations.

2.2.7 Charges in respect of employees temporarily engaged in Joint Operations shall be calculated to
reflect the actual costs thereto during the period or periods of such engagement.

2.3 Employee Relocation and Related Costs

For the purposes of this paragraph 2.3, the following words shall have the following respective
meanings, namely:

"Relocation Costs" means, with respect to employees of Operator, relocation costs, Transportation
Costs and transfer expenses, in conformity with the Operator’s established and customary practices,
including transportation of such employees’ families and their persona and household effects.

"Transportation Costs", for the above purpose, shall include the cost of freight and passenger service,
meals, hotels and other expenditures related to the transfer.

2.3.1 Relocation Costs, Transportation Costs and transfer expenses, within Nigeria, for personnel
engaged in Joint Operations.

2.3.2 Relocation Costs and Transportation Costs with respect to expatriate employees, including:

(i) Relocation Costs and transportation Costs for Operator’s employees and their families
transferring to the Joint Operations;

(ii) Relocation Costs and other related expenses incurred in the final repatriation or
transfer of the Operator’s expatriate employees and families in the case of such
employees’ retirement or separation from the company, or in the case of such
employees’ relocation to Operator’s Head Office.

PROVIDED HOWEVER, that:

(i) Relocation Costs incurred in moving an expatriate employee and his family beyond
his point of origin, established at the time of his transfer to Nigeria, will not be
charged to the Joint Account; and

(ii) no charge shall be made to the Joint Account with respect to expenses incurred in the
final repatriation or transfer of the Operator's expatriate employees and families to
other areas outside of the Contract Area.

2.3.3 Relocation Costs and Transportation Costs with respect to Nigerian employees on training
assignments outside the Contract Area.

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2.3.4 Charges in respect of employees temporarily engaged in Joint Operations shall be calculated to
reflect the actual costs thereto during the period or periods of such engagement.

2.4 Services provided by Third Parties

The cost of professional, technical, consultation, utilities and other services procured from third party
sources pursuant to any contract or other arrangement between such third parties and the Operator for
the purposes of the Joint Operations.

2.5 Services provided by Operator’s Affiliates, Non-Operator or Non-Operators' Affiliates

The cost of professional, administrative, scientific and technical services provided or performed by the
Non-Operator, or by any Affiliate of the Operator or Non-Operator for the direct benefit of Joint
Operations, including, but not limited to, services provided by the Producing, Exploration, Legal,
Financial, Purchasing, Insurance, Accounting and Computer Services Departments of Non-Operator or
such Affiliates.

2.5.1 Costs and charges hereinabove referred to shall include, without limitation, the costs and
charges for specific projects or studies carried out for the Joint Account by Non-Operators or
Non-Operators' Affiliates.

2.5.2 Charges for providing the above services shall reflect the actual cost only of providing such
services and shall not include any element of profit.

2.5.3 The charge out rate shall include all costs and expenses incidental to the employment of the
personnel utilised for the aforesaid services.

2.5.4 The charges for services rendered for purchasing and/or for coordinating forwarding and
expediting shall be chargeable to the extent that the same have not been fully reimbursed under
the provisions of Clause 3.1.3 hereof.

2.6 Damage And Loss To Joint Property.

Subject to the provisions of paragraph 2.6.2 hereunder, all costs or expenses incurred for the repair or
replacement of Joint Property resulting from damages or losses by fire, flood, storm, theft, accident or
any other cause shall be for the Joint Account.

2.6.1 The Operator shall furnish the Non-Operators with written notice of any occurrence of damage
or loss incurred which is estimated to exceed $50,000.00 as soon as practicable after the
occurrence of the event giving rise to the said damage or loss.

SPDC-91-0001 55
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2.6.2 Where the loss or damage referred to in this paragraph 2.6 is insured pursuant to clause 5.2 of
this Agreement, any recoveries or deductibles under the relevant insurance policies shall be for
the Joint Account. Recoveries or deductibles relating to insurance obtained by an individual
Party pursuant to Clause 5.1 shall be for the sole account of that Party.

2.7 Legal Expenses

All costs or expenses of handling, investigating, asserting defending and settling litigation or claims
arising out of or relating to Joint Operations or necessary to protect or recover the Assets, including, but
not limited to legal fees, court costs, arbitration costs, cost of investigation or procuring evidence and
amounts paid in settlement or satisfaction of any such litigation, arbitration or claims in accordance with
the provisions of this Agreement.

2.8 Duties and Taxes

All duties and taxes, fees and government assessment of every kind and nature except as excluded by
Clause 7.1 of this Agreement.

2.9 Costs of Offices, Camps and Miscellaneous Facilities in Nigeria

Net cost of establishing, maintaining and operating offices, camps, warehouses, housing and other
facilities serving the Joint Operations. If such facilities serve other operations in addition to the Joint
Operations, the net cost thereof shall be allocated to the properties and facilities served on such
equitable basis as may be approved by the Operating Committee pursuant to Clause 2.12 of this
Agreement.

2.10 Operator’s Affiliates Service Fees

The charge for Operator's Affiliate Service Fees (hereinafter "Head Office Overhead Charge") in the
amount specified in Subclause 6.1.1 of this Agreement.

2.10.1 The Head Office Overhead Charge shall cover professional, administrative and technical
services which include, but are not limited to, production, exploration, treasury, payroll,
communications, personnel, executive administrative management, central engineering and
process engineering services provided by the Operator’s Affiliates' Head Office or any of its
Affiliates to the extent not chargeable under paragraph 2.5 of this Schedule "B".

2.10.2 In respect of Operator’s Head Office Overhead Charge, Operator shall charge monthly to the
Joint Operations an amount based on one-twelfth (1/12) of the estimated annual Head Office
Overhead Charge. Adjustments of the Head Office Overhead Charge, based on actual
expenditures, will be made at the end of each calendar year.

SPDC-91-0001 56
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2.10.3 For the purpose of calculating the Head Office Overhead Charges pursuant to paragraph 2.10.2
hereof, costs, charges and expenditures relating to royalties, Concession rentals, taxes, fees and
charges paid to any government or taxing authority, shall be excluded.

2.11 Cost of Materials

The costs of materials purchased or furnished by the Operator for use in Joint Operations as provided
under Section 3 of this Accounting Procedure.

2.12 Cost of Operator’s Equipment and Facilities

The costs of equipment and Facilities owned and furnished by the Operator or any of its Affiliates shall
be charged to the Joint Account at rates commensurate with the cost of ownership and operation.

2.12.1 The rates charged pursuant to this paragraph 2.12 shall not exceed those currently prevailing
for the supply of like equipment and facilities on comparable terms in the area where the Joint
Operations are being conducted.

2.12.2 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, charges
for which shall be subject to a separate agreement.

2.13 Other Expenditures and costs

Any other expenditures and costs, not covered or dealt with in the foregoing provisions of this Section
2, which are reasonably incurred by the Operator in accordance with the provisions of this Agreement.

SECTION 3

MATERIALS ADMINISTRATION

Costs, expenses, credits and other charges in respect of materials and supplies, equipment, machines, tools and
any other goods of a similar nature acquired, used, consumed or disposed for the purposes of, or in the course of
the conduct of, the Joint Operations shall be for the Joint Account as set forth in this Section 3.

3.1 Materials Acquisition

Materials purchased by the Operator shall be at Net Cost. "Net Cost" shall include, but shall not be
limited to, the invoice price less trade and cash discounts actually received, purchase and procurement
fees, freight and forwarding charges between point of supply and point of shipment, freight to port of
destination, insurance, customs duties, consular fees, excise and other applicable taxes, other items

SPDC-91-0001 57
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chargeable against imported materials and, where applicable, handling and transportation expenses from
point of importation to warehouse or operating site.

3.1.1 Except as otherwise provided in paragraphs 3.1.4 and 3.1.5 below, materials for use in the Joint
Operations shall be purchased by the Operator in arm’s length transactions in the open market.

3.1.2 The Operator shall be under no obligation to purchase new, used or surplus materials from the
Non-Operators unless such materials are of the specification required and have a competitive
price.

3.1.3 Where an Affiliate of the Operator has arranged the purchase, coordinated the forwarding and
expediting effort, a fee equal to four percent (4%) of the FOB value of the materials will be
added to the cost of the materials purchased

3.1.4 Whenever any material is not readily obtainable at published or listed prices because of
national emergencies, strikes or other unusual causes over which the Operator has no control,
the Operator may charge Joint Operations for the required material at the actual cost incurred
by Operator in providing such material, and in moving it to the Contract Area.

3.1.5 Operator may purchase or otherwise acquire materials from an affiliate on the same terms as
set forth in this paragraph 3.1.

3.2 Materials Disposal

Operator shall have the right to dispose of surplus materials as provided in Clause 2.10 of this
Agreement.

3.2.1 Disposals of surplus material requiring Operating Committee approval under Clause 2.10 of
this Agreement shall be effected in accordance with a disposal and tendering procedure
established for such disposals by the Operator.

3.2.2 Any disposal and tendering procedure established by the Operator for the purposes of
subparagraph 3.2.1 shall:

(a) provide for disposal in arms length transactions in the open market; and

(b) include, for the Parties, a preferential right to purchase same at a competitive price.

3.2.3 Proceeds from each sale or other disposal of material hereunder shall be credited to the Joint
Account.

3.3 Inventories

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At reasonable intervals, inventories shall be taken by the Operator of all Joint Property. The Operator
shall give thirty (30) days written notice of its intent to take inventory to permit the Non-Operators to be
represented at the taking of such inventory. Failure of the Non-Operators to be represented after due
notice shall bind the Non-Operators to accept the inventory taken by the Operator as correct.

3.3.1 Reconciliation of the physical inventory with the account of the Joint Operations shall be made
by the Operator and a list of Overages and shortages with relevant explanation where
appropriate shall be furnished to the Non-Operators, if requested. Appropriate inventory and
accounting adjustments shall thereupon be made to the accounts of the Joint Operations.

3.3.2 Whenever there is a sale or change of interest in the Joint Property, a special inventory of such
Joint Property may be carried out by the Operator, provided the purchaser of such interest
agrees to bear all of the expenses thereof. In such cases, both the seller and the purchaser shall
be entitled to be represented at such inventory and shall be bound by the inventory whether or
not such representation is provided.

SECTION 4

ANNEXES

The annexes listed below form a part of the Uniform Accounting procedure, namely:

Annex 1. — Uniform Accounting Policies;

Annex 2. - Uniform Accounting Reporting Manual; and

Annex 3. - Uniform Budget Reporting Manual.

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SCHEDULE "C"

UNIFORM PROJECT IMPLEMENTATION PROCEDURE

PREAMBLE

This Schedule "C" is attached to and forms a part of the Joint Operating Agreement made between Nigerian
National Petroleum Corporation, The Shell Petroleum Development Company of Nigeria Limited, Nigerian
Agip Oil Company Ltd., and ELF (Nigeria) Limited the 11th day of July 1991.
Words and expressions defined in Article 1 of this Agreement, when used herein, shall have the meanings
assigned to them therein.

SECTION 1: APPLICATION

1.1 This Schedule sets out the procedure for initiating projects, tendering for and
implementing contracts and procuring materials and equipment for the Joint Operations
subject to sections 1.2 and 1.3 of this Schedule "C".

1.2 The procedure shall be applicable to all contracts and purchase orders whose values exceed the
respective limits set forth in subclause 2.2.8 of this Agreement and which, pursuant thereto, require the
prior concurrence of the Operating Committee.

1.3 The procedures set herein may be amended from time to time by the Operating Committee.

SECTION 2: PROCEDURE FOR INITIATING PROJECTS

2.1 The Operator realising the need for a project or contract to which this procedure applies pursuant to
section 1 hereinabove, shall introduce it as part of the proposed work programmes and budget to be
developed and submitted by the Operator, under Clause 2.3 of this Agreement, to the Chairman of the
Operating Committee.

2.1.1 The Operator shall provide adequate information with respect to the project including, without
limitation, the following:

a) A clear definition of the necessity and objectives of the project;

b) Scope of the project; and

c) Cost Estimate thereof.

2.1.2 The chairman of the Operating Committee shall forward or transmit the project proposal along
with all related documentation prepared and provided by the Operator pursuant to sub-section
2.1.1 hereof to the Technical Sub-Committee established pursuant to Clause 3.7 of this

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Agreement. The Technical Sub-Committee shall consider the proposal at its next meeting and,
if acceptable, shall recommend it to the Operating Committee for approval.

2.1.3 The Operating Committee may, prior to confirming its approval, make recommendations to the
Operator regarding the selection, scope and timing of the project. Such recommendations shall
constitute an instruction to the Operator who shall, where applicable, modify its previous
submittal as may be required by the said instruction of the Operating Committee.

2.1.4 The project as approved pursuant to sub-sections 2.1.2 and 2.1.3 shall form part of the Work
Programme and Budget of the Joint Operations. Such approval shall also constitute
authorisations by the Operating Committee to the Operator to initiate contracts and purchases
relevant to the project proposal.

2.1.5 Projects design and supervision/management shall first be drawn from available Operator’s in-
house expertise or that of the Operator’s Affiliated Companies as approved by the Operating
Committee under approved budget.

2.1.6 After approval of the project/Budget, the Operator shall:

(i) promptly provide the Non-operators with copies of all approved AFE’s;

(ii) prepare a detailed project implementation schedule including, without limitation,

detailed engineering design, material/equipment procurement, inspection,
transportation, fabrication, construction, installation, testing and commissioning; and

(iii) shall present same to Non-Operators including, without limitation, the following:

a) Project Definition;

b) Project Specification;

c) Flow Diagrams;

d) Projects Schedule;

e) Major Equipment specifications; and

f) Cost estimate of the project.

(iii) prepare an activity status report as directed by the Operating Committee.

SECTION 3: CONTRACT TENDER PROCEDURE

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3.1 The following tender procedure shall apply to work not directly undertaken by the Operator or by the
Operator’s Affiliate.

3.1.1 The Operator shall maintain a list of approved companies for the purposes of contracts for the
Joint Operations, (the "Approved Contractors’ List"). The Non-Operators shall have the right
to propose companies to be included in the list. Operator shall be responsible for prequalifying
any Contractor to be included in the Approved Contractors’ List.

3.1.2 Contractors included in the Approved Contractors’ List shall be both local and/or overseas
companies or entities. They shall also be registered with the Department of Petroleum
Resources of the Ministry of Petroleum Resources.

3.1.3 When a contract is to be bid, Operator shall present a list of proposed bidders to the Non-
Operators for concurrence not less than fifteen (15) working days before the issuance of
invitations to bid to prospective contractors. Non-Operators may propose additional names to
be included in the list of proposed bidders or the deletion of any one thereof. Contract
specifications shall be in English and in a recognised format used in the international
petroleum industry.

3.1.4 If Non-Operators have not responded within fifteen (15) working days following after the
presentation of the list of proposed bidders as aforesaid, the Operator’s list shall be deemed to
have been approved.

3.2 The Operator shall establish a Bid Committee who shall be responsible for prequalifying bidders,
sending out bid invitations, receiving and evaluating bids and determining successful bidders to whom
contracts shall be awarded.

3.3 Analyses and recommendations of bids received and opened by the Bid Committee shall be sent by
Operator to the Non-Operators for concurrence before a contract is executed with the selected
contractor. Non-Operators shall respond within fifteen (15) working days. Approval shall be deemed to
have been given if Non-Operators have not responded within the said period.

3.4 Prospective vendors/Contractors for work estimated in excess of $500,000.00 or =N=5,000,000.00 shall
submit the commercial summary of their Bids to NNPC not earlier than 15 minutes before the closure of
Bid as specified in the letter of invitation to Bid, if requested by NNPC.

3.5 In all cases in which an offshore company or its Nigerian Affiliate is invited to bid, the Operator shall
make full disclosure to the Non-Operators of its relationship, if any, with the company or companies.

3.6 The foregoing procedures may be waived in emergency cases. In such cases the Operator may negotiate
directly with contractors. In respect of work requiring specialised skills, upon the approval of NNPC,
the Operator may negotiate directly with the Contractor and promptly inform the Non-Operators of the
outcome of such negotiation.

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SECTION 4: GENERAL CONDITIONS OF CONTRACTS

Except as otherwise approved by the Parties, the following general guidelines and conditions of contract shall
apply.

4.1 Payment Terms

4.1.1 A minimum of 10% of contract price shall be held as a retention payment until after the end of
a guarantee period agreed with the contractor which shall vary between six months and twelve
months, depending on the project, with the exception of drilling and seismic data acquisition,
well surveys and other such services. A contractor may be given the option to provide other
guarantee equivalent to the 10% retention such as Letter of Credit or Performance Bond.

4.1.2 Provision shall be made for appropriate withholding tax, as may be applicable.

4.2 Language of Contract

The language of the contract shall be English.

4.3 Laws, Regulations and Permits

4.3.1 The governing law of all agreements shall be Nigerian Law.

4.3.2 The Regulations shall apply to contractors performing in Nigeria and, as far as practicable,
they shall use indigenous human and material resources.

4.3.3 All contracts shall include a provision whereby the Contractor shall hold the Operator harmless
and indemnify the Operator from and against all liabilities, losses, damages and claims
resulting from claims and suits by third parties.

4.4 Termination

Each contract shall also provide for early termination upon notice and Operator shall use all reasonable
endeavours to obtain a termination provision with minimal penalty.

4.5 Local Subsidiary

Contracts shall provide, in the case of a foreign contractor, that the local part of the work, where
practicable, shall be performed by contractor's local subsidiary.

SECTION 5: MATERIALS & EQUIPMENT PROCUREMENT PROCEDURE

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5.1 Operator may, through own in-house or Parent Company procure materials & equipment subject to
conditions set forth hereinbelow.

5.2 The provisions of this Section 5 shall not apply to lump sum or turnkey contracts/projects.

5.3 In ordering the equipment/materials, Operator shall obtain from vendors/manufacturers such
rebates/discounts and such warranties/guarantees that such vendors/manufacturers normally offer, and
all rebates, discounts, guarantees and all other grants and responsibilities shall be for the benefit of the
Joint Operations.

5.4 Operator shall:

5.4.1 by means of established policies and procedures ensure that its procurement efforts provide the
best total value, with proper consideration of quality, service, price, delivery and operating
costs to the benefit of the Joint Operations;

5.4.2 maintain appropriate records, which shall be kept up to date, clearly documenting procurement
activities.

5.4.3 provide a quarterly listing of excess materials in its stock list to Non-Operators and circulate
same to all other Joint Venture Operators; and

5.4.4 check the listings from other operators, pursuant to sub-section 5.4.3 above, prior to initiating
any foreign purchase order.

5.5 Operator shall initiate and maintain policies and practices which create a competitive
environment/climate amongst local and/or overseas suppliers. Competitive quotation processes shall be
employed for all local procurements where the estimated value exceeds the equivalent of $150,000.00.

5.5.1 Fabrication, whenever practicable, shall be done locally provided standards are not
jeopardised. To this effect, the Joint Operations recognise and shall accommodate local offers
at a reasonable premium.

5.5.2 Subject to Subclause 3.1.1, the Operator shall give preference to Nigerian Indigenous
Companies in the award of sub-contracts provided the companies possess the requisite skill for
the execution of such contracts.

Contracts within the agreed financial limit of the Operator shall be awarded to only competent
Nigerian indigenous contractors. Where there are no Nigerian indigenous contractors
possessing the required skill/capability for the execution of such contracts, the Operator shall
notify NNPC accordingly.

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5.6 Analyses and recommendations of competitive quotations received pursuant to section 5.5 shall be
presented to the Non-Operators for approval before a purchase order is issued to the selected
vendor/manufacturer.

5.6.1 Approval shall be deemed to have been given if a response has not been received within fifteen
(15) working days of receiving the analyses and recommendation presented pursuant to above
section 5.6.

SECTION 6: PROJECT MONITORING

6.1 Operator shall furnish, monthly, a project report to the Non-Operators.

6.1.1 For major contracts exceeding $1,000,000.00, or equivalent, Operator shall, in addition, furnish
to Non-Operators a detailed quarterly report which shall include:

a) Approved budget total for each project;

b) Expenditure on each project;

c) Variances and explanation;

d) Number and value of construction change orders;

e) Bar chart of schedule showing work in progress and work already completed and
schedule of milestones, and significant events; and

f) Summary of progress during the reporting period, summary of existing problems, if

any, and proposed remedial action; and anticipated problems; and percentage of
completion.

6.1.2 In the case of an increase in excess of 10% on the project, Operator shall promptly notify and
obtain the consent of the Non-Operators.

6.1.3 Not later than three (3) months following the physical completion of any major projects over
$1,000,000.00, or equivalent, the Operator shall prepare and deliver to the Non-Operators a
project completion report which shall include the following:

i) Cost performance of the project in accordance with the work breakdown at the
commencement of the project;

ii) Significant variations in any item or sub-items; and

iii) Summary of problems and unexpected events encountered during the project.

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SCHEDULE "D"

UNIFORM NOMINATION, SHIP SCHEDULING AND LIFTING PROCEDURE

PREAMBLE

This Schedule "D" is attached to and forms part of the Joint Operating Agreement made between Nigerian
National Petroleum Corporation, The Shell Petroleum Development Company of Nigeria Limited, Nigerian
Agip Oil Company, and ELF (Nigeria) Limited dated the 11th day of July 1991,
(the "Agreement").

WHEREAS:

1. The Participation Agreement made between NNPC and Shell dated the 22nd Day of August, 1984
provided for the nomination and lifting of Petroleum from the Contract Area.

2. Pursuant to Article 6 of the Participation Agreement, the Parties have the right, to nominate, lift and
separately dispose of their Participating Interest share of Available Production.

3. Heads of Agreement Governing Offtake/Scheduling and Lifting were agreed also between NNPC and
Shell on 22nd August, 1984.

4. Subsequent amendment of nomenclature, timing and scheduling require that Parties agree on the terms
for nomination, scheduling and lifting.

5. Agip and Elf each purchased a 5% Participating Interest in the Joint Venture in July, 1989.

6. This Schedule "D" represents the Parties understandings of the rights and obligations of the Parties and
the Operator on Production, Nomination, Scheduling and Lifting of Crude Oil from the Concession.

7. Parties are desirous that this Schedule "D" shall supersede and terminate the afore-mentioned Heads of
Agreement.

8. Parties are also desirous that this Schedule "D" shall supersede any provision in the Participation
Agreement on Nomination, Scheduling and Lifting.

SECTION 1

DEFINITION AND TERMINOLOGY

Words and expressions defined in this Agreement, when used herein, shall have the meaning assigned to them
therein. In addition, the following words shall have the following meanings.

a. EQUITY SHARE - means the Participating Interest share of each Party.

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b. INTEREST OWNER - means the following Parties.

Nigerian National Petroleum Corporation (NNPC)

SHELL
NAOC
ELF

c. AVAILABLE PRODUCTION - means the quantity of Petroleum which can be efficiently and
economically produced and saved from the producing wells subject to any production allowable and or
limitations imposed by government authority or other technical limitations resulting from Operations.

d. COMMERCIAL PRODUCTION QUOTA - means the quantity of Petroleum from time to time fixed or
advised by National Petroleum Investments Management Services (NAPIMS) on behalf of the
Honourable Minister of Petroleum Resources as the permissible quantity that may be produced from the
Contract Area on a crude stream basis for a particular month/quarter.

e. TECHNICAL ALLOWABLE PRODUCTION - means the quantity of Petroleum from time to time
determined by the Department of Petroleum Resources as being the quantity that may be produced from
the Contract Area on a well by well basis for a particular period.

f. ACTUAL PRODUCTION - means the quantity of Petroleum which is produced from the Contract Area
on a monthly/quarterly basis.

g. AVAILABLE MONTHLY SCHEDULING QUANTITY - means each Party’s Participating Interest

share of the COMMERCIAL PRODUCTION QUOTA for the calendar month plus credit/debits
accruing after reconciliation with actual production as provided for in clause 3.5, plus normal
Operational Carry-Forward between the months within a calendar quarter, plus carry-forward as per
clause 5.4.

h. OPERATIONAL CARRY-FORWARD - means the quantity of crude oil that each Party may carry
forward to the succeeding month, recognising the difficulty in lifting precisely the Available Monthly
Scheduling Quantity. This quantity should not be such as to cause a production shut-in through reaching
maximum stock levels where of course the provisions of Section 6 will apply.

i. WORKING STOCK - means the level of stock on top of the unpumpable stock level per crude stream
which Operator requires to operate the terminals efficiently. In the case of the
NNPC/SHELL/ELF/AGIP Joint Venture the working stock level shall be limited to 300,000 barrels per
crude stream. The stock shall be jointly owned by the Parties in the proportion of their Equity share and
shall not form part of any of the Parties share of Actual Production.

j. COMBINED LIFTING SCHEDULE - means the lifting programmes of all the Parties for a given
calendar month as prepared by the Operator and agreed to by the Parties.

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k. PRIMARY NOMINATION - means a written statement issued by each Party to the Operator at least
twenty-five (25) days prior to the commencement of each calendar month of its production nominations
based on its Participating Interest share of the COMMERCIAL PRODUCTION QUOTA Crude Oil by
grade, which it desires to take during the particular calendar month plus credit/debits accruing after
reconciliation with actual production as provided for in clause 3.5, plus normal Operational Carry-
Forward between the months within a calendar quarter, plus carry-forward as per clause 5.4

l. NOTICE OIL AND EMERGENCY OIL - shall be treated as provided for in the Memorandum of
Understanding between the Government of Nigeria and Shell Petroleum Development Company of
Nigeria Limited dated 11.7.91 ("MOU").

SECTION 2

INTEREST IN AND DISPOSITION OF PETROLEUM

There shall be undivided interests in the rights granted by the applicable Oil Mining Leases with respect to
Petroleum produced in the area of the Concession. Each Interest Owner will share therein to the extent of its
Equity Share.

SECTION 3

PRODUCTION/NOTICE OF AVAILABILITY

3.1 The Operator shall endeavour to produce the aggregate volume of oil nominated for lifting by the
Interest Owners.

3.2 In the event that Crude Oil is segregated into two or more grades the provisions of this Schedule "D"
shall apply separately to each such grade. To the extent that distribution on such a basis is
impracticable, a separate arrangement for sharing of such Crude Oil shall be agreed upon by the Parties.

3.3 On or before September 30 of every year, Operator shall advise the Parties of its forecast of the
AVAILABLE PRODUCTION to be produced by grades during each month of the first six (6) months
of the next ensuing year.

3.4 On or before March 31 of every year, Operator shall advise the Parties of its forecast of the
AVAILABLE PRODUCTION to be produced by grades during each month of the six months
commencing July 1 of the year.

3.5 Where for operational reasons the Operator cannot exactly produce at the anticipated COMMERCIAL
PRODUCTION QUOTA, the Operator shall notify the Parties promptly of any required changes
exceeding 2% of the quantities originally notified. In any event, when actual production for the
month/quarter is known each Party’s participating interest share will be recalculated and the differences

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with Commercial Production Quota will be credited/debited to each Party, and shall form the Parties
entitlement for the following month or quarter except in the case of production shut-ins where the
provisions of Section 6 will apply.

3.6 Not later than twenty-five (25) days before the beginning of each month, each Party shall notify the
Operator and the other Party of its PRIMARY NOMINATION of Crude Oil which it intends to lift
during the ensuing month which shall not exceed the Party’s monthly Participating Interest share of the
COMMERCIAL PRODUCTION QUOTA plus credit/debits accruing after reconciliation with actual
production as provided for in clause 3.5, plus normal Operational Carry-Forward between the months
within a calendar quarter, plus carry-forward as per clause 5.4.

3.7 At the end of each month/quarter, Parties will meet to reconcile Available Monthly Scheduling
Quantities with a view to making adjustments where necessary as per 1(k) above. All entitlements shall
be audited at the end of each calendar year by a mutually acceptable independent auditor.

3.8 If during any calendar quarter a Party has nominated a total quantity of Crude Oil which was less than
its Participating Interest share of the COMMERCIAL PRODUCTION QUOTA, and which has not
been produced (other than as provided for in Clause 6.4 and 6.5) a Make-Up Right shall accrue to the
Party to nominate the amount of such shortfall in the future(hereinafter in this Schedule "D" called a
"Make-Up Right"); provided that the quantity subject of any such Make-Up Right may be nominated
and produced during a future calendar quarter and provided that it does not jeopardise the interest of the
other Party(ies).

3.9 Make-Up Rights shall not be exercised to the detriment of the other Parties rights. Each Make-Up
Right, if not exercised, shall expire at the end of the quarter five years after the quarter in which the
Make-Up Right accrued to the Party and such Party would be entitled to a refund of the Operating
Costs.

3.10 In respect only of Make-Up Rights accruing any Party entitled thereto shall on request at anytime
thereafter or, failing such request, upon expiry of such right under Clause 3.8, be entitled to a refund
equal to that proportion of the relevant Operating Cost originally paid by that party for the calendar
quarter in which the Make-Up Right accrued which the shortfall to which the Make-Up right relates
bears to the Party’s Participating Interest share of the Commercial Production Quota in such calendar
quarter. Such refund shall be borne by the Parties other than the Party entitled to the Make-Up Right in
proportion to their respective nominations in the quarter in which the Make-Up Right accrued. The
refund shall be paid (together with Interest at the Bank Rate from the end of the quarter of accrual)
within 45 days. For the avoidance of doubt a Make-Up Right shall automatically expire in the event that
a Party requests a refund of relevant Operating Costs related thereto in advance of the five year period
referred to in Clause 3.9.

3.11 If during a calendar quarter a party makes liftings part of which is from the working stock, the party
shall replace such volume to the working stock not later than the 2nd month of the following quarter.

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3.12 Operator shall keep complete records of all liftings and advise the Parties in accordance with Section 3
of this Schedule "D".

SECTION 4

OPERATOR’S REPORTS

4.1 The Operator shall, not more than fifteen (15) working days after the end of each calendar month, and
quarter, prepare and furnish to the Parties, a written statement showing in respect of the month and
quarter respectively:

a) Each Party’s Participating Interest share of COMMERCIAL PRODUCTION QUOTA;

b) Lifting against each Parties PRIMARY NOMINATION, Exercise of Make-Up Rights, Cash
Call Portions, Overdue Portions, NOTICE OIL AND EMERGENCY OIL;

c) Lifting against ACTUAL PRODUCTION and Total Nomination;

d) Each Party’s share of Actual Production;

e) Quantity of Crude Oil in Stock for each interest owner at the end of the said Calendar month or
quarter; and

f) Any production losses attributable either to the Joint Account and or individual participating
Interest Owners.

4.2 In the event Non-Operators disagree with any of the Operator's reports, the areas of disagreement shall
be mutually resolved by the Operator and the Non-Operators. The Operator shall thereafter prepare a
revised report to reflect the changes agreed.

4.3 Operator must also endeavour to send regularly statistical data to the different reporting bodies and
should adhere to agreed formats of reporting.

SECTION 5

SHIP NOMINATION AND LIFTING PROCEDURES

5.1 The parties shall indicate or cause to be indicated in writing or by telex, offtake programmes in respect
of liftings of crude oil to meet the nominations to be accepted by the Operator. This will enable the
Operator in its role as Shipping Co-ordinator for and on behalf of all offtakers of crude oil from its
terminals, to construct a shipping programme which takes into account offtakers requirements, in
respect of volumes and date ranges, and the need for even-flow production. This information is to be

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received by the Operator not later than the 9th, 19th and penultimate days of the month preceding the
month of loading.

5.1.1 The offtake programme will comprise:-

(a) the vessel(s) named or to be named (TBN) and estimated time/date of arrival (ETA);

(b) the vessel(s) capacity, provided that the dimensions and capacity shall always be
within the limits specified by Operator from time to time;

(c) the quantity and grade of crude oil to be loaded; and

(d) the offtake point.

5.1.2 Such offtake programmes are to cover respectively the first 10 days, the second ten days and
the remaining period of the month of loading. At the same time as the parties submit their
offtake programmes for each month of loading they will also indicate, en bloc, the total amount
of crude oil which will constitute the offtake programme for the remaining unnominated period
of the month of loading.

5.1.3 On the 10th, 20th and 30th day of the month preceding lifting, the Operator shall advise the
parties of the acceptance of the offtake programme or any alteration to the programme which is
required. Any necessary alterations shall be agreed between the parties and the resulting
offtake programme shall be deemed to be the Firm Offtake Programme and shall not be further
amended without the agreement of both the parties and the Operator. By the 2nd working day
of the month Operator shall forward the combined lifting programme for the month to NNPC.

5.1.4 An acceptance date for a nominated vessel in the Firm Offtake Programme implies acceptance
of a "date range" commencing 0001 hours on the first day of the date range and terminating at
2359 hours on the day following the first day of the date range in the Firm Offtake Programme.
If the Operator qualifies the Acceptance date with the phrase "earliest date" this qualification
will imply acceptance of a date range commencing 0001 hours on the Acceptance date and
terminating 2359 hours on the next day following. Therefore in all cases the Operator will offer
acceptance of a date range covering a period of 2 days which will hereafter be referred to as an
"Agreed Date Range".

5.1.5 Nominations quoted as "TBN" shall be replaced by firm vessel nominations with the same
Agreed Date Range at least 4 working days before the commencement of the Agreed Date
Range with the provisions of 5.1.6 below applying.

5.1.6 Provided the Operator is given not less than 3 working days notice before an Acceptance date
or earliest Acceptance date, the party may substitute another vessel of similar size within the

SPDC-91-0001 72
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Agreed Date Range if the lifting of such substitute vessel of similar size is within the tolerance
of plus or minus 5 percent.

5.2 OVERLAPPING DATE RANGES - In the event the Combined Lifting Schedule contains overlapping
Arrival Date Ranges, the tanker which gives its Notice of Readiness (NOR) and has provided all
documentation and obtained clearances first within such accepted arrival date ranges shall be loaded
first unless urgent operational requirements dictate otherwise in which case demurrage shall be borne by
the Joint Venture.

5.3 OPERATIONAL DELAYS - The Parties recognize that occasionally environmental and technical
problems in the Contract Area may cause delays and/or disruptions in the COMBINED LIFTING
SCHEDULE. The Operator shall promptly notify the Parties of such delays and/or disruptions, and the
projected termination of each of such delays and/or disruptions. Each Party shall thereupon be advised
of the revised COMBINED LIFTING SCHEDULE. In the event such notification does not allow for a
revised combined lifting schedule on the part of non-operators, then any resultant costs would be For
the Joint Account.

5.4 ESTIMATED DELAYED ARRIVAL OF A TANKER - Whenever it becomes apparent that a tanker
will not be available as scheduled or will be delayed, the Party utilizing such tanker shall notify the
other Parties of the circumstances and expected duration of the delay. Upon assessing the impact that
the delay will have upon the Combined Lifting schedule and Production during the current and/or next
month, the Operator shall make appropriate revision(s) to the COMBINED LIFTING SCHEDULE to
avoid disruption in production In the event that any Party fails to lift its Nominated Share of Production
in any quarter due to circumstances beyond the Party’s Control or difficulties in maintaining the lifting
schedule, that Party shall have the right during the following quarter to lift the unlifted quantities
(hereinafter called "Operational Carry Forward").

5.5 TANKER STANDARDS — All Tankers nominated for lifting by any Party pursuant to this Schedule
"D", shall conform to the Regulations and standards concerning size, equipment, safety, maintenance
and the like adopted by the Operator for the port in question and by the appropriate government
authority. Failure of a tanker to meet such standards shall not excuse the nominating Party from the
applicable consequences provided in the Operating Agreement. The Operator shall keep the Parties
advised as to the current Regulations and standards in use at the Port.

5.6 CASH CALL CRUDE — The COMBINED LIFTING SCHEDULE shall be subject to adjustment to
effect the provisions of Clause 6.4 of this Agreement.

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SECTION 6

PRODUCTION DECREASES/INCREASE SUBSEQUENT TO NOMINATION

6.1 Production decreases occurring after lifting nominations have been scheduled and not resulting from the
fault of either Party shall be shared by the Parties in proportion to their respective Nominations.

6.2 Production increases occurring after lifting nominations have been confirmed by the Operator shall be
shared by the Parties, in proportion to their respective Participating Interest shares.

6.3 Any part of the COMMERCIAL PRODUCTION QUOTA which is not nominated by the Parties and is
not produced from the Contract Area during the relevant calendar month shall remain in the reservoir
for the benefit of all Parties.

6.4 Any production decrease caused by or resulting directly from the actions of one Party shall not affect
the availability or entitlement of the other Parties. Operator will, to the greatest extent possible,
endeavour not to affect the lifting of the other Parties.

6.5 To the extent that field operations permit, a Party shall have the right to adjust its nomination during a
month following confirmation of lifting schedules provided that the nominations, entitlement and lifting
of the other Parties are not affected thereby without their express written consent. Adjusted nomination
shall always be within the limits of the COMMERCIAL PRODUCTION QUOTA, plus credit/debits
accruing after reconciliation with actual production as provided for in clause 3.5, plus normal
Operational Carry-Forward between the months within a calendar quarter, plus carry-forward as per
clause 5.4.

6.6 For the avoidance of doubt each Parties Participating Interest Share shall be based on Actual Production
except where a difference between Actual Production and Commercial Production Quota is attributable
to a party in which case such party shall bear the full effect of such difference as stated in clause 6
herein.

SECTION 7

DELIVERY TERMS AND CONDITIONS

7.1 TANKER NOTIFICATION - Parties shall report, or cause the tankers nominated for lifting pursuant to
this Schedule "D" to report, by radio/telex to the Operator of each tanker’s scheduled arrival date and
hour as follows:

(a) Seven (7) days before estimated arrival, or upon clearing last port if there is less than seven (7)
days steaming time before estimated Arrival;

(b) Seventy-two (72) hours before estimated arrival;

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(c) Forty-Eight (48) hours before estimated arrival;

(d) Twenty-Four (24) hours before estimated arrival; and

(e) at any other times(s) between the seventy-two (72) hours notice, forty-eight (48) hours notice
and twenty-four (24) hours notice when estimated arrival is to be revised by more than twelve
(12) hours from that most recently notified or after that twenty-four (24) hours notice when
estimated arrival is to be revised by more than one half-hour.

Parties shall also cause each tanker so nominated, or their agent, to report by radio/telex to the Nigerian
Government Port Health Official at the Port at least seventy-two (72) hours before each tanker’s
scheduled arrival date giving the tanker's name, call sign, ETA at the Port(s), cargo tonnage to be
loaded, number of crew and health status, whether or not a doctor is on board and a request for "Free
Pratique".

7.2 NOTICE OF READINESS - Upon arrival at the designated safe anchorage at the Port or upon the time
of boarding of the Mooring Master, whichever is earlier, the Master of the tanker shall give the Operator
a NOTICE OF READINESS (NOR) by radio or by letter, as appropriate, confirming that the tanker is
ready to load cargo, berth or no berth. Laytime, as herein provided, shall Commence upon the
expiration of six (6) running-hours after receipt by the Loading Terminal of such notice, or upon the
tanker’s completion of mooring at the sea loading terminal, whichever first occurs. However, where
delay is caused to the tanker getting into berth after giving NOR for any reason over which neither
Operator nor the Loading Terminal has control, such delay shall not count as used laytime. In addition
time used by tanker while proceeding to berth or awaiting entry and Free Pratique by customs after the
expiration of six (6) running hours free time, shall not count as used laytime.

7.3 EARLY TANKER ARRIVAL - Notwithstanding the provisions of section 7.2 above, if the tanker
arrives and tenders NOR to load prior to its Agreed date range, the Operator shall endeavour to load
tanker on arrival or as soon thereafter as possible and laytime shall only commence when loading
commences. If, however, the Operator is unable to accept tanker for loading prior to the agreed Date
Range, laytime shall commence at 0600 hours, local time on the first day of the Agreed date range or
when loading commences, whichever occurs first.

7.4 LATE TANKER ARRIVAL - If tanker arrives and tenders NOR to load after its Agreed Date Range
and other tankers (having arrived during their Agreed date-range), are either loading or waiting to load
the loading of the tanker shall be governed by the earliest availability of crude and loading slot, and
laytime shall commence only when loading commences.

7.5 LAYTIME - Operator shall be allowed laytime in running hours equal to one half of the voyage laytime
permitted under Wordscale, or such other freight scale that is issued in replacement thereof, for loading
a full cargo and pro-rata thereof for a part cargo, with a minimum of eighteen (18) hours, Sundays and
holidays included. Any delay due to the fault of the tanker or its facilities to load cargo within the time

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allowed shall not count as used laytime. If rules of the Owner of the vessel or Regulations of
Government or appropriate Governmental Port Authority prohibit loading of the cargo at any time, the
time so lost shall not count as used laytime. Time consumed loading or discharging ballast or
discharging slops shall not count as used laytime. Laytime shall continue until hoses have been
disconnected.

Laytime allowed for loading a full cargo is "36 Running Hours" with a proviso for pro-rating the
laytime in the case of vessels loading part cargo. When a vessel is loading one parcel only and
operations commence ahead of the acceptance date there is no demurrage involved unless the vessel
completes cargo after the permissible laytime, commencing 0001 hours on the agreed acceptance date.
In cases where a vessel loads more than one parcel and more than one acceptance date is awarded, then
demurrage will not count unless the total loading is completed after the expiry of the permissible
laytime for the last parcel, counting from 0001 hours on the last acceptance date.

7.6 DEMURRAGE - If the Operator is unable to load within the time allowed, the Operator shall apply
demurrage per running hour (pro-rata for a part hereof) for laytime exceeding the allowed laytime as
specified herein. The rate of demurrage will be calculated by multiplying the time by the Average
Freight Rate Assessment (AFRA) as determined by the London Tanker Brokers’ Panel. In the event
such determination is no longer available, a freight rate assessment shall be mutually agreed by the
Parties; which rate shall be appropriate in relation to the size of the tanker and in force on the date the
tanker tenders NOR to load, and by the appropriate demurrage rate according to tanker size as specified
in the Worldwide Tanker Nominal Freight Scale or such other freight scale that is issued in replacement
thereof. If however, demurrage shall be incurred by reasons of fire, storm, explosion, or by strike,
picketing, lockout, stoppage or restraint or labour difficulties, or disturbances or by breakdown of
machinery or equipment in or about the Loading Terminal, the rate of demurrage as calculated in
accordance with the above shall be governed by Force Majeure and shall not attract any demurrage.
Demurrage claims are to be notified within 90 days from B/L date.

7.7 CHANGE OF BERTH - The Operator shall have the right to shift any vessel from one berth to another.
Charges of running lines on arrival at and leaving the berth, wharfage and dockage charges at that berth,
and any other extra port charges or port expenses incurred by reason of such shifting at the Operator’s
request shall be borne by the operator and shall count as used laytime. If however, it is necessary to shift
the vessel from the berth because of breakdown of tanker machinery or other deficiency of the vessel or
its crew, the resulting expenses shall be borne by the party whose Crude Oil is being lifted. The time
consumed in such circumstances, shall not count as used laytime. However, the vessel shall lose its
regular turn in berth. When the vessel is ready to recommence loading, it shall so advise the Operator
and await its turn for reberthing and such time after notice is given shall not count as used laytime.

7.8 TANKER DEPARTURE - Tanker shall vacate the berth as soon as loading is complete. The Party that
scheduled such tanker shall indemnify the Operator for any direct loss or damage incurred as a result of
tanker’s failure to vacate the berth promptly including such loss or damage as may be incurred due to
resulting delay in the docking of the tanker awaiting the next turn to load at such berth.

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7.9 LOADING HOSES - Hoses for loading shall be furnished by the Operator and shall be connected and
disconnected by the tanker’s crew under the supervision of a suitable qualified Ship’s Officer acting on
the advice of the Operator’s Mooring Master.

7.10 PARTIAL CARGO - Should Operator supply less than full cargo, for any reasons, the tanker shall not
be required to proceed to sea until all of her tanks are filled with a combination of cargo and ballast as
will place her in a seaworthy condition.

SECTION 8

CRUDE OIL QUALITY AND MEASUREMENT

8.1 CERTIFICATION - The quantity and origin of each shipment of Crude Oil shall be determined by the
Operator at the Loading Terminal and set forth in standard Certificates of Quantity, Quality and Origin.
Each Party shall have the right to designate a representative at its own expense, who shall have the right
to witness the determination of quantity, quality and origin. All reasonable facilities shall be supplied,
as necessary, to such Party’s representatives at the Port to enable such representatives to witness the
measurements taken at the loading Terminal and the taking of the samples to be used supplied to the
Representative of the Party.

8.2 ACCEPTANCE OF CERTIFICATE - If the Party in question does not appoint a representative, or if
such representative appointed as aforesaid agrees with the Certificate of Quantity, Quality and Origin of
a shipment of Crude Oil (in which event he shall so indicate by signing the Certificate of Quantity,
Quality and Origin), such determinations shall be final and binding on the Parties and the Operator.

8.3 REFUSAL OF CERTIFICATE - If the determinations of Quantity, Quality and Origin by the Operator
have not been approved by such a representative in accordance with section 8.2 above and a dispute
arises concerning the Quantity, Quality and Origin of Crude Oil, recourse shall be had to an
independent expert to resolve the dispute on the basis of his expertise. Claims about quantity and/or
quality of the crude oil delivered shall be notified within 45 days of the B/L date. The expert shall be
selected on the basis of his special knowledge of the subject matter in this regard and shall be appointed
by mutual agreement between the disputing Party and the Operator; provided, however, that the
documentation shall nevertheless be prepared in accordance with the Operator’s determinations. Such
expert shall file his conclusions within (30) days after his date of appointment. Any conclusions of such
expert shall be binding upon the Operator and the Parties. The cost incurred relative to the services of
such expert will be shared equally by the Operator and the disputing Party. Pending the determination of
the dispute, the tanker may sail, unless the Parties agree otherwise.

8.4 QUANTITY DETERMINATION - The quantity of Crude Oil lifted shall be determined at the time of
loading on the basis of gauging the terminal tanks before and after the lifting of such Crude Oil, or
otherwise by meter readings installed on the loading line from the tanks, if approved by appropriate
Governmental Authority. The quantity in Barrels of Crude Oil determined pursuant to the foregoing
procedure shall be corrected to a temperature of sixty degrees Fahrenheit (60F) in accordance with the

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most currently published ASTM-IP Petroleum Measurement Tables. A copy of the conversion
calculation, if any, shall be submitted to the Lifting Party through its representative. In addition, the
Basic Sediment and Water ("BS&W") content, determined in accordance with section 8.5 hereof, shall
be deducted from the quantity loaded, for purposes of preparing the Bill of Lading for such shipment.
Any substantiated loss of Crude Oil occurring in transit between the point of such determination and
delivery point shall be borne by the Joint Venture provided such losses do not result due to differences
in method of determining BS&W between the loading and discharge terminals. For differences
occurring where same method of determination at both points are used, provisions of 8.3 above shall
apply.

8.5 QUALITY DETERMINATION - The determination of API Gravity and BS&W content shall be made
of each shipment of Crude Oil. BS&W content and API Gravity shall be determined according to
standard international practices.

8.6 SAMPLES - A sample of each shipment of Crude Oil shall be taken. The sample shall be sealed and
retained by the Operator for a maximum of ninety (90) days. The lifting Party or its representative shall
have the right to receive one (1) gallon sealed sample of the Crude Oil loaded which shall be placed on
board the tanker, if so requested.

SECTION 9

TERMINATION OF HEADS OF AGREEMENT (HOA) GOVERNING OFFTAKE/SCHEDULING AND

LIFTING BETWEEN NNPC AND SHELL DATED 22ND AUGUST 1984.

9.1 This Schedule "D" shall supersede the Heads of Agreement (HOA) Governing Offtake/Scheduling and
Lifting between NNPC and Shell dated 22nd August 1984. The said HOA is hereby terminated.

9.2 This Schedule "D" shall also supersede any provision on Nomination, Scheduling and Lifting in the
Participation Agreement made between NNPC and Shell dated 22nd August 1984.

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