Accounting Procedure - Guidance Notes - Comparison of 2002 vs. 2004 Versions

NARRATION AND COMPARISON – 2000 vs.
2004
AIPN MODEL ACCOUNTING PROCEDURE
_________________________________
2004
© Association of International Petroleum Negotiators

Notes on Revisions to the AIPN MODEL INTERNATIONAL ACCOUNTING
PROCEDURE dated May 17, 2000
The following is an explanation, section by section, of changes made to the 2000 AIPN Model
Form International Accounting Procedure by the revision committee authorized by the AIPN
board at its September 2002 meeting. The full text of each revision is shown on the attached
redline copy of the model form. The committee was charged with updating the 2000 Accounting
Procedure to reflect changes made to the 2002 AIPN Model Form Joint Operating Agreement.
Consistent with the proposal approved by the AIPN board, the committee broadened that charge
to look at the entire Accounting Procedure to determine if any provisions needed to be updated
or revised for clarification.
The committee was co-chaired by Ben H. Welmaker Jr., Thompson & Knight and Kerry W.
Speers, ExxonMobil Exploration. Although the committee has a large membership, the
members who did the actual drafting were the two co-chairs and the following committee
members:
Robert M. Cummings (co-chair of the 2000 update committee and chair of the 1992 committee);
Danny J. Grace, ConocoPhillips;
Osiris Madera, Amerada Hess (co-chair 2000 update committee);
Roxana T. Serpa, graduate student at Rice University Jesse H. Jones Graduate School of
Management;
Robin A. Vann, ExxonMobil Production; and
Douglas Wilbourn, Unocal
Yi-Wei Wu, Total (via comments by email from Paris.
Input was received from outside the committee from various sources including Wayne Rodrigs,
Anadarko and Steven Graman, BP, both of whom attended committee meetings on occasion.
Suggestions were also received from participants at the 2003 Model Contract Workshop held in
Banff, Alberta, Canada in July where a presentation of the Accounting Procedure draft as of June
2003 was made.
During the update process many suggestions and revisions were considered and evaluated. The
committee tried to give adequate consideration to each suggestion but no attempt is made here to
list each suggestion reviewed.
General
Throughout the document all roman numerals have been changed to arabic to follow the
format in the Model JOA. The Disclaimer on the cover was revised to follow the
language utilized in the Model JOA. All duplicate word and numeric descriptions, e.g.,
ninety (90) days, were changed to numeric only, e.g., 90 days. All references to Articles
in the JOA, which had been underlined, are no longer underlined.
1.3 The reference to Article 1 of the Agreement was deleted because definitions are included
in both Article 1 and other provisions of the Model JOA.
Secondee - The definition of "Secondee" was removed and all references to "Secondee"
were changed to lower case initial caps. "Secondee" is only used as a defined term if
Article 4.3 ALTERNATIVE No. 3 of the Model JOA is selected. The Model JOA does
not otherwise capitalize "secondee".
Section – A definition of “Section” was added.
1.4.3 Clarification of “currency translation” was added to highlight the difference between it
and “currency conversion”.
A new Alternative 1 was added to allow for the use of the “Operator's normal practice".
Wording was also included in Alternative 1 requiring the Operator to furnish a statement
describing its normal practice upon request by a Non-Operator. Additionally, reference to
the publication where exchange rates are published was added to Alternatives 2, 3 and 4.
A new alternative 5 was added to allow for currency translation in accordance with the
Contract.
1.4.5 “Exclusive Operation Account” which is not a defined term was replaced with the
wording “separately maintained” to indicate that charges and credits for Exclusive
Operations will be distinguished from Joint Operations.
1.4.6 “Cash” and “Accrual” were capitalized as defined terms.
1.6.9 A reference to the currency exchange rate determined in accordance with Section 1.4.3
was inserted to ensure consistency of application.
1.6.13 Funding By Operator – There are many funding mechanisms, which might be utilized.
Two examples are shown in Appendix 1. They were placed in an appendix since funding
by the Operator is not universally used in the industry. Putting provisions of lesser
importance in an appendix may also make the form more user-friendly. These are only
two examples the Parties may use. They are not intended to be an exhaustive list of
possible funding mechanisms.
1.7 The words “this Agreement” were changed to “this Accounting Procedure” since the
intent is to refer to the Accounting Procedure rather than the entire Model JOA.
“Government Oil Company” was modified to “Government Oil & Gas Company” to
agree with the definition used in the Model JOA.
1.8.1 The committee felt that the reference to Article 4.2(B)(6) of the Model JOA was not
necessary. (The correct Article reference is actually Article 4.2(B)(7).) The word
"conducting" was changed to "participating" to recognize that some Non-Operators may
not provide personnel to assist with the audit but still share in the results of the audit or
audit report as well as the costs. A provision was added for pre-audit work to be
furnished to the Non-Operators to facilitate the audit.
1.8.2 Audits of Affiliates must take into consideration the fact that the Affiliate is not a party to
the Model JOA or the Accounting Procedure. In order to give proper recognition to that
fact and to conform the Affiliate audit provisions to current practices in the industry,
Section 1.8.2 was revised. All but the first sentence of that section was expanded into
four alternatives for audit of Affiliates and placed in Section 1.8.3. The Optional
Provision under Section 1.8.2 for Audit of Affiliate charges under Sections 2.6 and 2.7.1
was moved to Section 1.8.4.
1.8.3 A preface to this section was added to exclude charges under Section 2.5.1, if selected,
and Section 2.7.1. Those exclusions are addressed in Section 1.8.4. As indicated above,
Section 1.8.3 provides four alternatives for audit of Operator’s Affiliates.
Alternative 1 allows audit of Affilate charges using any of the following three options or
any combination thereof:
full audit; or
confirmation of confidential or proprietary information by an internationally

recognized independent public accounting firm; or
confirmation by an internationally recognized independent public accounting firm

that the allocation from the Affiliate was complete and accurate with no element
of profit or loss, excluded any duplication of costs covered under Sections 2 and 3
and was consistent in application to all of its activities.
Alternative 2 is limited to the third option under Alternative 1 above, i.e., confirmation by
an internationally recognized independent public accounting firm that the allocation from
the Affiliate was complete and accurate with no element of profit or loss, excludes any
duplication of costs covered under Sections 2 and 3 and was consistent in application to
all of its activities.
Alternative 3 provides for an independent public accounting firm designated by the

Affiliate to perform the audit of the Affiliate.
Alternative 4 allows a full audit just like the first option under Alternative 1 above, i.e.,
full audit access to the Affiliate by the Non-Operators.
All four alternatives have a requirement that no amounts paid to an Affiliate of the
Operator may be charged to the Joint Account unless the Non-Operators are allowed
audit access as provided in the alternative selected.
1.8.4 This section provides guidance to audit of Affiliates under Section 2.5.1, 2.6, 2.7.1 and
Section 2.7.3. It extends the audit rights under Section 1.8.3 to these sections mutatis
mutandis unless otherwise agreed by the Parties. Sections 2.5.1, 2.6 and 2.7.1 allow an
element of profit to be included in Affiliate provided services. Section 2.7.3 addresses
services provided by Non-Operator Affiliates. Section 1.8.4 further provides for the
Affiliate of a Party to be charged back to the Party if the audit rights provided for are not
granted. The Affiliate audit rights under these sections were not clearly specified in the
2000 Model Accounting Procedure.
1.8.5 Cross-references to the Model JOA provisions were corrected as a result of changes made
in the Model JOA.
1.8.7 The words “with supporting documentation” were inserted to ensure that sufficient
documentation is provided to support any audit claims.
1.8.8 The words “e.g. an independent accounting firm” were inserted to suggest some of the
options available for independent experts.
1.8.9 This provision was added to clarify that the audit by a successor Operator, provided
under Article 4.11(D) of the Model JOA, is also covered by Section 1.8 of the
Accounting Procedure. Recognition is given, however, to the fact that the 60-day
advanced notice requirement may not be possible due to the urgency of an audit resulting
from a change in Operator and that the requirement of providing information 30 days in
advance of the audit by a successor Operator may not be possible if the audit must be
done expeditiously.
1.9 The wording “Such allocation basis shall be subject to audit under Section 1.8” was
added to clarify and emphasize that the allocation basis is subject to audit.
2.0 Introduction – Wording was added to clarify the concept that charges to the Joint
Account should be per the “approved Work Programs and Budgets or as otherwise
specified in the Agreement”. The Accounting Procedure is an attachment to the Model
JOA and does not create rights or expand rights beyond those provided in the Joint
Operating Agreement. It does not allow the Operator to charge for expenditures not
provided for in the Joint Operating Agreement. And in fact some Alternatives or Options
may further restrict the ability of the Operator to charge costs or require approval of the
Parties before charging certain expenditures e.g. severance costs. These expenditures
should be per the approved Work Program and Budget or as provided in the Joint
Operating Agreement. The last sentence was revised to indicate that the clauses under
Section 2 are examples of what may be charged and not an exhaustive list.
2.3.3 This section was reworded to indicate that relocation costs to a location not within the
Joint Operation may be charged to the Joint Account only if the location is the point of
origin of the individual unless otherwise agreed to by the Operating Committee. An
employee being transferred to any location whether in a foreign country or the same
country but still working for the Joint Operations is chargeable under Section 2.3.1.
2.7.2 Examples of services provided by the technical and professional staff of an Affiliate of
the Operator were moved from Section 2.7.4 to Section 2.7.2. Additional examples of
services provided were added to the list. An Optional Provision was added to provide for
charging a fee for access to and use of technical data, intellectual property and know-how
of Operator’s Affiliates if the fee is included as a separate line item in the annual Work
Program and Budget. That fee is independent of any recovery under Section 3, Indirect
Charges.
2.8 This section was revised to include premiums for insurance provided under the Contract.
2.10 Dispute resolution was added to this clause so that it now covers litigation, dispute
resolution and associated legal services. Section 2.10.1 was revised to exclude legal
services provided by the Parties or their Affiliate employees. Section 2.10.2 was revised
to cover charges arising from the legal staff of a Party agreed to by the Operating
Committee or the Parties.
2.11 Taxes and Duties – The last sentence was slightly modified by moving the term "grossed
up" to clarify it. A note to “Consult your Tax Advisor…” concerning the tax
ramifications of using the gross-up procedure was added since it may not be legal in
some countries.
2.14 The phrase “or as otherwise specified in the Agreement” was added to avoid any
potential conflict with the Agreement regarding charges outside the Work Program and
Budget.
5.4 The words “the value” were added for clarification.
6.1 This section was revised to clarify that Non-Operators who do not participate in an
inventory will still receive a copy of the reconciliation of overages and shortages from the
inventory.
6.2 This section was revised to incorporate the Model JOA definition of Participating Interest
for clarification.
20043
AIPN MODEL FORM
INTERNATIONAL ACCOUNTING PROCEDURE
DISCLAIMER
Note: This model form has been prepared only as a suggested guide and may not contain all of the provisions that may be required by the
parties to an actual agreement. The provisions of the model form do not necessarily represent the views of the Association of International
Petroleum Negotiators (AIPN) or any of its members. Use of this model form or any portion or variation thereof shall be at the sole
discretion and risk of the user parties. Users of the model form or any variation thereof are encouraged to seek the advice of qualified legal
counsel to ensure that the final document reflects the actual agreement of the parties. The AIPN disclaims any and all interests or liability
whatsoever for loss or damages that may result from use of this model form or portions or variations thereof. All logos and references to the
AIPN must be removed from this model form when used as an actual agreement. ©20043 AIPN
EXHIBIT "A"
ACCOUNTING PROCEDURE
TABLE OF CONTENTS
SECTION PAGE
SECTION I. 1 GENERAL PROVISIONS .................................................................................................... 1

1.1 PURPOSE............................................................................................................................................ 1
1.2 CONFLICT WITH AGREEMENT. .............................................................................................................. 1
1.3 DEFINITIONS........................................................................................................................................ 1
1.4 JOINT ACCOUNT RECORDS AND CURRENCY EXCHANGE. ...................................................................... 2
1.5 STATEMENTS AND BILLINGS. ............................................................................................................... 3
1.6 PAYMENTS AND ADVANCES. ................................................................................................................ 4
1.7 ADJUSTMENTS. ................................................................................................................................... 8
1.8 AUDITS. .............................................................................................................................................. 8
1.9 ALLOCATIONS. .................................................................................................................................. 14
SECTION II. 2 DIRECT CHARGES.......................................................................................................... 15
2.1 LICENSES, PERMITS, ETC. ................................................................................................................. 15
2.2 SALARIES, WAGES AND RELATED COSTS. ......................................................................................... 15
2.3 EMPLOYEE RELOCATION COSTS. ....................................................................................................... 17
2.4 OFFICES, CAMPS, AND MISCELLANEOUS FACILITIES. .......................................................................... 17
2.5 MATERIAL. ........................................................................................................................................ 17
2.6 EXCLUSIVELY OWNED EQUIPMENT AND FACILITIES OF OPERATOR AND AFFILIATES. ............................ 18
2.7 SERVICES. ........................................................................................................................................ 18
2.8 INSURANCE. ...................................................................................................................................... 20
2.9 DAMAGES AND LOSSES TO PROPERTY. .............................................................................................. 20
2.10 LITIGATION, DISPUTE RESOLUTION AND LEGAL EXPENSES. ............................................................ 20
2.11 TAXES AND DUTIES. ...................................................................................................................... 21
2.12 ECOLOGICAL AND ENVIRONMENTAL. .............................................................................................. 21
2.13 DECOMMISSIONING (ABANDONMENT) AND RECLAMATION. .............................................................. 21
2.14 OTHER EXPENDITURES. ................................................................................................................. 21
SECTION III. 3 INDIRECT CHARGES ..................................................................................................... 22
3.1 PURPOSE.......................................................................................................................................... 22
3.2 AMOUNT. .......................................................................................................................................... 22
3.3 EXCLUSIONS. .................................................................................................................................... 23
SECTION IV. 4 ACQUISITION OF MATERIAL ....................................................................................... 25
4.1 ACQUISITIONS. .................................................................................................................................. 25
4.2 MATERIALS FURNISHED BY OPERATOR. ............................................................................................. 25
4.3 PREMIUM PRICES. ............................................................................................................................. 26
4.4 WARRANTY OF MATERIAL FURNISHED BY OPERATOR......................................................................... 26
SECTION 5 PAGE
SECTION V. DISPOSAL OF MATERIALS ................................................................................................ 27

5.1 DISPOSAL. ........................................................................................................................................ 27
5.2 MATERIAL PURCHASED BY A PARTY OR AFFILIATE. ............................................................................ 27
5.3 DIVISION IN KIND. .............................................................................................................................. 27
5.4 SALES TO THIRD PARTIES.................................................................................................................. 27
SECTION VI. 6 INVENTORIES ................................................................................................................ 28
6.1 PERIODIC INVENTORIES - NOTICE AND REPRESENTATION. ................................................................... 28
6.2 SPECIAL INVENTORIES....................................................................................................................... 28
APPENDIX 1 ............................................................................................................................................... 29
EXHIBIT "A"
ACCOUNTING PROCEDURE
Attached to and made part of the Operating Agreement, hereinafter called the "Agreement,"
effective as of the ____ day of _________, 20__, by and between _______________________,
_______________________, _____________________, and ________________________.
SECTION I. 1
GENERAL PROVISIONS
1.1 Purpose.
1.1.1 The purpose of this Accounting Procedure is to establish equitable methods for
determining charges and credits applicable to operations under the Agreement
which reflect the costs of Joint Operations to the end that no Party shall gain or
lose in relation to other Parties.
1.1.2 The Parties agree, however, that if the methods prove unfair or inequitable to
Operator or Non-Operators, the Parties shall meet and in good faith endeavor
to agree on changes in methods deemed necessary to correct any unfairness
or inequity.
1.2 Conflict with Agreement.
In the event of a conflict between the provisions of this Accounting Procedure and the
provisions of the Agreement to which this Accounting Procedure is attached, the
provisions of the Agreement shall prevail.
1.3 Definitions.
The definitions contained in Article I of the Agreement to which this Accounting

Procedure is attached shall apply to this Accounting Procedure and have the same
meanings when used herein. Certain terms used herein are defined as follows:
"Accrual basis" means that basis of accounting under which costs and benefits are
regarded as applicable to the period in which the liability for the cost is incurred or the
right to the benefit arises, regardless of when invoiced, paid, or received.
"Cash basis" means that basis of accounting under which only costs actually paid and
revenue actually received are included for any period.
"Country of Operations" means ________________________.
"Material" means machinery, equipment and supplies acquired and held for use in Joint
Operations.
"Secondees" means technical and professional personnel employed by a Non-

Operator or its Affiliate(s) who, with Operator’s approval, are loaned to Operator to
AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE PAGE 1

perform services for, and under the direction and control of, Operator under a
secondment agreement.
"Section" means a section of this Accounting Procedure.
1.4 Joint Account Records and Currency Exchange.
1.4.1 Operator shall at all times maintain and keep true and correct records of the
production and disposition of all liquid and gaseous Hydrocarbons, and of all
costs and expenditures under the Agreement, as well as other data necessary
or proper for the settlement of accounts between the Parties hereto in
connection with their rights and obligations under the Agreement and to enable
Parties to comply with their respective applicable income tax and other laws.
1.4.2 Operator shall maintain accounting records pertaining to Joint Operations in

accordance with generally accepted accounting practices used in the
international petroleum industry and any applicable statutory obligations of the
Country of Operations as well as the provisions of the Contract and the
Agreement.
1.4.3 The Joint Account shall be maintained by Operator in the

__________________ language and in United States of America ("U.S.")
currency and in such other language and currency as may be required by the
laws of the Country of Operations or the Contract. Conversions of currency
shall be recorded at the rate actually experienced in that conversion.
Currency translations are used to express the amount of expenditures
and receipts for which a currency conversion has not actually occurred.
Currency translations for expenditures and receipts shall be recorded at the
Check one Alternative.
ALTERNATIVE NO. 1
arithmetic average of the buying and selling exchange rates at the close
of business on the _______________________ day of the ____________
(insert "month of" or "month preceding") the current accounting period
in accordance with Operator's normal practice. A statement describing
the practice will be provided to the Non-Operators upon request.
ALTERNATIVE NO. 2
at the arithmetic average of the buying and selling exchange rates at the close
of business on the _____________ (insert "first" or "last")
Business_______________________ Day of the ____________ (insert "month
of" or "month preceding") the current accounting period as published by
______________________________, or if not published by
________________________, then by ___________________.

ALTERNATIVE NO. 3
at the arithmetic average of the buying and selling exchange rates at the
close of business on the _____________ (insert "first" or "last") Business
Day of the ____________ (insert "month of" or "month preceding") the
current accounting period as published by
________________________, then by ___________________.
ALTERNATIVE NO. 4
at the arithmetic average of the buying and selling exchange rates at the close
of each Business Day of the ___________ (insert "month of" or "month
preceding") the current accounting period as published by
________________________, then by ___________________.
ALTERNATIVE NO. 5
in accordance with the Contract.
1.4.4 Any currency exchange gains or losses shall be credited or charged to the
Joint Account, except as otherwise specified in this Accounting Procedure.
Check if desired.
OPTIONAL PROVISION
Any such exchange gains or losses shall be separately identified as such.
1.4.5 This Accounting Procedure shall apply, mutatis mutandis, to Exclusive

Operations in the same manner that it applies to Joint Operations; provided,
however, that the charges and credits applicable to Consenting Parties shall be
distinguished by an Exclusive Operation Account separately maintained. For
the purpose of determining and calculating the remuneration of the Consenting
Parties, including the premiums for Exclusive Operations, the costs and
expenditures shall be expressed in U.S. currency (irrespective of the currency
in which the expenditure was incurred).
1.4.6 The ___________ (insert "cash""Cash" or "accrual”)"Accrual”) basis for

accounting shall be used in preparing accounts concerning the Joint
Operations. If a "cash"Cash" basis for accounting is used, Operator shall
show accruals as memorandum items.
1.5 Statements and Billings.
1.5.1 Unless otherwise agreed by the Parties, Operator shall submit monthly to each
Party, on or before the _____ Day of each month, statements of the costs and
expenditures incurred during the prior month, indicating by appropriate

classification the nature thereof, the corresponding budget category, and the
portion of such costs charged to each of the Parties.
These statements, as a minimum, shall contain the following information:
- advances of funds setting forth the currencies received from each Party,
- the share of each Party in total expenditures,
- the accrued expenditures,
- the current account balance of each Party,
- summary of costs, credits, and expenditures on a current month, year-to-

date, and inception-to-date basis or other periodic basis, as agreed by
Parties (such expenditures shall be grouped by the categories and line
items designated in the approved Work Program and Budget submitted
by Operator in accordance with Article 6.4 of the Agreement so as to
facilitate comparison of actual expenditures against that work Work
Program and Budget), and
- details of unusual charges and credits in excess of U.S. dollars

________________ (U.S. $_________) U.S. $_________.
1.5.2 Operator shall, upon request, furnish a description of the accounting

classifications used by it.
1.5.3 Amounts included in the statements and billings shall be expressed in U.S.
currency and reconciled to the currencies advanced.
1.5.4 Each Party shall be responsible for preparing its own accounting and tax
reports to meet the requirements of the Country of Operations and of all other
countries to which it may be subject. Operator, to the extent that the
information is reasonably available from the Joint Account records, shall
provide Non-Operators in a timely manner with the necessary information to
facilitate the discharge of such responsibility.
1.6 Payments and Advances.
1.6.1 Upon approval of any Work Program and Budget, if Operator so requests, each
Non-Operator shall advance its share of estimated cash requirements for the
succeeding month's operations. Each such cash call shall be equal to the
Operator's estimate of the money to be spent in the currencies required to
perform its duties under the approved Work Program and Budget during the
month concerned. For informational purposes the cash call shall contain an
estimate of the funds required for the succeeding two (2) 2 months detailed by
the categories designated in the approved Work Program and Budget
submitted by Operator in accordance with Article 6.4 of the Agreement.
1.6.2 Each such cash call, detailed by the categories designated in the approved
Work Program and Budget submitted by Operator in accordance with Article

6.4 of the Agreement, shall be made in writing and delivered to all Non-
Operators not less than fifteen (15) 15 Days before the payment due date. The
due date for payment of such advances shall be set by Operator but shall be
no sooner than the first Business Day of the month for which the advances are
required. All advances shall be made without bank charges. Any charges
related to receipt of advances from a Non-Operator shall be borne by that Non-
Operator.
1.6.3 Each Non-Operator shall wire transfer its share of the full amount of each such
cash call to Operator on or before the due date, in the currencies requested or
any other currencies acceptable to Operator and at a bank designated by
Operator. If currency provided by a Non-Operator is other than the requested
currency, then the entire cost of converting to the requested currency shall be
charged to that Non-Operator.
1.6.4 Notwithstanding the provisions of Section 1.6.2, should Operator be required to

pay any sums of money for the Joint Operations which were unforeseen at the
time of providing the Non-Operators with said estimates of its requirements,
Operator may make a written request of the Non-Operators for special
advances covering the Non-Operators' share of such payments. Each such
Non-Operator shall make its proportional special advances within ten (10) 10
Days after receipt of such notice.
Check if desired.
OPTIONAL PROVISION
When the total of such cash calls for any month is _________________ U.S.
dollars (U.S. $___________) U.S. $___________ or less, each Non-Operator
shall advance its share thereof in accordance with this Section 1.6. When the
total cash requirements exceed the aforesaid amount, each Non-Operator shall
advance its share of the estimated funds required in three (3) 3 installments of
amounts to be specified by Operator, the first installment to be paid not later
than the first Business Day of the month for which the advance is required and
the second installment to be paid not later than the tenth Day of the month for
which the advance is required or if such Day is not a Business Day, then the
following Business Day and the third installment to be paid not later than the
twentieth Day of the month for which the advance is required or if such Day is
not a Business Day, then the following Business Day. The third installment can
be adjusted by Operator by notifying the Non-Operators of the adjusted amount
no later than the fifteenth Day of the month for which the advance is required.
1.6.5 If a Non-Operator's advances exceed its share of cash expenditures, the next
succeeding cash advance requirements, after such determination, shall be
reduced accordingly. However, if the amount of such excess advance is
greater than the amount of the next month’s estimated cash requirements for
such Non-Operator, the Non-Operator may request a refund of the difference,
which refund shall be made by Operator within ten (10) 10 Days after receipt of
the Non-Operator's request provided that the amount is in excess of
_____________ U.S. dollars (U.S. $ __________) U.S. $ __________.

Check if desired.
OPTIONAL PROVISION
If Operator does not refund the money within the time required, the unpaid
balance shall bear and accrue interest at the Agreed Interest Rate from the due
date until the payment is received by the Non-Operator who requested the
refund.
1.6.6 If Non-Operator's advances are less than its share of cash expenditures, the
deficiency shall, at Operator's option, be added to subsequent cash advance
requirements or be paid by Non-Operator within ten (10) 10 Days following the
receipt of Operator's billing to Non-Operator for such deficiency.
1.6.7 If, under the provisions of the Agreement, Operator is required to segregate
funds received from the Parties, any interest received on such funds shall be
applied against the next succeeding cash call or, if directed by the Operating
Committee, distributed quarterly. The interest thus received shall be allocated
to the Parties on an equitable basis taking into consideration date of funding by
each Party to the accounts in proportion to the total funding into the account. A
monthly statement summarizing receipts, disbursements, transfers to each joint
bank account and beginning and ending balances thereof shall be provided by
Operator to the Parties.
Check if desired.
OPTIONAL PROVISION - (INTEREST ON COMMINGLED FUNDS)
Any interest received by Operator from interest-bearing accounts containing

commingled funds received from the Parties shall be credited to the Parties in
accordance with the allocation procedure as set forth above.
1.6.8 If Operator does not request Non-Operators to advance their share of

estimated cash requirements, each Non-Operator shall pay its share of cash
expenditures within ten (10) 10 Days following receipt of Operator's billing.
1.6.9 Payments of advances or billings shall be made on or before the due date. In
accordance with Article VIII 8 of the Agreement, if these payments are not
received by the due date the unpaid balance shall bear and accrue interest
from the due date until the payment is received by Operator at the Agreed
Interest Rate. For the purpose of determining the unpaid balance and interest
owed, Operator shall translate to U.S. currency all amounts owed in other
currencies using the currency exchange rate readily available to Operator,
determined in accordance with Section 1.4.3, at the close of the last
Business Day prior to the due date for the unpaid balance. as quoted by the
applicable authority identified in Section 1.4.3 of this Section I
1.6.10 Subject to governmental regulation, Operator shall have the right, at any time
and from time to time, to convert the funds advanced or any part thereof to
other currencies to the extent that such currencies are then required for

operations. The cost of any such conversion shall be charged to the Joint
Account.
1.6.11 Operator shall endeavor to maintain funds held for the Joint Account in bank
accounts at a level consistent with that required for the prudent conduct of Joint
Operations.
1.6.12 If under the Agreement, Operator is required to segregate funds received from
or for the Joint Account, the provisions under this Section 1.6 for payments and
advances by Non-Operators shall apply also to Operator.
Check if desired. Caveat: Consult your tax advisor before selecting this option.
OPTIONAL PROVISION
1.6.13 Funding by Operator By Operator
1.6.13.1 Notwithstanding any of the provisions of Sections 1.6.1 through 1.6.6 to

the contrary, Operator may elect to fund the costs of the Joint Operations and bill
the Non-Operators for such funding pursuant to the provisions of this Section
1.6.13. Operator shall exercise such election by submission of notice to the Non-
Operators at the time of submission of any proposed Work Program and Budget
to the Parties pursuant to Article VII of the Agreement. In consideration for such
funding, each Non-Operator shall pay Operator the financing charge specified in
Section 1.6.13.3.
The Parties may agree on additional funding mechanisms including

funding by Operator.
1.6.13.2 Not later than the tenth (10th) Day after the end of any month for which
the Operator has funded the Joint Operations, Operator shall bill each Non-
Operator for (1) its share of the cash expenditure, and (2) the financing charge
calculated in accordance with Section 1.6.13.3.
1.6.13.3 Operator’s financing charge to each Non-Operator for funding the Joint
Operations shall be calculated in accordance with the following formula:
F = (C x PI) x I x P/365
Where:
F = the finance charge payable by the Non-Operator.
C = cash expenditures funded by the Operator on behalf of the Non-Operators in

accordance with Section 1.6.13.2(1).
PI = the Participating Interest of the Non-Operator.

I = interest at the LIBOR rate, determined in accordance with Article 1.4 of the
Agreement and applicable on the fifteenth (15th) Day of the month during which
such funding cost was incurred, or if such day is not a Business Day in London,
the first such Business Day thereafter.
P = the number of Days from the fifteenth Day of the month during which such
funding costs were incurred until the due date for the payment, as determined in
accordance with Section 1.6.13.4.
1.6.13.4 Notwithstanding the provisions of Section 1.6.8, each bill under this
Section 1.6.13 shall be due on the twentieth (20th) day of the month in which the
bill was issued, or if such day is not a Business Day in the Country of Operations,
the first Business Day thereafter.
1.6.13.5 In any subsequent Calendar Year, Operator may elect to adopt a cash
call procedure in accordance with Sections 1.6.1 through 1.6.6 by notice
submitted to the Non-Operators at the time of submission of any proposed Work
Program and Budget to the Parties pursuant to Article VII of the Agreement. In
addition, whenever a successor Operator is appointed pursuant to Article 4.11 of
the Agreement, such successor Operator shall notify the Non-Operators, within
thirty (30) Days of its appointment, as to whether it intends to adopt a cash call
procedure or an Operator funding procedure for the Joint Operations.
[Examples are set out in Appendix 1 to this model form. Caveat: Consult
your tax advisor before selecting this option.]
1.7 Adjustments.
Payments of any advances or billings shall not prejudice the right of any Non-Operator to
protest or question the correctness thereof; provided, however, all bills and statements
rendered to Non-Operators by Operator during any Calendar Year shall conclusively be
presumed to be true and correct after twenty-four (24) 24 months following the end of
such Calendar Year, unless within the said twenty-four (24) 24 month period a Non-
Operator takes written exception thereto and makes claim on Operator for adjustment.
Failure on the part of a Non-Operator to make claim on Operator for adjustment within
such period shall establish the correctness thereof and preclude the filing of exceptions
thereto or making claims for adjustment thereon. No adjustment favorable to Operator
shall be made unless it is made within the same prescribed period. The provisions of
this paragraph shall not prevent adjustments resulting from a physical inventory of the
Material as provided for in Section VI 6. Operator shall be allowed to make adjustments
to the Joint Account after such twenty-four (24) 24 month period if these adjustments
result from audit exceptions outside of this Agreement Accounting Procedure, third
party claims, or Government or Government Oil & Gas Company requirements. Any
such adjustments shall be subject to audit within the time period specified in Section
1.8.1.
1.8 Audits.
1.8.1 A Non-Operator, upon at least sixty (60) 60 Days advance notice in writing to
Operator and all other Non-Operators, shall have the right to audit the Joint
Accounts and records of Operator relating to the accounting hereunder for any

Calendar Year within the twenty-four (24) 24 month period following the end of
such Calendar Year except as otherwise provided in Section 3.1. As provided
in Article 4.2(B)(6) of the Agreement, Non-Operators shall have reasonable
access to Operator’s personnel and to the facilities, warehouses, and offices
directly or indirectly serving Joint Operations. The cost of each such audit shall
be borne by Non-Operators conducting participating in the audit. Where
there are two or more Non-Operators, the Non-Operators shall make every a
reasonable effort to conduct joint or simultaneous audits in a manner that will
result in a minimum of inconvenience to the Operator. Non-Operators must
take written exception to and make claim upon the Operator for all
discrepancies disclosed by said audit within said twenty-four (24) month period.
24 month period. Non-Operators may request information from the
Operator prior to the commencement of the audit. Operator will provide
the information in electronic format or hard copy documents, if electronic
format is not available. Operator will provide the information requested
within 30 Days before commencement of the audit but in no event sooner
than 30 Days after the written request. The information requested shall
be limited to that normally used for pre-audit work such as trial balance,
general ledger, and sub-ledger data.
1.8.2 Operator shall endeavor to produce information from its Affiliates reasonably
necessary to support charges from those Affiliates to the Joint Account other
than those charges referred to in Section 3.1.
If an Affiliate considers such information confidential or proprietary or if such

Affiliate will not allow the Non-Operators to audit its accounts, the statutory
auditor of the Affiliate shall be used to confirm the details and facts as required,
provided such statutory auditor is an internationally recognized firm of public
accountants. The auditing Non-Operator may instruct the statutory auditor on
the scope of such confirmation; however, the scope shall be subject to the
approval of the Affiliate in question, such approval not to be unreasonably
withheld. Should the statutory auditor of the Affiliate decline to act in such
capacity, or not be an internationally recognized independent firm of public
accountants, the auditing Non-Operators shall select an internationally
recognized independent firm of public accountants to carry out such
confirmation, subject to the approval of the Affiliate in question, such approval
not to be unreasonably withheld. The cost of such audit by the statutory auditor
or the independent firm of public accountants, as the case may be, shall be
borne by ________ (insert "Operator" or "Non-Operators who requested such
audit" or "charged to the Joint Account").
Check if desired.
OPTIONAL PROVISION (AUDIT OF AFFILIATE CHARGES UNDER SECTIONS 2.6

AND 2.7.1)
Anything contained herein to the contrary notwithstanding, any Party may audit
the records of an Affiliate of another Party relating to that Affiliate’s charges
under Sections 2.6 and 2.7.1. The provisions of this Accounting Procedure
shall apply mutatis mutandis to such audits.

1.8.3 Except for charges under Section 2.5.1, if selected, and Section 2.7.1, the
following provisions apply to all charges from Operator for its Affiliates.
(If Section 2.5.1 is not selected, delete the reference to that section
above.)
Check one Alternative
ALTERNATIVE NO. 1 – RESTRICTED AFFILIATE AUDIT
In addition to the information provided by the Operator under Section

1.8.2, a Non-Operator may seek to audit the books and records of an
Affiliate of Operator relating to the charges by the Affiliate to the Joint
Account for the same Calendar Year as provided in Section 1.8.1 above.
The charges of the Affiliate shall be subject to audit in accordance with
(a), (b), or (c) below or any combination thereof.
(a) If the Affiliate of Operator consents to the audit, the audit may be
conducted in the same manner as the audit of the books and records of
Operator.
If all or part of the charges are not audited under (a) above, the unaudited
portion may be audited under (b) and/or (c) below.
(b) The Affiliate may require use of an internationally recognized

independent public accounting firm to confirm confidential or proprietary
information and charges. The cost of the internationally recognized
independent public accounting firm shall be ___________ (insert "borne
by Operator", "borne by Non-Operators who requested the confirmation",
or "charged to the Joint Account"). The Non-Operator will seek
agreement with the Affiliate on the audit scope to confirm the details and
facts relating to such information and charges.
If the independent public accounting firm of the Affiliate declines to

conduct the audit or is not internationally recognized, the Non-Operator
will seek agreement with the Affiliate on an accounting firm that is
internationally recognized . The cost of using such firm shall be
_____________ (insert "borne by Operator", "borne by the Non-Operator
who requested the audit", or "charged to the Joint Account").
Operator will endeavor to cause its Affiliate to not unreasonably withhold

approval of the use of an internationally recognized independent public
accounting firm or the scope of examination requested by Non-Operators.
If all or part of the charges are not audited under (a) or (b) above, the
unaudited portion may be audited under (c) below.
(c) Operator may request its Affiliate to provide Non-Operators an

annual report from an internationally recognized independent public
accounting firm attesting that charges billed from such Affiliate to the
Joint Account represent a complete and accurate allocation of its costs to
the Joint Operations, exclude any element of profit, exclude any

duplication of costs covered under Sections 2 and 3, and are consistent
in application to all of its activities. The report will be furnished by the
Operator within 12 months of the request from the Non-Operator. The
cost of providing the annual report shall be ___________ (insert "borne
by Operator" "borne by the Non-Operator who requested the audit”, or
“charged to the Joint Account").
No amounts paid to an Affiliate of Operator, which the Non-Operator

seeks to audit, may be charged to the Joint Account if the Affiliate of the
Operator does not allow audit of such amounts as provided above.
ALTERNATIVE NO. 2 – AUDIT REPORT
The internal records of an Operator's Affiliate providing services to the

Joint Operations may not be audited by the Non-Operator. However, in
addition to the information provided by the Operator under Section 1.8.2,
and upon request by a Non-Operator within 24 months following the end
of the same Calendar Year as provided in Section 1.8.1 above Operator
will cause its Affiliate to provide Non-Operator an annual report from an
internationally recognized independent public accounting firm. The
report will attest that charges billed from such Affiliate to the Joint
Account represent a complete and accurate allocation of its costs to the
Joint Operations, exclude any element of profit, exclude any duplication
of costs covered under Sections 2 and 3, and are consistent in
application to all of its activities. The report will be furnished by the
Operator within 12 months of the request from the Non-Operator. The
cost of providing the annual report shall be ___________ (insert "borne
by Operator" "borne by the Non-Operator who requested the audit”, or
“charged to the Joint Account").

Operator does not furnish the audit report as provided above.
ALTERNATIVE NO. 3 – INDEPENDENT PUBLIC AUDITOR
In addition to the information provided by the Operator under Section

1.8.2, a Non-Operator may seek to audit the books and records of an
Affiliate of Operator relating to the charges by the Affiliate to the Joint
Account for the same Calendar Year as provided in Section 1.8.1. The
audit shall be conducted by an independent public accounting firm
designated by the Affiliate. The cost of such firm shall be ___________
(insert "borne by Operator", "borne by Non-Operators who requested the
confirmation", or "charged to the Joint Account"). The Non-Operator will
seek agreement with the Affiliate on the audit scope to confirm the details
and facts relating to such charges. The audit scope proposed by Non-
Operator shall be fair and reasonable.
If the independent public accounting firm of the Affiliate declines to

conduct the audit or is not internationally recognized, the Non-Operator

will seek agreement with the Affiliate on a firm that is an internationally
recognized independent public accounting firm. The cost of using such
firm shall be _____________ (insert "borne by Operator", "borne by the
Non-Operator who requested the audit", or "charged to the Joint
Account").
Operator will endeavor to cause its Affiliate to not unreasonably withhold

approval of the use of an internationally recognized independent public
accounting firm or of the scope of examination requested by Non-
Operators.

Operator does not allow audit of such amounts as provided above and
the scope of audit proposed by the Non-Operator was fair and
reasonable.
ALTERNATIVE NO. 4 – FULL AUDIT
In addition to the information provided by the Operator under Section 1.8.2,

and upon request by a Non-Operator, Operator will cause its Affiliate to
allow the Non-Operator to audit the books and records of the Affiliate
relating to the charges by the Affiliate to the Joint Account for the same
Calendar Year as provided in Section 1.8.1 above. The audit may be
conducted in the same manner as the audit of the books and records of
Operator.

Operator does not allow audit of such amounts as provided above.
1.8.4 Any Party may audit the records of Operator’s Affiliate relating to charges
under Section 2.5.1, if selected. The provisions of Section 1.8.3 shall
apply mutatis mutandis to such audit unless otherwise agreed by the
Parties. (If Section 2.5.1 is not selected, delete the preceding 2
sentences.)
Any Party may audit the records of an Affiliate of another Party relating to
that Affiliate’s charges under Section 2.7.1 . The provisions of Section
1.8.3 shall apply mutatis mutandis to such audits unless otherwise
agreed by the Parties. Should such charges be rejected under the
provisions of 1.8.3, such charges shall be charged back to the Party
whose Affiliate provided the service.
Any Party may audit the records of Operator’s Affiliate relating to charges
under Section 2.6. The provisions of Section 1.8.3 shall apply mutatis
mutandis to such audits unless otherwise agreed by the Parties.
Any Party may audit the records of a Non-Operator or its Affiliate relating
to charges under Section 2.7.3. The provisions of Section 1.8.3 shall
apply mutatis mutandis to such audit, unless otherwise agreed by the

Parties. Should such charges be rejected under the provisions of 1.8.3,
such charges shall be charged back to the Party whose Affiliate provided
the service.
1.8.5 Any information obtained by a Non-Operator Party under the provisions of this
Section 1.8 which does not relate directly to the Joint Operations shall be kept
confidential and shall not be disclosed to any party, except as would otherwise
be permitted by Article 15.1(A)(3) 15.2(A)(3) and (9)(10) of the Agreement.
1.8.4
1.8.6 In the event that the Operator is required by law or the Contract to employ a
public accounting firm to audit the Joint Account and records of Operator
relating to the accounting hereunder, the cost thereof shall be a charge against
the Joint Account, and a copy of the audit shall be furnished to each Party.
1.8.5
1.8.7 At the conclusion of each audit, the Parties shall endeavor to settle outstanding
matters expeditiously. To this end the Parties conducting the audit will make a
reasonable effort to prepare and distribute a written report to the Operator and
all the Parties who participated in the audit as soon as possible and in any
event within ninety (90) 90 Days after the conclusion of each audit. The report
shall include all claims, with supporting documentation, arising from such
audit together with comments pertinent to the operation of the accounts and
records. Operator shall make a reasonable effort to reply to the report in
writing as soon as possible and in any event no later than ninety (90) 90 Days
after receipt of the report. Should the Non-Operators consider that the report
or reply requires further investigation of any item therein, the Non-Operators
shall have the right to conduct further investigation in relation to such matter
notwithstanding the provisions of Sections 1.7 and 1.8.1 that the period of
twenty-four (24) 24 months may have expired. However, conducting such
further investigation shall not extend the twenty-four (24) 24 month period for
taking written exception to and making a claim upon the Operator for all
discrepancies disclosed by said audit. Such further investigations shall be
commenced within thirty (30) 30 Days and be concluded within sixty (60) 60
Days after the receipt of such report or reply, as the case may be.
1.8.6
1.8.8 All adjustments resulting from an audit agreed between the Operator and the
Non-Operator conducting the audit shall be reflected promptly in the Joint
Account by the Operator and reported to the Non-Operator(s). If any dispute
shall arise in connection with an audit, it shall be reported to and discussed by
the Operating Committee, and, unless otherwise agreed by the parties to the
dispute, resolved in accordance with the provisions of Article XVIII 18 of the
Agreement. If all the parties to the dispute so agree, the adjustment(s) may be
referred to an independent expert agreed to by the parties to the dispute e.g.
an independent accounting firm. At the election of the parties to the dispute,
the decision of the expert will be binding upon such parties. Unless otherwise
agreed, the cost of such expert will be shared equally by all parties to the
dispute.

1.8.9 The provisions of this Section 1.8 apply to audits conducted under Article
4.11(D) of the Agreement except that the 60 Day advance notice and the
advance information provisions of Section 1.8.1 shall not apply.
1.9 Allocations.
If it becomes necessary to allocate any costs or expenditures to or between Joint

Operations and any other operations, such allocation shall be made on an equitable
basis. For informational purposes only, Operator shall furnish a description of its
allocation procedures pertaining to these costs and expenditures and its rates for
personnel and other charges, along with each proposed Work Program and Budget.
Such allocation basis shall be subject to audit under Section 1.8.

SECTION 2
SECTION II. DIRECT CHARGES
Operator shall charge the Joint Account with for all costs and expenditures incurred in
connection with Joint Operations. It is also understood that charges by Operator for the
conduct of Joint Operations within the limits of approved Work Programs and Budgets or
as otherwise specified in the Agreement . Charges for services normally provided by an
operator such as those contemplated in Sections 2.7.2 and 2.7.3 which are provided by a
Party’s Affiliate shall reflect the cost to the Affiliate, excluding profit, for performing such
services, except as otherwise provided in Section 2.6, Section 2.7.1, and Section 2.5.1 if
selected.
The costs and expenditures shall be recorded as required for the settlement of accounts
between the Parties hereto in connection with the rights and obligations under this the
Agreement and for purposes of complying with the tax laws of the Country of Operations and of
such other countries to which any of the Parties may be subject.
Without in any way limiting the generality of the foregoing, chargeable

Chargeable costs and expenditures shall may include:
2.1 Licenses, Permits, Etc.
All costs, if any, attributable to the acquisition, maintenance, renewal or relinquishment

of licenses, permits, contractual and/or surface rights acquired for Joint Operations and
bonuses paid in accordance with the Contract when paid by Operator in accordance with
the provisions of the Agreement.
2.2 Salaries, Wages and Related Costs.
Salaries, wages and related costs include everything constituting the employees' total
compensation, as well as the cost to Operator of holiday, vacation, sickness, disability
benefits, living and housing allowances, travel time, bonuses, and other customary
allowances applicable to the salaries and wages chargeable hereunder, as well as the
costs to Operator for employee benefits, including but not limited to employee group life
insurance, group medical insurance, hospitalization, retirement, severance payments
required by the laws or regulations of the Country of Operations
(Check only one of the following Alternative Provisions.)
(additional severance payments in excess of those provided by the laws or

regulations of the Country of Operations shall be chargeable to the Joint Account to
the extent that they are in accordance with Operator’s benefit policies),
(additional severance payments in excess of those provided by the laws or

regulations of the Country of Operations, which are made in accordance with
Operator’s benefit policies, shall be allocated to the Joint Account in the proportion
that the time the employee was directly engaged in Joint Operations on a full time
basis bears to the employee’s total tenure with the Operator and its Affiliates),

(approval of the ________ (insert either “Operating Committee” or “Parties”) shall be
required to charge the Joint Account with any severance payments in excess of
those provided by the laws or regulations of the Country of Operations),
and other benefit plans of a like nature applicable to labor costs of Operator.
All costs associated with organizational restructuring (e.g., separation benefits,

relocation costs, asset disposition costs) of Operator or its Affiliates, other than those
costs which are directly related to employees of Operator who are directly engaged in
Joint Operations on a full time basis, will require the approval of the Parties to be
chargeable to the Joint Account.
Any costs associated with Country of Operations benefit plans which are not currently
funded shall be accrued and not be paid by Non-Operators, unless otherwise approved
by the Operating Committee, until the same are due and payable to the employee, upon
withdrawal of a Party pursuant to the Agreement and then only by the withdrawing Party,
or upon termination of the Agreement, whichever occurs first.
Expenditures or contributions made pursuant to assessments imposed by governmental

authority for payments with respect to or on account of employees described in Section
2.2.1 and Section 2.2.2 shall be chargeable to the Joint Account.
Check if desired.
OPTIONAL PROVISION
Because the funding of a defined benefit plan is not necessarily representative of the
cost to the Operator for the retirement plan, the actuarially determined service cost shall
be charged to the Joint Account instead of the amount of cash paid to fund the
retirement plan.
2.2.1 The salaries, wages and related costs of employees of Operator and its
Affiliates temporarily or permanently assigned in the Country of Operations and
directly engaged in Joint Operations shall be chargeable to the Joint Account.
2.2.2 The salaries, wages and related costs of employees of Operator and its
Affiliates temporarily or permanently assigned outside the Country of
Operations directly engaged in Joint Operations and not otherwise covered in
Section 2.7.2 shall be chargeable to the Joint Account.
2.2.3 Costs for salaries, wages and related costs may be charged to the Joint
Account on an actual basis or at a rate based upon the average cost in
accordance with Operator’s usual practice. In determining the average cost,
expatriate and national employees’ rates shall be calculated separately and
reviewed at least annually.
2.2.4 Reasonable expenses (including related travel costs) of those employees

whose salaries and wages are chargeable to the Joint Account under Sections
2.2.1 and 2.2.2 of this Section II and for which expenses the employees are

reimbursed under the usual practice of Operator shall be chargeable to the
Joint Account.
2.2.5 If employees are engaged in other activities in addition to the Joint Operations,
the cost of such employees shall be allocated on an equitable basis.
2.3 Employee Relocation Costs.
2.3.1 Except as provided in Section 2.3.3, Operator's cost of employees' relocation to

or from an assignment with the Joint Operations, whether within or outside the
Country of Operations and whether permanently or temporarily assigned to the
Joint Operations, shall be chargeable to the Joint Account. If such employee
works on other activities in addition to Joint Operations, such relocation costs
shall be allocated on an equitable basis.
2.3.2 Such relocation costs shall include transportation of employees, families,

personal and household effects of the employee and family, transit expenses,
and all other related costs in accordance with Operator's usual practice.
2.3.3 Relocation costs from to an assignment that is not with the Joint Operations to
another location classified as a foreign location by Operator shall not be
chargeable to the Joint Account unless such foreign location the place of the
new assignment is the point of origin of the employee or unless otherwise
agreed by the Operating Committee.
2.4 Offices, Camps, and Miscellaneous Facilities.
Cost of maintaining any offices, sub-offices, camps, warehouses, housing, and other
facilities of the Operator and/or Affiliates directly serving the Joint Operations. If such
facilities serve operations in addition to the Joint Operations the costs shall be allocated
to the properties served on an equitable basis.
2.5 Material.
Cost, net of discounts taken by Operator, of Material purchased or furnished by

Operator. Such costs shall include, but are not limited to, export brokers' fees,
transportation charges, loading, unloading fees, export and import duties and license
fees associated with the procurement of Material and in-transit losses, if any, not
covered by insurance. So far as it is reasonably practical and consistent with efficient
and economical operation, only such Material shall be purchased for, and the cost
thereof charged to, the Joint Account as may be required for immediate use.
Check if desired.
OPTIONAL PROVISION
2.5.1 Purchasing Fee.
When economical to do so, and required for the benefit of the Joint Operations,
Operator may request its Affiliates to provide purchasing, expediting and traffic
coordination services. Charges to the Joint Account for the provision of these

purchasing services shall be based on the Affiliate's standard purchasing fee
currently set at:
______% on the amount of each purchase order subject to a minimum fee of

$______ and a maximum fee of $_____ per purchase order.
The fee shall be reviewed periodically by Operator's Affiliates, and future

changes shall be made upward or downward as indicated by the Affiliate's cost
experience for the provision of these purchasing services. Any changes
affecting the charges to the Joint Account shall be subject to notification by
Operator and approval by the Parties. Such charges shall be in lieu of any
charges for the same or similar services provided herein.
2.6 Exclusively Owned Equipment and Facilities of Operator and Affiliates.
Charges for exclusively owned equipment, facilities, and utilities of Operator or any of its
Affiliates at rates not to exceed the average commercial rates of non-affiliated third
parties then prevailing for like equipment, facilities, and utilities for use in the area where
the same are used hereunder. On request, Operator shall furnish Non-Operators a list
of rates and the basis of application. Such rates shall be revised from time to time if
found to be either excessive or insufficient, but not more than once every six months.
Exclusively owned drilling tools and other equipment lost in the hole or damaged beyond
repair may be charged at replacement cost less depreciation plus transportation costs to
deliver like equipment to the location where used.
2.7 Services.
2.7.1 The charges for services provided by third parties, including the Affiliates of the
respective Parties which have contracted with Operator to perform services
that are normally provided by third parties, other than those services covered
by Section 2.7.2 and Section 2.7.3, shall be chargeable to the Joint Account.
Such charges for services by the Affiliates of the respective Parties shall not
exceed those currently prevailing if performed by non-affiliated third parties,
considering quality and availability of services.
2.7.2 The cost of services performed by Operator's Affiliates technical and

professional staffs not located within the Country of Operation and not
otherwise covered under Section 2.2.2, shall be chargeable to the Joint
Account. The individual rates shall include salaries and wages of such
technical and professional personnel, lost time, governmental assessments,
and employee benefits. Costs shall also include all support costs necessary for
such technical and professional personnel to perform such services, such as,
but not limited to, rent, utilities, support staff, drafting, telephone and other
communication expenses, computer support, supplies, depreciation, and other
reasonable expenses. Examples of such services include the following:
Geologic Studies and Interpretation

Seismic Data Processing
Well Log Analysis, Correlation and Interpretation
Laboratory Services

Ecological and Environmental Engineering
Decommissioning (Abandonment) and Reclamation
Well Site Geology
Project Management and Engineering
Source Rock Analysis
Petrophysical Analysis
Geochemical Analysis
Drilling Supervision
Development Evaluation
Project Accounting and Professional Services
Other Data Processing
Check if desired.
OPTIONAL PROVISION (may be used with Article 15 of the Agreement

Alternative 1)
Costs incurred as payment for access to, and use of, technical data,
intellectual property and know-how of the Operator's group of Affiliates in
accordance with the technology participation agreement between the
Operator and its Affiliates and in accordance with the customary cost
sharing system applicable to operating companies within the Operator's
group of Affiliates. Such costs shall be included in annual Work Program
and Budgets as a separate line item subject to the approval of the
Operating Committee.
2.7.3 The cost of services performed with the approval of Operator by the technical
and professional staffs of the Non-Operators and the Affiliates of the respective
Non-Operators, including the cost to such Affiliates and Non-Operators of their
respective Ssecondees, shall be chargeable to the Joint Account. The
individual rates shall include salaries and wages of such technical and
professional personnel and Ssecondees, lost time, governmental assessments,
and employee benefits. Costs (other than for Ssecondees) shall also include
all support costs necessary for such technical and professional personnel to
perform such services, such as, but not limited, to rent, utilities, support staff,
drafting, telephone and other communication expenses, computer support,
supplies, depreciation, and other reasonable expenses.
2.7.4 A Non-Operator shall bill Operator for direct costs of services and of
Ssecondees charged under the provisions of Section 2.7.3 on or before the last
Day of each month for charges for the preceding month, to which charges Non-
Operator shall ____ (Option - insert "not", place a period after the word “rate”
and delete the remainder of this sentence) add an administrative overhead rate
of _______(___%) percent. [Note: If a Secondment Agreement is utilized this
paragraph and the Secondment Agreement should be reviewed for
consistency] Within thirty (30) Days after receipt of a bill for such charges,
Operator shall pay the amount due thereon.

Check if desired.
OPTIONAL PROVISION
2.7.5 The charges for services under Section 2.7.2 and Section 2.7.3 shall not
exceed those currently prevailing if performed by non-affiliated third parties,
considering the quality and availability of such services.
2.8 Insurance.
Premiums paid for insurance required by law, the Contract or the Agreement to be
carried for the benefit of the Joint Operations.
2.9 Damages and Losses to Property.
2.9.1 All costs or expenditures necessary to replace or repair damages or losses

incurred by fire, flood, storm, theft, accident, or any other cause shall be
chargeable to the Joint Account. Operator shall furnish Non-Operators written
notice of damages or losses incurred in excess of ____________________
U.S. dollars (U.S. $_______) U.S. $_______ as soon as practical after report of
the same has been received by Operator. All losses in excess of
____________________ U.S. dollars (U.S. $_______) U.S. $_______ shall be
listed separately in the monthly statement of costs and expenditures.
2.9.2 Credits for settlements received from insurance carried for the benefit of Joint
Operations and from others for losses or damages to Joint Property or
Materials shall be chargeable to the Joint Account. Each Party shall be
credited with its Participating Interest share thereof except where such receipts
are derived from insurance purchased by Operator for less than all Parties in
which event such proceeds shall be credited to those Parties for whom the
insurance was purchased in the proportion of their respective contributions
toward the insurance coverage.
2.9.3 Expenditures incurred in the settlement of all losses, claims, damages,

judgments, and other expenses for the account of Joint Operations shall be
chargeable to the Joint Account.
2.10 Litigation, Dispute Resolution and Associated Legal Expenses.
The costs and expenses of litigation, dispute resolution and associated legal services
necessary for the protection of the Joint Operations under this the Agreement as follows:
2.10.1 Legal services, other than those provided by the Parties or their Affiliate
employees, necessary or expedient for the protection of the Joint Operations,
and all costs and expenses of litigation, arbitration or other alternative dispute
resolution procedure, including reasonable attorneys' fees and expenses,
together with all judgments obtained against the Parties or any of them arising
from the Joint Operations.
2.10.2 If the Parties hereunder shall so agree, _______________ (insert either

"Operating Committee" or "Parties") agree, litigation, arbitration or other

alternative dispute resolution procedures resulting from actions or claims
affecting the Joint Operations hereunder may be handled by the legal staff of
one or any of the Parties hereto or their respective Affiliates; and a charge
commensurate with the reasonable costs of providing and furnishing such
services rendered may be made by the Party or its Affiliates providing such
service to Operator for the Joint Account., but no such charges shall be made
until approved by the Parties
2.11 Taxes and Duties.
All taxes, duties, assessments and governmental charges, of every kind and nature,
assessed or levied upon or in connection with the Joint Operations, other than any that
are measured by or based upon the revenues, income and net worth of a Party.
If Operator or an Affiliate is subject to income or withholding tax as a result of services

performed at cost for the operations under the Agreement, its charges for such services
may be increased (grossed up) by the amount of such taxes incurred.(grossed up).
[NOTE: Consult your Tax Advisor with respect to Section 2.11]
2.12 Ecological and Environmental.
Costs incurred on the Joint Property as a result of statutory regulations for

archaeological and geophysical surveys relative to identification and protection of
cultural resources and/or other environmental or ecological surveys as may be required
by any regulatory authority. Also, costs to provide or have available pollution
containment and removal equipment plus costs of actual control, clean up and
remediation resulting from responsibilities associated with Hydrocarbon contamination
as required by all applicable laws and regulations.
2.13 Decommissioning (Abandonment) and Reclamation.
Costs incurred for decommissioning (abandonment) and reclamation of the Joint

Property, including costs required by governmental or other regulatory authority or by the
Contract.
2.14 Other Expenditures.
Any other costs and expenditures incurred by Operator for the necessary and proper
conduct of the Joint Operations in accordance with approved Work Programs and
Budgets or as otherwise specified in the Agreement and not covered in this Section II
2 or in Section III 3.

SECTION III. 3
INDIRECT CHARGES
3.1 Purpose.
Operator shall charge the Joint Account monthly for the cost of indirect services and
related office costs of Operator and its Affiliates not otherwise provided in this
Accounting Procedure. Indirect costs chargeable under this Section III 3 represent the
cost of general assistance and support services provided by Operator and its Affiliates.
These costs are such that it is not practical to identify or associate them with specific
projects but are for services which provide the Joint Operations with needed and
necessary resources which Operator requires and provide a real benefit to Joint
Operations. No cost or expenditure included under Section II 2 shall be included or
duplicated under this Section III 3. The charges under Section III 3 are not subject to
audit under Sections 1.8.1 and 1.8.2 other than to verify that the overhead percentages
are applied correctly to the expenditure basis.
3.2 Amount.
3.2.1 The indirect charge under Section 3.1 for any month shall equal the greater of
the total amount of indirect charges for the period beginning at the start of the
Calendar Year through the end of the period covered by Operator’s invoice
(“Year-to-Date”) determined under Section 3.2.2, less indirect charges previously
made under Section 3.1 for the Calendar Year in question, or the amount of the
minimum assessment determined under Section 3.2.3, calculated on an
annualized basis (but reduced pro rata for periods of less than one year), less
indirect charges previously made under Section 3.1 for the Calendar Year in
question.
3.2.2 Unless exceeded by the minimum assessment under Section 3.2.3, the
aggregate Year-to-Date indirect charges shall be a percentage of the Year-to-
Date expenditures, calculated on the following scale (U.S. Dollars):
Annual Expenditures
$0 to $ of expenditures = __%
Next $ of expenditures = __%
Excess above $ of expenditures = __%
3.2.3 A minimum amount of U.S. $ shall be assessed each Calendar Year

calculated from the Effective Date and shall be reduced pro rata for periods of
less than a year.

3.2.4 Indirect Charge for Projects.
As to major projects (such as, but not limited to, pipelines, gas reprocessing and
processing plants, final loading and terminalling facilities, and dismantling for
decommissioning of platforms and related facilities) when the estimated cost of
each project amounts to more than U.S. $ _____________, a separate indirect
charge for such project shall be approved by the ________________ (here insert
either "Operating Committee" or "Parties") at the time of approval of the project.
Check if desired.
OPTIONAL PROVISION
During its process of winding-up Joint Operations Operator shall have the right to
charge the greater of the sliding scale percentage rate or the minimum indirect
charge for a period of _______ (___)___ months. If the winding-up process
continues beyond the end of such period, the charge shall be confined to and
based upon the sliding scale percentage rate.
Check if desired.
OPTIONAL PROVISION
Notwithstanding the foregoing, the indirect rates and related calculation method
for development operations, production operations, and dismantling for
decommissioning of platforms and related facilities shall be agreed upon by the
__________ (here insert either "Operating Committee" or "Parties") prior to the
submission of the first annual budget for those phases of operations.
Check if desired.
OPTIONAL PROVISION
At the beginning of each year, the dollar amounts noted in Section 3.2 shall be
adjusted based on the previous year's annual change in the
____________________ Index as published by _________________________.
For this purpose, the starting index base shall be __________________ as
published on ________________, 20___.
3.3 Exclusions.
The expenditures used to calculate the monthly indirect charge shall not include the
indirect charge (calculated either as a percentage of expenditures or as a minimum
monthly charge), rentals on surface rights acquired and maintained for the Joint
Account, guarantee deposits, pipeline tariffs, concession acquisition costs, bonuses paid
in accordance with the Contract, royalties and taxes on production or revenue to the
Joint Account paid by Operator, expenditures associated with major construction
projects for which a separate indirect charge is established hereunder, payments to third
parties in settlement of claims, and other similar items.

Credits arising from any government subsidy payments, disposition of Material, and
receipts from third parties for settlement of claims shall not be deducted from total
expenditures in determining such indirect charge.

SECTION IV. 4
ACQUISITION OF MATERIAL
4.1 Acquisitions.
Materials purchased for the Joint Account shall be charged at net cost paid by the
Operator. The price of Materials purchased shall include, but shall not be limited to
export broker's fees, insurance, transportation charges, loading and unloading fees,
import duties, license fees, and demurrage (retention charges) associated with the
procurement of Materials,
(Check the following Optional Provision only if the Optional Provision for Section 2.5.1 is
selected.)
OPTIONAL PROVISION
the purchasing fee provided for in Section 2.5.1,
and applicable taxes, less all discounts taken.
4.2 Materials Furnished by Operator.
Materials required for operations shall be purchased for direct charge to the Joint
Account whenever practicable, except the Operator may furnish such Materials from its
stock under the following conditions:
4.2.1 New Materials (Condition "A").
New Materials transferred from the warehouse or other properties of Operator

shall be priced at net cost determined in accordance with Section 4.1 above as
if Operator had purchased such new Material just prior to its transfer.
Such net costs shall in no event exceed the then current market price.
4.2.2 Used Materials (Conditions "B" and "C").
4.2.2.1 Material which is in sound and serviceable condition and suitable

for use without repair or reconditioning shall be classed as
Condition "B" and priced at seventy-five percent (75%) of such
new purchase net cost at the time of transfer.
4.2.2.2 Materials not meeting the requirements of Section 4.2.2.1 above,

but which can be made suitable for use after being repaired or
reconditioned, shall be classed as Condition "C" and priced at fifty
percent (50%) of such new purchase net cost at the time of
transfer. The cost of reconditioning shall also be charged to the
Joint Account provided the Condition "C" price, plus cost of
reconditioning, does not exceed the Condition "B" price; and
provided that Material so classified meet the requirements for
Condition "B" Material upon being repaired or reconditioned.

4.2.2.3 Material, which cannot be classified as Condition "B" or Condition
"C", shall be priced at a value commensurate with its use.
4.2.2.4 Tanks, derricks, buildings, and other items of Material involving

erection costs, if transferred in knocked-down condition, shall be
graded as to condition as provided in this Section 4.2.2 of Section
IV, and priced on the basis of knocked-down price of like new
Material.
4.2.2.5 Material including drill pipe, casing and tubing, which is no longer
useable for its original purpose but is useable for some other
purpose, shall be graded as to condition as provided in this
Section 4.2.2. of Section IV Such Material shall be priced on the
basis of the current price of items normally used for such other
purpose if sold to third parties.
4.3 Premium Prices.
Whenever Material is not readily obtainable at prices specified in Sections 4.1 and 4.2 of
this Section IV because of national emergencies, strikes or other unusual causes over
which Operator has no control, Operator may charge the Joint Account for the required
Material at Operator's actual cost incurred procuring such Material, in making it suitable
for use, and moving it to the Contract Area, provided that notice in writing, including a
detailed description of the Material required and the required delivery date, is furnished
to Non-Operators of the proposed charge at least ____ Days (or such shorter period as
may be specified by Operator) before the Material is projected to be needed for
operations and prior to billing Non-Operators for such Material the cost of which exceeds
_____________ U.S. dollars (U.S. $_________) U.S. $_________. Each Non-Operator
shall have the right, by so electing and notifying Operator within __ Days (or such
shorter period as may be specified by Operator) after receiving notice from Operator, to
furnish in kind all or part of his share of such Material per the terms of the notice which is
suitable for use and acceptable to Operator both as to quality and time of delivery. Such
acceptance by Operator shall not be unreasonably withheld. If Material furnished is
deemed unsuitable for use by Operator, all costs incurred in disposing of such Material
or returning Material to owner shall be borne by the Non-Operator furnishing the same
unless otherwise agreed by the Parties. If a Non-Operator fails to properly submit an
election notification within the designated period, Operator is not required to accept
Material furnished in kind by that Non-Operator. If Operator fails to submit proper
notification prior to billing Non-Operators for such Material, Operator shall only charge
the Joint Account on the basis of the price allowed during a "normal" pricing period in
effect at time of movement.
4.4 Warranty of Material Furnished by Operator.
Operator does not warrant the condition or fitness for the purpose intended of the
Material furnished. In case defective Material is furnished by Operator for the Joint
Account, credit shall not be passed to the Joint Account until adjustment has been
received by Operator from the manufacturers or their agents.

SECTION V. 5
DISPOSAL OF MATERIALS
5.1 Disposal.
Operator shall be under no obligation to purchase the interest of Non-Operators in new

or used surplus Materials. Operator shall have the right to dispose of Materials but shall
advise and secure prior agreement of the Operating Committee of any proposed
disposition of Materials having an original cost to the Joint Account either individually or
in the aggregate of ____________________ U.S. Dollars (U.S. $_______) U.S.
$_______ or more. When Joint Operations are relieved of Material charged to the Joint
Account, Operator shall advise each Non-Operator of the original cost of such Material
to the Joint Account so that the Parties may eliminate such costs from their asset
records. Credits for Material sold by Operator shall be made to the Joint Account in the
month in which payment is received for the Material. Any Material sold or disposed of
under this Section 5 shall be on an "as is, where is" basis without guarantees or
warranties of any kind or nature. Costs and expenditures incurred by Operator in the
disposition of Materials shall be charged to the Joint Account.
5.2 Material Purchased by a Party or Affiliate.
Proceeds received from Material purchased from the Joint Property by a Party or an
Affiliate thereof shall be credited by Operator to the Joint Account, with new Material
valued in the same manner as new Material under Section 4.2.1 and used Material
valued in the same manner as used Material under Section 4.2.2, unless otherwise
agreed by the ________________ (insert either "Operating Committee" or "Parties").
5.3 Division In Kind.
Division of Material in kind, if made between the Parties, shall be in proportion to their
respective interests in such Material. Each Party will thereupon be charged individually
with the value (determined in accordance with the procedure set forth in Section 5.2) of
the Material received or receivable by it.
5.4 Sales to Third Parties.
Proceeds received from Material purchased from the Joint Property by third parties shall
be credited by Operator to the Joint Account at the net amount collected by Operator
from the buyer. If the sales price is less than that the value determined in accordance
with the procedure set forth in Section 5.2, then approval by the ________________
(insert either "Operating Committee" or "Parties") shall be required prior to the sale. Any
claims by the buyer for defective materials or otherwise shall be charged back to the
Joint Account if and when paid by Operator.

SECTION VI. 6
INVENTORIES
6.1 Periodic Inventories - Notice and Representation.
At reasonable intervals,
Check the following Optional Provision if desired.
OPTIONAL PROVISION
but at least annually,
inventories shall be taken by Operator of all Material held in warehouse stock on which
detailed accounting records are normally maintained. The expense of conducting
periodic inventories shall be charged to the Joint Account. Operator shall give Non-
Operators written notice at least sixty 60 Days (60) in advance of its intention to take
inventory, and Non-Operators, at their sole cost and expense, shall each be entitled to
have a representative present. The failure of any Non-Operator to be represented at
such inventory shall bind such Non-Operator to accept the inventory taken by Operator.,
Operator who shall in anythat event furnish each Non-Operator with a reconciliation of
overages and shortages. Inventory adjustments to the Joint Account shall be made for
overages and shortages. Any adjustment equivalent to _____________ U.S. Dollars
(U.S. $__________) U.S. $__________ or more shall be brought to the attention of the
Operating Committee.
6.2 Special Inventories.
Whenever there is a sale or change of interest a Participating Interest in the

Agreement, a special inventory may be taken by the Operator provided the seller and/or
purchaser of such interest agrees to bear all of the expense thereof. In such cases, both
the seller and the purchaser shall be entitled to be represented and shall be governed by
the inventory so taken.

APPENDIX 1
1.6.13 Funding by Operator
EXAMPLE NO. 1
1.6.13.1 Notwithstanding any of the provisions of Sections 1.6.1

through 1.6.6 to the contrary, Operator may elect to fund the
costs of the Joint Operations and bill each Non-Operator for
its Participating Interest share of such funding pursuant to
the provisions of Section 1.6.13. Operator shall exercise
such election by submission of notice to Non-Operators at
the time of submission of any proposed Work Program and
Budget to the Parties pursuant to Article 6 of the Agreement.
In consideration for such funding, each Non-Operator shall
pay Operator the financing charge specified in Section
1.6.13.3.
1.6.13.2 Not later than the 10th Day after the end of any month for
which the Operator has funded the Joint Operations,
Operator shall bill each Non-Operator for (1) its share of the
cash expenditure, and (2) the financing charge calculated in
1.6.13.3 Operator’s financing charge to a Non-Operator for funding

the Joint Operations shall be calculated in accordance with
the following formula:
F = (C x P) x I x S/365
Where:
F = the finance charge payable by the Non-Operator.
C = cash expenditures funded by the Operator on behalf of

the Parties in accordance with Section 1.6.13.1.
P = the Participating Interest of the Non-Operator.
I = interest at the London Interbank Offered U S Dollar rate

(“LIBOR”) for 1 month specified in the Financial Times or if not
published, then by The Wall Street Journal, applicable on the
15th Day of the month during which such funding cost was
incurred, or if such Day is not a Business Day, the first such
Business Day thereafter.
S = the number of Days from the fifteenth Day of the month

during which such funding costs were incurred until the due
date for the payment (both dates inclusive).

1.6.13.4 Notwithstanding the provisions of Section 1.6.8, each bill
under Section 1.6.13 shall be due on the 20th Day of the
month in which the bill was issued, or if such Day is not a
Business Day in the Country of Operations, the first Business
Day thereafter.
1.6.13.5 In any subsequent Calendar Year, Operator may elect to

adopt a cash call procedure in accordance with Sections
1.6.1 through 1.6.6 by notice submitted to the Non-Operators
at the time of submission of any proposed Work Program and
1.6.13.6 Whenever a successor Operator is appointed pursuant to

Article 4.11 of the Agreement, such successor Operator shall
notify the Non-Operators, within 30 Days of its appointment,
as to whether it intends to adopt a cash call procedure or an
Operator funding procedure for the Joint Operations.
EXAMPLE NO. 2
1.6.13.1 Notwithstanding any of the provisions of Sections 1.6.1

through 1.6.6 to the contrary, the Operator may elect to fund
the costs of Joint Operations on behalf of the Parties during
each accounting period subject to reimbursement of such
costs by the Parties pursuant to Section 1.6.13.
1.6.13.2 Not later than the 10th Day after the end of any month for which
the Operator has funded the Joint Operations, Operator shall
bill each Non-Operator for (1) its share of the cash
expenditure, and (2) the financing charge calculated in
1.6.13.3 When significant expenditures are envisaged during a year

Operator may request a funding payment that will remain with
Operator for a fixed period of time. However, such payment, if
any, will be periodically reviewed and adjustments made as
appropriate between Operator and the other Parties. Any
funding payment requested by Operator will be called for
receipt on the first Day of a calendar month subject to the
provision of 10 Days notice of settlement.
1.6.13.4 Operator’s financing charge to a Non-Operator for funding the

Joint Operations shall be calculated in accordance with the
following formula:
F = [(CxP) x (I x S/365)] less [D x (I x T/365)]
Where:

F = the financing charge or credit to be settled between the
relevant Non-Operator and Operator.
C = cash expenditures funded by the Operator on behalf of the

Parties in accordance with Section 1.6.13.1.
D = the funding payment received by the Operator from the

Non-Operator pursuant to Section 1.6.13.3.
P = the Participating Interest of the relevant Non-Operator

under the Agreement;
I = interest at London Interbank Offered U.S. Dollar rate

(“LIBOR”) for 1 month specified in the Financial Times or if not
published, the by The Wall Street Journal applicable on the
15th Day of the month during which such funding cost was
incurred, or if such Day is not a Business Day, the first such
Business Day in London, the first such Business Day
thereafter.
S = the number of Days from the 15th Day of the month during
which funding was incurred until the due date for the payment
(both dates inclusive).
T = the number of Days in the month relating to the invoice.
1.6.13.5 Notwithstanding the provisions of Section 1.6.8, each bill

under Section 1.6.13 shall be due on the 20th Day of the month
in which the bill was issued, or if such Day is not a Business
Day in the Country of Operations, the first Business Day
thereafter.
1.6.13.6 In times of major expenditures, Operator reserves the right to

introduce cash call advances as provided in Section 1.6.1
through 1.6.6 as an alternative method of funding Joint
Operations.
OPTIONAL PROVISION
“Similarly cash calls shall also be applied upon the unanimous

request of all Non-Operators.
1.6.13.7 In any subsequent Calendar Year, Operator may elect to

adopt a cash call procedure in accordance with Sections
1.6.1 through 1.6.6 by notice submitted to the Non-Operators
at the time of submission of any proposed Work Program and
1.6.13.8 Whenever a successor Operator is appointed pursuant to

Article 4.11 of the Agreement, such successor Operator shall
notify Non-Operators, within 30 Days of its appointment, as to

whether it intends to adopt a cash call procedure or an
Operator funding procedure for the Joint Operations.

********************
THIS PAGE IS NOT A PART OF
THE ACCOUNTING PROCEDURE OR
THE OPERATING AGREEMENT
**********************
References to the following Model Operating Agreement Articles may be found in this
Accounting Procedure in the Sections indicated.
Article I Section 1.3
Article 1.4 Section 1.6.13.3
Article 4.2(B)(6) Section 1.8.1
Article 4.11 ............................ Section 1.6.13.5, 1.6.13.8 (Appendix 1)

Article 6................................ Section 1.6.13.1 (Appendix 1)
Article 6.4 .............................. Sections 1.5.1, 1.6.1 and 1.6.2
Article VII 7............................ Sections 1.6.13.1 and 1.6.13.5, 1.6.13.7 (Appendix 1)
Article VIII 8........................... Section 1.6.9
Article 15.............................. Section 2.7.2 Optional
Article 15.1(A)(3) and (9)(10) Section 1.8.3 1.8.4
Article XVIII 18 ...................... Section 1.8.6 1.8.8
AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE

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NARRATION AND COMPARISON – 2000 vs.

© Association of International Petroleum Negotiators

Section – A definition of “Section” was added.

1.4.6 “Cash” and “Accrual” were capitalized as defined terms.

confirmation of confidential or proprietary information by an internationally

confirmation by an internationally recognized independent public accounting firm

Alternative 3 provides for an independent public accounting firm designated by the

5.4 The words “the value” were added for clarification.

AIPN MODEL FORM

INTERNATIONAL ACCOUNTING PROCEDURE

SECTION I. 1 GENERAL PROVISIONS .................................................................................................... 1

SECTION V. DISPOSAL OF MATERIALS ................................................................................................ 27

1.2 Conflict with Agreement.

The definitions contained in Article I of the Agreement to which this Accounting

"Country of Operations" means ________________________.

"Secondees" means technical and professional personnel employed by a Non-

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE PAGE 1

1.4 Joint Account Records and Currency Exchange.

1.4.2 Operator shall maintain accounting records pertaining to Joint Operations in

1.4.3 The Joint Account shall be maintained by Operator in the

Check one Alternative.

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE PAGE 2

in accordance with the Contract.

Any such exchange gains or losses shall be separately identified as such.

1.4.5 This Accounting Procedure shall apply, mutatis mutandis, to Exclusive

1.4.6 The ___________ (insert "cash""Cash" or "accrual”)"Accrual”) basis for

1.5 Statements and Billings.

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE PAGE 3

These statements, as a minimum, shall contain the following information:

- the share of each Party in total expenditures,

- the accrued expenditures,

- the current account balance of each Party,

- summary of costs, credits, and expenditures on a current month, year-to-

- details of unusual charges and credits in excess of U.S. dollars

1.5.2 Operator shall, upon request, furnish a description of the accounting

1.6 Payments and Advances.

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE PAGE 4

1.6.4 Notwithstanding the provisions of Section 1.6.2, should Operator be required to

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE PAGE 5

OPTIONAL PROVISION - (INTEREST ON COMMINGLED FUNDS)

Any interest received by Operator from interest-bearing accounts containing

1.6.8 If Operator does not request Non-Operators to advance their share of

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE PAGE 6

1.6.13 Funding by Operator By Operator

1.6.13.1 Notwithstanding any of the provisions of Sections 1.6.1 through 1.6.6 to

The Parties may agree on additional funding mechanisms including

F = the finance charge payable by the Non-Operator.

C = cash expenditures funded by the Operator on behalf of the Non-Operators in

PI = the Participating Interest of the Non-Operator.

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE PAGE 7

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE PAGE 8

If an Affiliate considers such information confidential or proprietary or if such

OPTIONAL PROVISION (AUDIT OF AFFILIATE CHARGES UNDER SECTIONS 2.6

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE PAGE 9

Check one Alternative

ALTERNATIVE NO. 1 – RESTRICTED AFFILIATE AUDIT

In addition to the information provided by the Operator under Section

(b) The Affiliate may require use of an internationally recognized

If the independent public accounting firm of the Affiliate declines to