License Agreement between Republic of Latvia and AMOCO Latvia Petroleum Company, a company incorporated in the United States and Oljeprospektering AB (OPAB), a company incorporated in Sweden

This License Agreement made the 3lst day of October, 1995 between the Republic of Latvia, represented by the Cabinet of Ministers of the Republic of Latvia (hereinafter" Government"), herein represented by the Minister of Environmental Protection and Regional Development, Mr. J.Iesalnieks, and the State Minister for Energy, Mr. J.Ozoli-§, of the first part:

and

AMOCO LATVIA PETROLEUM COMPANY, a company established under the laws of Delaware, U.S.A. (hereinafter "AMOCO"), and OLJEPROSPEKTERING AB (hereinafter

"OPAB"), a company established under the laws of Sweden (AMOCO and OPAB hereinafter sometimes collectively referred to as "Companies" or individually as "Company"), of the second part;

WITNESSETH

WHEREAS, petroleum in its natural state in the economic zone of the Republic of Latvia is wholly the property of the Republic of Latvia and under the control of the Republic of Latvia;

WHEREAS, the Republic of Latvia has the strategic long term goal of using its natural resources to promote Latvian economy and moving towards partial petroleum self -sufficiency;

WHEREAS, the Companies wish to explore for and exploit petroleum reserves in the economic zone of the Republic of Latvia in the area specified in Schedule "A" to this License Agreement (hereinafter "License Area"), in accordance with the laws of the Republic of Latvia;

WHEREAS, the Government and the Companies acknowledge that part of the License Area is the subject of a discussion between the Governments of Latvia and Lithuania and that only such area as is within Latvia shall be the subject of this License;

WHEREAS, the Government wishes its controlled company (hereinafter "Government Owned Company" or "GOC") to participate with the Companies in the exploration for and the exploitation of petroleum reserves in the License Area;

WHEREAS, the Republic of Latvia desires to continue to exercise its control of the petroleum reserves in the economic zone of the Republic of Latvia, subject to the terms of this License Agreement (hereinafter "License") with the Companies;

WHEREAS, the Government and the Companies intend that the provisions of this License be carried out in a spirit of good faith and goodwill;

WHEREAS, the Parties executed a Memorandum of Understanding memorializing the foregoing on the l7th day of May,1993 and amended and prolonged it on the l6th day of February,1995 and further amended and prolonged it on the 2-th day of May, 1995;

WHEREAS, pursuant to the Law On the Continental Shelf and Economic Zone of the Republic of Latvia of February 2,1993, the Cabinet of Ministers of the Republic of Latvia has authorized

the Minister of Environmental Protection and Regional Development, Mr. J.Iesalnieks, and the State Minister for Energy, Mr. J.Ozolins, to enter into this License with the Companies as a Licensee on behalf of the Republic of Latvia;

WHEREAS, the Board of Directors of AMOCO by its decision as of August 14,1995 has authorized Mr. Valdis Budrevics, President of AMOCO, to enter in this License Agreement with the Government;

WHEREAS, the Board of Directors of OPAB by its decision as of October 30,1995 has authorized Mr. Bjorn Inge Tonnessen, Project Manager of OPAB, to enter into this License Agreement with the Government; and

WHEREAS, the Government has taken or will take all necessary steps to ensure the enforceability and validity of the rights granted the Companies hereunder.

NOW THEREFORE, THE PARTIES hereto agree as follows:

ARTICLE I

DEFINITIONS

Unless the context requires otherwise, the following terms when used in this License shall have the meaning ascribed to them hereunder.

1.1 "Affiliated Company" means with reference to a Company a company that directly or indirectly controls or is controlled by such Company, or a company which directly or indirectly controls or is controlled by a company which controls such Company, it being understood that "control" shall mean ownership by one company of more than fifty (50) percent of the voting rights of the other company.

1.2 "Appraisal Well" means an Exploratory Well drilled for the purpose of evaluating the commerciality of a geological trap in which Petroleum has been discovered.

1.3 "Associated Gas" means Natural Gas found in association with Crude Oil.

1.4 "Basement" means igneous rocks, metamorphic rocks or rocks of such nature which, or formations below which, could not contain Petroleum deposits in accordance with the knowledge generally accepted in the international petroleum industry in Western Europe and shall also include impenetrable rock substances such as salt domes and mud domes as well as any other rocks which make further drilling impracticable or economically unjustifiable by the modern drilling technology normally utilized in the international petroleum industry.

"Blocks" means, subject to Article 24.2, the area as specified in Schedule "A".

"Commercial Discovery" means reserves of petroleum discovered on a prospect by Exploration Operations which Licensees have declared to be commercial in accordance with Article IX.

1.7 "Commercial Production" means production of Crude Oil or Natural Gas or both and delivery of same at the relevant Measurement Point under a program of regular production and sale.

1.8 "Contract Year" means a period of twelve (12) consecutive months counted from the Effective Date or from the anniversary of the Effective Date.

1.9 "Crude Oil" means crude mineral oil, asphalt, ozokerite and all kinds of hydrocarbons and bitumens, both in solid and in liquid form, in their natural state or obtained from Natural Gas by condensation or extraction.

1.10 "Crude Oil Price" means the price of Crude Oil determined in accordance with the relevant provisions in Schedule "D".

l.ll "Development Area" means that portion of the License Area reasonably determined by Licensee on the basis of the available seismic and well data to cover the horizontal extent of an accumulation of Petroleum constituting a Commercial Discovery, enlarged in area by an appropriate buffer zone, such enlargement to extend uniformly around the perimeter of such accumulation.

1.12 "Development Operations" means operations conducted in accordance with the Overall Development Program with a view to the development of Petroleum accumulations underlying Development Areas. Development Operations include the drilling, completion and testing of Development Wells, the drilling and completion of wells for gas or water injection, the laying of gathering lines, the installation of offshore platforms and installations, the installation of separators, tankage, pumps, artificial lift and other producing and injection facilities required to produce, process and transport Petroleum into main oil storage or gas processing facilities either onshore or offshore, including the laying of pipelines within or outside the License Area to such storage and delivery points, the installation of said storage or gas processing facilities, and also including incidental operations not specifically referred to herein as required for the development and production of the said Petroleum accumulations, and for the delivery of the Crude Oil and/or Natural Gas at the Measurement Point, in accordance with practices generally accepted in the international petroleum industry.

1.13 "Development Well" means a well drilled under the Overall Development Program for the purposes of producing Petroleum, increasing production, sustaining production or accelerating extraction of Petroleum including production wells, injection wells and dry wells.

1.14 "Discovery" means the finding during Exploration Operations of a deposit of Petroleum which can be recovered at the surface in a flow measurable by conventional petroleum industry testing methods.

1.15 "Exploration Costs" means costs, expenditures and obligations incurred in carrying out Exploration Operations.

1.16 "Exploration Operations" means operations conducted pursuant to this License with a view to the discovery of Petroleum accumulations and to the appraisal of the extent and volume of such accumulations, the characteristics of the relevant reservoirs and their likely behavior when produced. Exploration Operations shall include geological, geophysical and geochemical surveys, analyses and studies, the drilling, abandonment or completion of wells, the testing of such wells and all operations incidental thereto.

1.17 "Exploratory Well" means any well drilled for the purposes specified in Article 1.16, including dry holes, discovery wells, and Appraisal Wells.

1.18 "Financial Year" means the period from the lst January to the following 3lst of December.

1.19 "Foreign Exchange" means U.S. dollars and/or other freely convertible foreign currency generally acceptable in the international banking community.

1.20 "Gas Field" means a Gas reservoir or multiple vertically overlapping Gas reservoirs within the License Area which have been determined to be of commercial value in accordance with Article XIII of this License.

1.21 "Government" means the Government as represented by the Cabinet of Ministers of the Republic of Latvia, including all its subdivisions, agencies and instrumentalities, acting in its capacity as the Government.

1.22 "License Area" means, subject to Article 24.2, the Blocks excluding any portion of the Block in respect of which Licensee's rights hereunder are from time to time relinquished or surrendered pursuant to this License.

1.23 "Licensee" means the entities designated in Article 2.1 and their successors and assigns as permitted under Article XVII hereof.

1.24 "Measurement Point" means, in respect of Crude Oil or Natural Gas, the point of the delivery facility at which Crude Oil or Natural Gas, as the case may be, reaches the measuring instrument (meter) connected with the outlet flange of the Crude Oil or Natural Gas delivery facility either offshore or onshore, as specified in the Overall Development Program~

1.25 "Memorandum of Understanding" means the Memorandum of Understanding executed by the Parties on the l7th day of May,1993, as amended and prolonged on the l6th day of February, 1995, and further amended and prolonged on the 26th day of May, 1995.

1.26 "Natural Gas" or "Gas" means wet gas, dry gas, all other gaseous hydrocarbons carbon dioxide, and all substances contained therein, including sulphur and helium, which are produced from oil or gas wells, excluding condensed or extracted liquid hydrocarbons, and including the residue gas remaining after the condensation or extraction of liquid hydrocarbons from gas.

1.27 "Natural Gas Price" means the price of Natural Gas determined in accordance with the relevant provisions in Schedule "D".

1.28 "Non-Associated Gas" means Natural Gas found without association with Crude Oil or in association with Crude Oil which cannot be commercially produced.

1.29 "Oil Field" means a Crude Oil reservoir or multiple vertically overlapping Crude Oil reservoirs within the License Area which have been determined to have commercial value in accordance with Article IX of this License.

1.30 "Overall Development Program" means a plan adopted by the Licensee for the development of an Oil Field or Gas Field, and any amendment thereof. Such plan shall include, but shall not necessarily be limited to, recoverable reserves, the development well pattern, master design, production profile, economic analyses and time schedule of the Development Operations.

1.31 "Parties" means the Government and Licensee and "Party" means any of the Parties.

1.32 "Petroleum" means Crude Oil and Natural Gas.

1.33 "Petroleum Operations" means, as the context may require, Exploration Operations, Development Operations or Production Operations or any combination of two or more of such operations.

1.34 "Producible Area" means any part of the License Area covering the horizontal extent of the geological structure in which a discovery is made and from which, based upon the results obtained from the well or wells drilled in such part, Petroleum could possibly be produced in commercial quantities, including any Development Area.

1.35 "Producing Area" means any Development Area from which Petroleum is being produced in commercial quantities.

1.36 "Production Commencement Date" means the date upon which the permanent production facilities have been completed and Licensee commences regular deliveries of Petroleum in commercial quantities at the Measurement Point.

1.37 "Production Operations" means operations conducted with the intention of producing Petroleum in the License Area such as extraction, injection, stimulation, treatment, storage, transportation to the Measurement Point(s), lifting, etc., including the operation, maintenance and abandonment of all necessary facilities therefor.

1.38 "Royalty" means fee to be paid to the Government in accordance with Article XI.

1.39 "Quarter" means a period of three (3) successive months, beginning respectively, on the lst of January, the lst of April, the lst of July and the lst of October each Financial Year.

1.40 "Schedule" means a Schedule attached to this License and made a part hereof. In the event of any inconsistency or conflict between the provisions of this License and the provisions of any of the Schedules, the provisions of this License shall prevail.

1.41 "Sub-Contractor" means any legal entity or individual, not being an employee, contracted by or on behalf of Licensee to supply work or services related to this License and, for the avoidance of doubt, includes second and lower thier SubContractors contracted by or on behalf of other Sub-Contractors to supply services related to this License.

1.42 "Work Program" means all the plans formulated for the performance of the Petroleum Operations, including plans for Exploration, Development and Production Operations.

ARTICLE II

LICENSEE, GENERAL PROVISIONS, PERIODS AND DURATION

2.1 Licensee as of Effective Date shall have exclusive rights (license) to carry out Petroleum Operations and these rights are awarded to the following organizations comprising Licensee:

1. Amoco Latvia Petroleum Company (AMOCO), USA;

2. Oljeprospektering AB (OPAB), Sweden;

Government Owned Company (GOC) (until the GOC is assigned the rights pursuant to Article 4.2, said rights will be held by the Republic of Latvia).

2.2 This License gives Licensee exclusive rights to carry out Petroleum Operations within the territory specified in Schedule "A".

2.3 AMOCO undertakes to carry out functions, rights and obligations of the operator and Government approves that.

If AMOCO resigns, is abolished, or cannot perform functions of the operator because of reasons beyond its control, the Licensee shall appoint another operator, subject to the Government's approval, which approval shall not be unreasonably withheld.

2.4 The Exploration Period begins on the Effective Date of this License and shall consist of two (2) exploratory phases.

a) The term of the first exploratory phase (hereinafter "First Exploratory Phase") shall be three (3) consecutive Contract Years.

b) The term of the second exploratory phase (hereinafter "Second Exploratory Phase") shall be two (2) consecutive Contract Years.

2.5 At the end of the First Exploratory Phase, Licensee shall have the option:

a) to relinquish the License Area as provided in Article V; or

b) to obtain upon application to the Government an extension to the First Exploratory Phase for up to three years as is necessary to complete the drilling of the well already substantially commenced for that Phase or the appraisal work on a discovery; or

c) to proceed into the Second Exploratory Phase, which shall be extended upon application to the Government for up to two years as is necessary to complete the drilling of the well already substantially commenced for that Phase or the appraisal work on a discovery.

Licensee shall notify the Government of its election no less than thirty (30) days prior to the end of the First Exploratory Phase. If Licensee elects option b) above, it shall not thereafter have the right to proceed into the Second Exploratory Phase without prior notice to the Government on completion of the First Exploratory Phase and approval by the Government.

2.6 Any Exploratory Phase shall, upon the application to the Government, be extended by such period of time as is necessary to allow Licensee to obtain consent of the Government to a Development Plan submitted following a discovery of petroleum which Licensee deems to be commercial, and to commence production pursuant thereto.

2.7 The Production Period for each Development Area shall be twenty five (25) consecutive years from the Production Commencement Date. If at the end of the Production Period Licensee considers further production economic, Licensee may request that the Production Period be extended by five (5) years.

ARTICLE III

TITLE TO PETROLEUM ASSETS AND DATA

3.1 The Republic of Latvia is the sole owner of Petroleum underlying the License Area.

3.2 Licensee shall be entitled to use, free of charge, such quantities of Petroleum produced in the License Area, whether in the natural state or processed, as may be required for conducting Petroleum operations (including gas lift operations) in the License Area in accordance with practices generally accepted in the international petroleum industry in Western Europe. Any Petroleum so used shall not be considered as Petroleum produced and saved from the License Area.

3.3 Title to all original geological, geophysical, geochemical, drilling, engineering, well logs, production and other data obtained as a result of the Petroleum Operations shall be with the Government, subject to the provisions of Article 16.2. The Companies shall, however, be entitled to retain said original data and to make use of all such data, free of cost, for the purpose of Petroleum Operations under this License, and shall also be entitled to trade the data with any third party with the consent of the Government, which consent shall not be unreasonably withheld. If no written rejection of a proposed trade is issued by the Government within thirty (30) days after submission of a request by the Licensee for consent to such trade, then such consent shall be deemed given.

3.4 Title to Crude Oil and/or Gas to which Licensee is entitled under this License shall pass from the Government to Licensee at the relevant Measurement Point.

3.5 In the event that the Government elects to take its royalty payment in kind pursuant to Article 11.4, the Government's share of Crude Oil and/or Gas shall be delivered by Licensee to the Government or its nominee at the relevant Measurement Point.

ARTICLE IV

PARTICIPATING INTERESTS

4.1 The initial Participating Interests of the Licensee shall be as follows:

AMOCO 45 %

OPAB 45 %

Republic of Latvia 10 %

4.2 The Republic of Latvia shall assign its ten percent (10%) Participating Interest to a Latvian company majority owned by the Government (GOC) within one year of the Effective Date hereof or said ten percent ( 10 % ) interest shall revert to AMOCO and OPAB in equal parts. The Companies shall bear the GOC's ten percent ( 10 % ) Participating Interest share of Licensee's costs in the License Area until the approval of the first Overall Development Program in accordance with Article IX. Thereafter, the GOC shall bear its full Participating Interest share of all costs in accordance with the Joint Operating Agreement ("JOA").

4.3 In addition to the foregoing, the Government retains the right to assign a further ten percent (10 % ) Participating Interest either: a) to a third party company acceptable to the Companies or b) to the GOC (such company or the GOC being hereinafter "Designated Company" or "DC"). Such right may be exercised by the Government within thirty days after the Effective Date of this License by giving Licensee written notice of such exercise and the name and address of the DC. If the DC is not acceptable to the Companies, they shali so notify the Government and the Government shall thereafter have another sixty days in which to so designate another company. The foregoing procedure shall be followed until an acceptable company is designated. Should the Government timely exercise this right, each of the Companies shall assign a five percent (5 % ) Participating Interest to the DC such that the DC's Participating Interest is ten percent (10%). The DC shall bear such ten percent (10 %) Participating Interest share of all Licensee's costs related to this License including, but not limited to, those costs related to Articles VI and XXIII of this License. All costs and expenses related to the transfer shall be borne by the DC.

ARTICLE V

RELINQUISHMENT

5.1 If at the end of the First Exploratory Phase, Licensee does not elect to continue into the Second Exploratory Phase pursuant to Article 2.5 Licensee shall relinquish all of the License Area, except for such portion of the License Area as is included in a Development Plan approved by the Government, and shall have no further rights or obligations with regard thereto.

5.2 At the end of the Second Exploratory Phase, Licensee shall relinquish all of the License Area, except for such portion of the License Area as is included in a proposed Development Plan approved by the Government.

5.3 Upon relinquishment, pursuant to Article 5.1 or 5.2, Licensee shall have no further rights or obligations as to such part of the License Area relinquished and the License shall terminate as to such Area except that Licensee shall deliver to the Government all geological and geophysical data and information (including cores of drilling of rock and samples, samples of oil and gas, if such are obtained) about the License Area acquired under the License and not previously provided to the Government, it being understood that Licensee can retain copies of such data.

5.4 On the date this License is terminated in accordance with the provisions of Article II, the License Area shall be deemed to have been relinquished by Licensee.

ARTICLE VI

WORK OBLIGATIONS

6.1 During the term of the First Exploratory Phase, Licensee shall complete the following Work Program having an estimated total cost of four million eight hundred fifty thousand U.S. dollars ($4,850,000):

a) reprocess all of the seismic data from the License Area obtained pursuant to the Data Purchase License between the Government and the Companies dated June 30, 1992, and reprocess the 488 kilometers of seismic obtained pursuant to the Memorandum of Understanding, and submit the reprocessed data and a report concerning the prospectivity of License Area to the Government;

b) drill one Exploratory Well in the License Area into the preCambrian basement and submit the resulting geological and geophysical data and information to the Government.

It is recognized that some of the reprocessing and associated work hereunder may have been performed prior to the Effective Date of the License.

6.2 During the term of the Second Exploratory Phase, Licensee shall complete the following Work Program having an estimated total cost of five million U.S.dollars ($5,000,000):

- drill one Exploratory Well in the License Area and submit the resulting geological and geophysical data and information to the Government.

6.3 In the event that Licensee has failed to fulfill the minimum Work Program specified in Article 6.1 or 6.2 by the end of the relevant Exploratory Phase, Companies shall pay to the Government of Latvia in U.S. dollars within sixty (60) days following the end of the subject phase an amount equal to the difference between the estimated cost of the minimum Work Program prescribed for the subject phase as specified in Article 6.1 or 6.2, as the case may be, and the amount of Exploration Costs associated with the License incurred by Companies in accordance with normal international petroleum industry practice prevailing in Western Europe during the subject phase and such payment shall fully satisfy Companies's work obligations under the aforesaid Articles for all purposes.

In the event Licensee has carried out work during the first Exploratory Phase in excess of the work obligations set forth in Article 6.1, the excess work shall be set off against the work obligations for the Second Exploratory Phase.

6.5 Any Exploratory Well carried out in accordance with the Articles 6.1 or 6.2 shall be deemed as drilled if such well reaches its objective or that point below which further drilling becomes impracticable and drilling would be abandoned by a reasonable and prudent operator in the same or similar circumstances in accordance with practices generally accepted in the international petroleum industry in Western Europe.

ARTICLE VII

CONDUCT OF OPERATIONS

7.1 Subject to the provisions of this License, Licensee shall have the exclusive right to carry out Petroleum Operations in the License Area and shall be responsible for the conduct of said operations. In addition to the work obligations specified in Article VI, Licensee shall have the continuing right during the term of this License in accordance with good oil field practices in Western Europe to conduct Exploration Operations within the License Area, including but not limited to, the drilling or deepening of Exploratory Wells or Appraisal Wells and the deepening of Development Wells.

7.2 Petroleum Operations within the territory and/or economical zone of Latvia shall be conducted in accordance with the laws of the Republic of Latvia, including international conventions related to the environment which have been ratified or which are ratified in the future by the Republic of Latvia and made the law of the Republic of Latvia. In the event the laws of the Republic of Latvia conflict with the provisions of the Convention on the Protection of the Marine Environment of the Baltic Sea Area (including Recommendations adopted and approved by the Helsinki Commission) (hereinafter referred to as the "Helsinki Convention") which has been ratified by the Republic of Latvia, Licensee shall comply with the provisions of Helsinki Convention and shall not be subject to any penalties or taxes for doing so. All Petroleum Operations will be conducted in a safe manner in accordance with good international oil fleld practices prevailing in Western Europe and principles of environmental protection. In the event that Latvia does not have specific laws and regulations governing safety, construction and environmental and other issues pertaining to Petroleum Operations, the operations shall be conducted in accordance with the laws and regulations of Sweden, as far as they are not in contradiction with Latvian laws, and the Helsinki Convention. In performing Petroleum Operations Licensee will coordinate with appropriate Ministries and obtain such permits as may be required by the relevant Latvian laws or regulations.

As between the entities comprising Licensee, the conduct of operations by Licensee under this License shall be governed by a Joint Operating Agreement ("JOA") agreed to by the Companies which shall be binding on all entities comprising Licensee. Each entity comprising Licensee shall have voting rights thereunder commensurate with its Participating Interest. The following decisions under the JOA shall require the unanimous vote of the Participating Interests:

(i) approval of the annual Work Program and budget concerning exploration drilling beyond the work required to fulfill the work obligations contained in Article VI;

(ii) execution of a unitization agreement relating to the exploration of deposits extending outside the License Area.

AMOCO shall be the initial operator for the Licensee as regards conducting of Petroleum Operations in accordance with Article II.

7.4 The Licensee undertakes to provide Latvian companies with genuine opportunities, in competition with other companies, to obtain general contracts and sub-contracts, and to provide goods and services, connected with the performance of the activities under this License and shall give preference to such Latvian companies provided that such Latvian companies meet Licensee's established safety, engineering, and operational standards and specifications, and are competitive with those available from international suppliers in terms of price, quality, and ability to meet required schedules. Licensee shall require that its contractors, subcontractors .and any other party engaged by the Licensee for the performance of any activities in connection with this License comply with the foregoing.

Licensee shall provide the Government with such information as may reasonably be required by the Government to monitor compliance with the foregoing, including information regarding invitations to tender, tender awards and contractual relationships.

7.5 Upon termination of the work under the License, Licensee shall cause to be removed petroleum equipment placed on the continental shelf or on the shores of Latvia and used in the project, in a manner consistent with Western European international industry acceptable safety, environmental and work standards. The Government shall reserve the right to waive this requirement for any particular piece of the equipment, and upon mutual agreement to obtain title to such equipment.

7.6 Without limiting the rights of the Parties under Article XVIII, in the event that the Parties agree that Licensee is prevented or impeded from carrying on Petroleum Operations or from gaining access to the License Area for reasons relating to the protection of personnel, Sub-Contractors or property, Licensee's obligations hereunder and the running or the term of this License shall be suspended from the time of the commencement of such impairment until such time that the Parties agree that the impairment has been alleviated. When the Parties agree that the impairment has been alleviated, the term of this License shall resume from the point the suspension occurred; however a period of time shall be added to the Exploration Period and the Production Period, which period of time shall be equivalent to the amount of the time necessary to restore operations to the status which they occupied at the time of the impairment.

7.7 Licensee shall notify, reasonably in advance, to the Government or any other authority designated by the Government its program of conducting surveys over the License Area by aircraft indicating, inter alia, the name of the Sub-Contractor engaged to carry out the survey, the nature of the survey to be conducted, approximate extent of the area to be covered, the duration of the survey with the commencement date and name of the airport from which the survey aircraft will commence its flight. Flights are to be performed after approval of the appropriate Government authority as required by the laws of Latvia.

7.8 The Government or the authority designated by the Government for this purpose shall have the right at its own cost to inspect any aircraft or ship used by Licensee for carrying out any survey in the contract Area and to put on board in such aircraft or ship its representatives in such number as may reasonably be necessary to ensure compliance with the security requirements of the Government.

7.9 To the extent it does not unreasonably interfere with operations, the Licensee shall assist the appropriate Ministries in their efforts to make required inspections of operations by providing transportation to and from offshore facilities and providing accommodations while offshore on a space available basis to authorized Ministry personnel. Licensee will be given a minimum of two weeks written notice prior to said required inspections. The Government assumes sole liability for the health and safety of such personnel during said inspection.

7.10 The Licensee shall compensate the State Environment Impact Assessment Commission's non-staff experts for reasonable and customary expenses incurred while reviewing the environmental impact assessment documentation provided by Licensee for both the exploration environmental impact assessment and the Overall Development Program environmental impact assessment pursuant to Article 14 of the Latvian Law on State Environmental Impact Assessments (October 9, 1990).

ARTICLE VIII

OBLIGATIONS OF THE LICENSEE

8.1 Licensee shall provide all funds, technology and expertise necessary to conduct the Petroleum Operations.

8.2 Licensee shall conduct the Petroleum Operations diligently and as specified in Article 7.2; provided, however, that Licensee shall be liable for any acts or omissions, claims, damages, losses or expenses arising in connection with the Petroleum Operations only if resulting from Licensee's or its subcontractor's willful misconduct or negligence.

8.3 Licensee shall perform at the Measurement Point(s) all measurements on Petroleum produced from the License Area and not used in Petroleum Operations. The Government personnel may, at the Government's cost, observe these measurements and inspect the instruments used. If it is necessary or desirable to modify or replace these instruments, Licensee shall so inform the Government in advance, and the Government personnel may verify such modification or replacement.

8.4 Licensee shall provide current and timely information, data and reports to the Government regarding the Petroleum Operations.

8.5 The Licensee's capability to discharge its liability for damages shall be evidenced either:

(i) by insurance which provides reasonable coverage, in light of the risks involved in the operation of the Licensee and the premiums to be paid; or

(ii) by providing to the satisfaction of the Government reasonable evidence of financial capability to meet the liabilities involved, which evidence may include a parent company guarantee that such parent will provide the subsidiary with all means necessary to meet the subsidiary's obligations.

If insurance is provided in accordance with (i) above, then at the end of each calendar year the Government shall be informed of the insurance then in force and of the principal terms thereof.

ARTICLE IX

DECLARATION OF COMMERCIAL DISCOVERY

AND DESIGNATION OF DEVELOPMENT AREA

9.1 If any Petroleum Discovery is made within the License Area, Licensee shall promptly inform the Government of such Discovery, and shall act in accordance with the Articles XII and XIII.

9.2 As soon as practicable after a Petroleum Discovery, Licensee shall submit a report to the Government indicating whether or not such Discovery merits appraisal. If Licensee considers that the Discovery merits appraisal, the report shall include an appraisal program and timetable. Licensee shall carry out the appraisal program within the Exploration Period (including any extension thereof granted in accordance with Article II) and as indicated in the appraisal program and timetable submitted by Licensee. Any Appraisal Well shall be drilled at a location and to an objective depth determined by Licensee after consultation with the Government.

9.3 No later than one hundred and eighty ( 180) days following completion of the appraisal program and in any event prior to the end of Exploration Period (including any extension thereof granted in accordance with Article II), Licensee shall submit to the Government a detailed evaluation report which shall include all available technical data relevant to a determination of commerciality and relevant to the description of the Producible Area, including, but not limited to, geological and geophysical conditions, such as structural configuration, physical properties and the extent of reservoir rocks, areas, thickness and depth of pay zones, pressure, volume and temperature analysis of the reservoir fluids, Crude Oil and Natural Gas reserve estimates, recovery drive characteristics, anticipated production performance per reservoir and per well, fluid characteristics, including in the case of Crude Oil, gravity, sulphur percentage, sediment and water percentage and product yield pattern. Licensee shall declare in this report whether or not the Discovery is commercial. If Licensee declares the Discovery to be commercial, the report shall contain a description of the Producible Area, and the date on which the report is submitted to the Government shall be the Date of Commercial Discovery.

Within two hundred (200) days following the Date of Commercial Discovery, Licensee shall adopt and furnish to the Government an Overall Development Program which shall describe:

a) the Development Area;

b) the Development Operations to be carried out, including the further delineation of the Development Area and the method for the disposal of Associated Gas;

c) Licensee's plans for the spacing, drilling and completion of wells , the production and storage installation and transport and delivery facilities required for the production, storage and transport of Petroleum, and such plans shall include the following information;

(i) the estimated number of Development Wells;

(ii) the particulars of production equipment and storage facilities;

(iii) the Measurement Points for Crude Oil and Natural Gas;

(iv) the particulars of other technical equipment required for Petroleum Operations;

d) the estimated production profiles for Crude Oil and Natural Gas from the Oil or Gas Fields, and the estimated commercial life of said Fields;

e) the cost estimates of capital and recurrent expenditure;

f) the economic feasibility studies carried out by or for the Licensee in respect of alternative methods for development of the Discovery, if any, taking into account:

(i) the location;

(ii) the. meteorological conditions;

(iii) the cost estimates of capital and recurrent expenditures; and

(iv) any other relevant data and evaluation thereof;

g) the safety measures to be adopted in the course of the Development and Production Operations including measures to deal with emergencies;

h) the necessary measures to be taken for the protection of the environment which will include the plan of environmental assessment and its timetable;

contingencies which may affect Licensee's ability to implement the Overall Development Program; and

j) any proposed unitization agreement.

9.5 Licensee's Overall Development Program shall be prepared on sound engineering and economic principles in accordance with accepted standards prevailing in the international petroleum industry in Western Europe and shall be designed with the objective of optimizing economic recovery of Petroleum resources from the Development Area.

9.6 At the Government's request, Licensee shall provide reasonable additional information ` or data as may be necessary to evaluate the Overall Development Program. The Government may reject the Overall Development Program and/or the revisions to the Overall Development Program as submitted to the Government pursuant to Article 9.4 only if it fails to conform with sound engineering and economic principles in accordance with the accepted standards prevailing in the international petroleum industry in Western Europe. If no written rejection of the Development Plan or the specific revisions to the Overall Development Program defined in Article 9.4 is issued within 60 days of submission thereof, or within 60 days of receipt of the above referenced additional data and information requested by the Government, the Development Plan shall be deemed approved. The foregoing 60 days shall be extended for so long as is necessary for Licensee to obtain any necessary consent from any applicable governments to any aspect of unitization, as well as for Licensee to perform ecologic expertise.

9.7 In the event the Government objects to the Development Plan, Licensee may submit such Development Plan to an independent expert mutually agreeable to both sides for a determination as to whether the Development Plan provides for optimal economic recovery of petroleum from the Development Area and conformance with sound engineering and economic principles in accordance with accepted standards prevailing in the international petroleum industry in Western Europe. In the case of determination of conformity the Government shall approve the Development Plan. The expertise procedure set forth in Article XIX shall apply. If the expert rules that it does not meet such criteria, the expert shall specify in what ways the Overall Development Program does not meet such criteria and Licensee may revise the Overall Development Program so as to meet expert's objections. If Licensee is not willing to revise the Overall Development Program so as to meet the expert's objections, Licensee shall withdraw its declaration of Commercial Discovery with respect to the Discovery in question, and the Discovery then shall be treated as though Licensee had initially not considered the Discovery to be commercial in the evaluation report submitted pursuant to Article 9.3.

9.8 Licensee may in the course of the Development Operations, make revisions or additions to the Overall Development Program initially adopted; provided, however, that the following revisions or additions shall require the prior approval of the Government;

a) if the estimated production profiles specified in Article 9.4 d) will

experience a twenty percent (20 % ) change in the approved estimated annual average production profile for a period in excess of eighteen months and/or;

b) if the approved total cost estimates of capital and recurrent expenditures specified in Article 9.4 e) will experience a twenty percent (20 % ) change; and/or

c) if significant changes to approved safety and environmental protection measures specified in Article 9.4 g) and h) will be necessary.

Licensee shall follow the procedure specified in Article 9.6. A copy of all revisions or additions shall be provided to the Government.

9.9 In the event Licensee seeks to finance development with funds from banks or other financial institutions, the Government shall assist Licensee in doing so by providing any information and recommendations requested by such banks or financial institutions which are in accordance with the laws of Latvia.

ARTICLE X

DEVELOPMENT AND PRODUCTION PLANS

10.1 Licensee shall conduct Development Operations and Production Operations in respect of any Development Area in accordance with the Overall Development Program consistent with practices generally accepted in the international petroleum industry in Western Europe.

10.2 Annual plans and budgets for Development and Production Operations consistent with the Overall Development Program shall be provided to the Government as soon as possible after the designation of a Development Area and thereafter not later than 3lst December each year in respect of the Financial Year immediately following.

ARTICLE XI ROYALTY

1 l.1 Each entity comprising Licensee shall pay to the Government as to such entity's share of the Petroleum produced and saved from the License Area a royalty equal to eleven percent ( 11 % ) of the market value of such Petroleum.

11.2 The market value of the Petroleum shall be determined in accordance with Schedule "D" hereto.

11.3 Royalty payments shall be made to the Government within sixty (60) days after the transfer of the title to the Petroleum from the Licensee to the purchaser. Late payments shall be subject to interest compounded on a daily basis at the rate of LIBOR ("the London Interbank Offering Rate") plus three percent (3 % ) per annum.

11.4 The Government shall reserve the right to receive production from the License Area in payment of the royalty in lieu of a cash payment. Should the Government elect to receive production in lieu of a cash payment of royalty, the Government shall provide Licensee with no less than six (6) months notice, which election shall be effective for a minimum of one (1) year.

ARTICLE XII

DISPOSAL AND SALE OF CRUDE OIL

12.1 No later than sixty (60) days prior to the Production Commencement Date in respect of each Producing Area and thereafter at the beginning of each Quarter, the Licensee shall prepare and furnish to the Government a production forecast setting out the total quantity of Crude Oil that it estimates can be produced from the subject Producing Area during each of the next four (4) Quarters, based on a production rate designed to optimize economic recovery of Crude Oil from that Production Area in accordance with practices generally accepted in the international petroleum industry in Western Europe. The Licensee shall endeavor to produce each Quarter the forecast quantity.

12.2 Each entity comprising the Licensee shall, throughout the terms of this License, have the right to freely lift, separately take in kind, dispose of and export all of its share of Crude Oil produced in the License Area without further license or permit from the Government.

12.3 The Government shall have the right to purchase for the Latvian domestic market up to and including twenty five percent (25 % ) of the Crude Oil produced from any Producing Area and not used in the Petroleum Operations in accordance with Article 3.2, provided that a mutually acceptable sales agreement has been concluded which contains commercial terms which are no less favorable to the Licensee than those available if the Crude Oil were sold to a third party and/or exported. Such sales agreement must provide for payment by the Government to the Licensee abroad in convertible currency within forty five (45) days from each delivery of Crude Oil so purchased by the Government at the Measurement Point. Any amounts unpaid by the Government on the due date shall from the due date bear interest calculated on a daily basis at the LIBOR rate plus three percent (3 % ) from the due date until paid. If full payment is not received by Licensee within forty five (45) days from any such delivery as aforesaid, and such default is not remedied within five (5) days from the date Licensee gives to the Government appropriate notice of such default, Licensee shall have the right, but shall not be required:

a) to suspend the Government's right to purchase under this Article 12.3; and

b) if payment plus interest is not received by Licensee by one hundred ( 100) days from the day such payment was due, Licensee shall be entitled to receive and keep the Government's royalty entitlement (or production in lieu thereof) pursuant to Article 11.4 until such time as the Government has paid all amounts due plus interest, or until the value based on the Crude Oil Price as determined in Schedule "D" of the royalty or production so received and sold is equal to all amounts due hereunder plus interest, whichever first occurs.

The Government shall exercise this option to purchase by written notice co Licensee, such notice to be given not later than one hundred and eighty (180) days prior to the first day of the calendar year for which such option is to be exercised and such exercise shall be final and binding for a minimum of one (1) year.

ARTICLE XIII NATURAL GAS

13.1 The Government shall have the right to purchase for the Latvian domestic market up to one hundred percent ( 100 % ) of the Natural Gas produced from any Producing Area and not used in the Petroleum Operations in accordance with Article 3.2, provided that a mutually acceptable sales agreement has been concluded which contains commercial terms which are no less favorable to the Licensee than those available if the Natural Gas were exported and which provides for payment by the Government to the Companies abroad in convertible currency. Gas not required for the domestic market shall be exportable without Eurther license or permit from the Government. Each party shall have the right to participate in all discussions and negotiations with respect to all dispositions and sales of Natural Gas by any other Party from the License Area, to the extent of and in the ratio of its pro-rata interest in the License Area.

13.2 ASSOCIATED NATURAL GAS

13.2.1 In the event a Crude Oil Discovery which Licensee has declared commercial in accordance with Article 9.3 contains Associated Gas, Licensee shall declare in the detailed evaluation report specified in Article 9.3 whether the estimated production of Associated Gas is anticipated to exceed the quantities of Associated Gas which will be required in accordance with Article 3.2 for the Crude Oil Production Operations (such excess being hereinafter referred to as "Excess Associated Gas") and whether the excess Associated Gas may be produced in commercial quantities. If Licensee declares that such Excess Associated Gas exists and may be produced in commercial quantities, Licensee shall indicate in the Overall Development Program prepared for the Crude Oil Discovery pursuant to Article 9.4 the particulars of the gathering, treating, compressing and transporting facilities required to use the Excess Associated Gas for commercial purposes, together with the estimated cost thereof.

13.2.2 If Licensee declares that the Excess Associated Gas may be produced in commercial quantities, then within ninety (90) days following the date of Licensee's adoption of the Overall Development Program, the Government shall notify Licensee whether it wishes to purchase the Excess Associated Gas for domestic purposes.

13.2.3 If the Government elects to purchase the Excess Associated Gas in accordance with Article 13.2.2, then:

(i) Licensee shall construct the gathering, treating, compressing, transporting and processing facilities required for the production and delivery to the Measurement Point of the Excess Associated Gas, as specified in the Overall Development Program; and

(ii) the price of the Excess Associated Gas shall, for all purposes under this License, be the Natural Gas Price determined in accordance with the principles set out in Schedule "D". Any Gas Sales contract to be entered into shall be negotiated on the basis of the pricing principles set out in Schedule "D".

13.2.4 If Licensee declares that the Excess Associated Gas may not be produced in commercial quantities, then:

(i) Licensee shall deliver, free of cost, to the Government at the initial Gas/Crude Oil separation facilities in the Development Area, such quantities of Excess Associated Gas as the Government wishes to lift, and shall install such facilities at the separation facilities as will permit the delivery as aforesaid;

(ii) in the case indicated in sub-article (i) the Government shall be responsible for the gathering at the separation facilities, treating, compressing, transporting and processing of said Excess Associated Gas, and shall bear all costs related thereto;

(iii) any receipt and disposition of Excess Associated Gas by the Government shall be carried out in accordance with sound international petroleum industry practices in Western Europe, in a manner which will not interfere with the production of Crude Oil by Licensee or with the Licensee's Crude Oil transport facilities; and

(iv) no royalty shall be due from Licensee on the Excess Associated Gas taken by the Government pursuant to this Article 13.2.4.

13.2.5 Licensee shall have the right to flare any Excess Associated Gas not used in accordance with Article 13.2.3 or 13.2.4 after co-ordination with the Ministry of Environmental Protection and Regional Development of the Republic of Latvia or institution appointed by it.

13.3 NON-ASSOCIATED GAS

l3.3.1 In the event a Non-Associated Gas Discovery is made within the License Area, Licensee shall submit a detailed evaluation report in accordance with Article 9.3, including Licensee's estimate of reserves, production potential, estimate of Development Costs and Production Cost and economic viability. Licensee shall also declare in this report whether the Discovery is potentially commercial.

13.3.2 In the event the Discovery is declared potentially commercial by the Licensee as per Article 13.3.1, a Gas development committee composed of an equal number of representatives of the Government and Licensee shall be established for purposes of jointly evaluating the use of such Gas in the domestic market and the chain of downstream activities required to bring the Gas to the end consumers in said market. Simultaneously, Licensee shall be free to evaluate the viability of exporting the gas.

Within one (1) year from the date of the Licensee's evaluating report, the Parties shall meet with a view to assessing whether the outlets for such Gas and other relevant factors warrant the development and production of the Gas for sale to the domestic market, and/or, if such market was found not to be capable of absorbing the Gas production, for export.

In the event Licensee considers that outlets for such Natural Gas and other relevant factors preclude the development and production for sale to the domestic market, and/or the export market, and notwithstanding the provisions of this Article and Articles II, V and IX, the Licensee shall have the right to retain the area of the potentially commercial Discovery for a period of time, not to exceed five (5) years from the date of the Licensee's evaluation report as per Article 13.3.1. During such period, Licensee shall work towards establishing an economically viable domestic and/or export market and shall be free at any time to declare that development of the Non-Associated Gas Discovery is warranted and proceed in accordance with Article 13.3.3.

13.3.3 In the event Licensee considers that the development of the Non-Associated Gas Discovery is warranted, Licensee shall adopt and furnish to the Government in accordance with Article 9.4 an Overall Development program for said Discovery.

13.3.4 In the event the Government determines that the said Discovery cannot be used for the domestic market, but Licensee considers said Non-Associated Gas Discovery to be commercial if the Natural Gas produced is exported after treatment, Licensee shall be free to develop the Gas Field subject to the submission of an Overall Development Program to the Government in accordance with Article 9.4. In case Licensee begins the Development Operations for export purposes, the Government shall assist Licensee in developing the necessary facilities in Latvia.

13.3.5 The price of Non-Associated Natural Gas produced from a Gas Field purchased by the Government for use in Latvia shall, for all purposes under this License, be the Natural Gas Price determined in accordance with the provisions in Schedule "D".

ARTICLE XIV

TAXES AND DUTIES

14.1 The taxation of each Company, their Affiliates and Subcontractors shall be subject to the taxation laws of the Republic of Latvia and to effective treaties for the avoidance of double taxation, and the provisions of this Article XIV.

14.2 Notwithstanding the provisions of Latvian taxation laws the following provisions shall apply for the purposes of computing the taxable income of each Company under this License Agreement:

a) A Company's gross income shall mean the total proceeds received by such Company from its share of Petroleum produced and sold under this License, plus any other realized income (other than income that is exempt pursuant to Latvian tax laws or regulations, effective double taxation treaties, or this License) arising from Petroleum Operations under this License. Any income other than income arising from Petroleum Operations shall be subject to generally applicable taxation laws and effective double taxation treaties. In the event of a sale of Petroleum that is not an Arm'sLength Sale (as defined in Schedule "D"), the total proceeds from such sale shall be deemed to be based on the price of the Petroleum for the month of sale, as determined in accordance with Schedule "D".

b) A Company's taxable income shall be computed by subtracting from gross income all the costs and expenses of such Company incurred in respect of Petroleum Operations under this License. The costs and expenses deductible from gross income are enumerated in Schedule "E" attached hereto.

c) If the calculation of taxable income results in a loss for a given Financial Year, the amount of such loss shall be carried forward to the following Financial Year and to subsequent Financial Years, one year at a time in chronological order, for a period that expires at the end of the tenth Financial Year after the Financial Year of the loss, and shall offset such Company's taxable income in such Financial Year(s), until such time as the loss is wholly offset against such Company's taxable income. The losses that are eligible to be carried forward to a given Financial Year shall reduce taxable income in the order of Financial Years from which such losses are carried forward, beginning with the loss from the earliest Financial Year. If tax laws subsequently enacted by the Government allow for a longer carry-forward period than provided herein, each Company shall have the benefit of that longer period.

d) Except as provided in sub-paragraph e), each Company's taxable income shall be subject to the income tax at rate of twenty-five percent (25 % ).

e) Each Company shall be exempt from income tax for a period of three Financial Years, beginning with the first Financial Year that such Company has positive taxable income (computed after the offset of any applicable loss carry-forward pursuant to Article 14.2 c) from Petroleum Operations). After the three year period has elapsed, each Company shall be subject to tax at rate equal to one -half of the tax rate otherwise applicable in sub-paragraph d) for the subsequent two Financial Years.

f) Each Company's income tax liability shall be computed and assessed using U.S. dollars and taxes shall be paid in lats and santims. The exchange rate shall be the rate quoted by the Bank of Latvia, which is effective on the date of payment of taxes. The Company's branch in Latvia shall be audited on an annual basis by a public accountant authorized to practice in Latvia and the Annual report and auditor's report shall be prepared in Latvian.

g) The provisions of this Article 14.2 shall apply separately to each Company. Neither the Licensee nor the Companies as a group shall be subject to tax in Latvia.

14.3 Notwithstanding the provisions of Latvian taxation laws, each Company, the Affiliates of each Company, and their foreign Sub-Contractors shall be exempt from the following items imposed by any authority in the Republic of Latvia, in respect of Petroleum Operations undertaken pursuant to the License Agreement or in respect of property or capital employed in or income derived from such Operations:

a) Any tax on either net or gross income, other than the income tax imposed on each Company set forth in Article XIV.

b) All taxes, duties or levies on or in respect of consideration received by a Company which assigns a portion of its interest under the License, to the extent that such consideration consists of payments by assignee on behalf of assignor of any of assignor's future costs and there is no cash profit from such transactions.

c) All taxes, duties or levies on any distribution of proft or capital from Company or transfers of capital or property within a Company, or infusions of capital into Company from its parent Company.

d) All turnover, sales, value-added, excise taxes or similar taxes, including such taxes levied on payments made by a Company (or its Affiliates) to Sub-Contractors or suppliers as well as on payments made by Sub-Contractors or suppliers to their SubContractors or suppliers. In case of Sub-Contractors or suppliers that are residents of the Republic of Latvia all transactions that are exempt from va(ue-added tax under the provisions of this Article XIV, shall be deemed to be subject to value added tax at a zero percent (0 % ) rate.

e) All taxes, fees, duties, excise or export taxes upon the production, transportation, processing, or sale of Petroleum produced in the License Area or upon export of Petroleum by the Company or its customers, except natural resources taxes for emissions (emission charges) under Natural Resources Tax Law of 1995.

f) All customs and import duties, taxes, fees or levies on any ship, aircraft, drilling vessel, machinery, equipment, vehicles, plant, materials or supplies brought into Latvia by the Company or any Sub-Contractor for use in Petroleum Operations. Such items may be exported by the Company or any Sub-Contractor free of any export duties, taxes, fees and levies of any kind.

g) All customs and import and/or export duties, taxes, fees or levies on the import and/or export of household goods and personal effects of employees of a Company, its Affiliates or any SubContractor. In the event that such household goods or personal effects are sold in Latvia, such importer shall be subject to the generally applicable customs and import levies, if any, on such sold items.

h) All taxes, duties or levies imposed on or in respect to payments made by a Company (other than by a Company's branch in Latvia) to Affiliates for services and technical assistance.

i) All taxes, duties or levies imposed on or in respect of capital or any property employed offshore in Petroleum Operations, including any tax on net worth.

j) All other contributions other than generally applicable, nondiscriminatory charges or fees.

Notwithstanding the foregoing, a Company and its Affiliates shall be subject to generally applicable, non-discriminatory charges or fees for actual goods or services supplied at their request (such as normal port charges, airport landing fees, utility usage charges), property (immovable property) tax on on-shore buildings and structures, value added tax on payments for ordinary maintenance of buildings (such as utilities, current minor repairs, etc.).

a) Except as provided in effective taxation treaties or in this Article 14.4, the non-L,atvian employees resident in I.atvia of each Company, their Affiliates, or of any foreign Sub-Contractor shall be subject to the generally applicable income tax law of L,atvia, provided that in no event shall the tax rate applicable to such employees exceed forty percent (40 %) of their taxable income, and provided further that such income tax shall be no more burdensome than the income tax applied to Latvian residents.

b) Non-resident employees, of each Company, their Affiliates, or of any foreign Sub-Contractor shall be subject to the Latvian income tax only on income that is derived in Latvia as a direct result of services performed in Latvia unless such income is exempt from tax pursuant to effective double taxation treaties, Latvian law or regulations, or this Article XIV. Such employees shall be exempt from Latvian tax on income derived from sources outside Latvia. For purposes of this Article 14.4, an employee is a resident of Latvia if such employee is considered to be a resident of Latvia in effective double taxation treaties, or resides in Latvia for more than one hundred eighty three (183) days in any twelve month period or has a permanent home in Latvia. Employee benefits customary in international petroleum operations, for example including but not limited to, foreign service premiums, cost allowances, allowances, reimbursement of local income taxes, housing allowances, educational allowances, travel allowances and pension and savings contributions, received by non-resident employees, shall be exempt from taxation in I.atvia. In no event shall the tax rate applicable to such non-resident employees exceed forty percent (40 % ) of their taxable income, and further such income tax rate shall be no more burdensome than the income rate applied to Latvian residents.

c) Unless a longer period is provided in effective taxation treaties, salaries, wages and similar renumeration derived in respect of an employment connected with Petroleum Operations received by the non-resident employees of any Affiliate or of any Sub-Contractor shall be exempt from taxation in the Republic of Latvia if the employment is carried on in Latvia for a period or periods not exceeding in the aggregate thirty (30) days in any twelve-month period.

14.5 a) Except as provided in effective treaties for the avoidance of double taxation, any Affiliate or Sub-Contractor (other than residents of the Republic of Latvia) which is associated with offshore Petroleum Operations shall be deemed to have a permanent establishment in the Republic of Latvia only if such Petroleum Operations are carried on in Latvia for a period or periods exceeding in the aggregate one hundred eighty (180) days in any twelve-month period in the period of exploration, and exceeding in the aggregate thirty (30) days in any twelve-month period in development and production phase, unless a longer period of time is allowed under Latvian law. Such Affiliates or Sub-Contractors shall be exempt from income taxation in Latvia if they do not have a permanent establishment in Latvia.

b) The income tax rate applicable to foreign Sub-Contractors and Affiliates shall not exceed forty percent (40 % ) of their taxable income and such tax shall be no more burdensome than the tax generally applicable to Latvian companies.

14.6 The respective rights and obligations of the Parties under this Article XIV shall survive until such rights and obligations hereunder are satisfied.

14.7 For U.S. tax purposes, each entity comprising Licensee elects to be excluded from the application of all the provisions of Subchapter K, Chapter I, Subtitle A, of the U.S. Internal Revenue Code of 1986, as amended.

ARTICLE XV

CURRENCY AND EXCHANGE PROVISIONS

15.1 Each Company and its Sub-Contractors are hereby authorized, throughout the term of this License, to:

a) open, maintain and operate Foreign Exchange bank accounts abroad and in Latvia, and local currency bank accounts in Latvia;

b) pay their foreign Sub-Contractors directly abroad in Foreign Exchange for purchases of goods and services in relation to the Petroleum Operations;

c) export any Petroleum or other asset which is permitted to be exported pursuant to this License, without any further permission or license and without any restrictions as to the resale price of such Petroleum or assets abroad subject, however, to the filing with the Government of such declarations as may be reasonably required by the Government for control of statistical purposes;

d) receive abroad, remit abroad, retain abroad and use without restriction all Foreign Exchange including without limitation all payments received for exports of Petroleum referred to in Article 15.1 c) and all payments made by the Government to such Company or to Licensee, provided that such Company has paid all taxes, royalties and training obligations due and owing to the Government at that time under this License which are not subject of a bona fide dispute;

e) acquire abroad any loans necessary for the Petroleum Operations;

f) purchase local currency as necessary for the local Petroleum Operations, and convert local currency exceeding the Company's immediate local requirements into Foreign Exchange, through authorized banks or dealers at the most favorable exchange rate applicable for similar transactions by any private or outside enterprise on the date the transaction is initiated, without fees (other than the normal banking charges) or discrimination;

g) transfer abroad any Foreign Exchange in excess of such Company's local requirements;

h) employ in Latvia such expatriate employees as may be assigned to the Petroleum Operations, subject to the provisions of Article 7.4 and Schedule "C", and pay in Foreign Exchange the wages, allowances and other benefits to said employees partly or wholly abroad.

i) the Government shall provide such attestations as may be requested by a Company from time to time for purposes of evidencing and ,implementing the above authorizations.

15.2 The employees of each Company in Latvia and their sub-contractors are hereby authorized, throughout the term of the License to:

a) open, maintain and operate Foreign Exchange bank accounts abroad and in Latvia, and local currency bank accounts in Latvia;

b) receive abroad, remit abroad, retain abroad and use without restriction all Foreign Exchange in excess of such employee's local requirements;

c) purchase local currency as necessary for local requirements, and convert local currency exceeding immediate local requirements into Foreign Exchange, through authorized banks or dealers at the most favorable exchange rate applicable for similar transactions by any private or outside enterprise on the date the transaction is initiated, without fees (other than the normal banking charges) or discrimination.

ARTICLE XVI

DATA AND CONFIDENTIALITY

16.1 During both the Exploration and Production Periods, Licensee shall provide the Government on a current, timely and routine basis with all relevant reports, data and information collected and compiled with respect to the Petroleum Operations in the License Area and such financial information as may be appropriate to establish that Licensee has complied with the obligations contained in this License.

16.2 All information and data concerning the License Area and Petroleum Operations hereunder shall be kept confidential by the Parties for (a) a period of five (5) years from delivery of exploration information and data to the Government or termination of the License whichever occurs earlier, or (b) until the end of the License term with regard to production information and data, except to the extent necessary for any Party to the License to comply with the laws, rules or regulations of any Government or governmental agency or entity or any stock exchange to which the Party may be subjected. Copies of any information so furnished by one Party shall also be furnished to the other Party. This provision shall not preclude the Companies from disclosing such information and data to their employees or other Affiliates and their employees or to their SubContractors to the extent necessary to carry out the Petroleum Operations, or to their prospective assignees and their employees. This provision shall also not preclude the Companies from disclosing such information to third parties in relation to data trades in accordance with Article 3.3 or to banks and other financial institutions in accordance with Article 9.9 as is required to be disclosed Eor raising funds for the Petroleum Operations under this License. Disclosure of such information and data, except as provided above, shall not be made except with the concurrence of the other Parties to the License. The foregoing confidentiality obligation shall not apply to the non-defaulting Party in the event of a material breach by the other party which results in a termination of this License; provided, however, that if a dispute exists as to whether a material breach has occurred, the foregoing confidentiality obligation shall continue to apply until an arbitration decision has determined that a material breach has in fact occurred.

ARTICLE XVII

ASSIGNMENT

17.1 No Company shall assign or transfer all or part of its Participating Interest under this License to any of its Affiliates without giving written notice of such assignment or transfer to the Government. Following such an assignment, the assigning Company shall remain liable for the obligations of its Affiliate to the extent that the Affiliate fails to fulfill its obligations under this License. Before the actual assignment or transfer of all or part of its Participating Interest, the assigning Company shall provide the Government with written Guarantee Letter guaranteeing such obligations in the form satisfactory to the Government.

17.2 A Company shall not assign or transfer its Participating Interest under this License to any third party without the prior written consent of the Government, such consent not to be unreasonably withheld. The Government shall notify the Company of its approval or disapproval (indicating, in the event of disapproval, the grounds thereof) of the proposed assignment within thirty (30) days of the Company's written request for approval. If notification of approval or disapproval is not given within thirty (30) days, the assignment shall be deemed to have been approved.

17.3 Neither the GOC or the DC shall assign or transfer all or part of its Participating Interest under this License without the prior written consent of the Parties, such consent not to be unreasonably withheld.

17.4 Except as provided in Article 4.2 with respect to the ten percent ( 10 % ) Participating Interest held by the Republic of Latvia, the Government shall not assign or transfer any of its rights and obligations under this License without the prior written consent of the Licensee, such consent not to be unreasonably withheld.

17.5 Any transfer of a Participating Interest by a Company made pursuant to the terms of this Article XVII or Article IV shall be exempt from any taxes, charges, duties or fees related to such transfer, except as provided in Article 14.3 b).

17.6 In the event of an assignment or transfer the transferee shall agree in writing to assume the rights and obligations of the transferor under this License relating to the Participating Interest transferred.

ARTICLE XVIII

FORCE MAJEURE

18.1 Licensee shall not be liable for non-performance or delay in performance of any obligation provided for in this License if the non-performance or delay is caused by Force Majeure. "Force Majeure" within the meaning of this License shall be any insurrection, riot, war, strike or other circumstances preventing normal operation of the Parties, including acts or failure to act by the Government or any entity or agency operating under the authority, auspices or direction of the Government; any fires, floods or other Acts of God, as well as other circumstances; or any other cause beyond the reasonable control of the Licensee; any other situation which prevents or impedes Licensee from carrying on Petroleum Operations or from gaining access to the License Area for reasons relating to the protection of personnel or property. The Licensee shall give prompt notice (together with any notice or information it has received regarding the Force Majeure event) to the Government advising of the occurrence and effects of the event of Force Majeure and shall use all reasonable efforts to minimize any adverse consequences resulting from the event of Force Majeure.

18.2 If Petroleum Operations are delayed, curtailed or prevented by such causes, then the time for carrying out the obligations affected thereby, the duration of the relevant phase of Petroleum Operations, the term of this License and all rights and obligations hereunder shall be extended for a period equal to the delay caused by the Force Majeure occurrence plus such period of time as is necessary to reestablish operations.

18.3 When an event of Force Majeure is of such nature (i) that the objectives of this License are substantially and irremediably impaired, or (ii) that a Party's performance is impaired for more than one hundred eighty (180) consecutive days, the Parties shall meet to discuss possible alternatives for alleviating the Force Majeure, including the possible termination of the License.

ARTICLE XIX

ARBITRATION AND EXPERTISE

19.1 ARBITRATION

19.1.1 Except for disputes over Crude Oil Price or Gas Price, which shall be submitted to an expert under Article 19.2, any dispute as to any matter or operation arising out of or in connection with this License, including, without limitation, any dispute as to the validity, construction, enforceability or breach of this License, which cannot be settled amicably shall be exclusively and finally settled by arbitration, and any Party may submit such a dispute to arbitration.

19.1.2 Arbitration proceedings shall be conducted by three (3) arbitrators in accordance with the Rules of the London Court of International Arbitration.

19.1.3 Unless otherwise agreed in writing by the Parties, the third arbitrator appointed pursuant to Article 19.1.2 shall not be a national of Latvia or of the same nationality as an entity comprising Licensee.

19.1.4 In any arbitration proceeding hereunder:

a) proceedings shall, unless otherwise agreed in writing by the Parties, be held in London, England;

b) the English language shall be the official language for all purposes; and

c) the decision of a majority of the arbitrators shall be final and binding and shall be enforceable in any court of competent jurisdiction.

19.1.5 In case of arbitration, the Parties shall continue their performance of this License unless it is impossible to do so for reason of Force Majeure or unless Licensee's rights hereunder have been expropriated, nationalized or otherwise taken.

19.1.6 The costs of arbitration shall be borne in the manner determined by the arbitration tribunal.

19.1.7 To the extent that any Party could claim immunity for itself or its assets in proceedings leading to judgment pursuant to this License, execution or temporary protection or to the extent that such immunity is attributable to the Party or its assets, such Party hereby irrevocably agrees not to claim such immunity and hereby irrevocably waives such immunity.

19.2 EXPERTISE

19.2.1 Any Party wishing to submit a matter to an expert pursuant to Schedule "D" shall so notify the other Parties thereof, and such notice shall include a list of at least three (3) proposed experts. The other Parties shall respond to such notice within thirty (30) days after the receipt thereof by either agreeing to one of the proposed experts or by proposing at least three (3) additional proposed experts. In the latter case, the Party initiating the expert's determination shall have thirty (30) days in which to accept one or to reject all of the experts proposed by the other Parties. Failure to give notice hereunder shall constitute a rejection of the proposed experts.

19.2.2 If the Parties fail to agree on the selection of an expert within sixty (60) days after the first notice given under Article 19.2.1 above, then any Party may apply to the Center for Technical Expertise of the International Chamber of Commerce ("ICC"), Paris, France, for appointment of an expert in accordance with its Rules.

19.2.3 If an expert agreed upon pursuant to Article 19.2.1 or appointed pursuant to Article 19.2.2 declines to act, dies or otherwise becomes unable to act as expert, then the Parties shall promptly meet to agree on a replacement expert, and if the Parties do not agree on such replacement within thirty (30) days after any Party requests such meeting, then any Party may apply to the ICC Center for Technical Expertise for the appointment of such replacement expert in accordance with its Rules.

19.2.4 The Parties shall cooperate with the expert to the fullest extent, and each Party shall ensure such cooperation of its Affiliates. The expert shall be provided access to data and information which the Parties or their Affiliates are able to make available and which in the judgment of the expert might aid him in making a valid determination. Representatives of the Parties shall have the right to consult with the expert and to furnish him written materials, but the expert may impose reasonable limitations on this right and shall be free to evaluate the extent to which any data or information is substantiated or pertinent.

All costs of selecting and using the expert shall be borne equally by both Parties to the expertise.

ARTICLE XX

TERMINATION OF LICENSE AND LIABILITY

20.1 Licensee may relinquish its rights under this License during the Exploration Period specified in Article II:

a) in accordance with the provisions of said Article, or

b) following the completion of any Work Program obligation for the relevant Exploratory Phase (as defined in Article VI).

Thereafter, Licensee may by giving the Government notice to that effect of at least six (6) months relinquish its rights under this License in respect of any or all of the Producing Areas.

20.2 This License may be terminated by the Government by giving Licensee ninety (90) days prior written notice if Licensee fails to fulfill its obligations set forth in Article VI.

20.3 In the event the License is terminated pursuant to Articles 20.1 and 20.2, Companies (Licensee) shall have the right to remove and export all their property.

20.4 In the event that either Licensee or Government unilaterally breaches and terminates the License, it shall be liable to the other for the damages caused by the breach of the License in accordance with this License and the laws of the Republic of Latvia as provided in Article 22.1.

20.5 In the event the License is relinquished pursuant to Article 20.1 or terminated pursuant to Article 20.2, the Government shall have no obligation to reimburse Licensee for capital costs incurred by Licensee during the Exploration Period.

ARTICLE XXI

NOTICES

21.1 All notices, statements, and other communications to be given, submitted or made hereunder by any Party to another shall be sufficiently given if in writing and sent by Registered Post, Postage paid, or by telegram, telex, or facsimile, to the address or addressee of the other Party or Parties as follows, or to such other address or addressee as a Party may specify in writing to the others:

a) Ministry of Economy

Brivibas street 55, Riga, LV 1050

Telephone: 371-7-288444 or 371-7-285304

Facsimile: 371-7-280882 or 371-2-224794

b) AMOCO LATVIA PETROLEUM COMPANY

c/o: Amoco Production Company

501 Westlake Park Boulevard

P.O. Box 3092

Houston, Texas 77253-3092

Telex: 79-1226/203-231 Facsimile: 713-556-2139

Attention: Vice President, EUSA

c) OPAB

P.O.Box 27823

S-11593 Stockholm

Sweden

Telex: 17648 SPEAB S

Facsimile: 46-8 66 72 432

Attention: Managing Director

21.2 Notices when given in terms of Article 21.1 shall be effective when delivered or offered at the address of the other Parties as under Article 21.1 during business hours during working days and if received outside business hours on the next following working day.

ARTICLE XXII

GOVERNING LAW AND STABII,IZATION

22.1 The License shall be interpreted in accordance with the laws of the Republic of Latvia. Notwithstanding, should the laws of the Republic of Latvia not provide sufficient regulations in particular areas of law or should they be in contlict with the principles of international law as applied in the European Economic Community ("EEC") or the European Union ("EU") such principles of the EEC or the EU and decisions of international tribunals involving such principles of the EEC or the EU shall apply.

22.2 In order to secure to the Companies the fiscal, legal and economic stability of this License no general or special legislation, administrative measures, or any other act whatsoever of or emanating from the Government, or any central or local government authority in Latvia, shall annul this License, amend or modify its provisions or prevent or hinder the due and effective performance of its terms from the signature date hereof. No such annulment, amendment or modification shall be made except by written agreement of the Parties. Any decree, ruling, law or regulation which may be wholly or partly inconsistent with the provisions of this License and which suspends, revokes, modifies, amends or diminishes any of the Companies' rights hereunder shall be deemed to be circumstance hindering fulfillment of the License. In such event, the Companies may so notify the Government. Promptly upon the receipt of such notice, the Parties shall meet to negotiate in good faith and agree upon the modifications which need to be made to the terms of this License to restore the Companies' rights and benefits to a level equal to what they would have been had such circumstance not occurred, or upon such other remedy as they agree may be appropriate. In the event the Parties are unable to agree within ninety (90) days after the Companies' notice to the Government upon the modifications which are needed to the License or upon such other remedy as may be required, thén any Company may at any time thereafter refer the matter or matters in dispute to arbitration pursuant to Article XIX. The arbitrators in such event shall be empowered to determine and decree the remedy necessary to restore the Companies' rights and benefits to a level equal to what they would have been had such a change not occurred.

This Article 22.2 shall not apply to Latvian laws regarding the environment to the extent that such laws are sanctioned by international conventions ratified by Latvia.

ARTICLE XXIII

BONUS AND TRAINING

23.1 As there are no charges for the issuance of this License and rental fees for the License Area, Companies shall pay to the Government upon the Effective Date of the License a single lump sum of two hundred thousand U.S. dollars ($ 200,000).

23.2 Licensee shall pay to the Government one hundred and fifty thousand U.S. dollars ($ 150,000) per Contract Year during the Exploration Period and fifty thousand U.S. dollars ($ 50,000) during the first five Contract Years of the Production Period for the purposes of providing scholarships or training to Latvian nationals in various aspects of the petroleum industry and providing them with nonproprietary information and data or materials relating to worldwide petroleum science, technology, economics and engineering. The Licensee and the Government shall work together to determine the optimum training programs and Latvian participants. The training or scholarship expenditures, shall be paid to the Government at the beginning of the Contract Year. The Government annually within three (3) months after expiry of the Contract Year shall submit to the Companies report on the amounts spent for the above purposes.

23.3 The Companies agree not to recruit and employ any Government staff receiving training under this Article for a period of not less than two years following completion of that training, unless otherwise agreed.

ARTICLE XXIV

EFFECTIVE DATE AND BOUNDARIES

This License shall become effective ("Effective Date") upon the later of:

a) That date upon which the principles contained in this License are approved by Resolution of the Saeima (the Latvian Parliament); and

b) That date upon which the boundary between Latvia and Lithuania is resolved to include in Latvia all of the License Area.

If this License has not become effective by October 31,1996, Companies may elect to terminate this License with no further obligations.

24.2 The Government and the Companies acknowledge that part of the License Area may be the subject of a discussion between the Governments of Latvia and Lithuania regarding the boundary between Latvia and Lithuania. Therefore, if the boundary between Latvia and Lithuania as ultimately resolved includes less than the entire License Area, then Licensee shall elect, within ninety (90) days of notification by the Government of such resolution, to accept the License as effective as of the end of ninety (90) days or to terminate the License with no further obligations. If Licensee elects to accept the License as effective despite the reduction in the License Area, then the Effective Date shall be the 9lst day following the aforesaid notification.

24.3 The Government hereby reconfirms the boundary between Sweden and Latvia as agreed in the Agreement between the Government of the Kingdom of Sweden and the Government of the Soviet Socialist Republics on the Delimitation of the Continental Shelf and of the Swedish Fishing Zone and the Soviet Economic Zone in the Baltic Sea executed on April 18, 1988 and approved by Exchange of Notes on June 22, 1988, in so far as it affects the License Area.

ARTICLE XXV

MISCELLANEOUS

25.1 For a period of three (3) years following the Effective Date, the Companies may request exploration and production rights anywhere in the continental shelf of Latvia. The Government reserves the right to offer any portion of the continental shelf to others for the purposes of exploration and production on the basis of tender, but subject to the Companies' right to participate in tender on the same terms and conditions offered to any other person or entity.

25.2 If any of a Company's rights, interests or property provided for herein are expropriated, nationalized or otherwise taken by reason of any act of the Government or any central, state or local governmental authority, then the Government shall compensate such Company for the fair market value of such rights, interests or property. The fair market value shall mean the value of the operations as an on-going concern, assuming a willing buyer and seller in a nonhostile environment, and disregarding the unfavorable circumstances under which or following which the company shall be deprived of its rights, interest or property. The Parties and/or the arbitrators in the event of arbitration, shall select an audit firm or investment bank of international reputation for purpose of appraising the full market value of said rights, interest or property of the Company.

25.3 The Government hereby confirms that the issuance of this License is in conformity with the laws of Latvia.

25.4 This License Agreement shall be executed in five (5) originals of both the Iatvian language and the English language and both versions shall have the same force and effect; provided, however, that in the event of a dispute, arbitration or expertise pursuant to the Article XIX, the English version shall be the controlling version used by the arbitrators or the expert.

25.5 This License constitutes the entire Agreement of the Parties and as of the Effective Date supersedes all previous understandings or agreements, either oral or written, with respect to the subject matter hereof.

25.6 AMOCO and OPAB have provided a parent company guarantee as attached hereto in Schedule "B".

IN WITNESS WHEREOF, the representatives of the Parties of this License being duly authorized have executed these presents this 3lst day of October, 1995.

REPUBLIC OF LATVIA AMOCO LATVIA PETROLEUM COMPANY, a company incorporated in the United States

By: By:

Name: J.Iesalnieks Name: Valdis Budrevics

Title: Minister of Environmental Title: President

Protection and Regional Development

By

Name: J.Ozoli-§

Title: State Minister for Energy OLJEPROSPEKTERING AB,

a company incorporated in Sweden

By:

Name: Bjorn Ing Tonnessen

Title: Project Manager

Schedule "A"

Coordinates of the blocks

Point Coordinates Block No Sq. Kms.

1 56 10.00' N19 10.40' E

2 56 10.00' N19 20.00' E

3 56 00.00' N19 20.00' E 5619-16 238

4 56 00.00' N19 05.00' E

5 56 02.40' N19 05.60' E

1 55 55.16' N19 00.00' E

2 55 50.00' N19 00.00' E 5518-3 36

3 55 53.50 N18 56.79' E

1 56 00.00' N19 05.00' E

2 56 00.00' N19 20.00' E 5519-1 295

3 55 52.30' N19 20.00' E

4 55 50.00' N19 00.00' E

5 55 55.16' N19 00.00' E

6 55 57.30' N19 03.90' E

7 56 58.80' N19 04.80' E

Area = 569 Sq. Kms

Schedule "B"

HERE ATTACHED:

1. Parent company guarantee executed by

AMOCO PRODUCTION COMPANY (pages 56-57)

2. Parent company guarantee executed by

SVENSKA PETROLEUM EXPLORATION AB (pages 58-59)

(page numbers are not used on original documents)

Parent company Guarantee

to whom it may concern

WHEREAS, Amoco Latvia Petroleum Company, a corporation having its principal office at 200 East Randolph Drive, Chicago, Illinois 60601, (hereinafter "Company") is prepared to become a Party to a License Agreement (hereinafter "License") for the exploration and production of petroleum on the continental shelf (economic zone) of the Republic of Latvia and shall assume various obligations in connection therewith;

WHEREAS, Amoco Production Company, a corporation having its principal office at 200 East Randolph Drive, Chicago, Illinois 60601, is the owner of all the shares of Amoco Latvia Petroleum Company and is its parent company; and

WHEREAS, the obligations undertaken by Amoco Latvia Petroleum Company considerably exceed the basic capital of the Company.

NOW, THEREFORE, Amoco Production Company hereby acknowledges that it is fully aware of the legal and contractual obligations undertaken by the Company under the License and hereby guarantees to the Government of Latvia that:

1) if the Company defaults in performance of its work obligations under the License or fails to remedy or pay compensation in respect of such default as provided in the License within thirty (30) days after receipt of notice by confirmed telex, confirmed facsimile or registered mail from the Government of such default, then Amoco Production Company will within fourteen (14) days after receipt of notice from the Government of Latvia of such failure to remedy or pay compensation provide Company with all necessary financial means to enable Company to fully perform and discharge its obligations and rectify its default.

2) if the activities of the Company cause damage to the environment of Latvia or . to property of the Republic of Latvia for which Company is liable under the License, then Amoco Production Company undertakes to provide Company with all necessary financial means to enable Company to fully perform and discharge its obligations.

This Guarantee shall apply as of the Effective Date of the License as defined therein and for so long as the Company is bound by the obligations of the License or until its substitution by another Company with consent of the Government of Latvia as provided in the License.

Any dispute arising in relation to the performance or interpretation of this Guarantee will be finally settled by arbitration in accordance with the provisions of Articles 19.1 and 22.1 of the License, which Articles shall apply mutatis mutandis as between Amoco Production Company and the Government of Latvia. In the event the dispute also includes a disagreement as to whether Company has defaulted in the performance of its work obligations under the License or failed to remedy or pay compensation in respect of such default as provided in the License or as to whether the activities of Company have caused damage to the environment of Latvia or to the property of the Republic of Latvia for which Company is liable under the License, Amoco Production Company agrees that such dispute and the aforementioned disagreement shall be resolved in a single arbitration.

Amoco Production Company herewith certifies that the present Guarantee is issued in accordance with the Laws of the State of Delaware, U.S.A. and the Certificate of Incorporation and By-Laws of Amoco Production Company, and that the signatory is duly authorized to sign the present document on behalf of the Amoco Production Company.

IN WITNESS WHEREOF, this Guarantee has been executed on the 19 th day of

September,1995.

AMOCO PRODUCTION COMPANY

By:

Name: . D.F. W o r k

Tltle: G r o u p V. P.

i/jan/Iatvia/Parentco.gua

Parent Company Guarantee

executed by Svenska Petroleum Exploration AB

WHEREAS, Oljeprospektering AB, a corporation having its principal office at Sandhamnsgatan 51, Stockholm, Sweden (hereinafter "Company") is prepared to become a Party to a License Agreement (hereinafter "License") for the exploration and production of petroleum on the continental shelf (economic zone) of the Republic of Latvia and shall assume various obligations in connection therewith;

WHEREAS, Svenska Petroleum Exploration AB (hereinafter "Svenska"); a corporation having its principal office at Sandhamnsgatan 51, Stockholm, Sweden, is the owner of 95.9% the shares of the Company and is its parent company.

NOW, THEREFORE, Svenska hereby acknowledges that it is fully aware of the legal and contractual obligations undertaken by the Company under the License and hereby guarantees to the Government of Latvia that:

1) if the Company defaults in performance of its work obligations under the License or fails to remedy or pay compensation in respect of such default as provided in the License within thirty (30) days after receipt of notice by confirmed telex, confirmed facsimile or registered mail from the Government of such default, then Svenska will within fourteen ( 14) days after receipt of notice from the Government of Latvia of such failure to remedy or pay compensation provide Company with all necessary financial means to enable Company to fully perform and discharge its obligations and rectify its default.

2) the Company shall be insured so as to enable it to fully perform and discharge its obligations should the activity of the Company cause damage to the environment of Latvia or to property of the Republic of Latvia if and to the extent the Company is liable for such damage, such insurances to be limited to what is normal and standard in the proper conduct of the business of the Company.

This Guarantee shall apply as of the Effective Date of the License as defined therein and for so long as the Company is bound by the obligations of the License or until its substitution by another Company with consent of the Government of Latvia as provided in the License.

In case the Company defaults in any of its obligations towards the Government of Latvia under the Licence as referred to above, Svenska is at its own option entitled to settle its guarantee obligations hereunder directly to the Government of Latvia as an alternative to providing the necessary financial means to the Company as set out above.

Any dispute arising in relation to the performance or interpretation of this Guarantee will be finally settled by arbitration in accordance with the provisions of Articles 19.1 and 22.1 of the License, which Articles shall apply mutatis mutandis as between Svenska and the Government of Latvia. In the event the dispute also includes a disagreement as to whether Company has defaulted in the performance of its work obligations under the License or failed to remedy or pay compensation in respect of such default as provided in the License or as to whether the activities of Company have caused damage to the environment of Latvia or to the property of the Republic of Latvia for which Company is liable under the Licence, Svenska agrees that such dispute and the aforementioned disagreement shall be resolved in a single arbitration. IN WITNESS WHEREOF, this Guarantee has been executed on the 3lth day of October,1995.

SVENSKA PETROLEUM Exploration AB

Schedule "C"

Ancillary right and Assistance

enjoyed by the Licensee

l. Licensee is hereby exempt for the term of this License from any obligations to transfer or assign any interest (other than pursuant to Article IV), in the form of equity or otherwise, to any person, company or entity other than as provided under this License.

2. The Government shall grant or cause to be granted to Licensee in accordance with the laws of the Republic of Latvia the facilities including but not limited to licenses, permits, approvals, authorization, consents, visas, work permits required for the execution of the Petroleum Operations under the provisions of this License and the Government will use its good offices to expedite the procurement of said facilities. In the event facilities are required for the Petroleum Operations, including but not limited to storage, loading, processing facilities, pipelines and offices, the Government shall use its best efforts to require the competent authorities of the area in which such facilities are located to issue such licenses, permits, approvals, authorizations, consents needed for the construction and operation of said facilities by Licensee and, if public land is available and suitable for said facilities, to make available said land to Licensee by way of lease or otherwise under nondiscriminatory conditions.

3. Whenever emergency provisions are required to be put into effect to facilitate import or export of goods incidental to an emergency arising under this License, the Government shall use its good offices to expedite such import and export.

4. The Government will use its good offices in obtaining and providing to the Licensee such information and data as may be required by the Licensee for planning and executing projects incidental to Petroleum Operations under this License.

5. Licensee shall have access, free of cost, to all data and information related to the Blocks which could impact or affect the safe and efficient conduct of Petroleum Operations within the License Area. Licensee shall reimburse the Government for any direct expenses it may incur in providing the safety related or environmental protection data requested, except the data above referred that shall be provided free of charge to Licensee.

6. Licensee may request from the Government and the Government shall provide such data and information from outside the Blocks which is shown to be reasonably required for the safe and efficient conduct of Petroleum Operations and the protection of the environment. Licensee shall reimburse the Government for any direct expenses it may incur in providing the safety related or environmental protection data requested, except the data above referred that shall be provided free of charge to Licensee.

7. Should the Government so request, Licensee shall provide the Government such data and information from within the License Area as may be reasonably necessary to assist in the safe conduct of Petroleum Operations and the protection of the environment outside of the License Area.

Schedule"D"

Crude oil and gas Prices

l. DEFINITIONS

For purposes of this Schedule "D", the following terms shall have the meaning ascribed to them hereunder:

"Arm's Length Sales" means sales made at arm's length between willing and nonrelated buyers and sellers on the international market in exchange for payment in Foreign Exchange, excluding sales involving barter, sales from government to government and other transactions motivated in whole or in part by considerations other than the usual economic incentives involved in petroleum sales on the international market;

"Price Report" means Platt's Uilgram Price Report or such other publication reporting crude oil Arm's Length Sales price as the Parties may mutually agree;

"Transportation Rate" means the Average Freight Rate Assessment (AFRA) last published by the London Tanker Brokers Association, or any other published crude oil freight rate as the Parties may mutually agree, applicable to voyages between the point of loading and the point of delivery in question;

"BTU" means British Thermal Unit;

"FOB" means "Free on Board" as defined by the Incoterms (1990) of the International Chamber of Commerce;

"C & F" means "Cost and Freight" as defined in the Incoterms (1990) of the International Chamber of Commerce;

"Third Parties" means any company or entity other than an Affiliate.

2. CRUDE OIL PRICES

Prices will be determined for each type of Crude Oil or Crude Oil mix in accordance with the following provisions:

2.1. For purposes of Articles XI, XII and XIV of the License, a Crude Oil Price

expressed in U.S. Dollars per barrel will be determined for each month by volume averaging the prices, as such prices are determined hereinafter, in respect of all sales of Crude Oil made by Licensee (or its Affiliates on behalf of Licensee) during the subject month.

(i) Crude Oil sold by Licensee (or its Affiliates on behalf of Licensee) to Third Parties in Arm's Length Sales shall be valued at the net realized price, FOB vessel, Measurement Point, received by Licensee for such sales.

(ii) Crude Oil sold by Licensee to Affilļates, or to Third Parties in non-Arm's Length Sales, shall be valued by volume averaging the net realized prices, FOB vessel, Measurement Point, received by the Licensee for all Arm's Length Sales made by Licensee (or its Affiliates on behalf of Licensee) to Third Parties during the month in which the sale being valued hereunder is made, unless such Arm's Length Sale(s) to Third Parties represent less than thirtythree and one-third (33-1/3) percent, by volume, of the Crude Oil Sales made by Licensee (or its Affiliates on behalf of Licensee) during the month in question.

(iii) In the event less than thirty-three and one-third (33-1/3) percent, by volume, of the Crude Oil Sales made by Licensee (or its Affiliates on behalf of Licensee) during a given month are Arm's Length Sales to Third parties, Crude Oil sold by Licensee to Affiliates or to Third Parties in non-Arm's Length Sales, shall be valued on the basis of the FOB point of loading spot prices in effect at the time of delivery of the Crude Oil sale being valued hereunder, with thirty (30) days credit terms, as published in the Price Report, for Arm's Length Sales of reference crude oil(s) which are regularly sold in the same market as Crude Oil produced hereunder would normally be sold, adjusted to a Latvia point of loading basis by adding or subtracting thereto, as appropriate, the difference between the Transportation Rate of the reference crude oil(s) from its point of loading to the aforesaid market and the Transportation Rate for the Crude Oil from the Crude Oil Measurement Point to the same market, and further adjusted for differences in quality between the Crude Oil and the reference crude oil(s).

In the event Licensee comprises more than one (1) Company, each of said Company's revenues shall, for purposes of Articles XI and XIV of the License, be determined on the basis of the relevant prices determined pursuant to this Section 2.1 in respect of the sales made by that Company.

2.1.1 Prior to the Production Commencement Date, the

Parties shall meet to mutually agree upon the reference crude oil(s) and the quality adjustments specified in Section 2.1.1, and any additional price and freight cost determination methods as may be required to implement the provisions of said Section.

2.1.2 Within twenty (20) days following the end of each Quarter, Licensee shall determine in accordance with the provisions of this Section, the prices applicable to each sale made during the Quarter in question and the volume average Crude Oil Price applicable for each month of said Quarter, and shall notify the Government of said price(s), indicating the method of calculation and all data used therefor. Within thirty (30) days following receipt of said notification, the Government shall verify that the price calculations comply with the criteria and methods applicable under this Section, and shall notify Licensee of its acceptance or objections. Failing notification from the Government within this thirty (30) days period, the Licensee's price calculations shall be deemed to have been accepted by the Government.

2.1.3 In the event the Government shall have raised objections to Licensee's price determinations in accordance with Section 2.1.3, the Parties shall meet within fifteen (15) days from the Government's notice of objections to mutually agree upon the appropriate determinations,

If the Parties should fail to agree on the aforesaid price determinations within seventy-five (75) days after the end of the Quarter in question, either Party may immediately submit the price determinations in dispute (including the determination of the reference crude if the Parties have failed to determine them) to an expert appointed in accordance with Article 19.2 of the License. The expert shall decide in accordance with the provisions of this Section 2.1 and his determinations shall be final and binding for the Parties.

3- NATURAL GAS PRICES

3.1 Sales for the Domestic Market

3.1.1 The price for each million BTU of Natural Gas (whether Associated or Non-Associated) delivered to and taken by the purchaser(s) shall be equivalent to the C & F price per million BTU at the nearest port in Latvia of a basket of fuel oils. The C & F price of such imported basket of fuel oils shall include any sales, excise, and import taxes and duties attributable to the importation into, and sale in Latvia of such fuel oils. The basket of fuel oils shall include light, medium and heavy fuel oils regularly quoted for Rotterdam in the Price Report. The selection of the specific fuel oils and their weighing, the appropriate Transportation Rates, the appropriate heat content values for each fuel oil, and the necessary conversion factors required to calculate the said equivalent C & F price in US$ per million BTU shall be agreed at the time the GSA is negotiated.

3.1.2 The price will be calculated for each Quarter using selected price and other data available from the previous Quarter.

3.2. Export Sales

For purposes of Article XI and XIV of the License, Natural Gas exported by Licensee shall be valued at the net realized price, FOB, Measurement Point, received by Licensee.

Schedule "E"

Deductions for Tax Purpposes

l. The costs and expenses that may be deducted from gross income pursuant to Article 14.2 of the License include all the costs and expenses incurred in Petroleum Operations under this License that are allowed as deductions under any of the following: a) the taxation laws and regulations of the Republic of Latvia, b) effective treaties for the avoidance of double taxation or c) this Schedule "E". Subject to the provisions of this Schedule "E", such costs and expenses shall be deductible in the Financial Year in which they accrue. In any case such costs and expenses include:

a) Wages, salaries, living or housing allowances, moving expenses, and other reasonable and customary employee benefits attributable to employees engaged in or assigned to Petroleum Operations, whether such employees are working inside or outside Latvia;

b) Payments made under this License, including but not limited to royalties, rentals, bonuses and training payments, but excluding the income tax imposed on each Company;

c) Overhead and administrative expenses, whether incurred inside or outside Latvia, reasonably attributable to Petroleum Operations on the continental shelf of Latvia;

d) Expenditures that are reasonably attributed to the investigation, negotiation, signature and/or approval of this License;

e) Taxes (except the payments of the natural resources tax paid for excess emissions under Article 8.3 of Natural Resources Tax Law of 1995), duties, royalties and assessments of every kind, but excluding the income tax imposed on each Company;

f) Interest and other costs attributable to debt incurred to finance Petroleum Operations under this License. However, a Company shall be entitled to deduct interest only up to the amount of interest that would have been payable between independent parties in similar circumstances;

g) An allowance for depreciation or amortization as provided in paragraphs 2,3 and 4 of Schedule "E" for fixed assets or intangible costs;

h) Losses due to calamity, including fires, floods, storms and similar occurrences, to the extent not compensated by insurance;

i) Legal expenses and costs of litigation incurred in connection with Petroleum Operations;

j) Costs of measures taken for the protection, restoration, or rehabilitation of the environment;

k) Debts written off as uncollectible in cases when debtors are residents of countries with which Latvia has effective treaties for the avoidance of double taxation, or are residents of the United States or Latvia;

l) Insurance costs for insurance which cannot be obtained in the Republic of Latvia;

m) Dismantling or abandonment costs of facilities, material and equipment used in Petroleum Operations, which estimated cost shall be accrued and deducted on a units of production basis. However, the amounts so accrued and not spent for the said purposes shall be included for the taxable income in the Financial Year in which the facilities are abandoned;

n) Material, equipment, machinery, articles, supplies, facilities, repair costs and services (other than those depreciable or deductible under paragraphs 2, 3 and 4 of this Schedule "E") purchased for, or furnished to, Petroleum Operations;

o) Transportation, storage, handling, and marketing of petroleum;

p) Foreign currency losses;

q) All other costs reasonably incurred with respect to Petroleum Operations as are allowed as deductions under the taxation laws and regulations of the Republic of Latvia or effective treaties for the avoidance of double taxation.

2. For the purpose of determining the costs and expenses that are deductible in a given year, each Company may elect to deduct from gross income in the Financial Year incurred the costs (including intangible exploration, drilling and development expenses, but excluding the costs attributed to tangible fixed assets that are depreciable in accordance with the paragraph 3 herein) incurred prior to the Production Commencement Date of this License. In the event that a Company does not elect to deduct such costs incurred in a given Financial Year, such Company shall capitalize and amortize such costs on a straight-line basis over a period of ten (10) Financial Years, beginning with the Financial Year of Production Commencement Date. In the event Company earns taxable income (computed after the application of Article 14.2 c)) before the Production Commencement Date from this License, such income shall be deemed to reduce capitalized expenditures and shall not be taxable. In this case the capitalized costs to be amortized shall be reduced by the amount of earned income and only the remaining value of such costs shall be amortized on a straight-line basis within the period of ten ( 10) Financial Years of Production Commencement Date.

3. The depreciation cost of tangible fixed assets used in Development and Production Operations is computed at the amount of forty percent (40 % ) (if such fixed assets are not assets listed under the first three categories of paragraph 1 of part 1 of Article 13 of the Republic of Latvia law "On Enterprise Income Tax" that is effective on the signature date hereof) from the remaining value. For avoidance of doubt, tangible fixed assets used in Development and Production Operations (other than buildings which shall be depreciated at a rate of ten percent (10%) per year) are not within the aforementioned three categories, and such tangible fixed assets shall be depreciated at such rate of forty percent (40 % ). Company shall carry over depreciation costs of fixed assets to the Financial Year of the Production Commencement Date and deduct from gross income starting with the Financial Year of the Production Commencement Date.

4. Each Company may elect to capitalize, or deduct as incurred, intangible exploration expenses, or intangible drilling and development expenses, or both, incurred after Production Commencement Date. In the event that a Company does not elect to deduct such costs incurred in a given Financial Year, such Company shall capitalize and amortize such costs on a straight line basis over a period of ten (10) Financial Years, beginning with the Financial Year such costs are incurred.

5. Costs do not include penalties on violations of tax, environmental and labor protection regulations imposed by the Government.

First Amendment to License Agreement

between Republic of Latvia

and AMOCO Latvia Petroleum Company,

a company incorporated in the United States

and Oljeprospektering AB (OPAB),

a company incorporated in Sweden

On October 31, 1995, the Republic of Latvia (the "Government"), Amoco Latvia Petroleum Company, a company established under the laws of Delaware, U.S.A. ("Amoco") and Oljeprospektering AB, a company established under the laws of Sweden ("OPAB"), duly signed a License Agreement (the "License") which specifies certain terms and conditions respecting certain petroleum-related matters.

The License was signed in five originals of both the Latvian language and the English language, and Article 25.4 of the License specifies the manner in which both said versions shall be used and applied.

Based on further discussions, the Government, Amoco and OPAB have decided and agreed to amend the License as specified below in this FIRST AMENDMENT TO LICENSE AGREEMENT.

The Government, Amoco and OPAB, the Government, Amoco and OPAB hereby agree as follows:

1. The Latvian language version of Article 24.3 of the License shall be deleted in its entirety and replaced with the following:

Valdība apstiprina jūras robežu starp Zviedriju un Latviju, kuras konfigurācija noteikta ar 1988. gada 18. aprīlī noslēgto un 1988. gada 22. jūnijā ar notu apmaiņu apstiprināto Līgumu starp Zviedrijas Karalistes un Padomju Savienības Valdībām par kontinentālā šelfa, Zviedrijas zvejniecības zonas un Padomju ekonomiskās zonas Baltijas jūrā noteikšanu, ciktāl tas attiecas uz Licences Darbības Vietu.

2. The English language version of Article 24.3 of the License shall remain in full force and effect as written in the License which was duly signed on October 31, 1995.

3. In both the English language version and the Latvian language version of the License, the first number listed in Point 7 for block No. 5519-1 as specified on Schedule "A" of the License, which currently reads "56", shall be deleted in its entirety and replaced with the number "55".

Except as specified above, License shall remain as written in the form as signed on October 31, 1995.

The Government, Amoco and OPAB each represents and warrants to the others that its respective representative who signs below this FIRST AMENDMENT TO LICENSE AGREEMENT is duly authorized to do so, and that the signature of each said representative shall be binding on each of the Government, Amoco and OPAB to all of the terms and conditions specified herein, effective on the last date on which all of said representatives sign this FIRST AMENDMENT TO LICENSE AGREEMENT.

In addition, by the signature of its duly authorized representative below, the Government confirms that the execution of this FIRST AMENDMENT TO LICENSE AGREEMENT is in conformity with the laws of Latvia.

AGREED TO AND ACCEPTED:

REPUBLIC OF LATVIA

By: __________________

Printed or Typed Name

Title __________________

Date _______________

AGREED TO AND ACCEPTED:

AMOCO LATVIA PETROLEUM COMPANY

By: ___________________

Printed or Typed Name

Title ________________

Date ________________

AGREED TO AND ACCEPTED:

OLJEPROSPEKTERING AB (OPAB)

By: ___________________

Printed or Typed Name

Title _________________

Date ________________