3.1       Project Area

 

The Project Area means the ddddddd Block located in the ggggg Basin, having the geographic coordinates and boundary turning points set out in Annex 1 of this Agreement. The Annexes shall be an integral part of the Agreement.  It is expected that the geological formations for cooperation are between the top formation of the Silurian and the base formation of the Cambrian.

  

 

3.2 Work Program

3.2.1 The Joint Assessment period will be two consecutive years with two phases, each phase lasting twelve (12) consecutive months respectively, commencing from the Effective Date of this Agreement, except as otherwise stipulated in Article 4 and Article 20 herein. 

3.2.2 In Phase I, XXXX will study the Data Package and will drill (at least to the base of the Silurian shale), core and test two vertical wells. The purpose of these wells will be to understand the rock quality and rock physics of the shales and plan subsequent horizontal wells.

3.2.3 In Phase II, XXXX will drill and test (fracture stimulate) two horizontal wells (either as a sidetrack from the vertical wells or as new wells) to establish the flow characteristics of the shales, and their capability to produce at viable rates.

 

3.2.4. In the event that a well fails to reach its geological target, either because it encounters basement, or as a result of difficulties insurmountable by employing modern drilling technology in conformity with sound and safe oilfield practices, then such well shall count towards XXXX’s work obligation under this Agreement.

 

 

3.2.5 The Work Program goals outlined in this Article 3 above with respect to all of the four wells shall be deemed to be satisfied if XXXX has spent a cumulative drilling cost amounting to forty million US dollars ( U.S.$nnn) in pursuit of the Work Program. 

 

The Joint Assessment herein shall be carried out in one or two phases in accordance with the following:

 

4.1 Phase I shall begin on the Effective Date of this Agreement and shall last twelve (12) consecutive months. Within fifteen (15) days following the Effective Date XXXX shall submit the Phase I Work Program and Budget to the Steering Committee. Within thirty (30) days, the Steering Committee shall review and adopt the Work Program and Budget and submit the Work Program and Budget for approval to Aaaaaa who will provide feedback within this same timeframe. XXXX shall use its reasonable efforts to carry out the portion of the Work Program stipulated in Article 3.2.2 during Phase I. At the end of Phase I, XXXX will exercise its option either to enter into Phase II or to terminate the Agreement. This choice shall be communicated by XXXX to the Steering Committee in writing. Neither Party will incur any penalty, liability, or obligation as a result of XXXX’s exercise of its option to terminate this Agreement, other than as expressly set forth herein.

 

4.2 At the end of Phase I, If XXXX elects to enter into Phase II, then Phase II starts on the following date of the expiration date of Phase I, XXXX shall submit a Phase II Work Program and Budget within fifteen (15) days following the beginning date of Phase II to the Steering Committee. Within thirty (30) days, the Steering Committee shall review and adopt such Work Program and Budget and submit the Work Program and Budget for approval to Aaaaaa who will provide a response within this same timeframe. XXXX shall use its reasonable efforts to carry out the portion of the Work Program stipulated in Article 3.2.3 during Phase II. XXXX shall notify Aaaaaa in writing of the end of Phase II. Neither Party will incur any penalty, liability, or obligation as a result of XXXX’s exercise of its option to terminate this Agreement.

   

4.3 Where time is insufficient to complete the Work Program before the expiration of the relevant Joint Assessment phase, subject to the unanimous approval of the Steering Committee, which approval shall not be unreasonably withheld, the Joint Assessment phase as described in Article 4 herein shall be extended.  The period of extension shall be a reasonable period of time required to complete the above-mentioned Joint Assessment work.

 

4.4 The Joint Assessment period within the Project Area shall be two (2) years beginning on the Effective Date of this Agreement, unless otherwise provided in Article 4.3 herein, however, the total Agreement period shall not exceed [twenty-seven continuous months] [thirty continuous months].