I T TECHNOLOGY INC
JOINT OPERATING AGREEMENT
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>jointoperatingagmt.txt
<DESCRIPTION>JOINT OPERATING AGREEMENT
<TEXT>
                                  EXHIBIT 10.2

                            ALADDIN MIDDLE EAST LTD.

                            ERSAN PETROL SANAYII A.S.

                               AVENUE ENERGY INC.








                            JOINT OPERATING AGREEMENT

                            LICENSE AR/AME - EPS 3462
                            GAZIANTEP, S.E. ANATOLIA
                               REPUBLIC OF TURKEY



<PAGE>
                                TABLE OF CONTENTS

JOINT OPERATING AGREEMENT

ARTICLE                                                                PAGE

1.            Definitions and Interpretations........................... 2
2.            Scope of Understanding and Duration....................... 9
3.            Interest of the Parties...................................10
4.            Operator..................................................14
5.            Authorities and Duties of Operator........................17
6.            Rights of the Parties.....................................25
7.            Insurance and litigation..................................26
8.            The Operating Committee...................................29
9.            Exploration Programs and Budgets..........................34
10.           Appraisal Programs and Budgets............................36
11.           Development Programs and  Budgets.........................38
12.           Production Programs and Budgets...........................42
13.           Sole Risk Projects........................................43
14.           Accounting................................................56
15.           Default...................................................56
16.           Disposal of Petroleum.....................................60
17.           Confidentiality...........................................61
18.           Public Announcements......................................63
19.           Outgoings.................................................63
20.           Covenant, Undertaking and Relationship....................64
21.           Assignment and Encumbrances...............................66
22.           Withdrawal................................................68
23.           Force Majeure.............................................71
24.           Applicable law and Arbitration............................71
25.           Notices...................................................72
26.           Miscellaneous.............................................74
Signing Page............................................................75
Schedule 1 - Accounting Procedure

<PAGE>
                            JOINT OPERATING AGREEMENT

THIS AGREEMENT is made the 20th day of December 2002

BETWEEN:

ALADDIN MIDDLE EAST LTD, a corporation organized and existing under the laws of
the State of Delaware in the U.S.A., having offices in the city of Ankara and in
the city of Wichita, Kansas, (hereinafter referred to as "AME");

AND

ERSAN PETROL SANAYII A.S., a corporation existing under the laws of the Republic
of Turkey, having its head office in the city of Ankara ("ERSAN");

AND

AVENUE ENERGY INC., a corporation organized and existing under the laws of the
State of Delaware in the U.S.A., having offices at Sherman Oaks, CA, USA at
15303 Ventura Blvd., 9th Fl. Sherman Oaks, CA, USA and in Australia at 34-36
Punt Road, Windsor, Melbourne, Australia (hereinafter referred to as "AVENUE").

RECITALS

A.       The Parties are the holders of License AR/AME - EPS 3462 in the
         Gaziantep Petroleum District of South East Anatolia, Republic of
         Turkey, AVENUE having acquired its 45% Percentage Interest in the
         License under a Farmin and Participation Agreement dated 14 November
         2002 between the Parties and certain other parties.

B.       The Parties desire to provide for the exploration, development,
         production and operation of the License Area and to define their
         respective rights and obligations in respect thereof.


<PAGE>

NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements and obligations herein contained and to be performed, IT IS AGREED by
and between the Parties AS FOLLOWS:

1.       DEFINITIONS AND INTERPRETATIONS

In this Agreement:

"ACCOUNTING PROCEDURE" means the Accounting Procedure set out in Schedule 1
hereto;

"ADVANCE" means each payment of cash required to be made pursuant to a Cash
Call,

"AFE" means authorisation for expenditure;

"AFFILIATE" means, with respect to any Person, any other Person that (a) owns or
controls the first Person, (b) is owned or controlled by the first Person, or
(c) is under common ownership or control with the first Person, where 'own'
means a direct or indirect ownership of more than 50% of the equity interests or
rights to distributions on account of equity of the Person and 'control' means
the direct or indirect power to direct the management or policies of the Person,
whether through the ownership of voting securities, by contract, or otherwise;
notwithstanding the foregoing, each member of SGC is deemed to be an Affiliate
of each other member of SGC for the purposes of this Agreement;

"APPRAISAL WELL" means a well drilled to determine or further evaluate the
extent size or nature of a hydrocarbon accumulation in a geological formation
contained in a trap, structure or closure in which a Discovery has been made by
a previous Exploration Well drilled (whether within or outside the License Area)
on such trap, structure or closure;

"BASE RATE" means the prime rate of interest for Dollars in effect at the Bank
of America, or, if no such rate is available for Bank America, such other major
US clearing bank with offices in New York, NY as the Parties (other than any
Defaulting Party and its Affiliates) may select, at 10:00 a.m. New York, NY,
time on the day in question: in respect of Non-Working Days the rate set for the
immediately preceding Working Day will apply;

"BUDGET" means any budget in respect of a Program;

"CAPITAL EXPENDITURE" means costs and expenditures incurred in but not limited
to the following operations: the drilling of all wells (including testing, if
applicable, plugging and abandoning), development feasibility studies, the
design, construction, installation, acquisition, replacement or final
abandonment of any permanent facilities, permanent additions to Joint Property
and administrative costs directly attributed to such functions;

"CARRIED INTEREST" has the meaning specified in Article 3.2;

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<PAGE>

"CASH CALL" means any request to the parties for the payment of cash made by
Operator in accordance with the provisions of the Accounting Procedure in
connection with the Joint Operations or, where the context so requires, to the
Sole Risk Party in connection with any Sole Risk Project;

"COMMUNICATION" has the meaning specified in Article 25.1;

"CONVERSION RATE" means the conversion rate as published in the Wall Street
Journal for the two currencies in question on the relevant date or, if no such
rates are quoted on that date, on the immediately preceding Working Day on which
such rates were quoted;

"DEFAULTING PARTY" has the meaning specified in Article 15.1;

"DEVELOPMENT WELL" means a well which is drilled for the purpose of producing
from and depleting a known Petroleum bearing reservoir or for the purpose of
injecting gas or liquid substances into that reservoir to enhance the recovery
of Petroleum from that reservoir;

"DISCOVERY" means any discovery of reserves of Petroleum which are tested and
produced in the well encountering the same, or if not so tested, are determined
by Operating Committee to be capable of being produced;

"DOLLARS" or "$" means dollars of the United States of America;

"ERSAN ROYALTY INTEREST" means the right of ERSAN to a 2.5% overriding royalty
interest in Petroleum produced from the Licence Area;

"EXPLORATION WELL" means any well other than an Appraisal Well or a Development
Well;

"FARMIN AND PARTICIPATION AGREEMENT" means the agreement referred to in Recital
A of this Agreement;

"GOVERNMENT" means the Government of the Republic of Turkey, from time to time,
or any relevant agency, division or representative thereof;

"JOINT ACCOUNT" means the account established and maintained by Operator to
record all Advances, expenditures and receipts in the conduct of the Joint
Operations;

"JOINT OPERATIONS" means all operations relating to the License Area approved,
or deemed to be approved, by the Operating Committee and conducted in accordance
with this Agreement and in the case of operations under a development Program
and Budget means all operations in which all Parties are obliged to participate;

"JOINT PETROLEUM" means all Petroleum produced under the Joint Operations;

"JOINT PROPERTY" means all property, of whatever nature, acquired or held for
use in connection with the Joint Operations, but excluding Joint Petroleum and
the License;

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<PAGE>

"LICENSE" means each of:

(a)      License AR/AME - EPS 3462 in the Gaziantep Petroleum District of South
         East Anatolia, Republic of Turkey;

(b)      (unless the context otherwise requires) any petroleum lease granted
         under the Petroleum Law to the Parties in relation to all or part of
         the License Area;

(c)      any other exploration license or petroleum lease granted under the
         Petroleum Law which the Parties from time to time agree expressly and
         in writing to bring within the scope of this Agreement,

as any such license or lease may be extended, modified or replaced from time to
time;

"LICENSE AREA" means the area for the time being covered by the License;

"MATERIAL" means personal property, equipment or supplies;

"MONTH" means a calendar month;

"NATURAL GAS" means hydrocarbons which at atmospheric conditions of temperature
and pressure are in a gaseous phase;

"NET PRE-TAX REVENUE" means sales receipts (net of withholdings and deductions
at source and excluding VAT (if any), but before income or corporate tax
calculated and chargeable by reference to individual Parties), less:

(a)      royalties and similar payments made or due to the Government or under
         the ERSAN Royalty Interest in respect of such sales or related
         production; and

(b)      operating costs incurred by the Operator and/or the relevant Parties
         (or any of them) in connection with the production of those receipts
         (including production and transportation charges, commissions,
         salaries, fees and expenses chargeable to the Joint Account);

"NGLS" means any hydrocarbon found in Natural Gas which may be extracted or
isolated as liquefied Petroleum;

"NON-DEFAULTING PARTY" has the meaning specified in Article 15.1;

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<PAGE>

"NON-OPERATOR" means a Party other than Operator;

"NON-SOLE RISK PARTIES" has the meaning specified in Article 13.2.5;

"OPERATING COMMITTEE" means the committee established pursuant to Article 8;

"OPERATOR" means the Party from time to time acting as such pursuant to Article
4;

"OUTGOING OPERATOR" has the meaning specified in Article 4.3;

"PARTY" or "PARTIES" means any party or parties to this Agreement and their
respective successors and permitted assigns;

"PERCENTAGE INTEREST" means, for each of the Parties, the undivided percentage
interest held from time to time by it pursuant to this Agreement in the License,
the Joint Property and the Joint Petroleum, as provided in Article 3.1 or, where
the context so requires, in any Sole Risk Development;

"PERSON" includes any individual, corporation, company, partnership (general or
limited), business trust, or other governmental or non-governmental entity or
association;

"PETROLEUM" has the meaning assigned to it under the Petroleum Law;

"PETROLEUM LAW" means Petroleum Law No. 6326 of the Republic of Turkey, as
amended from time to time (including by Laws No. 6558, 6987, 1702, 2217 and
2208) and the Petroleum Regulations promulgated thereafter under Government
Decree 89/14111 published with the Official Gazette on 17 July 1989 issue no.
20224, as amended from time to time;

"PROGRAM" means any program of operations;

"QUARTER" means a period of three Months ending on 31st March, 3rd June, 30th
September, or 31st December in any Year;

"SGC" means the Sayer Group Consortium, consisting of AME, ERSAN,
Transmediterranean Oil Company Ltd and Guney Yildizi Petrol Uretim Sondaj
Muteahhitlik ve Ticaret A.S.;

"SOLE RISK DEVELOPMENT" has the meaning specified in Article 13.1;

"SOLE RISK DRILLING" has the meaning specified in Article 13.1;

"SOLE RISK PARTY" has the meaning specified in Article 13.2.3;

"SOLE RISK PROJECT" has the meaning specified in Article 13.1;

"SUB-AREA" means, at any given time, any part of the License Area determined as
such by the Operating Committee pursuant to Article 13.2.9, being delineated by
surface area but applying only to

                                       5
<PAGE>

that interpreted closure of any geological structure or stratigraphic trap in
which a reservoir or reservoirs of Petroleum exist, and which is subject to
development by less than all Parties pursuant to the terms of this Agreement;

"SUNK COSTS" means the contributions made by a Party on or after 14 November
2002 and in accordance with this Agreement, the Farmin and Participation
Agreement or any other Joint Operating Agreement entered into pursuant to the
Farmin and Participation Agreement (including, but not limited to, contributions
made on behalf of the holder(s) of the Carried Interest) towards the cost and
expenses incurred in relation to joint operations on any Exploration Licence or
Production Lease in which AVENUE or its Affiliate holds an interest (or has an
interest held on its behalf by AME) acquired pursuant to the Farmin and
Participation Agreement, and includes (without limiting the generality of the
foregoing):

(a)      any payment of or in respect of Withholding Tax payable in relation to
         any such cost or expenses or the contribution of a Party thereto;

(b)      in relation to AVENUE or its Affiliate:

         (i)      the full amounts paid pursuant to clauses 3, 4 and 9.3(c) of
                  the Farmin and Participation Agreement;

         (ii)     all stamp tax paid by it under or in respect of the Farmin and
                  Participation Agreement or the transaction contemplated
                  therein;

         (iii)    all fees, costs or expenses paid under any representation and
                  consulting agreement with Mr O.Sayer relating to the
                  activities contemplated in the Farmin and Participation
                  Agreement; and

         (iv)     all fees and expenses paid to the legal advisers to AVENUE and
                  IT Technology Inc in relation to the negotiation, preparation
                  and execution of the Farmin and Participation Agreement and
                  the consummation and closing of the transactions provided for
                  therein; and

(c)      in relation to AME and ERSAN, its contributions to the cost and
         expenses of joint operations incurred in relation to the drilling and
         other operations and works carried out in relation to either the
         Tosun-1 Well or the Karakilise-1 Well (both as defined in the Farmin
         and Participation Agreement) or both, on the basis that, unless
         otherwise agreed by the Parties and solely for the purposes of clause
         9.3 of the Farmin and Participation Agreement, Article 3.2.5 of this
         Agreement, and the corresponding provisions of any other applicable
         joint operating agreement between AME or its Affiliate and Avenue or
         its Affiliate of the other part (and whether or not other Persons are
         parties to such agreement), the amount of such contributions shall be
         deemed in the aggregate to equal one hundred and fifty percent (150%)
         of the amount of the Sunk Costs claimed and recoverable by AVENUE or
         its Affiliate in relation to those operations and works;

"WILFUL MISCONDUCT" means in relation to Operator an intentional and conscious
or reckless disregard of:

(a)      any provision or requirement of this Agreement or, in so far as
         applicable to the Joint Operations, of applicable law or regulations;
         or

                                       6
<PAGE>

(b)      any Program, not justifiable by any special circumstances,

by any director, officer, supervisory or management employee, agent or
contractor or sub-contractor of Operator or its Affiliates, but shall not
include any error in judgement or mistake made by any such person in the
exercise, in good faith, of any function, authority or discretion conferred upon
Operator;

"WITHHOLDING TAX" means the withholding from the petroleum exploration and
production revenues in accordance with Council of Ministers Decree No. 93/5147
published in the Turkish Official Gazette No. 21805(R) dated 30 December 1993,
as may be amended, and any other withholding that may be applicable to this
Agreement, the activities and payments hereunder or the Parties;

"WORKING DAY" means any day (other than a Saturday or Sunday) on which banks in
Ankara, Turkey and New York, NY are generally open for business;

"YEAR" means a calendar year under the Gregorian calendar;

Reference to any statute, statutory provision or statutory instrument includes a
reference to that statute, statutory provision or statutory instrument as may
from time to time be amended, extended or re-enacted;

Reference to any gender includes a reference to all other genders;

Unless the context otherwise requires reference to any Article is to an article
of this Agreement and reference to any Paragraph is to a paragraph of the
accounting Procedure;

Reference to the singular includes a reference to the plural and vice versa;

The headings are used for convenience only and shall not affect the construction
or validity of this Agreement.

2.       SCOPE OF UNDERSTANDING AND DURATION

2.1      Scope

2.1.1    The scope of this Agreement shall extend to the exploration for and the
         production of Petroleum under the License and the joint marketing and
         joint sales of Petroleum so produced, including the manner in which
         abandonment obligations (whether arising under the License or by law)
         shall be met and shall include the treatment, storage and
         transportation of Petroleum within the License Area.

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<PAGE>

2.1.2    Notwithstanding the foregoing, this Agreement shall not extend to any
         joint financing arrangements.

2.2.     Understanding

         This Agreement represents the entire Agreement and understanding
         between the Parties as to the subject matter hereof. There are no
         verbal understandings, agreements, representations or warranties which
         are not expressly set forth herein. Notwithstanding the foregoing, the
         provisions of the Farmin and Participation Agreement remain in full
         force and effect.

2.3      Commencement and Duration

         This Agreement shall commence on the date first mentioned above and
         shall, without prejudice to Article 17, continue for so long as the
         License remains in force and until all Joint Property has been disposed
         of and final settlement has been made between the Parties in accordance
         with their respective rights and obligations hereunder.

3.       INTEREST OF THE PARTIES

3.1      Percentage Interests

         Subject to Article 3.2 and to the other terms and conditions of this
         Agreement, the License, all Joint Property and all Joint Petroleum
         shall be owned by the Parties, and the Net Pre-tax Revenue derived from
         the Joint Operations (including the sale of Joint Petroleum by Operator
         on behalf of the Parties) shall accrue and be allocated to the Parties,
         and all costs and obligations incurred in the proper conduct of the
         Joint Operations shall be borne by the Parties, in proportion to their
         respective Percentage Interests, which at the date hereof are as
         follows:

                  AME              32.50%
                  ERSAN            32.50%
                  AVENUE           35   %
                                   ------
                  Total            100  %

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<PAGE>

3.2      Carried Interest

3.2.1    Notwithstanding anything to the contrary in this Agreement, an
         aggregate 10% Percentage Interest (held initially as to 50% by AME and
         as to the other 50% by ERSAN) shall be classified as a 'Carried
         Interest' and shall carry the rights and obligations set out in this
         Article 3.2.

3.2.2    The Carried Interest (or part thereof) held by a Party forms part of
         the Percentage Interest of that Party and, accordingly, except as
         expressly provided in this Article 3.2, references in the other
         provisions of this Agreement to the Percentage Interest of a Party
         include the Carried Interest (or part thereof) of that Party.

3.2.3    The Carried Interest of a Party may be transferred or otherwise dealt
         with in accordance with this Agreement as a Percentage Interest,
         provided that any transfer of a Percentage Interest by a Party holding
         the Carried Interest (or part thereof) shall clearly identify the
         extent (if any) to which the Percentage Interest so transferred
         comprises the Carried Interest (or part thereof) of that Party.

3.2.4    Notwithstanding Article 3.1, the share of any costs or expenses which
         the holder of the Carried Interest (or part thereof) is or, but for
         this Article 3.2.4 would be, required under the terms of Article 3.1 to
         contribute by virtue of the Carried Interest (or part thereof) held by
         it (being, in the aggregate, 10% of the total costs and expenses the
         subject of Article 3.1) shall be the responsibility of and advanced by
         the Parties (in each case by virtue of the Percentage Interests held by
         them which do not comprise all or part of the Carried Interest) in the
         following proportions:

                  AME             25 %
                  ERSAN           25 %
                  AVENUE          50 %
                                  ----
                  Total           100%

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<PAGE>

         To facilitate this arrangement, all Cash Calls relating to the Joint
         Operations shall include as a separate line item the amount payable by
         each Party under this Article 3.2.4 in relation to the Carried
         Interest, and the Operator shall maintain, separately in relation to
         each Party, and make available to each Party upon request, a record of
         all amounts advanced by each Party under this Article 3.2.4, the
         Parties in respect of whom such amounts were advanced, and all payments
         received by each Party under Article 3.2.5 in respect of amounts so
         advanced. For the avoidance of doubt:

         (i)      a Party shall not be responsible under this Article 3.2.4 for
                  the obligations of another Party in respect of tax, royalties
                  (Government or otherwise) or abandonment costs and provision;
                  and

         (ii)     the effect of this Article 3.2.4 (by way of example) is that a
                  Party whose entire Percentage Interest is comprised of the
                  Carried Interest or part thereof shall have no obligation
                  under Article 3.1 or this Article 3.2.4 to contribute to the
                  costs the subject of Article 3.1.

3.2.5    Notwithstanding Article 3.1, if the Joint Operations result in the
         making of a Discovery and the production for sale of Joint Petroleum,
         then at any time when the cumulative amount received by a Party,
         pursuant to clause 5.5(d)(i) or clause 9.3(d)(i) or (ii) of the Farmin
         and Participation Agreement, this Article 3.2.5 or the equivalent
         provisions of any other Joint Operating Agreement entered into pursuant
         to the Farmin and Participation Agreement, by way of recovery of Sunk
         Costs is less than ten percent (10%) of the cumulative amount of Sunk
         Costs incurred by that Party (disregarding any such recovery), fifty
         percent (50%) of the Net Pre-tax Revenue that would, but for this
         Article 3.2.5, accrue to the holder of the Carried Interest (or part
         thereof) under Article 3.1 by virtue of its holding of the Carried
         Interest (or part thereof) (being, for the avoidance of doubt, an
         aggregate 5% of the total amount of Net Pre-tax Revenue) shall instead
         accrue to the benefit of and be paid to that Party by way of a partial
         recovery (to the extent of 10%) of such Sunk Costs; provided that if at
         any one time payments


                                       10
<PAGE>

         are due under this Article 3.2.5 to more than one Party, the said
         percentage of such Net Pre-tax Revenue shall be allocated amongst those
         Parties in proportion to their respective Percentage Interests
         (disregarding any part thereof comprising the Carried Interest or part
         thereof). For the avoidance of doubt, while the preceding sentence is
         in operation, the holder of the Carried Interest (or part thereof)
         shall continue to be entitled to receive the remaining fifty percent
         (50%) of the said Net Pre-tax Revenue.

3.2.6    For the purposes of Article 3.2.5, the application of Net Pre-tax
         Revenue against Sunk Costs shall be made in US$, with any receipts and
         operating costs used to calculate such Net Pre-Tax Revenue and any such
         Sunk Costs denominated other than in US$ being notionally converted
         into US$ at the Conversion Rate applicable on the Business Day next
         following the date the same are received or, as applicable, incurred
         (or, if the Conversion Rate is not quoted on the relevant Business Day,
         on the nearest earlier date upon which a Conversion Rate is so
         available).

3.2.7    If the holder of the Carried Interest (or part thereof), in its
         capacity as such, (the "CARRIED INTEREST HOLDER") notifies the other
         Parties that is wishes to participate in a Sole Risk Project (whether
         as an original Sole Risk Party or otherwise), the Parties shall meet
         and use reasonable efforts to agree terms acceptable to all of the
         Parties which provide for the manner and basis upon which the Carried
         Interest Holder may so participate, such terms to provide for (inter
         alia) (i) the funding of the share of the costs and liabilities
         (actual, contingent and prospective) associated with such Sole Risk
         Project which are attributable to the Carried Interest or the
         Percentage Interest of any Party who is not participating in the Sole
         Risk Project (which Party or Parties, for the avoidance of doubt, shall
         not be obligated under Article 3 or otherwise to contribute to such
         costs, either in respect of its own Percentage Interest or in respect
         of the Carried Interest), (ii) insurance, (iii) the amount of any
         payments to be made by the Carried Interest Holder to the Sole Risk
         Parties pursuant to Articles 13.4.1 (where the Carried Interest Holder
         would be participating other than as an original Sole Risk Party), and
         (iv) the recovery of any payments made by a Sole Risk Party in respect
         of the costs associated with such Sole Risk Project which are
         attributable to the Carried Interest. Unless and until such terms are
         agreed by all of the Parties, the holder of a Carried Interest (or part
         thereof) shall not, by virtue of that Carried Interest or part thereof,
         be entitled to initiate a Sole Risk Project or, unless


                                       11
<PAGE>

         otherwise agreed by the all of the other Sole Risk Parties in that Sole
         Risk Project, to participate in any Sole Risk Project, and Article
         3.2.4 shall not apply to the funding of a Sole Risk Project in which
         the holder of a Carried Interest is so allowed to participate. Except
         as otherwise agreed by the Sole Risk Parties in a Sole Risk Project,
         the Carried Interest shall be disregarded for the purposes of
         determining the respective rights and obligations of the Parties under
         or arising out of Article 13 in relation to that Sole Risk Project.

3.2.8    For the purposes of Articles 8, 9, 10, 11, 12 and 13, any Party which
         for the time being holds a Percentage Interest which comprises, in part
         but not in whole, the Carried Interest or part thereof shall be treated
         as two distinct Parties in respect of a portion of its Percentage
         Interest corresponding with the Carried Interest or part thereof held
         by it, of the one part, and the balance of its Percentage Interest, of
         the other part. Accordingly, such a party may appoint a separate
         representative to the Operating Committee and vote separately (or have
         its representative vote separately) in respect of each such interest.

3.3      Withholding tax

         Notwithstanding anything to the contrary in this Agreement, any
         Withholding Tax incurred in relation to the costs and expenses charged
         to the Joint Account, or the payments by the Parties (or any of them)
         in relation thereto, shall ultimately be borne as to 50% percent by
         AVENUE and as to the remainder by the other Parties, as between them in
         the same proportions as their respective obligations to fund costs
         pursuant to Article 3.1 and 3.2.4 (i.e. so that a Party whose entire
         Percentage Interest is comprised of the Carried Interest or part
         thereof shall have no obligation under this Article 3.3 to bear or
         contribute to Withholding Tax).

4.       THE OPERATOR

4.1      Designation

         AME is hereby designated and agrees to act as Operator under and
         subject to the terms of this Agreement.


                                       12
<PAGE>

4.2      Resignation and Removal

4.2.1    Operator shall have the right to resign at the end of any Month, by
         giving not less than two hundred and seventy (270) days' notice to the
         Parties, or such shorter period of notice as the Operating Committee
         may direct.

4.2.2    Operator may be removed:

         (i)      at the end of any Month, if the Operating Committee so decides
                  and gives not less than ninety days' written notice to
                  Operator; or

         (ii)     by notice from any Non-Operator (other than a Non-Operator
                  which is an Affiliate of the Operator) if Operator:

                  (a)      ceases or threatens to cease to carry on business or
                           a major part thereof;

                  (b)      makes an assignment for the benefit of creditors,
                           admits its inability to pay its debts as they become
                           due, or such fact is determined in a judicial
                           proceeding, files or has filed against it a petition
                           in bankruptcy or other similar insolvency proceeding
                           or is adjudicated a bankrupt or insolvent;

                  (c)      files a petition seeking for itself any
                           reorganisation, arrangement, composition,
                           readjustment, liquidation, dissolution or other
                           similar arrangement under any present or future
                           statute, law or regulation; or

                  (d)      consents to or acquiesces in the appointment of a
                           trustee, receiver or liquidator of it or of all or
                           any substantial part of its assets or properties, or
                           if it or the holders of its common stock take any
                           action contemplating its dissolution or liquidation;
                           or

         (iii)    forthwith upon the Operating Committee so determining and
                  giving written notice to Operator, if:

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<PAGE>

                  (a)      the aggregate of the Percentage Interests of Operator
                           and any Affiliate of Operator is less than fifteen
                           percent (15%); or

                  (b)      the Operating Committee determines and notifies
                           Operator that there has been an event of negligence
                           or Wilful Misconduct or a material breach of this
                           Agreement or the License by Operator and Operator
                           fails within twenty eight (28) days after receipt of
                           such notice (or such longer period as may be
                           specified in the said notice) to remedy such breach
                           to the reasonable satisfaction of the other Parties
                           or, if such breach is not capable of remedy, to
                           otherwise restore as nearly as practicable the other
                           Parties to the position they would have been in had
                           the relevant event or breach not occurred.

4.2.3    Subject to the following, Operator shall have no claim against any
         Party as a result of the resignation or removal of Operator, provided
         always that any resignation or removal of Operator shall be without
         prejudice to any rights, obligations or liabilities which accrued
         during the period when Operator served in that capacity. If Operator
         resigns before the completion of all working obligations set out in the
         License or arising under the Petroleum Law in respect of the License,
         Operator shall not be entitled to any costs or expenses incurred in
         connection with the change of operatorship, but if Operator resigns
         thereafter or is removed it shall be entitled to charge the Joint
         Account any costs or expenses incurred by it as a result of the change
         of operatorship as may be approved by the Operating Committee (such
         approval not to be unreasonably withheld).

4.3      Election of Successor Operator

         As soon as practicable after notice is duly given as to the resignation
         or removal of Operator (hereinafter referred to as "OUTGOING OPERATOR")
         under Article 4.2, one of the Non-Operators shall, subject to its
         acceptance of the position under the terms of this Agreement and
         subject to any necessary approval of the Government, be selected by the
         Operating Committee to assume the position of Operator upon the
         effective date of the resignation or removal of the Outgoing Operator,
         provided that if the Outgoing Operator or any Party which is an
         Affiliate of the Outgoing Operator either fails to vote or votes for
         itself or any of its Affiliates as successor to the operatorship, those
         votes shall be disregarded and the percentage figure set out in Article
         8.4.5 shall apply to the total votes available to the remaining
         Parties.

                                       14
<PAGE>

4.4      Transfer of Responsibilities

4.4.1    Upon the effective date of the resignation or removal of the Outgoing
         Operator, the Outgoing Operator shall hand over or deliver to, or
         relinquish custody in favor of, the Non-Operator selected to succeed it
         as Operator, or if no such selection has yet been made, then to the
         Non-Operator having the largest Percentage Interest (or, in the event
         that more than one Non-Operator shall equally hold the largest
         Percentage Interest, the nominee of the Outgoing Operator among such
         Non-Operators, all funds relating to the Joint Account, all Joint
         Property, all Joint Petroleum and all books, records and inventories
         relating to the Joint Operations other than those books, records and
         inventories maintained by the Outgoing Operator in its capacity as the
         owner of a Percentage Interest. The Outgoing Operator shall use its
         best efforts to transfer to the aforesaid Non-Operator, effective as of
         the effective date of such resignation or removal, its rights as
         Operator under all contracts exclusively relating to the Joint
         Operations and the aforesaid Non-Operator shall assume all obligations
         of Operator thereunder (other than obligations arising or relating to
         any period or time prior to such effective date). Pending such transfer
         and in relation to all other contracts relating to the Joint Operations
         (to the extent they so relate), the Outgoing Operator shall hold its
         rights and interests as Operator from such effective date for the
         account and to the order of the aforesaid Non-Operator and the Parties
         shall, from such effective date, indemnify and hold harmless the
         Outgoing Operator from all obligations thereunder except and to the
         extent that the same devolve upon the Party which is the Outgoing
         Operator in its capacity as the holder of a Percentage Interest or
         arise from any default, negligence or Wilful Misconduct of the Outgoing
         Operator in its capacity as Operator occurring prior to the effective
         date of its resignation or removal as Operator.

4.4.2    As soon as practicable after the date on which the Outgoing Operator is
         required to transfer its responsibilities as provided in Article 4.4.1,
         the Parties shall audit the Joint Account and conduct an inventory of
         all Joint Property and all Joint Petroleum and such inventory shall be
         used in the return of and the accounting for the said Joint Property
         and Joint Petroleum by the Outgoing Operator for the purposes of the
         transfer of responsibilities under this Article 4. All costs and
         expenses incurred in connection with such audit and inventory shall be
         for the Joint Account.

                                       15
<PAGE>

5.       AUTHORITIES AND DUTIES OF OPERATOR

5.1      Right

5.1.1    Subject to this Agreement, Operator has the right and the obligation to
         conduct Joint Operations by itself, or through its agents or its
         contractors, subject to the overall supervision and control of the
         Operating Committee. Such right shall not be assigned without the
         written consent of the Non-Operators and any necessary consent of the
         Government, provided that the Non-Operators shall not withhold their
         consent in the case of an assignment to an Affiliate of Operator which
         has demonstrated to the satisfaction of the Non-Operators its financial
         and technical capability to perform the functions of Operator hereunder
         and which enters into a written instrument accepting and assuming all
         of the obligations of Operator under this Agreement.

5.1.2    If Operator conducts any or all of the Joint Operations through its
         agents, contractors or Affiliates, Operator shall nevertheless remain
         responsible to the Parties for such operations as Operator, as and to
         the extent provided in this Agreement.

5.2      Responsibility

5.2.1    Subject to the term and conditions of this Agreement and to the overall
         supervision and control of the Operating Committee, the
         responsibilities of Operator shall include, but not be limited to:

         (i)      the preparation of Programs, Budgets and AFEs pursuant to the
                  provisions of this Agreement,

         (ii)     the implementation of such Programs and Budgets as shall,
                  together with the relevant AFEs, have been approved by the
                  Operating Committee;

         (iii)    providing each of the Parties with reports, data and
                  information concerning the Joint Operations;

                                       16
<PAGE>

         (iv)     the planning for and obtaining of all requisite services and
                  material;

         (v)      the supervision, direction and control of statistical and
                  accounting services; and

         (vi)     providing all technical and advisory services required for the
                  efficient performance of Joint Operations.

5.2.2    Operator shall conduct the Joint Operations in a prudent and
         workmanlike manner in accordance with methods and practices customarily
         used in prudent oil and gas field practice and with that degree of
         diligence and prudence reasonably and ordinarily exercised by
         experienced operators engaged in similar activities under similar
         circumstances.

5.2.3    Subject to Article 5.8 (ii) Operator shall cause to be done, with due
         diligence, all such acts and things within its control as may be
         necessary to keep and maintain the License in full force and effect and
         shall conduct Joint Operations in compliance with the requirements of
         the License, the Petroleum Law and any other applicable law.

5.2.4    Subject only to the overall limit on the number of man-days included in
         an approved Program and Budget, the number of employees of Operator
         employed in connection with the Joint Operations shall be determined by
         Operator. Operator shall also determine their selection, hours of work
         and remuneration.

5.3      Liens and Encumbrances

         Operator shall, insofar as it may be within its reasonable control,
         keep all Joint Property free from all liens, charges, encumbrances, and
         adverse claims.

5.4      Representation of the Parties

         Subject to any determination by the Operating Committee, Operator shall
         represent the Parties regarding any matters or dealing with the
         Government, any other governmental authorities or


                                       17
<PAGE>

         third parties insofar as the same relate to the Joint Operations,
         provided always that there is reserved to each Party unfettered right
         to deal with the Government, any other governmental authorities or
         third parties with respect to matters relating to its own Percentage
         Interest. Operator shall, in any event, give prior notice to the
         Parties of any representations which it proposes to make as Operator to
         the Government or any other governmental authorities or third parties
         which may reasonably be expected to have a material effect upon the
         interests of the Parties hereunder or under the License. Operator shall
         also give notice to all Parties of the results of any such
         representations made in accordance with this Article 5.4.

5.5      Records

         Operator shall prepare and maintain proper books of account, records
         and inventories of the Joint Operations which shall be kept in
         compliance with the Accounting Procedure attached hereto and with due
         regard to the requirements of the Petroleum Law and the License.

5.6      Reports

         Operator shall promptly provide each Party with the following reports:

         (a)      daily drilling and workover and Monthly production reports of
                  Joint Petroleum;

         (b)      such other reports as the Operating Committee may decide; and

         (c)      at the sole cost of the Party requesting the same, such
                  additional reports as such Party may reasonably request.

         Operator shall also timely make all reports concerning the Joint
         Operations to the appropriate governmental authorities as required
         under the Petroleum Law and the License and, concurrently therewith,
         furnish copies of all such reports to the Parties. Reports not of a
         routine nature shall be reviewed by the Operating Committee before
         submission unless the Operating Committee agree that such review is not
         required.

                                       18
<PAGE>

5.7      Consultation and Information

5.7.1    Operator shall consult freely with the Parties and keep them informed
         of matters concerning the Joint Operations. Without prejudice to the
         generality of the foregoing, Operator shall:

         (i)      inform each Party of all logging, coring, testing and, in
                  addition, such other information concerning the Joint
                  Operations as the Operating Committee may decide, with such
                  advance notice as is practicable in the circumstances, so that
                  each Party may, subject to Article 6.3, have a representative
                  present on location during the conduct of such operations; and

         (ii)     provide each Party with copies of all well logs and core
                  analyses and sample fluids for pre-production assay tests and
                  such engineering, geological, geophysical and technical data
                  and such further data and information relating to the Joint
                  Operations as the Operating Committee may decide and, at the
                  sole cost of the Party requesting the same, provide such Party
                  with such additional data and information as such Party may
                  reasonably request.

5.8      Emergencies

         Operator is authorised to make any expenditure or incur commitments for
         the expenditures or take any actions it deems necessary in the case of
         emergency (but not otherwise):

         (i)      for the safeguarding of lives or property or the prevention of
                  pollution; or

         (ii)     in order to keep the License in good standing and/or avoid
                  breaches of the Petroleum Law, provided that the Operator may
                  not, by virtue of this paragraph (ii), spud or drill any well
                  or take any other action which this Agreement provides is to
                  be decided upon by the Operating Committee or the Parties (or
                  any combination of them).

                                       19
<PAGE>

         Operator shall promptly notify all the Parties of any such
         circumstances, the amount of expenditures and commitments for
         expenditures so made and incurred, the actions so taken in accordance
         with this Article 5.8 and the results thereof.

5.9      Disposal and Abandonment

5.9.1    Operator shall, subject to the Accounting Procedure, dispose of any
         item of Joint Property which Operator determines is no longer needed or
         suitable for Joint Operations provided that any such disposal shall be
         with the prior written approval of the Operating Committee and subject
         to such terms and conditions as would be arrived at pursuant to arms
         length negotiations.

5.9.2    If the Parties decide to abandon the Joint Operations, or any part
         thereof, Operator shall, subject to the Accounting Procedure, recover
         and endeavour to dispose of as much of the Joint Property as the
         Operating Committee determines can economically and reasonably be
         recovered, or as may be required to be recovered under the License, the
         Petroleum Law or any other applicable law, and the net costs or net
         proceeds therefrom shall be charged or credited to the Joint Account.

5.10     Contractors

5.10.1   In the case of any proposed contract for the Joint Operations (other
         than the Tosun Drilling Contract, as defined in the Farmin and
         Participation Agreement, or any other contract to the extent it relates
         to workover operations), Operator shall, unless otherwise decided by
         Parties having in the aggregate between them Percentage Interests
         exceeding seventy percent (70%) and except in the circumstances
         referred to in Article 5.8 and in respect of contracts of insurance
         placed pursuant to the provisions of Article 7.1.1, comply with the
         following provisions:

         (i)      In respect of each such contract subject to an exploration,
                  appraisal, production or development Program and Budget and
                  involving an expenditure likely to exceed $100,000, Operator
                  shall (jointly with AVENUE, in the event the Operator or its

                                       20
<PAGE>

                  Affiliate intends to bid for the relevant contract and AVENUE
                  notifies the Operator that it desires to join with the
                  Operator in relation to the matters set out below):

                  (a)      obtain competitive sealed bid tenders and consult
                           fully with the Non-Operators over the tendering
                           process and the preparation of a list of the persons
                           to be invited to tender (including any
                           sub-contractors), such consultations to take place on
                           a timely enough basis to allow the Non-Operators to
                           make recommendations as to amendments to the list;

                  (b)      after the expiration of the period allowed for
                           tender, and the bids have been opened, supply to the
                           Non-Operators a summary of all bids received and any
                           rebids, amendments to bids and subsequent
                           negotiations. Operator shall notify its
                           recommendation to the Non-Operators and any
                           Non-Operator may within ten (10) Working Days after
                           receipt of such notification (or, in exceptional
                           circumstances where the matter requires approval in
                           less than ten (10) Working Days, such shorter period,
                           being not less than 48 hours, as Operator may specify
                           in such notification) request a meeting of the
                           Operating Committee to approve Operator's
                           recommendation. If no such request is made within
                           such ten (10) Working Day period (or such shorter
                           period as aforesaid) Operator may forthwith proceed
                           to implement its recommendation;

                  (c)      apply the above provisions to any revision to a
                           contract where such revision will either alone or
                           cumulatively exceed $100,000;

                  (d)      at the specific written request of a Non-Operator,
                           supply such Non-Operator with a conformed copy of any
                           contract entered into in accordance with the
                           procedure in this Article 5.10.1.

         (ii)     In respect of each such contract subject to an exploration,
                  appraisal, production or development Program and Budget and
                  involving an expenditure which is not likely to exceed
                  $100,000, Operator shall be free to negotiate and award the
                  contract without


                                       21
<PAGE>

                  competitive bidding if within an approved AFE (where such AFE
                  is required) or if covered by an approved Budget for
                  production operating costs, provided that no such contract
                  shall be placed with a Party or an Affiliate of a Party
                  without the prior approval of the Operating Committee.

         The Operating Committee may from time to time direct that amounts
         smaller or greater than those set out in paragraphs (i) and (ii) of
         this Articles 5.10.1 shall thenceforth apply.

5.10.2   In the case of any proposed contract for the Joint Operations, Operator
         shall, unless otherwise agreed by the Operating Committee, use its
         reasonable endeavours to ensure that:

         (i)      any such contract can be freely assigned to any Non-Operator
                  in the event of any change of Operator;

         (ii)     in all contracts with contractors, Operator will be entitled
                  to recover on behalf of all the Parties the full amount of:

                  (a)      any loss, damage, injury or expense suffered or
                           incurred by them as a result of any tort or breach of
                           such contract on the part of the contractor concerned
                           or any sub-contractor of that contractor; or

                  (b)      any right of indemnity contained therein;

                  subject to the defenses, limitations, indemnities or
                  exclusions of liability in favour of the said contractor in
                  such contracts or available to the said contractor in
                  connection with such contract; and

         (iii)    in all contracts with contractors, such contractors shall
                  agree to make or bring all actions, claims or demands of
                  whatsoever nature arising out of or in connection with such
                  contracts on or against Operator and, without prejudice to any
                  right which Operator may


                                       22
<PAGE>

                  have to join any Non-Operator as party to any such action,
                  such contractors shall agree that no such action, claim or
                  demand is made or brought against any Non-Operator.

5.10.3   Operator or any of its Affiliates or any of the Parties or any of their
         Affiliates may supply material, services and facilities for Joint
         Operations and such supply shall not be subject to the terms of
         Articles 5.10.1 and 5.10.2 provided that one of the following
         conditions for such supply has been met:

         (i)      the terms, conditions and rates of such supply have been
                  approved by the Operating Committee; or

         (ii)     such supply is in respect of a contract placed in the
                  circumstances referred to in Article 5.8.

         Reports not of a routine nature shall be reviewed by the Operating
         Committee before submission unless the Operating Committee agree that
         such review is not required.

5.11.3   Abandonment Agreement

         Without prejudice to Article 5.11.2, not less than three years prior to
         the expected date for abandonment of any production or other
         substantial facilities, the Parties shall agree to the terms of an
         abandonment agreement which shall comply with any relevant provisions
         of the Petroleum Law and any regulations issued pursuant thereto and
         ensures that appropriate provision will be made for the cost of
         abandonment of those facilities and any related liabilities. Unless
         otherwise agreed abandonment liabilities shall be shared by the Parties
         (including the holder of the Carried Interest) in proportion to
         Percentage Interests. In the event of a Party defaulting under the
         abandonment agreement, then the Party in question shall be in default
         under this Agreement and deemed to be a Defaulting Party under Article
         15 hereof.

6.       RIGHTS OF THE PARTIES

                                       23
<PAGE>

6.1      Reservation of Rights

         Except as otherwise provided in this Agreement, each Party reserves all
         its rights under the License.

6.2      Inspection Rights

         Each Party shall have the right to inspect, at all reasonable times
         during usual business hours, all books, records and inventories of any
         kind or nature maintained by or on behalf of Operator and relating to
         the Joint Operations (other than those books, records and inventories
         maintained by the Party acting as Operator in its capacity as the owner
         of a Percentage Interest), provided that such Party gives Operator
         reasonable prior notice of the date upon which it desires to make such
         inspection and identifies the person or persons who will conduct the
         inspection.

6.3      Access rights

         Each Non-Operator shall have the right, at all reasonable times and at
         its sole risk and expense, of access to the License Area and/or the
         Joint Operations, provided such Non-Operator gives Operator reasonable
         notice of the date such access is required and identifies the
         representative or representatives to whom such access is to be granted.

7.       INSURANCE AND LITIGATION

7.1      Insurance

7.1.1    (i)      Operator shall obtain and maintain, with respect to the
                  Joint Operations and the Joint Property, all insurance
                  required under the Petroleum Law, the License or any other
                  applicable law. Without limitation to the foregoing, AME shall
                  obtain and maintain:

                  (a)      workers' compensation insurance with limits of
                           US$75,000 for the death or injury to any one person
                           and US$225,000 for each accident;

                                       24
<PAGE>

                  (b)      all risk insurance (including in relation to property
                           and equipment damage, pollution, contamination and
                           other environmental risks) with a limit of
                           US$1,500,000 per occurrence; and

                  (c)      third party/public liability insurance with a limit
                           of US$150,000 per occurrence,

                  in each case with a reputable and creditworthy insurer and on
                  terms that are commercially reasonable and customary for such
                  risks in the same or similar circumstances.

         (ii)     Operator shall also obtain such other insurance as the
                  Operating Committee may from time to time determine or the
                  Parties may from time to time agree (including in the Farmin
                  and Participation Agreement. With respect to such other
                  insurance, any Party may elect not to participate, if such
                  Party:

                  (a)      gives written notice to that effect to Operator; and

                  (b)      does nothing which may interfere with Operator's
                           negotiations for such insurance for the other
                           Parties; and

                  (c)      obtains and maintains its own insurance with respect
                           to its Percentage Interest share of all the risks
                           covered by such other insurance. Such Party shall
                           provide Operator with evidence of such other
                           insurance (in respect of which a certificate of
                           adequate coverage from a reputable insurance broker
                           shall be sufficient evidence) or other evidence of
                           financial responsibility as the other Parties may
                           determine to be acceptable (provided however, that no
                           such determination of acceptability shall in any way
                           absolve a non-participating Party from its obligation
                           to meet each Cash Call, including any Cash Call in
                           respect to damages and losses and/or the costs of
                           remedying the same in accordance with the terms of
                           this Agreement; and provided further that if such
                           Party obtains other insurance, such insurance shall
                           contain a waiver of subrogation in favour of all the
                           other Parties in respect of their interests
                           hereunder).

         (iii)    The cost of insurance in which all the Parties are
                  participating shall be for the Joint Account and the cost of
                  insurance in which less than all the Parties are participating
                  shall be charged to the Parties so participating in proportion
                  to their respective Percentage


                                       25
<PAGE>

                  Interests. Operator shall, with respect to all insurance
                  obtained by it pursuant to this Article 7.1.1:

                  (a)      inform the Parties at least ten (10) Working Days
                           before the inception or renewal dates of the
                           applicable insurance contract or contracts of the
                           salient terms and conditions (including premia)
                           quoted by the insurers to Operator;

                  (b)      promptly inform the Parties participating therein
                           when such insurance is taken out and supply them with
                           copies of the relevant policies when the same are
                           issued;

                  (c)      arrange for the Parties participating therein,
                           according to their respective Percentage Interests,
                           to be named as co-insureds on the relevant policies
                           with waivers of subrogation in favour of the Parties;
                           and

                  (d)      duly file and notify the Parties of all claims and
                           take all necessary and proper steps to collect any
                           proceeds and, if all the Parties are participating
                           therein, credit them to the Joint Account, or, if
                           less than all the Parties are participating therein,
                           credit them to the participating Parties in
                           proportion to their respective Percentage Interests.

         Subject to the foregoing, any of the Parties may obtain such insurance
         as it deems advisable for its own account and at its own expense,
         provided that each such policy contains a waiver of subrogation in
         favour of the other Parties.

7.1.2    Each of the Parties shall, in addition to any insurance required under
         Article 7.1.1, obtain and maintain, with respect to its Percentage
         Interest share of any liability to third parties which may arise in
         connection with the Joint Operations, such insurance, or demonstrate
         such other evidence of its financial responsibility, as may from time
         to time be determined by the Operating Committee. Each of the Parties
         shall, as and when required by any other Party, produce to the
         Operating Committee such evidence as it may reasonably require to
         establish that such insurance or other evidence of financial
         responsibility is being maintained. Such insurance shall in so far as
         it relates to Joint Operations contain a waiver of subrogation by the
         insurers in favour of the Parties.

7.1.3    Operator shall take all reasonable steps to ensure that all contractors
         (including subcontractors) performing work in respect to the Joint
         Operations obtain and maintain all insurance required under the
         License, the Petroleum Law, any other applicable law and such other
         insurance as


                                       26
<PAGE>

         Operator or the Operating Committee deems appropriate. Operator shall,
         with respect to all insurance obtained by such contractors
         (sub-contractors), take all reasonable steps to arrange for such
         contractors (including sub-contractors) to obtain from their insurers a
         waiver of subrogation in favour of the Parties in respect of their
         interests hereunder.

7.1.4    Operator shall promptly notify the Parties of any accident or incident
         causing damage to Joint Property or arising out of the conduct of the
         Joint Operations which could in its opinion reasonably be expected to
         give rise to a claim for damages by a third party for a sum in excess
         of One Hundred Thousand Dollars ($100,000). Operator shall provide the
         Parties' insurers all reasonable assistance in connection with their
         investigation of all claims.

7.2      Litigation

7.2.1    Operator shall promptly notify the Parties of any litigation, lien,
         demand, adverse claim or judgement relating to the Joint Operations or
         Joint Property where the total amount of damages together with
         associated costs are estimated to exceed of One Hundred Thousand
         Dollars ($100,000) or such other amount as may, from time to time, be
         determined by the Operating Committee. Operator shall have the
         authority to prosecute, defend or settle any litigation, lien, demand,
         adverse claim or judgement relating to the Joint Operations or Joint
         Property (other than as between the Parties), except where the total
         amount in dispute and/or the total amount of damages together with
         associated costs are estimated by Operator to exceed of One Hundred
         Thousand Dollars ($100,000), or such other amount as may from time to
         time be determined by the Operating Committee, in which event Operator
         shall have no authority without the prior approval of the Operating
         Committee, other than the authority necessary to enable Operator to
         prevent judgement being awarded against it in default of appearance or
         defence.

7.2.2    Notwithstanding Article 7.2.1, each Party shall have the right to
         participate in any such prosecution, defence or settlement at its own
         cost and expense provided always that no Party may settle its
         Percentage Interest share of any claim without first satisfying the
         Operating Committee that it can do so without prejudicing the interests
         of the Joint Operations.

                                       27
<PAGE>

7.2.3    Subject to Article 7.2.1, any claim, litigation, demand, adverse claim,
         judgement or other proceedings relating to Joint Operations or Joint
         Property made against any Party to this Agreement shall be promptly
         transmitted to all the other Parties by the Party against whom the same
         may be made, and the Party to the proceedings shall thereafter
         regularly consult with the other Parties and take account of their
         reasonable views with regard to the proper conduct of the same.

7.2.4    Provided that a Party complies in all respects with the provisions of
         Article 7.2.3 and except as otherwise provided in this Agreement, that
         Party shall be entitled to charge to the relevant Joint Account any
         loss, damage and expense reasonably and properly incurred by such Party
         with respect to the proceedings in question.

8.       THE OPERATING COMMITTEE

8.1      Establishment and Powers

         There is hereby established an Operating Committee which shall exercise
         general supervision and control over all matters pertaining to the
         Joint Operations. Without limiting the generality of the foregoing, but
         subject as otherwise provided in this Agreement, the powers and duties
         of the Operating Committee shall include:

         (i)      the consideration and determination of all matters relating to
                  general policies, procedures and methods of operation
                  hereunder;

         (ii)     subject to Article 18 the approval of any public announcement
                  or statement regarding this Agreement or the Joint Operations;

         (iii)    the consideration, revision and approval or disapproval of all
                  proposed Programs and Budgets and AFE's prepared and submitted
                  to it pursuant to the provisions of this Agreement;

         (iv)     the determination of the timing and location of all wells
                  drilled under the Joint


                                       28
<PAGE>

                  Operations (including the deepening, completing, sidetracking,
                  plugging back, reworking or abandonment thereof) and any
                  change in the use or status of a well;

         (v)      the consideration and determination of extensions or renewals
                  of the License and the area required to be surrendered in
                  accordance with the Petroleum Law or the License including the
                  voluntary surrender of the License or any part thereof;

         (vi)     removal of Operator in accordance with Article 4.2.2 hereof
                  and the election of a successor Operator;

         (vii)    the consideration and determination of contributions to and
                  from third parties for the drilling of wells and the purchase,
                  sale or exchange of information from, to or with third
                  parties;

         (viii)   the determination of any field to be included in a development
                  Program for a Discovery and the making of any related
                  application for the issue of a petroleum lease to be issued
                  under the Petroleum Law in respect of the License Area (or any
                  part of it);

         (ix)     the consideration and, if so required, the determination of
                  any other matter relating to the Joint Operations which may be
                  referred to it by the Parties or any of them (other than any
                  proposal to amend this Agreement) or which is otherwise
                  designated under this Agreement for reference to it.

8.2      Representation

         The Operating Committee shall consist of representatives appointed by
         each of the Parties, provided always that more than one of the Parties
         may appoint the same representative who shall represent them
         separately. Each Party shall, as soon as possible after the date of
         this Agreement, give notice to all the other Parties of the name of its
         representative and of an alternate on the Operating Committee. Such
         representative or alternate representative may be replaced from time to
         time, by like notice. Representatives may bring to meetings of the
         Operating Committee such


                                       29
<PAGE>

         advisers as they consider necessary. The representative of a Party or,
         in the absence of the representative, his alternate, shall be deemed
         authorised to represent and bind such Party with respect to any matter
         which is within the powers of the Operating Committee.

         All decisions of the Operating Committee shall be adopted by a vote of
         the representatives of the Parties in which the vote of each
         representative shall be weighted by the Percentage Interest in the
         License of the Party or Parties he represents. By way of example, the
         vote of a representative of a Party with a 10% interest in then License
         shall be worth 10% of the total votes of representatives of all the
         Parties.

8.3      Chairman

         The representative of the Party which is Operator shall be the chairman
         of the Operating Committee unless otherwise agreed by the Operating
         Committee.

8.4      Meetings and Voting

8.4.1    The Operating Committee shall hold meetings every Quarter (or at such
         other regular intervals as may be agreed by the Operating Committee).
         All meetings of the Operating Committee shall be held at AME's offices
         in Ankara or in such other places as the Parties may from time to time
         agree. Alternatively, meetings may be conducted by telephone conference
         call. Operator shall call such meetings and shall give at least fifteen
         (15) days notice of the time, date and place of each meeting, together
         with an agenda and a proposed resolution therefor. However, Operator
         shall use its reasonable best efforts to give at least thirty (30)
         days' notice for meetings which deal with operations and/or wells
         drilled under the Joint Operations. When calling a meeting, Operator
         shall as soon as is reasonably practicable thereafter, supply the
         Parties with copies of relevant data and information available to it
         relating to the matters on the agenda for such meeting. By notice to
         Operator, any Party can request that additional matters be placed on
         the agenda, and provided such notice is given at least seven (7) days
         before the date of the meeting, those matters will be placed on the
         agenda and considered by the Operating Committee. The representatives
         of all Parties may agree to consider a matter not on the agenda for
         such meeting.

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<PAGE>

8.4.2    The Operating Committee shall hold a special meeting upon the request
         of any Party. Such request shall be made by written notice to all the
         other Parties and shall state the matters to be considered at that
         meeting. Upon receiving such request, Operator shall, without delay,
         call a special meeting for a date not less than seven (7) nor more than
         ten (10) days after receipt of the request, or such other date as may
         be agreed by all the Parties.

8.4.3    For any meeting of the Operating Committee, the notice period set forth
         above may be waived with the consent of all the Parties.

8.4.4    Any Party not represented at a meeting may vote on any matter on the
         agenda for such meeting by either:

         (i)      appointing a proxy in writing; or

         (ii)     giving written notice of such vote to Operator prior to the
                  submission of such matter for vote at such meeting.

8.4.5    Except as otherwise expressly provided in this Agreement, all
         decisions, approvals and other actions of the Operating Committee on
         all proposals coming before it under this Agreement shall be decided by
         the affirmative vote of Parties owing in the aggregate Percentage
         Interests equating to more than seventy percent (70%) of the aggregate
         Percentage Interests of all Parties entitled to vote. An abstention or
         refrain from voting shall be considered a negative vote, except as
         otherwise specifically provided in this Agreement in cases where
         failure to reply is deemed approval or an affirmative vote. Each Party
         is entitled to vote in proportion to the respective Percentage Interest
         held by it at the time the vote is taken.

8.5      Minutes

8.5.1    For each meeting, the Operating Committee (failing which Operator)
         shall appoint a secretary for the Operating Committee who shall prepare
         the minutes of each meeting.

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<PAGE>

8.5.2    The secretary shall make a record of each proposal voted on and the
         results of such voting at each Operating Committee meeting. Each
         representative shall sign and be provided a copy of such record at the
         end of the meeting and it shall be considered the final record of the
         decisions of the Operating Committee.

8.5.3    The secretary shall provide each Party with a copy of the "minutes" of
         the Operating Committee meeting within fifteen (15) days after the end
         of the meeting. Each Party shall have fifteen (15) days after receipt
         of such "minutes" to give notice of its objections to the "minutes" to
         the secretary. A failure to give notice specifying objections to such
         "minutes" within the said fifteen (15) days period shall be deemed to
         be approval of such "minutes". In any event, the votes recorded under
         Article 8.5.2 shall take precedence over the "minutes" described above.

8.6      Action Without A Meeting

8.6.1    The Parties may vote on and determine, by notice to Operator, any
         proposal which is submitted to them by Operator by notice and which
         they could validly determine at a meeting of the Operating Committee if
         duly held for that purpose. Each Party shall cast its vote within
         fourteen (14) days after the proposal is received by it, except that
         where the Parties are requested to vote on and determine any proposal
         relating to the deepening, plugging back, testing or abandonment of a
         well on which drilling equipment is then located or where the matter
         presented for consideration by its nature requires determination in
         less than fourteen (14) days and such fact and lesser period are so
         stated in the notice submitting the proposal, the Parties shall cast
         their votes within such lesser period which shall be not less than
         twenty-four (24) hours after receipt of the notice. Failure by a Party
         to cast its vote within such period shall be regarded as a vote by that
         Party against the proposal.

8.6.2    Operator shall give prompt notice of the results of any such voting to
         the Parties and any decision so made shall constitute an effective
         decision of the Operating Committee and shall be binding on the
         parties.

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<PAGE>

8.7      License Provisions

         The Operating Committee shall determine the location and the time at
         which all working obligations required by the Licenses or the Petroleum
         Law shall be performed, unless and to the extent relief from such
         obligation is sought and obtained from the Government.

9.       EXPLORATION PROGRAM AND BUDGETS

9.1      Initial Program and Budget

9.1.1    The initial exploration Program shall be the program of work to be
         undertaken by AME as drilling contractor under the terms of the Turnkey
         Contract dated on or about 14 November 2002 between AME, in its
         capacity as Drilling Contractor, and Operator, on behalf of the Parties
         (the "TURNKEY CONTRACT").

9.1.2    The Budget for the initial exploration Program shall be the
         expenditures provided for in clause 4.1 of the Turnkey Contract.

9.1.3    In relation to the Turnkey Contract:

         (i)      Operator shall not, without the prior approval of the
                  Operating Committee, authorise or permit the commencement of
                  work under the Turnkey Contract other than work to be
                  performed on a turnkey basis as provided in clause 4.1 of the
                  Turnkey Contract;

         (ii)     as between the Parties, AVENUE's contribution to the amounts
                  payable under the Turnkey Contract shall be limited to the
                  sums paid or payable under clause 3.2(a) and, if applicable,
                  3.2(b) and 3.3 of the Farmin and Participation Agreement; and

         (iii)    provided AVENUE makes the payments referred to in
                  sub-paragraph (ii) above when due in accordance with the
                  Farmin and Participation Agreement, Operator shall not direct
                  a stoppage of work as contemplated by clause 6.1 of the
                  Turnkey Contract, and


                                       33
<PAGE>

                  shall defend, indemnify and hold harmless AVENUE from and
                  against any and all liabilities arising and amounts payable
                  under clause 6.3 of the Turnkey Contract.

9.1.4    Article 9.3 shall not apply to commitments for expenditures falling
         within clause 4.1 of the Turnkey Contract.

9.2      Annual Program and Budget

9.2.1    Not later than the 1st of September in 2003 and each Year thereafter,
         Operator shall submit to the Parties a proposed exploration Program and
         Budget for the next Year showing:

         (i)      the projects and other work to be undertaken;

         (ii)     the information required under the Accounting Procedure;

         (iii)    details of the estimated number of man-days for direct labour
                  for employees and contract personnel required; and

         (iv)     such other information as the Operating Committee, or any
                  Party or Parties having Percentage Interests of not less than
                  35% in the aggregate, may require Operator to provide.

9.2.2    The proposed exploration Program and Budget shall be subject to
         consideration, revision and approval by the Operating Committee. The
         Operating Committee shall consider such Program and Budget and make
         such revisions thereto as may be agreed as soon as practicable but in
         no event later than 1st of November. Not later than 1st of November,
         the Operating Committee shall approve an exploration Program and Budget
         and such approval shall, subject to Articles 9.3 and 9.4, authorise and
         obligate Operator to carry out and implement the Program and Budget.

9.3      Authorisation for Expenditure

         Before entering into any commitment incurring any expenditure under an
         approved exploration Program and Budget, Operator shall, except as
         provided in Articles 5.8 and 9.1.4, submit an AFE to the Parties for
         the program. The AFE shall include the information set out in, and be
         prepared


                                       34
<PAGE>

         in accordance with the provisions of, the Accounting Procedure.
         Provided that the AFE is within the limits of and is in accordance with
         the Budget, the Operating Committee shall be deemed to have approved
         the AFE unless, within twenty (20) days of its submission to the
         Parties, a Party or Parties having individually or in aggregate a
         Percentage Interest of at least thirty percent (30%) give(s) notice to
         Operator that they require such AFE to be formally approved by the
         Operating Committee. To the extent that the Operating Committee
         approves or is deemed to approve an AFE, Operator shall be authorised
         and obligated, in accordance with the provisions of the Accounting
         Procedure, but subject to Article 9.4, to implement and carry out such
         commitment or expenditure.

9.4      Amendment

         At any time, any Party may, by notice to all the other Parties, propose
         that an approved exploration Program and Budget and/or an approved AFE
         be amended. To the extent that an amendment is approved by the
         Operating Committee, the approved Program and Budget and/or AFE shall
         be deemed amended accordingly, provided always that any such amendment
         shall not invalidate any authorised commitment or expenditure made by
         Operator prior thereto, and promptly following such amendment Operator
         shall provide each Party with a copy of the amended AFE and/or Program
         and Budget, as the case may be.

10.      APPRAISAL PROGRAMS AND BUDGETS

10.1     Joint Program and Budget

10.1.1   In the event of a Discovery, Operator shall, if the Operating Committee
         so decides and as soon as practicable thereafter, submit to the Parties
         a proposed appraisal Program and Budget for such Discovery showing:

         (i)      the wells to be drilled and other projects and work to be
                  undertaken;

         (ii)     the information required under the provisions of the
                  Accounting Procedures;

                                       35
<PAGE>

         (iii)    details of the estimated number of man-days for direct labour
                  for employees and contract personnel required, and

         (iv)     such other information as the Operating Committee may require
                  Operator to provide.

10.1.2   The proposed appraisal Program and Budget shall be subject to
         consideration, revision, and approval by the Operating Committee. The
         Operating Committee shall, as soon as practicable, consider such
         appraisal Program and Budget and make such revisions thereto as may be
         agreed. If the Operating Committee approves and appraisal program and
         Budget, such approval shall, subject to Articles 10.2 and 10.3,
         authorise and obligate Operator to carry out and implement the
         appraisal Program.

10.2     Authorisation for Expenditure

         Before entering into any commitment incurring any expenditure under an
         approved appraisal Program and Budget, Operator shall, except as
         provided in Article 5.8, submit an AFE to the Parties for the Program.
         The AFE shall include the information set out in, and be prepared in
         accordance with the provisions of the Accounting Procedure. Provided
         that the AFE is within the limits of and is in accordance with the
         Budget, the Operating Committee shall be deemed to have approved the
         AFE unless, within twenty (20) days of its submission to the Parties, a
         Party or Parties having individually or in the aggregate a Percentage
         Interest of at least thirty percent (30%) give(s) notice to Operator
         that they require such AFE to be formally approved by the Operating
         Committee. To the extent that the Operating Committee approves or is
         deemed to approve an AFE, Operator shall be authorised and obligated,
         in accordance with the provisions of the Accounting Procedure, but
         subject to Article 10.3, to proceed with such commitment or
         expenditure.

10.3     Review and Amendment

10.3.1   Operator shall, as and when required by the Operating Committee, review
         the approved appraisal Program and Budget and submit to the other
         Parties a report thereon.


                                       36
<PAGE>

10.3.2   At any time any Party may, by notice to the other Parties, propose that
         an approved appraisal Program and Budget and/or an approved AFE be
         amended. The Operating Committee shall consider such proposal and, if
         the Operating Committee so require, Operator shall prepare and submit
         to the Parties a revised appraisal Program and Budget incorporating any
         such amendment and showing the matters listed under Article 10.1.1 and
         the information required under the provisions of the Accounting
         Procedure. To the extent that any such amendment or revised appraisal
         Program and Budget is approved by the Operating Committee, the approved
         appraisal Program and Budget and/or AFE shall be deemed amended
         accordingly, provided always that any such amendment shall not
         invalidate any authorised commitment or expenditure made by Operator
         prior thereto. Promptly following such amendment, Operator shall
         provide each Party with a copy of the amended AFE and/or Program and
         Budget, as the case may be.

11.      DEVELOPMENT PROGRAMS AND BUDGETS

11.1     Joint Program and Budget

11.1.1   Operator shall, if the Operating Committee so decides and as soon as
         practicable after such decision, submit to the Parties a proposed
         development Program and Budget for any Discovery and/or Development
         and/or work-over program, showing:

         (i)      the projects and other work to be undertaken;

         (ii)     the information required under the Accounting Procedure;

         (iii)    the manner in which the development is to be managed with
                  details of the estimated number of man-days for direct labour
                  for employees and contract personnel required;

         (iv)     an estimate of the date of commencement production and of the
                  annual rates production; and

         (v)      such other information as the Operating Committee may require
                  Operator to provide.

                                       37
<PAGE>

11.1.2   The proposed development Program and Budget shall be subject to
         consideration, revision and approval by the Operating Committee. The
         Operating Committee shall meet to consider such development Program and
         Budget as soon as practicable and to make such revisions thereto as may
         be agreed. Unless the Operating Committee otherwise agrees, the
         Operating Committee shall approve or reject the development Program and
         Budget as soon as possible but in any event within ninety (90) days of
         its submission by Operator to the Parties provided that, within the
         said period of ninety (90) days (or such other period as the Operating
         Committee may have agreed) any Party wishing to carry out further work
         or studies in connection with the development of the Discovery may, by
         notice to the other Parties, require that the said period be extended
         up to a maximum total period of:

         (i)      in the case of the carrying out of further appraisal drilling
                  of the Discovery, one hundred and eighty (180) days; and

         (ii)     in all other cases, one hundred and twenty (120) days;

         and in such event the said period shall be so extended. A Party
         proposing to carry out further appraisal drilling of the Discovery
         shall in its said notice to the other Parties inform them of its
         intention and:

         (a)      Operator shall carry out such drilling at the risk, cost and
                  expense of such Party and the provisions of Articles 13.2.4,
                  13.3.5, 13.3.6 (other than the first sentence) and 13.2.10
                  shall apply as if such Party was a Sole Risk Party and such
                  drilling was Sole Risk Drilling under that Article;

         (b)      such Party shall not be entitled to any reimbursement from the
                  other Parties of the costs and expenses thereof, unless as a
                  result of such drilling none of the Parties proceeds with
                  development of the Discovery substantially on the basis of the
                  proposed development Program and Budget, in which event each
                  of the other Parties shall pay to such Party, within
                  twenty-eight (28) days of the decision not to proceed with the

                                       38
<PAGE>

                  development, an amount equal to the amount it would have
                  contributed to the Joint Account had such drilling been
                  carried out as part of the Joint Operations; such amount shall
                  be paid in cash in the currency or currencies in which the
                  contributions for such costs and expenses would have been made
                  to the Joint Account; and

         (c)      all data and information obtained from such drilling shall
                  promptly be made available to and be owned jointly by all the
                  Parties.

11.1.3   (a)      If a development Program and Budget is approved by the
                  Operating Committee, each of the Parties shall decide within
                  ninety (90) days of such approval, or such longer period as
                  the Operating Committee may agree, whether to participate in
                  respect of its Percentage Interest share in the development of
                  the Discovery and shall inform the other Parties of its
                  decision by notice to them. If all the Parties decide to
                  participate in the development of the Discovery Operator shall
                  prepare from the said development Program and Budget and on
                  behalf of the Parties a petroleum lease application for
                  submission to the Government in accordance with the License
                  and the Petroleum Law. Any such application shall require the
                  approval of the Operating Committee prior to its submission as
                  aforesaid.

         (b)      If fewer than all the Parties participate in the development
                  of the Discovery the provisions of Articles 13.5.6 to 13.5.9
                  inclusive, shall apply:

11.1.4   This Article 11.1.4 shall apply if, in connection with or as a
         condition to the grant or coming into effect of any Government approval
         required for a development Program (whether by way of the grant of a
         petroleum lease under the Petroleum Law or in another form), the
         Program and Budget approved by the Operating Committee under Article
         11.1.2 and submitted to the Government for approval has been or is
         required to be amended. (For the avoidance of doubt "amended" in the
         previous sentence includes any change in the date of commencement of
         the development or in the proposed depths, or in the objective horizon,
         or in the number of wells required under the lease.) In such
         circumstances any of the Parties may by notice to the other Parties
         given within twenty-eight (28) days following the said authorisation,
         elect not to


                                       39
<PAGE>

         proceed with the development. If no Party is entitled to give such
         notice, or being entitled, no Party gives such notice, the approved
         development Program and Budget (with any amendments as aforesaid) shall
         be adopted for the development, the Parties shall be obliged to
         participate in carrying it out and Operator shall, subject to Articles
         11.2 and 11.3, be authorised and obliged to proceed in accordance with
         it.

11.2     Authorisation for Expenditure

         Except as provided in Article 5.8, Operator shall submit an AFE to the
         Parties, before entering into any capital commitment or incurring any
         Capital Expenditure in excess of $100,000 with respect to an approved
         development Program and Budget. To the extent that the AFE is approved
         or deemed to be approved by the Parties, Operator shall be authorised
         and obligated, subject to Article 11.3, to proceed with such commitment
         or expenditure. In cases where no AFE is required the approval of the
         development Program and Budget shall constitute the necessary authority
         to Operator to proceed with such commitment or expenditure.

11.3     Review and Amendment

11.3.1   Operator shall, in each Year, review the approved development Program
         and budget and submit to the Parties not later than 1st of September a
         report thereon, together with an update of such development Program and
         Budget dealing separately with the next Year and the remaining phases
         of the approved development program and showing the matters listed
         under Article 11.1.1.

11.3.2   At any time, any Party may, by notice to all the other Parties, propose
         that an approved development Program and Budget and/or an approved AFE
         be amended. The Operating Committee shall consider such proposal and,
         if the Operating Committee so requires, Operator shall prepare and
         submit to the Parties a revised development Program and Budget
         incorporating any such amendment and showing the matters listed under
         Article 11.1.1. To the extent that any such amendment or revised
         development Program and Budget is approved or in the case of an AFE
         deemed to be approved by the Operating Committee, the approved
         development Program


                                       40
<PAGE>

         and Budget and/or AFE shall, subject to obtaining any necessary consent
         of the Government, be deemed amended accordingly provided always that
         any such amendment shall not invalidate any authorised commitment or
         expenditure made by Operator prior thereto. Where any development
         Program and Budget and/or AFE is amended Operator will supply the
         Parties with a copy of the revised Program and Budget and/or AFE.

12.      PRODUCTION PROGRAMS AND BUDGETS

12.1     Annual Program and Budget

12.1.1   Operator shall not later than 1st September in the Year prior to the
         commencement of production and in each subsequent Year, submit to the
         Parties a proposed production Program and Budget for the next Year
         showing:

         (i)      the projects and other work to be undertaken;

         (ii)     the information necessary to satisfy the Accounting Procedure;

         (iii)    an estimate of the date of commencement of production (if
                  appropriate) and of the total production by Quarters and the
                  maximum daily rate to be achieved in each Quarter;

         (iv)     for the four (4) Years following the "next Year" referred to
                  above Operator's best estimate of the matters referred to in
                  (i) and (iii) above; and

         (v)      such other information as the Operating Committee may have
                  required Operator to provide.

12.1.2   The proposed production Program and Budget shall be subject to
         consideration, revision and approval by the Operating Committee
         provided that decisions of the Operating Committee in respect of any
         change to the production profile shall always be made in consideration
         of conditions imposed by, inter alia, the maximum economic rate of
         production consistent with good oilfield and reservoir engineering
         practices, the capacity of any field, pipeline and terminal facilities
         available for use, the number of wells drilled or to be drilled, the
         development Program approved by the Government and any regulatory
         control imposed by the Government. The Operating Committee shall
         consider such production Program and Budget and make such revisions
         thereto as may be agreed as soon as practicable but in any event not


                                       41
<PAGE>

         later than 1st December. Such approval shall, subject to Articles 12.2
         and 12.3 authorise and oblige Operator to carry out and implement the
         development Program.

12.2     Authorisation for Expenditure

12.2.1   Except as otherwise provided herein, Operator shall, before entering
         into any capital commitment or incurring any Capital Expenditure in
         excess of one hundred thousand dollars ($100,000) under an approved
         production Program and Budget, submit to the Parties an AFE therefor.
         To the extent that the AFE is approved by the Parties, Operator shall
         be authorised and obliged, subject to Article 12.3, to proceed with
         such commitment or expenditure. In cases where no AFE is required the
         approval of the production Program and Budget shall constitute the
         necessary authority to Operator to proceed with such commitment or
         expenditure.

12.2.2   Operator shall not be obliged to submit an AFE to the Parties before
         making commitments or incurring expenditure in connection with the
         workover of a well where such workover is pursuant to an approved
         Production Budget.

12.3     Amendment

         At any time any Party may, by notice to all the other Parties, propose
         that a production Program and Budget approved in accordance with
         Article 12.1.2 and/or an approved AFE be amended. To the extent that an
         amendment is approved or in the case of an AFE deemed to be approved by
         the Operating Committee, the approved production Program and Budget
         and/or AFE shall be deemed amended accordingly provided that any such
         amendment shall not invalidate any authorised commitment or expenditure
         made by Operator prior thereto.

13.      SOLE RISK PROJECTS

13.1     Preliminary

                                       42
<PAGE>

         Any Party may undertake sole risk drilling ("SOLE RISK DRILLING") or
         sole risk development ("SOLE RISK DEVELOPMENT") (either being a "SOLE
         RISK PROJECT") subject to the following provisions of this Article.
         Save as provided in this Article, no operations under the License may
         be conducted other than by Joint Operations.

13.2     General Provisions

13.2.1   No Sole Risk Project may be carried out if it is substantially similar
         to, or conflicts with, all or part of any Program approved by the
         Operating Committee and currently in effect at the commencement of the
         Sole Risk Project.

13.2.2   The following types, and only the following types, of Sole Risk Project
         may be proposed:

         (i)      subject to Article 13.3, Sole Risk Drilling consisting of:

                  (a)      the drilling of an Exploration Well or the testing,
                           deepening or side-tracking of a suspended well,
                           neither of such wells being inside the closure of any
                           geological structure or stratigraphic trap in which a
                           Discovery has been made; or

                  (b)      the drilling of an Exploration Well or the testing,
                           deepening or side-tracking of a suspended well,
                           inside the closure of any geological structure or
                           stratigraphic trap on which a well has been drilled
                           in which a Discovery has been made and which well is
                           drilled, deepened or sidetracked to a different
                           stratigraphic level from that in which such Discovery
                           was made and which is not completed in the horizon in
                           which such Discovery was made, provided always that
                           the approval of the Operating Committee shall be
                           required before any such testing, deepening or
                           side-tracking is carried out; or

                  (c)      the deepening, sidetracking or testing of an
                           Exploration or Appraisal Well which is in the course
                           of being drilled as part of the Joint Operations and
                           which does not form part of a development Program,
                           provided always that, unless the Operating Committee
                           otherwise agrees, any test programs agreed by the
                           Operating Committee must have been carried out, the
                           Parties informed of the results and a decision of the
                           Operating Committee taken to abandon the well before
                           any such deepening, sidetracking or testing is
                           carried out; or

                  (d)      the drilling of an Appraisal Well inside, or the
                           carrying out of geophysical work with respect to, the
                           closure of any geological structure or stratigraphic
                           trap in which a Discovery has been made; and

                                       43
<PAGE>

         (ii)     Sole Risk Development consisting of the development of a
                  Discovery.

13.2.3   Any Sole Risk Project shall be carried out at the sole risk, cost and
         expense of the Party or Parties electing to join such project as
         hereinafter provided ("SOLE RISK PARTY OR PARTIES"). If a Sole Risk
         Project is undertaken by more than one Sole Risk Party, the risk and
         cost thereof shall be borne each Sole Risk Party in the proportion that
         its Percentage Interest bears to the sum of the Percentage Interests of
         the Sole Risk Parties or in such other proportions as the Sole Risk
         Parties may agree.

13.2.4   A Sole Risk Party shall exercise all necessary precautions to ensure
         that a Sole Risk Project does not jeopardise, hinder or unreasonably
         interfere with the Joint Operations. Sole Risk Development shall have
         priority over Joint Operations commenced subsequent to the
         authorisation of such Sole Risk Development by the Government.

13.2.5   A Sole Risk Party shall indemnify and hold harmless the other Parties
         ("NON-SOLE RISK PARTIES") from and against all actions, claims, demands
         and proceedings whatsoever, brought by any third party (including
         without limitation any employee of the Sole Risk party) arising out of
         or in connection with the Sole Risk Project, shall keep the License
         free from all liens, charges, encumbrances and adverse claims which
         might arise by reason of the conduct of the Sole Risk Project and shall
         indemnify the Non-Sole Risk Parties against all damages, costs, losses
         and expenses whatsoever directly or indirectly caused to or incurred by
         them as a result of anything done or omitted to be done in the course
         of carrying out such Sole Risk Project, excepting only damage inflicted
         to the sub-surface including any reservoir. The approval of a Non-Sole
         Risk Party to the conduct of a Sole Risk Project (whether or not such
         approval is required) shall not constitute a waiver of these
         provisions.

13.2.6   a Sole Risk Party carrying out Sole Risk Drilling shall be entitled to
         use Joint Property for such Sole Drilling unless the Operating
         Committee otherwise decides.

13.2.7   A sole Risk Party shall be entitled to use for a Sole Risk Project any
         data and information which it owns jointly with the Non-Sole Risk
         Parties. Data and information obtained in respect of the


                                       44
<PAGE>

         Sole Risk Drilling shall be made available to all Parties but shall
         remain the property of the Sole Risk Party, until and in the event that
         the Non-Sole Risk Party discharges in full its liability to the Sole
         Risk Party under Article 13.4 (in the case of Sole Risk Drilling other
         than Sole Risk testing under Article 13.2.2(i)(c)), and the following
         provisions of this Article in the case of Sole Risk testing, when such
         data and information shall become the joint property of the Non-Sole
         Risk Party discharging such liability and the Sole Risk Party.

         Data and information obtained in respect of Sole Risk testing under
         Article 13.2.2.(i)(c) shall become the joint property of the Non-Sole
         Risk Party and the Sole Risk Party upon payment by the Non-Sole Risk
         Party of an amount equal to 250 per cent of its Percentage Interest
         share of the costs of the Sole Risk testing.

13.2.8   Subject to any necessary consent of the Government, a Sole Risk Project
         will be carried out by Operator on behalf of the Sole Risk Party under
         the provisions of this Agreement provided always that:

         (i)      if Operator is not participating in a Sole Risk Development
                  and such Sole Risk Development does not involve the use of
                  Joint Property as provided under Article 13.2.6, Operator
                  shall only carry out the Sole Risk Development with the
                  consent of all Parties;

         (ii)     if such consent of all Parties is not given the Sole Risk
                  Development, subject to any necessary consent of the
                  Government, will be carried out by the Sole Risk Party or such
                  one of their number appointed by them if there is more than
                  one Sole Risk Party, and such Sole Risk Party, unless the
                  context otherwise requires, shall be deemed to be Operator in
                  respect of the independent application of this Agreement as
                  provided in Article 13.2.9.

13.2.9   Sole Risk Development will, in respect of that part of the License Area
         to which it relates (such area being determined by the Operating
         Committee), be regarded as creating a Sub-Area and this Agreement shall
         so far as possible apply independently in the manner of a separate
         contract to


                                       45
<PAGE>

         such Sub-Area and apply mutatis mutandis to the interests of the
         Parties which participate in such Sole Risk Development provided always
         that:

         (i)      the Non-Sole Risk Parties shall have a right of access to the
                  Sub-Area; and

         (ii)     there shall be no separate right of assignment or withdrawal
                  and accordingly Articles 21 and 22 shall not apply
                  independently to such separate contract.

13.2.10  In connection with any Sole Risk Project:

         (i)      the Sole Risk Project will be carried out under the overall
                  supervision and control of a committee consisting of the Sole
                  Risk Parties in lieu of the Operating Committee; provided
                  always that in the case of Sole Risk Drilling such committee
                  shall require, and each Sole Risk Party shall maintain, in
                  respect of the Sole Risk Drilling operations, such levels of
                  insurance cover or financial responsibility as shall apply
                  pursuant to Article 7 (including any applicable requirement of
                  the Operating Committee) in respect of Joint Operations;

         (ii)     the computation of costs and expenses of the Sole Risk Project
                  incurred by the Sole Risk Parties shall be made in accordance
                  with the principles set out in the Accounting Procedure;

         (iii)    Operator or the Sole Risk Parties carrying out the Sole Risk
                  Project shall maintain separate books, records and accounts
                  (including bank accounts) for the Sole Risk Project which
                  shall be subject to the same right of examination and audit by
                  the Sole Risk Parties and, so long as they are entitled to
                  elect to participate in the Sole Risk Project, the Non-Sole
                  Risk Parties as those relating to the Joint Operations;

         (iv)     the costs and expenses of the Sole Risk Project shall not be
                  reflected in the statements and billings rendered by Operator
                  for the Joint Operations;

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<PAGE>

         (v)      if Operator is carrying out a Sole Risk Project on behalf of a
                  Sole Risk Party, Operator shall be entitled to make Cash Calls
                  on the Sole Risk Party in connection with the Sole Risk
                  Project and shall not use Joint Account funds or be required
                  to use its own funds for the purpose of paying the costs and
                  expenses of the Sole Risk Project; furthermore Operator shall
                  not be obliged to commence or, having commenced, to continue
                  the Sole Risk Project unless and until the relevant Advances
                  have been received from the Sole Risk Party; and

         (vi)     for the avoidance of doubt it is declared that in the
                  application of Article 7.1 in respect of a Sole Risk Project
                  all Non-Sole Risk Parties shall be regarded as third parties.

13.3     Sole Risk Drilling

13.3.1   No Sole Risk Drilling under Article 13.2.2(i)(a) or (b) may be proposed
         unless:

         (i)      such drilling was proposed to the Operating Committee at the
                  time of the consideration of the current exploration Program
                  but was not included in such Program; or

         (ii)     having been included in the current exploration Program the
                  Operating Committee has, where an AFE is required, voted
                  against or failed to vote in favour of such AFE (or the
                  relevant part thereof) relating to such drilling without
                  twenty-eight (28) days of submission of such AFE to the
                  Parties provided that a decision by the Operating Committee to
                  change the timing of such drilling within the Year to which
                  the current exploration Program relates shall not be a vote
                  against the AFE for the purpose of this Article 13.3.1(ii); or

         (iii)    such drilling was proposed to the Operating Committee in
                  reasonably sufficient detail by way of amendment to the
                  current exploration Program and the Operating Committee has
                  voted against or failed to vote in favour of such drilling
                  within sixty (60) days of submission of such amendment to the
                  Parties.

                                       47
<PAGE>

13.3.2   No Sole Risk Drilling under Article 13.2.2(i)(d) may be proposed
         unless:

         (i)      the Operating Committee has voted against or failed to vote in
                  favour of a proposal to instruct Operator to prepare an
                  appraisal Program in respect of the interpreted closure of any
                  geological structure or stratigraphic trap on which a wall has
                  been drilled in which Petroleum has been found to be present
                  or, having so instructed Operator, has voted against or failed
                  to vote in favour of such a Program within sixty (60) days of
                  its submission to the Parties; or

         (ii)     the Operating Committee has abandoned or completed its
                  appraisal Program of the interpreted closure of any geological
                  structure or stratigraphic trap on which a well has been
                  drilled in which Petroleum has been found to be present and
                  the Operating Committee has voted against or failed to vote in
                  favour of a proposal to instruct Operator to prepare a
                  development Program in respect thereof and no Party has given
                  notice under Article 13.5.1 that it intends to prepare such a
                  development Program.

13.3.3   Subject to Articles 13.3.1 and 13.3.2 if a Party wishes to propose Sole
         Risk Drilling under Article 13.2.2(i)(a), (b) or (d) it shall give
         notice to the other Parties setting out:

         (i)      the proposed location of such drilling; and

         (ii)     all other relevant information including, but not limited to,
                  the date on which it proposed that operations should be
                  started, such date being more than sixty (60) days but not
                  more than one hundred and eighty (180) days from the date of
                  the notice.

         Each of the Parties receiving such a notice shall respond to it, by
         notice to the other Parties, within twenty-eight (28) days thereof,
         electing whether or not to participate. Any Party failing to respond
         within the said twenty-eight (28) days shall be deemed to have elected
         not to participate.

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<PAGE>

13.3.4   If a Party wishes to propose Sole Risk Drilling under Article
         13.2.2(i)(c), such Party shall give as much notice as possible to the
         other Parties stating whether it wishes to use Joint Property for such
         Sole Risk Drilling (and, if so, what items thereof) and setting out
         such relevant information as is necessary in order to allow the other
         Parties to consider the proposal and elect whether or not to
         participate within the period hereinafter specified. Each of the
         Parties receiving such a notice shall respond to it, by notice to the
         other Parties, within forty-eight (48) hours thereof (or within such
         longer period as may be specified in the notice), electing whether or
         not to participate. Any Party failing to respond within the said period
         shall be deemed to have elected not to participate.

13.3.5   If the Percentage Interests of the Parties electing to participate
         together with the Percentage Interest of the Party proposing the Sole
         Risk Drilling exceed the percentage provided under Article 8.4.5, the
         operations shall be carried out, in accordance with the said notice, by
         Operator as part of the Joint Operations as if determined by the
         Operating Committee and, if appropriate, the current relevant Program
         shall be deemed amended accordingly and Operator shall promptly notify
         the Parties of the consequential amendments to the current relevant
         Budget.

13.3.6   If the Percentage Interests of the Parties electing to participate
         together with the Percentage Interests of the Party proposing the Sole
         Risk Drilling do not exceed the percentage provided under Article
         8.4.5, such Party together with any other Parties which have elected to
         participate may, subject to the provisos to Article 13.2.2(i)(b) or (c)
         in the case of Sole Risk Drilling thereunder, within twenty-eight (28)
         days following the expiration of the notice if given under Article
         13.3.3 or within 48 hours following the expiration of the notice if
         given under Article 13.3.4, require Operator (subject to Article
         13.2.8) to undertake the Sole Risk Drilling. In the case of a notice
         given under Article 13.3.3, the Sole Risk Drilling may not be commenced
         later than one hundred and eighty (180) days following such notice and,
         in the case of a notice given under Article 13.3.4, the Sole Risk
         Drilling shall be commenced as soon as it is possible to do so without
         interference to the Joint Operations on that well (and additional costs
         resulting from delays occasioned by the giving and receiving of noticed
         being for the account of the Sole Risk Party).

                                       49
<PAGE>

13.3.7   Where Sole Risk Drilling consisting of testing is proposed by a Party
         and any of the other Parties objects to such testing on the grounds of
         safety or the possibility of damage to the reservoir, no such testing
         shall be carried out unless otherwise decided by the Operating
         Committee.

13.4     Sole Risk Payments

13.4.1   If Sole Risk Drilling carried out under Article 13.2.2(i)(a), (b) or
         (c) (other than Sole Risk testing under Article 13.2.2(i)(c)) has
         resulted in a particularly Discovery, or Sole Risk Drilling has been
         carried out under Article 13.2.2(i)(d) in respect of a particular
         Discovery, and (in either such case) any Party which was a Non-Sole
         Risk Party in all or part of such Sole Risk Drilling wishes to
         participate in appraisal drilling, geophysical work or a development
         Program relating to that Discovery, then in respect of any such Sole
         Risk Drilling:

         (i)      in which such Party was a Non-Sole Risk Party; and

         (ii)     to the cost and expense of which such Party has not previously
                  contributed pursuant to the provisions of this Article 13.4,

         such Party shall pay to the Sole Risk Party (if more than one Party, in
         proportion to their respective Percentage Interests or in such other
         proportion as they may have agreed under Article 13.2.3) an amount
         equal to the amount it would have contributed to the Joint Account had
         such Sole Risk Drilling been carried out as part of the Joint
         Operations (which amount shall include, for the avoidance of doubt, the
         costs incurred in connection with any necessary plugging back) together
         with interest calculated on a day to day basis at a rate of two percent
         per annum (2%) above Base Rate from the date upon which the
         contribution would have been paid had such Sole Risk drilling been
         carried out as part of Joint Operations until the date of payment under
         this Article 13.4.1. Such amount shall be paid, in cash in the currency
         or currencies in which the contributions for the costs and expenses
         would have been made to the Joint Account, before the commencement of
         the appraisal drilling, geophysical work or development Program in
         question.

                                       50
<PAGE>

13.4.2   Upon the Government (by the granting to a petroleum lease under the
         Petroleum Law, or otherwise) authorising the development of a Discovery
         in respect of which Sole Risk Drilling has been carried out, any Party
         which participates in such development and was required to make one or
         more payments under the provisions of Article 13.4.1 to one or more
         Sole Risk Parties in respect of that Discovery shall in addition be
         liable to pay to each such Sole Risk Party as is also participating in
         the development an amount in US dollars in respect of each Sole Risk
         Drilling operation in which it did not participate equal to ten (10)
         times the amount paid to that Sole Risk Party in respect of such Sole
         Risk Drilling operation pursuant to Article 13.4.1 (any payment made
         pursuant to Article 13.4.1 in a currency other than US dollars being
         translated to US dollars at the Conversion Rate on the date of payment
         by the Non-Sole Risk Party).

13.4.3   Any liability which is calculated under Article 13.4.2 shall be
         satisfied by the Non-Sole Risk Party paying to the Sole Risk Party (if
         more than one Non-Sole Risk Party, in proportion to the liability of
         each such Party) amounts equal to the amounts of the Percentage
         Interest share of the Sole Risk Party of the Advances paid or payable
         under the relevant approved development Program and Budget until the
         liability of the Non-Sole Risk Party has been extinguished and such
         amounts shall be paid in US dollars to the Sole Risk Party:

         (i)      within thirty five (35) days of the date of the Government's
                  authorisation in the case of Advances paid prior to such date,
                  and for the purpose of calculating the amount payable under
                  this sub-paragraph any Advance paid in a currency other than
                  US dollars shall be translated to US dollars at the Conversion
                  Rate on the date of the said authorisation; and

         (ii)     not less than two (2) Working Days before the due dates for
                  payment of the Advances in the case of Advances to be paid
                  subsequent to the date of the said authorisation, and for the
                  purpose of calculating the amounts payable under this
                  sub-paragraph any Advance to be paid in a currency other than
                  US dollars shall be translated to US dollars at the Conversion
                  Rate on the fourth (4th) Working Day before the due date for
                  payment thereof.

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<PAGE>

13.4.4   Notwithstanding any of the foregoing provisions of this Article 13.4
         the Non-Sole Risk Party on becoming a Sole Risk Party shall assume and
         maintain responsibility for all royalty and operating costs
         attributable to its Percentage Interest share in the development.

13.4.5   If a Sole Risk Project has been carried out under Article 13.2.2(ii)
         and any Party which did not participate in all or part of such Sole
         Risk Project wishes to become an owner of any data and information thus
         acquired, then such Party shall pay to the Sole Risk Party (if more
         than one Party, in proportion to their respective Percentage Interests
         or in such other proportion as they may have agreed pursuant to Article
         13.2.3) an amount equal to the amount it would have contributed to the
         Joint Account together with interest calculated on a day to day basis
         at a rate of two percent per annum (2%) above Base Rate from the date
         upon which the contribution would have been paid had such Sole Risk
         Project been carried out as part of the Joint Operations until the date
         of payment under Article 13.4.1. Such amount shall be paid, in cash in
         the currency or currencies in which the contributions for the costs and
         expenses would have been made to the Joint Account.

13.5     Sole Risk Development

13.5.1   In the event that a proposal is made to the Operating Committee that a
         development Program and Budget should be prepared for a particular
         Discovery, pursuant to Article 11.1.1, and such proposal is rejected
         then, provided that any appraisal Program approved by the Operating
         Committee and relating to that Discovery has been completed (but
         excluding any appraisal work included in an appraisal Program if an AFE
         therefor has been submitted to the Parties as required under Article
         11.2 and which the Operating Committee has voted against or failed to
         vote in favour of the same within twenty-eight (28) days after
         submission), any Party may give notice to the other Parties that it
         intends to prepare a development Program and Budget for that Discovery.
         Such Party, together with such of the other Parties as within
         twenty-eight (28) days of such notice give counter-notice of their wish
         to participate therein, shall be entitled to proceed with the
         preparation thereof and to submit the same for approval by the
         Operating Committee in accordance with Article 11.1.2.

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<PAGE>

13.5.2   If a development Program and Budget, prepared in accordance with
         Article 13.5.1 or a revised form thereof, is approved by the Operating
         Committee in accordance with Article 11.1.2, then the Party or Parties
         which prepared the development Program and Budget shall be entitled to
         charge all reasonable costs incurred in the preparation thereof to the
         Joint Account together with interest calculated on a day to day basis
         at the rate of three (3) per cent above Base Rate from time to time
         from the date on which the costs were incurred to the date of
         repayment.

13.5.3   In the event that, following the submission to the Operating Committee
         of a proposed development Program and Budget for a particular Discovery
         in accordance with Article 11.1.2, the Operating Committee does not
         approve such development Program and Budget within the period therein
         provided, then any Party may serve notice on the other Parties of its
         intention to develop the Discovery at sole risk. Such notice shall be
         accompanied by details of its proposed development Program and Budget.
         Within ninety (90) days of such notice the other Parties may given
         counter-notice that they wish to participate in the development.

         If all the other Parties elect to participate the Parties shall proceed
         with the development in accordance with such development Program and
         Budget and the provisions of Article 11.1.4 shall apply.

13.5.4   If the development of a Discovery is carried out in accordance with the
         provisions of Article 13.5.3, then the Parties which prepared the
         development Program and Budget shall be entitled to charge all
         reasonable costs incurred in the preparation thereof to the Joint
         Account relating to that Discovery together with interest thereon
         calculated on a day to day basis at the rate of five (5) per cent per
         annum above Base Rate from time to time from the date on which the
         costs were incurred to the date of repayment.

13.5.5   In the event that, following approval by the Operating Committee of a
         development Program and Budget pursuant to Article 11.1.2 or following
         any notice served under Article 13.5.3 less than all the Parties, or in
         the case of Article 13.5.3 less than all the Non-Sole Risk Parties,
         elect to participate in the development of a Discovery within the
         periods therein respectively provided, those Parties which elected to
         participate, or in the case of Article 13.5.3 the Sole Risk Party and


                                       53
<PAGE>

         those Non-Sole Risk Parties which elected to participate, shall be
         entitled to proceed with the development of the Discovery at sole risk
         in accordance with the relevant development Program and Budget provided
         that if, in connection with or as a condition to the grant or coming
         into effect of any Government approval (whether by way of the grant of
         a petroleum lease under the Petroleum Law or in another form ) required
         in relation to that development Program and Budget, such development
         Program and Budget has been or is required to be amended (which shall
         for the avoidance of doubt including any change in the date of
         commencement of the development or in the proposed depth, or in the
         objective horizon, or in the number of wells required) then the Parties
         participating in the development shall as soon as practicable following
         such authorisation given notice to the other Parties of such amendments
         and within twenty-eight (28) days of such notice:

         (i)      any of the Parties participating in the development of the
                  Discovery may, by notice to all the other Parties, elect not
                  to proceed with the development; and/or

         (ii)     any of the Parties not participating in the development of the
                  Discovery may, by notice to all the other Parties, elect to do
                  so.

         Those Parties which, at the expiry of the said period of twenty-eight
         (28) days, are participating in the development shall be obliged to
         carry it out.

13.5.6   In the event that any of the Parties elects not to proceed with the
         development under Article 11.1.4 the other Parties shall be entitled to
         proceed with the development in accordance with the approved
         development Program and Budget (as amended) and, if they do so proceed,
         shall be obligated to carry out the development.

13.5.7   In the event that less than all the Parties participate in the
         development of a Discovery in respect of which no Sole Risk Drilling
         has been carried out then, unless the Parties participating in such
         development unanimously agree otherwise, the Percentage Interest of
         each Party in such development shall be in proportion to its Percentage
         Interest in the License.

13.5.8   In the event that less than all the Parties participate in the
         development of a Discovery in respect


                                       54
<PAGE>

         of which Sole Risk Drilling has been carried out then, unless the
         Parties participating in such development unanimously agree otherwise:

         (i)      if the Party which participated in the first such Sole Risk
                  Drilling (for the purposes of this Article 13.5.8 "Original
                  Sole Risk Party") or if more than one Original Sole Risk
                  Party, all the Original Sole Risk Parties participate in the
                  development, then the Percentage Interest of any Party which
                  was not an Original Sole Risk Party in such development shall
                  equal its Percentage Interest, and the remaining Percentage
                  Interest in the development shall be held by the Original Sole
                  Risk Party (if more than one, in proportion to their
                  Percentage Interests in the License or in such other
                  proportion as they may have agreed under Article 13.2.3); or

         (ii)     if less than all the Original Sole Risk Parties participate in
                  the development, then the calculation under (i) above shall
                  first be performed as though all the Original Sole Risk
                  Parties were participating. The Percentage Interests in such
                  development of those Original Sole Risk Parties who do not
                  participate shall then be allocated to all the participating
                  Parties, in proportion to the Percentage Interests obtained in
                  such preliminary calculation.

13.5.9   Any Party which does not participate in the development of a Discovery
         shall have no further rights in such development.

14.      ACCOUNTING

         The Accounting Procedure is hereby made part of this Agreement. In the
         event of any conflict between this Agreement and the Accounting
         Procedure, this Agreement shall prevail. The Accounting Procedure is an
         inseparable part of this Agreement.

15.      DEFAULT

15.1     Failure to Pay

                                       55
<PAGE>

         If any Party ("DEFAULTING PARTY") fails to pay its full share of any
         advance by the due date in accordance with the Accounting Procedure:

         (i)      Operator shall, as soon as practicable, notify by telex or fax
                  all the Parties of such default;

         (ii)     with the exception of the Defaulting Party, each Party
                  ("NON-DEFAULTING PARTY") shall contribute, as hereinafter
                  provided, a share of the amount in default in the proportion
                  that its Percentage Interest bears to the total of the
                  Percentage Interests of the Non-Defaulting Parties and pending
                  receipt of such additional contributions Operator shall make
                  arrangements to meet any commitments falling due by borrowing
                  the necessary funds from outside sources or by making the
                  necessary funds available itself. All costs of any such
                  financing shall be charged to the Non-Defaulting Parties;
                  financing made available by Operator shall bear interest
                  calculated on a day-to-day basis at a rate equal to two (2)
                  percent per annum above Base Rate:

         (iii)    within three (3) Working Days following the notification by
                  Operator under (i) above, Operator shall notify all the
                  Parties of the liability of each of the Non-Defaulting Parties
                  to contribute to the amount in default and shall make a
                  further Cash Call accordingly to take effect on the expiration
                  of six (6) Working Days specifies in (iv) below; and

         (iv)     if such default continues for more than six (6) Working Days
                  after the date of notification by Operator, each of the
                  Non-Defaulting Parties shall, on the Working Day next
                  following such sixth Working Day, pay the amount notified
                  under (iii) above, and thereafter shall continue to pay, in
                  addition to its share of subsequent Advances, the same
                  proportion of that part of all such subsequent Advances
                  attributed to the Defaulting Party, until such time as the
                  Defaulting Party has remedied its default in full or until
                  forfeiture, as hereinafter provided. Failure by any Party to
                  make such payments shall likewise and with the same results
                  render that Party in default.

15.2     Remedy of Default

         The Defaulting Party shall have the right to remedy the Default at any
         time prior to forfeiture, as hereinafter provided, by payment in full
         to Operator or, if the Non-Defaulting Parties have paid any amounts
         under Article 15.1, the Non-Defaulting Parties, in proportion to the
         amounts so paid to them, of all amounts in respect of which the
         Defaulting Party is in Default, which shall include any cost of
         financing or interest chargeable to the Non-Defaulting Parties pursuant
         to Article 15.1 (ii), together with interest thereon calculated on a
         day-to-day basis at a rate equal to three (3) percent per annum above
         Base Rate from time to time from and including the due date for payment
         of such amounts until the actual date of payment.

                                       56
<PAGE>

15.3     Continuation of Default

15.3.1   If any Default continues for more than six (6) Working Days after the
         date of notification by Operator under Article 15.1(i) then, for so
         long as the Default so continues, the Defaulting Party shall not be
         entitled to its share of Petroleum which shall instead be owned by the
         Non-Defaulting Parties in the proportions in which their respective
         Percentage Interests bear to the total of the Percentage Interests of
         the Non-Defaulting Parties.

15.3.2   During the continuation of any Default, the Defaulting Party shall not
         be entitled to be represented at meetings of the Operating Committee or
         to vote thereat (so that the voting interest of each Party other than
         the Defaulting Party shall be in the proportion which its Percentage
         Interest bears to the total Percentage Interests of such Parties). If
         the Default subsists for six months and the Defaulting Party continues
         to hold a Percentage Interest, then from the end of that six month
         period, while the Default subsists, the Defaulting Party shall have no
         further access to any data and information relating to the Joint
         Operations. The Defaulting Party shall be bound by decisions of the
         Operating Committee made during the continuation of the Default.

15.3.3   (i)      In the event that the Default continues for more than
                  thirty (30) days after the date of notification by Operator
                  under Article 15.1(i), then each of the Non-Defaulting Parties
                  shall have the right to have forfeited to it and to acquire,
                  by notice to the other Parties given within fifteen (15) days
                  after such period of thirty (30) days, the interest of the
                  Defaulting Party in the License and in and under this
                  Agreement or, if more than one Non-Defaulting Party exercises
                  such right, its proportionate share of the interest of the
                  Defaulting Party in the License and in and under this
                  Agreement, such share being the proportion in which its
                  Percentage Interest bears to the total Percentage Interests of
                  such Non-Defaulting Parties.

         (ii)     If none of the Non-Defaulting Parties exercises its right as
                  is mentioned in Article 15.3.3 (i) then, without prejudice to
                  any rights of the Non-Defaulting Parties, the Parties shall be
                  deemed to have decided to abandon the Joint Operations and
                  (subject to any abandonment agreement entered into pursuant to
                  Article 5.11.3) each Party, including


                                       57
<PAGE>

                  the Defaulting Party, shall pay its Percentage Interest share
                  of the costs of abandoning the Joint Operations.

15.3.4   With respect to Article 15.3.3, any such forfeiture and acquisition of
         the interest of the Defaulting Party in the License and in and under
         this Agreement shall be:

         (i)      subject to any necessary consent of the Government;

         (ii)     without prejudice to any other rights of each Party other than
                  the Defaulting Party;

         (iii)    so forfeited and acquired as beneficial owner or owners free
                  of any charges and encumbrances (other than rent and royalty
                  under the License or under the ERSAN Royalty Interest) but
                  subject to all obligations under this Agreement and the
                  License insofar as the interest assigned is concerned;

         (iv)     subject to the Defaulting Party remaining liable and obligated
                  for its Percentage Interest share of all net costs and
                  obligations that in any way relate to the abandonment of the
                  Joint Operations, except to the extent they result from Joint
                  Operations carried out after the date of forfeiture; and

         (v)      effective as of the date of Default;

         and the Defaulting Party shall promptly join in such actions as may be
         necessary or desirable to obtain any necessary consent of the
         Government and shall execute and deliver any and all documents
         necessary to effect any such forfeiture and acquisition and all costs
         and expenses pertaining to any such forfeiture and acquisition shall be
         the responsibility of the Defaulting Party.

15.4     In the event that either:

         (a)      less than all of the Non-Defaulting Parties acquire the
                  interest of the Defaulting Party in the License and in and
                  under this Agreement by forfeiture and acquisition in terms of
                  Article 15.3.3; or

         (b)      Non-Defaulting Parties acquire such interest otherwise than in
                  proportion to their respective Percentage Interests,

                                       58
<PAGE>

         then not later than the hundredth (100) day after the date of default
         the Non-Defaulting Parties shall make such cash adjustments between
         themselves as may be required to ensure that all amounts paid by them
         under Article 15.1(iv) and interest payable thereon under Article
         15.1(ii) are borne and the amounts (if any) recouped from the
         Defaulting Party are recouped by the Non-Defaulting Parties in
         proportion to the Percentage Interests of the Non-Defaulting Parties
         subsequent to forfeiture and acquisition in terms of Article 15.3.3. In
         the event that the Defaulting Party's Percentage Interest share of
         Petroleum shall have accrued to the Non-Defaulting Parties in terms of
         Article 15.3.1, such cash adjustments shall take into account the value
         of the Joint Petroleum share derived by Non-Defaulting Parties from the
         Defaulting Party's interest in terms of Article 15.3.1. in respect of
         the period from the date of default to the date of such adjustment.

16.      DISPOSAL OF PETROLEUM

16.1     Right and Obligation

         Subject to the provisions hereinafter contained and subject to the
         Petroleum Law, in respect of the development of any Discovery:

         (i)      as an alternative to receiving under Article 3.1 a share of
                  Net Pre-Tax Revenue derived from the sale of Joint Petroleum
                  by Operator on behalf of the Parties, each Party (excluding,
                  at any time when Article 3.2.5 applies, the holder of the
                  Carried Interest or part thereof, to the extent of the Carried
                  Interest or part thereof held by it) shall have the right to
                  take in kind and separately dispose of its Percentage Interest
                  share of the total quantities of Joint Petroleum available
                  under this Agreement. but excluding the Operator's reasonable
                  estimate of the amount of such Joint Petroleum unavoidably
                  lost in the course of Joint Operations or used by Operator in
                  the conduct of the Joint Operations, and less a quantity of
                  such Joint Petroleum equivalent to that required to satisfy
                  any Government royalty and the obligations of the Parties in
                  relation to the ERSAN Royalty Interest; and

         (ii)     Operator, if so required from time to time by a Party, shall
                  arrange for the lifting, marketing, sale and dispose of Joint
                  Petroleum.

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<PAGE>

16.2     NGLs and Natural Gas

         The Parties recognise that, in the event of the production of NGLs or
         Natural Gas, it may or will be or become desirable for them to enter
         into special arrangements for the disposal of the same and they agree
         that, in such event and upon the request of any of them, their
         respective representatives shall meet together as necessary to consider
         their entry into such arrangements and that, if and to the extent that
         any such arrangements are agreed, they will adopt and undertake the
         same. Until such time as the Parties have entered into special
         arrangements for the disposal of NGLs or Natural Gas, all operations
         with regard to the production of NGLs or Natural Gas shall be governed
         by the terms and conditions of this Agreement.

17.      CONFIDENTIALITY

17.1     Confidential Data and Information

         Each Party shall, and shall cause its Affiliates to, keep confidential
         all of the terms of this Agreement and all written and/or
         electronically stored data and information acquired or received by that
         Party under this Agreement throughout the term of this Agreement and
         for a period of two (2) years thereafter; provided, however, that this
         obligation of confidentiality shall not apply to any disclosure of
         information:

         (i)      that is in or enters the public domain without a breach of a
                  duty of confidentiality by the disclosing Person or was
                  obtained from a third party having no confidentiality
                  restriction to the Parties;

         (ii)     the disclosure of which is required of the disclosing Party or
                  its Affiliate by law, regulation, legal process, or order of
                  any court or governmental body having jurisdiction (including
                  applicable State and Federal securities laws, rules and
                  regulations in the USA) or pursuant to the regulations of any
                  securities exchange upon which any of the Parties or its
                  Affiliate is (or is to be) listed or its securities are (or
                  are to be) traded;

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<PAGE>

         (iii)    to any Affiliate or bona fide potential assignee of such
                  Party, and to the employees, agents, consultants, bankers,
                  financial and professional advisers of that Party, its
                  Affiliate or any such bona fide potential assignee, provided
                  that (a) they have a reasonable need to know the information
                  and (b) they are instructed and agree in writing to maintain
                  this information confidential;

         (iv)     by AVENUE or its Affiliates or any Person referred to in
                  paragraph (iii) above to whom Avenue has disclosed the same,
                  to investors or targeted potential investors in AVENUE or any
                  Affiliate of AVENUE in connection with a capital raising or
                  the listing of equities.

         In the event of any Party ceasing to hold a Percentage Interest, such
         Party shall nevertheless remain bound by this Article 17.1.

17.2     Trading Rights

         Operator may, with the prior written approval of all Parties and on
         such terms and conditions as they may determine, exchange any such data
         and information for other similar data and information and Operator
         shall promptly provide all the Parties with a conformed, copy of the
         agreement regulating such exchange and all such other data and
         information. Notwithstanding the foregoing provisions of this Article
         17, if any Party is also the owner or part owner of such other data and
         information or otherwise has a right of access to the same, it shall
         not be entitled to prevent an exchange which has been approved by the
         other Parties. In the event that the aforesaid proviso is invoked
         against a Party which is already owner or part owner of the other data
         and information then:

         (i)      that Party shall be entitled to request Operator to use all
                  reasonable endeavours to arrange within ninety (90) days of
                  the exchange approved by all the other Parties, a separate
                  exchange with the third party selected by the Party concerned
                  subject to Operating Committee approval of the third party for
                  such purpose (which approval shall not be unreasonably
                  withheld); and

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<PAGE>

         (ii)     upon receiving a request under sub-paragraph (i) above,
                  Operator shall use all reasonable endeavours to comply with
                  such requests and shall divulge to the Parties, subject to the
                  terms of the said separate exchange, all data and information
                  received pursuant thereto.

17.3     Sole Risk Data

         Notwithstanding Article 17.1 and 17.2 a Sole Risk Party may in its sole
         discretion exchange any data and information relating exclusively to a
         Sole Risk Project (and which are not Joint Property) for other similar
         data and information provided that in the event that one or more
         Non-Sole Risk Parties discharges in full its liability to the Sole Risk
         Party under Article 13.4 or (where the data and information exchanged
         is in respect of Sole Risk testing under Article 13.2.2(i)(c)) Article
         13.3.7 such other data and information shall be disclosed to the
         Parties discharging such liability provided that in making such
         disclosure the Sole Risk Party would not be in breach of the terms of
         the exchange. The Sole Risk Party shall however use all reasonable
         endeavours to ensure that the data can be disclosed upon the Non-Sole
         Risk Parties discharging their liability as aforesaid.

18.      PUBLIC ANNOUNCEMENTS

18.1     Subject to Article 18.2, Operator shall be responsible for the
         preparation and release of all public announcements and statements
         regarding this Agreement or the Joint Operations, provided always
         (except in the case of an emergency pertaining to operations under this
         Agreement) that no such public announcement or statement shall be
         issued or made unless prior thereto all the Parties have been furnished
         with a copy thereof and the approval of the Operating Committee has
         been obtained.

18.2     No Party shall issue or make any public announcement or statement
         regarding this Agreement or the Joint Operations unless prior thereto
         it furnished all the Parties with a copy of such announcement or
         statement and obtains the approval of the Operating Committee provided
         that, notwithstanding any failure to obtain such approval, no Party or
         any Affiliate of such Party shall be prohibited from issuing or making
         any such public announcement or statement if it is necessary to do so
         in order to comply with any applicable law, the regulations of a
         recognized


                                       62
<PAGE>

         stock exchange or the requirements of the Securities and Exchange
         Commission of the United States of America.

19.      OUTGOINGS

19.1     Payments to Government

         The Parties shall be liable for the payment of their respective
         Percentage Interest shares of all sums which may be properly payable
         under the Petroleum Law and the License, provided that to the extent
         permitted by the Petroleum Law and the License, Operator shall pay all
         such sums (including royalties) from the Joint Account.

19.2     ERSAN Royalty Interest

         Operator shall pay to ERSAN from the revenue derived from the sale of
         Joint Petroleum all sums due and owing to ERSAN in respect of that sale
         of Joint Petroleum in respect of the ERSAN Royalty Interest.

20.      COVENANT, UNDERTAKING AND RELATIONSHIP

20.1     Covenant and Undertaking

20.1.1   Without prejudice to the overriding responsibility of Operator under
         Article 5.2.2, each Party hereby covenants and undertakes with each
         other Party that it will comply with all the applicable provisions and
         requirements of the Petroleum Law and the License and will do all such
         acts and things within its control as may be necessary to keep and
         maintain the License in full force and effect.

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<PAGE>

20.1.2   Each Party hereby covenants and undertakes with each other Party as
         follows:

         (i)      neither it nor any of its Affiliates nor any of their
                  officers, directors, employees, agents, shareholders or
                  representatives (including a consultant) shall make, or cause
                  to be made, in connection with the Licence, the Joint
                  Operations, this Agreement or the transactions contemplated by
                  this Agreement, payments, loans or gifts or promises or offer
                  of payments, loans or gifts of any money or anything of value,
                  directly or indirectly:

                  (a)      to or for the use or benefit of any official or
                           employee of any government or agency or
                           instrumentality thereof (including without limitation
                           any enterprise owned or controlled by such
                           government), or any Person acting in an official
                           capacity for or on behalf of any government,
                           department, agency or instrumentality;

                  (b)      to or for the use or benefit of any political party
                           or official or candidate thereof, or any official or
                           employee of a public international organization, or
                           any person acting in an official capacity for or on
                           behalf of any political party or public international
                           organization;

                  (c)      in violation of any applicable law; or

                  (d)      to any other Person either as an advance or as a
                           reimbursement if it knows that any part of such
                           payment, loan or gift will be directly or indirectly
                           given or paid by such other Person to an official,
                           party, party official or candidate referred to in
                           sub-paragraph (a) or (b) above, or will reimburse
                           such other Person for payments, gifts, or loans
                           previously made, to any such official, party, party
                           official or candidate;

         (ii)     the receipt by it of the consideration which may be obtained
                  hereunder or of any funds or interests under Licence does not
                  violate the laws, decrees and regulations of the Republic of
                  Turkey;

         (iii)    it shall answer and shall cause each of its officers,
                  directors, employees and attorneys-in-fact, and its Affiliates
                  and their respective officers, directors, employees and
                  attorneys-in-fact, to answer, and shall exert reasonable
                  commercial efforts to cause its and their


                                       64
<PAGE>

                  consultants to answer, in reasonable detail, any questionnaire
                  or other written or oral communications, or any request for
                  information from AVENUE or its outside auditors, relating to
                  the covenants and undertakings set forth in paragraphs (i) and
                  (ii) above; and

         (iv)     to provide, on or before the 30th day after notice from AVENUE
                  so requesting, AVENUE with certification to the effect that it
                  has not, and its Affiliates and their personnel have not, made
                  or sought any payments, directly or indirectly, in violation
                  of paragraph (i) or (ii) above.

20.2     Relationship

20.2.1   The liability of the Parties hereunder shall be several and not joint
         or collective and each Party shall be responsible only for its
         individual obligations hereunder. It is expressly agreed that it is not
         the purpose or intention of this Agreement to create, nor shall the
         same be construed as creating, any mining partnership, commercial
         partnership or other partnership.

20.2.2   Each Party, to the extent of its Percentage Interest share, agrees to
         indemnify each other Party, for any claim by or liability to (including
         any costs and expenses necessarily incurred in respect of such claim or
         liability) any person not being a Party, arising from or in connection
         with the Joint Operations.

2.2.3    Nothing in Article 20.2.2 shall require a Party to indemnify a Party in
         respect of claims against or liabilities of that Party arising from its
         acts, defaults or omissions as Operator or in any capacity (including
         as contractor of or service or equipment supplier to the Joint
         Operations) other than as the holder of a Participating Interest.

21.      ASSIGNMENT AND ENCUMBRANCES

21.1     Restriction

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<PAGE>

         No assignment or transfer of any interest under the License or this
         Agreement shall be made by any Party otherwise than in respect of an
         undivided interest in all or part of its interest in the License and in
         and under this Agreement (so that any such assignment shall include all
         or a corresponding part of any interest of such Party in a Sole Risk
         Project) in accordance with the following provisions of this Article or
         the provisions of Article 22. In the case of an assignment or transfer
         of party only of such an interest, that part must equate to a
         Percentage Interest of not less than 5%.

21.2     Right

21.2.1   Each of the Parties may, subject to any necessary consent and approval
         of the Government and to the provisions hereinafter contained, at any
         time upon written notice to the other Parties (accompanied by written
         confirmation from the Party proposing to assign that the assignment is
         not being made with the intention that the assignee should thereafter
         cease to be an Affiliate of such Party) assign all or part of its said
         interest to an Affiliate of such Party if either:

         (i)      the Affiliate has demonstrated to the satisfaction of the
                  other Parties its financial capability to meet its prospective
                  obligations hereunder; or

         (ii)     the assigning Party has agreed to remain jointly and severally
                  liable with the Affiliate for the performance of the assigned
                  obligations.

21.2.2   Each of the Parties may at any time assign all or part of its said
         interest other than as provided in Article 21.2.1 if and only if:

         (i)      any necessary consent and approval of the Government to such
                  assignment shall have been obtained; and

         (ii)     the remaining, non-assigning Parties shall have consented to
                  such assignment in writing (which consent may only be withheld
                  on the grounds of lack of financial responsibility and
                  capability of the proposed assignee to discharge the
                  obligations under this Agreement as they relate to the
                  interest to be assigned).

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<PAGE>

21.3     Effective Date

         No such assignment shall be effective or binding upon the Parties until
         the date upon which the assignor or assignee furnishes all the Parties
         with:

         (i)      an executed or photostatic copy of an instrument evidencing
                  such assignment, together with any necessary consent and
                  approval of the Government; and

         (ii)     a written instrument (in form and content satisfactory to the
                  Parties and duly executed by the assignee) under which the
                  assignee accepts and assumes all of the obligations under this
                  Agreement, and complying with the requirements of any
                  abandonment agreement entered into pursuant to Article 5,
                  insofar as the interest assigned is concerned.

21.4     Continuing Obligations

         A Party so assigning all or part of its said interest shall remain
         liable to the other Parties for all obligations attaching to the
         interest assigned pursuant to this Article 21 which are incurred prior
         to the effective date of such assignment and such obligations shall in
         addition become the obligations of the assignee.

21.4.1   The Parties shall promptly join in such reasonable actions as may be
         necessary or desirable to obtain any consent and approval of the
         Government in connection with, and shall execute and deliver any and
         all documents reasonably necessary to effect, any such assignment.

21.5     Costs

         All costs and expenses pertaining to any such assignment shall be the
         responsibility of the assignor.

21.6     Encumbrance

         Nothing contained in this Article 21 shall prevent a Party from
         mortgaging, pledging or otherwise encumbering all or part of its
         interest in the License and in and under this Agreement for the purpose
         of security relating to finance provided that:

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<PAGE>

         (i) such Party shall remain liable for all obligations relating to such
         interest; and

         (ii) the encumbrance shall be subject to any necessary approval of the
         Government and be expressly subordinated to the rights of the other
         Parties under this Agreement.

22.      WITHDRAWAL

22.1     Restriction

         No Party may withdraw from the License or this Agreement otherwise than
         in accordance with the following provisions of this Article.

22.2     Right

22.2.1   Any Party may, subject to Article 22.3, at any time give notice to the
         other Parties that it wishes to withdraw from the License and this
         Agreement. Within thirty (30) days of receipt of such notice, any of
         the other Parties may similarly give notice that it wishes to withdraw
         form the License and this Agreement. If all the other Parties give such
         notice no assignment shall take place, the Parties shall be deemed to
         have decided to abandon the Joint Operations and the License shall be
         surrendered on the earliest possible date. If less than all the other
         Parties give such notice, the withdrawing Parties shall withdraw from
         the License and this Agreement on the earliest possible date and shall
         assign their respective interests in the License and in and under this
         Agreement to one or more of the non-withdrawing Parties in accordance
         with Article 22.3 without any compensation whatsoever, provided that if
         such an assignment has not been completed within ninety (90) days of
         the notice, all of the Parties shall be deemed to have decided to
         abandon the Joint Operations and the License shall be surrendered on
         the earliest possible date.

22.2.2   If, by the final date permitted under the Petroleum Law for the
         commencement or completion of drilling in respect of the License (and
         after taking account of relevant remedy periods normally afforded to
         licensees by the Government prior to forfeiture of license interests),
         no well has been spudded or, as applicable, completed as part of the
         Joint Operations but Sole Risk Drilling has commenced or, as
         applicable, been completed so as to prevent forfeit of the License,
         each of the Parties which is not by that time a participant in relation
         to such Sole


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<PAGE>

         Risk Drilling shall be deemed to have given notice under Article 22.2.1
         of its intention to withdraw from the License and this Agreement.

22.3     Conditions

         With respect to Article 22.2:

         (i)      a withdrawing Party shall assign all of its interest to such
                  non-withdrawing Parties as wish or are obliged to accept it,
                  which shall (unless otherwise agreed by such non-withdrawing
                  Parties) be allocated to them in the proportion in which their
                  respective Percentage Interests prior to the effective date of
                  withdrawal (as hereinafter defined) bears to the total of the
                  same;

         (ii)     a withdrawing Party shall promptly join in such actions as may
                  be necessary or desirable to obtain any consent of the
                  Government in connection with, and shall execute and deliver
                  any and all documents necessary to effect, any such
                  assignment. A withdrawal shall not be effective and binding
                  upon the Parties until the date upon which the same shall have
                  been done ("the effective date of withdrawal", provided that
                  if no such consent is required "the effective date of
                  withdrawal" shall be the date of expiry of the period of
                  thirty (30) days referred to in Article 22.2.1);

         (iii)    a withdrawing Party shall promptly join in all actions
                  required by the other Parties for the maintenance of the
                  License provided that its participation in such actions shall
                  not cause it to incur, after the date on which notice of
                  withdrawal is given, any financial obligations except as
                  provided in this Article 22;

         (iv)     a withdrawing Party shall pay all fines and penalties which
                  may be prescribed by the Government and all reasonable and
                  documented costs and expenses incurred by the other Parties in
                  connection with such withdrawal;

         (v)      a withdrawing Party shall not be allowed to withdraw from the
                  License and this Agreement if its interest is subject to any
                  liens, charges or encumbrances (other than (a) rents and
                  royalties due under the License or the Petroleum Law (b) the
                  ERSAN Royalty Interest (as defined in the Farmin Agreement
                  referred to in Recital A to this Agreement) and (c) a lien,
                  charge or encumbrance granted in favour of all of the other
                  parties and securing the performance of obligations under this
                  Agreement), unless the other Parties are willing to accept the
                  assignment subject to such additional liens, charges or
                  encumbrances;

         (vi)     unless the Party or Parties acquiring its interest agree to
                  accept the withdrawing Party's liabilities and obligations, a
                  withdrawing Party shall remain liable and obligated for its
                  Percentage Interest share of all expenditure accruing to the
                  Joint Account under any Program and Budget approved by the
                  Operating Committee and


                                       69
<PAGE>

                  authorized by AFE prior to the date on which notice of
                  withdrawal is given, even if the operations concerned are to
                  be implemented thereafter, provided always that this
                  sub-paragraph (vi) shall not render a withdrawing Party liable
                  for any amounts which such Party would not have been obliged
                  to pay had it not withdrawn; and

         (vii)    a withdrawing Party shall remain liable and obligated for its
                  share of all costs and obligations that in any way relate to
                  the abandonment of Joint Operations or a Sole Risk Project in
                  which such withdrawing Party participated in accordance with
                  any abandonment agreement entered into pursuant to Article 5
                  or with the provisions of this Agreement if abandonment
                  operations commence within three (3) years after the effective
                  date of withdrawal.

23.      FORCE MAJEURE

23.1     The obligations of each of the Parties hereunder, other than the
         obligations to make payment of money, shall be suspended during the
         period and to the extent that such Party is prevented or hindered from
         complying therewith by "Force Majeure" (as hereinafter defined). In
         such event, such Party shall give notice of suspension as soon as
         reasonably possible to the other Parties stating the date and extent of
         such suspension and the cause thereof. Any of the Parties whose
         obligations have been suspended as aforesaid shall resume the
         performance of such obligations as soon as reasonably possible after
         the removal of the cause and shall so notify all the other Parties.

23.2.1   In this Article 23 "Force Majeure" means any cause beyond the
         reasonable control of a Party provided that a lack of funds shall not
         constitute "Force Majeure".

24       APPLICABLE LAW AND ARBITRATION

24.1     This Agreement shall be governed by and construed in accordance with
         laws of the State of California, USA, excluding any provisions thereof
         which would require the application of the laws of any other
         jurisdiction.

24.2     Arbitration

24.2.1   All disputes arising out of or in connection with this Agreement,
         including any question regarding its existence, validity or
         termination, shall be referred to and finally resolved under the


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<PAGE>

         rules of the London Court of International Arbitration, which rules are
         deemed to be incorporated by reference to this Article.

24.2.2.  The number of arbitrators shall be one (or three if the Parties
         mutually so agree).

24.2.3   The seat or place of the arbitration shall be California, USA.

24.2.4   The language to be used in the arbitral proceedings shall be English.

24.2.5   The arbitrators' award may include compensatory damages against either
         Party, but under no circumstances shall the arbitrators be authorized
         to nor shall they award punitive damages or multiple damages against
         any Party.

24.2.6   The Parties hereby exclude any right of application or appeal to any
         court, to the extent that they may validly so agree, and in particular
         in connection with any question of law arising during the course of the
         arbitration or out of the arbitration panel.

25.      NOTICES

25.1     Manner of service

         Any notice or other communication (a "COMMUNICATION") which any Party
         may desire to give or deliver in connection with this Agreement shall
         be in writing and shall be delivered by hand or sent by fax to the
         addressee at its address or fax number and marked for the attention of
         the person set out in clause 11.3. Any such notice sent by fax shall be
         confirmed in hard copy form by post or by hand, provided that this
         shall not prevent the notice from having been effectively delivered
         upon receipt by the addressee of the relevant fax.

25.2     Time of notice

         A Communication shall be deemed to have been given and received:

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<PAGE>

         (i)      if delivered by hand, at the time of delivery; or

         (ii)     if sent by fax, on acknowledgment of the addressee's facsimile
                  receiving equipment (where such acknowledgment occurs before
                  1700 hours on the day of acknowledgment and such day is a
                  Working Day in the place of the addressee's address given
                  below) or (in any other case) on the Working Day following the
                  day of such acknowledgement.

25.3     Addresses

         The current addresses, fax numbers and, where applicable, contact names
         of the Parties for the purposes of Communications are as follows:

         AME and ERSAN:
         c/- ALADDIN MIDDLE EAST LTD
         Attn: Mr Oyman Sayer
         Sogutozu Caddesi No:23
         Balgat-Ankara*
         06520 Turkey

         Tel: +90.312.2871915 or 287 1988
         Fax:+90.312.2873357 or 287 5768

         AVENUE:
         Attn: Mr Jonathan Herzog
         15303 Ventura Blvd.,
         9th Fl. Sherman Oaks,
         CA, USA and

         Tel: +818 380 3020
         Fax:+818 380 3021

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<PAGE>

         Copied to:
         Attn: Mr Jonathan Herzog
         34-36 Punt Road,
         Windsor,
         Melbourne,
         Australia,.

         Tel: +613 9533 7800
         Fax:+613 9533 7900

         And to:
         Dr Jaap Poll
         45 Philip Road,
         Dalkeith, WA 6009
         Australia

         Tel: +61 8 9386 2045
         Fax: + 61 8 9386 2053

         A Party may change its address, fax number or contact name for the
         purpose of Communications by serving notice on the other Parties in
         accordance with this Article.

26.      MISCELLANEOUS

26.1     This Agreement shall be prepared in the English language and no
         translation into any other language shall be utilized in its
         interpretation. During the implementation of this Agreement the English
         language shall be used as working language. Without prejudice to the
         foregoing, the Parties shall arrange for the preparation of a Turkish
         translation of this Agreement solely for the purpose of submission to
         the Government.

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<PAGE>

26.2     This Agreement may be executed simultaneously in two or more
         counterparts, each of which shall be deemed an original, but all of
         which together shall constitute one and the same instrument.

26.3     All schedules referred to herein and attached hereto, including the
         Accounting Procedure, are by this reference incorporated herein as an
         integral part of this Agreement.

26.4     This Agreement shall be binding upon and ensure to the benefit of the
         Parties hereto and their successors and permitted assigns.


                                       74
<PAGE>

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first written
above.

ALADDIN MIDDLE EAST LTD.
By: /s/ Oyman Sayer
Mr Oyman Sayer
Executive Vice-President and
General Manager

ERSAN PETROL SANAYII A.S.
By: /s/ Oyman Sayer
Mr Oyman Sayer
Executive Vice-President and
General Manager

AVENUE ENERGY INC.
By: /s/ Jonathan Herzog
Mr. Jonathan Herzog
President

                                       75
<PAGE>

                                   SCHEDULE 1



                          TO JOINT OPERATING AGREEMENT

                                     BETWEEN

                             ALADDIN MIDDLE EAST LTD

                            ERSAN PETROL SANAYII A.S.

                                       AND

                               AVENUE ENERGY INC.




                              ACCOUNTING PROCEDURE

<PAGE>
                                TABLE OF CONTENTS

SCHEDULE 1 TO JOINT OPERATING AGREEMENT

SECTION                                                                    PAGE

SECTION I GENERAL PROVISIONS..................................................1
1.1           Purpose.........................................................1
1.2           Conflict........................................................1
1.3           Definitions.....................................................1
1.4           Joint Account Records and Currency Exchange.....................1
1.5           Statements and Billings.........................................2
1.6           Bank Accounts...................................................4
1.7           Payments and Advances...........................................4
1.8           Adjustments.....................................................6
1.9           Audits..........................................................7
1.10          Allocations.....................................................8
SECTION II DIRECT CHARGES.....................................................8
2.1           Licenses, Permits, Etc..........................................8
2.2           Salaries, Wages and Related Costs...............................8
2.3           Employee Relocation Costs......................................11
2.4           Offices, Camps, and Miscellaneous Facilities...................11
2.5           Material.......................................................11
2.6           Exclusively Owned Equipment and
              Facilities of Operator and Affiliates..........................12
2.7           Services.......................................................12
2.8           Insurance......................................................12
2.9           Damages and Losses to Property.................................12
2.10          Litigation and Legal Expenses..................................13
2.11          Taxes and Duties...............................................13
2.12          Other Expenditures.............................................13
SECTION III INDIRECT CHARGES.................................................14
3.1           Purpose........................................................14
3.2           Amount.........................................................14
3.3           Exclusions.....................................................14
3.4           Indirect Charge for Projects...................................15
3.5           Changes........................................................15

<PAGE>

SECTION IV ACQUISITION OF MATERIAL...........................................15
4.1           Acquisitions...................................................15
4.2           Materials Furnished by Operator................................15
4.3           Premium Prices.................................................16
4.4           Warranty of Material Furnished by Operator.....................16
SECTION V DISPOSAL OF MATERIALS..............................................17
5.1           Disposal.......................................................17
5.2           Material purchased by a Party or Affiliate.....................17
5.3           Division In Kind...............................................17
5.4           Sales to Third Parties.........................................17
SECTION VI INVENTORIES.......................................................18
6.1           Periodic Inventories - Notice and Representation...............18
6.2           Special Inventories............................................18
SECTION VII BUDGETING AND AFES...............................................18
7.1           Budget Preparation.............................................18
7.2.          Procedure for Budget Approval..................................20
7.3           Budget Approval and AFE Approval...............................20
7.4.          Sub-Division of Budgets for Approval by AFE and for Control....20
7.5.          Authorisation for Expenditure..................................21
SECTION VIII OVERRIDING PROVISIONS...........................................22
8.1           General........................................................22
8.2           Farmin and Participation Agreement.............................22
8.3           Pre-Agreement costs............................................22

<PAGE>
                                    SECTION I
                                    ---------

                               GENERAL PROVISIONS
                               ------------------

1.1      PURPOSE.

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

                  It is intended that approval of a Program and Budget and AFE's
                  as provided in the Agreement shall constitute approval of the
                  rates and allocation methods used therein to currently charge
                  the Joint Account, but subject to verification by audit at a
                  later date as provided in the Accounting Procedure.

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

1.2      CONFLICT . In the event of a conflict between the provisions of this
         Accounting Procedure and the provisions of the Agreement or of the
         Farmin and Participation Agreement, the provisions of the Agreement or,
         as the case may be, of the Farmin and Participation Agreement shall, to
         the extent of the conflict, prevail.

1.3      DEFINITIONS. The definitions contained in Article 1 of the Agreement
         shall apply to this Accounting Procedure and have the same meanings
         when used herein. Certain terms used herein are defined as follows:

         "THE AGREEMENT" shall mean the main body (Articles 1 to 26) of the
         Joint Operating Agreement to which this Accounting Procedure is a
         schedule.

         "COUNTRY OF OPERATIONS" shall mean Republic of Turkey.

         "MATERIAL" shall mean personal property (including, but not limited to,
         equipment and supplies) acquired and held for use in Joint Operations.

1.4      JOINT ACCOUNT RECORDS AND CURRENCY EXCHANGE.

         1.4.1    Operator shall at all times maintain and keep true and correct
                  records of the production and disposition of all Petroleum and
                  Natural Gas, and of all costs and expenditures under the
                  Agreement, as well as other data


                                                                               1
<PAGE>

                  necessary or proper for the settlement of accounts between the
                  Parties in connection with their rights and obligations under
                  the Agreement and to enable Parties to comply with their
                  respective applicable income tax and other laws.

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

         1.4.3    Joint Account records shall be maintained by Operator in the
                  English language and in United States of America ("U.S.")
                  currency and in such other language and currency as may be
                  required by the laws of the Country of Operations. Conversions
                  of currency shall be recorded at the rate actually experienced
                  in that conversion. Currency translations for expenditures and
                  receipts shall be recorded at the arithmetic average of the
                  buying and selling rates at the close of business on the last
                  Working Day of the preceding Month as published by the Central
                  Bank of Turkey, or if not published by the Central Bank of
                  Turkey, then by the clearing bank with whom the Parties
                  commingled Dollar denominated funds are maintained.

         1.4.4    Any currency exchange gain or losses shall be credited or
                  charged to the Joint Account, except as otherwise specified in
                  this Accounting Procedure.

         1.4.5    This Accounting Procedure shall apply, mutatis mutandis, to
                  Exclusive Operations in the same manner that it applies to
                  Joint Operations; provided, however, that the charges and
                  credits applicable to Consenting Parties shall be
                  distinguished by an Exclusive Operation Account. For the
                  purpose of determining and calculating the remuneration of the
                  Consenting Parties, including the premiums for Exclusive
                  Operations, the costs and expenditures shall be expressed in
                  U.S. currency (irrespective of the currency in which the
                  expenditure was incurred).

         1.4.6    The accrual basis for accounting shall be used in preparing
                  accounts concerning the Joint Operations.

                                                                               2
<PAGE>

1.5      STATEMENTS AND BILLINGS.

         1.5.1    Unless otherwise agreed by the Parties, Operator shall submit
                  Monthly to each Party, on or before the 10th Day of each
                  Month, statements of the costs and expenditures incurred
                  during the prior Month, indicating by appropriate
                  classification the nature thereof, the corresponding budget
                  category, and the portion of such costs charged to each of the
                  Parties.

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

                  -        advances of funds setting forth the currencies
                           received from each Party

                  -        the share of each Party in total expenditures

                  -        the current account balance of each Party

                  -        summary of costs, credits, and expenditures on a
                           current Month, Year-to-date, and inception-to-date
                           basis or other periodic basis, as agreed by Parties

                  -        details of unusual charges and credits in excess of
                           U.S. dollars five thousand (U.S.$5,000.00).

         1.5.2    Operator shall, upon request, furnish a description of the
                  accounting classifications used by it.

         1.5.3    Amounts included in the statements and billings shall be
                  expressed in U.S. currency and reconciled to the currencies
                  advanced.

         1.5.4    Each Party shall be responsible for preparing its own
                  accounting and tax reports to meet the requirements of the
                  Country of Operations and of all other countries to which it
                  may be subject. Without limiting the foregoing, each Party
                  acknowledges that it will keep its records and accounts in
                  accordance with Turkish Accounting Procedures and Fiscal
                  Procedure Law as published in the Turkish Official Gazette on
                  10.01.1961 Law Number 213. Operator, to the extent that the
                  information is reasonably available from the Joint Account
                  records, shall provide Non-Operators in a timely manner with
                  the necessary statements to facilitate the discharge of such
                  responsibility.

                                       3
<PAGE>

1.6      BANK ACCOUNTS.

         1.6.1    Operator shall open and maintain a single set of bank accounts
                  for the Joint Operations. Should there be a change in Operator
                  under the Agreement (other than pursuant to a transfer to an
                  Affiliate), then separate bank accounts shall thereafter be
                  maintained by the successor Operator. To the extent permitted
                  by applicable law and regulations, Operator will utilise
                  interest bearing accounts when possible so temporary short
                  term cash balances held pending disbursement can earn
                  interest.

         1.6.2    The bank accounts shall be denominated in Dollars and Turkish
                  Lira and any other foreign currency that Operator deems
                  necessary.

         1.6.3    Operator shall notify the Parties of the name of the bank and
                  the account numbers on opening of each account.

         1.6.4    The accounts shall be established in the Republic of Turkey
                  and/or any other country the Operating Committee may deem
                  appropriate.

         1.6.5    Operator may not commingle in any of the accounts its own
                  funds.

1.7      PAYMENTS AND ADVANCES.

         1.7.1    Not less than ten (10) days prior to the beginning of each
                  Month, Operator shall furnish the Parties with a Cash Call,
                  requesting an Advance or Advances for such Month and showing
                  estimated Cash Calls for the two (2) Months immediately
                  following that Month. The amount requested in a Cash Call
                  shall be Operator's estimate of the amount required from the
                  Parties to enable Operator to defray the net cash payments,
                  being cash payments less cash receipts as adjusted for cash on
                  hand, due in the relevant Month under obligations properly
                  incurred by Operator in connection with the Joint Operations
                  and in accordance with the Agreement.

         1.7.2    Each Cash Call shall be made in writing and delivered to all
                  Non-Operators not less than fifteen (15) Days before the
                  payment due date and shall be accompanied by a statement
                  indicating the Budget and, where applicable, AFEs for which
                  the funds are required and the amounts attributed to each
                  major budget heading for which the funds are required,
                  analysed by Budget and, where applicable, AFE. The due date
                  for payment of such Advances shall be set by Operator but
                  shall be no sooner than the first Day of the Month for which
                  the Advances are required. All Advances shall be made


                                                                               4
<PAGE>

                  without bank charges. Any charges related to receipt of
                  Advances from a Non-Operator shall be borne by that
                  Non-Operator.

         1.7.3    Each Non-Operator shall wire transfer its share of the full
                  amount of each such cash call to Operator on or before the due
                  date, in the currencies requested, and to a bank account
                  established under Section 1.6 designated by Operator and
                  denominated in the relevant currency. If currency provided by
                  a Non Operator is other than as requested, the entire cost of
                  converting to the requested currency shall be charged to that
                  Non-Operator.

         1.7.4    Notwithstanding the provisions of Section 1.7.2, should
                  Operator be required to pay any sums of money for the Joint
                  Operations which were unforeseen at the time of providing the
                  Non-Operators with said estimates of its requirements and
                  which have been authorised by the Parties in an approved
                  Budget and, if applicable, an AFE, or are incurred pursuant to
                  and in accordance with Article 5.8 of the Agreement, Operator
                  may make a written request of the Non-Operators for special
                  advances covering the Non-Operators' share of such payments.
                  Each such Non-Operator shall make its proportional special
                  advances within ten (10) Days after receipt of such notice.

         1.7.5    If a Non-Operator's advances exceed its share of cash
                  expenditures, the next succeeding cash advance requirements,
                  after such determination, shall be reduced accordingly. A
                  Non-Operator may request that its excess advances be refunded.
                  Operator shall make such refund within ten (10) Days after
                  receipt of the Non-Operator's request provided that the amount
                  is in excess of the requesting Non-Operator's share of the
                  cash advance requirements for the succeeding Month.

         1.7.6    If Non-Operator's advances are less than its share of cash
                  expenditures, the deficiency shall, at Operator's option, be
                  added to subsequent cash advance requirements or be paid by
                  Non-Operator within ten (10) Days following the receipt of
                  Operator's billing to Non-Operator for such deficiency.

         1.7.7    If, under the provisions of the Agreement, Operator is
                  required to segregate funds received from the Parties, any
                  interest received on such funds shall be applied against the
                  next succeeding cash call or, if directed by the Operating
                  Committee, distributed quarterly. The interest thus received
                  shall be allocated to the Parties on an equitable basis taking
                  into


                                                                               5
<PAGE>

                  consideration date of funding by each Party to the accounts in
                  proportion to the total funding into the account. A Monthly
                  statement summarizing receipts, disbursements, transfers to
                  each joint bank account and beginning and ending balances
                  thereof shall be provided by Operator to the Parties. Any
                  interest received by Operator from interest-bearing accounts
                  containing commingled funds received from the Parties shall be
                  credited to the Parties in accordance with the allocation
                  procedure as set forth above.

         1.7.8    Subject to governmental regulation, Operator shall have the
                  right, at any time and from time to time, to convert the funds
                  advanced or any part thereof to other currencies to the extent
                  that such currencies are then required for operations. The
                  cost of any such conversion shall be charged to the Joint
                  Account.

         1.7.9    Operator shall endeavor to maintain funds held for the Joint
                  Account in bank accounts at a level consistent with that
                  required for the prudent conduct of Joint Operations.

         1.7.10   If under the Agreement, Operator is required to segregate
                  funds received from or for the Joint Account, the provisions
                  under this Section 1.7 for payments and Advances by
                  Non-Operators shall apply also to Operator.

1.8      ADJUSTMENTS. Payments of any advances or billings shall not prejudice
         the right of any Non-Operator to protest or question the correctness
         thereof; provided, however, all bills and statements rendered to
         Non-Operators by Operator during any Year shall conclusively be
         presumed to be true and correct after twenty-four (24) Months following
         the end of such Year, unless within the said twenty-four (24) Month
         period a Non-Operator takes written exception thereto and makes claim
         on Operator for adjustment. Failure on the part of a Non-Operator to
         make claim on Operator for adjustment within such period shall
         establish the correctness thereof and preclude the filing of exceptions
         thereto or making claims for adjustment thereon. No adjustment
         favorable to Operator shall be made unless it is made within the same
         prescribed period. The provisions of this paragraph shall not prevent
         adjustments resulting from a physical inventory of the Property as
         provided for in Section VI. Operator shall be allowed to make
         adjustments to the Joint Account after such twenty-four (24) Month
         period if these adjustments result from audit exceptions outside of
         this Agreement, third party claims, or Government requirements. Any
         such adjustments shall be subject to audit within the time period
         specified in Section 1.9.1.

                                                                               6
<PAGE>

1.9      AUDITS.

         1.9.1    A Non-Operator, upon at least sixty (60) Days advance notice
                  in writing to Operator and all other Non-Operators, shall have
                  the right to audit the Joint Accounts and records of Operator
                  relating to the accounting hereunder for any Year within the
                  twenty-four (24) Month period following the end of such Year.
                  The cost of each such audit shall be borne by Non-Operators
                  conducting the audit. It is provided, however, that
                  Non-Operators must take written exception to and make claim
                  upon the Operator for all discrepancies disclosed by said
                  audit within said twenty-four (24) Month period. Where there
                  are two or more Non-Operators, the Non-Operators shall make
                  every reasonable effort to conduct joint or simultaneous
                  audits in a manner which will result in a minimum of
                  inconvenience to the Operator. Operator and Non-Operators
                  shall make every effort to resolve any claim resulting from an
                  audit within a reasonable period of time.

         1.9.2    In connection with any audit under Section 1.9.1, a
                  Non-Operator may audit the records of an Affiliate of Operator
                  relating to that Affiliate's charges. The provisions of this
                  Accounting Procedure shall apply mutatis mutandis to such
                  audit. Operator shall procure its relevant Affiliates
                  facilitat6e any such audit.

         1.9.3    At the conclusion of each audit, each Party shall endeavour to
                  settle outstanding matters with Operator and shall circulate a
                  written report concerning unresolved items to all the Parties
                  within two (2) Months of the conclusion of each audit. The
                  report shall include all claims arising from such audit
                  together with comments pertinent to the operation of the
                  accounts and records. Operator shall reply to the report in
                  writing as soon as possible and in any event not later than
                  two (2) Months following receipt of the report. Should the
                  Parties (or any of them) consider that the report or reply
                  requires further investigation of any item therein, such
                  Parties shall have the right to conduct further investigation
                  in relation to such matter notwithstanding that the said
                  period of twenty-four (24) Months may have expired. Such
                  further investigation shall be commenced within ninety (90)
                  days and be concluded within one hundred and twenty (120) days
                  of the receipt of such report or reply.

         1.9.4    All adjustments resulting from an audit agreed between
                  Operator and the Parties conducting the audit shall be
                  rectified promptly in the Joint Account


                                                                               7
<PAGE>

                  by Operator and reported to the other Parties. If any dispute
                  shall arise in connection with an audit, it shall be referred
                  to the Operating Committee. If Operator and such Parties are
                  unable to reach final agreement on a proposed audit adjustment
                  and the amount in dispute is in excess of $20,000, and either
                  Operator or such Parties so desire, such adjustment may be
                  referred by the Operating Committee to an internationally
                  recognised independent firm of public accountants selected by
                  such other Parties and approved by Operator, such approval not
                  to be unreasonably withheld. The decision of such firm of
                  public accountants shall be final and binding upon the
                  Parties.

         1.9.5    Any information obtained by a Non-Operator under the
                  provisions of this Section 1.9 which does not relate directly
                  to the Joint Operations shall be kept confidential and shall
                  not be disclosed to any party, except as would otherwise be
                  permitted by Article 17 of the Agreement.

         1.9.6    In the event that the Operator is required by law to employ a
                  public accounting firm to audit the Joint Account and records
                  of Operator relating to the accounting hereunder, the cost
                  thereof shall be a charge against the Joint Account, and a
                  copy of the audit shall be furnished to each Party.

1.10     ALLOCATIONS. If it becomes necessary to allocate any costs or
         expenditures to or between Joint Operations and any other operations,
         such allocation shall be made on an equitable basis. Upon request,
         Operator shall furnish a description of its allocation procedures
         pertaining to these costs and expenditures.

                                   SECTION II
                                   ----------

                                 DIRECT CHARGES
                                 --------------

Subject to the Agreement, Operator shall charge the Joint Account with all costs
and expenditures incurred after the date of the Agreement in connection with
Joint Operations. Charges for services normally provided by an operator which
are provided by Operator's Affiliates shall reflect the cost to the Affiliate,
excluding profit, for performing such services, except as otherwise provided in
Section 2.6.

The costs and expenditures shall be recorded as required for the settlement of
accounts between the Parties hereto in connection with the rights and
obligations under this Agreement and for purposes of complying with the tax laws
of the Country of Operations and of such other


                                                                               8
<PAGE>

countries to which any of the Parties may be subject. Without in any way
limiting the generality of the foregoing, chargeable costs and expenditures
shall include:

2.1      LICENSES, PERMITS, ETC. All costs, if any, attributable to the
         acquisition, maintenance, renewal or relinquishment of licenses,
         permits, contractual and/or surface rights acquired for Joint
         Operations, when paid by Operator in accordance with the provisions of
         the Agreement provided that no such amount shall be charged to the
         Joint Account where payment of that amount, or of an amount in lieu
         thereof, is provided for in clause 6.5 of the Farmin and Participation
         Agreement.

2.2      SALARIES, WAGES AND RELATED COSTS.

         2.2.1    Costs related to the employees of Operator and its Affiliates
                  in the Country of Operations directly engaged in Joint
                  Operations whether temporarily or permanently assigned, as
                  more particularly set out below. For the avoidance of doubt,
                  costs related to any such employees shall not be charged to
                  the Joint Account to the extent they relate to activities of
                  the Operator or its Affiliates carried out other than in
                  pursuance of the duties of the Operator under the Agreement
                  (e.g. where the Operator or its Affiliate are acting as
                  contractor for the Parties in relation to drilling
                  operations).

         2.2.2    Salaries and wages, including everything constituting the
                  employees' total compensation. To the extent not included in
                  salaries and wages, the Joint Account shall also be charged
                  with the cost to Operator of holiday, vacation, sickness,
                  disability benefits, living and housing allowances, travel
                  time, bonuses, and other customary allowances applicable to
                  the salaries and wages chargeable hereunder, as well as costs
                  to Operator for employee benefits, including but not limited
                  to employee group life insurance, group medical insurance,
                  hospitalization, retirement, and other benefit plans of a like
                  nature applicable to labor costs of Operator. Operator's
                  employees participating in Country of Operations benefit plans
                  may be charged at a percentage rate to reflect payments or
                  accruals made by Operator applicable to such employees. Such
                  accruals for Country of Operations benefit plans shall not be
                  paid by Non-Operators, unless otherwise approved by the
                  Operating Committee, until the same are due and payable to the
                  employee, upon withdrawal of a Party pursuant to the
                  Agreement, or upon termination of the Agreement, whichever
                  occurs first.

                                                                               9
<PAGE>

         2.2.3    Expenditures or contributions made pursuant to assessments
                  imposed by governmental authority for payments with respect
                  thereto or on account of such employees.

         2.2.4    Salaries and wages charged in accordance with Operator's usual
                  practice, when and as paid or accrued, or on a basis of the
                  Operator's average cost per employee for each job category;
                  and the rates to be charged shall be reviewed at least
                  annually. In determining the average cost per employee for
                  each job category, expatriate and national employee salaries
                  and wages shall be calculated separately. During a given
                  period of time it is understood that some costs for salaries
                  and wages may be charged on an actual basis while the
                  remaining costs for salaries and wages are charged at a rate
                  based upon the above described average cost.

         2.2.5    Reasonable expenses (including related travel costs) of those
                  employees whose salaries and wages are chargeable to the Joint
                  Account under Section 2.2.1 of this Section II and for which
                  expenses the employees are reimbursed under the usual practice
                  of Operator.

         2.2.6    All personnel who are not engaged exclusively on the Joint
                  Operations and are under the direct control of Operator or its
                  Affiliates will maintain time sheets for the purpose of
                  charging salary and related benefits to the Joint Account.
                  Time sheets will record time worked on the Joint Operations
                  and all other operations whether such personnel are engaged
                  full time or part time on the Joint Operations and will show
                  the time worked on the various projects and other
                  classifications of cost to enable personnel costs to be shown
                  separately for budget and cost control purposes.

                  Indirect time such as annual holidays, public holidays,
                  sickness, staff training, general supervisory duties, general
                  administration, and other like items shall be allocated both
                  to Joint Operations and to other operations in the same ratio
                  as direct time writing.

         2.2.7    The amount to be charged to the Joint Account for each
                  employee referred to in Section 2.2.1 shall be the proportion
                  of Operator's or any of its Affiliates' actual cost of
                  salaries and related benefits for each such person that the
                  time worked by such person on the Joint Operations including
                  indirect time allocation bears to the total time worked by
                  such person as shown on the time sheets, provided that
                  payments in respect of retirement


                                                                              10
<PAGE>

                  and severance and other like items shall be allocated
                  equitably to the Joint Operations and other operations of
                  Operator and its Affiliates which have benefited from the
                  services of the staff involved.

2.3      EMPLOYEE RELOCATION COSTS.

         2.3.1    Except as provided in Section 2.3.3, Operator's cost of
                  employees' relocation to or from the License Area vicinity or
                  location where the employees will reside or work, whether
                  permanently or temporarily assigned to the Joint Operations.
                  If such employee works on other activities in addition to
                  Joint Operations, such relocation costs shall be allocated on
                  an equitable basis.

         2.3.2    Such relocation costs shall include transportation of
                  employees, families, personal and household effects of the
                  employee and family, transit expenses, and all other related
                  costs in accordance with Operator's usual practice.

         2.3.3    Relocation costs from the vicinity of the License Area to
                  another location classified as a foreign location by Operator
                  shall not be chargeable to the Joint Account unless such
                  foreign location is the point of origin of the employee.

2.4      OFFICES, CAMPS, AND MISCELLANEOUS FACILITIES. Cost of maintaining any
         offices, sub-offices, camps, warehouses, housing, and other facilities
         of the Operator and/or Affiliates directly serving the Joint
         Operations. If such facilities serve operations in addition to the
         Joint Operations the costs shall be allocated to the properties served
         on an equitable basis.

2.5.     MATERIAL. Cost, net of discounts taken by Operator, of Material
         purchased or furnished by Operator as specified in Section IV of this
         Accounting Procedure. So far as it is reasonably practical and
         consistent with efficient and economical operation, only such Material
         shall be purchased for, and the cost thereof charged to, the Joint
         Account as may be required for immediate use.

2.6      EXCLUSIVELY OWNED EQUIPMENT AND FACILITIES OF OPERATOR AND AFFILIATES.
         Charges for exclusively owned equipment, facilities, and utilities of
         Operator and its Affiliates at rates not to exceed the average
         commercial rates of non-affiliated third parties then prevailing for
         like equipment, facilities, and utilities for use in the area where the
         same are used hereunder. On request, Operator shall furnish


                                                                              11
<PAGE>

         Non-Operators a list of rates and the basis of application. Such rates
         shall be revised from time to time if found to be either excessive or
         insufficient, but not more than once every six months.

         Drilling tools and other equipment lost in the hole or damaged beyond
         repair may be charged at replacement cost less depreciation plus
         transportation costs to deliver like equipment to the location where
         used.

2.7      SERVICES. The cost of services provided by third parties including
         Affiliates of Operator. Such charges for services by Operator's
         Affiliates shall not exceed those currently prevailing if performed by
         non-affiliated third parties, considering quality and availability of
         services.

2.8      INSURANCE. Premiums paid for insurance required by law or the Agreement
         to be carried for the benefit of the Joint Operations.

2.9      DAMAGES AND LOSSES TO PROPERTY.

         2.9.1    All costs or expenditures necessary to replace or repair
                  damages or losses incurred by fire, flood, storm, theft,
                  accident, or any other cause. Operator shall furnish
                  Non-Operators written notice of damages or losses incurred in
                  excess of twenty thousand U.S. dollars (U.S. $20,000.00) as
                  soon as practical after report of the same has been received
                  by Operator. All losses in excess of five thousand U.S.
                  dollars (U.S. $5,000.00) shall be listed separately in the
                  monthly statement of costs and expenditures.

         2.9.2    Credits for settlements received from insurance carried for
                  the benefit of Joint Operations and from others for losses or
                  damages to Joint Property or Materials. Each Party shall be
                  credited with its Participating Interest share thereof except
                  where such receipts are derived from insurance purchased by
                  Operator for less than all Parties in which event such
                  proceeds shall be credited to those Parties for whom the
                  insurance was purchased in the proportion of their respective
                  contributions toward the insurance coverage.

         2.9.3    Expenditures incurred in the settlement of all losses, claims,
                  damages, judgments, and other expenses for the account of
                  Joint Operations.

2.10     LITIGATION AND LEGAL EXPENSES. The costs and expenses of litigation and
         legal services necessary for the protection of the Joint Operations
         under this Agreement as follows:

         2.10.1   Legal services necessary or expedient for the protection of
                  the Joint Operations, and all costs and expenses of
                  litigation, arbitration or other alternative dispute
                  resolution procedure, including reasonable attorneys'


                                                                              12
<PAGE>

                  fees and expenses, together with all judgments obtained
                  against the Parties or any of them arising from the Joint
                  Operations.

         2.10.2   If the Parties shall so agree, actions or claims affecting the
                  Joint Operations may be handled by the legal staff of one or
                  any of the Parties; and a charge commensurate with the
                  reasonable costs of providing and furnishing such services
                  rendered may be made by the Party providing such service to
                  Operator for the Joint Account, but no such charges shall be
                  made until approved by the Parties.

2.11     TAXES AND DUTIES. All taxes, duties, assessments and governmental
         charges, of every kind and nature, assessed or levied upon or in
         connection with the Joint Operations, other than any that are measured
         by or based upon the revenues, income and net worth of a Party.

         If Operator or an Affiliate is subject to income or withholding tax as
         a result of services performed at cost for the operations under the
         Agreement, its charges for such services may be increased by the amount
         of such taxes incurred (grossed up).

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

                                   SECTION III
                                   -----------

                                INDIRECT CHARGES
                                ----------------

3.1      PURPOSE. Operator shall charge the Joint Account monthly for the cost
         of indirect services and related office costs of Operator and its
         Affiliates not otherwise provided for in this Accounting Procedure.
         These costs are such that it is not practical to identify or associate
         them with specific projects but are for services which provide Operator
         with needed and necessary resources which Operator requires and provide
         a real benefit to Joint Operations. No cost or expenditure included
         under Section II shall be included or duplicated under this Section
         III.

3.2      AMOUNT. The charge for the period beginning with the Year through the
         end of the period covered by Operator's invoice ("Year-to-Date") under
         Section 3.1 above shall be a percentage of the Year-to-Date
         expenditures, calculated on the following scale (U.S. Dollars):

                                                                              13
<PAGE>
                  Annual Expenditures

                  $0 to $1,000,000 of expenditures =  5 %

                  Next $1,500,000 of expenditures =  3 %

                  Next $3,500,000 of expenditures = 2 %

                  Excess above $6,000,000 of expenditures = 1%

         A minimum amount of U.S.$2,500 shall be assessed each month.

         Notwithstanding the foregoing, the indirect rates and related
         calculation method for development operations and for production
         operations shall be agreed upon by the Parties prior to the submission
         of the first annual Budget for those phases of operations.

3.3      EXCLUSIONS. The expenditures used to calculate the monthly indirect
         charge shall not include expenditures incurred or relating to a period
         or time prior to the date of the Agreement, the indirect charge,
         rentals on surface rights acquired and maintained for the Joint
         Account, any payments under the Farmin and Participation Agreement or
         in respect of the works and operations referred to in clauses 3 to 6
         (both inclusive) of that agreement, guarantee deposits, pipeline
         tariffs, concession acquisition costs, bonuses paid in accordance with
         the License, royalties and taxes paid under the License, expenditures
         associated with major construction projects for which a separate
         indirect charge is established hereunder, payments to third parties in
         settlement of claims, and other similar items.

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

3.4      INDIRECT CHARGE FOR PROJECTS. As to major construction projects (such
         as, but not limited to, pipelines, gas reprocessing and processing
         plants, and final loading and terminalling facilities) when the
         estimated cost of each project amounts to more than one hundred
         thousand dollars (U.S. $100,000.00) a separate indirect charge for such
         project shall be set by the Operating Committee at the time of approval
         of the project.

3.5      CHANGES. The indirect charges provided for in this Section III may be
         amended periodically by mutual agreement between the Parties if, in
         practice, these charges are found to be insufficient or excessive.

                                                                              14
<PAGE>
                                   SECTION IV
                                   ----------

                             ACQUISITION OF MATERIAL
                             -----------------------

4.1      ACQUISITIONS. Materials purchased for the Joint Account shall be
         charged at net cost paid by the Operator. The price of Materials
         purchased shall include, but shall not be limited to export broker's
         fees, insurance, transportation charges, loading and unloading fees,
         import duties, license fees, and demurrage (retention charges)
         associated with the procurement of Materials, the purchasing fee
         provided for in Section 2.5.1, and applicable taxes, less all discounts
         taken.

4.2      MATERIALS FURNISHED BY OPERATOR. Materials required for operations
         shall be purchased for direct charge to the Joint Account whenever
         practicable, except the Operator may furnish such Materials from its
         stock under the following conditions:

         4.2.1    NEW MATERIALS (CONDITION "1"). New Materials transferred from
                  the warehouse or other properties of Operator shall be priced
                  at net cost determined in accordance with Section 4.1 above,
                  as if Operator had purchased such new Material just prior to
                  its transfer.

         Such net costs shall in no event exceed the then current market price.

         4.2.2    USED MATERIALS (CONDITIONS "2" AND "3").

                  4.2.2.1  Material which is in sound and serviceable condition
                           and suitable for use without repair or reconditioning
                           shall be classed as Condition "2" and priced at
                           seventy-five percent (75%) of its original issue
                           price.

                  4.2.2.2  Materials not meeting the requirements of Section
                           4.2.2.1 above, but which can be made suitable for use
                           after being repaired or reconditioned, shall be
                           classed as Condition "3" and priced at fifty percent
                           (50%) of its original issue price. The cost of
                           reconditioning shall also be charged to the Joint
                           Account provided the Condition "3" price, plus cost
                           of reconditioning, does not exceed the Condition "2"
                           price; and provided that Material so classified meet
                           the requirements for Condition "2" Material upon
                           being repaired or reconditioned.

                  4.2.2.3  Material which cannot be classified as Condition "2"
                           or Condition "3", shall be priced at a value
                           commensurate with its use.

                                                                              15
<PAGE>

                  4.2.2.4  Tanks, derricks, buildings, and other items of
                           Material involving erection costs, if transferred in
                           knocked-down condition, shall be graded as to
                           condition as provided in this Section 4.2.2 of
                           Section IV, and priced on the basis of knocked-down
                           price of like new Material.

                  4.2.2.5  Material including drill pipe, casing and tubing,
                           which is no longer useable for its original purpose
                           but is useable for some other purpose, shall be
                           graded as to condition as provided in this Section
                           4.2.2 of Section IV. Such Material shall be priced on
                           the basis of the current price of items normally used
                           for such other purpose if sold to third parties.

4.3      PREMIUM PRICES. Whenever Material is not readily obtainable at prices
         specified in Sections 4.1 and 4.2 of this Section IV because of
         national emergencies, strikes or other unusual causes over which
         Operator has no control, Operator may charge the Joint Account for the
         required Material at Operator's actual cost incurred procuring such
         Material, in making it suitable for use, and moving it to the License
         Area.

4.4      WARRANTY OF MATERIAL FURNISHED BY OPERATOR. Operator does not warrant
         the Material furnished. In case of defective Material, credit shall not
         be passed to the Joint Account until adjustment has been received by
         Operator from the manufacturers or their agents.

                                                                              16
<PAGE>
                                    SECTION V
                                    ---------

                              DISPOSAL OF MATERIALS
                              ---------------------

5.1      DISPOSAL. Operator shall be under no obligation to purchase the
         interest of Non-Operators in new or used surplus Materials. Operator
         shall have the right to dispose of Materials but shall advise and
         secure prior agreement of the Operating Committee of any proposed
         disposition of Materials having an original cost to the Joint Account
         either individually or in the aggregate of twenty-five thousand U.S.
         Dollars (U.S. $25,000.00) or more. When Joint Operations are relieved
         of Material charged to the Joint Account, Operator shall advise each
         Non-Operator of the original cost of such Material to the Joint Account
         so that the Parties may eliminate such costs from their asset records.
         Credits for Material sold by Operator shall be made to the Joint
         Account in the month in which payment is received for the Material. Any
         Material sold or disposed of under this Section shall be on an "as is,
         where is" basis without guarantees or warranties of any kind or nature.
         Costs and expenditures incurred by Operator in the disposition of
         Materials shall be charged to the Joint Account.

5.2      MATERIAL PURCHASED BY A PARTY OR AFFILIATE. Material purchased from the
         Joint Property by a Party or an Affiliate thereof shall be credited by
         Operator to the Joint Account, with new Material valued in the same
         manner as new Material under Section 4.2.1 and used Material valued in
         the same manner as used Material under Section 4.2.2, unless otherwise
         agreed by the Operating Committee.

5.3      DIVISION IN KIND. Division of Material in kind, if made between the
         Parties, shall be in proportion to their respective interests in such
         Material. Each Party will thereupon be charged individually with the
         value (determined in accordance with the procedure set forth in Section
         5.2) of the Material received or receivable by it.

5.4      SALES TO THIRD PARTIES. Material purchased from the Joint Property by
         third parties shall be credited by Operator to the Joint Account at the
         net amount collected by Operator from the buyer. If the sales price is
         less than that determined in accordance with the procedure set forth in
         Section 5.2, then approval by the Operating Committee shall be required
         prior to the sale. Any claims by the buyer for defective materials or
         otherwise shall be charged back to the Joint Account if and when paid
         by Operator.

                                                                              17
<PAGE>
                                   SECTION VI
                                   ----------

                                   INVENTORIES
                                   -----------

6.1      PERIODIC INVENTORIES - NOTICE AND REPRESENTATION. At reasonable
         intervals, but at least annually, inventories shall be taken by
         Operator of all Material on which detailed accounting records are
         normally maintained. The expense of conducting periodic inventories
         shall be charged to the Joint Account. Operator shall give
         Non-Operators written notice at least thirty Days (30) in advance of
         its intention to take inventory, and Non-Operators, at their sole cost
         and expense, shall each be entitled to have a representative present.
         The failure of any Non-Operator to be represented at such inventory
         shall bind such Non-Operator to accept the inventory taken by Operator,
         who shall in that event furnish each Non-Operator with a reconciliation
         of overages and shortages. Inventory adjustments to the Joint Account
         shall be made for overages and shortages. Any adjustment equivalent to
         twenty thousand U.S. Dollars (U.S.$20,000.00) or more shall be brought
         to the attention of the Operating Committee.

6.2      SPECIAL INVENTORIES. Whenever there is a sale or change of interest in
         the Agreement, a special inventory may be taken by the Operator
         provided the seller and/or purchaser of such interest agrees to bear
         all of the expense thereof. In such cases, both the seller and the
         purchaser shall be entitled to be represented and shall be governed by
         the inventory so taken.

                                   SECTION VII
                                   -----------

                               BUDGETING AND AFES
                               ------------------

7.1      BUDGET PREPARATION.

         7.1.1    EXPLORATION AND APPRAISAL BUDGETS. Each exploration and each
                  appraisal Budget required under Articles 9 and 10 of the
                  Agreement shall include:

                  (i)      an estimate in Dollars of the total cost of the
                           relevant Program and a sub-division of such total
                           into each main classification and sub-classification
                           of cost. The estimates for each such classification
                           and sub-classification of cost shall be based on an
                           Accrual Basis for each of the Quarters of the
                           relevant Year or Years;

                  (ii)     a schedule of estimated Joint Property warehouse
                           stock movement;

                  (iii)    the amount of any escalation allowance;

                  (iv)     the amount of any contingency allowance;

                                                                              18
<PAGE>

                  (v)      a statement indicating which budget items, if any,
                           are contingent upon the outcome of other budget items
                           such as the testing of Exploration Wells and related
                           salaries and overheads;

                  (vi)     an estimate of the timing and value of each AFE and
                           commitment (being contracts or other orders placed or
                           goods purchased) to be made under the Budget;

                  (vii)    an estimate of the total number of man months.

7.1.2    DEVELOPMENT BUDGETS. Each development Budget required under Article 11
         of the Agreement shall include:

                  (i)      an estimate on an annual basis in Dollars of the
                           total cost of the development and a sub-division of
                           such total into each main classification and
                           sub-classification of cost. The estimate for each
                           such classification and sub-classification of cost
                           shall be phased on an Accrual Basis and shall be
                           shown by Quarter;

                  (ii)     the items detailed in paragraphs (ii) to (v)
                           inclusive of Section 7.1.1;

                  (iii)    an estimate of the timing and value of the AFEs and
                           commitments to be made under the Budget identifying
                           the total commitments under each main classification
                           of cost in each Quarter of the first Year and the
                           subsequent Year. Operator shall endeavour to provide
                           the timing and estimated commitment for currencies
                           other than Dollars (with the exchange rate used)
                           where such commitment is known;

                  (iv)     an estimate of the total number of man months.

7.1.3    PRODUCTION BUDGETS. Each production Budget required under Article 12 of
         the Agreement shall be divided into the following sections:

                  (i)      Capital Expenditure

                  (ii)     operating expenditure

                  (iii)    extraordinary expenditure.

                  Each production Budget shall include the items detailed in
                  paragraphs (i) to (vi) inclusive of this Section 7.1.1, and an
                  estimate of the cost to complete projects commencing in the
                  respective Budget year.

                                                                              19
<PAGE>

7.2.     PROCEDURE FOR BUDGET APPROVAL. The procedure for approval of
         exploration, appraisal, development and production Budgets is provided
         in Articles 9, 10, 11 and 12 of the Agreement.

7.3      BUDGET APPROVAL AND AFE APPROVAL. Approval of Budgets for exploration,
         appraisal, development and production provides Operator with general
         approval of the proposals but does not, subject to Article 5.8 of the
         Agreement, permit Operator to enter into commitments or incur any
         expenditures for any item included in the said Budgets for which an AFE
         is required in accordance with the provisions of the Agreement until
         such AFE is approved by the Operating Committee or deemed to be
         approved as hereinafter provided.

7.4.     SUB-DIVISION OF BUDGETS FOR APPROVAL BY AFE AND FOR CONTROL.

         7.4.1    Exploration, appraisal, development and production Budgets
                  shall be divided into separately numbered classifications and
                  sub-classifications of cost to provide a breakdown of the
                  project into work elements in sufficient detail to allow
                  adequate cost allocation and control. Where individual items
                  of expenditure are attributable to more than one such
                  classification or sub-classification such items shall be
                  apportioned on an equitable basis.

         7.4.2    Notwithstanding the above to the extent that such AFE's are
                  required in accordance with the Agreement AFE's for wells
                  included in an exploration or an appraisal Budget shall be
                  issued on a dry hole basis. Estimated testing costs will be
                  provided with such AFE's for information and if testing is
                  required approval will be sought in a telex detailing the
                  testing program. Where an AFE is required this will be
                  followed as soon as possible with a formal AFE for testing.

         7.4.3    Operator may not, without the prior approval of the Operating
                  Committee, transfer sums over US$100,000 between Budget
                  classifications or sub-classifications after Budgets have been
                  approved.

7.5.     AUTHORISATION FOR EXPENDITURE.

         7.5.1    Operator shall request approval of an AFE in accordance with
                  Articles 9, 10, 11 or 12 of the Agreement at a time when the
                  main details of the relevant commitment or expenditure can be
                  ascertained but consistent with giving the Non-Operators
                  twenty-eight (28) days advance notice of the date by which
                  approval is required.

                                                                              20
<PAGE>

                  If any Non-Operator shall not after fourteen (14) days from
                  the submission of the AFE have given notice to Operator that
                  it approves and votes in favour of the AFE or that it requires
                  such AFE to be formally approved at a meeting of the Operating
                  Committee Operator shall forthwith telex such Non-Operator
                  reminding it of the date by which approval of the AFE is
                  required. An AFE within an approved Program and Budget shall
                  be deemed to be approved by the Operating Committee unless
                  within 28 days of its submission to the Non-Operators any
                  Non-Operator gives notice to Operator that it requires such
                  AFE to be formally approved at a meeting of the Operating
                  Committee.

                  In circumstances beyond its control Operator may reduce the
                  period of twenty-eight (28) days advance notice to such period
                  as may be reasonable. Operator will inform the Non-Operators
                  of such shorter period and the reason therefore when it
                  submits the AFE.

         7.5.2    The AFE will describe the project, state the justification for
                  the items of expenditure, give the estimate of the items of
                  expenditure necessary to complete the project, and give the
                  estimated phasings of such expenditures. Necessary further
                  details to support the estimated cost of the project will be
                  included as attachments to the extent reasonably required by
                  the Non-Operators.

                  Any Party which has voted in favour of an AFE shall sign an
                  AFE Form indicating its authorisation thereof. After approval
                  Operator shall promptly notify the Parties indicating the
                  identity of those Parties whose authorisation have formed part
                  of such approval.

                  Operator shall notify the Parties of a deemed approval of an
                  AFE as soon as such has become effective.

         7.5.3    Approval, or where permitted deemed approval, of an AFE
                  constitutes authority for Operator to enter into any
                  commitment or incur any expenditure properly made in relation
                  to any approved AFE, provided that the whether or not payments
                  in respect of such commitments and expenditure will result in
                  the final cost of such commitments and expenditure exceeding
                  the estimated cost of such AFE, provided that if at any time
                  it becomes apparent that:

                                                                              21
<PAGE>

                  (i)      commitments yet to be made will or are likely to
                           cause the estimated cost to be exceeded; or

                  (ii)     expenditure to be incurred under commitments already
                           made will cause the estimated cost to be exceeded by
                           more than 10% or twenty thousand Dollars ($20,000)
                           (whichever is the lower),

                  Operator shall immediately notify the Parties and shall
                  without delay prepare a revised AFE giving the reasons for the
                  increased cost, and shall request approval of the revised AFE
                  and shall not enter into any new commitment in relation to
                  such AFE until the revised AFE has been approved, or where
                  permitted deemed to be approved.

                                  SECTION VIII
                                  ------------

                              OVERRIDING PROVISIONS
                              ---------------------

8.1      GENERAL. Sections 8.2 and 8.3 apply notwithstanding any provision of
         this Accounting Procedure to the contrary.

8.2      FARMIN AND PARTICIPATION AGREEMENT. No amount shall be payable by
         AVENUE under the Agreement or this Accounting Procedure for or in
         connection with the works and operations the subject of clauses 3.2 and
         3.4 of the Farmin and Participation Agreement.

8.3      PRE-AGREEMENT COSTS. No amount shall be payable by AVENUE under the
         Agreement or this Accounting Procedure in relation to costs,
         expenditures or liabilities incurred or relating to a period or time
         prior to the date of the Agreement, all of which shall be borne by AME
         and ERSAN, as between them equally or in such other proportions as they
         may agree.

                       * * * * * * * * * * * * * * * * * *

                                                                              22


</TEXT>
</DOCUMENT>
