SHAREHOLDERS AGREEMENT

Shareholder Agreement

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CANARGO ENERGY CORP | TETHYS PETROLEUM LIMITED

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Title: SHAREHOLDERS AGREEMENT
Date: 3/15/2007
Industry: Oil and Gas Operations Sector: Energy

SHAREHOLDERS AGREEMENT, Parties: canargo energy corp , tethys petroleum limited

Exhibit 10(34)

(1) CANARGO LIMITED

(2) THE INVESTORS

and

(3) TETHYS PETROLEUM LIMITED

SHAREHOLDERS AGREEMENT

TABLE OF CONTENTS


Clause	Heading	Page No

1	DEFINITIONS AND INTERPRETATION		3
1.1	Definitions		3
1.2	Interpretation		6
1.3	General references		6

2	CONDITIONS PRECEDENT		6

3	INVESTMENT		7
3.1	Completion		7
3.2	Condition subsequent		7

4	WARRANTIES		7
4.1	Warranties by each Party		7
4.2	Warranties by CanArgo and the Company		7
4.3	Warranties by Investors		7

5	AGREED BUSINESS CONTROLS		7
5.1	Positive undertakings		7
5.2	Negative undertakings		8

6	CONDUCT OF THE BUSINESS		8

7	EXIT STRATEGY AND CONFIDENTIALITY		9
7.1	Exit		9
7.2	Confidentiality		9
7.3	Disclosure on Listing		9

8	TRANSER OF SHARES		9

9	ISSUE OF SHARES		10

10	COSTS AND EXPENSES		10

11	TERMINATION		10
11.1	Automatic Termination		10
11.2	Accrued Rights		10

12	GENERAL		8
12.1	Third party rights		8
12.2	Deadlock		8
12.3	Survival of obligations		10
12.4	Successors		11
12.5	No Partnership or Agency		11
12.6	Assignment		11
12.7	Waivers and remedies cumulative		11
12.8	Amendments		9
12.9	Notices		9
12.10	Counterparts		10
12.11	Governing Law and Jurisdiction		13

(i)

THIS AGREEMENT is made as a Deed on 24 ^th January 2007 among

(1)		CANARGO LIMITED a company incorporated in Guernsey with registered number 32825 and having its registered office at P.O. Box 291, St. Peter Port, Guernsey GY1 3RR (“ CanArgo ”);

(2)		THE PERSONS whose names and addresses are set out in Schedule 1 (the “ Investors ”); and

(3)		TETHYS PETROLEUM LIMITED a company incorporated in Guernsey with registered number 41075 and having its registered office at P.O. Box 524, St. Peter Port, Guernsey GY1 6EL (the “ Company ”).

WHEREAS

(A)		The Investors have agreed to make an investment into the Company (the “ Investment ”) on the terms and conditions set out in this Agreement.

(B)		The Parties have agreed to enter into this Agreement in order to regulate the operation and management of the Company and the relationship between the Parties.

(C)		In consideration of the mutual agreements and covenants contained in this Agreement, the Parties have granted the rights and accepted the obligations contained in this Agreement.

IT IS AGREED:-

1		DEFINITIONS AND INTERPRETATION

1.1		Definitions

		In this Agreement the following words and expressions shall, unless the context otherwise requires, have the following meanings:-

		“Agent(s)” means Kraken Group Limited, a Gibraltar Corporation, or its nominees.

		“ Agent Compensation Shares ” means the 1,173,815 Ordinary Shares in aggregate to be issued to the Agents credited as fully paid in connection with this Investment, subject to each of the Agents executing a Deed of Adherence pursuant to Clause 8.2, and with the maximum number of Ordinary Shares to be issued to the Agents being no more than 6% of the number of Ordinary Shares issued in connection with the Investment;

		“Articles” means the articles of association of the Company from time to time;

		“Board” means the board of directors of the Company from time to time;

		“Business” means the business of the Company which is the exploration, production, processing, transportation, marketing and selling of crude oil, oil products, natural gas, natural gas liquids and related products;

		“CEC” means CanArgo Energy Corporation;

		“CEC Senior Subordinated Noteholders” means the holders from time to time of the $13m Senior Subordinated convertible guaranteed notes due 1 ^st September 2009 issued by CEC pursuant to a note and warrant purchase agreement dated 3 ^rd March 2006;

		“Companies Law” means The Companies (Guernsey) Law, 1994 as amended, extended or replaced;

“Compensation Committee” means the compensation committee of the Company from time to time (also referred to as the “Remuneration and Nomination Committee”);

“Completion Date” means the day on which Completion takes place being the day on which the conditions precedent referred to in Clause 2 are satisfied or waived or such later date as may be fixed by the Company being not later than 15 ^th March 2007 the date upon which the parties agree to perform the obligations set out in Clause 3.1, and “Completion” means the performance of those obligations;

“Directors” means the directors of the Company from time to time, and “Executive Directors” means directors who act in an executive capacity;

“Employee, Director and Consultant Warrants” means warrants to subscribe for ordinary shares in the Company by employees, directors or consultants of the Company up to a maximum of 10% of the issued share capital of the Company from time to time at an exercise price per share of no lower that the Subscription Price, and allocated at the discretion of the Compensation Committee of the Board;

“Existing Issued Shares” means the 70,000,000 Ordinary Shares of £0.01 each held by CanArgo at the date of this Agreement;

“Existing Subscription Rights” means the rights to call for the issue, allotment or transfer of shares in the capital of the Company pursuant to the following:-

	(a)		the Nabarro Wells Subscription Rights;

	(b)		the Persistency Warrants;

	(c)		the Ingalls & Snyder Warrants; and

	(d)		the Employee, Director and Consultant Warrants;

“Ingalls & Snyder Warrants” means the warrants to subscribe for shares in the Company granted or to be granted to Ingalls & Snyder Value Partners LP pursuant to the NWRPA;

“Investor Warranties” means the warranties contained in Clause 4.3 and Schedule 9;

“Listing” shall mean the admission to, or permission to deal on, any Recognised Investment Exchange, including without limitation, the Toronto Stock Exchange (TSX), TSX Venture Exchange, the Oslo Stock Exchange (including the Junior Over the Counter Market on the Oslo Stock Exchange), the Official List or AIM Market of the London Stock Exchange plc, becoming unconditionally effective in relation to all or any of the issued equity share capital of the Company;

“Nabarro Wells Subscription Rights” means the right to subscribe for shares in the capital of the Company which may be granted to Nabarro Wells & Co. Limited in the event that the Company obtains admission to the AIM Market of the London Stock Exchange plc pursuant to the terms of its engagement letter with the Company dated 18 July 2006;

“NWRPA” means the Note and Warrant or Royalty Purchase Agreement entered into by the Company on 5 September 2006;

“Ordinary Shares” means the ordinary shares of £0.01 each in the capital of the Company having the rights set out in the Articles;

“Participants” means collectively the Investors, CanArgo and any Agents (and the expression “Participant” shall be construed accordingly);

“Parties” means the parties to this Agreement from time to time;

“Permitted Issue” means the issue of any shares in the capital of the Company or the grant of options or warrants to subscribe for shares in the capital of the Company pursuant to or including any of the following:-

	(i)		a Listing;

	(ii)		any sponsor, nominated adviser or similar adviser in connection with a Listing, including without limitation the Nabarro Wells Subscription Rights;

	(iii)		any broker or similar person in connection with a Listing;

	(iv)		the Persistency Warrants;

	(v)		the Ingalls & Snyder Warrants;

	(vi)		the terms of any share option and/or warrant scheme which may from time to time be established by the Board for the purpose of incentivising employees, directors and consultants of the Tethys Group or VEL;

	(vii)		a potential repayment or refinancing of the NWPRA; and

	(viii)		the proposed acquisition by the Company or by Tethys Kazakhstan Limited of the 30% interest in BN Munai LLP not already owned by Tethys Kazakhstan Limited;

“Persistency Warrants” means the warrants to subscribe for shares in the Company granted to Persistency pursuant to the NWRPA;

“Recognised Investment Exchange” has the meaning ascribed thereto in Section 285(1) of the Financial Services and Markets Act 2000;

“Resolutions” means the resolutions of the Company adopting the Articles;

“Shareholder Majority” means holders of not less than 75% of the Ordinary Shares in issue from time to time;

“Shareholders” means the holders of Ordinary Shares from time to time;

“Subscription Price” means US$0.50 per Ordinary Share;

“Tethys Group” means the Company, and any subsidiary or subsidiary undertaking of the Company from time to time (being, as at the date of this agreement, Tethys Kazakhstan Limited (incorporated in Guernsey with registered number 41210), Tethys Services Limited (incorporated in England and Wales with company number 05900069), BN Munai LLP (a Kazakh limited liability partnership), Kul-Bas LLP (a Kazakh limited liability partnership) and TethysMunaiGaz LLP (a Kazakh limited liability partnership) and “member of the Tethys Group” shall have a corresponding meaning; and

“VEL” means Vazon Energy Limited, an energy consultancy company registered in Guernsey, with registered address at P.O. Box 144, St Peter Port, Guernsey, GY1 3HX

		(Company Number 32244) which provides consultancy services to the Tethys Group, CanArgo and CEC;

		“Warranties” means the warranties contained in Clause 4 and Schedule 4.

		“$” or “US$” means the lawful currency of the United States of America and “£” or “UK£” means the lawful currency of the United Kingdom of Great Britain and Northern Ireland.

1.2		Interpretation

1.2.1		Words and expressions defined in the Articles shall have the same meanings herein except in so far as expressly varied by or inconsistent with the provisions of this Agreement. In the event of any conflict between the provisions of this Agreement and the provisions of the Articles the provisions of this Agreement shall, as between the parties hereto, prevail.

1.2.2		Any reference to any provisions of any Act shall include any amendment, consolidation or re-enactment thereof from time to time provided that the liability of any party under this Agreement shall not be created or increased solely by reason of any such amendment, consolidation or re-enactment whether retrospective in its effect or not.

1.2.3		The Schedules and Recitals form part of this Agreement and have the same full force and effect as if expressly set out in their entirety in the operative part of this Agreement.

1.3		General references

1.3.1		In this Agreement, unless otherwise specified or the context otherwise requires:-

	(a)		words importing the singular shall include the plural and vice versa ;

	(b)		words importing any gender shall include all other genders;

	(c)		a “person” includes any individual, firm, company or other body corporate, corporation, government, state or agency of state, trust or foundation, or any association, partnership or un

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