ROYALTY AND PRODUCTION SHARING AGREEMENT

US Oil Corp., a corporation incorporated under the laws of the State of Texas, and having its office in Houston, hereinafter referred to as Contractor, and represented for the purposes of this Contract by Mr. Dinesh Shukla, its president, hereinafter referred to either collectively or individually as the “Contractor”,

WHEREAS, the Government wishes to promote the exploration and exploitation of Petroleum within the territory of the Republic of Guinea to contribute to the economic development of the country;

WHEREAS, the Government, in order to carry out in the best technical and economic conditions the Petroleum exploration and exploitation operations concerning the Contract Area, wishes to contract the services of a qualified contractor;

WHEREAS, the Contractor represents that it has the technical competence and financial ability to perform the Petroleum Operations herein described, and wishes to carry out such Petroleum Operations under the terms and conditions of a royalty and production sharing contract pursuant to the provisions of the Petroleum Code;

1.1

“Calendar Year” means a period of twelve (12) consecutive months commencing with the first day of January and ending the last day of the following December.

1.2

“Contract Year” means a period of twelve (12) consecutive months commencing on the Effective Date or the anniversary date of the Effective Date.

1.3

“Barrel” means a quantity consisting of 158.984 liters at standard atmospheric pressure of 1.01325 bars and temperature of fifteen degrees centigrade (15 degree C).

1.4

“Petroleum Code” means the Ordinance N 119/PRG/86 of September 23, 1986 concerning the legal and fiscal regime of the exploration and exploitation of Petroleum as well as the regulations made thereunder.

1.5

“Contractor” means collectively or individuallyUSOil as well as any company to which rights and obligations may be transferred pursuant to Article 23 below.

1.6

“Contract” means this document and its appendices, as well as any extension or modification hereto which may be mutually agreed by the Parties in accordance with the provisions of Article 29 below.

1.7

“Petroleum Costs” means all costs and expenses incurred in carrying out the Petroleum Operations under this Contract.

1.8

“Effective Date” means the date on which this Contract comes into force and effect, as defined in Article 30 below.

1.9

“Commercial Discovery” means the discovery of a Petroleum field which has been duly evaluated in accordance with the provisions of the Article below, and which can be produced commercially after taking into account all technical and economic data.

1.11

“Natural Gas” means the dry and wet gas, whether or not associated with Crude Oil, as well as all gases produced in association with Petroleum.

1.14

“Minister” means the Minister in charge of the Petroleum sector or his designated representative.

1.15

“Petroleum Operations” means the operations authorized under this Contract, related to the exploration, appraisal, development, production, transportation and sale of Petroleum, and includes Natural Gas processing operations as well as all necessary connected operations, but does not include refining and marketing of petroleum products.

1.16

“Parties” means the Government and the Contractor, and “Party” means either the Government or the Contractor.

1.17

“Exploitation Area” means that portion of the Contract Area delimited by a Commercial Discovery and defined pursuant to Article 7.2 below.

1.18

“Crude Oil” means all hydrocarbons that are produced in liquid state and at atmospheric pressure, at the wellhead, at the separator or after processing, asphalt, ozokerites and all other liquid hydrocarbons either in natural condition or obtained from Natural Gas by condensation or extraction, including inter alia (?) (Looks like byproducts, literally, products condensated between others) condensates and Natural Gas liquids.

1.19

“Delivery Point” means the FOB point at loading terminal of Crude oil or Natural Gas in the Republic of Guinea or any other point agreed upon by the Parties.

1.20

“Affiliated Company” means any company that directly or indirectly controls or is controlled by any entity constituting the Contractor, or any company that directly or indirectly controls or is controlled by a company or entity which itself directly or indirectly controls any entity constituting the Contractor. For the purposes of the foregoing definition, “Control” means the direct or indirect ownership by a company or any other entity of at least fifty percent (50%,) of the shares or interest forming the capital of another company or entity conferring upon the owner thereof a majority of voting rights exercisable at general meetings of that another Company or entity, or a participation giving a determining position in the management of another company or entity.

1.21

“Quarter” means a period of three (3) consecutive months commencing with the first day of January, April, July and October.

1.22

“Contract Area” means the area described in Appendix A. It is understood that the zones given back by the Contractor will be considered as excluded from the Contract Area. Conversely, the exploitation zones will form an integral part of the Contract Area during the term of this contract. The Contract Area is represented by (?) a surface of {blank} as indicated by the map on Appendix A.

2.1

This Contract is a royalty and production sharing contract whereby the Government appoints the Contractor for rendering all the necessary services, on behalf of the Government, regarding the exploration for and, where applicable, the exploitation of Petroleum that may exist in the Contract Area.

The Contractor shall act, on a exclusive basis for the Government for the entire Contract Area, to conduct and carry out the Petroleum Operations. It shall supply all technical means technologies, equipment and materials as well as the personnel necessary for operations.

The Contractor shall bear, at its sole risk and expense, the full responsibility to finance the Petroleum Operations, subject to the provisions of Article 15 below.

In the event of a Commercial Discovery in the Contract Area, the production of Petroleum shall be, during the term of the exploitation period, shared between the Parties in accordance with the provisions of Article 13 below.

2.2

The object of this Contract is to define the terms and conditions under which the Contractor shall provide the Government with the services set forth in the Article above, as well as the respective rights and obligations of the Parties.

3.3

The Contractor shall begin the Petroleum exploration operations within two (2) months after the Effective Date.

3. 4

If the Contractor has fulfilled for the First Exploration period its work and expected expenditure obligations as set forth in Article 4 hereof, it shall obtain ipso jure a new Exploration period of two ( 2 ) Contract Years. For each renewal, he Contractor shall notify, in accordance with the provisions of the Petroleum Code, a justifiable application with the Minister at least two (2) months prior to the expiry of the First Exploration period.

3.5

In order to enable the Contractor to complete its work and expected expenditure obligations, the Minister will grant an extension to the Second Exploration period for a period not exceeding twelve(12) months, upon notification made by the Contractor at least two (2) months prior to the expiry of the Second Exploitation period.

3.6

In the event the contractor has completed its initial exploration work program, or before, if the Contractor believes exploration operations could be more beneficial, the contractor will commit to begin the second exploration period; to begin and to complete one (1) exploratory well and to undertake logging, testing and hook-up operations. To facilitate the Contractor in executing this work, the Minister will grant an extension to the second exploration period, for a period not to exceed four (4) years, upon notification made by the contractor at least two (2) months prior to the end of that exploration period.

In the event a Petroleum discovery is made during this Second Exploration period and the remaining period of validity is insufficient to allow the Contractor to undertake the appraisal of that discovery, such exploration period shall, upon application by Contractor, be extended for the time necessary to the completion of that work. Such extension shall not exceed a period of twelve ( 12 ) months.

3.7

Subject to the provisions of Article 24 below, this Contract shall expire two years after the end of the second exploration period and all of the relevant extensionsfor the entirety of the Contract Area, with the exception of the Exploitation Area(s), each being defined as a contiguous area of 50 Kilometers by 50 Kilometers, to be designated by the Contractor following exploration and based on information furnished from the exploratory well.

3.8

Following the determination by the Contractor of the commercial viability of a discovery, the exploitation period with respect to that Commercial Discovery shall commence upon the date of adoption of the development plan in accordance with the provisions of Article 3.7 below and shall expire thirty five (35) years following that date.

However, where the Contractor at the expiry of that exploitation period considers and demonstrates to the Minister that the field is able to continue to produce commercially, said exploitation period shall be extended up to a maximum of five (5) years.

3.9

The Contractor shall have the right to drill more wells in the Exploitation area during the Exploitation period and where there is more than one Commercial Discovery, each of them shall have a different exploitation period.

4.3

If the Contractor fails to fulfill the obligations set forth in Article 4.2(a), then this contract will become automatically null and void.

4.4

Each exploratory well set forth in this Article shall be drilled to a minimum depth of 2500 meters. However, the Contractor may, after prior notice to the Minister, discontinue an exploratory well at a lesser depth than initially specified for one of the following reasons:

In the event that any of the above reasons exists, the exploratory well in question shall be deemed to have been drilled to the minimum contractual depth.

For the purposes of this Article, a well drilled under an appraisal work program shall not be considered as an exploratory well and shall not relieve the Contractor of the corresponding work obligations.

4.5

The Contractor can carry out, either during the First exploration period or during the Second exploration period, exploration works in excess of the minimum work obligations.

4.6

The expected exploration expenditure obligations set forth in Article 4.1 above are expressed in constant Dollars.

The surrendered area(s) shall consist of limited number of areas of a simple geometrical shape, as determined previously by the Contractor.

5.3

The Contractor will surrender the total Exploration area and discharge all its rights regarding any areas if there is no petroleum activity {on them}?over a consecutive period of six months during the first and second exploration periods.

6.3

6.4

6.5

7.1

If the Contractor considers a discovery to be a Commercial Discovery, it shall, within six (6) months from the completion of the appraisal work mentioned in Article 6.4 above, notify to the Petroleum Operations Management Committee referred to in Article 9.2 below the development plan concerning such Commercial Discovery.

The Contractor shall determine the commercial nature of a discovery, provided that the above-mentioned economic study demonstrates the commercial nature of that discovery. A discovery may be declared as commercial by the Contractor if, after taking into account the contractual provisions and the submitted development plan, the forecast of income and expenses prepared in accordance with the standards used in the international petroleum industry confirm its commerciality.

7.3

Within sixty (60) days from the notification of the development plan to the Petroleum Operations Management Committee; the latter may notify the Contractor of revisions or changes to that development plan. The Contractor will endeavor to include said revisions or changes in accordance with good international petroleum industry practice.

No later than thirty (30) days after the expiry of the time period referred to above, the Contractor shall submit the development plan to the Minister, for its adoption within thirty (30) days.

The date of adoption of the development plan shall be the date of notice given by the Minister. If the Minister fails to give such notice within the thirty (30) days’ period, the development plan submitted by the Contractor shall be deemed adopted at the date of expiry of said period.

7.4

The Contractor shall commence the physical development works on the field within six (6) months after the date of adoption of the development plan and shall continue them with due diligence.

7.5

No later than three (3) months prior to the end of each Calendar Year, the Contractor shall notify the Petroleum Operations Management Committee of the annual development program, and, as the case may be, the annual production program relating to each Exploitation Area, for the following Calendar Year. The provision of Article 9.5 below shall apply mutatis mutandis to the annual development and production program as regards their adoption by the Minister.

7.6

7.7

7.8

7.9

8.2

8.3

8.4

9.2

In order to ensure the timely notice of Petroleum Operations, a Petroleum Operations Management Committee shall be set up on the Effective Date.

That Committee shall consist on one hand, of three (2) representatives from the Ministry, and, on the other hand, of two (2) representatives from the Contractor.

That Committee shall be chaired by a representative of the Contractor for a two year term followed by a Ministry representative for a two year term and henceforth in this sequence. The Committee shall meet upon a reasonable request made by its chairman. Unless otherwise agreed by the Parties, the Committee shall meet in Conakry.

9.3

Within two (2) months from the Effective Date, the Contractor shall notify the Petroleum Operations Management Committee of the annual work program and the corresponding budget for the remaining period of the current Calendar Year.

9.4

For the following Calendar Year, the Contractor shall submit to the Petroleum Operations Management Committee no later than two (2) months prior to the expiry of each Calendar Year, the annual work program and the corresponding budget related to the following Calendar Year.

9.5

Within fifteen (15) days from the submission of the annual work program and budget to the Petroleum Operations Management Committee, the latter may advise the Contractor of revisions or changes to such program or budget. The Contractor may endeavor to include said revisions or changes in accordance with good international petroleum industry practice.

No later than thirty (30) days after the expiry of the above-mentioned time period, the Contractor shall convey to the Minister, for its adoption within fifteen (15) days, the annual work program and the corresponding budget.

The date of adoption of the annual work program and the corresponding budget shall be the date of notice given by the Minister.

If the Minister fails to give such notice within the fifteen (15) days’ period, the annual work program and the corresponding budget submitted by the Contractor shall be deemed to have been adopted at the date of expiry of said period.

9.6

contribute to the training of those personnel in order that they may have access to any position of skilled workers, foremen, executives and directors.

10.2

At the end of each year, the Contractor shall prepare and deliver to the Minister a recruitment program concerning Guinean personnel for the following years with a view to increasing the participation of Gu