Exhibit No

Exhibit 10.1

DRILLING CONTRACT
No. S-NOC-1001/05

BETWEEN

NINOTSMINDA OIL COMPANY LTD

AND

SAIPEM S.p.A

THIS AGREEMENT (the “Contract”), dated effective the _____ day of January 2005 , is made between:

NINOTSMINDA OIL COMPANY (NOC) , a Company organised under the laws of Cyprus and having its registered office at 22 Stasicratous, Olga court , P.O. Box 48, Nycosia , Cyprus (herein after referred as the “Operator”)

SAIPEM S.p.A. a corporation organised under the laws of Italy ( herein after referred as the “Contractor”), located at Via Martiri di Cefalonia 67, 20097 San Donato Milanese, Milano Italy.

Contractor and Operator in this Contract may be referred to individually as a “Party” and collectively as the “Parties.”

WHEREAS, Operator desires to have wells drilled on land in the Operating Area, and to have performed or carried out all auxiliary operations and services as detailed in the Appendices to this Contract or as Operator may require; and
WHEREAS, Contractor is willing to furnish the drilling rig complete with camp, transport and other equipment and personnel for the purpose of drilling such wells and performing such auxiliary operations and services for Operator.

NOW THEREFORE, in consideration of the mutual promises and covenants set forth in this Contract, the Parties agree as follows:

1) INTERPRETATION

1.1) Definitions.

In this Contract, unless the context otherwise requires:

“Appendix” and collectively, “Appendices,” means Appendix A, B, C, D, E and F, attached to and made part of this Contract;

“Commencement Date” means the point in time that the Drilling Unit is rigged up, passed the acceptance test and is ready to spud in the first well in the Operating Area. Commencement Date shall take place in a window from the eighty (80) days to one hundred five (105) days from the issuance of the irrevocable letters of credit as detailed in Article 9.5.

“Contractor’s Items” means the equipment, materials and services which are listed in the Appendices that are to be provided by or at expense of Contractor;

“Contractor’s Personnel” means the personnel to be provided by Contractor from time to time to conduct operations under this Contract, as listed in the Appendices;

“Drilling Unit” means the land drilling rig IDECO E. 2100 No. 5827 complete with all Contractor’s Items, spare parts and consumables necessary and advisable to complete the operations contemplated by this Contract, and as specified in Appendix A, attached to and made part of this Contract.

“Drilling Period” means the time between Commencement Date and Termination Date.

“Operating Area” means those areas of land in Georgia, Manavi field (as directed by Operator) where Operator may from time to time be entitled to conduct drilling operations;

“Operator’s Items” means the equipment, materials and services which are listed in the Appendices that are to be provided by or at expense of Operator;

“Termination Date” means the date when the Drilling Unit is released by the Operator, with the mast laid down, the mud tanks empty and available to the Contractor for preparing its move from the last drilling location.

“Wilful Misconduct” means a wanton deliberate or reckless disregard of good and prudent oil field practice as commonly used in the international petroleum industry by the Party concerned.

1.2) Currency.

In this Contract all amounts expressed in Dollars, are in United States of America (“USA”) Dollars.

2) TERM

2.1) Effective Date.

This Contract shall take effect when the Parties have both executed it.

2.2) Duration.

The Contract will commence on the date of its execution by both Parties and terminate on the Termination Date. The drilling services contemplated by this Contract will be required to perform operations on one (1) well “Firm Well” in accordance with the terms and conditions of this Contract, subject to any extension in accordance with Article 2.3.

2.3) Options.

Operator shall have the right at its sole discretion to extend the scope of the Contract in a back to back sequence for up to two additional optional wells, to be located in Georgia, by delivery of written notice to Contractor as follows :

First optional well : Operator shall exercise the option to drill the first optional well, as soon as possible and in any case not later than 60 days after the well testing of Firm well has been completed. The time from the moment the services are completed on the Firm well ( i.e. mast laid down, mud tanks empty and drilling unit is available to the Contractor for preparing its move) until operation are resumed will be remunerated as per art. 8.11 and Appendix B ( extended stand-by rate without crew

Second optional well : Operator will confirm its intention to drill the second optional well not later than sixty (60) days after the spud date of the first optional well.

2.4) Early Termination.

Notwithstanding any other provisions in this Contract to the contrary, Operator may, at any time after the happening of any event set forth below, terminate this Contract forthwith without obligation to pay any additional charge, early termination fee, demobilization lump sum fees, or penalty (unless expressly provided otherwise in Articles 2.4 or 2.6) upon serving written notice of termination on Contractor:

A. if the Drilling Unit is not available in the Contract Area within the end of the commencement window (80 to 105 days from the issuance of the irrevocable letters of credit ) as defined in the article 1.1 of this Contract , unless such event is caused by Force Majeure; or

B. if the Drilling Unit becomes an actual, constructive, or total loss, termination being from the moment the loss occurs; or

C. should Contractor become insolvent or make an assignment for the benefit of creditors or be adjudicated bankrupt or admit in writing its inability to pay its debts generally as the same become due; or should any proceedings be instituted by Contractor under the laws of any country for relief of debtors or for the appointment of a receiver, trustee or liquidator of Contractor; or should a voluntary petition in bankruptcy or for a reorganisation or for an adjudication of Contractor as an insolvent or a bankrupt be filed; or should an attachment be levied upon the Contractor’s Items; or should any action be taken under the laws of the country where Contractor is domiciled, or if Contractor sells or otherwise disposes of its interest in Contractor’s Equipment (including the Drilling Unit), or reduces the number of its personnel, any or all of which could materially impair Contractor’s ability to fulfil its obligations under this Contract; or

D. if Contractor is unable to perform its obligations under this Contract for a period of twenty one (21) or more days due to a breakdown or failure of Contractor’s Drilling Unit; or

E. if operations under this Contract are suspended for a period of fifteen (15) or more days due to Force Majeure, in which case the demobilisation lump sum fee indicated under Appendix B shall be applicable; or

F. If Contractor’s Personnel or Drilling Unit do not perform in accordance with international oilfield standards for similar services in the reasonable opinion of Operator; or

G. If Contractor’s Drilling Unit does not perform in accordance with manufacturer’s specifications for such Drilling Unit or the specifications set forth in Appendix A in the reasonable opinion of Operator; or

H. If Contractor otherwise fails to comply with its obligations under this Contract, receives a notice to remedy such breach from Operator, and fails to cure such breach within a period of five (5) days.

I In case Operator find necessary to terminate the drilling program due to unexpected difficulties encountered whilst drilling which materially hinder the continuation of the provision of the drilling services contemplated by this contract.

2.5) Effect of Early Termination for Failure to Comply With Contract

If Operator terminates this Contract as provided for in Article 2.4, Operator shall only be liable to pay Contractor for services properly performed and completed as of the date of termination with the exclusion of point E in which case demobilisation fee shall remain applicable. Such liability shall be without prejudice to any claim which Operator may have against Contractor in terms of this Contract.

2.6) Early Termination at Operator Sole Discretion.

Even when Contractor is not in default of its obligations under the Contract, the Contract may be terminated forthwith at the Operator’s sole discretion by delivery of written notice of termination to Contractor at any time, subject to Operator payment to Contractor of the following lump sum fees:

A. Before the Commencement Date:

The Operator shall then pay the early termination lump sum fee for such termination indicated under Appendix B point 2 a ).

B. After the Commencement Date:

The Operator shall pay the early termination fee for such termination indicated under Appendix B point 2 b).

Operator notwithstanding anything to the contrary in this Contract shall in no case have any obligation to pay any early termination lump sum fee or demobilization lump sum fee if the Contractor obtains additional work for the Drilling Unit in direct continuity with the completion of this Contract

2.7) Return of Operator Items.

Contractor shall return to Operator its items in the same condition as received from Operator (normal wear and tear accepted ) as soon as possible and not later than thirty (30) days of the Termination Date.

2.8) Area of Work.

The wells shall be drilled in Manavi Oil field, Georgia.

3) CONTRACTOR’S PERSONNEL

3.1) Personnel.

Contractor represents that it shall furnish Contractor’s Personnel, at Contractor’s cost, in the numbers and classifications specified in Appendix D, attached to and made part of this Contract, to perform the Contractor’s obligations under this Contract. The rates charged for Contractor’s Personnel, reflecting Contractor’s costs, are set forth on Appendix D. Contractor’s rig superintendent, tool pusher, tour pusher and drillers will have valid IWCF certificates (which shall be exhibited to Operator on demand). Contractor further represents that Contractor’s Personnel shall be competent and efficient and that each will be properly qualified, trained and skilled to meet or surpass any qualifications for the specific assignment held and shall provide evidence of this qualification to Operator upon request.

All of Contractor’s Personnel shall be deemed at all times to be employees solely of Contractor and shall provide services under this Contract in accordance with the work schedules set forth in Appendix D.

Contractor shall cause Contractor’s Personnel to be competent, safe and efficient. All Contractor’s Personnel mobilised from or resident in countries outside the Operating Area shall be conversant in both written and spoken English.

3.2) Increase in Contractor’s Personnel

Operator may, at any time, request Contractor to increase the number of Contractor’s Personnel, and Operator shall reimburse Contractor for the direct costs incurred by Contractor in so doing as detailed in Appendix B.

3.3) Transfer of Key Personnel

It is understood and agreed that certain personnel of Contractor assigned to the drilling operations are essential to the operations. Therefore, once the drilling operation has commenced, Contractor shall not transfer any of Contractor’s Personnel without Operator’s prior approval. If, with Operator’s approval, Contractor transfers any of Contractor’s Personnel, Contractor shall arrange for replacement personnel of similar skills and experience to be immediately available, at Contractor’s sole cost and expense.

3.4) Replacement of Contractor Personnel.

Contractor shall remove and replace any of Contractor’s Personnel if Operator so requests such replacement in writing.

3.5) Contractor’s Representatives.

Contractor shall nominate one of its representatives who shall be in charge of the remainder of Contractor’s Personnel and shall have full authority to resolve all day-to-day matters which arise between Operator and Contractor.

3.6) Contractor’s Instructions

The Contractor agrees that it shall adequately instruct all of its Personnel on the use of plant, equipment and safety apparatus, and proper work procedures for the purpose of doing everything reasonably possible to protect against personal injury and damage to plant, equipment and the hole. Contractor shall enforce adequate safety rules and procedures within the Operating Area and require that Contractor’s Personnel observe such rules and procedures and cause Contractor’s Personnel to observe all health, safety and environmental policies of Operator and any instructions of Operator with respect to such policies.

3.7) Local personnel

For the purpose to provide the local personnel as per Schedule D, Contractor shall establish a plan for their employment and training. For the opportunities of employment of Georgian personnel Contractor shall consult with the Operator.

4) CONTRACTOR’S ITEMS.

4.1) Obligation to Supply Contractor’s Items.

Contractor shall provide the Contractor’s Items indicated in Appendices A and D, attached to and made part of this Contract, and perform the services to be provided or performed by it according to the Contract.

4.2) Maintain Stock of Contractor’s Items.

Contractor shall be responsible, at its sole cost, for maintaining stock levels of Contractor’s Items and replenishing them as necessary, including spare parts listed in Appendices A and D of this Contract adequate to continue Contractor’s operations without interruption in accordance with the provisions of this Contract.

4.3) Maintain and Repair Equipment.

Contractor shall be responsible for the maintenance and repair of all Contractor’s Items and shall provide all spare parts, consumables and materials required for such maintenance and repair. Contractor shall, if requested by Operator, also maintain or repair, at its cost, any of Operator’s Items which Contractor is qualified in Contractor’s reasonable opinion to and can maintain or repair with Contractor’s normal complement of personnel and equipment provided, however, that Operator shall at its cost provide all spare parts, consumables and materials required to maintain or repair Operator’s Items and the basic responsibility and liability for furnishing and maintaining such items shall remain in Operator.

4.4) Inspection of In-hole Equipment

Prior to commencement of drilling operations under this Contract, Contractor shall, at Contractor’s sole expense, cause a recognised inspection service company to inspect all in-hole equipment to be used by Contractor in the performance of this Contract. Operator shall be furnished with copies of all inspection reports. Any drill pipe not passing Premium Grade (API RP 7G) shall be rejected and immediately replaced at Contractor’s expense by other drill pipes checked and graded Premium Grade or better. Any drill collars showing defects shall be re-cut or replaced at Contractor’s expense by new drill collars or alternatively by other re-cut drill collars in accordance with drill collar specifications. After the above initial inspection of the in hole equipment, all other inspections will be carried out by Contractor at Operator’s cost.

5) CONTRACTOR GENERAL OBLIGATION.

5.1) Performance of Drilling Unit

Contractor represents and warrants to Operator that the Drilling Unit is capable of: i) drilling to a depth of 20,000 feet ii) performing in accordance with all manufacturer’s specifications and the specifications set forth in Appendix A iii) operating in environmental condition from a minimum of - 15 degrees Celsius up to a maximum of 45 degrees Celsius iv) handling oil base mud up v) mud weight up to 2.2 specific gravity.

Contractor shall provide Operator with manufacturer’s specifications for all or part of the Drilling Unit at any time requested by Operator.

5.2) Contractor Standard of Performance

Contractor shall carry out all operations under this Contract on a day work basis. For this purpose, the term “day work basis” means Contractor shall furnish equipment labour and perform services as provided in this Contract, for a specific sum per day under the direction supervision and control of Operator (which term is deemed to include any employee, agent consultant or subcontractor engaged by Operator to direct drilling operations). When operating on a day work basis, Contractor shall be fully paid at the applicable rates of payment and assumes only the obligations and liabilities stated in this Contract. Contractor shall comply with all current laws covering Contractor’s operations of the Drilling Unit under this Contract.

5.3) Operations of Drilling Unit

Contractor shall be solely responsible for the operations (including the mobilisation and demobilisation) of the Drilling Unit, including, without limitation, supervising moving operations, and positioning the Drilling Unit and camp at location as required by Operator, as well as such operations at drilling site as may be necessary or desirable for the safety of the Drilling Unit. Operations under this Contract will be performed 24 hours per day.

5.4) Compliance with Operator’s Instruction

Contractor shall comply with all instructions of Operator consistent with the provision of this Contract including, without limitation, drilling, well control and safety instructions. Such instruction shall be confirmed in writing by the authorised representative of Operator. However, Operator shall not issue any instruction which would be inconsistent with policies and procedures jointly agreed by Contractor and Operator in writing in “bridge documentation” or otherwise.

5.5) Mud and Casing Program.

Contractor shall follow the mud and casing program as specified by Operator. Operator shall provide these programs for each well in advance of the spud date of each well to be drilled under this Contract.

5.6) Records to Be Kept By Contractor.

Contractor shall keep and furnish to Operator an accurate record of the work performed and formation drilled on IADC-API Daily Drilling Report Form and other record-keeping as may be directed by Operator. A legible copy of such form signed by Contractor’s representatives shall be furnished by Contractor to Operator on a daily basis. All drilling reports shall be kept and recorded in English.

5.7) Safety Equipment

Contractor shall maintain and test its well control equipment listed in the Appendices in good condition at all times in accordance with internationally accepted oilfield practices. Contractor shall use all reasonable means to control wells, to prevent fires and blowouts and to protect the well during all drilling and completion operations.

6) OPERATOR OBLIGATION.

6.1) Equipment and Personnel

Operator shall at its cost provide Operator’s Items and Operator’s Personnel and perform the services to be provided by it according to the Contract. Operator’s Items and Personnel are set forth on Appendices A and D, attached to and made part of this Contract. Operator shall maintain an inventory of Operator’s Items and keep them available to Contractor to support drilling operations under this Contract. When, at Operator’s request and with Contractor’s agreement, the Contractor furnishes or subcontracts for certain items or services which Operator is required to provide in accordance with this Contract, such items or services shall be deemed to be Operator furnished items or services.

For furnishing such items and services, Operator shall reimburse Contractor the properly documented cost incurred by Contractor in providing such items or services, plus ten percent (10 %) handling fee.

6.2) Maintenance and Repair

Operator shall be responsible, at its cost, for the maintenance and repair of all Operator’s Items which Contractor is not qualified to or cannot maintain or repair with Contractor’s normal complement of personnel and equipment.

6.3) Custom or Excise Duties

Operator shall pay all (if any) import charges or custom duties including, without limitation, local sales taxes, value added taxes, or other similar taxes or fees that are levied on the import and export of Contractor’s Items into or from the Operating Area for purposes of performing this Contract, or between countries within the Operating Area. All imports or exports of Contractor’s Items into or from the Operating Area shall be at the direction and in the name of Operator in order to utilise customs reductions and exemptions available to Operator, and Operator shall have no obligation to pay such additional duties and taxes on import and export of Contractor’s Items levied as a result of Contractor’s failure to comply with the provisions of this Article 6.3.

6.4) Drill Site and Access

Operator shall provide Contractor with access to the drilling sites as well as any drilling permits, licenses or certificates needed to conduct operations under this

Contract. The drilling site shall be surveyed and marked by Operator and shall be free of obstructions. Contractor shall co-operate with Operator in obtaining such drilling permits, licenses or certificates and shall fully comply with the requirements for all such permits, licenses or certificates; provided, however, that Contractor shall be solely responsible for obtaining at it’s own cost a GOSGORTECHNADZOR technical passport or similar certification for its Drilling Unit and related equipment.

Operator also shall prepare sound locations capable of properly supporting the drilling rig, and shall be responsible for a conductor pipe program adequate to prevent soil and subsoil washout. Contractor shall supply dimensions and loadings to Operator for site preparation promptly upon request by Operator.

Operator shall advise Contractor of any significant surface condition, or obstruction which Contractor might encounter while en route to the location of which Operator is aware. Operator’s provision of such assistance shall not be deemed to constitute a warranty of the safety or reliability of any location or route. Prior to moving the rig to the operating area the Contractor shall survey and accept the drilling location and the proposed route to that new drilling location.

7.TAXES

7.1) Reimbursed Taxes

Operator shall reimburse Contractor for income tax, profit tax, property tax and other similar tax of a general nature on the Contractor’s income from operations in the Operating Area under the Contract levied by governmental authorities in Georgia, expressly including withholding tax but excluding without limitation tax on or related to Contractor’s personnel or subcontractors (collectively, the “Reimbursed Taxes”)

It is understood and agreed that as of the date of this Contract, the income tax rate applicable to Contractor (as to the “non resident Subcontractor” under the Oil and Gas Law of Georgia) is set at four percent (4%) of the amounts payable by the Operator to Contractor in accordance with article 8 of this Contract.

7.2) Tax Reporting

Contractor agrees to prepare and timely file all required income or other tax returns and declarations required by the government of the area where the Drilling Rig operates under this Contract and timely make all tax payments when due. Contractor shall consult with Operator before filing any such tax returns or paying the applicable taxes. Contractor shall provide Operator monthly copies of all such filings and a summary of such payments, include filings and payments for personnel taxes.

Contractor shall provide tax receipts to Operator for all taxes and other similar charges to be reimbursed by Operator to Operator’s satisfaction.

7.3) Reimbursement of Reimbursed Taxes

Upon delivery of notification by the Contractor to the Operator of the amount of such taxes paid by Contractor which pertain to performance by Contractor under this Contract, accompanied by copies of each such return or declaration, Operator shall reimburse Contractor the amount of any Reimbursed Taxes: provided, however, that Contractor has complied with all the provisions of this Article 7 and Operator does not dispute such Reimbursed Taxes. Notwithstanding the foregoing, Operator shall in no event be liable for (i) Reimbursed Taxes levied or increased as a result of Contractor’s failure to consult with or follow the directions of Operator (it being expressly acknowledged by Contractor that Operator may have available to it exemptions or reductions of applicable taxes for which special procedures may be necessary) or (ii) resulting from interest, penalties, legal fees or other charges or costs applicable to assessments, administrative sanctions or judicial proceedings by tax authorities as a result of Contractor’s failure to consult with or follow the directions of Operator.

7.4) Refunds

In the event that Contractor becomes aware that it is entitled to any refund of Reimbursed Taxes, it shall promptly inform Operator in writing of such entitlement. In the event Contractor receives such refund, Contractor shall promptly pay such refund in full to Operator. The provisions of this Article 7.4 shall survive termination of this Contract.

7.5) Change in Legislation

In the event that the legislation of any country in the Operating Area changes (or the interpretation of such law changes) during the term of this Contract and Contractor as a result suffers a material and direct economic disadvantage, including a material increase in the personnel taxes to which it is subject, the Contractor may request Operator in writing for an increase in rates to compensate for the loss thus incurred by Contractor. If Contractor and Operator cannot agree on such adjustment within ninety (90) days of its written submission to Operator, then Contractor shall have the right to terminate this Contract by delivery of written notice of termination to Operator.

7.6 Cooperation to Minimise Tax

The Parties shall cooperate to minimise their mutual tax obligations in the Operating Area and maximise the utilisation of tax benefits available to Operator in the Operating Area.

8) RATES OF PAYMENT

8.1) Payment

Operator shall pay to Contractor during the term of this Contract the amount from time to time due at the rates of payment set forth in this Article 8 and in accordance with the other provisions of this Contract. No other payment shall be due from Operator unless specifically provided for in this Contract, or agreed to in writing by Operator. The amounts shown in this Contract Appendix B are not inclusive of VAT which may be applicable in Georgia.

8.2) Mobilisation Fee.

Operator shall pay Contractor the lump sum Mobilisation Fee indicated under Appendix B herewith attached, and made part of this Contract, for mobilising Contractor’s Equipment, including the Drilling Unit from the port or place at which the mobilisation of the Drilling Unit commences to Operator’s Drilling Location at the commencement of this Contract and for completely rigging-up to commence the drilling of the first well under this Contract.

The Mobilisation Fee shall be deemed to cover all costs and expenditures of whatever nature incurred by Contractor in mobilising all of Contractor’s Equipment and Contractor’s Personnel to Operator’s Drilling Location. The Operating Rate shall commence at such time as Operator accepts the Drilling Unit (as per the attached acceptance procedures) as being fully rigged up, ready and able to commence drilling operations under this Contract (Drilling bit ready to pass through the rotary table). The Parties shall perform the acceptance test in accordance with the acceptance procedures and time requirements set forth in Appendix E. In the Mobilisation Fee are included two days ( 48 hours ) to perform the acceptance test; in the event Operator decides to further continue the acceptance test and not for reasons attributable to Contractor the Stand By rate shall start to be applicable up to the moment the applicable daily rate shall start.

8.3) Demobilisation Fee

Once satisfactory completion of drilling operations under this Contract has occurred, the tree cap is installed and tested, all day rates shall cease and Contractor shall commence rigging-down operations in preparation for demobilisation. Upon completion of demobilisation, Operator shall pay Contractor the lump sum Demobilisation Fee indicated under Appendix B which shall be deemed to cover all costs and expenditures of Contractor in completely rigging down and demobilising Contractor’s Equipment, including the Drilling Unit, from Operator’s last location drilled under this Contract to the place where demobilisation of the Drilling Unit ceases. The demobilisation fee shall also include the cost of demobilising all of Contractor’s Personnel. No demobilisation payments shall be payable by Operator if

the Contractor obtains additional work for the Drilling Unit in direct continuity with the completion of this Contract.

8.4) Moving Remuneration

The moving between location shall be remunerated to Contractor in accordance to one of the following options which Operator has to select by giving written notice to Contractor within thirty (30) days from Commencement Date (or in terms of the first optional well within thirty (30) days of the spud date of the first optional well).

Option 1- Daily rate basis

For the time spent to move the Drilling Unit between locations the Moving Rate shall apply. The Moving Rate as detailed in appendix B shall commence when the tree cap is installed and tested, the mast laid down, the mud tanks empty and shall cease when Contractor is ready to pick up bit on next location. In the event the moving between location starts following an extended stand by period of the Drilling Unit the moving rate shall start when the first load leaves the drilling location. Transportation facilities in addition to those provided by Contractor by the contract, shall be furnished by Operator at its care and charge, or upon Operator request shall be furnished by Contractor, and Operator shall reimburse Contractor the relevant documented cost plus the applicable overhead as per article 6.1. The Moving Rate without crew ( as per point I) b) appendix B) will be applicable only if the moving operations will be performed to a stacking area following Operator notice to apply the extended stand-by rate without crew at completion of the well.

For the avoidance of doubt the Moving Rate shall cover all costs incurred in moving the Drilling Unit between locations and no additional monies shall be payable except for the above fore mentioned relevant documented cost plus applicable article 6.1 overhead.

Option 2- Lump sum basis

The Moving Lump Sum Fee indicated under Appendix B shall apply to periods during which the Contractor’s Equipment, including the Drilling Unit, are being moved between Operator’s Drilling Locations. The Moving Lump Sum Fees shall apply to the period commencing when the tree cap is installed and tested and shall cease when Contractor is ready to pick up bit on the next drilling location.

This Article 8.4 shall not apply when mobilising to and rigging up on the first location drilled under this Contract and tearing down and demobilising from the last location so drilled. The Moving Lump Sum Fee shall be deemed to cover all costs and expenditures of whatever nature incurred by Contractor in mobilising all of Contractor’s Equipment and Contractor’s Personnel between Operator’s Drilling Locations

8.5) Operating Rate.

The Operating Rate indicated under Appendix B will first become payable from the moment when the Drilling Unit spuds the first well at the first drilling location (The bit pass through the rotary table). The Operating Rate shall continue to be payable while Contractor drilling operations continue in accordance with this Contract and except as otherwise provided in this Contract.

8.6) Standby Rate With Crew.

The Standby Rate indicated under Appendix B shall apply and shall be payable:

(a) Whenever the Drilling Unit is shut down at Operator’s request and the Drilling Unit is standing by with full crews, or during that time when Contractor is waiting on Operator’s orders or Operator furnished items or services if during such waiting periods Contractor’s drilling string is not in use.

(b) From the moment the Contractor could have spudded in the first well and it has been delayed by Operator until the Operating Rate shall apply .

(c) In case of impossibility to continue moving operations due to road/locations problems not under Contractor’s control.

8.7) Repair Rate.

In the event Contractor is unable to conduct normal operations as required under this Contract solely because of a material breakdown or failure of any of Contractor’s Equipment, including the Drilling Unit, (as distinguished from normal rig maintenance), Operator shall pay Contractor at the Equipment Repair Rate indicated under Appendix B. The Equipment Repair Rate shall apply from the time such breakdown or failure occurs until normal operations are resumed or terminated. Notwithstanding the above, the Repair Rate will be zero (0) after Contractor has been unable to conduct normal operations for the reasons set out above, for a total of twenty-four (24) hours per thirty (30) days (not cumulative month by month) period and will remain zero (0) until the breakage or failure of Contractor’s Equipment, including the Drilling Unit, is remedied. Daily maintenance and inspections such as lubrication, packing of swivels, slipping and cutting drill lines, top drive system normal maintenance as per manufacturer’s instructions shall not be deemed as repair time.

8.8) Remedial Rate.

The Remedial Rate indicated under Appendix B shall be payable during the period in which Contractor is re-drilling the borehole in accordance with Article 10.2.

8.9) Force Majeure Rate.

The Force Majeure Rate indicated under Appendix B shall be payable during any period in which operations are not being carried on because of Force Majeure and

the Contract has not been terminated, subject to termination of the Contract for Force Majeure in accordance with Article 2.4(E).

8.10) Extended Standby Rate with crew.

The Extended Standby Rate indicated under Appendix B shall be payable during the period of any well test or geological evaluation exceeding seven (7) days and not exceeding sixty (60) days. During this period the full rig crew and Contractor equipment shall remain at Operator disposal.

8.11) Extended Standby Rate Without Crew

The Extended Standby Rate Without Crew indicated under Appendix B will be applicable in case Operator stops the operation for further geological evaluation up and removes all Contractor Personnel upon seven (7) days prior notice and not exceeding sixty (60) days. Contractor shall recommence the operations after Operator gives fifteen (15) days prior notice to Contractor. Operator shall pay Contractor the rates specified in Appendix B per 24 hour days. Operator will reimburse Contractor transportation costs for returning personnel to their point of origin during such period and again upon returning the personnel to Operating Area immediately prior to the re-commencement of Operations.

The rate applicable will be an escalating rate. After the first month of application the rate will be increased by 1.35 times each following month.

8.12) Force Majeure Rate Without Crew.

The Force Majeure Rate Without Crew indicated under Appendix B will be applicable in case Operator decides to stop the operation and remove all Contractor Personnel upon seven (7) days prior notice for reasons of Force Majeure. Contractor shall recommence the operations after Operator gives fifteen (15) days prior notice to Contractor. Operator shall pay Contractor the rates specified in Appendix B per 24 hour days. Operator shall reimburse Contractor transportation costs for returning personnel to their point of origin during such period and again upon returning the personnel to the Operating Area immediately prior to the re-commencement of Operations.

9) INVOICES AND PAYMENT

9.1) Monthly Invoices

Contractor shall bill Operator at the end of each month for all daily charges earned by Contractor during the month. Other charges shall be billed at the end of the month in which they were incurred. Billing for daily charges will reflect details of the time spent (calculated to the nearest hour) and the rate charged for the time. Billings for other

charges will be accompanied by invoices supporting costs incurred for Operator or other substantiation as required by Operator.

9.2) Payment

Operator shall pay by wire transfer all billings within thirty (30) days after the receipt of such billings, except that if Operator disputes an item billed, Operator shall within twenty (20) days after receipt of the bill notify Contractor of the item disputed, specifying the reason therefore, and payment of the disputed item shall be withheld until settlement of the dispute. Payment shall be made of any undisputed portion. If Operator refuses to pay undisputed items, Contractor shall have the right to terminate this Contract.

9.3) Manner of Payment.

All payment due by Operator to Contractor under this Contract shall be made in USA Dollars to Contractor’s account to be indicated under Contractor’s invoices.

9.4) Late Payment

If Operator fails to pay Contractor undisputed amounts invoiced within thirty (30) days after receipt of the applicable invoice, Contractor shall be entitled to interest, calculated quarterly, on the undisputed amount remaining unpaid at the London Interbank Offering Rate (“LIBOR”). LIBOR for purposes of this Contract shall mean the rate per quarter at which USA Dollar deposits of six (6) months duration are offered to prime banks in the London Inter Bank Market, as quoted in the Wall Street Journal as in effect for the first business day of the quarter for which LIBOR is to be determined.

9.5) Payment Guarantee

Payment under this Contract shall be guaranteed through the issuance of irrevocable Standby Letters of Credit (herein after LC) as per the following specifications.

LC are issued for an aggregate amount as stated under Appendix F.

LC are to be issued by a first class international bank at least rated A by Standard & Poor’s to be agreed between parties within 20 days from contract signature and will be payable at sight and on first demand without restriction or conditions and notwithstanding any objection by the COMPANY against presentation to the confirming/negotiating bank of the documents specified on LC forms included in Appendix “F”.

Failure by Operator to comply with the above, may cause an early termination of Contract by Contractor without notice and without juridical formalities.

Should the drilling activities continue in accordance with art. 2.3 or for any other reason, beyond October 30, 2005, then Operator, 10 working days prior to expiry date, shall cause LC2 to included in Appendix F to be extended up to a new date accepted by the Contractor, likewise the expiry date of December 2005 for LC3 shell be extended by the same additional numbers of days.

Failure of this procedure by Operator will cause an early termination of the Contract without notice and without juridical formalities.

10) LIMITATION OF LIABILITY

10.1) Equipment or Property

Except as specifically provided in this Contract to the contrary, each Party shall at all times be responsible for and shall hold harmless and indemnify the other Party from and against damage to or loss of its own equipment or property, howsoever owned, regardless of the cause of loss, including the negligence of such Party, and despite the fact that a Party’s items may be under the control of the other Party, except that:

(a) Operator shall be responsible for damage to or loss of Contractor’s drill string in the event of its loss, destruction or damage in the borehole. In such event, Operator shall pay to Contractor the following:

A. For damaged equipment that is repairable, the lesser of either the cost of repairs or the replacement cost less an allowance for depreciation.

However, Contractor shall be responsible for damages to or loss of Contractor drilling string in the event its loss, destruction of damage in the borehole is due to Contractor negligence or Wilful Misconduct.

10.2) The Hole.

Operator shall be solely responsible for damage to or loss of the borehole and other damage below the surface, including the casing. If such damage or loss was caused wholly or partially by the negligence or wilful misconduct of Contractor, its employees, agents or subcontractors, then Contractor shall at Operator’s direction, drill a new borehole in the same location or re-drill such section of the borehole as Operator may require at the Remedial Rate indicated in Appendix B.

10.3) Inspection of Materials Furnished by Operator.

Contractor agrees to visually inspect all materials furnished by Operator before using such materials and to notify Operator of any apparent defects in such materials. Contractor shall not be liable for any loss or damage resulting from the use of materials furnished by Operator.

10.4) Contractor’s Personnel.

Contractor agrees to protect, defend, indemnify, and hold harmless Operator, its officers, directors, employees and joint owners from and against all claims, demands, and causes of action of every kind and character for bodily injury, death or damage to property, without limit and without regard to the cause or causes of such injury, death or damage or the negligence of any Party or Parties, in favour of Contractor’s employees or Contractor’s subcontractors or their employees, or Contractor’s invitees.

10.5) Operator’s Personnel.

Operator agrees to protect, defend, indemnify, and hold harmless Contractor, its officers, directors, employees and joint owners from and against all claims, demands, and causes of action of every kind and character for bodily injury, death or damage to property, without limit and without regard to the cause or causes of such injury, death or damage or the negligence of any Party or Parties, in favour of Operator’s employees or Operator’s subcontractors or their employees, or Operator’s invitees.

10.6) Pollution and Contamination.

Notwithstanding anything to the contrary contained in this Contract, it is understood and agreed by and between Contractor and Operator that any responsibility for pollution or contamination shall be as follows:

(a) Contractor shall assume all responsibility for cleaning up and containing pollution or contamination which originates above the surface of wells drilled in accordance with this Contract from improper care or disposal of items in Contractor’s possession and control and directly associated with Contractor’s equipment and facilities and shall protect, defend, indemnify and save the Operator harmless from and against all claims, demands and causes of action of every kind and character arising directly or indirectly from all such pollution or contamination.

(b) Operator shall assume all responsibility for cleaning up and containing pollution or contamination which originates below the surface (other than as provided to be Contractor’s liability in Article 10.6(a) above) and shall protect, defend, indemnify and save the Contractor harmless from and against all claims, demands and causes of action of every kind and character arising directly or indirectly from all such pollution or contamination.

10.7) Cost of Control.

Operator shall be liable for the cost of regaining control of any wild well and shall indemnify Contractor for any such cost regardless of the cause, including, but not limited to, the negligence of Contractor, its agents, employees or subcontractors, and excluding Wilful Misconduct of Contractor.

10.8) Underground Damage.

Operator agrees to defend and indemnify Contractor for any and all claims including, but not limited to, claims arising as a result of the negligence of Contractor, its agents, employees or subcontractors against Contractor resulting from operations under this Contract on account of injury to, destruction of, or loss or impairment of any property right in or to oil, gas, or other mineral substance or water, which at the time of the act or omission causing such injury, destruction, loss, or impairment, such substance had not been reduced to physical possession above the surface, and for any loss or damage to any formation, strata, or reservoir beneath the surface.

10.9) Consequential Damages.

Neither Party shall be liable to the other for special, indirect or consequential damages resulting from or arising out of this Contract, including, without limitation, loss of profit, loss of production, loss of use or business interruptions, however caused.

10.10) Indemnity Obligation.

Except as otherwise expressly limited in this Contract, the Parties intend that all indemnity obligations and/or liabilities assumed by such Parties under terms of this Contract, including, without limitation, clauses 10.1 through 10.9, be without limit and without regard to the cause or causes thereof (including pre-existing conditions), strict liability, or the negligence of any Party or Parties, whether such negligence be sole, joint or concurrent, active or passive.

11) INSURANCE

11.1) Contractor’s Insurance.

Contractor shall carry and maintain the Insurance shown hereunder for the duration of this Contract. Contractor may from time to time with the prior approval of Operator change the insurance it carries. Contractor will increase its insurance beyond the limits provided in this Contract or will change its insurance if required by Operator, but any additional cost of additional insurance premiums will be paid by Operator.

11.2) Policies and Receipts.

Contractor will furnish Operator on request, with certificates of all its insurance policies relating to Contractor’s operations under this Contract and provide thirty (30) days prior written notice to Operator of any change or cancellation of such policies.

11.3) Subrogation.

For liabilities assumed under this Contract by Contractor, its insurance shall be endorsed to provide that the underwriters waive their right of subrogation against Operator.

12) ASSIGNMENT.

The Operator shall be entitled to assign its rights, obligations and duties under the Contract to any affiliate, provided that the Operator shall remain liable for and shall

not be relieved of any of its obligations under this Contract both before and after such assignment.

Neither Party shall have the right to assign this Contract to any third party without prior approval of the other Party. Such approval shall not unreasonably withhold.

13) NOTICES.

Notices, reports and other communications required or permitted by this Contract to be given or sent by one Party to the other Party shall be delivered by hand or mailed to the following :

To CONTRACTOR

SAIPEM S.p.A
For Operational matters

Mr. Corrado Bottazzi
Fax 00971-6 ###-###-####
E-mail: ***@***

For Commercial matters

Mr. Fabio Rondini
Fax: 0039-02-52044709
E-mail : ***@***

To OPERATOR

NINOTSMINDA OIL COMPANY LTD

Mr. Niko Tevzadze
Fax: 00995 32 932892
E-mail: ***@***

14) MISCELLANEOUS.

14.1) Confidential Information

The Contractor shall keep any and all Information disclosed to Contractor in the course of performance of this Contract strictly confidential and shall not use, publish reproduce, copy, trade or otherwise disclose such Information for any purpose not directly related to performance of this Contract. “Information” for this purpose shall include without limitation geological and geophysical data, maps models, interpretations, drilling logs and records, cores, fluid samples, and commercial, contractual and financial information related to prospectitivity of the Operating Area

and Operator’s business in the Operating Area. Such Information shall be the sole property of Operator. Contractor shall cause its employees, officers, directors, agents and representatives to fully and completely observe the confidentiality and other restrictions of this Article 14.1 imposed upon Contractor.

14.2) Governing Language

The Governing language of the Contract shall be English

14.3) Force Majeure.

Except as otherwise provided in this Article 14.3, each Party to this Contract shall be excused from complying with the terms of this Contract, except for the payment of moneys then due, if and for so long as such compliance is prevented by riots, strikes, wars (declared or undeclared), insurrections, rebellions, terrorist acts, civil disturbances, dispositions of orders of governmental authority, whether such authority be actual or assumed, acts of God (other than weather conditions) or by act or cause which is reasonably beyond the control of such Party, such causes being herein sometimes called “Force Majeure.” If any such failure is occasioned by a governmental law, rule, regulation, disposition or order as and the affected Party is operating in accordance with good oilfield practice in the area of operations and is making reasonable effort to comply with such law, rule, regulation. disposition or order, the matter shall be deemed beyond the control of the affected Party. In the event that either Party is rendered unable, wholly or in part, by any of these causes to carry out its obligation under this Contract, it is agreed that such Party shall give notice and details of Force Majeure in writing to the other Party as promptly as possible after its occurrence. In such case, the obligations of the Party giving the notice shall be suspended during the continuance of any inability so caused except that Operator shall be obligated to pay to Contractor the Force Majeure Rate provided for in Appendix B. Either Party shall have the right to terminate this Contract for Force Majeure after fifteen (15) days of Force Majeure have passed in accordance with Article 2.4(E).

14.4) Right to Audit

Contractor shall keep proper books, records and accounts of operations under this Contract and shall permit Operator at all reasonable times to inspect the portions of such books, records and accounts related to any variation of the rates hereunder. All such books, records and accounts shall be available for inspection during this Contract and for at least 12 months following the termination of this Contract. All such books and records shall be kept in English in accordance with generally accepted accounting practices.

14.5) Waivers

It is fully understood and agreed that none of the requirements of this Contract shall be considered as waived by either Party unless done in writing, and then only by the duly authorised agent or representative of the Party.

14.6) Entire Agreement

The Contract together with the Appendices attached supersedes any oral or written communications made between the Parties prior to execution of the Contract and relating to the Operations.

14.7) Publicity

Articles, films or comments to the press about the services shall not be prepared, made by the Contractor or allowed to be made by Subcontractors, or any Third Party unless, such articles films, or comments are submitted to Operator in advance and the prior written consent of Operator is obtained.

14.8) Independent Contractor

Contractor shall perform this Contract as an independent contractor. Nothing in this Contract or in the relationship of the Parties shall be construed as creating a joint venture, partnership, association, fiduciary relationship, company or any other legal entity, or the relationship of an employer and employee between Contractor and Operator other than that of independent contractors.

14.9) Cooperation with Others

Contractor shall afford other contractors and Operator every reasonable facility for the execution of work concurrently with its own work and access to the Drilling location, provided that to do so will not unduly interfere with or prejudice the Contractor’s operations.

14.10) Business Ethics

Contractor shall not offer or give or agree to give to any person in the services of Operator any gift or consideration of any kind as an inducement or reward for doing or forbearing to do or for having done or forborne to do any act in relation to the obtaining or execution of this Contract or any other contract for Operator or for showing or forbearing to show favour or disfavour to any person in relation to this Contract or any other contract with Operator.

14.11) Arbitration

All disputes arising out of or in connection with the present contract shall be determined by arbitration in London, England in accordance with the provisions of the UK’s Arbitration Act 1996. Disputes hereunder shall be resolved by a sole arbitrator

agreed upon by the Parties. Should the Parties fail to agree upon a sole arbitrator, then disputes hereunder shall be determined by three arbitrators, one arbitrator being appointed by each Party and the third arbitrator, who will act as Chairman, to be appointed by the arbitrators appointed by the Parties. Provided always that nothing herein shall prevent the Parties from commencing proceedings ancillary to arbitration for the purpose of obtaining security in respect of claims pursued hereunder.

14.12) GOVERNING LAW

THE PARTIES TO THIS CONTRACT AGREE THAT THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND INTERPRETATION OF THIS CONTRACT SHALL BE GOVERNED AND CONTROLLED BY THE SUBSTANTIVE LAWS OF ENGLAND, EXCLUDING ITS CONFLICTS LAWS OR CHOICE OF LAW PROVISIONS.

14.14) No Use of Operator Information to Compete

Contractor acknowledges that the Operator’s Information is valuable to Operator and, therefore, its protection and maintenance constitutes a legitimate interest to be protected by Operator by the following covenant not to compete. During the term of this Contract and for two years thereafter Contractor will not use Operator’s Information obtained by Contractor through its Services under this Contract to compete with, or usurp business opportunities of, the Operator (or assist others in doing so), within the Republic of Georgia, regarding oil and gas exploration, production, geophysical or geotechnical work, seismic exploration, geophysical consulting, prospect development, prospect promotion, or design, sale, fabrication, assembly, or operation of pipelines, refineries or facilities to extract, produce, treat, manufacture, transport, store, or refine oil or gas (the “Operator Opportunities”). Contractor further covenants that during the term of this Contract and for a period of five (5) years thereafter it will not participate in the equity of, or take an equity interest in any Operator Opportunities. The foregoing shall not prohibit Contractor from performing the services for other parties within the Republic of Georgia so long as Contractor abides by such undertakings. The Parties agree that these limitations are reasonable as to duration, scope, and geographic coverage.

14.15) Severability

In case one or more of the provisions contained in this Contract shall be determined to be invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provision contained in this Contract shall not in any way be affected or impaired by such determination, unless such invalidity, illegality or unenforceability diminishes the rights and obligations, taken as a whole, of the Parties.

14.16) Amendments

This Contract may be altered, modified, amended, or repealed, only by the mutual

written agreement of the Parties.

14.17) Construction of Ambiguity.

The Parties agree and acknowledge that the Contract has been jointly negotiated and drafted and expresses the mutual intent of the Parties. Accordingly, the rule of construction against the drafting Party, whichever it may be, in the event an ambiguity exists with regard to the interpretation of any particular provision of this Contract shall have no application to this Contract.

14.18) Succession

This Contract shall be binding upon and inure to the benefit of the Parties and, subject to the terms of this Contract, their respective successors and permitted assigns.

IN WITNESS WHEREOF, the duly authorised representatives of the Parties have executed this Contract in two originals the date shown below.

APPENDICES

APPENDIX A

DRILLING UNIT ( TECHNICAL ANNEX )

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A       RIG GENERAL DATA

B      DRAWINGS

C      MAST, SUBSTRUCTURE, DRAWWORKS & ASSOCIATED EQUIPMENT

C1     MAST & ASSOCIATED EQUIPMENT

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C2     SUBSTRUCTURE, FLOOR, AND RIG FLOOR EQUIPMENT

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C3     BLOCKS & SWIVEL ASSEMBLY

          General Requirements

C4     DRAWWORKS ASSEMBLY

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C5     DRAWWORKS ELECTRIC MOTORS

C6     BOP HANDLING SYSTEM UNDER SUBSTRUCTURE

D      CIRCULATING SYSTEM

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D1     MUD PUMPS

D2     RIG FLOOR MUD MANIFOLD

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D3     MUD TANK SYSTEM

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E      RIG POWER & ELECTRICAL SYSTEMS

E1      S.C.R. CONVERSION SYSTEM

E2       POWER PLANT-BACKUP POWER

E3       ELECTRICAL LIGHTING SYSTEM

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E4       ELECTRICAL SAFETY DEVICES

F       WELL CONTROL EQUIPMENT

F1       BOP STACK REQUIREMENTS: 21 1/4" DIVERTER SYSTEM

F2        BOP STACK REQUIREMENTS: 13 5/8" NOMINAL

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F3        CHOKE & KILL VALVES ON BOP STACKS

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F4        KILL AND CHOKE LINES

F5        CHOKE MANIFOLD

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F6        BOP CONTROL SYSTEM

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F7        DRILL STRING SAFETY EQUIPMENT

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F8        MISCELLANEOUS WELL CONTROL MATERIAL

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G        DOWN HOLE TUBULAR EQUIPMENT & RELATED HANDLING TOOLS

G1        Kellys, Drill Pipe, Collars, Crossovers

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G2        D.P. - D.C. HANDLING TOOLS

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H CASING, TUBING EQUIPMENT AND FISHING TOOLS

     Fishing

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I RIG INSTRUMENTATION

Graduated as per METRIC system

I1 DRILLER’S CONSOLE INSTRUMENTS

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J SAFETY & FIRE FIGHTING EQUIPMENT

J1 GAS DETECTION SYSTEM

J2 PORTABLE MONITORING INSTRUMENTATION

J3 CASCADE AIR-BREATHING SYSTEM & SCBA EQUIPMENT

J4

     FIRST AID EQUIPMENT

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J5 PERSONNEL PROTECTIVE EQUIPMENT

J6 FIRE FIGHTING EQUIPMENT

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J7 MISCELLANEOUS SAFETY EQUIPMENT

K RIG SITE HOUSING/OFFICE REQUIREMENTS

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L RIG INTERCOMMUNICATION SYSTEM

M Miscellaneous

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APPENDIX B

COMPENSATION

• Note: The rate of remuneration for extended stand-by rate without crew will be applicable for the first month only, thereafter will be increased by 1.35 times each following month.

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     Early termination fee = ( 120 – N ) x 50% of Operating Rate

Where

120 = planned number of days to complete the firm well
N = where N is the number of days elapsing from the Commencement Date to the early termination date

It is understood that in the event the well program is completed prior the 120 days not early termination fee shall be applicable

OPTION 1 – Daily Rate Basis

Rata I (Moving Rate) for the moving time plus Hoisting and transportation means at Contractor care and Operator cost plus the applicable handling fee or at Operator care and cost.

To the moving between location at the daily rate remuneration basis the following incentive scheme (Bonus - Malus) shall apply :

Moving performed less than 10 days ( moving location within 20 km )

5,000 USD / day shall be added to the moving rate for each day saved ( pro-rata )

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Moving performed between 11 and equal to max 13 days

NIL

Moving performed more than 14 days

8,000 USD / day shall be deducted from the moving rate for each day in excess of the 14^th day

OPTION 2 - Lump Sum Basis

(a) Up to 20 Km

Lump sum fee 250,000 USD.

(b) Up to 50 Km

Lump sum fee 310,000 USD.

For moving between location in excess of the above indicated 50 km the parties will agree relevant compensation fee.

4. Accommodation and meals.

5. Additional Personnel

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The above daily rates shall be applicable from the moment the personnel arrive at the Operating Area. To the above traveling cost shall be invoiced to Company at Cost.

6. Additional equipment

TBA

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