3. Exploration Capital Costs

3. Exploration Capital Costs:

(1) All expenditures which are incurred in  Petroleum Operations prior to the issue of a notice of discovery of
Petroleum under a Petroleum Agreement shall be treated as Exploration  Capital Costs.
(2) Exploration Capital Costs incurred after the issue of a notice of discovery of Petroleum in any part of a contract Area shall be included in Exploration Capital Cost if Petroleum so discovered is subsequently  deemed not to be a commercial discovery.