Prospectus re Admission to the Official List - Heritage Oil

years. In addition, since December 2003 the lower houses of Russia’s parliament have been dominated bypolitical parties in support of former President Putin, which has translated into a period of stability andprosperity for Russia at large. Possible future changes in the government, major policy shifts or anypossible lack of consensus between the president, the government, Russia’s parliament and powerfuleconomic lobby groups could lead to political instability, which could have a material adverse effect on theGroup’s operations in Russia.In Russia, the division of authority between federal and regional authorities in respect of the developmentand implementation of state policy, in relation to the exploration, production, transport and sale of oil andgas and the industrial and environmental safety concerns may lead to a climate of uncertainty in theGroup’s Russian operations. Such uncertainty could hinder the Group’s long-term planning efforts inRussia, and may create uncertainties in its operating environment. These uncertainties may also preventthe Group from effectively and efficiently carrying out its business strategy in respect of its Russianoperations.KRIIn October 2007, the Group, through a wholly-owned subsidiary, entered into a PSC with the governmentof the KRI to explore for oil and gas in the KRI. The KRI is located in northern Iraq. Iraq is currentlyexperiencing periods of civil unrest and political and economic instability. In addition, the Government ofTurkey recently authorised Turkey’s military to make incursions into Iraq in order to carry out cross-borderassaults against the Kurdistan Workers Party. The Turkish military has recently amassed a significantnumber of troops along the Iraqi border, and has carried out air strikes and conducted limited shelling oftargets in northern Iraq.Additionally, the national government of Iraq has been considering and may bring into force a newpetroleum law, and the PSC with the KRI may, accordingly, be subject to challenge or changes once such afederal law comes into effect. As at the date of this document, the new Iraqi petroleum law has yet to bebrought into force and it is not clear how the Iraqi government and U.S. State Department sentiment willaffect the Group’s interests in the KRI. Furthermore, the Group received a letter from the Iraq Ministry ofOil dated 17 December 2007, stating that contracts signed with the KRG without the prior approval of thegovernment of Iraq are to be considered annulled as they violate the ‘‘prevailing Iraqi law’’. There can,therefore, be no assurance that the PSC in the KRI will not be adversely affected by the actions of the Iraqigovernment authorities or others and the validity and effectiveness of and enforcement of such PSC in Iraqcannot be assured. This could have a materially adverse effect on the Group’s ability to obtain oil and gaslicences in other areas of Iraq.No assurances can be given that the Group will be able to maintain or obtain effective security or insuranceof any of its assets or personnel in Iraq where, at times, terrorism and insurgent activities have disruptedvarious business activities during the past and may affect the Group’s operations or plans in the future.Currently military forces from the United States of America and other allied countries are operating withinIraq to assist the new local government to maintain peace and national security and law and order at thenational level. There can be no assurances that the commitment of these foreign nations to maintain theirmilitary presence will continue in the short to medium term nor can there be assurances that the localgovernment of Iraq can itself provide the necessary degree of peace, order, stability and security withoutforeign military assistance. As such, the Group’s ability to maintain effective security over its assets may beadversely impacted in the KRI.UgandaThe Group holds rights to explore and develop oil and gas properties in and around Lake Albert, whichstraddles the border of Uganda and the DRC. There is a long history of war and other forms of hostilitybetween Uganda and the DRC, and both countries have experienced civil conflict, terrorism and guerrillaactivities for a number of decades, although great efforts have been made to bring stability to Uganda.There can be no assurance that the conflict between Uganda and the DRC or that internal conflict in thesecountries will not continue.DRCThe DRC has a history of prolonged periods of war and pronounced political and civil unrest. Whilstconsiderable efforts have been made to bring stability to the country, there remains some unrest in theDRC, although this is mostly in the north-eastern region. As a result, the Group’s operations may beexposed to various levels of political risk and regulatory uncertainties, including government regulations,21