Exhibit 10.5
CONTRACT AREA: JATILUHUR, ONSHORE W.JAVA
C-
PRODUCTION SHARING CONTRACT
between
PERUSAHAAN PERTAMBANGAN MINYAK XXX GAS BUMI NEGERA
( PERTAMINA )
and
SABA JATILUHUR LIMITED
CONTRACT AREA: JATILUHUR, ONSHORE, W.JAVA.
INDEX
SECTION TITLE PAGE
I SCOPE AND DEFINITIONS 3
II TERM 6
III EXCLUSION OF AREAS 7
IV WORK PROGRAM AND EXPENDITURES 8
V RIGHTS AND OBLIGATIONS OF THE PARTIES 11
VI RECOVERY OF OPERATING COST AND HANDLING
OF PRODUCTION 17
VII VALUATION OF CRUDE OIL 22
VIII CONPENSATION,ASSISTANCE,AND PRODUCTION BONUS 25
IX PAYMENTS 26
X TITLE TO EQUIPMENT 27
XI CONSULTATION AND ARBITRATION 28
XII EMPLOYMENT AND TRAINING OF INDONESIAN PERSONNEL 29
XIII TERMINATION 30
XIV BOOKS AND ACCOUNTS,AND AUDITS 31
XV PARTICIPATION 32
XVI OTHER PROVISIONS 34
XVII EFFECTIVENESS 36
EXHIBITS
"A" DESCRIPTION OF XXXXXXXX XXXX X-0
"X" XXX XX XXXXXXXX XXXX X-0
"C" ACCOUNTING PROCEDURE C-1
"D" OPERATING AGREEMENT D-1
"E-1" ORGANIZATION (EXPLORATION STAGE) E-1
"E-2" ORGANIZATION (COMMERCIALITY STAGE) E-2
"F" MEMORANDUM OF PARTICIPATION F-1
PRODUCTION SHARING CONTRACT
between
PERUSAHAAN PERTAMBANGAN MINYAK XXX GAS BUMI NEGARA
( PERTAMINA )
and
SABA JATILUHUR LIMITED
THIS CONTRACT, made and entered into on this ______day of _______, 19 _______,
by and between PERUSAHAAN PERTAMBANGAN MINYAK XXX GAS BUMI NEGARA, a State
Enterprise, established on the basis of Law No. 8./1971 hereinafter called
"PERTAMINA", party of the first part, and SABA JATILUHUR LIMITED a corporation
organized and existing under the laws of CAYMAN ISLANDS, hereinafter called
"CONTRACTOR", party of the second part, both hereinafter sometimes referred to
either individually as the "Party" or collectively as the "Parties".
WITNESSETH
WHEREAS, all mineral oil and gas existing within the statutory mining territory
of Indonesia, are national riches controlled by the State; and
WHEREAS, PERTAMINA has an exclusive "Authority to Mine" for mineral oil and gas
throughout the area described in Exhibit "A" and outlined on the map which is
Exhibit "B" both attached hereto and made a part hereof, which area is
hereinafter referred to as the "Contract Area" ; and
WHEREAS, PERTAMINA wishes to promote the development of Contract Area and
CONTRACTOR desires to join and assist PERTAMINA in accelerating the exploration
and development of the resources within the Contract Area; and
WHEREAS, PERTAMINA and CONTRACTOR have the financial ability, technical
competence and professional skills necessary to carry out the Petroleum
Operations hereinafter described; and
WHEREAS, in accordance with Law No.44 Prp/1960 Law No.8/1971 cooperative
agreements in the form of a Production Sharing Contract may be entered into in
the sector of oil and gas between PERTAMINA and foreign contractors; and
WHEREAS the parties will carry out operations on the Contract Area as a Joint
Operation, the participating interest of CONTRACTOR being subject to a regime of
Production Sharing, and for this purpose have entered into an Operating
Agreement, annexed hereto as Exhibit "D";
NOW THEREFORE, in consideration of the mutual covenants herein contained, it is
hereby agreed as follows:
SECTION I
SCOPE AND DEFINITIONS
1.1 SCOPE
This Contract is a Production Sharing Contract in accordance with the
provisions herein contained. PERTAMINA shall have and be responsible for
the management of the operations contemplated hereunder. PERTAMINA,
assisted by CONTRACTOR, will be responsible for conducting the Petroleum
Operations and the Parties shall establish a Joint Operating Body which
shall conduct and execute the Petroleum Operations in accordance with the
provisions of this Contract. The Parties shall, subject to the provisions
herein contained, provide all the financial and technical assistance
required for such operations and shall carry the risk of Operating Cost in
carrying out operations and CONTRACTOR shall therefore have an economic
interest in the development of the Petroleum deposits in the Contract
Area. The costs accruing therefrom shall be included in Operating Costs
recoverable as provided in Section VI. Except as may otherwise be provided
in this Contract, in the Accounting Procedures attached hereto or by
written agreement of PERTAMINA, CONTRACTOR will not incur interest
expenses to finance its operations hereunder.
During the term of this Contract, CONTRACTOR participating interest share
of the total production achieved in the conduct of such operations shall
be divided in accordance with the provisions of Section VI hereof.
1.2. DEFINITIONS
In the text of this Contract, words and terms defined in Article 1 of Law
No. 44 Prp/1960 shall have the same meaning in accordance with such
definitions.
1.2.1. Affiliated Company or "Affiliate" means a company or other
entity that controls, or is controlled by a party to this
Contract, or a company or other entity which controls or is
controlled by a company or other entity which controls a party
to this Contract, it is being understood that control shall
mean ownership by one company or entity of at least 50% of (a)
the voting stock, if the other company is a corporation
issuing stock, of (b) the controlling rights or interests, if
the other entity is not a corporation.
1.2.2 Barrel means a quantity or unit of oil, forty two (42) United
States gallons at the temperature of sixty (60)
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degrees Fahrenheit.
1.2.3. Barrel of Oil Equivalent (BOE) means six thousand (6,000)
standard Cubic feet of Natural Gas based on the gas having a
calorific value of one thousand (1,000) British Thermal Unit
per cubic foot (BTU/ft3).
1.2.4. Budget of Operating Costs means costs estimates of all items
included in the Work Program.
1.2.5. Calendar Year or "Year", means a period of twelve (12) months
Commencing with January 1 and ending on the following December
31, according to the Gregorian Calendar.
1.2.6. Contract Area means the area within statutory mining territory
of Indonesia covered by the "Authority to Mine" which is the
subject of this Contract, which Contract Area is described and
outlined in Exhibit "A" and "B" attached hereto and made a
part hereof.
1.2.7. Contract Year means a period of twelve (12) consecutive months
according to the Gregorian Calendar counted from the Effective
Date of this Contract or from the anniversary of such
Effective Date.
1.2.8. Crude Oil means crude mineral oil, asphalt, ozokerite and all
kinds of hydrocarbons and bitumens, both in solid and in
liquid form, in their natural state or obtained from Natural
Gas by condensation or extraction.
1.2.9. Effective Date means the date of the approval of this Contract
by the Government of Indonesia in accordance with the
provisions of the applicable law.
1.2.10. Force Majeure means delays or defaults in Performance under
this Contract caused by circumstances beyond the control and
with out the fault or negligence of PERTAMINA and/or
CONTRACTOR that may affect economically or otherwise the
continuing of operations under this Contract, including but
not restricted to acts of God or the public enemy, perils of
navigation, fire, hostilities, war (declared or undeclared),
blockade, labor disturbances, strikes, riots, insurrections,
civil commotion, quarantine restrictions, epidemics, storms,
earthquakes, or accidents.
1.2.11. Foreign Exchange means currency other than that of the
Republic of Indonesia but acceptable to PERTAMINA and to the
Republic of Indonesia and to CONTRACTOR.
1.2.12. Indonesian Income Tax Law means the current Tax Code including
all appropriate regulations.
1.2.13. JOB means the Joint Operating Body established for the
purpose provided for in Article 3 of the Operating Agreement.
1.2.14. Natural Gas means all gaseous hydrocarbons from xxxxx,
including wet mineral gas, dry mineral gas, casing head gas
and residue gas remaining after the extraction of liquid
hydrocarbons from wet gas.
1.2.15. Operating Agreement means the Operating Agreement attached
hereto as Exhibit "D" and made a part hereof.
1.2.16. Operating Costs means expenditures made and obligations
incurred in carrying out Petroleum Operations hereunder
determined in accordance with the Accounting Procedures
attached hereto as Exhibit "C" and made a part hereof.
1.2.17. Operator means the Operator appointed pursuant to Article 3
of the Operating Agreement.
1.2.18. Petroleum means mineral oil and gas, hereinafter called Crude
Oil and Natural Gas as defined in Law No.44 Prp/1960.
1.2.19. Petroleum Operations means all exploration, development,
extraction, producing, transportation, marketing, abandonment
and site restoration operations authorized or contemplated
under this Contract.
1.2.20. Point of Export means the outlet flange of the loading arm
after final sales meter at the export terminal, or some other
point (s) mutually agreed by the Parties.
1.2.21. Work Program means a statement itemizing the Petroleum
Operations to be carried out in the Contract Area as set forth
in Section IV.
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SECTION II
TERM
2.1. The term of this Contract shall be thirty (30) years as from the Effective
Date.
2.2. At the end of the initial six (6) years as from the Effective Date
CONTRACTOR shall have the option to request PERTAMINA for a four (4)
years extension, the approval of such request shall not be unreasonably
withheld.
2.3. If at the end of the initial six (6) years as from the Effective Date or
the extension thereto, no Petroleum is discovered in commercial
quantities in the Contract Area, then without prejudice to Section XIII,
this Contract shall automatically terminate in its entirety.
2.4. If Petroleum is discovered in any portion of the Contract Area within six
(6) year period, or the extension thereto, which in the judgement of
PERTAMINA and CONTRACTOR can be produced commercially, based on
consideration of all pertinent operating and financial data, then as to
that particular portion of the Contract Area development will commence.
In other portions of the Contract Area exploration may continue
concurrently without prejudice to the provisions of Section III regarding
the exclusion of areas.
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SECTION III
EXLUSION OF AREAS
3.1.1. On or before the end of the initial three (3) years' period as from the
Effective Date, (CONTRACTOR) shall relinquish twenty-five percent (25%)
of the original Contract Area.
3.1.2. On or before the end of the sixth (6th) Contract Area, (CONTRACTOR)
shall relinquish an additional area equal to twenty-five percent (25%)
of the original Contract Area.
3.1.3. On or before the end of the tenth (10) Contract years , (CONTRACTOR)
shall relinquish an additional area so that area retained thereafter
shall not be in excess of 1,347 square kilometers, or twenty percent
(20%) of the original total Contract Area, whichever is less.
3.1.4. (CONTRACTOR's) obligation to relinquish part of the original Contract
Area under the preceding provisions shall not apply to any part of the
Contract Area corresponding to the surface area of any field in which
Petroleum has been discovered.
3.1.5. With regard to the remaining portion of the Contract Area left after
the mandatory relinquishment as set forth in subsection 3.1.2. above,
the parties shall maintain a reasonable exploration effort. In respect
of any part of such remaining unexplored portion of the Contract Area
for which JOB does not during two (2) consecutive Years submit an
exploration program, PERTAMINA may by written notice to (CONTRACTOR)
require them either to submit an exploration program or to relinquish
such part of the Contract Area.
3.1.6. Upon (30) days written notice to PERTAMINA prior to the end of the
second Contract Year and prior to the end of any succeeding Contract
Year, (CONTRACTOR) shall have the right to relinquish any portion of
the Area, and such portion shall then be credited against that portion
of the Contract Area which (CONTRACTOR) is next required to relinquish
under the provisions of subsections 3.1.1. and 3.1.2.
hereof.
3.1.7. (CONTRACTOR) shall advise PERTAMINA in advance of the date of
relinquishment of the portion to be relinquished. For the purpose of
such relinquishments, (CONTRACTOR) and PERTAMINA shall consult with
each other regarding the shape and size of each individual portion of
the area being relinquished, provided, however, that so far as
reasonably possible, such portion shall each be of sufficient size and
convenient shape to enable Petroleum Operations to be conducted
thereon.
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SECTION IV
WORK PROGRAM AND EXPENDITURES
4.1. The Parties shall Commence Petroleum Operations hereunder not later than
six (6) months after the Effective Date.
4.2. The amount to be spent and the program to be carried out by the Parties in
conducting Petroleum Operations pursuant to the terms of this Contract
during the first six (6) Contract Years and in conducting Petroleum
Operations pursuant to the terms of this Contract during the next four (4)
Contract Years following the Effective Date shall in the aggregate be not
less than hereafter specified for each of the Contract Year as follows:
Work Program Amount
First Contract Year geological & geophysical study
and 300 Km seismic. US$ 2,650,000
Second Contract Year 2200 Km seismic/CSMAT US$ 7,200,000
Third Contract Year drilling two (2) xxxxx. US$ 7,250,000
Fourth Contract Year geological & geophysical work. US$ 2,100,000
Fifth Contract Year seismic survey & G&G. US$ 6,800,000
Sixth Contract Year drilling two (2) xxxxx US$ 7,300,000
Seventh Contract Year geological & geophysical work. US$ 4,300,000
Eighth Contract Year seismic survey and
drilling one(1)well. US$ 7,800,000
Ninth Contract Year drilling one (1) well US$ 5,800,000
Tenth Contract Year drilling two (2) xxxxx US$ 9,300,000
The Parties shall have the option to transfer the work requirement from
one category to the other with prior approval of PERTAMINA.
Notwithstanding any provisions to the contrary as may elsewhere herein
contained, it is specifically agreed that during the first three (3)
Contract Years CONTRACTOR shall provide at least seventeen million and one
hundred thousand United States Dollars (US$17,100,000) for all
expenditures for operations as provided under subsection 4.2, or up to the
approval of the plan of development by PERTAMINA, whichever is less, to
match PERTAMINA's deemed prior expenditures.
Thereafter:
a) Funds equal to PERTAMINA's participating interest share for
exploration operations and the drilling of appraisal xxxxx
shall be provided by CONTRACTOR;
b) Before the first commercial production has commenced, funds equal to
PERTAMINA's participating interest share for development, production,
processing and transportation (to the point of delivery or export)
shall be provided by the CONTRACTOR:
c) After commercial production has commenced, the funds for
development, production, processing and transportation
(to the point of delivery or export) shall be provided by the
Parties according to their respective participating interest
share;
d) At PERTAMINA's request, funds equal to PERTAMINA's participating
interest share for any development after the first commercial
production has commenced shall be provided by the CONTRACTOR;
Always provided that PERTAMINA shall repay CONTRACTOR funds provided by
CONTRACTOR for the PERTAMINA's participating interest share thereof, in
accordance with subsection 6.1.8 of section VI hereof but limited to
Article 2 Exhibit "D".
If during any of the first three Contract Years, the Parties should
spend less than the amount of money as specified hereinabove, an amount
equal to such under expenditure may be carried forward and added to the
amount to be expended in the following Contract Year, however, if at
the end of the third Contract Year, the Parties shall have been
prevented from expending the above specified amount for the first three
(3) Contract Years due to reasons beyond their control, the amount
equal to such under expenditure may be carried over and added to the
following Contract Year, otherwise the amount equal to the under
expenditure will be payable to PERTAMINA. Furthermore, any under
expenditure in fourth and subsequent Contract Year may be carried
forward and added to the following Contract Year. If during any
Contract Year or Contract Years the Parties should expend more than the
amount of money required to be so expended as specified hereinabove,
the excess may be subtracted from the amount of money as specified
hereinabove, for the succeeding Contract Years.
4.4. At least three (3) months prior to the beginning of each Calendar Year
or at such other time as may otherwise be mutually agreed to by the
parties, JOB shall prepare and submit to the Operating Committee for
the Parties' decision a Work Program and Budget of Operating Costs for
the Contract Area setting forth the Petroleum Operations which the
Parties propose to carry out during the ensuing Calendar Year, and
after having reached a decision, JOB shall submit such Work Program and
Budget of Operating Costs for approval to PERTAMINA.
4.5. It is recognized by the Parties that the details of a Work Program may
require changes in the light of existing circumstances and nothing
herein contained shall limit the right of JOB to make such changes,
provided they do not change the general objectives of the Work Program,
nor increase the expenditure in the approved Budget of Operating Costs.
4.6. It is further recognized that in the event of emergency or
extraordinary circumstances requiring immediate actions, either Party
and JOB may take all actions it deems proper or advisable to protect
their interests and those of their respective employers and any cost so
incurred shall be included in the Operating Costs.
4.7. PERTAMINA agrees that the approval of a proposed Work Program
and Budget of Operating Costs will not be unreasonably withheld.
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SECTION V
RIGHTS AND OBLIGATIONS OF THE PARTIES
5.1. The Parties shall, subject to Section 4.2. and 4.3. hereinabove,
5.1.1. furnish all necessary funds to purchase or lease all
material, equipment and supplies required to be
purchased or leased with Foreign Exchange pursuant to the
Work Program;
5.1.2. furnish such other funds for the performance of the Work
Program that requires payment in Foreign Exchange, including
payment to third parties who perform services as a
contractor.
5.2. JOB shall:
5.2.1. furnish all technical aid, including foreign
personnel, required for the performance of the Work
Program, payment whereof requires Foreign Exchange;
5.2.2. be responsible for the preparation and execution
of the Work Program, which shall be implemented in a
workmanlike manner and by appropriate scientific methods;
5.2.3. (a) conduct an environmental baseline assessment
at the beginning of CONTRACTOR's activities,such
assessment to be done in stages coincident with
agreed Work Program;
(b) take the necessary precautions for protection of
ecological systems, navigation and fishing and shall
prevent extensive pollution of the area, sea or
rivers and other as the result of operations
undertaken under the Work Program;
(c) After the Contract expiration or termination, or
relinquishment of part of the Contract Area, or
abandonment of any field, remove all equipment and
installations from the area in a manner acceptable
to PERTAMINA, and perform all necessary site
restoration activities in accordance with the
applicable Government regulations to prevent hazards
to human life and property of others or environment;
provided however, if PERTAMINA takes over any
area or field prior to its abandonment, CONTRACTOR
shall be released from its obligation to remove
the equipment and installations and perform the
necessary site restoration activities of the
field in such area. In such event all the
accumulated funds reserved for the removal and
restoration operations shall be transferred to
PERTAMINA;
(d) include in the annual budget of Operating Costs,
estimates of the anticipated abandonment and site
restoration costs for each exploratory well in the
Work Program. All expenditures incurred by the
CONTRACTOR in the abandonment of all such xxxxx and
restoration of their drillsites shall be treated as
Operating Costs in accordance with the Accounting
Procedure attached hereto as Exhibit "C";
(e) include with requisite plan of development for each
commercial discovery, an abandonment and site
restoration program together with a funding procedure
for such program. The amount of monies estimated to
be required for this program shall be determined each
year in conjunction with the Budget of Operating
Costs for the plan of development and all such
estimates shall be treated as Operating Costs in
accordance with the Accounting Procedure attached
hereto as Exhibit "C".
5.2.4. retain control to all leased property paid for with Foreign
Exchange and caused to be brought into Indonesia, and be
entitled to freely remove the same therefrom;
5.2.5. have right of ingress to and egress from the Contract Area
and to and from facilities wherever located at all times;
5.2.6. have the right to use and have access to, and PERTAMINA shall
make available, so far as possible, all geological,
geophysical, drilling, well, production and other information
held by PERTAMINA or by any other governmental agency relating
to the Contract Area including well location maps;
5.2.7. submit to PERTAMINA copies of all such original geological,
geophysical, drilling, well, production and other
data and reports as it may compile during the term hereof;
5.2.8. prepare and carry out plans and programs for industrial
training and education of Indonesians for all job
classifications with respect to operations contemplated
hereunder;
5.2.9. give preference to such goods and services which are produced
in Indonesia or rendered by Indonesian nationals, provided
such goods and services are offered at equally advantageous
conditions with regard to quality, price, availability at the
time and in the quantities required.
5.3 CONTRACTOR shall :
5.3.1 have the right during the term hereof to freely lift, dispose
of and export its share of Crude Oil and retain abroad the
proceeds obtained therefrom;
5.3.2. appoint an authorized representative for Indonesia with
respect to this Contract, who shall have an office in
Jakarta;
5.3.3. after Commercial production commences, fulfill its
obligations towards the supply of the domestic market in
Indonesia. CONTRACTOR agrees to sell and deliver to
PERTAMINA a portion of the share of the Crude Oil to which
it is entitled pursuant to subsections 6.1.3. and 6.3.1 of
Section VI calculated for each Year as follows ;
(a) multiply its Participating Interest share of Crude Oil
produced from the Contract Area by a fraction the
numerator of which is the total quantity of Crude Oil
to be supplied for domestic market and the denominator
is the entire Indonesian production of Crude Oil of all
petroleum companies;
(b) compute twenty-five percent(25%) of its Participating
Interest share of Crude Oil produced from the
Contract Area;
(c) multiply the lower quantity computed, either under (a)
or (b) by the resultant percentage of CONTRACTOR's
entitlement provided as applicable under subsection
6.1.3 of Section VI hereof, from the Crude Oil
remaining after deducting Operating costs.
The quantity of Crude Oil computed under (c) shall be the
maximum quantity to be supplied by CONTRACTOR in any Year
pursuant to this subsection 5.3.3 and deficiencies, if any,
shall not be carried forward to any subsequent Year; provided
that if for any Year the recoverable Operating Costs exceeds
the difference of the total sales proceeds from Crude Oil
produced and saved hereunder minus the First Tranche
Petroleum, as provided under Section VI hereof, CONTRACTOR
shall be relieved from this supply obligation for such Year.
The price at which such Crude Oil shall be delivered and sold
under subsection 5.3.3 of this subsection shall be fifteen
percent (15%) of the price as determined under subsection
6.1.2 of Section VI hereof.
CONTRACTOR shall not be obligated to transport such Crude Oil
beyond the point of export but upon request CONTRACTOR shall
assist in arranging transportation and such assistance shall
be without cost or risk to CONTRACTOR.
Notwithstanding the foregoing, for a period of five (5)
consecutive years (meaning sixty (60) months) starting the
month of the first delivery of Crude Oil produced and saved
from each new field in the Contract Area, the fee per barrel
for the quantity of Crude Oil supplied to the domestic market
from each such new field shall be equal to the price
determined in accordance with Section VI hereof for Crude Oil
from such field taken for the recovery of Operating Costs.
The proceeds in excess of the aforesaid fifteen percent (15%)
shall preferably be used to assist financing of continued
exploration efforts by CONTRACTOR in the Contract Area or in
other areas of the Republic of Indonesia if such opportunity
exist. In case no such opportunity can be demonstrated to
exist in accordance with good oil field practice, CONTRACTOR
shall be free to use such proceeds at its own discretion;
5.3.4. have the right to sell, assign, transfer, convey or otherwise
dispose of all or any part of its rights and interest under
this Contract to any Affiliated Company without the prior
written consent of PERTAMINA, provided that PERTAMINA shall be
notified in writing of the same beforehand and further
provided that any assignee whom such rights and interests are
assigned to under any clause of this Contract shall not hold
more than one Technical Assistance Contract or Production
Sharing Contract at any given time ;
5.3.5. have the right to sell, assign, transfer, convey or otherwise
dispose of all or any part of its rights and interests under
this Contract to parties other than Affiliated Companies with
the prior written consent of PERTAMINA and the Government of
the Republic of Indonesia, which consent shall not be
unreasonably withheld; also provided that any assignee whom
such rights and interests are assigned to under any clause of
this Contract shall not hold more than one Technical
Assistance Contract or Production Sharing Contract at any
given time, except during the first three Contract Years
CONTRACTOR shall hold more dominant participating interest
than any other participant of this Contract.
5.3.6. severally be subject to and pay to the Government of the
Republic of Indonesia the income tax and the final tax on
profit after tax deduction imposed on it pursuant to the
Indonesian Income Tax Law and its implementing regulations.
CONTRACTOR shall comply with the requirements of the tax law
in particular with respect to filing of returns, assessment of
tax and keeping and showing of books and records;
5.3.7. have the right of ingress to and egress from the Contract
Area and to and from facilities wherever located at all times;
5.3.8. have the right to use and have access to, and PERTAMINA shall
furnish all geological, geophysical, drilling, well,
production and other information held by PERTAMINA or by any
other government agency relating to the Contract Area,
including well locations maps;
5.3.9. not disclose geological, geophysical, petrophysical,
engineering, well logs and completion, status reports and any
other data as CONTRACTOR may compile during the term hereof to
third parties without PERTAMINA's written consent. This clause
shall survive after the termination of this Contract ;
5.3.10. the execution of the Work Program shall be exercised so as
not to conflict with Government obligations imposed on the
Government by international law.
5.4. PERTAMINA shall ;
5.4.1. except with respect to CONTRACTOR obligation to pay income tax
and final tax on profits after tax deductions as set forth in
subsection 5.3.6. of Section V hereinabove, assume and
discharge other Indonesian taxes of CONTRACTOR or JOB
including value added tax, transfer tax, import and export
duties on materials, equipment and supplies brought into
Indonesia by either Party through JOB, its contractors and
subcontractors, exactions in respect of property capital, net
worth, operations remittances or transactions including any
tax or levy upon or in connection with operations performed
hereunder by JOB.
PERTAMINA shall not be obliged to pay CONTRACTOR's income tax
and the final tax on profits after tax deduction, nor taxes on
tobaccos, liquor and personnel income tax, and income tax and
other taxes, not listed above of contractors and sub
contractors.
The obligations of PERTAMINA hereunder shall be deemed to have
been complied with by the delivery to CONTRACTOR within one
hundred and twenty (120) days after the end of each Calendar
Year, of documentary proof in accordance with the Indonesian
fiscal laws that liability for the above mentioned taxes has
been satisfied, except that with respect to any of such
liabilities which CONTRACTOR or JOB may be obliged to pay
directly, PERTAMINA shall reimburse CONTRACTOR only out of
PERTAMINA's share of production within sixty (60) days after
receipt of invoice therefor. PERTAMINA should be consulted
prior to payment of such taxes by CONTRACTOR or JOB or by any
other party on their behalf;
5.4.2. otherwise assist and expedite JOB's execution of the Work
Program by providing facilities, supplies and personnel
including, but not limited to, supplying or otherwise making
available all necessary visas, work permits, transportation,
security protection and rights of way and easements as may
be requested by JOB or CONTRACTOR and make available from the
resources under PERTAMINA's control. In the event such
facilities, supplies or personnel are not readily
available, then PERTAMINA shall promptly secure the use
of such facilities, supplies and personnel from alternative
sources. Expenses then incurred by PERTAMINA at JOB's or
CONTRACTOR's request shall be reimbursed to PERTAMINA by JOB
and the funds provided therefor shall be included in the
Operating Costs.
Such reimbursement will be made in United Stated Dollars
computed at the rate of exchange extended by the Indonesian
Government at the time of conversion. CONTRACTOR shall advance
to PERTAMINA through JOB before the beginning of each annual
Work Program a minimum amount of seventy-five thousand United
States Dollars (US$ 75,000) for the purpose of enabling
PERTAMINA to meet CONTRACTOR's Participating interest share of
Rupiah expenditure incurred pursuant to this subsection
If at any time during the annual Work Program period the
minimum amount advanced under this subsection 5.4.2. has been
fully expended, separate additional advance payments as may be
necessary to provide for CONTRACTOR's Participating interest
share of Rupiah expense estimated to be incurred by PERTAMINA
during the balance of such annual Work Program period will be
made. If any amount advanced hereunder is not expended by
PERTAMINA by the end of an annual Work Program period, such
unexpended amount shall be credited against the minimum amount
to be advanced pursuant to this subsection 5.4.2. for the
succeeding annual Work Program period;
5.4.3. ensure that at all times during the term hereof sufficient
Rupiah funds shall be available to cover the Rupiah
expenditures necessary for the execution of the Work Program;
5.4.4. have title to all original data resulting from the Petroleum
Operations including but not limited to geological,
geophysical, petrophysical, engineering, well logs and
completion, status reports and any other data JOB may compile
during the terms hereof, provided, however, that all such data
shall not be disclosed to third parties without informing
CONTRACTOR and giving CONTRACTOR the opportunity to discuss
the disclosure of such data if CONTRACTOR so desires and
further provided that CONTRACTOR may retain copies of such
data;
5.4.5. to the extent that it does not interfere with performance of
Petroleum Operations use the equipment which becomes its
property by virtue of this Contract solely for Petroleum
Operations envisaged under this Contract and if PERTAMINA
wishes to use such equipment for any alternative purpose, then
PERTAMINA shall first consult CONTRACTOR.
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SECTION VI
RECOVERY OF OPERATING COSTS AND HANDLING OF PRODUCTION
6.1 CRUDE OIL
The following shall apply to CONTRACTOR's participating interest share
of Crude Oil produced and saved from the Contract Area.
6.1.1 CONTRACTOR is authorized by PERTAMINA and obligated to market
its participating interest share of Crude Oil subject to the
provisions hereinafter set forth.
6.1.2 CONTRACTOR will recover its participating interest share
of all Operating Costs out of the sale proceeds or other
disposition of the required quantity of its participating
interest share of Crude Oil equal in value to such
Operating Costs which is produced and saved hereunder and not
used in Petroleum Operations except as provided in
subsections 7.1.4 and 7.1.5 of Section VII, CONTRACTOR
shall be entitled to take and receive and freely export
such Crude Oil. For the purpose of determining the quantity
of Crude Oil delivered to CONTRACTOR required to recover
said Operating Costs, the weighted average price of all
Crude Oil produced and sold from the Contract Area during the
Calendar Year will be used, excluding however deliveries made
pursuant to subsection 5.3.3 of Section V.If, in any Calendar
Year CONTRACTOR's participating interest share of Operating
Costs exceeds the value of its Participating Interest share of
Crude Oil produced and saved hereunder and not used in
Petroleum Operations, then the unrecovered excess shall
be recovered in the succeeding years.
6.1.3 Of the CONTRACTOR's participating interest share of Crude Oil
remaining after deducting Operating Costs the Parties shall be
entitled to take each Year:
(a) If the first Crude Oil of this Contract Area is from a
Marginal Field as described herein below, for such
production the parties shall be entitled to take and
receive each Year, respectively sixty-four point two eight
five seven percent (64.2857%) for PERTAMINA and
thirty-five point seven one four three percent (35.7143%)
for CONTRACTOR over the life of such field.
A "Marginal Field" is the first field of the Contract Area
proposed by CONTRACTOR for development and approved by
PERTAMINA, capable of Crude Oil production not exceeding
ten thousand (10.000) Barrels daily average projected for
the initial two (2) production years (24 consecutive
production months).
Marginal Field production represents a separate segment from
the others.
(b) For Crude Oil production as a result of tertiary recovery
of enhanced oil recovery (EOR) projects, the parties shall
be entitled to take and receive each Year, respectively
sixty-four point two eight five seven percent (64.2857%)
for PERTAMINA and thirty five point seven one four three
percent (35.7143%) for CONTRACTOR.
Tertiary recovery EOR production represents a separate
segment from the others.
(c) For Crude Oil production from pre-Tertiary reservoir rocks,
the parties shall be entitled to take and receive each
Year, respectively as follows
(i) PERTAMINA sixty-four point two eight five seven
percent (64.2857%) and CONTRACTOR thirty-five point
seven one four three percent (35.7143%) for the
segment of zero (0) to fifty thousand (50,000)
Barrels daily average of all of such pre-Tertiary
production of the Contract Area for the Calendar
Year;
(ii) PERTAMINA seventy-three point two one four three
percent (73.2143%) and CONTRACTOR twenty-six point
seven eight five seven percent (26.7857%) for the
segment of fifty thousand and one (50,001) Barrels to
one hundred and fifty thousand (150,000) Barrels
daily average of all of such pre-Tertiary production
of the Contract Area for the Calendar Year;
(iii) PERTAMINA eighty-two point one four two nine percent
(82.1429%) and CONTRACTOR seventeen point eight five
seven one percent (17.8571%) for the segment of more
than hundred fifty thousand (150,000) Barrels daily
average of all of such pre-Tertiary production of
the Contract Area for the Calendar Year;
Pre-Tertiary reservoir rocks mean petroleum reservoir
rocks deposited or formed in pre-Tertiary times.
(d) For Crude Oil production of the Contract Area other than
those under paragraphs (a), (b), and (c) hereinabove,
PERTAMINA and CONTRACTOR shall be entitled to take and
receive each Year seventy three point two one four three
percent (73.2143%) and twenty-six point seven eight five
seven percent (26.7857%) respectively.
Each of the above segments represent separate production
segment from the others.The deduction of investment credit and
Operating Costs before the entitlements are taken by each
respective Party as provided under this clause 6.1.3.shall be
subject to the following proration method: for each, Calendar
Year, the recoverable investment credit and Operating Costs
shall be apportioned for deduction from the production of each
of the segment as hereinabove defined, at the same ratios as
the production from each such segment bears to the total
production of such Year.
In the event that Crude Production from a field qualifies for
more than one of the definitions set out in (a), (b) and (c)
of this clause 6.1.3, CONTRACTOR will have the option to elect
which one of the clause shall be applied. Such election when
made shall not be changed.
6.1.4 Title to CONTRACTOR's portion of Crude Oil under subsections
6.1.3, 6.1.7 and 6.3.1 of this Section VI as well as to such
portion of Crude Oil exported and sold to recover its
participating interest share of Operating Costs shall pass to
CONTRACTOR at the point of export, or, in the case of Crude
Oil delivered to PERTAMINA pursuant to subsection 5.3.3 of
Section V, paragraph (c) or otherwise, at the point of
delivery.
6.1.5 CONTRACTOR will use its best reasonable efforts to market
such Crude Oil to the extent markets are available. Either
Party shall be entitled to take and receive their respective
portion in kind.
6.1.6 If PERTAMINA elects to take any of its portion of Crude Oil
in kind, it shall so advise CONTRACTOR in writing not less
than ninety (90) days prior to the commencement of each
semester of each Calendar Year specifying the quantity which
it elects to take in kind, such notice to be effective
for the ensuing semester of each Calendar Year provided,
however, that such election shall not interfere with the
proper performance of any Crude Oil sales agreement for
Petroleum produced within the Contract Area which CONTRACTOR
has executed prior to the notice of such election. Failure
to give such notice shall be conclusively deemed to evidence
the election not to take in kind. Any sale of PERTAMINA's
portion of Crude Oil shall not be for a term of more
than one (1) Calendar Year without PERTAMINA's consent.
6.1.7. (a) CONTRACTOR may recover an investment credit amounting
to fifteen decimal seven eight zero zero percent
(15.7800%) of the capital investment cost directly
required for developing Crude Oil production
facilities as provided under clause 2.3.3 of Exhibit
"C" hereof, of a new field producing from Tertiary
reservoir rock out of deduction from gross production
before recovering Operating Costs, commencing in the
earliest production Year or Years before tax
deduction (to be paid in advance in such production
Year when taken).
(b) CONTRACTOR may recover an investment credit amounting
to one hundred and two point one four zero zero
percent (102.1400%) of the capital investment cost
directly required for developing Crude Oil production
facilities as provided under clause 2.3.3 of Exhibit
"C" hereof, of a new field producing from
pre-Tertiary reservoir rock out of deduction from
gross production before recovering Operating Costs,
commencing in the earliest production Year or Years
before tax deduction (to be paid in advance in such
production Year when taken).
The investment credit referred to in paragraph (a) and (b)
may be applied to new secondary recovery and tertiary
recovery enhanced oil recovery project but are, however, not
applicable to any interim production schemes nor further
investment to enhance production and reservoir drainage in
excess of what was contemplated in the original development
program as approved by PERTAMINA.
6.1.8 PERTAMINA shall repay CONTRACTOR only out of PERTAMINA's
participating interest share of Crude Oil produced each
Year and saved hereunder and not used in Petroleum
Operations an amount equal to the funds provided by
CONTRACTOR for the PERTAMINA's participating interest share
as provided under subsection 4.3 of Section IV, plus
an uplift of fifty percent (50%) on PERTAMINA's participating
interest share of the exploration and development
funds as provided under subsection 4.3(a), 4.3(b) and
4.3(d) of Section IV hereof. If, in any Calendar Year,
such repayment plus 50% uplift exceed the value of
PERTAMINA's participating interest share of Crude Oil
produced and saved hereunder and not used in Petroleum
Operations, then the excess shall be repaid in the
succeeding Year or Years.
The above repayment by PERTAMINA will be made after PERTAMINA
has first deducted the amount from its participating interest
share of annual production to finance its participating
interest share in the annual operating expenses for the
corresponding Year.
6.2 NATURAL GAS
6.2.1. Any Natural Gas produced from the Contract Area to the extent
not used in Petroleum Operation hereunder, may be flared if
the processing or utilization thereof is not economical. Such
flaring shall be permitted to the extent that gas is not
required to effectuate the maximum economic recovery of
Petroleum by secondary recovery operations, including
repressuring and recycling.
6.2.2. Should PERTAMINA and CONTRACTOR consider that the processing
and utilization of Natural Gas is economical and choose to
participate in the processing and utilization thereof, in
addition to that used in secondary recovery operations, then
the construction and installation of facilities for such
processing and utilization shall be carried out pursuant to an
approved Work Xxxxxxx.Xx is hereby agreed that all costs and
revenues derived from such processing, utilization and sale
of Natural Gas shall be treated on a basis equivalent to that
provided for herein concerning Petroleum Operation and
disposition of Crude Oil except of the Natural Gas, or the
propane and butane fractions extracted from Natural Gas
but not spiked in Crude Oil,of the CONTRACTOR's participating
interest share of Natural Gas remaining after deducting
Operating Costs associated with the Natural Gas
Operations as stipulated in Exhibit "C", PERTAMINA shall be
entitled to take and receive thirty seven point five zero zero
zero percent (37.5000%) and CONTRACTOR shall be entitled to
take and receive sixty two point five zero zero zero percent
(62.5000%).
6.2.3 CONTRACTOR may recover an investment credit amounting to one
hundred and two point one four zero zero percent (102.1400%)
of the capital investment cost directly required for
developing Natural Gas production facilities as provided under
clause 2.3.3 of Exhibit "C" hereof of a new field producing
from pre-Tertiary reservoir rocks out of deduction from gross
production before recovering Operating Costs, commencing in
the earliest production Year or Years before tax deduction (to
be paid in advance in such production Year when taken).
6.2.4 In the event, however, CONTRACTOR considers that the
processing and utilization of Natural Gas is not economical,
then PERTAMINA may choose to take and utilize such Natural Gas
that would otherwise be flared, all costs of taking and
handling to be for the sole account and risk of PERTAMINA.
6.3 FIRST TRANCHE PETROLEUM
6.3.1. Notwithstanding anything to the contrary elsewhere contained
in this Contract, the Parties shall be entitled to first take
and receive each Year a quantity of Petroleum of twenty
percent (20%) of CONTRACTOR's participating interest share of
the Petroleum Production for each such Year, called the "First
Tranche Petroleum ", before any deduction for investment
credit and recovery of Operating Costs and handling of
production as provided under this Section VI.
6.3.2. Such First Tranche Petroleum for each Calendar Year is further
shared for Crude Oil between PERTAMINA and CONTRACTOR in
accordance with the sharing split provided under subsection
6.1.3 of this Section VI, by apportioning it as applicable, to
the respective production segment as therein defined, at the
same ratios as the production from each such segment over the
total production of the year.
6.3.3. For Natural Gas, such First Tranche Petroleum is shared
between PERTAMINA and CONTRACTOR in accordance with the
sharing split provided under subsection 6.2.2 of this Section
VI.
--o0o--
SECTION VII
VALUATION OF CRUDE OIL
7.1 Crude Oil sold to third parties shall be valued as follows:
7.1.1. All Crude Oil taken by CONTRACTOR including its share and the
share for the recovery of Operating Costs, and sold to third
parties shall be valued at the net realized price F.O.B.
Indonesia received by CONTRACTOR for such Crude Oil.
7.1.2. All of PERTAMINA's Crude Oil taken by CONTRACTOR and sold to
third parties shall be valued at the net realized price F.O.B.
Indonesia received by CONTRACTOR for such Crude Oil.
7.1.3. PERTAMINA shall be duly advised before the sales referred to
in paragraphs 7.1.1 and 7.1.2 hereinabove are made.
7.1.4. Subject to any existing Crude Oil sales agreement, if more
favorable terms are available to PERTAMINA for the Crude Oil
referred to in paragraphs 7.1.1 and 7.1.2 hereinabove, except
CONTRACTOR's share of Crude Oil, then PERTAMINA shall so
advise CONTRACTOR in writing (with a copy to JOB) not less
than ninety (90) days prior to the commencement of the
deliveries under PERTAMINA's proposed sales contract. Forty
five (45) days prior to the start of such deliveries,
CONTRACTOR shall notify PERTAMINA (with copy to JOB) regarding
CONTRACTOR's intention to meet the more favorable net realized
price in relation to the quantity and period of delivery
concerned in said proposed sales contract. In the absence of
such notice PERTAMINA shall market said Crude Oil.
7.1.5 PERTAMINA's marketing of such Crude Oil as referred to in
clause 7.1.4 herein above shall continue until forty five (45)
days after PERTAMINA's net realized price on said Crude Oil
becomes less favorable. CONTRACTOR's obligation to market said
Crude Oil shall not apply until after PERTAMINA has given
CONTRACTOR at least forty five (45) days advance notice (with
a copy to JOB) of its desire to discontinue such sales. As
long as PERTAMINA is marketing the Crude Oil referred to
above, it shall account to CONTRACTOR on the basis of the more
favorable net realized price.
7.1.6 Without prejudice to any provisions of Section VI and Section
VII, CONTRACTOR may at its option transfer to PERTAMINA during
any Calendar Year the right to market any Crude Oil which is
in excess of normal and contractual requirements provided that
the price is not less than the net realized price from the
Contract Area. PERTAMINA's request stating the quantity and
expected loading date must be submitted in writing to JOB
(with a copy to CONTRACTOR) at least thirty (30) days prior to
lifting said Crude Oil. Such lifting must not interfere with
CONTRACTOR's scheduled tanker movements. PERTAMINA shall
account to CONTRACTOR in respect to any sale made by it
hereunder.
7.1.7. PERTAMINA shall have the option, in any Year in which the
quantity of Petroleum to which it is entitled pursuant to
subsections 6.1.3 and 6.3.1 of Section VI hereof is less than
fifty percent (50%) of CONTRACTOR's participating interest
share of production by ninety (90) days written notice in
advance of that Year, to market for the account of CONTRACTOR,
at the price provided for in Section VII hereof for the
recovery of Operating Costs, a quantity of Crude Oil which
together with PERTAMINA's entitlement under subsections 6.1.3
and 6.3.1 of Section VI hereof equals fifty percent (50%) of
CONTRACTOR`s participating interest share of Crude Oil
produced and saved from the Contract Area.
7.2 Crude Oil sold to other than third parties shall be valued as follows:
7.2.1. By using the weighted average per unit price received by
CONTRACTOR and PERTAMINA from sales to third parties
excluding, however, commissions and brokerages paid in
relation to such third party sales during the three (3) months
preceding such sale adjusted as necessary for quality, grade
and gravity.
7.2.2. If no such third party sales have been made during such period
of time, then on the basis used to value Indonesian Crude Oil
of similar quality, grade and gravity and taking into
consideration any special circumstances with respect to sales
of such Indonesian Crude Oil.
7.3. Third party sales referred to in Section VII shall mean sales by
CONTRACTOR to purchasers independent of CONTRACTOR with whom (at the time
sale is made) CONTRACTOR has no contractual interest involving directly
or indirectly any joint interest.
7.4. Commission or brokerages incurred in connection with sales to third
parties, if any, shall not exceed the customary and prevailing rate.
7.5. During any given Calendar Year, the handling of production (i.e. the
implementation of the provisions of Section VI hereof )and the proceeds
thereof shall be provisionally dealt with on the basis of the relevant
Work Program and Budget of Operating Costs based upon estimates of
quantities of Crude Oil to be produced, of internal consumption in
Indonesia, of marketing possibilities, of prices and other sale
conditions as well as of any other relevant factor. Within thirty (30)
days after the end of the said given Year, adjustments and cash
settlements between the Parties shall be made on the basis of the actual
quantities, amounts and prices involved, in order to comply with the
provisions of this Contract.
7.6 In the event the Petroleum Operations involved the segregation of Crude
Oils to different quality and/or grade and if the Parties do not
otherwise mutually agree:
7.6.1 any and all provisions of this Contract concerning evaluation
of the Crude Oil shall separately apply to each segregated
Crude Oil;
7.6.2 each Crude Oil produced and segregated in a given Year shall
contribute to;
(a) the "required quantity" destined in such Year to the
recovery of all investment credit and Operating Costs
pursuant to subsections 6.1.2 and 6.1.7 of the
Sections VI hereof;
(b) the "required quantity" of Crude Oil to which a Party
is entitled in such Year pursuant to subsections
6.1.3 and 6.3.1 of Section VI hereof;
(c) the "required quantity" of Crude Oil which CONTRACTOR
agrees to sell and deliver in such Year for domestic
consumption in Indonesia pursuant to paragraph (c) of
subsection 5.3.3 of Section V hereof, out of the
share of Crude Oil to which it is entitled pursuant
to subsections 6.1.3 and 6.3.1 of Section VI;
with quantities, each of which shall bear to the respective
"required quantity" (referred to in (a) or (b) or (c) above)
the same proportion as the quantity of such Crude Oil produced
and segregated in such given Year bears to the total quantity
of Crude Oil produced in such Year from the Contract Area.
--o0o--
SECTION VIII
COMPENSATION, ASSISTANCE, AND PRODUCTION BONUS
8.1 CONTRACTOR shall pay to PERTAMINA as compensation for Information now
held by PERTAMINA the sum of One Million United States Dollars (US$
1,000,000), after approval of this Contract by the Government of The
Republic of Indonesia in accordance with the provisions of applicable
law. Such payment shall be made within thirty (30) days after the
Effective Date.
8.2 CONTRACTOR shall within thirty (30) days after PERTAMINA's request
during the first Contract Year provide PERTAMINA with equipment or
services in an amount not exceeding Two Hundred and Seventy Five
Thousand United States Dollars (US$ 275,000), for exploration and
production activities in Indonesia's Petroleum Industry.
8.3 CONTRACTOR shall pay to PERTAMINA the sum of One Million United States
Dollars (US$ 1,000,000) within thirty (30) days after cumulative
Petroleum production from the Contract Area has reached fifteen (15)
million Barrels of Oil Equivalent (15 MMBOE); and
CONTRACTOR shall pay to PERTAMINA the sum of One Million United States
Dollars (US$ 1,000,000) within thirty (30) days after cumulative
Petroleum production from the Contract Area has reached twenty (20)
million Barrels of Oil Equivalent (20 MMBOE); and
CONTRACTOR shall pay to PERTAMINA the sum of One Million United States
Dollars (US$ 1,000,000) within thirty (30) days after cumulative
Petroleum production from the Contract Area has reached twenty five (25)
million Barrels of Oil Equivalent (25 MMBOE).
8.4 Such compensation and production bonus payments shall be solely borne by
CONTRACTOR and not included in the Operating Costs.
--o0o--
SECTION IX
PAYMENTS
9.1 All payments which this Contract obligates CONTRACTOR to make PERTAMINA
or the Government of the Republic of Indonesia shall be made in United
States dollar currency at a bank to be designated by each of them and
agreed upon by Bank Indonesia or at CONTRACTOR's election, other
currency acceptable to them, except that CONTRACTOR may make such
payments in Indonesian Rupiah to the extent that such currencies are
realized as a result of the domestic sales of Crude Oil or Natural Gas
or Petroleum products, if any.
9.2 All payments due to CONTRACTOR shall be made in United States dollars or
at PERTAMINA's election, other currencies acceptable to CONTRACTOR at a
bank to be designated by CONTRACTOR.
9.3 Any payments required to be made pursuant to this Contract shall unless
otherwise specified, be made within thirty (30) days following the end
of the month in which the obligation to make such payment occurs.
--o0o--
SECTION X
TITLE TO EQUIPMENT
10.1 Equipment purchased by the Parties or through JOB pursuant to the Work
Program becomes the property of PERTAMINA (in case of import, when
landed at the Indonesian ports of import) and will be used in Petroleum
Operations hereunder.
10.2 The provisions of subsection 10.1 of this Section X shall not apply to
leased equipment belonging to third parties who perform services as a
contractor which equipment may be freely exported from Indonesia, and
to leased equipment belonging to Indonesian nationals.
--o0o--
SECTION XI
CONSULTATION AND ARBITRATION
11.1. Periodically, PERTAMINA and CONTRACTOR shall meet to discuss the conduct
of the Petroleum Operations envisaged under this contract and will make
every effort to settle amicably any problem arising therefrom.
11.2. Disputes, if any, arising between PERTAMINA and CONTRACTOR
relating to this Contract or the interpretation and performance of
any of the clauses of this Contract , and which cannot be settled
amicably, shall be submitted to the decision of arbitration.
PERTAMINA on the one hand and CONTRACTOR on the other hand shall
each appoint one arbitrator and so advise the other Party and
these two arbitrators will appoint a third. if either Party fails
to appoint an arbitrator within thirty (30) days after receipt of
a written request to do so such arbitrator shall, at the request of
the other Party, if the Parties do not otherwise agree, be
appointed by the President of the International Chamber of Commerce.
If the first two arbitrators appointed as aforesaid fail to agree on
a third within thirty (30) days following the appointment of the
second arbitrator, the third arbitrator shall, if Parties do not
otherwise agree, be appointed, at the request of either Party, by the
President of the International Chamber of Commerce.If an arbitrator
fails or is unable to act, his successor will be appointed in the
same manner as the arbitrator whom he succeeds.
11.3. The decision of a majority of the arbitrators shall be final and
binding upon the Parties.
Arbitration shall be conducted at a place to be agreed upon by both parties and
in accordance with the Rules of Conciliation and Arbitration of the
International Chamber of Commerce.
--o0o--
SECTION XII
EMPLOYMENT AND TRAINING OF INDONESIAN PERSONNEL
12.1 JOB shall employ qualified Indonesian personnel in its operations and
after commercial production commences will under-take the schooling and
training of Indonesian personnel for labor and staff positions including
administrative and executive management positions of JOB. At such time
CONTRACTOR shall also consider with PERTAMINA a program of assistance
for training of PERTAMINA's personnel.
12.2 Costs and expenses of training Indonesian personnel for operations
hereunder shall be included in Operating Costs. Costs and expenses for a
program of training for PERTAMINA `s personnel shall be borne on a basis
to be agreed by PERTAMINA and CONTRACTOR.
--o0o--
SECTION XIII
TERMINATION
13.1 This contract cannot be terminated during the first three (3) years as
from the Effective Date, except by provisions as
stipulated in subsection 13.3 of section XIII hereunder.
13.2 At any time following the end of the third Contract Year as from the
effective Date, if in the opinion of CONTRACTOR, circumstances do not
warrant continuation of the Petroleum Operations CONTRACTOR may, by
giving written notice to that effect to PERTAMINA and after consultation
with PERTAMINA, relinquish its rights and be relieved of its obligations
pursuant to this Contract, except such rights and obligation as related
to the period prior to such relinquishment.
Without prejudice to the provisions stipulated in subsection 13.1 hereinabove,
either Party shall be entitled to terminate this contract in its
entirety by a ninety (90) days written notice if a major breach of
Contract is committed by the other Party, provided that conclusive
evidence thereof is proved by arbitration as stipulated in section XI.
--o0o--
SECTION XIV
BOOKS AND ACCOUNTS, AND AUDITS
14.1 BOOKS AND ACCOUNTS
Subject to the requirements of subsection 5.3.6 of section V hereof,
PERTAMINA shall be responsible for keeping complete books and accounts
reflecting all Operating Costs as well as monies received from the sales
of Crude Oil and Natural Gas, consistent with modern petroleum industry
practices and proceedings as described in exhibit "C" attached hereto.
Should there be any inconsistency between the provisions of this
contract, and the provisions of Exhibit "C" then the provisions of this
Contract shall prevail. Until such time that commercial production
commences, however, PERTAMINA delegates to JOB its obligations to keep
books and accounts.
14.2 AUDITS
14.2.1 CONTRACTOR shall have the right to inspect and audit
PERTAMINA's and JOB's books and accounts relating to this
Contract, as the case may be, for any Calendar Year within
the one (1) year period following the end of such Calendar
Year. Any such audit will be satisfied within twelve (12)
months after its commencement . Any exception must be made in
writing within sixty (60) days following the end of such
audit and failure to give such written exception within such
time shall establish the correctness of PERTAMINA's and JOB's
books and accounts.
14.2.2 PERTAMINA and the Government of the Republic of Indonesia
shall have the right to inspect and audit JOB's books and
accounts relating to this Contract for any Calendar Year
covered by this Contract . Any exception must be made in
writing sixty (60) days following the completion of such
audit.
In addition, PERTAMINA and the Government of the Republic of
Indonesia may require JOB to engage independent accountants
to examine, in accordance with generally accepted auditing
standards, JOB's books and accounts relating to this Contract
for any Calendar Year or perform such auditing procedures as
deemed appropriate by PERTAMINA. A copy of the independent
accountant's report or any exceptions shall be forwarded to
PERTAMINA and CONTRACTOR within sixty (60) days following the
completion of such audit. The cost related to the engagement
of such independent accountants shall be included in the
Operating Costs.
--o0o--
SECTION XV
PARTICIPATION
15.1 PERTAMINA shall have the right to demand from CONTRACTOR that a seven
and one half percent (7.5%) undivided interest in the total rights and
obligations under this Contract be offered to either itself or a
limited liability company to be designated by PERTAMINA the
shareholders of which shall be Indonesian nationals (both hereinafter
called "the Indonesian Participant").
15.2 The right referred to in subsection 15.1 of this section XV shall lapse
unless exercised by PERTAMINA not later than three (3) months after
CONTRACTOR's notification by registered letter to PERTAMINA of its
first discovery of petroleum in the Contract area, which in the
judgement of CONTRACTOR after consultation with PERTAMINA can be
produced commercially. PERTAMINA shall make its demand known to
CONTRACTOR by registered letter.
15.3 CONTRACTOR shall make its offer by registered letter to the Indonesian
Participant within one (1) month after receipt of PERTAMINA's
registered letter referred to in subsection 15.2 of this Section XV.
CONTRACTOR's letter shall be accompanied by a copy of this Contract and
a draft Operating Agreement embodying the manner in which CONTRACTOR
and the Indonesian Participant shall cooperate. The main principles of
the draft Operating Agreement are contained in Exhibit "F" to this
Contract .
15.4 The offer by CONTRACTOR to the Indonesian Participant shall be
effective for a period of six months. If the Indonesian Participant has
not accepted this offer by registered letter to CONTRACTOR within the
said period, CONTRACTOR shall be released from the obligation referred
to in this Section XV.
15.5 In the event of acceptance by the Indonesian Participant of
CONTRACTOR's offer. the Indonesian Participant shall be deemed to have
acquired the undivided interest on the date of CONTRACTOR's
notification to PERTAMINA referred to in subsection 15.2 in this
Section XV and thereafter, the Indonesian Participant shall bear and
pay its proportionate share of all Operating Costs .
15.6 For the acquisition of a seven and one half percent (7.5%) undivided
interest in the total of the rights and obligations arising out of this
Contract, the Indonesian Participant shall reimburse CONTRACTOR an
amount equal to seven and one half percent (7.5%) of the sum of
Operating Costs and seven and one half percent (7.5%) of the
compensation paid to PERTAMINA for information and signature bonus
referred to Section VIII to the extent such expenditures have been
incurred by CONTRACTOR for and on behalf of its activities in the
Contract Area up to the date of CONTRACTOR's notification to PERTAMINA
mentioned in subsection 15.2 of this Section XV.
15.7 At the option of the Indonesian Participant the said amount shall be
reimbursed ;
15.7.1 either by a transfer of the said amounts by the Indonesian
Participant within three (3) months after the date of its
acceptance of CONTRACTOR's offer referred to in subsection
15.3 of this section XV, to CONTRACTOR's account with the
banking institution to be designated by it, in the currency
in which the relevant costs have been financed; or
15.7.2 by way of a "payment out of production" of fifty percent
(50%) of the Indonesian Participant 's production
entitlements under this Contract, equal in total to one
hundred and fifty percent (150%) of the said amount set forth
in the preceding subsection 15.1 of this section XV and
commencing as from the first sale of Petroleum produced and
saved from the Contract Area
.
15.8 At the time of its acceptance of CONTRACTOR's offer, the Indonesian
Participant shall state whether it wishes to reimburse in cash or out
of production in the manner indicated under clauses 15.7.1 and 15.7.2
of this section XV.
--o0o--
SECTION XVI
OTHER PROVISIONS
16.1 NOTICES
Any notices required or given by either Party to the other shall be
deemed to have been delivered when properly acknowledged for receipt by
the receiving Party. All such notices shall be addressed to:
PERUSAHAAN PERTAMBANGAN MINYAK XXX GAS BUMI XXXXXX
Xxxxx Xxxxxxx Xxxxx 0-X
Xxxxxxx, Xxxxxxxxx
ATTN : Senior Vice President Director
Exploration and Production
SABA JATILUHUR LIMITED
Xx. XXX Xxxxx Xx. 00X
Xxxxxxxx Xxxxx
Xxxxxxx 00000, Xxxxxxxxx
ATTN: Chief Representative
Either Party may substitute or change such address on written notice
thereof to the other .
16.2 LAWS AND REGULATIONS
16.2.1 The laws of the Republic of Indonesia shall apply to this Contract
16.2.2 No term or provision of this Contract, including the
agreement of the Parties to submit to arbitration hereunder,
shall prevent or limit the Government of the Republic of
Indonesia from exercising its inalienable rights.
16.3 SUSPENSION OF OBLIGATIONS
16.3.1 Any failure or delay on the part of either Party or JOB in
the performance of their obligation or duties hereunder shall
be excused to the extent attributable to Force Majeure.
16.3.2 If operations are delayed, curtailed or prevented by such
causes, then the time for carrying out the obligations
thereby affected , the term of this Contract and all rights
and obligations hereunder shall be extended for a period
equal to the period thus involved.
16.3.3. The Party or JOB whose ability to perform its obligations is
so affected shall notify the other Party (and JOB, it
applicable) thereof in writing, stating the cause and the
Parties and JOB shall do all reasonably within their power to
remove such cause.
16.4 PROCESSING OF PRODUCTS
16.4.1 CONTRACTOR shall be willing to consider to come to another
contract or loan agreement for the processing of products
derived from the Petroleum Operations hereunder, on mutually
agreeable terms.
16.4.2 Within the framework of the preceding principles CONTRACTOR
would agree on the conditions stated below to have refined in
Indonesia twenty eight decimal five seven percent (28.57%) of
the share of crude oil to which it is entitled pursuant to
Section 6.1.3 hereof, and should no refining capacity be
available therefor to set up a corresponding refining
capacity for that purpose . The conditions above referred to
are that :
(a) PERTAMINA has first requested CONTRACTOR thereto;
(b) CONTRACTOR's share of crude oil pursuant to
subsections 6.1.3 and 6.3.1 of section VI hereof be
not less than one hundred thousand (100,000) Barrels
per day, and;
(c) if refining capacity has to be erected that
setting up and use of such refining capacity be
economical in the judgement of the Parties.
16.4.3 It is further agreed that CONTRACTOR may in lieu of setting
up such refining capacity , but subject to the same
conditions, make an equivalent investment in another project
related to petroleum or petrochemical industries.
16.4.4 Petroleum to be delivered to such facilities would be sold by
CONTRACTOR at the net realized price F.O.B Indonesia received
by CONTRACTOR established pursuant to Section VII hereof or
at another mutually agreed price.
--o0o--
SECTION XVII
EFFECTIVENESS
17.1 This Contract shall come into effect on the Effective Date.
17.2 This Contract shall not be annulled, amended or modified in any
respect, except by the mutual consent in writing of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Contract, in quadruplicate
and in the English language, as of the day and year first above written.
PERUSAHAAN PERTAMBANGAN SABA JATILUHUR
MINYAK XXX GAS BUMI NEGARA LIMITED
(PERTAMINA)
/s/ /s/
---------------------------- ------------------
President Director and President
Chief Executive Officer
APPROVED BY THE MINISTER OF MINING AND ENERGY
This __22nd_day of September,1997,
on behalf of the
GOVERNMENT OF THE REPUBLIC OF INDONESIA
/s/-----------------------
EXHIBIT - A
This Exhibit "A" its attached to an made an integral part of the Contract
Between PERUSAHAAN PERTAMBANGAN MINYAK XXX GAS BUMI NEGARA and SABA JATILUHUR
LIMITED dated the 22nd day of September 1997
Coordinates of Contract Area:
Seri Longitude Latitude
A 106(degree) 37' E 06(degree) 48' S
B 106(degree) 37' E 06(degree) 40' S
C 106(degree) 45' E 06(degree) 22' S
D 106(degree) 45' E 06(degree) 22' S
E 106(degree) 49' E 06(degree) 27' S
F 106(degree) 49' E 06(degree) 27' S
G 107(degree) 02' E 06(degree) 27' S
H 107(degree) 02' E 06(degree) 26' S
I 107(degree) 10' E 06(degree) 26' S
J 107(degree) 10' E 06(degree) 29' S
K 107(degree) 24' E 06(degree) 29' S
L 107(degree) 24' E 06(degree) 33' S
M 107(degree) 41' E 06(degree) 33' S
N 107(degree) 41' E 06(degree) 39' S
O 107(degree) 58' E 06(degree) 39' S
P 107(degree) 58' E 06(degree) 49' S
Q 108(degree) 30' E 06(degree) 49' S
R 108(degree) 30' E 07(degree) 00' S
S 107(degree) 42' E 07(degree) 00' S
T 107(degree) 42' E 06(degree) 48' S
Page A-1
EXHIBIT - B
This Exhibit "B" its attached to and made an integral part of the Contract
Between PERUSAHAAN PERTAMBANGAN MINYAK XXX GAS BUMI NEGARA and SABA JATILUHUR
LIMITED dated the 22nd day of September 1997
LOCATION MAP
[GRAPHIC OMITTED]
Page B-1
CONTRACT AREA: JATILUHUR, ONSHORE W.JAVA
EXHIBIT "C"
This Exhibit "C" is attached to and made an integral part of the Contract
between PERUSAHAAN PERTAMBANGAN MINYAK XXX GAS BUMI NEGARA and SABA JATILUHUR
LIMITED dated the 22nd day of September 1997
ACCOUNTING PROCEDURE
ARTICLE 1
General Provisions
1.1. Definitions
The accounting procedure herein provided for is to be followed and
observed in the performance of either Party's obligations under the
Contract to which this Exhibit is attached. The definitions and terms
appearing in this Exhibit "C" shall have the same meaning as those defined
in said Contract.
1.2. Accounting and Statements
PERTAMINA's and JOB's, as the case may, accounting records and books will
be kept in accordance with generally accepted and recognized accounting
systems consistent with modern petroleum industry practices and
procedures. Books and reports will be maintained and prepared in
accordance with methods established by PERTAMINA. The chart of accounts
and related account definitions will be prescribed by PERTAMINA. Reports
will be organized for the use of PERTAMINA in carrying out its management
responsibilities under this Contract.
ARTICLE II
Operating Costs
2.1. Definition
For any Year in which commercial production occurs, Operating Costs
consists of (a) current Year non-capital costs, (b) current Year's
depreciation for capital costs and (c) current Year allowed recovery of
prior Year's unrecovered Operating Costs.
2.2. Non-Capital costs
Non-capital costs means those Operating costs incurred that relate to
current Year's operations. In addition to costs relating only to current
operations, the costs of surveys and the intangible costs of drilling
exploratory and development xxxxx, as described in paragraphs 2.2.3,
2.2.4 and 2.2.5 below, will be classified as non-capital costs.
Non-capital costs include, but are not limited to the following :
2.2.1. Operations
Labor, materials and services used in day to day oil well
operations, oil field production facilities operations,
secondary recovery operations, storage handling
transportation, and delivery operations, gas well operations,
gas field production facilities operations, gas
transportation, and delivery operations, gas processing
auxiliaries and utilities, and other operating activities
including repairs and maintenance;
2.2.2. Office, services and general administration
General services including technical and related services,
material services, transportation, rental of specialized and
heavy engineering equipment, site rentals and other rentals of
services and property, personnel expenses, public relation and
expenses abroad;
2.2.3. Production drilling
Labor, materials and services used in drilling xxxxx with the object
of penetrating a proven reservoir, including the drilling of
appraisal xxxxx as well as redrilling, deepening or
recompleting xxxxx, and access roads leading directly to
xxxxx;
2.2.4. Exploratory drilling
Labor, materials and services used in drilling of xxxxx with
the object of finding unproven reservoirs of oil and gas, and
access roads leading directly to xxxxx;
2.2.5. Surveys
Labor, materials and services used in aerial, geological,
topographical, geophysical and seismic surveys, and core hole
drilling;
2.2.6. Other exploration expenditures
Auxiliary or temporary facilities having lives of one year or
less used in exploration and purchased geological and
geophysical information;
2.2.7. Training
Training of Indonesian personnel as set forth in Section XII
of the Contract.
2.3. Capital Costs
Capital Costs means expenditures made for items which normally have a
useful life beyond the year incurred. A reasonable annual allowance for
depreciation of capital costs, computed as described in Article III
Section 3.1. will be allowed as recoverable Operating Costs for the
current year. Capital Costs include classification described herein but
are not limited to the following specifications;
2.3.1. Construction utilities and auxiliaries
Workshops, power and water facilities, warehouses, cargo
jetties and field roads except the access roads
mentioned in paragraphs 2.2.3. and 2.2.4. above;
2.3.2. Construction housing and welfare
Housing, recreational facilities and other tangible property
incidental to construction;
2.3.3. Production facilities
Wellhead equipment, subsurface lifting equipment, production
tubing, sucker rods, surface pumps, flow lines, gathering
equipment, delivery lines and storage facilities. Costs of oil
jetties and anchorages, treating plants and equipment,
secondary recovery systems, gas plants and steam systems;
2.3.4. Movables
Surface and subsurface drilling and production tools,
equipment and instruction, barges, floating craft, automotive
equipment, aircraft, construction equipment furniture and
office equipment and miscellaneous equipment.
ARTICLE III
Accounting Methods To Be Used To Calculate
Recovery of Operating Costs
3.1. Depreciation
Depreciation will be calculated beginning the Year in which the asset
is placed into service with a full year's depreciation allowed in the
initial year. The method used to calculate each Year's allowable
recovery of capital cost is the declining balance depreciation method.
Calculation of each such Year's allowable recovery of capital costs
should be based on the individual asset's capital costs at the
beginning of each Year multiplied by the depreciation factor as
follows, for :
Group 1 = 50% Group 2 = 25% Group 3 = 10%
For the Groups of capital assets for any Crude Oil project apply useful
lives as follows:
GROUP 1:
Automobiles 1.5 years
Trucks - light (13,000 pounds or less)
and tractor units 2 years
Trucks - heavy (more than 13,000 pounds) 3 years
Buses 4.5 years
Aircraft 3 years
Construction Equipment 3 years
Furniture and Office Equipment 5 years
GROUP 2:
Construction utilities and auxiliaries 5 years
Construction housing and welfare 10 years
Production facilities 5 years
Railroad cars and locomotives 7.5 years
Vessels, barges, tugs and similar water
transportation equipment 9 years
Drilling and production tools, equipment
and instruments 5 years
For the Groups of capital assets for Natural Gas projects, apply fifty
percent (50%) of the following useful lives :
GROUP 1:
Automobiles 3 years
Trucks - light (13,000 pounds or less)
and tractor units 4 years
Trucks - heavy (more than 13,000 pounds)
and trailers 6 years
GROUP 2:
Aircraft 6 years
Vessels, barges, tugs and similar water
transportation equipment 18 years
Drilling and production tools,
equipment and instruments 8 years
Construction Equipment 6 years
Furniture and Office Equipment 10 years
GROUP 3:
Construction utilities and auxiliaries 8 years
Construction housing and welfare 20 years
Production facilities 8 years
Railroad cars and locomotives 15 years
Balance of unrecovered capital costs is eligible for full depreciation
at the end of the individual asset's useful life.
The undepreciated balance of assets taken out of service will not be
charged to Operating Costs but will continue depreciating based upon
the lives described above except where such assets have been subjected
to unanticipated destruction, for example, by fire or accident.
3.2. Overhead Allocation
General and administrative costs, other than direct charges, allocable
to this operation should be determined by a detailed study, and the
method determined by such study shall be applied each year
consistently. The method selected must be approved by PERTAMINA, and
such approval can be reviewed periodically by PERTAMINA and CONTRACTOR.
3.3. Interest Recovery
Interest on loans obtained by a Party from Affiliates or parent
companies or from third party non-affiliates at rates not exceeding
prevailing commercial rates for capital investments in petroleum
operations may be recoverable as operating costs. Details of any
financing plan and amount must be included in each Years budget of
Operating Costs for the prior approval of PERTAMINA. All other
financing must also be approved by PERTAMINA.
3.4. Gas Costs
Operating Costs directly associated with the production of Natural Gas
will be directly chargeable against Natural Gas revenues in determining
entitlements under Section VI subsection 6.2.2 of the Contract.
Operating Costs incurred for production of both Natural Gas and Crude
Oil will be allocated to Natural Gas and Crude Oil based on the
relative value of the products produced for the current Year. Common
support costs will be allocated on an equitable basis agreed to by both
parties.
If after commencement of production the Natural Gas revenues do not
permit full recovery of Natural Gas costs, as outlined above, then the
excess costs shall be recovered from Crude Oil revenues. Likewise, if
excess Crude Oil costs (Crude Oil costs less Crude Oil revenues)
exists, this excess can be recovered from Natural Gas revenues.
If production of either Natural Gas or Crude Oil has commenced while
the other has not, the allocable production costs and common support
cost shall be allocated in an equitable manner. Propane and butane
factors extracted form Natural Gas but not spiked in Crude Oil to be
deemed as Natural Gas for the purpose of accounting.
3.5. Inventory Accounting
The costs of non-capital items purchased for inventory will be
recoverable at such time the items have landed in Indonesia.
3.6. Insurance and Claims
Operating Costs shall include premiums paid for insurance normally
required to be carried for the Petroleum Operations relating to
CONTRACTOR's obligations conducted under the Contract, together with
all expenditures incurred and paid in settlement of any and all losses,
claims, damages, judgement and other expenses, including fees relating
to CONTRACTOR's obligations under the Contract.
3.7. Abandonment and Site Restoration
Operating Costs shall include all expenditures incurred in the abandonment
of all exploratory xxxxx and the restoration of their drillsites, together
with all estimates of monies required for the funding of any abandonment
and site restoration program established in conjunction with an approved
plan of development for a commercial discovery.
Expenditures incurred in the abandonment of exploratory xxxxx and the
restoration of their drillsites shall be charged as Operating Cost in
accordance with Article II of this Exhibit "C"
Estimates of monies required for the funding of any abandonment and site
restoration program established pursuant to paragraph (e) of clause 5.2.3
of the Contract shall be charged as Operating Costs annually on the basis
of accounting accruals beginning in the year of first production. The
amount charged in each Year will be calculated by dividing the total
estimated cost of abandonment and economic life of each discovery. The
estimates of monies required for all abandonment and site restoration
activities shall be reviewed on an annual basis and such estimates shall
be adjusted each Year as required.
--o0o--
CONTRACT AREA: JATILUHUR, ONSHORE W.JAVA
Page D- 23
EXHIBIT "D"
OPERATING AGREEMENT
PERUSAHAAN PERTAMBANGAN MINYAK XXX GAS BUMI NEGARA
( PERTAMINA )
and
SABA JATILUHUR LIMITED
ARTICLE NUMBER TITLE PAGE
ARTICLE 1 DEFINITIONS D-2
ARTICLE 2 WORK OBLIGATIONS D-4
ARTICLE 3 OPERATOR D-5
ARTICLE 4 OPERATING COMMITTEE D-9
ARTICLE 5 PROGRAMS AND BUDGETS D-11
ARTICLE 6 SOLE RISK OPERATIONS D-12
ARTICLE 7 ALLOCATION OF CRUDE OIL LIFTINGS D-14
ARTICLE 8 COSTS AND EXPENSES D-15
ARTICLE 9 DEFAULTS IN PAYMENTS D-17
ARTICLE 10 ACCOUNTING D-18
ARTICLE 11 TECHNICAL INFORMATION D-19
ARTICLE 12 NATURAL GAS D-20
ARTICLE 13 ASSIGNMENT OF INTEREST D-21
ARTICLE 14 INSURANCE D-22
ARTICLE 15 COMPLIANCE WITH OBLIGATIONS D-23
EXHIBIT "D"
OPERATING AGREEMENT
Attached to and made a part of the Contract between:
PERUSAHAAN PERTAMBANGAN MINYAK XXX GAS BUMI NEGARA
and
SABA JATILUHUR LIMITED
dated the 22nd day of September, 1997
OPERATING AGREEMENT
ARTICLE 1-DEFINITIONS
1.1 In this Operating Agreement words and expressions used in the Production
Sharing Contract shall have the meaning ascribed to them therein.
1.2 "Development Operations" shall mean creation or installation of facilities
for purpose of producing, treating if necessary, transporting to an agreed
point of delivery and delivering Petroleum from a commercial field,
including development drilling operations.
1.3 "Exploratory Drilling Operations" shall mean unless the Parties otherwise
mutually agree drilling operations for the purpose of prospecting for
Petroleum conducted in the Contract Area at a distance not less then five
(5) kilometers from a well already drilled hereunder or in the process of
being drilled, or outside the agreed closing contour of a structure
already drilled hereunder or in the process of being drilled or deeper
horizons within that structure.
1.4 "Exploration Operations" shall mean geological, geophysical and
Exploratory Drilling Operations conducted in the Contract Area.
1.5. "Appraisal Operations" shall mean operations conducted in the Contract
Area for the purpose of determining whether a field discovered therein
is a commercial field.
1.6. "Participating Interest" shall mean the respective undivided interest
which a party owns at any particular time in and to the total rights
and obligations under the Contract. Initially the Parties
participating interests are as the follows:
PERTAMINA 25%
CONTRACTOR 75%
In the event a Party transfers all or part of its Participating Interest
in the Contract in accordance with the provisions of this Agreement and
the Contract , the Participating Interest of the Parties shall be
revised accordingly
1.7 "Contract " shall mean the Production Sharing Contract made and entered
into between PERTAMINA and CONTRACTOR covering the Contract Area.
"Partyand Parties" means a Party or Parties to this Agreement and the Contract
their assignees and/ or successors in interest.
--o0o--
ARTICLE 2 - WORK OBLIGATIONS
2.1. Without prejudice to Sub.Article 8.1.1. of this Exhibit "D",CONTRACTOR
shall bear the entire costs for exploration operation and the drilling
of appraisal xxxxx, and the costs for development operations
up to commencement of first commercial production in the Contract Area.
2.2. After commencement of commercial production CONTRACTOR shall recover
all of its Participating Interest Share of Operating Costs, and in
addition, PERTAMINA shall repay CONTRACTOR out of PERTAMINA's
Participating Interest Share of all funds provided by CONTRACTOR under
subsection 4.3. of Section IV and in accordance with the provisions of
Section VI of the Contract .
In the case no commercial discovery is made on the Contract Area, it is
expressly agreed that PERTAMINA shall be under no obligation whatsoever
to make the repayment provided for in this Article 2.
--o0o--
ARTICLE 3 - OPERATOR
3.1. Petroleum Operations to be carried out pursuant to the Contract shall be
conducted by PERTAMINA, Operator, assisted by CONTRACTOR through a Joint
Operating Body, hereafter referred to as "JOB" in the Contract ,
Accounting Procedure and this Operating Agreement to be organized
pursuant to Article 3.3. hereunder. JOB shall conduct Petroleum
Operations in accordance with policies, programs and budgets approved by
the Operating Committee. Such operations shall be conducted by JOB or by
JOB's duly authorized agents or by independent contractors engaged by
JOB.
3.2. In conducting Petroleum Operations on behalf of the Parties, JOB shall
comply with the obligations under the Contract and with regard to any
applicable laws or regulations of the Indonesian Government. All
relations with PERTAMINA or the Indonesian Government with regard to the
conduct of operations under the Contract shall be maintained through JOB,
provided however each Party shall always have the right to have a
representative present at any such meeting during negotiations on the
subject matter of the Contract .
3.3. PERTAMINA, Operator, assisted by CONTRACTOR or any of its Affiliates
to which its Participating Interest is assigned shall establish JOB
as outlined in the Organization Chart annexed hereto as Exhibit
"E" and PERTAMINA delegates the functions, rights and obligations of
Operator to JOB during the term of the Contract. The Parties have agreed
on the positions and the Party which would assign its secondees to fill
such positions, all as indicated on the Organization Chart and any
replacement will likewise be the responsibility of the Party as indicated
thereon. Any change to the Organization Chart, if needed, shall be made
by unanimous agreement of the Parties. The direct and indirect costs
incurred by CONTRACTOR in so providing assistance to PERTAMINA, Operator,
shall be charged to the Joint Account and shall be included in the
Operating Costs.
3.4. Subject to the provisions of this Agreement, JOB shall have exclusive
control of all operations, and :
3.4.1. employ all personnel reasonably required therefor;
3.4.2. acquire on behalf of the Parties all assets including any
equipment, materials and supplies necessary or desirable
for carrying on operations hereunder;
3.4.3. keep full and adequate accounting and other records in
accordance with the Contract and the Accounting Procedure,
and establish the Joint Account for the said project;
3.4.4. furnish the Parties with all information acquired in relation
to operations hereunder, including but not limited to
technical data, daily and monthly operating report, monthly
accounting statement and any other information which may be
required by the Operating Committee;
3.4.5. allow the authorized representatives of the Parties full
access to the operations, with the right to inspect the same;
3.4.6. prepare and submit to the Operating Committee programs and
budgets as provided in Article 5, 6 and 7 hereof and once they
have been approved by the Operating Committee, submit such
programs and budgets to PERTAMINA in accordance with the
Contract ;
3.4.7. shall semi-annually submit a forecast of operating expenses
and capital expenditure (also called Budget of Operating
Costs) to the Operating Committee. Should actual or
anticipated operating expenses for any semi annual period be
in excess of such forecast by ten percent (10%) , the matter
shall be called to the attention of the Operating Committee as
soon as such overrun occurs or is anticipated and the
Operating Committee shall determine what actions, if any,
should be taken in that regard;
3.4.8. shall submit to the Operating Committee for prior approval an
Authorization for Expenditure (AFE) covering each individual
project of the Petroleum Operations and requirements within
the approved Budgets of Operating Costs, in the categories set
out below.
(a)Drilling
(i) Each exploratory well
(ii) Each appraisal well
(iii) Each development well or group of development xxxxx.
(iv) Deepening of any well bellow original total depth,
involving exploratory footage.
(v) Workovers in excess of fifty thousand United States
Dollars (US$50,000)for any well,including deepening
into development zones.
(b) Exploration - Projects for Geological and Geophysical
work, core drilling and overhead charges applicable to
geological and geophysical operations shall be covered by
an AFE (s) with respect to each project or group of
project estimated to cost in excess of fifty thousand
United States Dollars (US$50,000) - these projects may be
accumulated and included in quarterly AFE (s).
(c) Plant and Equipment
(i) Individual construction projects and equipment
purchases exceeding fifty thousand United States
Dollars (US$50,000) each.
(ii) Equipping of xxxxx exceeding fifty thousand
United States Dollars (US$50,000). Equipping
xxxxx includes generally the purchase and
installation of equipment and material for
lifting, heating, storing and otherwise handling
production.
(iii)Storehouse Commitments for purchases in excess of fifty
thousand United States Dollars ($US50,000).
(iv) Unusual Significant Commitment of any kind in excess
of fifty thousand United States Dollars
(US$50,000);
3.4.9. shall maintain regular progress reporting to the Operating
Committee on projects implementation, i.e., on the
operational, technical and financial phases, to reflect
progress of the approved Work Program Implementation;
3.4.10. enter into such Contracts as maybe required in connection
with the operations under this Agreement and the
Contract;
3.4.11. promptly pay from the Joint Account and discharge all costs
and expenses incurred by it in connection with
Petroleum Operations;
3.4.12. carry out Petroleum Operations hereunder in a workmanlike
manner and in accordance with good oilfield and
engineering practices and in accordance with the applicable
laws and regulations;
3.4.13. deliver in kind to the Parties as the case may be their
respective shares in accordance with the Contract of
all Crude Oil produced in the Contract Area.
3.5. JOB undertakes to carry out the Work Programs adopted by the Operating
Committee and approved by PERTAMINA within the limits of the approved
Budget of Operating Costs and shall not undertake any operation not
included in an approved Work Program, or make any expenditure in excess of
the budgeted amounts except as follows:
3.5.1. If necessary to carry out an approved Work Program, JOB may
make expenditure in excess of the corresponding budget up to
but not exceeding ten percent (10%) of the amount specified
for each category of such budget and such expenditure shall be
reported promptly by JOB to the Parties, specifying such
category.
3.5.2. In case of emergency, JOB may make such immediate expenditure
necessary for the protection of life or property and such
emergency expenditure shall be reported promptly by JOB to the
Parties.
3.6. JOB shall not be liable to the Parties for any act or omission in the
conduct of the operations under the Contract including gross negligence or
willful misconduct on the part of JOB and the Parties shall be responsible
for such act or omission of JOB and the obligations of the Contract in
accordance with the provisions of the Contract.
In performing its obligations hereunder, it is not intended that either Party
shall realize a profit or incur any loss in performing such obligations.
--o0o--
ARTICLE 4-OPERATING COMMITTEE
4.1. There shall be established an Operating Committee consisting of one
representative of each PERTAMINA and CONTRACTOR.
Each PERTAMINA and CONTRACTOR shall designate its representative by
notice to the other and each by the same notice may designate one or more
alternate representatives, any one of them whom shall be authorized to
represent said party in the absence of its representative. Each
representative or alternate representative may be assisted by such
advisers as he deems necessary at any meeting of the Operating Committee.
PERTAMINA's representative shall be the Chairman of the Operating
Committee.
The Operating Committee shall establish the policies, programs, and
budgets under which Petroleum Operations shall be conducted. Without
limiting the generality of the foregoing, its principal functions shall
be:
4.1.1. To establish policies from time to time governing various
aspects or activities of Petroleum Operations;
4.1.2. To review and adopt, and revise. annual Work Programs and
Budgets of Operating Costs; and
4.1.3. To appoint such technical, financial, accounting, legal or
other committee as the representatives may deem
appropriate for studies, analysis, reports, etc. on matters
pertaining to Petroleum Operations.
4.2. The Operating Committee shall meet whenever the representative of a Party
shall require it by giving not less than ten (10) days notice to the
other representative which notice shall specify the matter or matters to
be considered at such meeting. More particularly, the Operating Committee
shall be convened at least once a year by JOB to discuss and decide upon
the Work Program and Budget of Operating Costs submitted to it by JOB and
any other matters contemplated under the Contract and arising in
connection therewith.
4.3. Except as otherwise provided herein all matters brought forth at any
meetings of the Operating Committee shall be decided by the unanimous
vote of the two representatives of the Parties.
4.4. Except as provided for in Article 4.5 hereof, all meetings of the
Operating Committee shall be held in Jakarta, Indonesia, or elsewhere as
may be agreed from time to time by the Parties.
4.5. Any matter relating to operations hereunder may be submitted to the
Operating Committee for consideration and vote without holding a meeting
provided that such matter is submitted in writing or by telegraph or
telex to the representatives of the Operating Committee with a copy to
JOB. In such event, each representative shall vote by giving written or
telegraph or telex notice of such vote to JOB and the other
representative and any decision so reached shall be binding on the
Parties. JOB shall keep a written record of each such vote and of the
outcome of such voting.
4.6. All decisions made by the Operating Committee including the decisions
reached under Article 4.5 above, shall be set out in writing and the
minutes thereof shall be signed by both representatives. Any decision so
recorded and signed shall be final and binding upon the Parties.
Notwithstanding anything to the contrary herein, on all matters of termination,
extension or exclusion, CONTRACTOR's representative shall have the
determining vote at the Operating Committee.
--o0o--
ARTICLE 5 - PROGRAMS AND BUDGETS
5.1 Exploration Programs and Budgets
Not later than one hundred and twenty (120) days prior to the
commencement of each Calendar Year JOB shall submit to the Operating
Committee a recommended Exploration Program and Budget of Operating
Costs for such Calendar Year. An Exploration Program shall consist only
of geological, geophysical and exploratory drilling operations.
Not later than ninety (90) days prior to the commencement of such
Calendar Year the Operating Committee shall decide upon an Exploration
Program and Budget of Operating Costs to be submitted to PERTAMINA in
accordance with the Contract.
In no case shall an Exploration Program and Budget of Operating Costs
be insufficient to comply with the obligations of the Parties in
accordance with the Contract.
5.2. Appraisal Program and Budgets
Within six (6) months of each discovery of crude Oil and Natural Gas
(except a discovery made pursuant to a Sole Risk Program), the
Operating Committee shall decide whether such discovery requires the
carrying out of Appraisal Operations in order to determine whether
there exists a commercially exploitable field.
5.2.1. If the Operating Committee decides that said Appraisal
Operations shall be carried out, JOB shall submit to it within
sixty (60) days an Appraisal Program, and the corresponding
Budget of Operating Costs for the remaining part of the
current Calendar Year and for the next following Calendar
Year.
Within forty five (45) days of the submission of such
Appraisal Program and Budget of Operating Costs by JOB the
Operating Committee shall approve the proposal submitted by
JOB or may vary it.
5.2.2. If the Operating Committee does not decide that such Appraisal
Operations shall be carried out, any Party shall have the
option to have such Appraisal Operations carried out by JOB on
its behalf and at its sole cost and expense as provided in
Article 6 hereof.
5.3. Development Programs and Budget
As soon as the Parties consider that a field discovered and appraised
is a commercially exploitable field, the Operating Committee shall seek
PERTAMINA's approval to have such field development by JOB.
--o0o--
ARTICLE 6-SOLE RISK OPERATIONS
6.1. In case any Party (Sole Risk Party) wishes to carry out Exploration and/ or
Appraisal Operations not included in any Work and/ or Appraisal Program and
Budget of Operating Costs it shall so notify JOB within fifteen
(15)days of the adoption of the said Work and/ or Appraisal Program and
Budget of Operating Costs. Such notice shall specify in detail the
operations that the Sole Risk Party wishes to have carried out. JOB shall
promptly prepare a program and budget covering the said operations(Sole
Risk Operations) and shall submit the same to the Sole Risk Party. The Sole
Risk Party shall upon its approval of the program and budget satisfy JOB as
to his financial arrangements for carrying out such program and budget,
thereafter the sole risk program and budget shall be included in the Work
Program and Budget of Operating Costs to be submitted to PERTAMINA in
accordance with subsection 4.4 of section IV of the Contract.
After approval of the Work Program And Budget of Operating Costs by PERTAMINA,
any geophysical survey to be conducted under Sole Risk Operations shall
be carried out by JOB on behalf of the Sole Risk Party at the Party's
sole risk and expense. The Non Sole Risk Party shall have the right to be
deemed to have participated in such survey by giving notice at any time
to the Sole Risk Party of its intention to do so and paying to the said
Sole Risk Party within thirty (30) days from the date of giving such
notice twice its Participating Interest share of the total cost of such
survey already incurred.
In respect of any well to be drilled on a location selected pursuant to a
geophysical survey, a Party shall not be entitled to participate in such
well unless either (1) the geophysical survey was carried out at that
Party's Sole Risks or (2) that Party has elected to be deemed to have
participated in such survey as provided for above.
6.3. If a Sole Risk Operation results in the completion of a well capable
of commercial production, each Non Sole Risk Party shall compensate the
Sole Risk Party, with respect to such Sole Risk Operation, by delivering
to such Sole Risk Party a quantity of petroleum free from any liens and
encumbrances subject to the obligation to supply domestic market. Such
deliveries shall continue until such time as the value of all petroleum
so delivered equals the amount due from such Non Sole Risk Party which
shall be equal to the total cost of drilling, completing and equipping the
sole risk well plus three hundred percent (300 %) (in the case of a Sole
Risk Exploration well) or two hundred percent (200%)(in the case of a Sole
Risk Appraisal well) of the Non Sole Risk Party's Participating Interest
share of such total cost had Non Sole Risk Party participated in such well.
6.4. If the representatives of the Parties cannot agree on the drilling of a
development well or xxxxx, a Party desiring to have such development well
or xxxxx drilled at the sole risk expense of such Party, such Party may
request JOB to carry out such Sole Risk Operations.
If the well(s)is a producer, the Non Sole Risk Party shall compensate the
Sole Risk Party its entire participating interest share of production
from said development well(s) until the value of petroleum delivered to
the Sole Risk Party equals the total cost of drilling, completing and
equipping the sole risk development well(s) plus three hundred percent
(300 %) and two hundred percent(200 %) of the costs and expense for
conducting the facilities for such development well(s), had such Non Sole
Risk Party participated in such well(s). JOB shall follow the procedure,
pursuant to Article 6.1 hereabove in obtaining the approval of PERTAMINA.
6.5. With respect to Sole Risk drilling, not more than two exploratory xxxxx
shall be drilled during one year unless otherwise agreed upon by the
Parties. Two (2) Sole Risk xxxxx or more shall not be drilled at the same
time.
6.6. The Sole Risk provisions of this Article 6 shall also be applicable to
deepening,side tracking and/or completion of an actively drilling well.
6.7. The provisions of this Article 6 shall not be applicable during the period
which the Parties are complying with their minimum obligations
under-subsection 4.2 of section IV of the Contract.
Even if a Sole Risk Operation results in a dry hole, the Sole Risk Party shall
be entitled to treat, as its Operating Costs, its total costs attributable
to such Sole Risk Operation.
--o0o--
ARTICLE 7-ALLOCATION OF CRUDE OIL LIFTINGS
7.1. Each Party shall be entitled to production in proportion to
its Participating Interest, in accordance with the provisions
of Section V, VI, and VII of the Contract and Article 2 of
this Exhibit. CONTRACTOR's entitlement shall be obtained by
deducting from its Participating Interest share of production
PERTAMINA's share thereon calculated in accordance with the
terms of the Contract.
7.2. The Parties will enter into an Offtake Agreement to provide for orderly
lifting Crude Oil produced (including over/under lifting procedures) in
accordance with good oil field practice and subject to the terms of the
Contract
The Offtake Agreement Shall provide that for the purpose of calculating
actual entitlements and tanker programming between the Parties, the
Participating Interest of CONTRACTOR and any Party to which it assigned a
Participating Interest shall be treated as one.
--o0o--
ARTICLE 8-COSTS AND EXPENSES
8.1. The contribution of the Parties to expenditures incurred by JOB for the
joint Account shall be made in accordance with the following rules.
8.1.1. All costs and expenses of whatsoever kind and nature incurred
under approved budgets for Exploration Operations, the
drilling of appraisal xxxxx and Development Operations up to
commencement of commercial production shall be provided by
CONTRACTOR alone in accordance with Section IV of the
Contract, subject to Section VI thereof.
8.1.2. All costs and expenses of whatsoever kind and nature incurred
under approved budgets for Exploration Operations and the
drilling of appraisal xxxxx after commencement of first
commercial production shall be provided by CONTRACTOR alone,
twenty five percent (25%) of which PERTAMINA shall repay
CONTRACTOR out of PERTAMINA's Participating Interest share of
Crude Oil.
8.1.3. All costs and expenses of whatsoever kind and nature incurred
under approved budgets for the carrying out of the feasibility
and engineering studies of an appraisal area and/or
Development Operations shall be borne and paid by the Parties
pro rata to their respective Participating Interests.
8.1.4. All costs and expenses of whatsoever kind and nature incurred
under approved budgets for the carrying out of Sole Risk
Exploration or appraisal Operation shall be borne and paid by
the Party having requested such Sole Risk Operations.
8.1.5. Operating expenses incurred in producing Crude Oil (other than
expenses enumerated under Articles 8.1.1, 8.1.2, 8.1.3 and
8.1.4 above) shall be borne and paid by the parties pro rata
to their respective Participating Interests.
8.2 In order to enable JOB to pay expenditures incurred or to be incurred by
it under this Operating Agreement for the joint Account each Party shall
make to it monthly advances of the sums required by JOB in accordance with
such Party's share of estimated expenditures. JOB shall keep an account
recording advances made to it by the Parties. Any balance outstanding
shall be notified in the monthly accounting statements to be furnished in
accordance with article 3.4.4 hereof.
Any surplus shall be carried forward to the following month. Any deficit
shall be paid by the Parties within thirty (30) days of receipt of such
statement. Requests for advances for any month made by JOB shall be sent
to the Parties not later than five (5) days before the beginning of such
month. Sums required to cover expenditure in relation to Exploration,
Appraisal and/or Development Operations shall be requested separately from
funds required for the Production operating expenses referred to in
article 8.1.5 hereof. The amount of the advances requested shall be paid
by each Party within twenty (20) days of receipt of such advance notice
--o0o--
ARTICLE 9-DEFAULTS IN PAYMENTS
Any default of a Party in paying its share of any expenditures hereunder or of
any advance requested from it hereunder shall have the following consequences.
9.1 If such default is a failure by a Party to pay its share of any
expenditure or to pay advance requested by JOB for expenditures
corresponding to Development Operations, the Participating Interest of
the parties shall be recalculated in the manner set out bellow and the
defaulting Party shall forfeit its right and execute such assignment as
may be required to give effect to the recalculated interests. The
recalculated Participating Interests shall become the equivalent of
those fractions:
9.1.1 The numerators of which shall be the cumulative contribution of
the respective Parties to the financing of Development
Operations.
9.1.2 The denominators of which shall be the cumulative contribution of
all the Parties to the same expenditures.
9.2 None of the recalculations and assignments of interests contemplated in
article 9.1 above shall take place prior to the expiration of a delay
period of six (6) months after the defaulting Party has been notified
by JOB of the establishment of such default. If during such delay
period the Party defaulting has paid the other Party the amount in
default together with interest at the London Inter-Bank Offered Rate
(LIBOR) plus two percent (2%) per annum such recalculation and
assignment shall not take place.
9.3 If such default concerns an expenditure for a Sole Risk Exploration a
Sole Risk Appraisal Program and if the debt has not been discharged
within two (2) months of the notification by JOB of the establishment
of such default the defaulting Party shall forfeit all its rights under
Article 6.3 hereof and the non defaulting Party be considered as the
Sole Risk Party under such Article 6.3 attributable to the carrying out
of such program.
9.4 If such defaults is a failure by a Party to advance to JOB amounts
requested in respect of that Party's share of operating expenses of
Production, such Party's right to Production from the Contract Area
until the debt owed by the defaulting Party together with interest at
LIBOR plus two percent (2%) has been discharge shall be forfeited to
the non defaulting Party.
9.5 The provisions of this article 9 requiring the assignment of interest
or the forfeiture of rights by any defaulting Party shall in no way
operate to discharge such Party from its obligation to pay any sum due
to JOB as result of such default or the other Party with interest at
LIBOR plus two percent (2%) from the date until paid.
Notwithstanding anything contained above the defaulting Party shall
hold harmless the other Party or Parties from any prejudice resulting
from its default.
--o0o--
ARTICLE 10 - ACCOUNTING
10.1 JOB shall maintain accounts in accordance with good internationally
accepted accounting practices consistent with the provisions of the
Contract as contemplated by the Accounting Procedures.
10.2 So long as the keeping of books and accounts is delegated by PERTAMINA
to JOB in accordance with subsection 14.1 of section XIV of the
Contract JOB shall keep such books and accounts. The parties shall have
the right to inspect and audit JOB's books and accounts, provided
however, any Party shall have the right to have its representative
present during such inspection and audit. All Parties shall be promptly
notified of the results thereof.
10.3 JOB shall maintain at all times the Joint Account recording the
cumulative expenditure incurred in respect of operations under the
Contract and giving details as to the allocation of such expenditures
separately between :
10.3.1 Expenditure for exploration;
10.3.2 Expenditure for appraisal;
10.3.3 Expenditure for development;
10.3.4 Operating expenses of production; and,
10.3.5 Overhead costs as provided for under Exhibit "C", Accounting
Procedures.
The Join Account shall be kept in United States Dollars and shall
reflect any difference of exchange resulting from operations effected
in other currencies.
10.4 JOB shall also maintain and furnish to the Parties insofar as it is
possible such date, records, accounts and statements on such forms as
either Party may request for the purposes of its own internal
requirements.
--o0o--
ARTICLE 11-TEHNICAL INFORMATION
Each Party undertakes that it will treat as confidential and prevent disclosure
to any third party in any way except to its Affiliates and any Indonesian
Governmental Agency any geological, geophysical or other technical data and
information pertaining to the Contract Area. This obligation shall be a
continuing obligation which shall be observed by each Party during the term of
this Contract notwithstanding that such Party may have ceased to be a Party to
its termination.
--o0o--
ARTICLE 12-NATURAL GAS
If a discovery of Natural Gas has been made and if the Parties or either of them
wishes to produce such gas they shall enter into a special agreement to regulate
their respective rights and obligation in accordance with subsection 6.2.2 of
section VI of the Contract. Such special agreement shall be based on the
principles adopted in this Operating Agreement.
--o0o--
ARTICLE 13-ASSIGNMENT OF INTEREST
13.1 All assignments shall be in accordance with the provisions of the
Contract.
13.2 Except for an assignment contemplated under Article 9 hereof, no
assignment of Participating Interest be made which would result in a
Party having a Participating Interest of less than five percent (5%).
All assignment of Participating Interest shall have the effect of making
the assignee a Party to the Contract. No assignment shall be valid
unless the assignee has agreed in writing to be bound by the provisions
of the Contract.
--o0o--
ARTICLE 14-INSURANCE
14.1 JOB shall carry, for the benefit and protection of the Parties to the
Contract such insurance as the Operating Committee shall authorize and
require. However, the Operating Committee shall not require JOB to carry
physical damage insurance on jointly used property or interests. It is
understood that each Party will be responsible for its own interest in
such properties and will assume its portion of any loss that occurs.
With respect to losses of jointly used property, it is agreed that no
Party to the Contract shall have any right of recovery against any other
Party, their agents, directors, officers or employees, or against their
respective property or vessels, and such rights of recovery are
respectively waived; any insurance policy covering the interest of a
Party in jointly used property shall be appropriately endorsed so as to
effectively waive all pertinent rights of subrogation.
14.2 In the absence of specific directions by the Operating Committee, JOB
shall require all contractors engaged in operations under the Contract
and this Agreement to maintain such insurance as JOB deems necessary
(and economically feasible) to adequately protect and indemnify the
Parties and JOB.
Notwithstanding any provisions to the contrary in the Contract and this
Agreement, each Party shall indemnify and hold harmless the other Party
from any claim, loss or damages as a result of injury or death of its
officers, employees, servants and agents in the performance of Petroleum
Operations.
--o0o--
ARTICLE 15 - COMPLIANCE WITH OBLIGATIONS
The obligations imposed upon the parties by this Agreement or by the Contract or
by the Laws of the Republic of Indonesia shall be several and not joint.
The parties undertake between themselves to comply with such obligations and to
abstain from any act or omission capable of leading to the termination of the
Contract.
--o0o--
Exhibit E-1
[GRAPHIC OMITTED]
Exhibit E-2
[GRAPHIC OMITTED]
CONTRACT AREA: JATILUHUR, ONSHORE W.JAVA
Page F-1
EXHIBIT "F"
This Exhibit "F", THE MEMORANDUM OF PARTICIPATION, is attached to and made an
integral part of the Contract between:
PERUSAHAAN PERTAMBANGAN MINYAK XXX GAS BUMI NEGARA
and
SABA JATILUHUR LIMITED
dated this 22nd day of September 1997
MEMORANDUM OF PARTICIPATION
The Operating Agreement between CONTRACTOR and the Indonesia Participant
referred to in subsection 15.3 of Session XV of the Contract shall embody, inter
alia, the following main principles:
1. PERTAMINA shall be the Operator of the venture under properly defined
rights and obligations and PERTAMINA and SABA JATLUHUR LIMITED shall be the
representatives of this venture to the JOB.
2. Authorized representatives of both parties shall meet periodically for the
purpose of reviewing the venture's operations. All decisions shall be taken
by majority vote except in case of terminating the Contract which decision
shall require the unanimous consent of both parties. However, if either
party wishes to withdraw from the venture it shall transfer without cots
its undivided interest to the other party.
3. Both parties shall have the obligation to provide or cause to provide their
respective proportions of such finance and such currencies as may be
required from time to time by the Operator for the operations envisaged
under the Contract. The effects of a Party's failure to meet calls for
funds within the prescribed time limits shall be provided.
4. In respect of any Exploratory Drilling Operations, a "nonconsent" provision
shall be made which assures the Indonesian Participant that it does not
have to participate in such Operations in the Work Program and Budget and
which, in case of success, adequately compensate the party participating in
such operations for the costs and risks incurred by the latter.
5. Subject to adequate lifting tolerances, each party shall offtake at
CONTRACTOR's point of export its production entitlement in its
proportionate share of any portion of the Crude Oil which PERTAMINA elects
not to take in kind, both as provided under the Contract. However, if the
Indonesian Participant is not in a position to market such quantity wholly
or partly, it shall in respect of the quantity which it cannot market
itself have the option under an adequate notification procedure : either to
require CONTRACTOR (or its associates if CONTRACTOR so desires) to purchase
that quantity, or to lift that quantity at later date under an adequate
procedure.
6. In respect of any quantity to be purchased from the Indonesian Participant
by CONTRACTOR (or its associates) the price in respect of each quality
Crude Oil shall be :
(i) For Crude Oil to be delivered for local consumption under the
terms of the Contract fifteen percent (15%) of the price as
provided in Section VII or as otherwise provided for in the
Contract.
(ii) For all other Crude Oil, the weighted average net realized price
received by CONTRACTOR for comparable types and quantities sold by
it during the Calendar Year involved minus five percent (5%).
If Natural Gas (associated gas and non-associated gas) is encountered
in Commercial quantities, special provision shall be drawn up having
due regard inter alia, to the long term character of Natural Gas Supply
Contracts.
