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PACKAGE V SUPPLY AGREEMENT
FOR NATURAL GAS IN SUPPORT OF
THE 1973 LNG SALES CONTRACT EXTENSION
BETWEEN
PERTAMINA
AND
VIRGINIA INDONESIA COMPANY
LASMO SANGA SANGA LIMITED
OPICOIL HOUSTON, INC.
UNION TEXAS EAST KALIMANTAN LIMITED
UNIVERSE GAS & OIL COMPANY, INC.
AND
VIRGINIA INTERNATIONAL COMPANY
DATED: JUNE 16, 1995
EFFECTIVE: OCTOBER 6, 1994
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PACKAGE V SUPPLY AGREEMENT
FOR NATURAL GAS IN SUPPORT OF
THE 1973 LNG SALES CONTRACT EXTENSION
THIS SUPPLY AGREEMENT, made and entered into in Jakarta the 16th day
of June, 1995, by and between PERUSAHAAN PERTAMBANGAN MINYAK ▇▇▇ GAS BUMI
NEGARA ("PERTAMINA"), on the one hand, and VIRGINIA INDONESIA COMPANY ("VICO"),
LASMO SANGA SANGA LIMITED, OPICOIL HOUSTON, INC., UNION TEXAS EAST KALIMANTAN
LIMITED, UNIVERSE GAS & OIL COMPANY, INC., and VIRGINIA INTERNATIONAL COMPANY
(herein referred to collectively as "Contractors" and individually as
"Contractor"), on the other hand,
WITNESSETH:
A. WHEREAS, Contractors individually own or control all of
the interest of "Contractors" in that certain Amended and Restated Production
Sharing Contract, dated April 23, 1990, but effective as of August 8, 1968
(such contract as hereafter amended is herein referred to as the "Amended and
Restated Production Sharing Contract") and that certain Production Sharing
Contract dated April 23, 1990, but effective as of August 8, 1998 (such
contract as hereafter amended is herein referred to as the "Renewed
Production Sharing Contract"). The Amended and Restated Production Sharing
Contract and the Renewed Production Sharing Contract are herein referred to
collectively as the "Production Sharing Contracts" and the area covered thereby
is herein referred to as the "VICO Contract Area"; and
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B. WHEREAS, pursuant to the Production Sharing Contracts,
each of PERTAMINA and Contractors is entitled to take and receive, sell and
freely export its respective share of the Natural Gas produced and saved from
the VICO Contract Area (the percentage share of such Natural Gas to which each
of PERTAMINA and Contractors is entitled, as determined under the Production
Sharing Contracts, is herein referred to as the "Production Sharing Percentage"
of such party); and
C. WHEREAS, the reserves of Natural Gas in the VICO Contract
Area exceed the reserves of Natural Gas committed to be produced, supplied and
delivered by PERTAMINA and Contractors to meet a portion of PERTAMINA's
existing obligations under LNG sales contracts, LPG sales contracts, and
domestic gas sales contracts; and
D. WHEREAS, PERTAMINA, with assistance from Contractors, has
constructed and expanded and is further expanding the Natural Gas liquefaction
and related facilities located at Bontang Bay, on the east coast of Kalimantan,
Indonesia (herein referred to as the "Bontang Plant"); and
E. WHEREAS, funds for the expansion of the liquefaction
plant will be provided to PERTAMINA through financing of the cost of such
expansion on terms, mutually agreeable to PERTAMINA and Contractors, which
provide for the repayment of funds provided pursuant to such financing and the
cost of such funds (repayment of funds and the cost of such funds are
hereinafter referred to as "Financing Costs"); and
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F. WHEREAS, PERTAMINA and Contractors are parties to the
Amended and Restated Bontang Processing Agreement dated as of February 9, 1988
(as from time to time amended, the "Processing Agreement"), which provides for
the operation of the Bontang Plant and the payment of the costs of such
operation (such costs as determined in accordance with the Processing Agreement
are herein referred to as "Plant Operating Costs"); and
G. WHEREAS, PERTAMINA and Contractors have agreed to use the
Bontang Plant in part for the liquefaction of the VICO Contract Gas (as defined
in Section 2.2 hereof) and the Other Contract Gas (as defined in Section 2.3
hereof); and
H. WHEREAS, PERTAMINA, in collaboration with Contractors and
its production sharing contractors in other contract areas in East Kalimantan
(herein referred to as the "Other Contract Areas") has entered into that
certain Amended and Restated 1973 LNG Sales Contract dated as of January 1,
1990 (such contract as amended as of June 1, 1992 and as amended hereafter
being herein referred to as the "1973 Sales Contract") with Chubu Electric
Power Co., Inc., The Kansai Electric Power Co., Inc., Kyushu Electric Power
Co., Inc., Nippon Steel Corporation, Osaka Gas Co., Ltd., and Toho Gas Co.,
Ltd. (herein referred to collectively as "Buyers" and individually as "Buyer");
and
I. WHEREAS, by a Memorandum of Agreement effective as of
October 6, 1994 (the "1973 Extension MOA", and unless otherwise so stated, any
terms defined in the 1973 Extension MOA shall have the same meanings when used
herein), PERTAMINA and Buyers agreed, subject to fulfillment of certain
conditions, to execute a Second Amended and Restated
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1973 Sales Contract extending the 1973 Sales Contract for the period (the
"Extension Period") beginning on January 1, 2000 and ending on December 31,
2009 (quantities of LNG for the Extension Period sold pursuant to the 1973
Extension MOA herein referred to as the "Extension Quantities"); and
J. WHEREAS, arrangements for the transportation of the
Extension Quantities and for the payment of costs respecting such
transportation will be made on terms mutually agreeable to PERTAMINA and
Contractors (herein referred to as "Transportation Costs"); and
K. WHEREAS, the 1973 Extension MOA provides that the Natural
Gas to be processed into LNG and sold and delivered by PERTAMINA as Extension
Quantities is to be produced from the Bontang Gas Supply Area, which consists
of the VICO Contract Area and the Other Contract Areas; and
L. WHEREAS, PERTAMINA and each Contractor desire to supply
and deliver Natural Gas from the VICO Contract Area in support of the
performance by PERTAMINA of an agreed portion of its obligations to deliver
Extension Quantities under the 1973 Sales Contract; and
M. WHEREAS, each Contractor desires to dispose of its
Production Sharing Percentage of the VICO Contract Gas (as herein defined) in
accordance with the terms of this Supply Agreement,
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NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
EFFECTIVE DATE AND DURATION
This Supply Agreement shall be effective as of October 6, 1994, and
shall terminate on the date the 1973 Sales Contract terminates; provided,
however, that if the 1973 Extension MOA terminates as a result of acceptable
transportation arrangements not having been agreed upon on a timely basis, then
this Supply Agreement shall terminate on the date the 1973 Extension MOA
terminates.
ARTICLE 2
SUPPLY COMMITMENT AND QUANTITY
2.1 Net Gas Requirement. The total quantity of net Natural
Gas required to be supplied and delivered out of proved recoverable reserves of
Natural Gas in East Kalimantan for liquefaction and sale as Extension
Quantities is estimated to be 4.5403 trillion standard cubic feet ("t.s.c.f.").
Such quantity is herein referred to as the "1973 Extension Net Gas
Requirement". The 1973 Extension Net Gas Requirement is based on the Fixed
Quantities which Buyers have agreed to purchase under the 1973 Extension MOA.
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2.2 VICO Contract Gas. PERTAMINA and Contractors hereby
commit and agree to supply and deliver from proved economically recoverable
reserves of Natural Gas in specific fields within the VICO Contract Area
sufficient Natural Gas (and LNG resulting from the liquefaction thereof) to
meet a portion of the 1973 Extension Net Gas Requirement over the term of this
Supply Agreement consisting of 0.9805 t.s.c.f., or 21.5956% thereof. Such
quantities of net Natural Gas committed to be supplied pursuant to this Supply
Agreement are herein referred to as the "VICO Contract Gas", and the
above-stated percentage is herein referred to as the "Producers' Percentage".
The specific fields from which the VICO Contract Gas will be committed are
identified in the supplemental memorandum entered into among PERTAMINA,
Contractors and the production sharing contractors in the Other Contract Areas
pursuant to the Memorandum of Understanding Re: Supply Agreements and Package
V Sales dated October 5, 1994 (the "Package V Supplemental Memorandum"). The
VICO participating fields and the quantities in each field comprising the VICO
Contract Gas are as follows:
Participating Fields Quantity of Gas (t.s.c.f.)
-------------------- --------------------------
Badak 0.3241
Lampake 0.0277
Mutiara 0.1307
▇▇▇▇▇ 0.3434
Pamaguan 0.0045
Semberah 0.1501
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The quantities committed from each field are subject to revision from time to
time, as the reserves from the fields may be updated and as additional data,
from deliverability studies and otherwise, become available.
2.3 Other Contract Gas. To meet the balance of the 1973
Extension Net Gas Requirement, constituting 3.5598 t.s.c.f., or 78.4044%
thereof, sufficient Natural Gas (and LNG resulting from the liquefaction
thereof) will be committed for supply and delivery by PERTAMINA and its
production sharing contractors from proved recoverable reserves of Natural Gas
in the Other Contract Areas by separate supply agreements, similar hereto and
compatible herewith, executed and delivered concurrently herewith (such amounts
are herein collectively referred to as the "Other Contract Gas"). The specific
fields from which the Other Contract Gas will be committed are also identified
in the Package V Supplemental Memorandum.
2.4 ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ Certification. The amounts of
net Natural Gas constituting the VICO Contract Gas and the Other Contract Gas
are part of the estimates of proved recoverable reserves of Natural Gas as
certified by the independent consultant firm of ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ in
written statements based on data available on May 31, 1994.
The quantities for the VICO Contract Gas and the Other Contract Gas
set forth in Sections 2.2 and 2.3 hereof and the Producers' Percentage were
established by PERTAMINA at a meeting on May 29, 1995 of the East Kalimantan
Gas Reserves Management Committee.
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2.5 Reduction to Net Gas Requirement. Notwithstanding the
above, if, pursuant to paragraph 4 of the 1973 Extension MOA, the Extension
Quantities are reduced as a result of Financing not being arranged, PERTAMINA
and Contractors agree to amend this Supply Agreement to decrease the VICO
Contract Gas, such decrease to be based on the proportion of the VICO Contract
Gas to the 1973 Extension Net Gas Requirement. By separate amendments, similar
to and compatible with that entered into by PERTAMINA and Contractors, executed
and delivered concurrently therewith, the balance of any such decrease in the
1973 Extension Net Gas Requirement will be allocated to the Other Contract Gas
based on the proportion of the Other Contract Gas to the 1973 Extension Net Gas
Requirement.
ARTICLE 3
COORDINATION OF GAS SUPPLY
The VICO Contract Gas and the Other Contract Gas may be produced from
participating fields at times and production rates which may change from time
to time during the term hereof so as to secure the optimal ultimate recovery of
Natural Gas. The supply of Natural Gas from the VICO Contract Area and the
Other Contract Areas will be coordinated by PERTAMINA so as to conserve and
permit full utilization of such Natural Gas. The sources of supply, producing
rates, quality of gas, metering and related matters shall be matters for study
by the East Kalimantan Gas Reserves Management Committee, consisting of
representatives from PERTAMINA, VICO, TOTAL Indonesie and UNOCAL Indonesia
Company.
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ARTICLE 4
ADMINISTRATION, TITLE AND INSURANCE
4.1 LNG Sales Contract. PERTAMINA shall be responsible for
the due and prompt administration of the 1973 Sales Contract for the benefit of
PERTAMINA and Contractors. All matters which affect the 1973 Sales Contract or
the sale, transportation and delivery of LNG thereunder will be administered by
a representative to be appointed by PERTAMINA and the representative appointed
by Contractors under Article 7 hereof. It is understood, however, that it will
be necessary from time to time for PERTAMINA, as seller under the 1973 Sales
Contract, to take certain administrative and operational actions without prior
consultation where immediate action is required. Contractors will be promptly
advised of any such action.
4.2 Consultation. PERTAMINA and Contractors agree to consult
with each other freely on all matters relating to the 1973 Extension MOA and
the 1973 Sales Contract. PERTAMINA and Contractors shall confer and agree as
to any amendment to the 1973 Extension MOA or the 1973 Sales Contract or to any
permitted action or election thereunder which constitutes a material adjustment
in the quantities of LNG to be sold and delivered thereunder or a change in the
terms thereof. At the request of any party hereto, a memorandum evidencing any
such agreement shall be prepared as soon as feasible and signed by each party
hereto.
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4.3 Title. PERTAMINA will cause the LNG resulting from the
liquefaction of the VICO Contract Gas and the Other Contract Gas to be
delivered to Buyer at the Delivery Point. Title to each Contractor's share of
the LNG resulting from the liquefaction of the VICO Contract Gas shall pass to
PERTAMINA at the same time as the passage of title from PERTAMINA to Buyer.
4.4 Insurance. The interests of PERTAMINA and each
Contractor in each cargo of LNG transported by PERTAMINA from the Bontang Plant
shall be adequately insured pursuant to arrangements mutually agreed to by
PERTAMINA and each Contractor. PERTAMINA and each Contractor shall be entitled
to receive its Production Sharing Percentage of the Producers' Percentage of
any proceeds paid under a marine insurance policy covering a cargo of LNG being
transported from the Bontang Plant. Such proceeds shall be remitted by the
insurer directly to the bank designated as Trustee pursuant to Article 5
hereof.
4.5 Delivery and Invoicing. At the time of delivery of each
cargo of LNG to Buyer at the Delivery Point, PERTAMINA will furnish Contractors
with appropriate documentation to evidence the quantity and quality of LNG
delivered, together with copies of the invoices to Buyer covering such
shipment. PERTAMINA will also furnish Contractors with a copy of each invoice
or billing delivered to Buyer on account of interest or other payment
obligation of Buyer under the 1973 Sales Contract concurrently with its being
furnished to Buyer. Calculation of the Contract Sales Price, the amount of
sales invoices and other ▇▇▇▇▇▇▇▇ to Buyer, and any adjustments, shall be
reviewed and approved by PERTAMINA and Contractors prior to presentation to
Buyer.
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ARTICLE 5
PAYMENT
5.1 Contractor Entitlement. The amounts to be paid to each
Contractor for its share of the LNG resulting from the liquefaction of Natural
Gas to be supplied under this Supply Agreement shall be its Production Sharing
Percentage of the Producers' Percentage of the sum of:
(a) all amounts to be paid by Buyers to PERTAMINA for
Extension Quantities sold and delivered under the 1973 Sales Contract;
(b) all other amounts which a Buyer shall become obligated to
pay pursuant to the 1973 Sales Contract with regard to deliveries of Extension
Quantities, including, but not limited to:
(i) amounts payable by such Buyer for its failure to
take quantities it is obligated to purchase under the 1973 Sales
Contract;
(ii) any incremental payments applicable to make-up
deliveries; and
(iii) any interest accruing on overdue invoice payments;
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(c) amounts payable by insurers in respect of LNG resulting from
the liquefaction of the VICO Contract Gas and the Other Contract Gas; and
(d) interest earned on any of the amounts referred to in this
Section 5.1.
5.2 PERTAMINA Assignment of Contractor Percentage Share. In
order to arrange for the receipt by each Contractor of the payments to which
such Contractor is entitled under Section 5.1 hereof, PERTAMINA hereby assigns
to each Contractor that Contractor's Production Sharing Percentage of the
Producers' Percentage of all amounts referred to in Section 5.1 hereof.
5.3 Method of Payment. Throughout the term of this Supply
Agreement, all those payments referred to in Section 5.1 hereof shall be paid
in U.S. Dollars, directly to BankAmerica International in New York City (or
such other leading bank in the United States as shall be selected by PERTAMINA
and approved by Contractors) pursuant to a Trustee and Paying Agent Agreement,
the parties to which shall be PERTAMINA, Contractors, the production sharing
contractors in the Other Contract Areas and the Trustee thereunder. Amounts so
received by the Trustee shall be used for payment of (i) Financing Costs; (ii)
an agreed portion of Plant Operating Costs, (iii) Transportation Costs in
respect of LNG sold and delivered from the Bontang Plant, and (iv) other costs
approved by PERTAMINA and Contractors. Amounts received by the Trustee, to the
extent that they are not used for payment of the costs referred to in the
preceding sentence, shall, insofar as they are applicable to the
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VICO Contract Gas, be disbursed to PERTAMINA and each Contractor in accordance
with its Production Sharing Percentage at a bank or banks of its choice.
5.4 Contractors' Right to Payment.
(a) The right of Contractors to the payments provided for in this
Article 5 shall extend throughout the term of this Supply Agreement and shall
not, except in the event of an occurrence contemplated in Section 5.4(d), be
affected by the production rates or sources of Natural Gas supplied from the
VICO Contract Gas or the Other Contract Gas from time to time during the term
hereof.
(b) If the quantities of net Natural Gas produced from the
participating fields within the VICO Contract Area and delivered pursuant to
this Supply Agreement exceed in the aggregate the quantity of the VICO Contract
Gas, the Producers' Percentage (and the percentage of the revenues to be paid
to PERTAMINA and Contractors hereunder) will not be increased, except in the
event of an occurrence contemplated in Section 5.4(d), and Contractors,
together with PERTAMINA, will be credited with and have the right to receive
revenue from future marketing opportunities in respect of a quantity of net
Natural Gas from reserves in the Other Contract Areas equal to such excess
quantities.
(c) If the quantities of net Natural Gas produced from the
participating fields within the VICO Contract Area and delivered pursuant to
this Supply Agreement are in the aggregate less than the quantity of the VICO
Contract Gas, the Producers' Percentage (and the percentage
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of the revenues to be paid to PERTAMINA and Contractors hereunder) will not be
reduced, except in the event of an occurrence contemplated in Section 5.4(d),
and the production sharing contractors in the Other Contract Areas and any new
contract area, together with PERTAMINA, will be credited with and have the
right to receive revenue from future marketing opportunities in respect of a
quantity of net Natural Gas from reserves in the VICO Contract Area equal to
excess quantities delivered from sources within the Gas Supply Area.
(d) If an insufficiency of deliverable reserves of Natural Gas
shall occur which precludes the delivery from participating field(s) within the
VICO Contract Area or from participating field(s) within any of the Other
Contract Areas of the aggregate amount of Natural Gas committed therefrom
pursuant to this Supply Agreement or to any of the supply agreements referred
to in Section 2.3 hereof over the term thereof, then such insufficiency shall
be delivered from field(s), including but not limited to the participating
field(s) within the area(s) not then experiencing an insufficiency of
deliverable reserves, and the Producers' Percentage shall thereupon be adjusted
(together with a corresponding adjustment to the VICO Contract Gas) to reflect
the revised share of the net Natural Gas in support of PERTAMINA's obligations
under the 1973 Sales Contract which will be supplied and delivered from the
VICO Contract Area over the term hereof, such adjustment in the Producers'
Percentage to apply only to payments provided for in this Article 5 received
after the date thereof. The procedure for determining (i) an insufficiency in
deliverable reserves, (ii) the allocation of the right to supply such
insufficiency among the VICO Contract Area, the Other Contract Areas and any
new contract area and (iii) the calculation of the future Producers'
Percentage, shall be made in accordance with principles to be decided upon by
PERTAMINA.
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ARTICLE 6
ARBITRATION AND GOVERNING LAW
6.1 Arbitration. All disputes arising in connection with this
Supply Agreement shall be finally settled by arbitration conducted in the
English language in Paris, France, by three arbitrators under the Rules of
Arbitration of the International Chamber of Commerce. Judgment upon the award
rendered may be entered in any court having jurisdiction, or application may be
made to such court for a juridical acceptance of the award and an order of
enforcement, as the case may be.
6.2 Governing Law. This Supply Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York, United
States of America.
ARTICLE 7
CONTRACTORS' REPRESENTATIVE
VICO is designated representative by Contractors for performance on
behalf of Contractors of their obligation under Section 4.1 hereof and for the
giving of notices, responses or other communications to and from Contractors
under this Supply Agreement. Such representative may be changed by written
notice to such effect from Contractors to PERTAMINA.
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ARTICLE 8
NOTICES
Any notices to the parties shall be in writing and sent by mail,
cable, telex or facsimile to the following addresses:
To PERTAMIN:
PERUSAHAAN PERTAMBANGAN MINYAK ▇▇▇ GAS BUMI NEGARA
(PERTAMINA)
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
Attention: Head of BPPKA
Cable: PERTAMINA, Jakarta, Indonesia
Telex: PERTAMINA, 44134 Jakarta
Facsimil: 3846932
To Contractors:
VIRGINIA INDONESIA COMPANY (VICO)
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
Jl. H.R. Rasuna Said ▇▇▇. ▇▇▇-▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
Attention: President - VICO Indonesia
Cable: VICO
Telex: 62458 or 62468
Facsimil: 523-6100
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cc: VIRGINIA INDONESIA COMPANY
One Houston Center
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇.▇.▇.
Attention: Chairman
Telex: 166-100
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
A party may change its address by written notice to the other parties.
ARTICLE 9
MISCELLANEOUS
9.1 Amendment. This Supply Agreement shall not be amended or
modified except by written agreement signed by the parties hereto.
9.2 Successors and Assigns. This Supply Agreement shall inure to
the benefit of, and be binding upon, PERTAMINA and each Contractor, their
respective successors and assigns, provided that this Supply Agreement shall be
assignable by a Contractor only if such Contractor concurrently assigns to the
same assignee an equal interest in the Production Sharing Contracts.
9.3 Exclusivity. The parties to this Supply Agreement shall be
the only persons or entities entitled to enforce the obligations hereunder of
the other parties hereto, and no persons
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or entities not parties to this Supply Agreement shall have the right to
enforce any of the obligations hereunder of any of the parties hereto.
9.4 Headings and Subheadings. The Article headings and
subheadings used herein are for convenience of reference only.
IN WITNESS WHEREOF, PERTAMINA and Contractors have caused their duly
authorized representatives to execute this Supply Agreement as of the day and
year first written above.
PERUSAHAAN PERTAMBANGAN MINYAK CONTRACTORS:
▇▇▇ GAS BUMI NEGARA (PERTAMINA) -----------
VIRGINIA INDONESIA COMPANY
BY /s/ ▇. ▇▇▇▇'OE BY /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------- -------------------------------------
LASMO SANGA SANGA LIMITED
BY /s/ ▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
OPICOIL HOUSTON, INC.
BY /s/ CHING-▇▇▇▇ ▇▇▇▇▇
--------------------------------------
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UNION TEXAS EAST KALIMANTAN
LIMITED
BY /s/ ▇. ▇. ▇▇▇▇▇▇
-------------------------------------------
▇. ▇. ▇▇▇▇▇▇
Vice President
UNIVERSE GAS & OIL COMPANY, INC.
BY /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------
VIRGINIA INTERNATIONAL COMPANY
BY /s/ ▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
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