SUPPLY AGREEMENT
for
NATURAL GAS
to
BADAK IV LNG SALES CONTRACT
Dated: 12th August 1991
Effective: 23rd October 1990
PERTAMINA
VIRGINIA INDONESIA COMPANY
OPICOIL HOUSTON, INC.
ULTRAMAR INDONESIA LIMITED
UNION TEXAS EAST KALIMANTAN LIMITED
UNIVERSE GAS & OIL COMPANY, INC.
and
VIRGINIA INTERNATIONAL COMPANY
BADAK IV LNG SALES CONTRACT
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT, made and entered into in Jakarta the
12th day of August, 1991, but effective as of the 23rd day of
October, 1990, by and between PERUSAHAAN PERTAMBANGAN MINYAK DAN
GAS BUMI NEGARA ("PERTAMINA"), on the one hand, and VIRGINIA
INDONESIA COMPANY ("VICO"), OPICOIL HOUSTON, INC., ULTRAMAR
INDONESIA LIMITED, 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
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
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
WHEREAS, the reserves of natural gas in the VICO Contract Area
exceed the reserves 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
WHEREAS, PERTAMINA, with assistance from Contractors, is
constructing one additional liquefaction train at the natural gas
liquefaction plant located at Bontang Bay, on the east coast of
Kalimantan, Indonesia (as so expanded, the "Bontang Plant") which
expansion will include construction of such additional port,
utility, plant and other facilities as may be required; and
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
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
WHEREAS, PERTAMINA and Contractors have agreed to use the
Bontang Plant in part for the liquefaction of the VICO Contract Gas
(as hereinafter defined in Section 2.2) and the Other Contract Gas
(as hereinafter defined in Section 2.3); and
WHEREAS, it is contemplated that additional LNG resulting from
the increased capability of the Bontang Plant will be sold on the
basis of the highest price and most favorable terms available for
such LNG; and
WHEREAS, PERTAMINA, in collaboration with Contractors and its
production sharing contractors in the other contract areas in East
Kalimantan (herein referred to as the "Other Contract Areas") has
made arrangements for the sale and supply to Osaka Gas Co., Ltd.,
Tokyo Gas Co., Ltd. and Toho Gas Co., Ltd. (collectively "Buyers"
and individually "Buyer"), pursuant to the Badak IV LNG Sales
Contract dated as of October 23, 1990 (the "Badak IV LNG Sales
Contract"), of LNG produced from natural gas supplied from the VICO
Contract Area and the Other Contract Areas; and
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 its obligations under the Badak IV LNG
Sales Contract; and
WHEREAS, each Contractor desires to dispose of its Production
Sharing Percentage of the VICO Contract Gas (as hereinafter
defined) in accordance with the terms of this Supply Agreement,
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
This Supply Agreement shall be effective as of the 23rd day of
October, 1990 and shall terminate on the date the Badak IV LNG
Sales Contract terminates.
ARTICLE 2
2.1 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 LNG
under the Badak IV LNG Sales Contract is estimated to be 2.0538
trillion standard cubic feet ("t.s.c.f."): such quantity is herein
referred to as the "Badak IV Base Net Gas Requirement". The Badak
IV Base Net Gas Requirement is based on the "Fixed Quantities" of
LNG which Buyers are initially committed to purchase under the
Badak IV LNG Sales Contract. In addition to such Fixed Quantities,
further quantities of LNG may be required under the Badak IV LNG
Sales Contract in respect of LNG which Buyers have options to
purchase. The additional quantities of net natural gas, estimated
not to exceed 0.3717 t.s.c.f., required to be supplied for
liquefaction and sale as LNG are herein called the "Badak IV
Additional Net Gas Requirement". "Fixed Quantities", as used above,
shall have the meaning defined in the Badak IV LNG Sales Contract.
2.2 PERTAMINA and Contractors hereby commit and agree to
supply and deliver from proved 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 Badak IV Base Net Gas Requirement and the Badak IV
Additional Net Gas Requirement over the term of this Supply
Agreement consisting of 0.6063 t.s.c.f., or 25.000% thereof,
subject to adjustment provided in Section 2.4. 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 VICO
Contract Gas will be committed, as well as the quantities committed
from each field, will be identified in a supplemental memorandum to
be entered into among PERTAMINA, Contractors and the production
sharing contractors in the Other Contract Areas (the "Supplemental
Memorandum").
2.3 To meet the balance of the Badak IV Base Net Gas
Requirement and the Badak IV Additional Net Gas Requirement
constituting 1.8192 t.s.c.f., or 75.000% thereof, subject to
adjustment as provided in Section 2.4, 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
specific fields within 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, as well as the quantities committed from each field,
will be identified in the Supplemental Memorandum.
2.4 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 to be certified by
the independent petroleum consultant firm of DeGolyer and
MacNaughton in written statements based on data available on
December 31, 1991.
The quantities for the VICO Contract Gas and the Other
Contract Gas and the Producers' Percentage set forth in Sections
2.2 and 2.3 were established by PERTAMINA in its letter dated
December 20, 1989 (No. 1852/D0000/89.S1) to be used only on a
provisional basis until such time as DeGolyer and MacNaughton
certify such reserves, following which the identity of the
participating fields and the quantities in each field which
comprise the VICO Contract Gas and the Other Contract Gas and the
Producers' Percentage shall be adjusted and documented in the
Supplemental Memorandum in accordance with the Memorandum of
Understanding Re: Supply Agreements and Package IV Sales, of even
date herewith, by and among PERTAMINA, Contractors and the
production sharing contractors in the Other Contract Areas.
2.5 Upon completion of the adjustments provided for in
Section 2.4, but not later than the date of loading the initial
cargo of LNG for delivery under the Badak IV LNG Sales Contract,
PERTAMINA and Contractors shall execute an addendum to this Supply
Agreement confirming the VICO participating fields, the quantities
in each field which comprise the VICO Contract Gas and the Other
Contract Gas and the Producers' Percentage.
ARTICLE 3
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, Ltd.
ARTICLE 4
4.1 PERTAMINA shall be responsible for the due and prompt
administration of the Badak IV LNG Sales Contract for the benefit
of PERTAMINA and Contractors. All matters which affect the Badak
IV LNG Sales Contract or the sale and delivery of LNG thereunder
will be administered by a representative to be appointed by
PERTAMINA and the representative appointed by Contractors under
Article 8. It is understood, however, that it will be necessary
from time to time for PERTAMINA, as seller, to take certain
administrative and operational actions without prior consultation
where immediate action is required. Contractors will be promptly
advised of such action.
4.2 PERTAMINA and Contractors agree to consult with each
other freely on all matters relating to the Badak IV LNG Sales
Contract. PERTAMINA and Contractors shall confer and agree as to
any amendment to the Badak IV LNG 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 change in the terms thereof. At the
request of any party hereto, a memorandum evidencing such agreement
shall be prepared as soon as feasible and signed by each party
hereto.
ARTICLE 5
5.1 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" as defined in the
Badak IV LNG Sales Contract. Title to each Contractor's share of
LNG extracted from the VICO Contract Gas shall pass to PERTAMINA eo
instante with the passage of title from PERTAMINA to each Buyer.
5.2 At the time of delivery of each cargo of LNG to a Buyer
at the Delivery Point, PERTAMINA will furnish Contractors with
appropriate documentation to evidence the quantity and quality
thereof, together with copies of the invoices to such Buyer
covering such shipment. PERTAMINA will also furnish to Contractors
a copy of each invoice or billing delivered to a Buyer on account
of (a) take-or-pay, (b) interest or (c) other payment obligation
of Buyers under the Badak IV LNG Sales Contract, concurrently with
its being furnished to such Buyer. Calculation of the "Contract
Sales Price" under the Badak IV LNG Sales Contract, the amount of
sales invoices and other billings to Buyers, and any adjustments,
shall be reviewed and approved by PERTAMINA and Contractors prior
to presentation to Buyers.
ARTICLE 6
6.1 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
LNG sold and delivered under the Badak IV LNG Sales
Contract;
(b) all other amounts which a Buyer shall become
obligated to pay pursuant to the Badak IV LNG Sales
Contract including, without limitation:
(i) amounts payable on account of LNG required to
be taken but which is not taken by such Buyer;
(ii) any incremental payments applicable to make-up
deliveries; and
(iii) any interest accruing on overdue invoice
payments;
(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 6.1.
6.2 In order to arrange for the receipt by each Contractor of
the payments to which such Contractor is entitled under Section
6.1, PERTAMINA hereby assigns to each Contractor that Contractor's
Production Sharing Percentage of the Producers' Percentage of all
amounts referred to in Section 6.1.
6.3 Throughout the term of this Supply Agreement, all
payments referred to in Section 6.1 shall be paid in U.S. Dollars,
directly to Continental Bank 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. The said Trustee and
Paying Agent Agreement shall provide that amounts received by the
Trustee shall be used for payment of Financing Costs, Plant
Operating Costs and 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
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.
6.4 (a) The right of Contractors to the payments provided
for in this Article 6 shall extend throughout the term of this
Supply Agreement and shall not, except in the event of an
occurrence contemplated in Section 6.4(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 6.4(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 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 6.4(d), and 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 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 Badak IV LNG 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 6 received after the date
thereof. The procedure for determining (a) an insufficiency in
deliverable reserves, (b) the allocation of the right to supply
such insufficiency among the VICO Contract Area, the Other Contract
Areas and any new contract area and (c) the calculation of the
future Producers' Percentage, shall be made in accordance with
principles to be decided upon by PERTAMINA.
ARTICLE 7
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.
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 8
VICO is designated representative by Contractors for
performance on behalf of Contractors of their obligation under
Section 4.1 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.
ARTICLE 9
Any notices to the parties shall be in writing and sent by
mail or telex to the following addresses:
To PERTAMINA:
PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
(PERTAMINA)
Jalan Medan Merdeka Timur 1 A
Jakarta, Indonesia
Attention: Head of BPPKA
Cable: PERTAMINA, Jakarta, Indonesia
Telex: PERTAMINA, 44134 Jakarta
Telecopy: 343882
To Contractors:
VICO INDONESIA
6th Floor, Kuningan Plaza
South Tower
JL. H.R. Rasuna Said Kav. C11-14
P.O. Box 2828
Jakarta Selatan, Indonesia
Attention: President - VICO Indonesia
Cable: VICO
Telex: 79644421
Telecopy: 5200174 or 3800037
cc: VIRGINIA INDONESIA COMPANY
One Houston Center
1221 McKinney
Suite 624
P.O. Box 1551
Houston, Texas 77251-1551
U.S.A.
Attention: Chairman
Telex: 166-100
Telecopy: (713) 754-6698
A party may change its address by written notice to the other
parties.
ARTICLE 10
10.1 This Supply Agreement shall not be amended or modified
except by written agreement signed by the parties hereto.
10.2 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 Contract.
10.3 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 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.
IN WITNESS WHEREOF, PERTAMINA and Contractors have caused their
duly authorized representatives to execute this Supply Agreement on
the day and year first written above, but effective as of October
23, 1990.
PERUSAHAAN PERTAMBANGAN MINYAK Contractors:
DAN GAS BUMI NEGARA (PERTAMINA) VIRGINIA INDONESIA COMPANY
BY _________/s/________________ BY _______/s/___________
OPICOIL HOUSTON, INC.
BY _______/s/___________
ULTRAMAR INDONESIA LIMITED
BY _______/s/_____________
UNION TEXAS EAST KALIMANTAN
LIMITED
BY _______/s/______________
UNIVERSE GAS & OIL COMPANY, INC.
BY _______/s/______________
VIRGINIA INTERNATIONAL COMPANY
BY _______/s/_________________