SECOND
SUPPLY AGREEMENT
FOR PACKAGE IV EXCESS SALES
(OSAKA GAS CONTRACT - PACKAGE IV QUANTITIES)
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: September 22, 1993
Effective: January 1, 1991
SECOND
SUPPLY AGREEMENT
FOR PACKAGE IV EXCESS SALES
(OSAKA GAS CONTRACT - PACKAGE IV QUANTITIES)
THIS SUPPLY AGREEMENT, made and entered into in Jakarta the 22
day of September, 1993, but effective as of the 1st day of January,
1991, by and between PERUSAHAAN PERTAMBANGAN MINYAK DAN 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:
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 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
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
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 defined in Section 2.2 hereof) and the Other Contract Gas (as
defined in Section 2.3 hereof); and
WHEREAS, PERTAMINA, in collaboration with Contractors, its
production sharing contractors in other contract areas in East
Kalimantan (herein referred to as the "Other Contract Areas") and
Mobil Oil Indonesia Inc. ("MOBIL"), has entered into an LNG Sales
Contract with Osaka Gas Co., Ltd. ("Buyer") dated as of March 31,
1988 (such contract as amended is herein referred to as the "LNG
Sales Contract" and any terms defined therein have the same
meanings when used herein). Pursuant to the LNG Sales Contract,
PERTAMINA is committed to deliver and Buyer to receive, for each
Annual Program Period, the Scheduled Annual Quantity, which will
not be less than the Minimum Annual Quantity but (pursuant to
Section 7.4 thereof) may include Excess Quantities in excess of the
sum of the Reserved Quantity and the Annual Quantity if PERTAMINA
confirms that it has uncommitted production and shipping capacity
available. Such Annual Quantities, Reserved Quantities and Excess
Quantities shall include the portions attributable thereto of any
quantities which PERTAMINA may be obliged to deliver pursuant to
the Side Letter Agreement herein referred to; and
WHEREAS, PERTAMINA and Buyer have executed a side letter to
the LNG Sales Contract of even date therewith pursuant to which
PERTAMINA is obligated to deliver to Buyer, without charge other
than the Transportation Element of the Contract Sales Price,
certain quantities of LNG provided Buyer complies with the
conditions therein set forth (such side letter is herein referred
to as the "Side Letter Agreement"); and
WHEREAS, the Scheduled Annual Quantity for Annual Program
Period July 1, 1988, to December 31, 1988, and for each of Annual
Program Periods 1989, 1990 and 1991, was established pursuant to
Section 12.1 of the LNG Sales Contract; and
WHEREAS, pursuant to the Memorandum of Agreement on 1992 and
1993 Quantities Under 1988 Sales and Purchase Contract between
PERTAMINA and Buyer dated November 22, 1991 (herein referred to as
the "1992 and 1993 MOA"), PERTAMINA and Buyer have agreed to the
Annual Quantity in respect of each of the 1992 and 1993 Annual
Program Periods; and
WHEREAS, PERTAMINA, in collaboration with Contractors, the
production sharing contractors in the Other Contract Areas and
MOBIL, will make arrangements for the transportation of the
quantities of LNG to be sold and delivered under the LNG Sales
Contract and for the payment of costs respecting such
transportation (herein referred to as "Transportation Costs"); and
WHEREAS, the LNG Sales Contract provides that the Natural Gas
to be processed into LNG and sold and delivered by PERTAMINA is to
be produced from the Gas Supply Areas which include both (i) the
Bontang Gas Supply Area, which consists of the VICO Contract Area
and the Other Contract Areas and (ii) the Arun Gas Supply Area; and
WHEREAS, by its letter No. 700/E0000/88-S2 dated June 22,
1988, PERTAMINA initially determined that seventy-five percent
(75%) of the LNG sold and delivered under the LNG Sales Contract
would be supplied and produced from the Bontang Gas Supply Area and
twenty-five percent (25%) from the Arun Gas Supply Area; and
WHEREAS, by the Memorandum of Agreement on Supply
Entitlements, effective as of July 1, 1990, among VICO, MOBIL,
Total Indonesie ("TOTAL") and Unocal Indonesia, Ltd. ("UNOCAL"),
it was determined that, effective July 1, 1990, one hundred percent
(100%) of the LNG sold and delivered under the LNG Sales Contract
would be supplied and produced from the Bontang Gas Supply Area;
and
WHEREAS, in respect of the period from July 1, 1990 until
December 31, 1990, one hundred percent (100%) of the LNG sold and
delivered under the LNG Sales Contract was supplied in Package III
percentages; and
WHEREAS, PERTAMINA, in its letter No. 1852/D0000/89.S1 dated
December 20, 1989, set forth the gas sales to be allocated to
Package III. The "Package III Entitlement", as used herein, shall
refer to (i) seventy-five percent (75%) of the LNG sold and
delivered under the LNG Sales Contract prior to July 1, 1990; (ii)
all LNG sold and delivered under the LNG Sales Contract in the
period from July 1, 1990 until December 31, 1990; and (iii)
15,125.25 billion BTU's each year, beginning with 1991, sold and
delivered under the LNG Sales Contract (such 15,125.25 billion
BTU's being herein referred to as the "Base Quantity"); and
WHEREAS, pursuant to the Fifth Supply Agreement for Excess
Sales (Osaka Gas Contract) dated as of March 31, 1988, PERTAMINA
and Contractors have agreed to supply and deliver Natural Gas from
the VICO Contract Area in support of the Package III Entitlement;
and
WHEREAS, subject to the proviso hereinbelow, the "Package IV
Entitlement" is herein defined as any quantities, beginning with
1991, sold and delivered under the LNG Sales Contract in excess of
the Base Quantity; provided that if in any year Buyer fails to
take delivery of the Minimum Annual Quantity, any quantities
purchased by Buyer under the LNG Sales Contract in a later year to
make up such deficiency shall not be included in the Package IV
Entitlement for such later year; and
WHEREAS, PERTAMINA, Contractors and the production sharing
contractors in the Other Contract Areas have executed a Memorandum
of Agreement Osaka/Toho LNG Sales and Purchase Contracts effective
as of January 1, 1991, establishing the method by which the portion
of the revenues earned under the LNG Sales Contract relating to the
Package IV Entitlement is to be determined; and
WHEREAS, PERTAMINA and each Contractor desire to supply and
deliver Natural Gas from the VICO Contract Area in support of an
agreed portion of the Package IV Entitlement; and
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,
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
This Supply Agreement shall be effective as of January 1,
1991, and shall terminate on the date the 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 as
Package IV Quantities under the LNG Sales Contract is estimated to
be 0.1566 trillion standard cubic feet ("t.s.c.f."). Such quantity
is herein referred to as the "Osaka Gas Net Gas Requirement
(Package IV)".
2.2 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 Osaka Gas Net Gas Requirement
(Package IV) over the term of this Supply Agreement consisting of
0.0392 t.s.c.f., or 25.0000% thereof, subject to adjustment as
provided in Section 2.4 hereof. 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, 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"). 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 To meet the balance of the Osaka Gas Net Gas Requirement
(Package IV), constituting 0.1174 t.s.c.f. or 75.0000% thereof,
subject to adjustment as provided in Section 2.4 hereof, 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, 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 as certified by the
independent consultant firm of DeGolyer and MacNaughton in written
statements dated on or before April 30, 1992, based on data
available on December 31, 1991.
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 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
certified 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 would be adjusted and documented in the
Supplemental Memorandum in accordance with the Memorandum of
Understanding Re: Supply Agreements and Package IV Sales, dated
August 12, 1991, 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 hereof, 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. Pending completion of such adjustments, the Producers'
Percentage set out in Section 2.2 hereof shall be used on a
provisional basis.
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 and UNOCAL.
ARTICLE 4
4.1 PERTAMINA shall be responsible for the due and prompt
administration of the LNG Sales Contract for the benefit of
PERTAMINA and Contractors. All matters which affect the 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 7 hereof.
It is understood, however, that it will be necessary from time to
time for PERTAMINA, as seller under the LNG 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 PERTAMINA and Contractors agree to consult with each
other freely on all matters relating to the LNG Sales Contract.
PERTAMINA and Contractors shall confer and agree as to any
amendment to the 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 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.
4.3 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 eo instante with the
passage of title from PERTAMINA to Buyer.
4.4 The interests of PERTAMINA and each Contractor in each
cargo of LNG 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 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 obligations of Buyer under the
LNG Sales Contract concurrently with its being furnished to Buyer.
Calculation of the Contract Sales Price, the amount of sales
invoices and other billings to Buyer, and any adjustments, shall be
reviewed and approved by PERTAMINA and Contractors prior to
presentation to Buyer.
ARTICLE 5
5.1 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 Package IV
Entitlement of the sum of:
(a) all amounts to be paid by Buyer to PERTAMINA for LNG
sold and delivered from the Bontang Plant under the LNG Sales
Contract;
(b) all other amounts which Buyer shall become obligated
to pay pursuant to the LNG Sales Contract with regard to deliveries
of LNG from the Bontang Plant, including, but not limited to:
(i) amounts payable by Buyer for its failure to
take quantities it is obligated to purchase under the LNG
Sales Contract; and
(ii) 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 5.1.
5.2 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 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 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 that
certain Amended and Restated Bontang Excess Sales Trustee and
Paying Agent Agreement, dated as of February 9, 1988, among
PERTAMINA, Contractors, the production sharing contractors in the
Other Contract Areas and the Trustee thereunder, as the same may be
from time to time amended. Amounts so received by the Trustee
shall be used for payment of (i) an agreed portion of Plant
Operating Costs, (ii) Transportation Costs in respect of LNG sold
and delivered from the Bontang Plant and (iii) 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.
5.4 (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 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, 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, 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.
ARTICLE 6
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 7
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.
ARTICLE 8
Any notices to the parties shall be in writing and sent by
mail, cable, telex or telecopy 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: 3846932
To Contractors:
VIRGINIA INDONESIA COMPANY (VICO)
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 9
9.1 This Supply Agreement shall not be amended or modified
except by written agreement signed by the parties hereto.
9.2 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 Contracts.
9.3 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 as of the day and year first written above but effective
as of January 1, 1991.
PERUSAHAAN PERTAMBANGAN MINYAK CONTRACTORS:
DAN GAS BUMI NEGARA (PERTAMINA)
VIRGINIA INDONESIA COMPANY
BY _________/s/_______________ BY __________/s/__________
LASMO SANGA SANGA LIMITED
BY _________/s/___________
OPICOIL HOUSTON, INC.
BY ________/s/____________
UNION TEXAS EAST KALIMANTAN
LIMITED
BY _______/s/_____________
UNIVERSE GAS & OIL COMPANY,
INC.
BY _________/s/___________
VIRGINIA INTERNATIONAL COMPANY
BY ___________/s/_________