PACKAGE V SUPPLY AGREEMENT
(1995-1999 LNG SALES TO KOREA GAS CORPORATION)
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: September 30, 1994
PACKAGE V SUPPLY AGREEMENT
(1995-1999 LNG SALES TO KOREA GAS CORPORATION)
THIS SUPPLY AGREEMENT, made and entered into in Jakarta on
June 16, 1995, 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:
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
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
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 a Memorandum of Agreement dated September 30,
1994, ("MOA", and unless otherwise so stated, any terms defined in
the MOA shall have the same meanings when used herein) with Korea
Gas Corporation ("Buyer") pursuant to which PERTAMINA is obligated
to sell to Buyer certain quantities of LNG on an ex-ship basis and
certain quantities of LNG on an FOB basis; and
I. WHEREAS, the MOA provides that the Natural Gas to be
processed into LNG and sold by PERTAMINA under the MOA is to be
produced from the areas in East Kalimantan covered by production
sharing contracts between PERTAMINA and its suppliers, which
consists of the VICO Contract Area and the Other Contract Areas;
and
J. WHEREAS, arrangements for the transportation of the
ex-ship quantities pursuant to the MOA 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, 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 under the MOA; and
L. 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
EFFECTIVE DATE AND DURATION
This Supply Agreement shall be effective as of September 30,
1994, and shall terminate on the date when all rights and
obligations of Contractors hereunder have been satisfied.
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 LNG under the MOA is estimated to be .3243
trillion standard cubic feet ("t.s.c.f."). Such quantity is herein
referred to as the "MOA Net Gas Requirement". The MOA Net Gas
Requirement is based on the Fixed Quantities which Buyer has
committed to purchase pursuant to the terms of the MOA.
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 MOA Net Gas
Requirement over the term of this Supply Agreement consisting of
0.0700 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 0.0232
Lampake 0.0020
Mutiara 0.0093
Nilam 0.0245
Pamaguan 0.0003
Semberah 0.0107
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 MOA
Net Gas Requirement, constituting 0.2543 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
economically 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 DeGolyer and MacNaughton 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 DeGolyer and MacNaughton 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.
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.
ARTICLE 4
ADMINISTRATION, INSURANCE AND CONSULTATION
4.1 MOA. PERTAMINA shall be responsible for the due and
prompt administration of the MOA for the benefit of PERTAMINA and
Contractors. All matters which affect the MOA 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 9 hereof. It
is understood, however, that it will be necessary from time to time
for PERTAMINA, as seller under the MOA, 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 Insurance. PERTAMINA shall ensure that the interests
of it and each Contractor in respect of each ex-ship cargo of LNG
transported by PERTAMINA from the Bontang Plant to Buyer 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 an ex-ship 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 6
hereof.
4.3 Consultation. PERTAMINA and Contractors agree to
consult with each other freely on all matters relating to the MOA.
PERTAMINA and Contractors shall confer and agree as to any
amendment to the MOA 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.
ARTICLE 5
TITLE, DELIVERY AND INVOICING
5.1 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" as that term
is defined in the MOA. 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 pursuant to the MOA.
5.2 Delivery and Invoicing. At the time of delivery of
each cargo of LNG to Buyer at the relevant "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 in respect of the sale of LNG
in question. 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 pursuant to the MOA
concurrently with its being furnished to Buyer. Calculation of the
Contract Sales Price as provided for in the MOA, 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 6
ENTITLEMENT AND PAYMENT
6.1 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 Buyer to PERTAMINA for LNG
sold and delivered under the MOA;
(b) all other amounts which Buyer shall become obligated
to pay pursuant to the MOA with regard to deliveries of LNG
thereunder including, but not limited to, 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 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 6.1
hereof, PERTAMINA hereby assigns to each Contractor that
Contractor's Production Sharing Percentage of the Producers'
Percentage of all amounts referred to in Section 6.1 hereof.
6.3 Method of Payment. Throughout the term of this Supply
Agreement, all those payments referred to in Section 6.1 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 portionof
Plant Operating Costs; (iii) Transportation Costs in respect of the
ex-ship cargoes; and (iv) other costs approved by PERTAMINA and
Contractors. Amounts received by the Trustee, to the extentthat
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 Contractors' Right to Payment. 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
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.
ARTICLE 7
DELIVERABILITY
7.1 Oversupply of VICO Contract Gas. 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.
7.2 Shortfall of VICO Contract Gas. 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 8
ARBITRATION AND GOVERNING LAW
8.1 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.
8.2 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 9
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.
ARTICLE 10
NOTICES
Any notices to the parties shall be in writing and sent by
mail, cable, telex or facsimile 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
Facsimile: 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: 62458 or 62468
Facsimile: 523-6100
cc: VIRGINIA INDONESIA COMPANY
One Houston Center
1221 McKinney
Suite 700
P.O. Box 1551
Houston, Texas 77251-1551
U.S.A.
Attention: Chairman
Telex: 166-100
Facsimile: (713) 754-6698
A party may change its address by written notice to the other
parties.
ARTICLE 11
MISCELLANEOUS
11.1 Amendment. This Supply Agreement shall not be amended
or modified except by written agreement signed by the parties
hereto.
11.2 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.
11.3 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 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.
11.4 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:
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/