EXHIBIT 17
AGREEMENT FOR THE SALE AND PURCHASE OF
NAPHTHA
DATED: FEBRUARY 6, 2001
1
AGREEMENT FOR THE SALE AND PURCHASE OF NAPHTHA
DATE: FEBRUARY 6TH, 2001
PARTIES: EP INTEROIL, LTD. Incorporated in the Cayman Islands of Ugland
House, South Church Street, Georgetown, Grand Cayman, Cayman
Islands, British West Indies (the SELLER).
SHELL INTERNATIONAL EASTERN TRADING COMPANY owned by Shell Eastern
Trading (Pte) Ltd incorporated in Singapore of Shell House #04-00,
UE Square, 83 Clemenceau Avenue, Singapore 239920 (the BUYER).
RECITAL
The Seller wishes to sell and the Buyer wishes to buy Naphtha produced at the
InterOil Refinery in Port Moresby Harbour, Papua New Guinea, and the parties
have agreed to enter into this agreement to provide for the general terms and
conditions under which such sales will take place.
OPERATIVE PART
The Seller agrees to sell and the Buyer agrees to buy Naphtha under the General
Terms and Conditions set out in the Schedule to this Agreement for the Term
defined in the Schedule.
2
SCHEDULE
GENERAL TERMS AND CONDITIONS FOR THE SALE AND PURCHASE OF NAPHTHA
1 DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
1.2 REFERENCES AND HEADINGS
1.3 GOVERNING LAW
1.4 WAIVER
1.5 VARIATIONS
2 CONTRACT TERM
3 SALE
3.1 CONTRACT QUANTITY
3.2 NAPHTHA STORAGE TANKS
4 DELIVERY TITLE RISK
4.1 DELIVERY
4.2 TITLE
4.3 WARRANTY OF TITLE
5 PRICE
5.2 CESSATION OR INTERRUPTION OF PRICE QUOTATIONS
3
5.3 ROUNDING OFF
5.4 BILL OF LADING DATE
5.5 LOST BILL OF LADING
6 PAYMENT TERMS
6.1 INVOICE FOR LIFTINGS
6.2 TIME AND METHOD OF PAYMENT
6.3 INTEREST ON LATE PAYMENTS
7 LIFTING CRITERIA
7.1 ESSENTIAL CRITERIA
8 SCHEDULING, TANKER NOMINATION AND LOADING
8.1 FORECAST PRODUCTION AND OTHER INFORMATION
8.2 NOMINATED DATE RANGE AND QUANTITIES
8.4 NOMINATION AND VERIFICATION OF TANKER
8.5 TANKER SUBSTITUTION
8.6 AGREED ARRIVAL DATE
8.7 REJECTION OF AGREED ARRIVAL DATE
8.8 TANKER ARRIVAL
8.9 NON-COMPLIANCE WITH TANKER SPECIFICATIONS
9 BERTH AND LOADING
9.1 SAFE BERTH
4
9.2 LAYTIME
9.3 DEMURRAGE
9.4 ACCEPTANCE OF PORT REGULATIONS
9.5 BUYER"S TANKER
10 QUANTITY/QUALITY DETERMINATION
10.1 PRIMA FACIE CONCLUSIVE
10.2 TANK GAUGING
10.3 NOTIFICATION OF CLAIMS
10.4 TESTS
10.5 QUALITY SPECIFICATION
10.6 INDEPENDENT INSPECTOR
11 FORCE MAJEURE
11.1 RELIEF FROM OBLIGATIONS
11.2 PAYMENTS AND MARKETS
11.3 NOTICE
11.4 OBLIGATIONS OF DELAYED PARTY
11.5 EXTENDED FORCE MAJEURE
12 RISK STRUCTURE
12.1 INSURANCE
12.2 LIABILITY FOR INDIRECT DAMAGES
5
13 POLLUTION
14 TAXES, DUES, DUTIES, IMPOSTS AND GST
14.1 PORT CHARGES
14.2 NEW IMPOSTS
15 NOTICE
15.1 MEANS OF NOTICE
15.2 CHANGE OF ADDRESS
15.3 REPRESENTATIVES
15.4 AUTHORITY OF THE REPRESENTATIVES
15.5 WARRANTY
16 ASSIGNMENT
16.1 SUCCESSORS AND ASSIGNS
16.2 CONDITIONS OF ASSIGNMENT
17 CONFIDENTIALITY
17.1 NON-DISCLOSURE
17.2 EXCLUSIONS
18. DISPUTE RESOLUTION
18.1 NOTICE OF DISPUTE
18.2 MEETING
18.3 FURTHER ALTERNATIVE DISPUTE RESOLUTION
6
18.4 EXPERT
18.5 ARBITRATION
18.6 CONFIDENTIALITY OF PROCEEDINGS
18.7 REPRESENTATION
18.8 CONTINUED PERFORMANCE OF OBLIGATIONS
1 DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
As used in these General Terms and Conditions or in the Agreement or in any
invoice or order relating to Naphtha sold under the Agreement, the following
terms shall have the following meaning:
"A$" means Australian Dollars;
"ACCEPTED QUANTITY" means the quantity (plus or minus 5% operational tolerance )
of Naphtha agreed upon between Buyer and Seller pursuant to Clause 8.2 hereto;
"AGREED ARRIVAL DATE" means the 3 day period entirely within the Date Range,
"ALDR-3", in which the Buyer shall present its Tanker for loading at the
Moorings for a lifting;
"AGREEMENT" means the Agreement between Seller and Buyer to which these General
Terms and Conditions are attached as a schedule and form part or which by
reference expressly incorporates these General Terms and Conditions;
"AFFILIATE" with respect to the Parties shall mean any Entity directly or
indirectly controlling, controlled by, or under common control with the Parties.
For the purposes of this definition, the term "control" (including the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of the Entity, whether through the
7
ownership of voting securities or by contract or otherwise. With respect to the
Buyer, "Affiliate" or "affiliated company" of Buyer means any company (other
than Buyer) which is directly or indirectly affiliated with N.V. Koninklijke
Nederlandsche Petroleum Maatschappij and/or The "Shell" Transport and Trading
Company p.l.c;
For the purposes of the foregoing a particular company is:
directly affiliated with another company if the latter holds fifty percent (50%)
or more of the shares or similar entitlements carrying the right to vote at a
general meeting (or its equivalent) of the former; and indirectly affiliated
with a company (hereinafter in this paragraph called "the parent company") if a
series of companies can be specified beginning with the parent company and
ending with the particular company, so related that each company is directly
affiliated with one or more of the companies earlier in the series;
"API" means American Petroleum Institute;
"ASTM" means American Society for Testing and Materials;
"BARREL" means a volume of 42 US standard gallons at 60(degree)F;
"BILL OF LADING" means a clean, full set of bills of lading in the form
requested by Buyer issued by Seller for the Naphtha loaded into Buyer's Tankers
as proof of delivery of the Naphtha;
"BILL OF LADING DATE" has the meaning given in Clause 5.4 hereto;
"BUYER" means the entities so described in the Agreement;
"CONTRACT QUANTITY" means all Naphtha that Seller makes available for export
from InterOil Facilities in Clause 3;
"DATE RANGE" has the meaning the period during which a lifting of Naphtha is
intended to occur;
"DELIVERY POINT" means the point at which Naphtha passes the loading hose flange
on the manifold of the Tanker at the Moorings of the InterOil Facilities;
8
"DISCLOSING PARTY" has the meaning given in Clause 16.1 hereto;
"ENTITY" means an individual, partnership (whether general or limited), limited
liability company, corporation, trust, estate, unincorporated association,
nominee, joint venture or other entity;
"ETA" means estimated time of arrival;
"FOB" means free on board as defined by INCOTERMS 2000 edition;
"FORCE MAJEURE" means any of the circumstances described in Clause 11.1 hereto;
"GENERAL TERMS AND CONDITIONS" means these terms and conditions for the sale and
purchase of Naphtha, that form part of the Agreement;
"HVN" means heavy grade Naphtha, HVN - BOILING RANGE 105 DEG C UP TO 155 DEG C,
AS GIVEN IN CLAUSE 5;
"INTEROIL FACILITIES" means the facilities on InterOil's Marine Jetty, Napa
Napa, Port Moresby Papua New Guinea, on and offshore for the production,
transportation and storage of Naphtha and other petroleum liquids;
"INTEROIL REFINERY" means the crude oil refinery and InterOil Facilities at Napa
Napa, Port Moresby, Papua New Guinea;
"IP" means Institute of Petroleum;
"LIBOR" means the Interbank Offering Rate for one month as quoted by Royal Bank
of Scotland PLC, in effect at or about 10:00 am New York time on the due date,
or if not quoted on the due date, the last date it is quoted immediately prior
to the due date of payment for the amount and period overdue;
"LAYTIME" means the period as described in Clause 9.2 hereto;
"LVN" means light grade Naphtha, LVN - BOILING RANGE 25 DEG C TO 90 DEG C, per
Cause 5,
9
"METRIC TON" shall mean metric ton, as shown as "tonnes", "mt" or "ton";
"MOORINGS" means the facilities for mooring Tankers at the Port;
"MVN" means medium grade Naphtha, MVN - BOILING RANGE 90 DEG C TO 105 DEG C, PER
CLAUSE 5;
"NAPHTHA " means petroleum liquids with a final boiling point of 170degC or
less, and a maximum (reid) vapour pressure of 12.5 psi, produced from the
InterOil Refinery;
"NAPHTHA PRICE" means the price payable by Buyer to Seller for Naphtha as
described in Clause 5 hereto;
"NOMINATED QUANTITY" means the quantity of Naphtha nominated by Seller for
lifting pursuant to Clause 8.2(a) hereto;
"NAPHTHA STORAGE TANK" has the meaning given in Clause 3.3 hereto;
"NOTICE OF READINESS" means the notice given to Seller's Representative by the
master of the Tanker and that the Tanker has arrived at the anchorage designated
by Seller and is ready in all respects to enter the Moorings and that the Tanker
has received all clearances required by applicable laws or regulations
including, without limitation on the foregoing, clearances from Customs and
Health Authorities;
"OTHER PARTY" means an Entity other than Buyer and Seller;
"OWNING PARTY" has the meaning given in Clause 16.1 hereto;
"PARTY" means a party to the Agreement for the time being and includes its
successors and permitted assigns;
"PLATTS" means the Price Reporting arm of Standard and Poor's, New York, United
States of America;
""PLATTS MOPJ" has the meaning Mean of Price Japan for Naphtha as reported by
Platts, given in Clause 5.1 hereto;
10
"PLATTS MOPS" has the meaning Mean of Price Singapore for Naphtha as reported by
Platts, given in Clause 5.1 hereto;
"PORT" means the Marine Jetty of the InterOil Refinery;
"PORT REGULATIONS" means any Port regulations for Port Moresby Harbour, by a
Government or Governmental appointed body and appropriate marine facility/jetty
guidelines for the use at the InterOil Refinery and InterOil Facilities and the
InterOil marine jetty guidelines in the Port Moresby Harbour, Port Moresby,
Papua New Guinea at the InterOil Tanker loading facilities to be issued by
Seller to Buyer by no later than November 30th 2001, pursuant to Clause 9.4
hereto;
"PROVISIONAL PRICE" has the meaning given in Clause 6.2 (b) for provisional
price when final price is not known at time of invoicing,
"REPRESENTATIVE" means Buyer's Representative, Buyer's Operational
Representative, Seller's Representative or Seller's Operational Representative
as the case may be appointed as such from time to time under Clause 14.3;
"SELLER" means E.P. InterOil Limited of the Cayman Islands;
"SELLER'S REPRESENTATIVE" means the person appointed as such from time to time
under Clause 14.4;
"TANKER" means the tanker or vessel provided by Buyer to lift Naphtha hereunder;
"TANKER OWNER" means any or all of the owner, disponent owner, charterer or
operator of the Tanker;
"TERM" has the meaning given in Clause 2.3; and
"USD" means United States Dollar currency
11
1.2 REFERENCES AND HEADINGS
Unless the context otherwise requires, in these General Terms and Conditions:
(a) references to Clauses are to clauses of these General Terms and
Conditions;
(b) references to the singular include the plural and vice versa;
(c) paragraph headings in these General Terms and Conditions have been
inserted for the purpose of reference only and shall have no effect
whatsoever on the meaning, interpretation or construction of the
provisions hereof;
(d) references to days weeks or months means calendar days, weeks or months;
and
(e) a reference to "dollars" or "cents" is to United States of America
currency, unless stated otherwise.
1.3 GOVERNING LAW
(a) This Agreement shall be governed by and construed in accordance with the
law of England, and for the purposes specifically of Clause 17.5 below
each of the Parties agrees to submit to the jurisdiction of the courts of
England.
(b) The Parties do not intend that any term of this Agreement should be
enforceable by virtue of the Contracts (Rights of Third Parties) Act 1999,
by any person who is not a party to this Agreement.
(c) The United Nations Convention on Contracts for the International Sale of
Goods of Vienna, 11th April 1980, shall not apply to this Agreement.
12
1.4 WAIVER
No waiver of any provision of this Agreement nor consent to any departure
therefrom, by any of the Parties shall be effective unless the same shall be in
writing and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which it is given. No default or delay on the
part of either of the Parties in exercising any rights, powers or privileges
hereunder shall operate as a waiver thereof or of any other right hereunder; nor
shall a single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
1.5 VARIATIONS
This Agreement cannot be modified in any way except in writing and signed by the
Parties.
2 TERM & QUANTITY
2.1 The Contract Quantity of Naphtha shall be delivered by Seller for export
from InterOil Facilities delivered during the Term as defined in Clause
2.3.
2.2 Not Used
2.3 The Term of this Agreement is for three years from the Bill of Lading date
of the first Naphtha export cargo from the InterOil Facilities. At the end
of the three year term this Agreement shall terminate unless mutually
agreed in writing by both parties.
3 SALE
3.1 CONTRACT QUANTITY
Seller agrees to sell and supply and Buyer agrees to purchase, receive and pay
for all of the quantity of Naphtha available for export from the InterOil
Refinery and made available for lifting at the Delivery Point during the Term
pursuant to the Agreement.
13
3.2 CARGO QUANTITY
Each Naphtha cargo (whether one individual grade or a combination of LVN, MVN,
HVN grades) shall be lifted in shipments of no less than 10,000 and no greater
than 35,000 metric tonnes.
Buyer from time to time may reasonably request to load smaller parcels of LVN,
MNV, or HVN should it wish to do so for freight optimisation, without financial
penalty to Seller. In co-operation with Buyer, Seller will provide commercially
reasonable endeavours to accede to such requests.
3.3 NAPHTHA STORAGE TANKS
Buyer acknowledges the following with regard to the storage tanks on the
InterOil Refinery site dedicated to the storage of Naphtha ("NAPHTHA STORAGE
TANK"):
(a) the Naphtha Storage Tanks have a total combined effective storage net
capacity of 350,000 net U.S. barrels. The assumed export tankage is to be of
150,000 bbls, 125,000 bbls and 75,000 bbls per tank, each tank being capable of
being in LVN, HVN or MVN service respectively and, with Seller's agreement,
interchangeably.
(b) Buyer shall use reasonable endeavors to work with Seller to minimise the
impact of liftings during periods of non-routine operational maintenance on the
InterOil Refinery and InterOil Facilities, including but not limited to the
Naphtha Storage Tanks. All routine tank maintenance shall be advised by Seller
at no less than 60 days' advance written notice.
4 DELIVERY TITLE RISK
4.1 DELIVERY
Seller shall supply and Buyer shall receive each lifting of Naphtha FOB the
Tanker at the Delivery Point.
4.2 TITLE
All title risk and property in respect of each shipment of Naphtha hereunder
shall pass
14
from Seller to Buyer at the Delivery Point.
4.3 WARRANTY OF TITLE
Seller hereby irrevocably undertakes and warrants that Seller has at all times,
including but not limited to the time of delivery of the Naphtha and cargo (and
the passing of their risk and property) in accordance with the Agreement herein,
full, unencumbered and indefeasible title to the Naphtha and cargo delivered to
Buyer under the Agreement and further has the full right and authority to
transfer title to such Naphtha and cargo and to effect delivery of same to
Buyer.
5 NAPHTHA PRICE
5.1 PRICE DETERMINATION
Unless otherwise agreed, for the purpose of price determination, the three
InterOil Refinery Naphtha `Design Grades' listed below shall be combined and
covered by three primary prices listed below:
DESIGN GRADES
LVN - BOILING RANGE 25 DEG C TO 90 DEG C
MVN - BOILING RANGE 90 DEG C TO 105 DEG C
HVN - BOILING RANGE 105 DEG C TO 155 DEG C
The three primary prices for Naphtha shall be:
I LIGHT NAPHTHA PRICE - FOR LVN with a maximum endpoint of 90 deg C in
accordance with Clause 5.1.1 below, allowing some MVN in the mix to 90 deg C.
The Medium Naphtha and Heavy Naphtha mix shall be priced as follows:
II MEDIUM NAPHTHA PRICE - for the medium naphtha in accordance with Clause
5.1.2.
15
III HEAVY NAPHTHA PRICE - for the heavy naphtha in accordance with Clause 5.1.2.
Above prices shall be subject to the export Naphtha conforming to the
specifications stipulated in Clause 10.3. The primary prices shall be calculated
in accordance with sub-clauses 5.1.1 and 5.1.2 below.
It is recognised that Buyer may seek to change cutpoints of the Light Naphtha
and the Medium Naphtha/Heavy Naphtha Mix and, subject to Seller's agreement to
accede to Buyer's requests, Buyer and Seller may agree price adjustments to be
calculated and applied to the primary pricing formulas. An example of one
methodology under consideration is shown in Appendix B.
5.1.1. LIGHT NAPHTHA - LVN
[Deleted for confidentiality]
5.1.2. HV/MV NAPHTHA MIX
[Deleted for confidentiality]
5.2 CEASATION OR INTERRUPTION OF PRICE QUOTATIONS
Buyer shall pay to Seller for each barrel of Naphtha delivered hereunder at the
Naphtha Price stated in the Agreement provided that:
if the relevant pricing quotations are interrupted or cease to be published then
Buyer and Seller shall meet and use their best endeavours to select an
appropriate alternate price quotation to be used to determine the Naphtha Price
and if the Parties fail to agree upon an alternate price quotation, the Naphtha
Price shall be calculated in accordance with the mechanism set out in Clause
6.2(b) hereto.
5.3 ROUNDING OFF
In determining the Naphtha Price, fractions of a dollar are to be rounded up to
the nearest 3 decimal places.
16
5.4 BILL OF LADING DATE
The Bill of Lading Date shall be the day on which the particular lifting is
completed and Seller's loading hose is disconnected.
5.5 LOST BILL OF LADING
If Buyer does not receive a full set of clean, original Bills of Lading in the
form requested by Buyer in its documentary instructions, or they contain any
inaccuracies, or if they are not received at all, whether as a result of an act
or omission of Seller, Seller's Representative or the terminal operator, Seller
shall:
(a) re-affirm the warranties contained in Clause 4.3; and
(b) irrevocably and unconditionally indemnify Buyer and hold Buyer harmless
against any claim made against Buyer by any person as a result of breach by
Seller of any of the warranties set out in Clause 4.3, and all loss, costs
(including, but not limited to legal costs), damages, and expenses which Buyer
may suffer, incur or be put to as a result of Seller's failure to deliver the
Bill of Lading in accordance with the Agreement. This Indemnification shall be
in the form of a Letter of Indemnity as shown in Appendix "A".
The indemnity contained in Clause 5.5(b) shall terminate upon delivery to and
acceptance by Buyer by Seller's or Seller's Representative of the full set of
clean original Bills of Lading or a full clean replacement set of Bills of
Lading.
6 PAYMENT TERMS
6.1 INVOICE FOR LIFTINGS
(a) Seller or Seller's Representative shall provide to Buyer the Seller's
invoice and such documents including but not limited to the full set of
clean original Bills of Lading, certificate of origin, certificate of
quality and quantity as are reasonably requested by Buyer for each cargo
of Naphtha delivered hereunder.
(b) Each invoice shall show:
17
(i) the total quantity of Naphtha lifted by Buyer at such lifting;
(ii) the total sum claimed to be due and owing to Seller;
(iii) bank and account details for Seller
6.2 TIME AND METHOD OF PAYMENT
(a) Subject to other provisions of this Clause 6.2, Buyer shall make payment
in United States currency by telegraphic transfer to the Seller's bank and
to the account as directed in Seller's invoice free of all charges and
without set off discount deduction or counter-claim not later than 30
calendar days after the Bill of Lading Date where the Bill of Lading Date
shall count as day zero.
(b) [Deleted for confidentiality]
(c) In the event that, at any time from the commencement of this Agreement,
there is a material change to the methodology of calculating components in
the price formula by the reporting services in Clause 5, for example the
premia reported by Petroleum Argus in Clause 5.1, or if any of the
reporting service assessments used as components in the price formula are
discontinued, the Parties shall agree a suitable replacement marker.
Should the Parties fail to agree on a replacement, an independent expert
shall be mutually agreed upon to identify a replacement.
(d) Subject to any direction to the contrary specified in an invoice, payments
that come due on a Sunday or Monday bank holiday in New York shall be made
on the following banking day. Payments that come due on a Saturday or any
other bank holiday, except one falling on a Monday, in New York shall be
made on the preceding banking day.
(e) All bank charges incurred at Seller's bank shall be for Seller's account.
All bank charges incurred at Buyer's bank shall be for Buyer's account.
18
(f) Seller shall make reasonable endeavours to ensure that all documents
required for payment are sent to Buyer no later than 3 working days prior
to the payment due date failing which payment shall be made 3 working days
after receipt of such requisite documents by Buyer.
6.3 INTEREST REIMBURSEMENT AND INTEREST ON LATE PAYMENTS
For any one shipment, Seller may, upon giving written notice to Buyer and
subject to Buyer's consent not to be unreasonably withheld, prior to that
shipment's Bill of Lading Date, request for payment to be made earlier than 30
days after the Bill of Lading Date as specified in Clause 6.2(a) on a revised
payment date, but no earlier than 5 days after the Bill of Lading Date. Seller
shall pay early payment interest to Buyer for the period from the revised
payment date until 30 days after the Bill of Lading Date at LIBOR [deleted for
confidentiality].
7 LIFTING CRITERIA
7.1 ESSENTIAL CRITERIA
(a) Buyer shall arrange the liftings based on information provided by Seller
or Seller's Representative pursuant to Clause 8.1. For this purpose Buyer
and Seller will mutually endeavour to ensure liftings are scheduled to
ensure Naphtha in storage at the Naphtha Storage Tank does not reach tank
tops or refinery production is not reduced to avoid potential tank tops.
(b) Buyer shall use all reasonable efforts to ensure that during any month ,
liftings shall occur no later than 3 days prior to forecast tank tops so
that the effective working storage capacity of 350,000 barrels is not
reached;
(c) The above allowances may be varied as advised by Seller or Seller's
Representative to Buyer from time to time.
19
8 SCHEDULING, TANKER NOMINATION AND LOADING
8.1 FORECAST PRODUCTION AND OTHER INFORMATION
Seller or Seller's Representative shall provide the following information to
Buyer:
(a) every Tuesday, or as soon as practicable each week, the production and
inventory forecasts for all grades of Naphtha which are projected to be
available for lifting in the next succeeding 3 months, highlighting the
last possible date as contemplated under Clause 7.1(b) by which the next
lifting must take place;
(b) notice as soon as practicable of any material increase or decrease (of 20%
or more over any one-week period) in forecasts of Naphtha production
advised in Clause 8.1(a);
(c) loading windows assigned to other cargoes loading or discharging at the
same primary jetty, e.g. firm arrival slots for crude oil import cargoes;
(d) notice as soon as practicable of operational circumstances that will
reduce the capacity of any one of the Naphtha Storage Tanks; and
(e) at least 60 days written notice of scheduled maintenance to any of the
Naphtha, Marine and InterOil Refinery facilities (including the loading
terminal), or scheduled unavailability of resources which will either
impact on production or impose constraints on Buyer's ability to accrue
and lift Naphtha.
8.2 NOMINATION PROCEDURES - DATE RANGES AND QUANTITIES
(a) On or before the 43rd day prior to the first day of the Date Range being
nominated for the next proposed liftings, Buyer will use its best efforts
based on Seller's Forecast Production to provide the following information
to Seller or Seller's Representative:
(i) the 10-day Date Range for the next lifting;
20
(ii) the nominated quantity of Naphtha to be lifted ("NOMINATED
QUANTITY") that is between 10,000 to 35,000 metric tonnes.
(iii) indicative 10 day lifting windows for the subsequent 2 liftings.
(b) Within 1 business day of Buyer's notice of the Date Range, which will not
be earlier than the 42nd day of the first date range, Seller or Seller's
Representative shall notify Buyer of its acceptance or rejection of the
nominated Date Range
(c) In the case of rejection, Seller or Seller's Representative shall detail
the reasons to Buyer and Buyer and Seller or Seller's Representative shall
consult with each other within the next 24 hours and reach agreement on a
revised Date Range mutually. Notwithstanding Clause 8.2(b) should parties
fail to reach agreement on a revised Date Range, Seller will advise Buyer
of a Date Range with last day of such seven day Date Range being the
forecast tank tops day minus three days.
(d) Pursuant to (b) or (c) above, the 7 day window shall be referred to as the
accepted 7 day loading date range (ALDR-7), and quantities nominated by
Buyer and agreed to by Seller shall become `Accepted Quantity'.
(e) No later than 33 days prior to the first day of the ALDR-7, Seller shall
be obliged to narrow this range to a five-day loading window which (unless
parties mutually agree otherwise) shall fall fully within the ALDR-7.
Seller may also renominate the quantity to be lifted in accordance with
limits set in clause 3.2 above, provided the resulting forward offtake
programme remains feasible, or else provided such quantity changes are
accompanied by adjustments to the timing of subsequent ALDRs as necessary.
Any such adjustments shall be mutually agreed and confirmed in writing.
Such 5 day Date Range shall be referred to as the accepted 5 day loading
Date Range (ALDR-5).
21
(f) No later than 23 days prior to the first day of the ALDR-5, Seller shall
further narrow this range to a three-day loading window which shall be
referred to as the final accepted loading Date Range, "stem", or ALDR-3.
The ALDR-3 shall fall fully within the previously advised ALDR-5 range
unless the Parties mutually agree otherwise.
Seller is aware that the above notice periods are required to permit Buyer to
plan advance sales and to commit to chartering acceptable offtake Tankers in a
timely and responsible manner. In the event that Buyer is obliged to charter a
suitable Tanker earlier than 23 days prior to the ALDR-3 notification by Seller,
due to limited supply of quality Tankers, then the ALDR-3 shall be deemed to be
the first three days of the ALDR-5 unless otherwise agreed by the Parties. The
Buyer shall notify the Seller in such events.
8.3 NOMINATION AND VERIFICATION OF TANKER
(a) No later than 15 days before the first day of the Date Range Buyer shall
nominate to Seller or Seller's Representative the Tanker to be used by
Buyer.
(b) Seller shall advise Buyer within 24 hours of Seller's acceptance or
rejection of Tanker nomination.
(c) Buyer shall ensure that all Tankers nominated, and each Tanker arriving at
the Moorings for loading, shall comply with the specifications set out in
the Port Regulations and appropriate marine facility/jetty guidelines.
(d) Without limitation to Buyer's obligations pursuant to Clause 8.3(a), Buyer
shall provide to Seller or Seller's Representative appropriate
documentation to enable Seller or Seller's Representative to verify
compliance with the Port Regulations and appropriate marine facility/jetty
guidelines at the time of nomination of the Tanker provided that if Buyer
is not able to supply such documentation, Buyer shall at the time of
confirmation provide a notice of compliance to Seller or Seller's
Representative, in a form acceptable to Seller, which acceptance shall not
be unreasonably withheld.
22
8.4 TANKER SUBSTITUTION
No later than 3 working days prior to the first day of the relevant Date Range
Buyer may nominate a substitute Tanker which meets all the requirements of the
Port Regulations and appropriate marine facility/jetty guidelines, and Seller
shall advise of acceptance or rejection of that Tanker within 24 hours of
receiving such nomination from Buyer.
8.5 TANKER ARRIVAL
(a) Buyer shall use reasonable endeavours to present its Tanker for loading at
the Moorings within the ALDR-3.
(b) If, due to an event of Force Majeure, the Tanker is not presented within
ALDR-3 ready to receive the Nominated Quantity of Naphtha or is so
presented but ceases to be able to lift the Nominated Quantity then the
Parties shall negotiate in good faith to try to agree on alternative
arrangements.
8.6 NON-COMPLIANCE WITH TANKER SPECIFICATIONS
Notwithstanding Clauses 8.3 and 8.4, Seller shall not be obliged to load any
Tanker that does not comply with the specifications of the Port Regulations. In
addition, and without liability, Buyer shall provide access and other assistance
to enable Seller to inspect the Tanker and any relevant documentation upon its
arrival at the Moorings to ensure the Tanker complies with any Port Regulations
and appropriate marine facility/jetty guidelines which, the intention being,
shall be no more onerous than other regulations in effect at comparable
Australian ports.
9 BERTH AND LOADING
9.1 SAFE BERTH
Seller shall provide, or cause to be provided to Buyer a safe berth at the
Moorings as described in the Port Regulations.
23
9.2 LAYTIME
(a) The time, which excludes time lost by reason of Force Majeure ("LAYTIME")
allowed to Seller for the loading of the Accepted Quantity for each
lifting hereunder:
(i) for Naphtha parcels in excess of 24,500 metric tons - "mt", Laytime
shall be 36 hours Sundays and public holidays included;
(ii) for Naphtha parcels co-loaded with other products at the InterOil
Facilities, Laytime for the combined nominated quantity shall be 36
hours Sundays and public holidays included, subject to the Buyer's
Tanker being able to co-load with out delay; and
(iii) for Naphtha parcels smaller than 24,500 mt loaded stand-alone,
Laytime shall be 24 hours Sundays and public holidays included.
(b) Subject to Clause 9.3(d)(ii), Laytime shall commence:
(i) berth or no berth, 6 hours after Notice of Readiness to load is given
to Seller or Seller's Representative by the Tanker by letter, facsimile,
radio or telephone, or upon the Tanker's arrival (i.e. all fast in berth),
whichever first occurs, provided that if the Tanker arrives before the
first day of the ADLR-3, Laytime shall not commence until the Tanker is
all fast in the berth or at 0600 hours local time on the first day of the
ADLR-3 whichever is earlier; and
(ii) if the Tanker arrives after the end of the ADLR-3, when the Tanker
has finished mooring, that is, all fast.
(c) Laytime hours shall cease when disconnection of loading hose is complete.
24
9.3 DEMURRAGE
(a) In the event of any delay from any cause whatsoever (including a delay
caused by force majeure) whether in connection with the scheduling of the
Tanker's turn to load, provision of a berth for the Tanker, berthing or
loading of the Tanker or otherwise howsoever without limitation, any
liability of Seller and/or Buyer for such delay shall be limited to the
payment of demurrage.
(b) If the Accepted Quantity is not loaded within the Laytime, Seller shall
pay to Buyer demurrage, in respect of the time required to load the
Accepted Quantity in excess of the Laytime at the rate per day (or pro
rata for part of a day) equal to the actual demurrage rate payable by
Buyer to the Tanker owner pursuant to the charter party between Buyer and
the Tanker owner or if the Tanker is time-chartered, a rate that was
agreed between Seller or Seller's representative and Buyer at the time the
Tanker was nominated or accepted for the lifting. It is agreed that the
demurrage claim shall be agreed no later than three months from the date
documents supporting such claim are sent to Seller. Payment for demurrage
claims must be paid no later than one month from the date of such
agreement.
In the event of a delay beyond either of these deadlines (which aggregate
period shall not under any circumstances exceed 4 months unless otherwise
agreed in writing,) late payment interest shall be payable (at the rate
defined in the payment clause) on the full demurrage amount agreed or if
not so agreed, then claimed by Seller, from the deadline and paid with
final settlement.
Buyer shall submit to Seller within 90 days of the Bill of Lading Date,
the Buyer's demurrage claim together with a copy of the charter party.
(c) If the Accepted Quantity is not loaded within the Laytime due to bad
weather or storms, Seller's liability to pay demurrage shall be halved
unless Tanker is already on demurrage in which case, Seller's liability
for demurrage is not reduced.
25
(d) Time incurred, spent or lost due to any of the following shall not count
as Laytime, or if the Tanker is on demurrage, for demurrage when spent or
lost:
(i) on an inward passage moving from anchorage to the Moorings;
(ii) if the pilot reasonably determines that it is not safe to moor the
Tanker at night or otherwise unless carried out concurrently with
loading;
(iii) due to any cause attributable to Buyer, the Tanker or the Tanker
Owner, including but not limited to breakdown or deficiency of the
Tanker;
(iv) as a result of the inability of the Tanker by reason of its own
deficiencies to receive the shipment at a rate consistent with being
able to accept up to 150 psi pressure at the ship's manifold over
the total period taken for loading;
(v) as a result of strike, lockout, stoppage or restraint of labour of
the Tanker;
(vi) in any deballasting or handling slops or both unless concurrent with
loading.
(e) Seller shall not be liable (other than for demurrage and for Deadfreight
as specified in this clause) for any loss or damage, direct or indirect,
which Buyer may suffer as a result of the Tanker not being loaded within
the Laytime.
(f) If all or part of such Seller's demurrage is incurred due to an event of
Force Majeure occurring after Laytime finishes, the rate of demurrage
shall be reduced to one half (1/2) for the period of such demurrage or
part thereof.
(g) Deadfreight
In the event the Seller is unable to load 95% of the Accepted Quantity in
ADLR3 without incurring demurrage due to shortage of available quantity,
the Seller shall compensate Buyer for any demurrage waiting for available
cargo as per above.
26
Alternatively, subject to Buyer's and Seller's agreement, Seller may
short-load Tanker and pay associated Deadfreight charges to Buyer. Buyer
and Seller agree to act in good faith to identify and choose the more cost
effective means (between demurrage and Deadfreight) to mitigate costs to
Seller associated with cargo shortage. Notwithstanding such identification
of the more cost effective means, it is recognised that Buyer may not
intentionally be able to delay Tanker beyond ADLR3 to await loading of 95%
of Accepted Quantity. Should this be the case, mutual agreement between
Buyer and Seller is not required as contemplated above and Buyer can order
Tanker to sail with Deadfreight after Laytime has been fully spent with
such actual Deadfreight cost being reimbursed by Seller. Seller is not
liable to pay Deadfreight if due to Force Majeure.
9.4 ACCEPTANCE OF PORT REGULATIONS
The Seller shall provide Buyer with a full and complete set of the Port
Regulations and Seller's marine facility operational requirements once these
have been finalised, for Buyer's review and acceptance.
Buyer shall cause copies of the same to be provided to the owners and the Master
of the Tanker nominated and accepted under Clause 8.4 or the Regulations or, if
applicable, substituted pursuant to Clause 8.4. Buyer shall use all reasonable
endeavours to ensure that the Master and the owners of the Tanker comply in all
respects with the requirements set out in the Port Regulations and Seller's
marine facility guidelines and operational requirements; such regulations and
requirements not to be more onerous than those applicable to loading from oil
refineries in Australia.
9.5 BUYER'S TANKER ARRIVES LATE AND CAUSES POTENTIAL TANK TOPS OR TANK TOPS
(a) Where Buyer's Tanker is or will be late for the Agreed Loading Date Range
(ALDR-3) and in Seller's reasonable opinion this is likely to directly
cause production at the InterOil Refinery to be curtailed, then Seller may
request Buyer to use an alternative acceptable Tanker capable of arriving
within Agreed Arrival Date to avoid reaching terminal tank-tops.
27
(b) If Buyer's Tanker has not arrived prior to three days before tank tops,
and Seller can find a buyer with Tanker at short notice, Seller can sell a
marketable quantity of Naphtha sufficient to make ullage for Naphtha
production prior to late arrival of Buyer's Tanker).
(c) If action taken in (b) is unable to alleviate the potential tank tops and
shut-in is unavoidable, Seller can then take further action to minimize
impact on production at the InterOil Refinery by the late arrival of
Buyer's Tanker. Such action may include reducing production or shutting
down the InterOil Refinery partially or completely and/or selling the full
nominated quantity to a third party buyer (latter action must in all
scenarios be preceded by consultation with, and formal notification of
specific intent to Buyer).
(d) As a consequence of Buyer's Tanker arriving late and causing Seller to
take action to avoid shut in by selling Naphtha to a third party, Buyer
shall pay Seller direct damages equal to Seller's direct incremental
costs, for arms length transactions, for alternative sale of Naphtha being
an amount representing the difference between the actual FOB equivalent
price received for such Naphtha and the price that would have been payable
in sale to Buyer.
(e) In respect of consequential losses arising from the late arrival of
Buyer's Tanker, Buyer shall also pay Seller liquidated damages based on
lost refining and marketing margin due to any reduced refinery throughput.
The Parties further agree that such sum represents a genuine pre-estimate
of the Seller's losses caused by reduced production, such downturn in
production being due to action taken due to the late arrival of Buyer's
Tanker.
(f) Seller shall act in good faith and use its reasonable endeavours to
minimise the costs and losses and provided further in each case that
evidence in reasonable detail in support of Seller's claim for
reimbursement of each such cost or loss shall be furnished to Buyer;
(g) Where the Buyer's Tanker fails to tender a valid notice of readiness
within the relevant Agreed Arrival Date, then for any resultant production
quantities curtailed
28
by Buyer's Tanker arriving after such loading Date Range owing to reasons
other than Force Majeure, Seller may short-load Buyer's Tanker to the
extent of the quantities curtailed but only to the extent required to
avoid impact on the volume of subsequent loadings. Buyer shall be entitled
to verify the above amounts and information and for this purpose, Seller
shall provide such co-operation and assistance as Buyer may reasonably
require.
(h) Payments associated with this clause 9.5 will be due 30 days after Seller
submits fully documented details of claim to Buyer.
(i) Any payments under this Clause 9.5 shall be payable by Buyer to Seller
only in the event of willful misconduct or gross negligence on the part of
Buyer, and shall be capped at USD [Deleted for confidentiality] per day of
lost refinery production.
10 QUANTITY/QUALITY DETERMINATION
10.1 PRIMA FACIE CONCLUSIVE
The quantity and quality of the Naphtha in each shipment shall be determined by
measurement, sampling and testing in accordance with internationally recognised
industry standards at the InterOil Facilities loading terminal by an independent
inspector appointed by the Buyer but acceptable to the Seller. The
determinations of such independent inspector, in the absence of fraud or
manifest error, shall be final and binding upon both Parties. The original cargo
suppliers shall prepare and sign certificates as to the quantity and a
certificate as to the quality of the oil loaded upon completion of loading of
the cargo. Such certificates shall be countersigned by the independent inspector
to signify his agreement with the figures stated therein. Seller or Seller's
Representative shall advise Buyer by telex, cable or facsimile of the quantity
and quality recorded on such certificates as soon as possible after completion
of loading of the cargo. The costs of such independent inspection shall be
shared equally between Seller and Buyer.
29
A sufficient quantity of the relevant representative samples shall be correctly
taken at the loading terminal and kept in accordance with internationally
recognised methodology and practice. The samples, so obtained will be retained
by Seller for at least one hundred and twenty (120) days after loading unless
otherwise required or a dispute arises in connection therewith, in which event
such samples shall be retained for as long as the Parties require.
10.2 NOTIFICATION OF CLAIMS
Any claims as to shortage in the quantity or defects in the quality of Naphtha
loaded into the Tanker shall be communicated to Seller or Seller's
Representative immediately after such shortage or quality defects are
discovered. Such communications shall be followed by a formal written notice of
claim with all necessary details to properly process the claim. If no
notification or formal written notice of claim is received within 70 days from
the date of the occurrence of the claim, such claims shall be deemed to have
been waived.
10.3 QUALITY SPECIFICATIONS
10.3.1 LIGHT NAPHTHA
The Seller undertakes and warrants that the quality of the light grade Naphtha
(LVN) supplied and delivered hereunder shall fully comply with the
specifications applicable to Japan Open Spec Naphtha as per the CFR FAR EAST
OPEN SPEC NAPHTHA CONTRACT applicable at the time of loading of the cargo,
subject to the modifications made in the table below.
For reference purposes, the specifications applicable to Japan Open Spec Naphtha
as per the latest CFR FAR EAST OPEN SPEC NAPHTHA CONTRACT 2000 VERSION including
such modifications as indicated (***) is as follows:
PROPERTY UNIT(S) SPECIFICATION TEST METHOD
***S.G. at 60Deg F Report D 1298
***Colour (Saybolt) Min +30 D 156
30
R.V.P at 37.8 Deg C (PSI) Max 12.5 D 323
***Lead (PPB) Max 50 UOP 350
Sulphur (PPM) Max 650 IP 243
Paraffins (Vol PCT) Min 65.0 D 1319/2002
N-Paraffins (Vol PCT) Min 30.0 D 1319
Olefins (Vol PCT) Max 1.0 D 1319/2002
*** I.B.P.(Deg C) Min 25 D-86
***95%Evap.P.(Deg C) Max 105* D-86
Total Chlorine (PPM) Max 1 combustion by IP-243
followed by colorometric determination
Mercury (PPB) Max 1**
Arsenic (PPB) Max 20**
Oxygenated (MTBE and/or Max 50 PPM
Products ETBE and/or
ethanol and/or
methanol)
* For avoidance of doubt, fullrange Naphtha (as described for example by the
Argus premium constituting component "c" of the light grade Naphtha price)
typically exhibits higher value properties than the above specification, for
example AG fullrange Naphtha typically has a paraffins content of 80% as opposed
to the 65% stipulated in Japan Open Spec above. Likewise a typical FBP for light
grade Naphthas is 100 deg C, and 140-180 deg C for fullrange Naphthas.
** Subject to typical testing procedures as applied for Naphtha in Asia.
31
10.3.2 MVN/HVN NAPHTHA MIX
The Seller undertakes and warrants that the qualities of MVN and HVN supplied
and delivered hereunder shall fully comply with the specifications stipulated
below:
MVN
PROPERTY UNIT(S) SPECIFICATION TEST METHOD
S.G. at 60Deg F report D 1298
Colour (Saybolt) Min +30 SAYBOLT
R.V.P at 37.8 Deg C (PSI) report D 323
Lead (PPB) Max 50 D-3116
Sulphur (PPM) Max 50 D-2622
Paraffins (Vol PCT) report D 1319
Olefins (Vol PCT) Max 1.0 D 1319
Aromatics (VolPCT) report D-1319
***5%Evap.P.(Deg C) Min 75 D-86
***95%Evap.P.(Deg C) Max 110 D-86
Vanadium (PPM) Max 1 D-3605
Sodium (PPM) Max 1 D-3605
Arsenic (PPB) Max 10 Gutzeit Method, Vogel 34
edition, (p 796)
Total Chlorine (PPM) Max 1 combustion by IP-243
followed by colorometric determination
32
Mercury (PPB) Max 1**
Oxygenated Products (MTBE and/or Max 50 PPM ETBE and/or ethanol and/or methanol)
HVN
PROPERTY UNIT(S) SPECIFICATION TEST METHOD
S.G. at 60Deg F report D 1298
Colour (Saybolt) Min +30 SAYBOLT
R.V.P at 37.8 Deg C (PSI) report D 323
Lead (PPB) Max 50 D-3116
Sulphur (PPM) Max 50 D-2622
Paraffins (Vol PCT) report D 1319
Olefins (Vol PCT) Max 1.0 D 1319
Aromatics (VolPCT) max 20 D-1319
N+A (VolPCT) min 50 D-1319
***5% Evap P.(Deg C) Min 90 D-86
***95 Evap P.(Deg C) Max 155 D-86
Vanadium (PPM) ` Max 1 D-3605
Sodium (PPM) Max 1 D-3605
Arsenic (PPB) Max 10 Gutzeit Method, Vogel 34
edition, (p 796)
Total Chlorine (PPM) Max 1 combustion by IP-243
followed by colorometric determination
33
Mercury (PPB) Max 1**
10.4 ACCESS
To the extent permitted by the Operator of the InterOil Facilities, Seller shall
grant access to and facilitate, and co-operate with, Buyer's nominated
Representative to the loading terminal of the InterOil Facilities upon
reasonable notice for purposes of conducting review and analysis consistent with
this Section 7 and for ascertaining production forecast and stock levels.
11 FORCE MAJEURE
11.1 RELIEF FROM OBLIGATIONS
No failure or omission to carry out or to observe any of the terms, provisions,
or conditions or this Agreement shall give rise to any claim by one Party
against the other, or be deemed to be a breach of this Agreement if the same
shall be caused directly by:
(a) war, hostilities, acts of the public enemy or of belligerents,
sabotage, blockade, revolution, insurrection, riot or disorder;
arrest or restraint of rulers, or peoples, civil and governmental
frustration, expropriation, requisition, confiscation or
nationalisation;
(b) embargoes or export or import restrictions; substantial interference
by, or restrictions or onerous regulation imposed by civil or
military authorities, whether legal or de facto and whether
purporting to act under some constitution, decree, law or otherwise;
(c) acts of God, fire, earthquake, storm, cyclone, lightning, tidal
wave, or perils of the sea;
(d) accidents of navigation, loss of tanker tonnage due to sinking by
belligerents or to governmental taking whether or not by formal
requisition;
(e) unforeseen accidents or mechanical failures resulting in the shut
down, decrease of capacity throughput or closing of the InterOil
Refinery;
34
(f) accidents to or closing of harbours, docks, canals, channels,
mooring point, or other assistance to or adjuncts of shipping or
navigation;
(g) epidemic, quarantine, strikes, lockouts or other labour
disturbances, but only to the extent they are nationwide or
widespread, excluding any strikes or other labour disturbances;
(h) rationing or allocation, imposed by applicable law, decree or
regulation beyond Seller or Seller's Affiliates control; or
(i) any other event, matter or thing wherever occurring, and whether or
not of the same class or kind as those set forth, which shall not be
reasonably within the control of the Party affected.
11.2 PAYMENTS AND MARKETS
Notwithstanding the provisions of Clause 11.1, Buyer shall not be relieved of
any obligation to make payments for Naphtha delivered hereunder.
11.3 NOTICE
Any Party who is, by reason of Force Majeure, unable to perform any obligation
or condition required by this Agreement to be performed shall notify the other
Party as soon as possible specifying:
(a) the cause and extent of such non-performance;
(b) the date of commencement thereof; and
(c) the means proposed to be adopted to remedy or abate the Force Majeure.
11.4 OBLIGATIONS OF DELAYED PARTY
Any Party who is, by reason of Force Majeure, unable to perform any obligation
or condition required by this Agreement to be performed shall:
35
(a) use all reasonable diligence and employ all reasonable means to remedy or
abate the Force Majeure as expeditiously as possible;
(b) resume performance as expeditiously as possible after termination of the
Force Majeure or the Force Majeure has abated to an extent that permits
resumption of such performance;
(c) notify the other Party when the Force Majeure has terminated or abated to
an extent which will permit resumption or performance to occur; and
(d) notify the other Party when resumption of performance has occurred;
provided that no Party shall, by virtue of this Clause 11, be required against
the will of that Party to adjust or settle any strike, lockout or other labour
dispute and provided further that under no circumstances shall Seller be
obligated to replace Naphtha supplies or cargoes lost as a result of an event of
Force Majeure.
11.5 EXTENDED FORCE MAJEURE
If the Force Majeure event relied upon by the Affected Party under this clause
to excuse its failure to perform under this agreement shall persist for a
continuous period of more than thirty (30) days, then the other Party as the
case may be shall be at liberty to terminate the Agreement by written notice to
the Affected Party whereupon both parties shall be discharged from all
obligations under this Agreement except for antecedent breaches, if any.
12 RISK STRUCTURE
12.1 INSURANCE
The Buyer shall ensure that each Tanker arranged by Buyer shall, all at no cost
to Seller:
36
(a) have on board all certificates of financial responsibility in respect of
oil pollution necessary for the required voyage, such as, but not limited
to a certificate of insurance required under the International Convention
on Civil Liability for Oil Pollution Damage:
(b) the Tanker owners shall be members of the International Tanker Owners
Pollution Federation Limited; and
(c) maintain with respect to the Tanker the standard level of oil pollution
liability insurance available from the International Group of P&I Clubs on
the date such Tanker is accepted, and the standard level of excess oil
pollution liability insurance available through market underwriters on
such date currently USD one billion.
12.2 LIMITATION OF LIABILITY
Notwithstanding any other provisions in this Agreement, the Parties agree as
follows:
(i) In no event shall either Party make any claim against the other Party or
its employees, officers, agents, or consultants on account of any alleged
error of judgement made in good faith in connection with its performance
under this Agreement;
(ii) Neither Seller nor the Buyer shall be liable whether in tort or in
contract for any consequential, indirect or special losses, punitive,
exemplary damages of any kind (including but not limited to loss of
profit, loss of use and loss of interest) arising out of or in any way
connected with the Agreement, its implementation, performance of or
failure to perform the Agreement;
(iii) In the event that the Buyer is liable to the Seller for breach of the
accepted loading date range, Buyer's total liability to the Seller under
this Agreement for its breach of those provisions shall be limited to a
maximum of $[Deleted for confidentiality] per day;
37
For the purposes of this Agreement, "Gross Negligence and Willful Misconduct"
means any act or omission done or omitted to be done with wanton, intentional
and reckless disregard of the reasonably foreseeable consequence of such act or
omission.
13 TAXES, DUES, DUTIES, IMPOSTS
13.1 PORT CHARGES
Any wharfage, harbour dues, port charge, pilotage, line launches, tugs or
similar charges (collectively "Port Charges") levied at the InterOil Facilities
whether chargeable on the cargo loaded or on the Tanker shall be for the account
of Buyer, unless the Parties agree otherwise in writing.
13.2 NEW IMPOSTS
Subject to Clause 13.1, in the event any additional tax, dues, duty or impost is
levied at the InterOil Marine Facilities whether chargeable on the cargo loaded
or on the Tanker, the Parties shall as soon as reasonably practicable meet to
agree on the responsibility for payment of the levy, and failing agreement,
either Party may terminate this Agreement upon 3 months' prior written notice to
the other Party.
14 NOTICE
14.1 MEANS OF NOTICE
All notices, statements and other communications to be given, submitted or to be
made under this Agreement shall be sufficiently given if in writing and sent
either:
(a) by hand or courier; or
(b) by facsimile with receipt acknowledged,
to the address or facsimile numbers specified in this Agreement under Clause
14.4.
38
14.2 CHANGE OF ADDRESS
Any Party may change its address for the purposes set forth in Clause 14.1 upon
given 15 days prior written notice to the other Party.
14.3 REPRESENTATIVES
(a) Each Party hereby appoints the Representatives specified in Clauses 14.4
and 14.5.
(b) A Party may change its Representatives by notice to the other Party, and
the Seller may nominate an agent to act for the Seller's Representative in
certain matters, which notice shall be given to the Buyer.
(c) All notices, statements and other communications given, submitted and made
under this Agreement by the Buyer or by the Seller from time to time or at
any time under this Agreement may be given and received by a single notice
by a Representative, such notice being effective notice to or from the
relevant Party.
14.4 SELLER'S REPRESENTATIVES
(a) The Seller's Representative and its address and facsimile number are:
Managing Director
E.P. InterOil, Ltd
25025 I-45 North, Suite 420
The Woodlands, Texas 77387, USA
Telephone: (281) 292-1800
Facsimile: (281) 292-0888
Attention: Christian Vinson
14.5 BUYER'S REPRESENTATIVES
(a) The Buyer's Operational Representative and its address and facsimile number
are:
39
NAME: Head of Operations, Chemical Feedstocks
Attn: WAYNE KHOO ST114
TEL +65 384 8745
FAX NO: +65 384 8548
TELEX NO: RS20196
14.6 AUTHORITY OF THE REPRESENTATIVES
The Representatives shall have the following authority:
(a) to make agreements concerning the administration or procedures under the
Agreement; and
(b) to render any invoice, Bill of Lading or other documentation as required
by the Agreement.
15 ASSIGNMENT
15.1 SUCCESSORS AND ASSIGNS
Subject to Clause 15.2, the Agreement shall be binding upon and inure to the
benefit of the Parties, their successors and assigns.
15.2 CONDITIONS OF ASSIGNMENT
The Agreement shall not be assignable by either Party without the assignee
entering into a covenant in writing with the non-assigning Party, in a form
acceptable to the non-assigning Party such acceptance not to be unreasonably
withheld, to be bound by the provisions of the Agreement as if it were a Party
to the Agreement.
40
16 CONFIDENTIALITY
16.1 NON-DISCLOSURE
Neither Party ("DISCLOSING PARTY") may in the absence of prior written consent
either before or for a period of 3 years after termination of this Agreement
divulge or suffer its employees, consultants, agents or representatives to
divulge to any person (other than to those of its officers, employees,
consultants, agents or representatives who reasonably require the information to
enable them to properly perform their duties) any of the contents of the
Agreement or any other information concerning the operations, dealings,
transactions, contracts or commercial or financial affairs of the other Party
("OWNING PARTY").
16.2 EXCLUSIONS
The restrictions imposed by Clause 16.1 do not apply to the disclosure of
information:
(a) to any Affiliate or bona fide intended assignee of the Disclosing Party
upon obtaining a similar undertaking of confidentiality from that
Affiliate or assignee in favour of both Parties;
(b) to independent consultants, legal counsel and contractors of the
Disclosing Party whose duties reasonably require disclosure provided those
consultants, legal counsel and contractors have made a similar undertaking
of confidentiality to the Disclosing Party;
(c) to any bank or financial institution from whom the Disclosing Party is
seeking or obtaining finance, provided those banks or institutions have
made a similar undertaking of confidentiality to the Disclosing Party;
41
(d) to the extent required by any applicable laws or regulations having
jurisdiction over the Disclosing Party; or by the regulations of any
recognised stock exchange on which are listed for quotation shares in the
capital of the Disclosing Party or any related body corporate (as that
term is defined in the Corporations Law) of the Disclosing Party; or in a
prospectus issued by the Disclosing Party or an Affiliate of the
Disclosing Party as required by securities laws governing the Disclosing
Party or such Affiliate; or to the extent required for the purpose of any
litigation arising from the Agreement; provided that if the Disclosing
Party is served with any notice, demand, request, subpoena or other
proceedings seeking discovery, disclosure or production of the Agreement
or any information which has been previously disclosed to the Disclosing
Party and which is proprietary to the Owning Party, then the Disclosing
Party shall:
(i) forthwith give a copy of the notice, demand, request, subpoena or
other proceedings to the Owning Party;
(ii) comply with any reasonable directions issued by the Owning Party in
respect of the protection or dissemination of such information,
documentation and agreements (whether or not confidential);
(iii) upon receiving notice from the Owning Party, accept and give effect
to, as far as is possible, any reasonable representation from the
Owning Party in regard to the conduct of any negotiations,
dissemination or proceedings relating to such information,
documentation and agreements (whether confidential or not); and
(iv) not otherwise do anything to prejudice the protection of such
information, documentation or agreement or which is inconsistent
with paragraphs (i) - (iii) inclusive above; or
(e) to the extent that the same has become generally available to the public.
42
17. DISPUTE RESOLUTION
17.1 NOTICE OF DISPUTE
The Party claiming that a dispute, controversy or claim has arisen shall give
notice to the other Party identifying such dispute, controversy or claim and
designating its representative in negotiations, being a senior officer of the
Party with authority to settle the matter, and the other Party shall promptly
give notice in writing designating its representative in negotiations with
similar authority.
17.2 MEETING
Within 10 days of the notice of dispute, the senior officers of each disputant
shall meet to seek to resolve the matter.
17.3 FURTHER ALTERNATIVE DISPUTE RESOLUTION
If the dispute, controversy or claim is not resolved by the senior officers
within such period of 10 days, the Parties shall, within a further 10 days, seek
to agree the process for resolving the matter through means other than
litigation, such as further negotiations, mediation or conciliation and on:
(a) the procedure and timetable for any exchange of documents and other
information relating to the dispute, controversy or claim;
(b) procedural rules and a timetable for the conduct of the selected mode of
proceedings; and
(c) the procedure for selection and remuneration of any mediator who may be
employed by the Parties.
17.4 EXPERT
If the Parties agree that the matter should be referred to an expert for
resolution, the following procedure shall apply unless otherwise agreed by the
Parties:
43
(a) either Party shall notify ("INITIAL NOTICE") the other Party of the matter
it wishes to be resolved including the name of the person whom it
nominates as the expert;
(b) the recipient of the Initial Notice shall notify the other Party ("REPLY")
within 3 days if it does not accept the person so nominated and make a
nomination of the person it proposes to be the expert;
(c) if the Parties are not able to agree on the appointment of the expert
within 7 days of the Initial Notice, either Party may request the Chairman
of the Australian Institute of Petroleum to appoint a person qualified by
education, experience and training in the subject matter in dispute to be
the expert;
(d) the expert so appointed shall promptly fix a reasonable time and place for
receiving submissions or information from the Parties or from any other
persons that the expert may think fit and the expert may make such further
enquiries and require such other evidence as he or she may consider
necessary for determining the matter and shall in accordance with this
Agreement determine the matter with all due diligence and speed;
(e) the expert shall not be deemed not to be an arbitrator but shall render
his decision as an expert;
(f) the determination of the expert shall be final and binding upon the
Parties save in the event of fraud, mistake or miscarriage;
(g) each Party shall bear the costs and expenses of all counsel, witnesses and
employees retained by it but the cost and expenses of the expert shall be
apportioned between the Parties in such proportions as the expert shall in
the circumstances consider proper; and
(h) if an expert appointed has not arrived at a determination within a period
of 30 days from the date of appointment, either Party may upon giving
notice to the other, terminate the appointment and a new expert shall be
appointed and the point of difference determined in accordance with the
provisions of this Clause.
44
17.5 ARBITRATION
If each of the Parties does not agree that the dispute be resolved pursuant to
Clause 17.4, then the dispute shall be resolved by arbitration, and the
arbitration shall be:
(a) governed by English law;
(b) carried out under the United Nations Commission on International Trade Law
Arbitration rules and regulations (UNCITRAL);
(c) conducted and presided over by a single arbitrator appointed by the London
Court of International Arbitration (LCIA);
(d) held in London, England and the language of the arbitration shall be
English; and
(e) empowered to order interest and costs under an award; and.
(f) binding on all parties under arbitration.
Any party to the dispute under arbitration may commence proceedings or take any
action it deems necessary in the jurisdiction referred to in Clause 1.3 above to
enforce a decision of the arbitrator whether pursuant to:
(g) the general law or legislation of the jurisdiction;
(h) the New York Convention on the Recognition and Enforcement of Foreign
Artbitral Awards 1958; or
(i) any other treaty making enforcement possible.
17.6 CONFIDENTIALITY OF PROCEEDINGS
Any dispute resolution procedure, other than litigation and any determination,
shall be kept confidential between the Parties.
45
17.7 REPRESENTATION
The Parties may be represented by legal counsel in any dispute resolution
procedure. Each Party shall bear the costs and expenses of all counsel,
witnesses and employees retained by it but the cost and expenses of the mediator
shall be apportioned equally between the Parties.
17.8 CONTINUED PERFORMANCE OF OBLIGATIONS
The referral of a matter to dispute resolution under this Clause 17 shall not
affect the obligations of the Parties in accordance with the terms and
conditions of this Agreement.
46
EXECUTION PAGE
EXECUTED by EP INTEROIL, LTD )
)
)
) ____________________________
) Authorised Signature
)
)
___________________________ ) ____________________________
Date: ) Name
)
) ____________________________
) Designation
)
)
)
EXECUTED by SHELL )
INTERNATIONAL EASTERN )
TRADING COMPANY OWNED BY )
SHELL EASTERN TRADING (PTE) ) ____________________________
LTD. ) Authorised Signature
)
)
) ____________________________
) Name
)
) ____________________________
____________________________ ) Designation
Date )
)
)
47
APPENDIX "A"
FORMAT OF LETTER OF INDEMNITY TO BE USED
FROM: EP InterOil, Ltd. incorporated in the Cayman Islands of Ugland House,
South Church Street, Georgetown, Grand Cayman, Cayman Islands, British West
Indies.
TO: SHELL INTERNATIONAL EASTERN TRADING COMPANY, owned by Shell Eastern Trading
Pte Ltd
IN CONSIDERATION of your paying for the cargo of
_________________________________U.S. Barrels/Metric Tons of (type of crude oil
and / or product) _________________________which sailed from (Port)
___________on (Tanker and date) __________________________________________loaded
with such cargo when the (document) _______________________________________for
such cargo has not been delivered to you at the time payment is due under our
contract dated
______ref:______________________________________________________________.
We hereby warrant to you that at the time property passed as specified under the
terms of the above contract we had the right to sell the said cargo to you and
we had unencumbered title to the said cargo.
We hereby irrevocably and unconditionally undertake to indemnify you and hold
you harmless against any claim made against you by anyone as a result of breach
by us of any of our warranties as set out above, and all losses, costs
(including, but not limited to costs as between attorney or solicitor and own
client), damages, and expenses which you may suffer, incur or be put to which
are not too remote as a result of our failure to deliver the above document(s)
in accordance with the contract.
This indemnity shall terminate on delivery by us of the aforesaid document(s)
and their acceptance by you.
This indemnity shall be governed by and construed in accordance with the laws
and legal jurisdiction governing the aforesaid contract and all disputes,
controversies or claims arising out of or in relation to this indemnity or the
breach, termination or validity hereof not settled by negotiation shall be
resolved with the procedure provided in such contract
AUTHORISED SIGNATORY OF SELLER
Name:
Designation:
48
Appendix B
At Buyer's timely and reasonable request and subject to Sellers agreement, such
agreement not to be unreasonably withheld, cutpoints may be adjusted from time
to time. It is recognized that parties will need to agree a pricing adjustment
clause and the purpose of this clause is to describe one methodology that, while
not yet agreed, may be adopted for such price adjustment.
Final prices mayl be calculated in accordance with the following: The intention
of this clause is to fix the Deemed Cutpoints between LVN/MVN and MVN/HVN to
levels of 90 deg C and 105 deg C respectively, to facilitate Seller co-operating
with Buyer requests for actual naphtha cutpoint shifts, while keeping Seller
whole in pricing terms on the deemed set of cutpoints. Fixing the cut
temperatures at deemed levels shall achieve the following:
1 Seller's income will be unaffected by Buyer nominating more or less of a
particular cut based on prevailing market conditions.
2. Allow Buyer to fine tune the qualities within refinery normal operating
parameters to maximise cut value to customers.
3. This shall be achieved by the following price formulas using as basis the
IBP (initial boiling point) and FBP (final boiling point) of the various
cuts, and to the prices defined in Clauses 5.1.1 and 5.1.2, where the
calculated price is referred to as LVNC, MVNC and HVNC. The final prices
for product shall be defined as follows, and calculated in USD/bbl: For
this purpose the LVN price will be converted to a USD/BBL price using the
actual bbl/mt factor in the case of pricing an LVN cargo, in the case of
pricing the LVN component of MVN/HVN cargoes the most recent LVN cargo
BBL/MT factor shall be used.
4. LVN
[Deleted for confidentiality]
5. MVN
[Deleted for confidentiality]
6. HVN
[Deleted for confidentiality]
Note that this Deemed Cut Point Clause should be structured to work in an
equitable and reasonable way if there is good column separation, eg. no gap/no
overlap would be an ideal case. If separation between
49
grades is such that there is, in Seller's reasonable opinion, an unacceptable
level of overlap, or for other reasons, constraints on cutpoint flexibility
become evident, the parties shall meet to discuss how best to modify this Clause
so that the Objectives stated under 1. and 2. above can be met. If no agreement
can be reached on this cutpoint calculation as per above or indeed any other
cutpoint adjustment clause, or if either party raises objections to this clause
which cannot be resolved, actual cutpoints shall conform to quality to Clause
10, and prices as per Clauses 5.1 and 5.2 shall apply unless other price
adjustment mechanism is mutually agreed.
The Deemed Cutpoint calculations above will influence price to the extent that
Prices for the grades vary, calculations below demonstrate the effect of the
Deemed Cutpoints Clause on daily income, including a +/- $2/bbl variation
between LVN and HVN, in combination with two sets of cutpoints between LVN, MVN
and HVN.
SAMPLE CALCULATIONS (1)
[Deleted for confidentiality]
SAMPLE CALCULATIONS (2)
[Deleted for confidentiality]
50