EXHIBIT 21
CRUDE SUPPLY AGENCY AND SALES AGREEMENT
DATE: 21 December 2001
1. PARTIES
This Agreement is entered into between:
E.P. INTEROIL, LTD, a company incorporated under the laws of the Cayman
Islands with its registered office at c/o Maples and Calder, Ugland
House, South Church Street, George Town, Grand Cayman, Cayman Islands,
British West Indies ("BUYER"); and
BP SINGAPORE PTE LIMITED a company registered in Singapore with its
registered office at 396 Alexandra Road # 01-01 BP Tower, Singapore
119954 ("SELLER").
2. SCOPE
Seller agrees to sell and to be the exclusive marketing agent for the
supply of crude oil ("CRUDE") to Buyer or a nominated related company,
subject to Seller's prior approval, not to be unreasonably withheld, to
provide for all the crude oil requirements of the Buyer's oil refinery
at Napa Napa near Port Moresby in Papua New Guinea (the "INTEROIL
REFINERY") in accordance with the terms of this Agreement. This
Agreement comprises the following Special Provisions and the General
Terms & Conditions for Sales and Purchases of Crude Oil (BP Oil
International Limited General Terms & Conditions for Sales and
Purchases of Crude Oil 2000 Edition) attached as Annexure `A'. If there
is any conflict between the terms of these Special Provisions and the
terms of the General Terms & Conditions, the former will prevail.
As exclusive marketing agent for Crude supply to the InterOil Refinery,
Seller undertakes to act in good faith and use its reasonable
endeavours to:
(a) ensure a competitive CIF price for Crude delivered to the
InterOil Refinery; and
(b) supply a steady volume of Crude to the InterOil Refinery in
accordance with the scheduling/nomination provisions under
clause 4 such that the InterOil Refinery incurs no loss of
crude run.
3. CRUDE
3.1 TYPE
The Crude shall be, when available, Kutubu Blend crude oil ("KUTUBU
BLEND CRUDE"), in running production quality and may be substituted by
similar crudes from a pre-determined basket subject to prior agreement
by both parties.
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The Seller may, and would be expected to nominate Crude outside this
basket if it believes that Crude offers excess value to the InterOil
Refinery. Such Crude may include crudes such as distressed cargoes or
West African crudes.
The Seller agrees to work with the Buyer's scheduler/LP planner to
supply the optimum Crude on the day crude selection and purchase
decision is made with the Buyer having last say on Crude supplied
(subject to availability).
3.2 DELIVERY
Subject to agreement on price under clause 3.3 the Seller shall deliver
the Crude to the InterOil Refinery as and when, and in the amounts
required by the Buyer, for processing in the InterOil Refinery in
accordance with the scheduling/nomination provisions in clause 4.
The Buyer shall make available to the Seller a terminal and berth that
is both safe and meets an International level of HSSE standards in
accordance with the following publications by Witherbys:
- ISGOTT
- Mooring Equipment Guidelines
- Guide to Marine Terminal Fire Protection and Emergency Evacuation.
Such terminal shall be made available for inspection at the reasonable
request of the Seller and Buyer agrees to work with Seller to rectify
problems highlighted in such inspections.
The Seller acknowledges the terms of the Project Agreement dated 29 May
1997 (as amended and extended by the Extension Deed dated 1 July 1999)
between the Buyer as Developer, InterOil Limited as the Refiner and the
Independent State of Papua New Guinea (copy attached hereto as Annexure
`B'). The Seller agrees to act in good faith; to use all reasonable
efforts to ensure Crude Access (as defined in that Agreement) and not
to frustrate the Buyer's ability to purchase Kutubu Blend Crude.
3.3 PRICE
[deleted for confidentiality]
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3.4 PAYMENT
The Buyer shall pay the Seller within 30 days after Bill of Lading date
(unless both parties mutually agree alternate terms on a cargo-by-cargo
basis) however payment may be made up to 45 days after Bill of Lading
date if the Buyer pays interest on the payment amount at the rate of
LIBOR plus 2% pa. for the excess period over 30 days.
Payment shall be made by means of an irrevocable documentary letter of
credit in accordance with the provisions of section 23.8 of the General
Terms & Conditions. Said letter of credit shall be opened with a bank
of investment grade standard and be in a form and substance acceptable
to the Seller.
All banking charges at applicant's bank are for applicant's account and
beneficiary's bank for beneficiary's account.
The letter of credit shall be advised to Seller's London office, by not
later than 1600hrs (London time) 15 working days prior to loading
dates.
3.5 FEE
[deleted for confidentiality]
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3.6 SUPPLY
The Seller will supply the Crude nominated by the Buyer on a delivered
basis to the InterOil Refinery and title to and risk in such Crude will
pass to the Buyer at the permanent flange of the discharge jetty at the
InterOil Refinery.
The Seller will be responsible for the charter of a mutually acceptable
vessel at a competitive market rate for delivery of Crude and will
liaise with the Buyer to ensure freight economics are optimised.
Quality and quantity will be based on that available at the Port of
Loading and otherwise will be in accordance with the General Terms &
Conditions.
3.7 SURPLUS
If the Buyer decides that a cargo is surplus to the requirements of the
InterOil Refinery after the Buyer has committed to that cargo (for
whatever reason in the Buyer's sole discretion) or in the event that
the Buyer/InterOil Refinery is unable to receive a cargo of Crude
previously agreed for whatever reason, the Seller will use its best
efforts to obtain the best netback value for the sale of that Crude.
Any loss resulting from the sale will be borne by the Buyer; any gain
resulting from the sale will be shared equally by the Buyer and the
Seller.
3.8 CRUDE OPTIMISATION
[deleted for confidentiality]
4. SCHEDULE OF DELIVERIES
4.1 ESSENTIAL CRITERIA:
(a) The Seller shall arrange deliveries of Crude to the InterOil
Refinery based on information provided by the Buyer or Buyer's
Representative pursuant to clause 4.2. For this purpose the
Buyer
and the Seller will mutually endeavour to ensure deliveries
are scheduled so that production of the InterOil Refinery is
not reduced as a result of a Crude shortfall or a delivery of
Crude is unable to be discharged due to insufficient ullage in
the Refinery Crude tanks.
(b) Seller shall use all reasonable efforts to ensure that during
any month, deliveries shall occur such that the Crude
inventory level does not fall below 80,000 barrels or such
other level as may be mutually agreed from time to time.
(c) Notwithstanding the right of the Buyer to reduce Refinery
Crude runs due to scheduled or unscheduled Refinery
maintenance, tank-tops for one or more Refinery products or
for general economic considerations, Buyer undertakes to
maintain a minimum 75%
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stream factor when averaged over any rolling 12 month period.
In the event that this does not occur then Buyer and Seller
will, within 30 days of the 12 month period, discuss and agree
in good faith a pro rata increase in the commission fee.
Seller reserves the right to terminate this Agreement, upon 60
days notice, in the event that the stream factor in any
rolling 12 month period falls below 50%.
4.2 FORECAST PRODUCTION AND OTHER INFORMATION
Buyer or Buyer's Representative shall provide the following information
to the Seller:
(a) every Tuesday, or as soon as practicable each week, the crude
inventory and crude usage forecasts for the InterOil Refinery
for the current month and the next succeeding 2 months,
highlighting the last possible date as contemplated under
clause 4.1(b) by which the next delivery must arrive;
(b) notice as soon as practicable of any material increase or
decrease (of 10% or more over any one week period) in
forecasts of crude usage or inventory;
(c) notice as soon as possible of operational circumstances that
will reduce the capacity of either of the two proposed crude
storage tanks;
(d) at least 60 days notice of scheduled maintenance of any of the
InterOil Refinery marine and other facilities (including the
loading terminal), or unavailability of resources, which will
either impact on Refinery crude usage or impose constraints on
Seller's ability to deliver Crude.
4.3 NOMINATION PROCEDURES - DATE RANGES AND QUANTITIES.
Buyer and Seller acknowledge that the following nomination procedures
must work equitably for both parties and be acceptable to the Kutubu
Offtake Coordinator. To the extent that the following procedures are
shown to be impractical then both parties will work together to agree
an amended set of procedures:
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(a) On or before the 15th day of month x, Seller will use best
efforts based on the Kutubu Offtake Coordinator's forecast
production to provide the following information to Buyer or
Buyer's Representative:
(i) tentative 5 day loading windows for the available Crude
cargoes in month x+3;
(ii) firm 5 day loading windows for the available crude
cargoes in month x+2 and firm price indications for such
cargoes in accordance with clause 3.3 of this Agreement;
(iii) firm 2 day loading windows in month x+1 for those
cargoes previously agreed between the Buyer and the
Seller; and
(iv) full details, including CIF price, quality, loading
dates and estimated arrival dates of any alternative
Crudes that Seller may wish to propose for delivery in
month x+2.
(b) Not later than the 28th day of month x, the Buyer will
nominate which Crude cargoes it will commit to buy for
delivery in month x+2.
4.4 NARROWING OF DATE RANGES.
(a) The Loading Date Range for Kutubu Blend Crude cargoes will be
advised by the Seller to the Buyer on a regular basis in
accordance with advice from the Kutubu Offtake Coordinator.
(b) For alternate Crude deliveries:
(i) the Buyer and the Seller will agree a 10 day arrival
window (ADR 10) at the time of commitment to the cargo
which will be narrowed by the Seller to a 5 day window
(ADR 5) (within ADR 10) 30 days prior to vessel arrival;
and
(ii) no Later than 15 days prior to the first day of the ADR
5, the Seller shall further narrow this range to a three
day arrival window (ADR 3) which shall fall fully within
the previously advised ADR 5 unless the Parties mutually
agree otherwise.
5. TERM AND TERMINATION
(a) The supply of Crude under this Agreement will be for a term of
5 years from the Bill of Lading date of the first loading of
the supply of Crude to the InterOil Refinery.
(b) This Agreement may only be terminated in accordance with this
clause 5 and Section 27 of the General Terms & Conditions.
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(c) The Seller may at its sole discretion (without prejudice to
its other rights) either terminate this Agreement or suspend
delivery under this Agreement until further notice on
notifying the Buyer in writing, if the Buyer fails in its
repayment obligations under the Credit and Indemnity Agreement
executed by the parties on or about the date of this
Agreement.
(d) The Buyer may at its sole discretion (without prejudice to its
other rights) either terminate this Agreement or suspend the
taking of delivery under this Agreement until further notice
on notifying the Seller in writing, if the Seller fails in its
obligations under the First Demand Bond executed by the Seller
on or about the date of this Agreement.
(e) Failure by the Buyer to comply with the requirements of clause
3.4, shall be a breach by the Buyer of this Agreement
entitling the Seller to terminate this Agreement and claim
damages. In any event, whether the Seller has exercised that
right to terminate or not, the Seller shall be under no
obligation to commence discharge of the shipment in question
or loading the shipment in question (as the case may be) and
shall be entitled to claim direct damages (including
demurrage, if any).
(f) Neither party may terminate this Agreement, suspend delivery
or the taking of delivery without first giving the other party
at least 30 days notice of such intention to terminate or
suspend and the opportunity to rectify the cause of such
intention to terminate within that time.
6. CONFIDENTIALITY
The parties undertake that information listed below which is exchanged
between the parties pursuant to the Agreement shall be deemed to be
confidential and the parties agree to keep and maintain, and shall
cause its employees and agents to keep and maintain, the information
indicated herein below confidential:-
(a) any and all information received, obtained or observed by the
parties or its employees and agents in respect of the InterOil
Refinery, in particular, the technology, operation and
processes utilised in the InterOil Refinery and any commercial
information relating thereto; and
(b) any and all information received from the parties related
companies in relation to supply of the InterOil Refinery which
is in writing marked "private and confidential " or
"confidential".
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The parties further undertake to use all such information only for the
purposes contemplated in the Agreement and will confine such
information to its directors, officers and employees who are directly
concerned with such purposes and made aware of its confidential status.
The foregoing restrictions on the party as the recipient of information
("the Recipient") shall not apply to any information which:-
(c) the Recipient can prove by documentary evidence, was already
in the possession of the Recipient and at the Recipient's free
disposal before the Recipient received, obtained or observed
the information; or
(d) is disclosed to the Recipient without any obligation of
confidence by a third party who has not derived it directly or
indirectly from the other party or affiliated companies of the
other party;
(e) is reasonably required by Overseas Private Investment
Corporation to be disclosed to it or its nominated advisers;
(f) is or becomes public knowledge through no act or default on
the part of the Recipient or the Recipient's agents or
employees.
7. VARIATIONS TO THE GENERAL TERMS & CONDITIONS
The General Terms & Conditions are varied as follows, and if there is
any conflict between the terms of these Special Provisions and the
General Terms & Conditions, the terms of these Special Provisions shall
prevail:
(a) Section 11.1 - The quantity delivered in any cargo shall be
that agreed under clause 4 and shall be delivered in one
cargo;
(b) Section 11.3 - Nominated Discharge Port is the InterOil
Refinery wharf, Port Moresby Harbour, Papua New Guinea;
(c) Section 13.2 - For non Kutubu Crude cargoes running hours
shall commence:
(i) berth or no berth, 6 hours after NOR or upon all fast in
berth, whichever first occurs, provided that if the
Vessel arrives before the first day of ALDR 3, running
hours shall not commence until the Vessel is all fast in
berth or at 0600hrs on the first day of ALDR3 whichever
is the earlier; and
(ii) if the Vessel arrives after the end of ALDR 3, when the
Vessel is all fast in berth.
(d) Section 18.1.4 - Definition of "banking day" - means a day
other than a Saturday or Sunday or statutory "bank holiday" in
New York, New York;
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(e) Section 23.6 - Seller's bank details
Pay to Citibank New York
Account No. 40595264
ABA No. 021000089
In favour of BP Singapore Pte Limited
(f) Section 26.1 - Indemnities and limitation of liabilities - The
Seller shall indemnify the Buyer for loss of crude run due to
negligence of the Seller at a rate of USD [deleted for
confidentiality] per day, and Seller's liability in respect of
direct, indirect or consequential losses or expenses as a
result of such loss shall be capped at that rate. Seller's
negligence shall be limited to acts or omissions occurring in
the course of performance of the supply obligation which
actually results in a loss of throughput and shall
specifically exclude any event of force majeure.
(g) Section 29 - Notices
In respect of Seller: BP Singapore Pte Limited
396 Alexandra Road
#01-01 BP Tower
Singapore 119954
Fax No: 65 275 7659
Richard Massam
In respect of the Buyer: EP InterOil, Ltd
C/- InterOil Australia Pty Ltd
Suite 2 Level 2 Orchid Plaza
79 Abbott Street
Cairns, QLD 4870
Australia
Fax No: 61 7 4031 4565
Managing Director
The parties have caused their duly authorised representatives to execute this
Agreement on the 20th day of December 2001.
E.P. INTEROIL, LTD BP SINGAPORE PTE LIMITED
- ----------------------------------- ----------------------------------
Name : Name :
Title : Title :
9
CRUDE SUPPLY AGENCY AND SALES AGREEMENT
BETWEEN
BP SINGAPORE PTE LIMITED
(SELLER)
AND
EP INTEROIL, LTD
(BUYER)
ANNEXURE
BP OIL INTERNATIONAL LIMITED
GENERAL TERMS & CONDITIONS
FOR SALES AND PURCHASES OF
CRUDE OIL