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FIRST SUPPLY AGREEMENT FOR PACKAGE V EXCESS SALES
(1998-1999 LNG SALES TO KOREA GAS CORPORATION UNDER BADAK V)
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: MAY 1, 1996
EFFECTIVE: AUGUST 12, 1995
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FIRST SUPPLY AGREEMENT FOR PACKAGE V EXCESS SALES
(1998-1999 LNG SALES TO KOREA GAS CORPORATION UNDER BADAK V)
THIS SUPPLY AGREEMENT, made and entered into in Jakarta on May 1,
1996, 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";
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);
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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;
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");
E. 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");
F. 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);
G. 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 an LNG
Sales Contract dated August 12, 1995 ("Badak V", and unless otherwise so
stated, any terms defined in Badak V 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 FOB basis;
H. WHEREAS, pursuant to Part Two, paragraph 2(f) II of the
Memorandum of Understanding Re: Supply Agreements and Package V Sales dated
October 5, 1994, between PERTAMINA, Contractors and the production sharing
contractors in the Other Contract Areas
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("MOU"), the sales of LNG pursuant to Badak V to be delivered during the years
1998 and 1999 are Package V Sales as that term is defined in the MOU ("Package
V Badak V Quantities");
I. WHEREAS, Badak V provides that the Natural Gas to be
processed into LNG and sold by PERTAMINA under Badak V is to be produced from
the areas in East Kalimantan covered by production sharing contracts between
PERTAMINA and its suppliers, which consist of the VICO Contract Area and the
Other Contract Areas;
J. 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 Badak V;
and
K. 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 August 12, 1995, and
shall terminate on the date when all rights and obligations of Contractors
hereunder have been satisfied.
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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 economically
recoverable reserves of Natural Gas in East Kalimantan for liquefaction and
sale as Package V Badak V Quantities is estimated to be 0.1077 trillion
standard cubic feet ("t.s.c.f."). Such quantity is herein referred to as the
"Package V Badak V Net Gas Requirement." The Package V Badak V Net Gas
Requirement is based on the Fixed Quantities which Buyer has committed to
purchase pursuant to the terms of Badak V.
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 Package V Badak V Net Gas Requirement over the term of
this Supply Agreement consisting of 0.0233 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 Package V Supplemental Memorandum of Understanding entered
into among PERTAMINA, Contractors and the production sharing contractors in the
Other Contract Areas pursuant to the MOU ("Package V Supplemental Memorandum").
The VICO Contract Area 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 0.0077
Lampake 0.0007
Mutiara 0.0031
Nilam 0.0081
Pamaguan 0.0001
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Semberah 0.0036
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 Package V
Badak V Net Gas Requirement, constituting 0.0844 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 economically 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
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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 AND CONSULTATION
4.1 LNG Sales Contract. PERTAMINA shall be responsible for
the due and prompt administration of Badak V for the benefit of PERTAMINA and
Contractors. All matters which affect Badak V or the sale and delivery of LNG
thereunder will be administered by a representative to be appointed by
PERTAMINA and the representative appointed by Contractors under Article 9
hereof. It is understood, however, that it will be necessary from time to time
for PERTAMINA, as seller under Badak V, 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 Consultation. PERTAMINA and Contractors agree to consult
with each other freely on all matters relating to Badak V. PERTAMINA and
Contractors shall confer and agree as to any amendment to Badak V 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.
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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. 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 Badak V.
5.2 Delivery and Invoicing. At the time of delivery of each
cargo of LNG to Buyer at the Delivery Point, PERTAMINA will furnish Contractors
with appropriate documentation to evidence the quantity and quality of LNG
delivered, together with copies of the invoices to Buyer 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 Badak V concurrently with its being
furnished to Buyer. Calculation of the Contract Sales Price, the amount of
sales invoices and other billings to Buyer, and any adjustments, shall be
reviewed and approved by PERTAMINA and Contractors prior to presentation to
Buyer.
ARTICLE 6
ENTITLEMENT AND PAYMENT
6.1 Contractors' 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 Package
V Badak V Quantities;
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(b) all other amounts which Buyer shall become obligated to
pay pursuant to Badak V with regard to deliveries of Package V Badak V
Quantities 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 that certain Amended and Restated
Bontang Excess Sales Trustee and Paying Agent Agreement, dated as of February
9, 1988, among PERTAMINA, Contractors, the production sharing contractors in
the Other Contract Areas and the Trustee thereunder, as the same may be from
time to time amended. Amounts so received by the Trustee shall be used for
payment of (i) an agreed portion of Plant Operating Costs; and (ii) other costs
approved by PERTAMINA and Contractors. Amounts received by the Trustee, to the
extent that they are not used for payment of the costs referred to in the
preceding sentence, shall, insofar as they are applicable to the VICO Contract
Gas, be disbursed to PERTAMINA and each Contractor in accordance with its
Production Sharing Percentage at a bank or banks of its choice.
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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.
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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
Conciliation and 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 obligations 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:
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To PERTAMINA:
PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
(PERTAMINA)
Jalan Medan Merdeka Timur 1 A
Jakarta 10110, 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.
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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.
CONTRACTORS:
PERUSAHAAN PERTAMBANGAN MINYAK VIRGINIA INDONESIA COMPANY
DAN GAS BUMI NEGARA (PERTAMINA)
By /s/ F. ABDA'OE By /s/ C. M. REIMER
------------------------------ -------------------------------------
F. Abda'oe C. M. Reimer
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LASMO SANGA SANGA LIMITED
By /s/ J. HOGAN
-----------------------------------
J. Hogan
OPICOIL HOUSTON, INC.
By /s/ C.Y. CHUNG
-----------------------------------
C.Y. Chung
UNION TEXAS EAST KALIMANTAN LIMITED
By /s/ L.D. KALMBACH
-----------------------------------
L.D. Kalmbach
UNIVERSE GAS & OIL COMPANY, INC.
By /s/ T. NORIMATSU
-----------------------------------
T. Norimatsu
VIRGINIA INTERNATIONAL COMPANY
By /s/ J. HOGAN
-----------------------------------
J. Hogan
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