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PACKAGE VI SUPPLY AGREEMENT
FOR NATURAL GAS IN SUPPORT OF 2000-2017 LNG SALES TO
CHINESE PETROLEUM CORPORATION UNDER BADAK VI
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: OCTOBER 25, 1995
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PACKAGE VI SUPPLY AGREEMENT
FOR NATURAL GAS IN SUPPORT OF 2000-2017 LNG SALES TO
CHINESE PETROLEUM CORPORATION UNDER BADAK VI
THIS SUPPLY AGREEMENT, made and entered into in Jakarta on May 1st,
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"; and
B. WHEREAS, pursuant to the Production Sharing Contracts, each of
PERTAMINA and Contractors is entitled to take and receive, sell and freely
export its respective share of the Natural Gas produced and saved from the
VICO Contract Area (the percentage share of such Natural Gas to which each of
PERTAMINA and Contractors is entitled, as determined under the
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Production Sharing Contracts, is herein referred to as the "Production Sharing
Percentage" of such party); and
C. WHEREAS, the reserves of Natural Gas in the VICO Contract Area
exceed the reserves of Natural Gas committed to be produced, supplied and
delivered by PERTAMINA and Contractors to meet a portion of PERTAMINA's
existing obligations under LNG sales contracts, LPG sales contracts, and
domestic gas sales contracts; and
D. WHEREAS, PERTAMINA, with assistance from Contractors, has
constructed and expanded and is further expanding the Natural Gas liquefaction
and related facilities located at Bontang Bay, on the east coast of Kalimantan,
Indonesia (herein referred to as the "Bontang Plant"); and
E. WHEREAS, funds for the expansion of the liquefaction plant
will be provided to PERTAMINA through financing of the cost of such expansion
on terms, mutually agreeable to PERTAMINA and Contractors, which provide for
the repayment of funds provided pursuant to such financing and the cost of such
funds (repayment of funds and the cost of such funds are hereinafter referred
to as "Financing Costs"); and
F. WHEREAS, PERTAMINA and Contractors are parties to the Amended
and Restated Bontang Processing Agreement dated as of February 9, 1988 (as from
time to time amended, the "Processing Agreement"), which provides for the
operation of the Bontang Plant and the payment of the costs of such operation
(such costs as determined in accordance with the Processing Agreement are
herein referred to as "Plant Operating Costs"); and
G. WHEREAS, PERTAMINA and Contractors have agreed to use the
Bontang Plant in part for the liquefaction of the VICO Contract Gas (as defined
in Section 2.2 hereof) and the Other Contract Gas (as defined in Section 2.3
hereof); and
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H. WHEREAS, PERTAMINA, in collaboration with Contractors and its
production sharing contractors in other contract areas in East Kalimantan
(herein referred to as the "Other Contract Areas"), has entered into an LNG
Sales and Purchase Contract dated October 25, 1995 ("Badak VI", and unless
otherwise so stated, any terms defined in Badak VI shall have the same meanings
when used herein) with Chinese Petroleum Corporation ("Buyer") pursuant to
which PERTAMINA is obligated to sell to Buyer certain quantities of LNG on an
ex ship basis; and
I. WHEREAS, pursuant to Part Two, paragraph 2(f) 2 of the
Memorandum of Understanding Re: Supply Agreements and Package VI Sales dated
October 27, 1995, between PERTAMINA, Contractors and the production sharing
contractors in the Other Contract Areas ("MOU"), the sales of LNG pursuant to
Badak VI in respect of the period 2000 to 2017 are Package VI Sales as that
term is defined in the MOU (herein referred to as "Package VI Badak VI
Quantities"); and
J. WHEREAS, arrangements for the transportation of the Package VI
Badak VI Quantities and for the payment of costs respecting such transportation
will be on terms mutually agreeable to PERTAMINA and Contractors (herein
referred to as "Transportation Costs"); and
K. WHEREAS, Badak VI provides that the Natural Gas to be
processed into LNG and sold and delivered by PERTAMINA under Badak VI 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; and
L. 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 VI; and
M. 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,
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NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
EFFECTIVE DATE AND DURATION
This Supply Agreement shall be effective as of October 25, 1995 and
shall terminate on the date when all rights and obligations of Contractors
hereunder have been satisfied.
ARTICLE 2
SUPPLY COMMITMENT AND QUANTITY
2.1 Net Gas Requirement. The total quantity of net Natural Gas
required to be supplied and delivered out of proved economically recoverable
reserves of Natural Gas in East Kalimantan for liquefaction and sale as Package
VI Badak VI Quantities is estimated to be 1.7531 trillion standard cubic feet
("t.s.c.f."). Such quantity is herein referred to as the "Package VI Badak VI
Net Gas Requirement". The Package VI Badak VI Net Gas Requirement is based on
the Fixed Quantities for the years 2000-2017 which Buyer has committed to
purchase pursuant to the terms of Badak VI.
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 VI Badak VI Net Gas Requirement over the term of this Supply
Agreement consisting of 0.3787 t.s.c.f., or 21.6% thereof, subject to
adjustment as provided in Section 2.4 hereof. Such quantities of net Natural
Gas committed to be supplied pursuant to this Supply Agreement are herein
referred to as the "VICO Contract Gas", and the above-stated percentage is
herein referred to as the "Producers' Percentage". The specific fields from
which the VICO Contract Gas will be committed, as well as the quantities
committed
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from each field, will be identified in a supplemental memorandum of
understanding to be entered into among PERTAMINA, Contractors and the
production sharing contractors in the Other Contract Areas pursuant to the MOU
("Package VI Supplemental Memorandum").
The quantities committed from each field are subject to revision from
time to time, as the reserves from the fields may be updated and as additional
data, from deliverability studies and otherwise, become available.
2.3 Other Contract Gas. To meet the balance of the Package
VI Badak VI Net Gas Requirement, constituting 1.3744 t.s.c.f., or 78.4%
thereof, subject to adjustment as provided in Section 2.4 hereof, sufficient
Natural Gas (and LNG resulting from the liquefaction thereof) will be committed
for supply and delivery by PERTAMINA and its production sharing contractors
from proved 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, as well as the quantities
committed from each field, will be identified in the Package VI 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 April 30, 1995.
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 to be used only on a provisional basis until
such time as the identity of the participating fields and the quantities in
each field which comprise the VICO Contract Gas, and the Other Contract Gas and
the
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Producers' Percentage shall be adjusted and documented in the Package VI
Supplemental Memorandum in accordance with the MOU.
2.5 Addendum. Upon completion of the adjustments provided
for in Section 2.4 hereof but not later than April 30, 1996, PERTAMINA and
Contractors shall execute an addendum to this Supply Agreement confirming the
VICO Contract Area participating fields, the quantities in each field which
comprise the VICO Contract Gas and the Other Contract Gas and the Producers'
Percentage. Pending completion of such adjustments, the Producers' Percentage
set out in Section 2.2 hereof shall be used on a provisional basis.
ARTICLE 3
COORDINATION OF GAS SUPPLY
The VICO Contract Gas and the Other Contract Gas may be produced from
participating fields at times and production rates which may change from time
to time during the term hereof so as to secure the optimal ultimate recovery of
Natural Gas. The supply of Natural Gas from the VICO Contract Area and the
Other Contract Areas will be coordinated by PERTAMINA so as to conserve and
permit full utilization of such Natural Gas. The sources of supply, producing
rates, quality of gas, metering and related matters shall be matters for study
by the East Kalimantan Gas Reserves Management Committee, consisting of
representatives from PERTAMINA, VICO, TOTAL Indonesie, Unocal Indonesia Company
and Indonesia Petroleum, Ltd.
ARTICLE 4
ADMINISTRATION, INSURANCE AND CONSULTATION
4.1 LNG Sales Contract. PERTAMINA shall be responsible for
the due and prompt administration of Badak VI for the benefit of PERTAMINA and
Contractors. All matters which affect Badak VI or the sale, transportation and
delivery of LNG thereunder will be
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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 VI, to take certain administrative and operational
actions without prior consultation where immediate action is required.
Contractors will be promptly advised of any such action.
4.2 Insurance. PERTAMINA shall ensure that the interests of
it and each Contractor in respect of each cargo of LNG transported by PERTAMINA
from the Bontang Plant to Buyer shall be adequately insured pursuant to
arrangements mutually agreed to by PERTAMINA and each Contractor. PERTAMINA
and each Contractor shall be entitled to receive its Production Sharing
Percentage of the Producers' Percentage of any proceeds paid under a marine
insurance policy covering a cargo of LNG being transported from the Bontang
Plant. Such proceeds shall be remitted by the insurer directly to the bank
designated as Trustee pursuant to Article 6 hereof.
4.3 Consultation. PERTAMINA and Contractors agree to consult
with each other freely on all matters relating to Badak VI. PERTAMINA and
Contractors shall confer and agree as to any amendment to Badak VI or to any
permitted action or election thereunder which constitutes a material adjustment
in the quantities of LNG to be sold and delivered thereunder or a change in the
terms thereof. At the request of any party hereto, a memorandum evidencing any
such agreement shall be prepared as soon as feasible and signed by each party
hereto.
ARTICLE 5
TITLE, DELIVERY AND INVOICING
5.1 Title. PERTAMINA will cause the LNG resulting from the
liquefaction of the VICO Contract Gas and the Other Contract Gas to be
delivered to Buyer at the Delivery Point. Title to each Contractor's share of
the LNG resulting from the liquefaction of the VICO Contract
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Gas shall pass to PERTAMINA at the same time as the passage of title from
PERTAMINA to Buyer pursuant to Badak VI.
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 VI 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
VI Badak VI Quantities;
(b) all other amounts which Buyer shall become obligated to
pay pursuant to Badak VI with regard to deliveries of
Package VI Badak VI Quantities, including, but not
limited to: (i) amounts payable by Buyer for its failure
to take quantities it is obligated to purchase under
Badak VI; (ii) any incremental
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payments applicable to make-up deliveries; and (iii) any
interest accruing on overdue invoice payments;
(c) amounts payable by insurers in respect of LNG resulting
from the liquefaction of the VICO Contract Gas and the
Other Contract Gas; and
(d) interest earned on any of the amounts referred to in this
Section 6.1.
6.2 PERTAMINA Assignment of Contractor Percentage Share. In
order to arrange for the receipt by each Contractor of the payments to which
such Contractor is entitled under Section 6.1 hereof, PERTAMINA hereby assigns
to each Contractor that Contractor's Production Sharing Percentage of the
Producers' Percentage of all amounts referred to in Section 6.1 hereof.
6.3 Method of Payment. Throughout the term of this Supply
Agreement, all those payments referred to in Section 6.1 hereof shall be paid
in U.S. Dollars, directly to BankAmerica International in New York City (or
such other leading bank in the United States as shall be selected by PERTAMINA
and approved by Contractors) pursuant to a trustee and paying agent agreement,
the parties to which shall be PERTAMINA, Contractors, the production sharing
contractors in the Other Contract Areas and the Trustee thereunder, as the same
may be from time to time amended. Amounts so received by the Trustee shall be
used for payment of (i) an agreed portion of Plant Operating Costs; (ii)
Financing Costs; (iii) Transportation Costs; and (iv) 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.
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, except in the event of an occurrence
contemplated in Section 7.3, be affected by the
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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, except in the event of an occurrence contemplated in
Section 7.3, 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, except in the event of an occurrence contemplated in
Section 7.3, 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.
7.3 Insufficiency of Deliverable Reserves. If an
insufficiency of deliverable reserves of Natural Gas shall occur which
precludes the delivery from participating field(s) within
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the VICO Contract Area or from participating field(s) within any of the Other
Contract Areas of the aggregate amount of Natural Gas committed therefrom
pursuant to this Supply Agreement or to any of the supply agreements referred
to in Section 2.3 hereof over the term thereof, then such insufficiency shall
be delivered from field(s), including but not limited to the participating
field(s) within the area(s) not then experiencing an insufficiency of
deliverable reserves, and the Producers' Percentage shall thereupon be adjusted
(together with a corresponding adjustment to the VICO Contract Gas) to reflect
the revised share of the net Natural Gas in support of PERTAMINA's obligations
under Badak VI in respect of the period 2000 to 2017 which will be supplied and
delivered from the VICO Contract Area over the term hereof, such adjustment in
the Producers' Percentage to apply only to payments provided for in Article 6
received after the date thereof. The procedure for determining (i) an
insufficiency in deliverable reserves, (ii) the allocation of the right to
supply such insufficiency among the VICO Contract Area, the Other Contract
Areas and any new contract area and (iii) the calculation of the future
Producers' Percentage, shall be made in accordance with principles to be
decided upon by PERTAMINA.
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.
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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:
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: 384-6932
To Contractors:
VIRGINIA INDONESIA COMPANY (VICO)
6th Floor, Plaza Kuningan
Menara Selatan
Jl. H.R. Rasuna Said Kav. C11-14
P.O. Box 2828
Jakarta 12940, Indonesia
Attention: President - VICO Indonesia
Cable: VICO
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Telex: 62458
Facsimile: 523-6894
cc: VIRGINIA INDONESIA COMPANY
One Houston Center
1221 McKinney
Suite 700
P.O. Box 1551
Houston, Texas 77251-1551
U.S.A.
Attention: Chairman
Telex: 166-100
Facsimile: (713) 754-6698
A party may change its address by written notice to the other parties.
ARTICLE 11
MISCELLANEOUS
11.1 Amendment. This Supply Agreement shall not be amended or
modified except by written agreement signed by the parties hereto.
11.2 Successors and Assigns. This Supply Agreement shall inure to
the benefit of, and be binding upon, PERTAMINA and each Contractor, their
respective successors and assigns, provided that this Supply Agreement shall be
assignable by a Contractor only if such Contractor concurrently assigns to the
same assignee an equal interest in the Production Sharing Contracts.
11.3 Exclusivity. The parties to this Supply Agreement shall be
the only persons or entities entitled to enforce the obligations hereunder of
the other parties hereto, and no persons or entities not parties to this Supply
Agreement shall have the right to enforce any of the obligations hereunder of
any of the parties hereto.
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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 VIRGINIA INDONESIA COMPANY
MINYAK DAN GAS BUMI
NEGARA (PERTAMINA)
By /s/ F. ABDA'OE By /s/ C. M. REIMER
---------------------------- ---------------------------------
F. Abda'oe C. M. Reimer
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
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VIRGINIA INTERNATIONAL COMPANY
By /s/ J. HOGAN
---------------------------------
J. Hogan
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