1
LNG SALE AND PURCHASE CONTRACT
(BADAK VI)
BETWEEN
PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
(PERTAMINA)
AND
CHINESE PETROLEUM CORPORATION
EFFECTIVE AS OF OCTOBER 25, 1995
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TABLE OF CONTENTS
Page
ARTICLE 1 - DEFINITIONS 2
ARTICLE 2 - SALE AND PURCHASE 10
ARTICLE 3 - SOURCES OF SUPPLY 11
ARTICLE 4 - TRANSPORTATION AND UNLOADING 13
ARTICLE 5 - ON-SHORE FACILITIES 20
ARTICLE 6 - DURATION OF CONTRACT 23
ARTICLE 7 - QUANTITIES 24
ARTICLE 8 - CONTRACT SALES PRICE 33
ARTICLE 9 - TRANSFER OF TITLE 36
ARTICLE 10 - INVOICES AND PAYMENT 37
ARTICLE 11 - QUALITY 41
ARTICLE 12 - PROGRAMMING AND SHIPPING MOVEMENTS 42
ARTICLE 13 - MEASUREMENTS AND TESTS 44
ARTICLE 14 - DUTIES, TAXES AND CHARGES 52
ARTICLE 15 - FORCE MAJEURE 54
ARTICLE 16 - ARBITRATION 57
ARTICLE 17 - APPLICABLE LAW 58
ARTICLE 18 - AUTHORIZATIONS AND APPROVALS; FINANCING 59
ARTICLE 19 - CONFIDENTIALITY 60
ARTICLE 20 - NOTICES 61
ARTICLE 21 - JOINT COORDINATING COMMITTEE 63
ARTICLE 22 - MISCELLANEOUS 64
SCHEDULE A - TESTING AND METHODS
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This CONTRACT is made this 25th day of October, 1995
BETWEEN
1. PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA ("PERTAMINA"), ▇.▇.
▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ Timur ▇▇.▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇;
and
2. CHINESE PETROLEUM CORPORATION, of ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇.
WITNESSETH:
WHEREAS:
A. The Parties entered into a Memorandum of Understanding dated December
6, 1994 with respect to the sale and purchase of quantities of LNG
during 1998 to 2017; and
B. The Parties now desire to enter into this Contract to formally provide
for the terms and conditions upon which the LNG referred to above will
be sold and purchased.
In consideration of the foregoing and the mutual promises and undertakings
herein the Parties agree as follows:
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ARTICLE 1 - DEFINITIONS
The terms or expressions set out below will have the following meanings in this
Contract. Except as otherwise specifically provided, the singular shall include
the plural or vice versa.
1.1 Actual Cubic Foot
A volume equal to the volume of a cube whose edge is one foot.
1.2 Adverse Weather Conditions
As defined in Section 4.5(b)(vi).
1.3 Affiliate
As defined in Article 19.
1.4 Allowance
The quantity of LNG by which Buyer reduces a Quantity Deficiency in
respect of a given calendar year pursuant to the provisions of Section
7.3(d).
1.5 Allowance Restoration Period
As defined in Section 7.3(d)(iv).
1.6 Allowed Laytime
As defined in Section 4.5(b).
1.7 Annual Program
As defined in Section 12.1(a).
1.8 Authorizations and Approvals
As defined in Article 18.
1.9 British Thermal Unit (BTU)
The amount of heat required to raise the temperature of one
avoirdupois pound of pure water from 59.0 Defrees F to 60.0 Degrees F
at an absolute pressure of 14.696 pounds per square inch.
1.10 Business Day
As to a given jurisdiction, every day other than Saturdays, Sundays,
and national holidays (including compensatory days) in such
jurisdiction.
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1.11 Buyer
Chinese Petroleum Corporation, a corporation organized under the laws
of Taiwan or the successor in interest to such corporation or the
permitted assignee of such corporation or such successor in interest.
1.12 Buyer's Facilities
As defined in Section 5.1.
1.13 Buyer Force Majeure
As defined in Section 4.7(a).
1.14 Cargo
That quantity of LNG (stated in MMBTUs) which represents, for purposes
of calculations hereunder, the maximum amount of LNG that can
practicably be delivered by the LNG Tanker taking into account vessel
capacity, port restrictions, and other relevant considerations.
1.15 Certificate
As defined in Section 3.2(a).
1.16 Contract
This LNG Sale and Purchase Contract, including Schedule A annexed
hereto and forming a part hereof, as it may from time to time be
amended, modified, varied or supplemented in accordance with Section
22.2.
1.17 Contract Sales Price
As defined in Section 8.1.
1.18 Coordinated Maintenance Schedule
As defined in Section 12.3.
1.19 Cubic Meter
A volume equal to the volume of a cube whose edge is one meter.
1.20 Dedicated LNG Tanker
For the Fixed Quantity periods 1998 and 1999, the Dedicated LNG Tanker
shall be the "Dwiputra", an LNG tanker under long term time charter to
Seller. For the Fixed Quantity Periods 2000 to 2017, the Dedicated LNG
Tanker shall be a new-build LNG tanker with a loaded Cargo size of at
least 135,000 cubic meters, with a discharge capacity of a full cargo
in twelve (12) hours and having a design consistent with the
requirements of Section 5.1.
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1.21 Delivery Point
The point at an Unloading Port where the flange coupling of Buyer's
unloading line joins the flange coupling of the LNG discharging
manifold on board the LNG Tanker.
1.22 ETA
Estimated time of arrival as defined pursuant to Section 4.3(a)(i).
1.23 Event
As defined in Section 4.5(c).
1.24 Excess Laytime
As defined in Section 4.5(c).
1.25 Excess Laytime Allowance
As defined in Section 4.5(c).
1.26 Financing
As defined in Article 18.
1.27 Fixed Quantity
As defined in Section 7.1.
1.28 Fixed Quantity Period
As defined in Section 7.1.
1.29 Force Majeure
As defined in Section 15.1.
1.30 Force Majeure Deficiency
As defined in Section 7.6(a).
1.31 Gas Supply Area
The areas in East Kalimantan, Indonesia, covered by production sharing
contracts between Seller and Seller's Suppliers, and such other nearby
contract areas as Seller may designate from time to time.
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1.32 Gross Heating Value
The quantity of heat expressed in British Thermal Units produced by
the complete combustion in air of one cubic foot of anhydrous gas, at
a temperature of 60.0 Degrees F and at an absolute pressure of 14.696
pounds per square inch, with the air at the same temperature and
pressure as the gas, after cooling the products of the combustion to
the initial temperature of the gas and air, and after condensation of
the water formed by combustion.
1.33 Joint Coordinating Committee
The joint technical and operating committee provided for in Article 21.
1.34 Liquefied Natural Gas (LNG)
Natural Gas in a liquid state at or below its boiling point at a
pressure of approximately one atmosphere.
1.35 LNG Element
As defined in Section 8.1.
1.36 LNG Tankers
The Dedicated LNG Tanker and Substitute LNG Tankers, and "LNG Tanker"
means either the Dedicated LNG Tanker or a Substitute LNG Tanker.
1.37 Loading Port
The port located at and forming a part of Seller's Facilities.
1.38 Make-Good LNG
As defined in Section 7.3(d)(iv).
1.39 Make-Good Obligation
The obligation of Buyer as set forth in Section 7.3(d)(iv) to take and
pay for LNG in an amount (measured in BTUs) equal to each Allowance
exercised.
1.40 Make-Up LNG
As defined in Section 7.5.
1.41 MMBTU
One million (1,000,000) BTUs.
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1.42 Natural Gas
Any hydrocarbon or mixture of hydrocarbons consisting essentially of
methane, other hydrocarbons, and non- combustible gases in a gaseous
state and which is extracted from the subsurface of the earth in its
natural state, separately or together with liquid hydrocarbons.
1.43 Ninety-Day Schedule
As defined in Section 12.2.
1.44 Non-Utilization Cost
As defined in Section 4.7.
1.45 Notice of Readiness
The notice given at the time prescribed in Section 4.5(a) by the
Master of an LNG Tanker or its agent to Buyer by letter, telegraph,
telex, facsimile, radio or telephone that such LNG Tanker is ready to
discharge LNG.
1.46 Parties
Both Seller and Buyer, and "Party" means either of Buyer or Seller.
1.47 Port Charges
All charges of whatsoever nature (including rates, tolls and dues of
every description) in respect of an LNG Tanker entering, using or
leaving a port, including charges made in respect of marking and
lighting the port and charges in respect of work performed, services
rendered or facilities provided.
1.48 Prime Rate
The rate of interest announced from time to time by Citibank, N.A.,
New York ("Citibank") as Citibank's prime rate. The prime rate may not
be the lowest rate charged by Citibank to its borrowers. If there is
any doubt as to the Prime Rate for any period, a written confirmation
signed by an officer of Citibank shall conclusively establish the
Prime Rate in effect for such period. In the event that Citibank shall
for any reason cease quoting a prime rate as described above, then a
comparable rate shall be determined using rates then in effect and
shall be used in place of the said prime rate.
1.49 Proved Remaining Recoverable Reserves
Reserves which have been proved to a high degree of certainty by
reason of actual completion, successful testing or in certain cases by
adequate core analyses, and which are defined areally by reasonable
geological interpretation of structure and known continuity of oil- or
gas-saturated material.
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1.50 Quantity Deficiency
As defined in Section 7.3(a).
1.51 Restoration Quantities
As defined in Section 7.6(a).
1.52 Round-Up Request
As defined in Section 7.3(a)(ii).
1.53 Seller
Perusahaan Pertambangan Minyak dan Gas Bumi Negara ("PERTAMINA"), a
State Enterprise of the Republic of Indonesia, or the successor in
interest of such enterprise, or the permitted assignee of such
enterprise or such successor in interest.
1.54 Seller's Facilities
As defined in Section 5.2.
1.55 Seller's Gas Supply Obligation
From time to time on any given date, the amount of Natural Gas
required to satisfy all the remaining obligations of Seller on such
date to supply LNG or Natural Gas from the Gas Supply Area both to
Buyer and other buyers plus the amount of Natural Gas from the Gas
Supply Area required to supply any additional commitment or
commitments which Seller anticipates making.
1.56 Seller's Suppliers
In respect of portions of the LNG to be sold hereunder :
(a) Total Indonesie and Indonesia Petroleum, Ltd.;
(b) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Company, ▇▇▇▇▇ ▇▇▇▇▇-Sanga Limited, OPICOIL
Houston, Inc., Union Texas East Kalimantan Limited, Universe
Gas & Oil Company, Inc. and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ Company;
(c) Unocal Indonesia Company;
(d) Indonesia Petroleum, Ltd.; and
such other entities that may, from time to time, execute a Supply
Agreement with Seller, and any successors and assigns of any of the
aforesaid suppliers who shall have agreed in writing to be bound by all
of the obligations of their respective assignors under the applicable
Supply Agreement with Seller.
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1.57 Seller's Transportation Arrangements
The agreements between Seller and Seller's Transporter providing for
the transportation of LNG hereunder, together with any amendment,
modification or supplement thereto.
1.58 Seller's Transporter
Each entity which contracts with Seller to provide transportation of
LNG hereunder.
1.59 Standard Cubic Foot (scf)
The quantity of Natural Gas, free of water vapor, occupying a volume
of one Actual Cubic Foot at a temperature of 60.0 Degrees F and at an
absolute pressure of 14.696 pounds per square inch.
1.60 Substitute LNG Tanker
An LNG tanker, other than the Dedicated LNG Tanker, meeting the
requirements of Section 5.3 and used by Seller for transporting LNG
hereunder.
1.61 Supply Agreement
As defined in Section 3.1.
1.62 Take-or-Pay Quantity
As defined in Section 7.5.
1.63 Taiwanese Tax
As defined in Section 14.3(c).
1.64 Tax Law
As defined in Section 14.3(a).
1.65 Term
As defined in Article 6.
1.66 Transportation Element
As defined in Article 8.1.
1.67 Unloading Port
The port at Yung An, near Kaohsiung, Taiwan, or such other port in
Taiwan as is agreed to between Buyer and Seller.
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1.68 U.S.CPI
The United States Consumer Price Index (determined by reference to:
All Urban Consumers (CPI-U); Unadjusted U.S. City Average; All items;
with a base period of 1982-84 = 100) as published by the U.S.
Department of Labor, Bureau of Labor Statistics.
1.69 Used Laytime
As defined in Section 4.5(a).
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ARTICLE 2 - SALE AND PURCHASE
Seller agrees to sell and deliver at the Delivery Point, and Buyer agrees to
purchase, receive and pay for, or to pay for if not taken, LNG, in the
quantities, at the price and in accordance with the other terms and conditions
of this Contract.
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ARTICLE 3 - SOURCES OF SUPPLY
3.1 Sources of Supply
The Natural Gas to be processed into LNG and sold hereunder is to be
produced from the Gas Supply Area. Seller represents that Seller will
maintain throughout the Term the right and ability to sell all quantities
of LNG to be sold and delivered hereunder. In this connection, Seller
undertakes to execute and deliver to Seller's Suppliers within six (6)
months from the date hereof separate supply agreements with each of
Seller's Suppliers under which agreements each of Seller's Suppliers
respectively and Seller undertake to supply such quantities of Natural Gas
in the aggregate as will be sufficient to permit Seller to meet its
obligations under this Contract ("Supply Agreement"). At such time as the
supply agreements have been executed and delivered Seller will execute and
deliver and cause Seller's Suppliers to execute and deliver a certificate
confirming to Buyer such fact. Notwithstanding any reference to Seller's
Suppliers in this Contract, Seller is fully responsible for performance of
all the obligations of Seller hereunder, and no contractual default of
Seller's Suppliers shall excuse Seller from its full responsibility
hereunder.
3.2 Reserves of Natural Gas
(a) Seller has furnished Buyer with statements, each entitled
"Certificate" and each dated on or prior to December 31, 1994 of
DeGolyer and MacNaughton expressing its estimate of Proved Remaining
Recoverable Reserves of Natural Gas in the Gas Supply Area. Seller
represents that such estimated quantity is in excess of Seller's Gas
Supply Obligation as of the date hereof. Hereafter and throughout the
Term, before committing additional Natural Gas from the Gas Supply
Area to sale or other utilization, Seller shall secure from an
independent petroleum engineering consultant firm of recognized
standing in the petroleum industry, qualified by reputation and
experience in estimating reserves of oil and Natural Gas in subsurface
reservoirs, the written statement (the "Certificate") of such firm
expressing its estimate of Proved Remaining Recoverable Reserves of
Natural Gas in the Gas Supply Area in an amount at least equal to
Seller's Gas Supply Obligation. Seller shall provide Buyer with copies
of each Certificate of such independent petroleum engineering
consultant firm on which Seller relies in making any such commitment
for supply of Natural Gas from the Gas Supply Area. Seller shall also
furnish allsupporting documentation provided by such independent
petroleum engineering consultant firm in connection with the issuance
of such Certificate.
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(b) If, during the Term hereof, Seller obtains information from its
activities (including the activities of Seller's Suppliers) in
operating fields in the Gas Supply Area which indicates unforeseen
adverse changes in the Proved Remaining Recoverable Reserves of
Natural Gas in the Gas Supply Area, Seller will promptly inform Buyer
of such situation and will further inform Buyer of any measures which
Seller may be required to take in order to fulfill its obligations
under this Contract.
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ARTICLE 4 - TRANSPORTATION AND UNLOADING
4.1 Transportation
(a) At no cost to Buyer, except as otherwise provided herein, Seller shall
be responsible for the transportation from Seller's Facilities to
Buyer's Facilities of the LNG to be sold and delivered hereunder,
using an LNG Tanker.
(b) Seller may use any spare capacity of an LNG Tanker for purposes other
than transporting LNG under this Contract and may schedule the use of
an LNG Tanker to make deliveries hereunder to the extent necessary to
make the best use of such spare capacity.
(c) Seller shall use its best efforts to cause the LNG Tankers to comply
with the regulations of, and to obtain all marine permits required by
Taiwan and other relevant authorities respecting the operation of LNG
Tankers. Buyer shall provide Seller with advice on a timely basis as
to the requirements of Taiwanese regulations and shall use its best
efforts to assist compliance therewith. Buyer shall reimburse to
Seller any and all costs, including costs of modification required to
be made to LNG Tankers, which are incurred by Seller as a result of
the requirements of any governmental authority in Taiwan which differ
from standard international maritime safety or other requirements,
such as those established by the International Maritime Organization,
the U.S. Coast Guard, the Japanese Maritime Agency or internationally
recognized vessel classification societies. Seller agrees to limit
such modifications to the extent strictly needed to comply with
Taiwanese requirements and/or its obligations hereunder and will
consult with Buyer before carrying out such modifications. Seller
further agrees to refund any money paid to it under this Section
4.1(c) if the aforesaid international maritime requirements are
subsequently changed so that they require the same modifications as
were required by Taiwanese authorities.
4.2 Transportation During 1998 and 1999 Fixed Quantity Periods
For the Fixed Quantity Periods 1998 and 1999 the LNG sold hereunder shall
be transported on the Dwiputra or on a Substitute LNG Tanker.
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4.3 Notices of LNG Tanker Movements and Characteristics of LNG Cargoes
(a) With respect to each Cargo of LNG to be delivered hereunder, Seller
shall give or shall cause the Master of the LNG Tanker delivering the
same to give to Buyer at Buyer's Facilities the following notices:
(i) a first notice, which shall be sent upon the departure of the
LNG Tanker from the Loading Port and which shall set forth the
time and date that loading was completed, the volume,
expressed in Cubic Meters, of LNG loaded on board the LNG
Tanker and the estimated time of arrival of the LNG Tanker at
the sea buoy of the Unloading Port ("ETA");
(ii) a second notice, which shall be sent forty-eight (48) hours
prior to the ETA;
(iii) a third notice, which shall be sent twenty-four (24) hours
prior to the ETA;
(iv) a final notice, which shall be sent five (5) hours prior to
the ETA; and
(v) a Notice of Readiness, which shall be given at the time
prescribed in Section 4.5(a) below.
(b) Within thirty-six (36) hours after departure of each LNG Tanker from
the Loading Port, Seller shall notify Buyer, for Buyer's information
only, of the following characteristics of the LNG comprised in the
Cargo as determined at the time of loading:
(i) the Gross Heating Value per Standard Cubic Foot;
(ii) the molecular percentage of hydrocarbon components and
nitrogen; and
(iii) average temperature.
The notices referred to in paragraphs (a) and (b) of this Section 4.3 shall
be sent by telex or, if necessary, by radio. The notices referred to in
subparagraphs (iii), (iv) and (v) of paragraph (a) shall be sent by both
telex and radio.
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4.4 Obligations of Buyer at Unloading Port
(a) Buyer shall cooperate with the Master of an LNG Tanker directed to the
Unloading Port to ensure the continuous and efficient delivery of LNG
hereunder. Buyer shall provide, in accordance with the provisions of
this Contract, a safe berth for prompt berthing of an LNG Tanker at
Buyer's Facilities and shall operate Buyer's Facilities, or ensure
that they are operated, so as to permit discharge of the Cargo of an
LNG Tanker as quickly as possible. During discharge of each Cargo of
LNG, Buyer shall return to the LNG Tanker natural gas in such
quantities as are necessary for the safe unloading of the LNG at such
rates, pressures and temperatures as may be required by the LNG Tanker
design and commonly accepted operating practice for such LNG Tanker.
The LNG to be sold and delivered hereunder shall be unloaded through
manifold strainers of sixty (60) mesh (or such other mesh as shall be
agreed from time to time by the Parties).
(b) Buyer shall cause to be made available at an Unloading Port such tugs,
fireboats, pilots and other services as are necessary for the purposes
of safety and efficiency and are required by Taiwan authorities.
(c) Seller shall pay, or shall cause Seller's Transporter to pay, all Port
Charges in respect of LNG Tankers at the Unloading Port promptly when
due, provided that Buyer shall reimburse to Seller the amount (if any)
by which such Port Charges exceed the average of those generally
payable for vessels of the same type and size in LNG unloading ports
in Japan.
4.5 Demurrage at Unloading Port
(a) Upon the arrival of an LNG Tanker at an Unloading Port (or off the
Unloading Port if such LNG Tanker is prohibited from approaching or
entering the Unloading Port by applicable safety regulations) the
Master of the LNG Tanker or its agent shall give notice to Buyer or
its agent that such LNG Tanker is ready to discharge LNG, berth or no
berth ("Notice of Readiness"). A Notice of Readiness may be tendered
on any day of the week or any hour of the day. Laytime used in
unloading an LNG Tanker ("Used Laytime") shall begin to count upon the
earlier of (i) four (4) hours from Notice of Readiness, except where
such Notice of Readiness is given when the LNG Tanker is prevented
from berthing because of night berthing restrictions in which case
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it shall begin to count from four (4) hours after the sunrise
following such Notice of Readiness, or (ii) the LNG Tanker's being
"all fast" in berth. Used Laytime shall continue to run until
discharge and return lines have been disconnected and the LNG Tanker
is cleared for departure.
(b) "Allowed Laytime" at an Unloading Port shall be twenty-four (24)
consecutive hours extended by any period of delay which is caused by:
(i) reasons attributable to Seller, the LNG Tanker or its Master,
crew, owner or operator, including but not limited to delays
in departure due to quarantine, port regulation or documentary
clearance to the extent so attributable;
(ii) prevention or delay in an LNG Tanker attaining its full design
discharge rate because of the condition of the Cargo;
(iii) Force Majeure;
(iv) occupancy of the berth by another vessel if the LNG Tanker
arrives more than one (1) day after the delivery date
scheduled in the most recent Ninety-Day Schedule without the
consent of Buyer; provided that such period of extension shall
be equal to the lesser of (A) twenty-four (24) hours, or (B)
the time elapsed between Notice of Readiness and the departure
from the berth of such other vessel;
(v) arrival of the LNG Tanker before the delivery date scheduled
in the most recent Ninety-Day Schedule without the consent of
the Buyer; provided that such period of extension shall be
equal to the time elapsed (if any) between commencement of
used laytime and the earlier of (A) 00:00 hours on the
scheduled delivery date, or (B) completion of berthing; or
(vi) "Adverse Weather Conditions", which for purposes hereof means
weather and/or sea conditions actually experienced at the
Unloading Port which are sufficiently severe either: (A) to
prevent all LNG Tankers from proceeding to berth, discharging
or departing from berth in accordance with the weather
standards prescribed in the standard published regulations of
the maritime agency of Taiwan, or (B) to cause an actual
determination by the Master that it is unsafe for the LNG
Tanker to berth, discharge or depart from berth. The
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period of delay to an LNG Tanker caused by Adverse Weather
Conditions shall not be considered to extend past the time
during which such Adverse Weather Conditions actually
prevailed except where additional delay is caused by the
occupation of the berth by another LNG Tanker.
(c) In the event Used Laytime exceeds Allowed Laytime (such excess being
herein referred to as "Excess Laytime"), Buyer shall pay to Seller
demurrage determined in accordance with the following formula:
(TE - U.S.$0.12 / MMBTU) x Cargo
-------------------------------- x Days
10
where :
TE = the Transportation Element applicable at the time the
demurrage occurs;
Days = the duration in days (or parts thereof) of the Excess
Laytime.
provided, however, that demurrage shall only be payable under this Section
4.5 (c) to the extent that an event of Excess Laytime ("Event") exceeds a
certain allowance period ("Excess Laytime Allowance"). Such Excess Laytime
Allowance shall be limited to:
(i) six (6) hours per Event; and
(ii) twelve (12) hours in the aggregate for all prior Events during
a period of sixty (60) days ending on the date the Event in
question arises.
Seller shall invoice Buyer for demurrage amounts due under this Section 4.5
at the end of each calendar month, and Buyer shall pay such invoices in
accordance with the terms of Section 10.2.
4.6 Effect of Unloading Port Delays; Excess Boil-Off
(a) Notwithstanding the provisions of Section 11.1, if the Gross
Heating Value of LNG to be delivered hereunder is higher than
the limits set forth in Section 11.1 by reason of boil-off
occurring during a delay in unloading an LNG Tanker of more
than forty-eight (48) hours after
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Notice of Readiness has been given, such LNG shall be deemed
to have met the quality specifications of this Contract
regarding the Gross Heating Value.
(b) If an LNG Tanker is delayed in berthing and/or commencement of
unloading for a reason that would not result in an extension
of allowed laytime under Section 4.5(b), and if, as a result
thereof, the commencement of unloading is delayed beyond
thirty (30) hours after Notice of Readiness has been given,
then, for each full hour by which commencement of unloading is
delayed beyond such thirty (30) hour period, Buyer shall pay
Seller an amount, on account of excess boil-off, equal to the
Contract Sales Price multiplied by the number of MMBTUs per
hour by which such boil-off reduces the aggregate number of
BTUs of a Cargo at berth, provided, however, that Buyer shall
not pay for any boil-off which exceeds the boil-off
performance undertaking by Seller's Transporter as agreed
under Seller's Transportation Arrangements for the applicable
LNG Tanker. The hourly BTU reduction rate to be applied for
such purpose shall be determined by actual boil-off experience
as determined at appropriate intervals.
4.7 Non-Utilization Cost
(a) If there is an event of force majeure pursuant to Section 15.1
affecting Buyer's performance of its obligations hereunder
("Buyer Force Majeure") which results in an LNG Tanker being
unutilized and there is an expected Force Majeure Deficiency,
then Buyer shall pay to Seller on account of such non-
utilization an amount in U.S.$ ("Non-Utilization Cost")
determined in accordance with the following formula:
FMD x (TE - U.S. $0.12/MMBTU)
Where:
FMD = the Force Majeure Deficiency resulting from a
Buyer Force Majeure in MMBTUs; and
TE = Transportation Element applicable at the time
such Force Majeure Deficiency occurs.
(b) Any Non-Utilization Cost payable hereunder shall be reduced to
the extent that the LNG Tanker is utilized to deliver to a
third party LNG
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which would otherwise have been purchased and received by
Buyer had a Buyer Force Majeure not occured.
(c) Seller shall invoice Buyer for amounts due under this Section
4.7 on a monthly basis and Buyer shall pay such invoice in
accordance with Section 10.2.
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ARTICLE 5 - ON-SHORE FACILITIES
5.1 Buyer's Facilities
Buyer has heretofore constructed or will further construct LNG
receiving terminal facilities at an Unloading Port as may be necessary
to fulfill Buyer's obligations to receive LNG hereunder ("Buyer's
Facilities"). Such facilities shall include without limitation, the
following:
(a) Berthing facilities capable of receiving an LNG Tanker having an
overall length of up to three hundred (300) metres, a beam of up to
fifty (50) metres and a draft of up to eleven (11) metres, which the
LNG Tankers can always safely reach, fully laden, and safely depart,
and at which an LNG Tanker can lie safely berthed and discharge safely
afloat at all times;
(b) Unloading facilities capable of receiving LNG at a rate which will
permit the discharging of a Cargo from an LNG Tanker within twelve
(12) hours of pumping time at the full pumping rate specified by the
LNG Tanker design;
(c) A vapor return line system of sufficient capacity to transfer to the
LNG Tanker quantities of natural gas necessary for the safe unloading
of LNG at such rates, pressures and temperatures as may be required by
the LNG Tanker design;
(d) Systems for timely provision of an LNG Tanker with adequate fresh
water, low sulfur fuel oil (until such time as Buyer has bunker oil
available) and diesel oil if necessary;
(e) Facilities allowing access to the LNG Tanker from onshore adequate for
the handling and delivery of ship's stores, provisions and spare parts
to the LNG Tanker;
(f) Shore based tanks and loading lines for liquid nitrogen adequate to
service the LNG Tanker;
(g) LNG storage tanks of adequate capacity to receive and store a Cargo of
LNG upon each scheduled arrival of an LNG Tanker;
23
(h) Appropriate systems for necessary radio communications with an LNG
Tanker; and
(i) Regasification facilities.
5.2 Seller's Facilities
Seller's facilities shall comprise Natural Gas reservoirs, Natural Gas
production and treatment facilities in and transportation facilities
from the Gas Supply Area including without limitation those facilities
located at Bontang Bay, East Kalimantan for treatment, compression,
liquefaction, processing, transmission, storage, berthing and loading,
and utilities, together with such expansion or modification of the
foregoing as may be necessary, to fulfill its obligations hereunder
("Seller's Facilities").
5.3 Compatibility of Buyer's Facilities and LNG Tankers
(a) Seller shall cause the LNG Tankers to be compatible with Buyer's
Facilities existing as of the effective date of this Contract.
(b) Buyer shall ensure, at no cost to Seller, that any construction or
modification of Buyer's Facilities after the effective date of this
Contract, in addition to meeting the requirements of Section 5.1, is
compatible with the LNG Tankers.
(c) Seller and Buyer shall consult to determine the most effective manner
to achieve the compatibility referred in (a) and (b) above;
provided, however, that Buyer shall have the right to request
modifications to the LNG Tanker to be carried out entirely at Buyer's
expense and such request shall not be unreasonably refused.
5.4 Fuel, Liquid Nitrogen and Fresh Water
Buyer, at no cost to Seller, shall provide at Buyer's Facilities
adequate systems to supply in a safe and efficient manner the
requirements of an LNG Tanker for low sulphur fuel oil (or, when
available, bunker oil) and diesel oil and shall further arrange for
the supply of the requirements of an LNG Tanker for liquid nitrogen
and fresh water. Subject to reasonable advance notice (not in any
event to be less than seven (7) days) prior to arrival of an LNG
Tanker, Buyer shall at all times during the term of this Contract
cause adequate supplies of such products to meet the requirements of
an LNG Tanker to be available for
24
sale at Buyer's Facilities on the terms and conditions generally
prevailing for long-term contracts for such items in ports in Taiwan.
Seller will have at all times throughout the Term the right to
purchase low sulfur fuel oil (thereafter bunker oil at such time it
is available to Buyer) and diesel requirements of the Dedicated Vessel
(and of any Substitute LNG Tanker during the time it is in service
hereunder) from Buyer or its nominee on such generally prevailing
terms and conditions.
25
ARTICLE 6 - DURATION OF CONTRACT
This Contract shall be effective on the date hereof and shall continue in
effect until the expiration of the parties' respective obligations to sell and
purchase LNG as provided in Article 7 or the earlier termination of this
Contract pursuant to Article 18 ("Term"). The Term may be extended on such
terms and conditions as are agreed between the Parties no later than five (5)
years prior to the expiry of the Term.
26
ARTICLE 7 - QUANTITIES
7.1 Required Deliveries
During each calendar year specified below (each such period being
called a "Fixed Quantity Period"), Seller shall sell and deliver to
Buyer, and Buyer shall purchase, receive and pay for, or pay for if
not taken, at the Contract Sales Price, the quantity of LNG having a
heating value as specified for such Fixed Quantity Period (each such
quantity being called a "Fixed Quantity") as follows:
FIXED QUANTITY PERIOD FIXED QUANTITIES
(CALENDAR YEAR) (BILLIONS OF BTUS)
--------------- ------------------
1998 5,187
1999 38,903
2000 88,179
2001-2017 95,500
The above Fixed Quantities are subject to adjustment as provided in
Section 7.3(a). After giving effect to any such adjustment, the term
"Fixed Quantity" shall mean the applicable Fixed Quantity as so
adjusted, and the respective obligations of Seller to sell and
deliver, and of Buyer to purchase, receive and pay for, or pay for if
not taken, the Fixed Quantity of LNG in any Fixed Quantity Period
shall apply to the applicable Fixed Quantity as so adjusted.
7.2 Deliveries
Within each Fixed Quantity Period, the quantities to be delivered by
Seller and received by Buyer shall be delivered at rates and intervals
and in quantities which are reasonably constant over the course of
such Fixed Quantity Period and give effect to the maintenance,
downtime and shipping schedules provided for in Article 12, so as to
assure, as nearly as possible, continuous full utilization of the LNG
Tankers, an even production rate at Seller's Facilities, and even
rates of deliveries at Buyer's Facilities.
7.3 Buyer's Obligation to Take or Pay
(a) If, during any Fixed Quantity Period, Buyer should fail to
take the full Fixed Quantity applicable thereto, Buyer shall
pay Seller, at the Contract Sales Price in effect as of the
last day of such Fixed Quantity Period, for
27
the quantities of LNG required to be purchased but which were
not taken by Buyer during such Fixed Quantity Period (any such
quantity deficiency being called a "Quantity Deficiency"),
subject, however, to paragraphs (b), (c) and (d) below and the
following:
(i) if, after taking into account all adjustments
provided for in this Section 7.3 including any
Allowance that has been exercised, there remains a
Quantity Deficiency for Buyer at the end of any Fixed
Quantity Period, Buyer may carry forward and add to
the Fixed Quantity for the next succeeding Fixed
Quantity Period:
(A) the full amount when such Quantity Deficiency
amounts to less than a Cargo; or
(B) any fractional portion of a Cargo when the
Quantity Deficiency exceeds a Cargo.
Amounts so carried forward shall not be included in
such Quantity Deficiency.
(ii) if, at the time an Annual Program is developed under
Section 12.1, it is estimated that Buyer will have a
Quantity Deficiency in the year which is the subject
of such Annual Program in an amount that is less than
a Cargo, Buyer shall have the right to request an
increase in the quantity which Buyer wishes to take
during such subject year in an amount sufficient to
fill up such Cargo (such right being hereinafter
referred to as Buyer's "Round-Up Request"). If Buyer
does not make a Round-Up Request or if Seller does
not accept such Round-Up Request, the non- delivery
of the partial Cargo of LNG shall not constitute a
failure of Seller to make LNG available for sale for
the purpose of Section 7.3(b). No such Round-Up
Request shall, however, operate to increase Buyer's
Fixed Quantity under this Contract. However, Buyer
shall have a take-or-pay obligation in respect of LNG
quantities that have been the subject of a Round-Up
Request which is accepted by Seller; and
(iii) if, at the end of any Fixed Quantity Period, Buyer
has purchased and received quantities of LNG
hereunder in excess of the Fixed Quantity of Buyer
for such Fixed Quantity Period other than Make-Up
LNG, Make-Good LNG, or Restoration Quantities, the
28
excess shall be applied to reduce the Fixed Quantity
of the next Fixed Quantity Period.
(b) The obligation (set forth in paragraph (a) above) of Buyer to
pay for Fixed Quantities not taken in any Fixed Quantity
Period shall be reduced by the quantity of LNG which Buyer was
unable to purchase because of an event of Force Majeure
affecting either Seller or Buyer or because of Seller's
failure for any other reason to make such quantity available
for sale in accordance with this Contract.
(c) In calculating the quantity of LNG delivered by Seller and
purchased by Buyer for each Fixed Quantity Period, quantities
delivered and purchased within the first five (5) days of the
next Fixed Quantity Period shall be included, provided such
quantities were scheduled in the Annual Program for the Fixed
Quantity Period with respect to which the calculation is being
made.
(d) The obligation of Buyer pursuant to paragraph (a) above to pay
for quantities not taken may be reduced by the exercise of an
allowance as follows ("Allowance") :
(i) Buyer may only exercise an Allowance by delivering
written notice to Seller, as described in Section
7.3(d)(ii). A notice of exercise of an Allowance,
once given, may not be later withdrawn. Provided,
however, that corrections of clerical or arithmetic
errors may be made at any time;
(ii) each notice of exercise of an Allowance shall specify
the quantity of LNG subject to the Allowance. Such
notice shall be given pursuant to Section 12.1 or by
notice to Seller no later than sixty (60) days prior
to the scheduled date of loading of the Cargo to
which the Allowance specified in any such notice
relates;
(iii) no Allowance can be exercised if its exercise would
result in Buyer's aggregate outstanding Allowances
exceeding six decimal four percent (6.4%) of the
Fixed Quantity for the Fixed Quantity Period in which
the Allowance is desired to be exercised. For the
purposes of this Section 7.3(d)(iii), and subject to
the provisions of Section 7.3(d)(viii), an Allowance,
or portion thereof, shall be deemed outstanding until
either Make-Good LNG is taken
29
pursuant to Section 7.3(d)(iv), or payment is made
pursuant to Section 7.3(d)(vi);
(iv) each Allowance shall be made good in full (even if it
amounts to a fractional portion of a Cargo) by the
purchase of an equal quantity of LNG in excess of
Fixed Quantities ("Make-Good LNG") within a period
commencing January 1 of the year following the Fixed
Quantity Period in relation to which such Allowance
was exercised and ending with the earlier of the
expiration of five (5) calendar years or March 31,
2018 ("Allowance Restoration Period"). Any Make-Good
LNG purchased after the expiration of the last Fixed
Quantity Period but prior to March 31, 2018 shall be
paid for at the LNG Element in effect as of the date
of delivery plus the actual transportation costs
incurred in delivering the Make-Good LNG. Buyer may
not satisfy a Make- Good Obligation or any part
thereof during a Fixed Quantity Period until it shall
first have taken its Fixed Quantity for such Fixed
Quantity Period. If Buyer has more than one Allowance
outstanding, the Make-Good Obligations in respect
thereof shall be satisfied in the same chronological
order in which such Allowances were exercised;
(v) every request for Make-Good LNG, shall specify the
Allowance to which such request relates;
(vi) if, at the expiration of the Allowance Restoration
Period, a Make-Good Obligation has not been satisfied
in full, Buyer pursuant to Section 7.3(d)(iv) shall
pay Seller for any unsatisfied portion of the
Make-Good Obligation at the Contract Sales Price
(reduced to exclude that portion of the
Transportation Element related to voyage costs) in
effect as of the last day of such Allowance
Restoration Period. Buyer shall have the right to
request Make-Up LNG pursuant to Section 7.5 with
respect to any such payment;
(vii) Seller shall not be obligated to reserve any LNG
production or shipping capacity for the purposes of
permitting Buyer to satisfy Make-Good Obligations;
and
(viii) in the event that Buyer requests quantities of LNG to
satisfy a Make-Good Obligation pursuant to Section
7.3(d)(v) which Seller
30
is unable to make available for any reason, including
Force Majeure, the following provisions shall apply:
(A) Buyer shall be relieved from the obligation
pursuant to subparagraph (vi) to pay for such
requested quantity as of the expiration of
the Allowance Restoration Period relating
thereto, except in the case where Section
7.3(d)(viii)(C) requires such payment;
(B) such requested quantities shall be deemed not
outstanding for the purposes of Section
7.3(d)(i) until Seller shall (whether during
or after the Allowance Restoration Period)
have offered the same to Buyer but shall then
be outstanding if Buyer does not accept such
offer; any change in the quantity outstanding
due to a failure to accept such an offer
shall not result in an acceleration of any
then outstanding Make-Good Obligations; and
(C) such requested quantities shall be scheduled
for delivery at any time prior to the
expiration of the last Fixed Quantity Period
as mutually agreed by Seller and Buyer. If
such requested quantities have not been
scheduled as of the end of the last Fixed
Quantity Period and should Seller be unable
to deliver such requested quantities during
the three (3) months following the last Fixed
Quantity Period, Buyer shall have no further
obligation in respect thereof. If Seller
gives Buyer reasonable notice that such
requested quantities are available during
such three-month period but Buyer does not
take such quantities, Buyer shall then make
the payment required under Section
7.3(d)(vi).
7.4 Force Majeure Allocation
(a) Whenever deliveries of LNG by Seller under this Contract must
be reduced by reason of an event or circumstance of Force
Majeure affecting Seller's Facilities an allocation of
quantities then available for sale at the Seller's Facilities
will be made between Buyer and other purchasers of LNG from
Seller's Facilities. At such times, the total quantities
available for sale from Seller's Facilities shall be allocated
among the purchasers therefrom (including Buyer) pro rata in
the ratio of their respective quantities which are eligible
for allocation as provided
31
below. The quantities eligible for such allocation shall, as
to Buyer, be the portion of the Fixed Quantities to be
purchased hereunder during the period of such Force Majeure
and, as to other purchasers, be those fixed or contract
quantities of LNG which are committed for sale from Seller's
Facilities during the period of such Force Majeure in
satisfaction of Seller's contracts with other purchasers which
provide for sales of LNG over a term of at least fifteen (15)
years.
(b) If such an event of Force Majeure does not preclude full
production and loading of all Fixed Quantities under the
allocation formula described in paragraph (a) above, but is of
such an extent as to prevent Seller from producing and loading
all Make-Up LNG, Make-Good LNG and Restoration Quantities
scheduled for delivery from Seller's Facilities to Buyer and
equivalent quantities for the same purposes scheduled for
delivery from Seller's Facilities to other purchasers under
LNG sales contracts providing for deliveries over a term of at
least fifteen (15) years, quantities of such LNG as are
available shall be allocated between Buyer and such other
purchasers in proportion to the respective quantities so
scheduled.
(c) Whenever deliveries of LNG by Buyer under this Contract must
be reduced by reason of a Buyer Force Majeure, an allocation
of quantities then able to be received at Buyer's Facilities
will be made between Seller and other suppliers of LNG to
Buyer. At such times, the total quantities able to be
received by Buyer's Facilities shall be allocated among the
suppliers therefrom (including Seller) pro rata in the ratio
of their respective quantities which are eligible for
allocation as provided below. The quantities eligible for
such allocation shall, as to Seller, be the portion of the
Fixed Quantities to be sold hereunder during the period of
such Force Majeure and, as to other suppliers, be those fixed
or contract quantities of LNG which are committed for sale to
Buyer during the period of such Force Majeure in satisfaction
of Buyer's contracts with other suppliers which provide for
sales of LNG to Buyer over a term of at least fifteen (15)
years.
7.5 Take-or-Pay Make-Up
If, pursuant to Section 7.3(a) or Section 7.3(d)(vi), Buyer shall have
paid for any quantity of LNG which was not taken by Buyer
("Take-or-Pay Quantity"), then, in any subsequent year, Buyer may
purchase up to an equal quantity of LNG from Seller as make-up LNG
("Make-Up LNG") (to the extent not
32
previously made up). Buyer may request Make-Up LNG by giving written
notice to Seller as provided in Section 12.1. If, during any year for
which Make-Up LNG has been requested, (i) Seller has uncommitted
quantities of LNG available for such purpose, (ii) Seller has
available LNG Tanker capacity which may be used to transport such
Make-Up LNG, and (iii) Buyer shall have first taken and paid for the
Fixed Quantity for such year, then Seller shall sell and deliver to
Buyer the quantity of Make-Up LNG requested; provided, however, that
after the expiration of three (3) months following the end of the last
Fixed Quantity Period such Make-Up LNG shall only be made available if
either Seller has at the time uncommitted shipping capacity available
for the purpose or Buyer provides transportation. Buyer's right to
purchase Make-Up LNG under this Section 7.5 shall expire on December
31, 2018 unless Buyer shall have requested Make-Up LNG during the year
2017 or by January 15, 2018 pursuant to Section 12.2 and Seller shall
have had insufficient uncommitted LNG to meet such request. In such
circumstances, the parties shall consult to agree upon a deferred
schedule for Buyer to take delivery of any outstanding balance of
Take-or-Pay Quantity not made up by December 31, 2018. Buyer shall pay
for Make-Up LNG at the Contract Sales Price in effect as of the date
of delivery, reduced by the amount previously paid on account of all
or that part of the Take-or-Pay Quantity being made up by such sale;
provided, however, that any Make-Up LNG delivered after the end of the
last Fixed Quantity Period shall be paid for at the LNG Element in
effect as of the date of delivery (reduced by the amount previously
paid as the LNG Element on account of all or that part of the
Take-or-Pay Quantity being made up by such sale) plus the actual
transportation costs incurred in delivering the Make-Up LNG.
Take-or-Pay Quantities shall be made up, and prior payments applicable
thereto applied, in the same chronological order in which such
quantities accrued.
7.6 Force Majeure Deficiency
(a) If, during any Fixed Quantity Period or Fixed Quantity
Periods, all or any portion of the Fixed Quantity of LNG
required to be taken by Buyer therein is not delivered by
Seller or taken by Buyer by reason of Force Majeure (any such
quantity not taken for such reason being called a "Force
Majeure Deficiency"), the Parties shall each make best efforts
to restore the Force Majeure Deficiency in full by Seller
selling and Buyer purchasing such quantities of LNG prior to
the expiration of the last Fixed Quantity Period. In the event
that, despite such best efforts, Seller fails to deliver or
Buyer fails to take delivery of the outstanding Restoration
Quantities by the end of 2017, then any obligation of Seller
33
to deliver and Buyer to take delivery of such Restoration
Quantities shall cease on such date. The quantities to be
restored ("Restoration Quantities") will be scheduled for
delivery pursuant to Article 12 at the mutual convenience of
the Parties. As between a Force Majeure Deficiency resulting
from Force Majeure affecting Seller and a Force Majeure
Deficiency resulting from a Buyer Force Majeure, the
Restoration Quantities applicable thereto shall be scheduled
in the chronological order in which the Force Majeure events
arose. Buyer shall pay for Restoration Quantities at the
Contract Sales Price in effect as of the date of delivery. In
the case of Restoration Quantities arising from a Buyer Force
Majeure, that part of the invoice relating to the
Transportation Element for the quantities being restored will
be reduced by the amount of any Non-Utilization Cost
previously paid under Section 4.7 in respect of such
quantities.
(b) If a Buyer Force Majeure causes a reduction in deliveries of
LNG and if Seller sells to third parties quantities of LNG
which Buyer is unable to purchase, then the Force Majeure
Deficiency shall be reduced by the amount, if any, that
Seller's Gas Supply Obligation (including amounts so sold to
third parties) exceeds the estimate of Proved Remaining
Recoverable Reserves stated in the most recent Certificate as
a result of such sales.
7.7 Allocation for Make-Good LNG, Make-Up LNG and Restoration Quantities
Whenever Make-Good LNG is requested under Section 7.3(d), Make-Up LNG
is requested under Section 7.5 and/or Restoration Quantities are
requested under Section 7.6(a) by Buyer and quantities are requested
for similar purposes by other purchasers from Seller's Facilities
under contracts which provide for sales of LNG over a term of at least
fifteen (15) years, and uncommitted quantities of LNG are not
available from Seller's Facilities to meet all such requests, then the
quantities of LNG which are available from Seller's Facilities for
such purposes shall be allocated, as between Buyer on the one hand and
such other purchasers on the other hand, based on the proportion of
the contract quantities of each requesting purchaser to the total of
the contract quantities of all of the requesting purchasers.
34
7.8 Order of Priority of Make-Good LNG, Make-Up LNG and Restoration
Quantities
Make-Good LNG requested under Section 7.3(d) and Make-Up LNG requested
under Section 7.5 and Restoration Quantities under Section 7.6(a)
shall be delivered and taken in the following order:
(i) Make-Up LNG;
(ii) Make-Good LNG; and
(iii) Restoration Quantities.
Provided, however, that Buyer and Seller may agree from time to time
to alter the order of the foregoing for a specific purpose and period
of time, and after each such period the above order of priority shall
be restored.
35
ARTICLE 8 - CONTRACT SALES PRICE
8.1 Formula Calculation of Price
The contract sales price applicable to the quantities of LNG to be
sold and delivered at the Delivery Point and to any quantities of LNG
required to be taken but which are not taken and are required to be
paid for by Buyer hereunder, expressed in United States Dollars per
million British Thermal Units (U.S.$/MMBTU) ("Contract Sales Price"),
shall comprise an LNG element ("LNG Element") and a transportation
element ("Transportation Element") and shall be determined and
adjusted from time to time in accordance with the provisions of this
Article 8. The Contract Sales Price to be applied to the BTUs
comprising each Cargo shall be that Contract Sales Price in effect as
of the date of completion of unloading of such Cargo.
8.2 LNG Element
(a) The LNG Element included in the Contract Sales Price shall be
calculated according to the following formula:
9 A 1 U.S.CPIn
LE = --- (Po x ----------) + --- (Po' x --------) + C
10 U.S.$18.00 10 U.S.CPIo
where:
LE = the LNG Element (expressed in U.S.$/MMBTU);
Po = U.S.$3.06/MMBTU;
A = the arithmetic average of the realized export prices
per barrel in U.S. Dollars, f.o.b. Indonesia, of all
field classifications of Indonesian crude oils then
being sold and exported by PERTAMINA, except premiums
and except such prices for spot sales;
Po' = U.S.$ 3.24/MMBTU;
U.S.CPIn = in respect of the applicable calendar year, the
average of the monthly values of U.S.CPI for the
twelve-month period commencing with the month of
November, fourteen (14) months prior to the beginning
of the applicable calendar year, and ending
36
with the month of October, three (3) months prior to
the commencement of the applicable calendar year;
U.S.CPIo = 143.8, being the arithmetic average of the monthly
values of U.S.CPI for the twelve-month period,
November 1992 through October 1993; and
C = U.S.$0.012/MMBTU.
(b) An adjustment of the LNG Element to reflect any change in U.S.CPI
shall be made on and shall be effective as of January 1 of each
calendar year, and further adjustments of the LNG Element shall be
made as of each effective date on which:
(i) the realized export prices of more than one of the field
classifications of Indonesian crude oils sold by PERTAMINA
shall have changed from the respective prices therefor
included in the last preceding determination of "A" made
pursuant to Section 8.2(a); or
(ii) two or more field classifications of such crude oils shall
have been added to or deleted from the crude oils being sold
by PERTAMINA since the date of the last preceding
determination of "A" made pursuant to Section 8.2(a).
Procedures for verifying changes in the realized export prices of all
Indonesian crude oils and for determining the effective date of any
adjustment of the LNG Element shall be separately agreed upon by the
Parties.
(c) The Parties shall agree separate procedures for handling corrections,
revisions or changes in the calculation of U.S.CPI. It is agreed that
if at any time the U.S. Department of Labor, Bureau of Labor
Statistics discontinues publishing a report on U.S.CPI values, then
the Parties shall agree upon an index method that reflects inflation
in the United States of America's consumer prices to replace the
discontinued U.S.CPI report.
37
8.3 Transportation Element for Fixed Quantity Periods beginning in 2000
The Transportation Element to be included in the Contract Sales Price
shall be determined on, and with effect from, January 1, of each
calendar year, in accordance with the following formula (expressed in
U.S.$/MMBTU):
TE = 0.58 x (1.025)n
where: n = 1 on January 1, 1995 and one higher whole
number on each subsequent January 1.
TE = the Transportation Element expressed in
U.S.$/MMBTU for the Fixed Quantity Periods
beginning in 2000.
8.4 Transportation Element for 1998 and 1999 Fixed Quantity Periods
Without prejudice to any other provisions of this Contract, the
provisions of Section 8.3 shall not apply to determine the
Transportation Element to be included in the Contract Sales Price for
1998 and 1999 Fixed Quantities. The Transportation Element to be
included in the Contract Sales Price for 1998 and 1999 Fixed
Quantities shall be determined on, and with effect from, January 1 of
each such year, in accordance with the following formula (expressed in
U.S.$/MMBTU):
TE = 0.58 x (1.025)n
where: n = 1 on January 1, 1995 and one higher whole
number on each subsequent January 1.
TE = the Transportation Element expressed in
U.S.$/MMBTU for the Fixed Quantity Periods
1998 and 1999.
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ARTICLE 9 - TRANSFER OF TITLE
The LNG to be sold by Seller and purchased by Buyer hereunder shall be
delivered to Buyer at the Delivery Point. Delivery shall be deemed completed
and title and risk of loss shall pass from Seller to Buyer as the LNG reaches
the Delivery Point.
39
ARTICLE 10 - INVOICES AND PAYMENT
10.1 Invoice and Cargo Documents
(a) Promptly after completion of unloading of an LNG Tanker,
Seller, or its representative, shall furnish to Buyer, or its
representative, a certificate of volume unloaded together with
such other documents concerning the cargo as may be reasonably
requested by Buyer for the purpose of Taiwan customs
clearance. Buyer shall complete a laboratory analysis pursuant
to Section 13.7 to determine quality and BTU content of the
LNG as soon as possible but not later than forty-eight (48)
hours after the completion of unloading and shall promptly
furnish to Seller or its representative a certificate with
respect thereto by telex, telegram or facsimile or by other
agreed means of electronic communication.
(b) (i) Promptly upon completion of such analysis, Seller or
its representative shall furnish by telex, telegram,
or facsimile or by other agreed means of electronic
communication to Buyer an invoice, stated in U.S.
Dollars, in the amount of the Contract Sales Price
for the number of BTUs delivered; and
(ii) At the same time Seller shall send to Buyer a hard
copy of the invoice together with relevant documents
setting forth the basis for the calculation thereof.
(c) If Buyer has not completed the above mentioned quality and BTU
analysis within the forty-eight (48) hour period mentioned
above, Seller may furnish a provisional commercial invoice
based upon the typical BTU content and typical mole
composition analysis of LNG then being delivered to Buyer, and
such provisional invoice shall be payable on the due date
specified in Section 10.3 subject only to any later adjusting
payment which may be called for when the aforesaid analysis
has been completed.
10.2 Other Invoices
Any amount (other than an amount provided for in Section 10.1) due
from one Party to the other, including, without limitation, amounts
payable pursuant to Section 7.3(a) (on account of Fixed Quantities of
LNG required to be purchased but which were not taken by Buyer) and
Section 7.3(d)(vi), then the Party to whom such moneys are owed shall
furnish an invoice therefor together with
40
relevant supporting documents showing the basis for the calculation
thereof. The procedure set forth in Section 10.1(b) for sending an
invoice by telex, telegram, or facsimile or by other agreed means of
electronic communication shall be followed. Such invoices shall be
paid in accordance with Section 10.3(b).
10.3 Invoice Due Dates, etc.
(a) Each invoice for LNG delivered to Buyer referred to in Section
10.1 shall become due and payable by Buyer on the eighth (8th)
Business Day in Taiwan after the date on which the invoice has
been received by Buyer in Taiwan under Section 10.1(b)(i).
(b) Each invoice sent pursuant to Section 10.2 shall become due
and payable by the Party receiving the invoice within twenty
(20) calendar days after the date of receipt of such invoice.
(c) Invoices sent by telex shall be deemed received upon receipt
of the addressee's answerback to conclude transmission and in
the case of facsimile, when the addressee acknowledges receipt
of a legible invoice. The Parties shall send invoices
hereunder by telex whenever possible.
(d) If any invoice to Buyer has a due date that is not a Business
Day in Taiwan, such invoice shall become due and payable on
the next day which is a Business Day in Taiwan.
(e) If any invoice to Seller has a due date that is not a Business
Day in Indonesia, such invoice shall become due and payable on
the next day which is a Business Day in Indonesia.
(f) In the event the full amount of any invoice is not paid when
due, any unpaid amount thereof shall bear interest from the
due date until paid, at an interest rate, compounded annually,
two percent (2%) greater than the Prime Rate in effect from
time to time during the period of delinquency. Such interest
rate shall be adjusted up or down, as the case may be, to
reflect any changes in the Prime Rate as of the dates of such
changes in the Prime Rate.
41
10.4 Payment
(a) Buyer shall pay, or cause to be paid, in U.S. Dollars all
amounts which become due and payable by Buyer pursuant to any
invoice issued hereunder to a bank account or accounts in the
United States to be designated by Seller. Buyer shall not be
responsible for such bank's disbursement of amounts remitted
by Buyer to such bank, and Buyer's deposit in immediately
available funds of the full amount of each invoice with such
bank shall constitute full discharge and satisfaction of the
obligations hereunder for which such amounts were remitted.
Each payment by Buyer of any amount owing hereunder shall be
in the full amount due without reduction or offset for any
reason, including, without limitation, taxes in Taiwan,
exchange charges or bank transfer charges.
(b) Transfer of funds to the bank in the United States, effected
from Taiwan before the close of business in Taiwan on or
before the due date of any invoice, shall be deemed timely
payment notwithstanding that such United States bank cannot
credit such transfer as ready funds for a period of up to
thirteen (13) hours by reason of the time difference between
Taiwan and the United States or for one or more days which are
not banking days in the United States.
(c) Seller shall pay, or cause to be paid, in U.S. Dollars the
amounts which become due and payable by Seller pursuant to a
Section 10.2 invoice to an account with a bank designated by
Buyer. Seller shall not be responsible for the designated
bank's disbursement of funds by Seller to Buyer pursuant to
this paragraph (c).
10.5 Seller's Rights Upon Buyer's Failure to Make Payment
If payment of any invoice for quantities of LNG delivered hereunder or
for Fixed Quantities of LNG not taken and for which Buyer is obligated
to pay hereunder is not made within thirty (30) days after the due
date thereof, Seller shall be entitled, upon giving thirty (30) days'
written notice to Buyer, to suspend subsequent deliveries to Buyer
until the amount of such invoice and interest thereon has been paid,
and Buyer shall not be entitled to any make-up rights in respect of
such suspended deliveries. Any such suspension shall be without
prejudice to any other rights and remedies of Seller arising hereunder
or by law or otherwise, including the right of Seller to receive
payment of all
42
obligations and claims which arose or accrued prior to such suspension
or by reason of such default by Buyer.
10.6 Disputed Invoices
In the event of disagreement concerning any invoice, Buyer shall make
provisional payment of the total amount thereof and shall immediately
notify Seller of the reasons for such disagreement, except that:
(i) in the case of obvious error in computation, Buyer shall pay
the correct amount disregarding such error; and
(ii) in the case of any disputed invoice for demurrage incurred at
the Unloading Port, Buyer's provisional payment shall be
ninety percent (90%) thereof or such greater amount as is not
disputed by Buyer.
Invoices may be contested by Buyer or modified by Seller only if,
within a period of ninety (90) days after Buyer's receipt thereof,
Buyer serves on Seller notice questioning their correctness. If no
such notice is served, invoices shall be deemed correct and accepted
by both parties. Promptly after resolution of any dispute as to an
invoice, the amount of any overpayment or underpayment shall be paid
by Seller or Buyer to the other, as the case may be, together with a
late fee on such overpayment or underpayment at the same rate as
provided for in Section 10.3(d) for the period from the due date for
payment of the contested invoice until the date such overpayment or
underpayment is made.
43
ARTICLE 11 - QUALITY
11.1 Gross Heating Value
The LNG when delivered by Seller to Buyer shall have, in a gaseous
state, a Gross Heating Value of not less than 1100 BTUs per Standard
Cubic Foot and not more than 1160 BTUs per Standard Cubic Foot
determined in accordance with the quality standards and procedures as
provided in Schedule A.
11.2 Components
The LNG delivered by Seller to Buyer shall, in a gaseous state,
contain not less than eighty-five molecular percentage (85 MOL%) of
methane (CH4), and, for the components and substances listed below,
such LNG shall not contain more than the following:
A. Nitrogen (N2), 1.0 MOL %.
B. Butanes (C4) and heavier, 2.00 MOL %.
C. Pentanes (C5) and heavier, 0.10 MOL %.
D. Hydrogen sulfide (H2S), 0.25 grains per 100 Standard Cubic
Feet (0.25 grains/100 scf).
E. Total sulfur content, 1.3 grains per 100 Standard Cubic Feet
(1.3 grains/100 scf).
Although the LNG which Seller delivers to Buyer is permitted to
contain the sulfur concentrations shown in clauses D and E above,
under normal operating conditions at Seller's Facilities, Seller would
expect such concentrations to be materially less. Should any question
regarding quality of the LNG arise, Seller and Buyer shall consult and
cooperate concerning such question.
44
ARTICLE 12 - PROGRAMMING AND SHIPPING MOVEMENTS
12.1 Annual Program
(a) On or before June 15 preceding each Fixed Quantity Period
Seller shall notify Buyer of the current estimate of the BTU
content of each Cargo to be delivered in such Fixed Quantity
Period based to the extent practicable on recent operating
experience. Not later than ninety (90) days prior to the
beginning of each calendar year, Seller shall give written
notice to Buyer of the anticipated quantities of LNG to be
available for delivery hereunder from Seller's Facilities in
each calendar quarter of the next calendar year, taking into
consideration the projected capacity of Seller's Facilities.
On or before October 15 of each year in which such notice is
given, Buyer shall advise Seller in writing of the quantities
Buyer wishes to take during each calendar quarter of the
following year, specifying the amount of any Make-Up LNG
requested pursuant to Section 7.5, and any Restoration
Quantities in excess of Fixed Quantities requested pursuant to
Section 7.6(a), and, if known by Buyer, any Allowance it
intends to exercise. In addition, by October 15 of each year,
Buyer shall request any Make-Good LNG pursuant to Section
7.3(d)(iv). The Parties shall thereupon consult together
regarding a programming schedule of quantities to be delivered
to Buyer's Facilities during each calendar month during the
following year. Thereafter, Seller shall issue by December 1
of the same year a programming schedule ("Annual Program"),
which shall take into consideration the anticipated capacity
of the Parties' respective facilities, the Coordinated
Maintenance Schedule and the shipping schedules. Such Annual
Program and the Ninety-Day Schedules referred to below (and
any revisions thereof) are intended to assist the Parties in
planning their respective operations during the periods
involved. The content of the Annual Program and Ninety-Day
Schedules shall not reduce the entitlement of any Party during
any Fixed Quantity Period to sell, deliver and be paid for, or
to purchase and receive, as the case may be, the quantities of
LNG required under Article 7 to be sold, delivered and paid
for during such Fixed Quantity Period. The Parties will each
take all appropriate steps to carry out each Annual Program
and Ninety-Day Schedule.
45
(b) An Annual Program shall be amended to reflect a request for:
(i) Make-Up LNG relating to a Take-or-Pay Quantity paid
for in respect of the immediately preceding year;
(ii) Make-Good LNG relating to an Allowance exercised in
respect of the immediately preceding year; or
(iii) Restoration Quantities relating to a Force Majeure
Deficiency arising in respect of the immediately
preceding year;
provided that the requested LNG and the necessary
transportation are available and such request is received by
Seller not later than January 15 of the year to which such
Annual Program relates.
12.2 Ninety-Day Schedules
Not later than the fifteenth (15th) day of each calendar month, Seller
shall, after discussion with Buyer, deliver to Buyer a three-month
forward plan of delivery ("Ninety-Day Schedule"), which follows the
applicable Annual Program as nearly as practicable and sets forth, by
voyages and the projected dates thereof, the pattern of shipments
forecast for each of the next three (3) calendar months. Each
Ninety-Day Schedule shall reflect all adjustments, if any,
necessitated by deviation from prior Ninety-Day Schedules so as to
maintain as far as practicable the scheduled shipments forecast in the
Annual Program.
12.3 Maintenance and Inspection Coordination
Not later than ninety (90) days prior to the beginning of each
calendar year, the Parties shall consult and agree on a program
designed to coordinate the anticipated scheduled maintenance and
inspection downtime during that calendar year of Buyer's Facilities,
Seller's Facilities, and the LNG Tankers. Such program ("Coordinated
Maintenance Schedule") will be devised so as to minimize the
collective impact of such downtime and maintenance periods on the
continuous delivery of LNG hereunder.
46
ARTICLE 13 - MEASUREMENTS AND TESTS
13.1 Parties to Supply Devices
Seller shall supply, operate and maintain, or cause to be supplied,
operated and maintained, suitable gauging devices for the LNG tanks
of the LNG Tanker, pressure and temperature measuring devices, and any
other measurement or testing devices which are incorporated in the
structure of LNG tankers or customarily maintained on shipboard.
Buyer shall supply, operate and maintain, or cause to be supplied,
operated and maintained, devices required for collecting samples and
for determining quality and composition of the LNG and any other
measurement or testing devices which are incorporated in land
structures or customarily maintained at LNG unloading facilities.
13.2 Selection of Devices
Such devices shall be chosen by mutual agreement of the Parties and
shall be such as are, at the time of selection, the most accurate and
reliable devices in their practical application. The required degree
of accuracy of such devices selected shall be mutually agreed upon and
verified by the Parties, in advance of their use, and at the request
of either Buyer or Seller such degree of accuracy shall be verified by
an independent surveyor mutually agreed upon by the Parties. In any
event all measuring devices (including those on board an LNG Tanker)
shall comply with the maximum permissible tolerances provided for in
Schedule A Part III.
13.3 Units of Measurement and Calibration
The Parties will cooperate closely in the design, selection, and
acquisition of devices to be used for measurements and tests under
this Article 13 in order that, to the maximum extent possible, all
measurements and tests may be conducted either in Imperial units of
measurement or in S.I. units of measurement. In the event that it
becomes necessary to make measurements and tests using a new system of
units of measurement, the Parties shall establish mutually agreeable
conversion tables, or, if they are unable to agree, such tables may be
established by the procedures provided for resolution of disputes on
measurement and testing in Section 13.11. Measurement devices shall
be calibrated as follows :
47
Measurement Imperial Units S.I. Units
Volume Cubic feet Cubic Meters
Temperature Degrees Fahrenheit Degrees Kelvin or Celsius
Pressure Pounds per square inch Kilo Pascal or millibar
or inches of mercury or mm mercury
Length Feet Meters
Weight Pounds Kilograms
Density Pounds per cubic Kilograms per Cubic
foot Meter
13.4 Tank Gauge Tables of LNG Tankers
Seller shall provide Buyer, or cause Buyer to be provided, with a
certified copy of tank gauge tables for each LNG tank of each LNG
Tanker verified by a competent impartial authority or authorities
mutually agreed upon by the Parties. Such tables shall include
correction tables for list, trim, tank construction and any other
items requiring such tables for accuracy of gauging. The Parties shall
each have the right to have representatives present at the time each
LNG tank on each LNG Tanker is volumetrically calibrated. If the LNG
tanks of any LNG Tanker suffer distortion of such nature so as to
cause a prudent expert to question reasonably the validity of the tank
gauge tables described herein (or any subsequent calibration provided
for herein), Seller shall cause Seller's Transporter to notify Buyer
and Buyer or Seller may require recalibration of such LNG tanks during
any period when the LNG Tanker is out of service for scheduled
inspection or repairs. Upon recalibration of the LNG tanks of the LNG
Tankers, the same procedures used to provide the original tank gauge
tables will be used to provide revised tank gauge tables based upon
the recalibration data. The calibration and recalibration of LNG
tanks provided for in this Section 13.4 shall constitute the only
calibration required for purposes of this Contract.
13.5 Gauging and Measuring LNG Volumes Delivered
Volumes of LNG delivered pursuant to this Contract shall be determined
by gauging the LNG in the LNG tanks of the LNG Tankers before and
after unloading.
Gauging the liquid in the LNG tanks of the LNG Tankers and measuring
of liquid temperature, vapor temperature and vapor absolute pressure
in each LNG tank, trim and list of the LNG Tankers, and atmospheric
pressure shall be performed, or be caused to be performed, by Seller
before and after unloading.
48
The first gauging and measurements shall be made immediately before the
commencement of unloading. The second gauging and measurements shall take place
immediately after completion of unloading.
Copies of gauging and measurement records shall be furnished to Buyer.
A. Gauging the Liquid Level of LNG
The level of the LNG in each LNG tank of the LNG Tanker shall be
gauged by means of the gauging device installed in the LNG Tanker for
that purpose. The level of the LNG in each LNG tank of the LNG Tanker
shall be logged and printed on board the LNG Tanker.
B. Determination of Temperature
The temperature of the LNG and of the vapor space in each LNG tank of
the LNG Tanker shall be measured by Seller by means of a sufficient
number of properly located temperature measuring devices, to permit
the determination of average temperatures. Temperatures shall be
logged and printed on board the LNG Tanker.
C. Determination of Pressure
The absolute pressure of the vapor in each LNG tank shall be
determined by means of pressure measuring devices installed in each
LNG tank of the LNG Tanker. The atmospheric pressure shall be
determined and recorded by readings from the standard barometer
installed in the LNG Tanker.
D. Determination of Density
Density of the LNG shall be determined by Seller as mutually agreed
to by the Parties. Initially, the density of the LNG will be computed
by the method described in Schedule A.. Should any improved data, or
method of calculation become available which is acceptable to the
Parties, such improved data, or method shall then be used.
13.6 Samples for Quality Analysis
Representative samples of the LNG delivered shall be obtained, or be
caused to be obtained, in triplicate by Buyer during the time of
unloading and delivery to Buyer. The three (3) samples shall be taken
from an appropriate point on Buyer's receiving line as close as
possible to the unloading flanges and collected in the gaseous state
using the continuous gasification/collection
49
method agreed by the Parties. In addition Buyer shall obtain spot
samples during unloading. The method and devices for sampling and the
quantity of the samples to be withdrawn, shall be determined by
agreement between the Parties to provide for taking representative and
adequate samples of the LNG delivered.
The samples obtained shall be distributed as follows:
First sample - for use for analysis by Buyer receiving the
LNG shipment.
Second sample - for use of Seller.
Third sample - for retention by Buyer for an agreed period,
not to exceed twenty (20) days, during which
any dispute as to the accuracy of any
analysis shall be raised, in which case the
sample shall be further retained until the
Parties agree to retain it no longer.
If it is not possible for any reason to obtain composite samples by
the continuous gasification/collection method, the composition of the
LNG delivered shall be the arithmetic average of the results obtained
by analyses of the spot samples. If it is not possible to obtain such
spot samples, an analysis of the LNG loaded at the Loading Port, after
adjustment for boil-off measured in respect of the laden voyage, shall
be used to determine the composition of the cargo delivered. For this
purpose, Seller shall utilize devices comparable to those utilized at
Buyer's Facilities and shall employ methods of taking and analyzing
the samples at the Loading Port comparable in accuracy to those
employed at Buyer's Facilities.
13.7 Quality Analysis
The samples provided for in Section 13.6 shall be analyzed, or be
caused to be analyzed, by Buyer on receiving the LNG shipment to
determine the molar fraction of the hydrocarbon and other components
in the sample by gas chromatography in accordance with "G.P.A.
Standard 2261, method of Analysis for Natural Gas and Similar Gaseous
Mixtures by Gas Chromatography", published by G.P.A., current as of
1990. If better standards for analysis are subsequently adopted by
G.P.A. or other recognized competent impartial authority, upon mutual
agreement of the Parties, they shall be substituted for
50
the standards then in use, but such substitution shall not take place
retroactively.
The spot samples taken as specified in Section 13.6 shall serve the
purpose of fall-back reference in case of failure to obtain a
representative composite sample. The composition of the LNG unloaded
from the LNG Tanker shall be determined in case of such failure in
accordance with the procedure provided for in Section 13.6.
A calibration of the chromatograph or other analytical instrument used
shall be performed by Buyer immediately prior to the analysis of the
sample of LNG delivered.
Buyer shall give advance notice to Seller of the time Buyer intends to
conduct a calibration thereof, and Seller shall have the right to have
a representative present at each such calibration; provided, however,
Buyer shall not be obliged to defer or reschedule any calibration in
order to permit the representative of Seller to be present.
The sample shall be analyzed, or be caused to be analyzed, by Buyer to
determine the concentrations of hydrogen sulfide (H2S) and total
sulfur referred to in Section 11.2 using the methods described as
follows:
- ASTM D 2784-70 Standard Method of Test for Sulfur in Liquefied
Petroleum Cases
If the total sulfur content is less than zero decimal
twenty-five (0.25 ) grains per 100 Standard Cubic Feet, it
shall not be necessary to analyze the sample for hydrogen
sulfide.
- ASTM D 2725-70 Standard Method of Test for Hydrogen Sulfide in
Natural Gas (Methylene Blue Method).
13.8 Operating Procedures
Prior to conducting operations for measurement, gauging and analysis
provided in Sections 13.5, 13.6 and 13.7 the Party responsible for
such operations shall notify the appropriate representatives of the
other Party, allowing such representative reasonable opportunity to be
present for all operations and computations; however, the absence of
the other Party's representative after notification and opportunity to
attend shall not prevent any operations and
51
computations from being performed. At the request of either Party,
any measurement, gauging and analysis provided for in Sections 13.5,
13.6 and 13.7 shall be witnessed and verified by an independent
surveyor mutually agreed upon by the Parties. The results of such
surveyor's verifications shall be made available promptly to each
party. All records of measurements and the computation results shall
be preserved and available to the Parties for a period of not less
than three (3) years after such measurements and computation. A
procedure for operation of onboard CTMS equipment shall be developed
and mutually agreed during the design phase of the Dedicated LNG
Tanker.
13.9 BTU Quantities Delivered
The quantity of BTUs of LNG delivered from an LNG Tanker shall be
calculated by Seller following the procedures described in this
Section 13.9 and shall be verified by an independent surveyor mutually
agreed upon by the Parties.
A. Determination of Gross Heating Value
The Gross Heating Value of the samples of the LNG shall be
determined by computation, in accordance with the method
described in Schedule A, on the basis of the molecular
composition determined pursuant to Section 13.7 and of the
molecular weights and heating values described in "G.P.A.
Publication 2145" published by G.P.A., current at the time of
computation.
If better constants or improved methods for determination of
heating value are subsequently adopted by G.P.A. or other
recognized competent impartial authority, they shall, upon
mutual agreement of the Parties, be substituted therefor, but
not retroactively. The Gross Heating Value of the
representative sample shall be the conclusive Gross Heating
Value for the purpose of determining quantities of BTUs
delivered.
B. Determination of Volume of LNG Unloaded
The LNG volume in the LNG tanks of the LNG Tanker before and
after unloading shall be determined by gauging as provided in
Section 13.5 on the basis of the tank gauge tables provided
for in Section 13.4. The volume of LNG remaining in the LNG
tanks of the LNG Tanker after unloading shall then be
subtracted from the volume before unloading and the resulting
volume shall be taken as the volume of the LNG delivered from
the LNG Tanker.
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If failure of gauging and measuring devices of an LNG Tanker
taking the CTMS operating procedure into consideration should
cause impossibility of determining the LNG volume, the volume
of LNG delivered shall be determined by gauging the liquid
level in Buyer's onshore LNG storage tanks immediately before
and after unloading the LNG Tanker and such volume shall be
increased by adding an estimated LNG volume, agreed upon by
the Parties, for boil-off from such onshore LNG storage tanks
and related pipelines during the unloading of LNG. Buyer shall
provide Seller, or cause Seller to be provided with, a
certified copy of tank gauge tables for each onshore LNG tank
which is to be used for this purpose verified by a competent
impartial authority.
C. Determination of BTU Quantities Delivered
The quantities of BTUs delivered from LNG Tankers shall be computed by
Seller by means of the following formula:
Q = V x D x P - Qr
where:
Q represents the quantity of the LNG delivered in BTUs.
V represents the volume of the LNG unloaded, stated in Cubic
Meters, determined as provided in Section 13.9 B.
D represents the density of the LNG unloaded, stated in
kilograms per Cubic Meter, as determined in accordance with
Schedule A.
P represents the Gross Heating Value of the LNG unloaded, stated
in BTUs per kilogram as determined in accordance with Schedule
A.
Qr represents the quantity in BTUs of the vapor which displaced
the volume of LNG unloaded from the LNG tanks of the LNG
Tanker.
Physical constants, calculation procedures and examples of BTU determination
are provided in Schedule A.
53
13.10 Verification of Accuracy and Correction for Error
Accuracy of devices used shall be tested and verified in accordance
with a program as recommended by the manufacturer unless superseded by
a mutually agreed schedule at any time, if requested by either Party,
including the request by a Party to verify accuracy of its own
devices. Each Party shall have the right to inspect at any time the
measurement devices installed by the other Party, provided that the
other Party be notified in advance. Testing shall be performed only
when the Parties are represented, or have received adequate advance
notice thereof, using methods recommended by the manufacturer or any
other method agreed to by the Parties. At the request of any Party,
any test shall be witnessed and verified by an independent surveyor
mutually agreed upon by the Parties. Permissible tolerances shall be
as defined in Schedule A. Inaccuracy of a device exceeding the
permissible tolerances shall require correction of previous
recordings, and computations made on the basis of those recordings, to
zero error with respect to any period which is definitely known or
agreed upon by the Parties, as well as adjustment of the device. In
the event that the period of error is neither known nor agreed upon,
corrections shall be made for each delivery made during the last half
of the period since the date of the most recent calibration of the
inaccurate device. However, the provisions of this Section 13.10
shall not be applied to require the modification of any invoice which
has become final pursuant to Section 10.6.
13.11 Disputes
In the event of any dispute concerning the subject matter of this
Article 13, including, but not limited to, disputes over selection of
the type or the accuracy of measuring devices, their calibration, the
result of a measurement, sampling, analysis, computation or method of
calculation, such dispute shall be decided by arbitration pursuant to
Section 16.2.
13.12 Costs and Expenses of Test and Verification
All costs and expenses for testing and verifying Seller's measurement
devices as provided for in this Article 13 shall be borne by Seller,
and all costs and expenses for testing and verifying Buyer's
measurement devices shall be borne by Buyer. The fees and charges of
independent surveyors for measurements and calculations as provided
for in Section 13.8 and 13.9 shall be borne equally by the Parties.
When the services of independent surveyors are required and selected
by mutual agreement pursuant to Section 13.10, then the fees and
charges of such surveyors shall be borne equally by the Parties.
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ARTICLE 14 - DUTIES, TAXES AND CHARGES
14.1 Buyer's Burden
Buyer shall pay, bear or reimburse to Seller all taxes, royalties,
duties or other imposts which may be levied in Taiwan in respect of
LNG delivered under this Contract.
14.2 Seller's Burden
Seller shall directly or indirectly pay or bear all taxes, royalties,
duties or other imposts which may be levied in Indonesia in respect of
LNG delivered under this Contract and in respect of LNG Tankers.
14.3 Income Tax
(a) It is the understanding of the parties that Seller will not be
subject to income tax in Taiwan by virtue of the sale of LNG
to Buyer pursuant to this Contract. Further, it is the
understanding of the parties that under the income tax law of
Taiwan, as amended on December 30, 1989 (the "Tax Law"),
Seller will not be subject to income tax in Taiwan unless
Seller conducts its business in Taiwan in such a manner as to
be deemed to be (i) a resident company, (ii) engaged in a
trade or business directly, (iii) maintaining a "permanent
establishment" or (iv) doing business through a "business
agent" (as those terms are defined in the Tax Law).
(b) Seller agrees, at all times during the term of this Contract
and to the extent reasonably practicable, to cooperate in
minimizing its liability for Taiwanese income tax; in
particular Seller agrees to conduct all business and other
activities with or in Taiwan so as not to be deemed to fall
within any of the four (4) categories specified in Section
14.3(a).
(c) If Seller shall become subject to income tax levied or imposed
by the government of Taiwan or any subdivision thereof, or any
government authority in Taiwan, on any revenues, income or
profits (including revenues, income or profits resulting from
payments under this Section 14.3(c)) derived from the sale or
import of LNG under this Contract ("Taiwanese Tax"), Buyer
agrees to indemnify and hold harmless Seller from and against
Taiwanese Tax. The foregoing indemnity shall be reduced by the
full amount of benefit obtained or obtainable by Seller
55
on its income tax liability in Indonesia, whether as credit or
deduction, attributable to the payment by Seller of Taiwanese
Tax. By way of example, if Seller is assessed U.S.$1,000 of
income tax in Taiwan. which is subject to this indemnity, but
Seller becomes entitled to a reduction of U.S.$300 on its
Indonesian income tax because of such payment, the amount of
the indemnity shall be limited to U.S.$700.
(d) If following the date of this Contract there shall occur any
change in the Tax Law which would result in Taiwanese income
tax being levied on Seller with respect to revenues, income or
profits resulting from the sale or import of LNG hereunder,
Seller shall, upon notice from Buyer, consult with Buyer and
take such action as may be reasonably practicable to limit the
amount of such Taiwanese income tax. Nothing in this Article
14 shall require Seller to take or forego taking any action
which would impair Seller's performance of its obligations or
enjoyment of its benefits under this Contract.
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ARTICLE 15 - FORCE MAJEURE
15.1 Events of Force Majeure
Neither Seller nor Buyer shall be liable for any delay or failure in
performance hereunder if and to the extent such delay or failure in
performance results from any of the following events ("Force
Majeure"):
(a) fire, flood, atmospheric disturbance, lightning, storm,
typhoon, tornado, earthquake, landslide, soil erosion,
subsidence, washout or epidemic;
(b) war, riot, civil war, blockade, insurrection, act of public
enemies or civil disturbance;
(c) strike, lockout or other industrial disturbance;
(d) serious accidental damage to or other serious failure of
Seller's Facilities unless such damage or failure is the
result of gross negligence on the part of Seller's management;
(e) serious accidental damage to or other failure of Buyer's
Facilities or the facilities for transporting Natural Gas to
Buyer's Natural Gas distribution systems unless such damage or
failure is the result of gross negligence on the part of
Buyer's management;
(f) the Proved Remaining Recoverable Reserves of Natural Gas in
the Gas Supply Area expressed in the then most recent
Certificate referred to in Section 3.2(a) which can be
economically produced have been fully depleted;
(g) act of government which directly affects the ability of a
party to perform any obligation hereunder other than the
obligation to remit payments as provided in Section 10.4 on
account of LNG delivered and taken or not taken but required
to be paid for under this Contract;
(h) delay in completion and testing of any stage of the expansion
of Seller's Facilities contemplated by Seller in connection
with the performance of this Contract so as to prevent the
same from becoming operational on a continuing basis, which
delay is caused by delay in receiving major items of equipment
or materials from the manufacturer or vendor thereof, provided
that Seller shall have taken all steps reasonably
57
available to obtain timely delivery of such items including
the placing of purchase orders within such time as was prudent
under then existing circumstances;
(i) delay in completion and testing of the vessel intended to be
used as the Dedicated LNG Tanker for 2000 to 2017 so as to
prevent the same from becoming operational on a continuing
basis, provided that Seller shall have taken all steps which
could reasonably have been expected and which are necessary to
fulfill its responsibility to provide transportation under
this Contract; or
(j) (i) the removal of an LNG Tanker from service due to loss,
accidental damage or other serious failure (unless such loss,
damage or failure is the result of gross negligence on the
part of Seller), or (ii) other unavailability of an LNG
Tanker caused by an event beyond the reasonable control of
Seller provided that Seller shall have taken all steps which
could reasonably have been expected and which are necessary to
fulfill its responsibility to provide transportation under
this Contract.
Nothing herein shall relieve Buyer of its obligation to pay for LNG
delivered or to make any other payment which has become due and
payable under this Contract prior to the occurrence of any of the
events described above.
15.2 Notice, Resumption of Normal Performance, etc.
Immediately upon the occurrence of an event of Force Majeure, the
Party whose performance of its obligations hereunder is affected shall
give notice thereof to the other Party describing such event and the
estimated period during which operations will be suspended or reduced.
The Parties shall exercise reasonable diligence to ensure resumption
of normal performance under this Contract after the occurrence of any
event of Force Majeure (which shall include Seller taking all
reasonable steps to provide alternative transportation in the event of
Force Majeure affecting an LNG Tanker), and, prior to resumption of
normal performance, the Parties shall continue to perform their
obligations under this Contract to the extent not affected by such
event of Force Majeure.
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15.3 Settlement of Industrial Disturbances
Settlement of strikes, lockouts or other industrial disturbances shall
be entirely within the discretion of the Party experiencing such
situations and nothing herein shall require such Party to settle
industrial disputes by yielding to demands made on it when it
considers such action inadvisable.
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ARTICLE 16 - ARBITRATION
16.1 Arbitration
All disputes arising between the Parties relating to this Contract or
the interpretation or performance hereof shall be finally settled by
arbitration conducted in accordance with the Rules of Arbitration of
the International Chamber of Commerce, effective at the time, by three
(3) arbitrators appointed in accordance with such Rules. Arbitration
shall be conducted in the English language and shall be held at Paris,
France, unless another location is selected by mutual agreement of the
Parties. The award rendered by the arbitrators shall be final and
binding upon the parties concerned.
16.2 Disputes of Technical Nature
Notwithstanding the terms of Section 16.1, if a dispute of a technical
nature arises in connection with the interpretation, performance or
non-performance of any of the provisions of Article 13, the Parties
shall agree upon the appointment of a competent, impartial authority
within ten (10) days of a request by either party for the appointment
of such an authority. Failing such agreement, either Party may submit
the matter for expert resolution to the National Bureau of Standards
of the United States Department of Commerce. All decisions of an
authority acting under this Section 16.2 shall be binding on the
Parties. Expenses incurred in connection with the services of such
authority shall be shared equally by the Parties.
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ARTICLE 17 - APPLICABLE LAW
This Contract shall be governed by and interpreted in accordance with the laws
of the State of New York, United States of America. The Parties agree that the
U.N. Convention on Contracts for the International Sale of Goods and the
Convention on the Limitation Period in the International Sale of Goods shall
not apply to this Contract and the respective rights and obligations of the
Parties hereunder.
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ARTICLE 18 - AUTHORIZATIONS AND APPROVALS; FINANCING
Seller and Buyer shall use best efforts to obtain all authorizations, approvals
and permissions of national and local governments or other competent
authorities or bodies which are required for performance of this Contract (the
"Authorizations and Approvals"), and will cooperate fully with each other
wherever necessary for this purpose. If, Seller or Buyer should fail to obtain
the Authorizations and Approvals within six (6) months after the execution of
this Contract or should Seller fail to arrange the financing for expansion of
Seller's Facilities by January 1, 1997 (the "Financing"), then such Party shall
promptly notify the other Party upon such failure, and Seller and Buyer shall
consult as to the circumstances pertaining thereto. If, within thirty (30) days
after the date of the aforesaid notice, the Parties have not agreed on a
postponement of the time within which the Authorizations and Approvals shall be
obtained, or Financing arranged then either Seller or Buyer may terminate this
Contract by written notice given at any time prior to the date upon which the
Authorizations and Approvals are obtained or Financing arranged. The same right
of termination and procedures relating thereto shall apply upon the expiration
of any postponement period or periods agreed to between the Parties.
Termination of this Contract shall be without prejudice to any accrued rights
of the Parties arising under this Contract prior to termination.
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ARTICLE 19 - CONFIDENTIALITY
No Party to this Contract shall use or communicate to third parties the
contents of this Contract or other confidential information or documents which
may come into the possession of such Party in connection with the performance
of this Contract without the prior agreement of the Party or parties to which
such information or documents are confidential. This restriction shall not
apply to the contents of this Contract, or information or documents, which:
(i) have fallen into the public domain otherwise than through the act or
failure to act of the Party that has obtained them; or
(ii) are communicated to:
(A) any of Seller's Suppliers, or any Affiliate (as defined
below), with the obligation of the receiving person to
maintain confidentiality;
(B) persons participating in the implementation of this project,
such as Seller's Transporter, legal counsel, accountants,
other professional, business or technical consultants and
advisers, underwriters or lenders, with the obligation of the
receiving persons to maintain confidentiality; or
(C) any governmental agency of the Republic of Indonesia or
Taiwan, or having jurisdiction over any of Seller's Suppliers
or any Affiliate or Seller's Transporters, provided that such
agency has authority to require such disclosure, and that such
disclosure is made in accordance with that authority.
As used before, the term "Affiliate" means a company that controls, is
controlled by, or is under common control with, a party to this Contract or any
of Seller's Suppliers.
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ARTICLE 20 - NOTICES
All notices and other communications for purposes of this Contract shall be in
writing in English, which shall include transmission by telex, facsimile or
telegraph, except that notices given from LNG Tankers at sea may be by radio
except as otherwise required. Notices and communications shall be directed as
follows :
A. To Seller at the following mail address :
PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA (PERTAMINA)
Attention : General Manager, Gas Marketing Department
P.O. Box 1012 / JKT
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇. ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
and at the following Telegraph, Telex and Facsimile addresses :
Telegraph : PERTAMINA JAKARTA, INDONESIA
Telex : 46471 - 45077 - 44441 - 46552 - 46554 - 45347
PERTAMINA JAKARTA, INDONESIA
Facsimile : ▇▇-▇▇-▇▇▇▇▇▇▇
B. To Buyer at the following mail address :
CHINESE PETROLEUM CORPORATION
Attention : Director of Supply Division
▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
and at the following Telegraph, Telex and Facsimile addresses:
Telegraph : CHINESE PETROLEUM CORPORATION
Chinol Taipei
Taipei, Taiwan
Telex : 11934 SPCHINOL
CHINESE PETROLEUM CORPORATION
Facsimile : 886-2-381-4624
64
The Parties may designate additional addresses for particular communications as
required from time to time, and may change any addresses, by notice given
thirty (30) days in advance of such additions or changes. Immediately upon
receiving communications by telex, facsimile, telegraph or radio, a Party shall
acknowledge receipt by the same means, and may request a repeat transmittal of
the entire communication or confirmation of particular matters. If the sender
receives no acknowledgment of receipt within twenty-four (24) hours, or
receives a request for repeat transmittal or confirmation, said Party shall
repeat the transmittal or answer the particular request.
65
ARTICLE 21 - JOINT COORDINATING COMMITTEE
Each of the Parties shall promptly appoint representatives to a joint technical
and operating committee ("Joint Coordinating Committee"), which shall hold its
first meeting within sixty (60) days after the execution of this Contract and
thereafter at such intervals as shall be decided upon by the Joint Coordinating
Committee. The Joint Coordinating Committee and such other technical
representatives as may be designated shall consult together to coordinate plans
(a) relating to additions to or modifications of Seller's Facilities and
Buyer's Facilities to accommodate deliveries hereunder; and (b) relating to LNG
Tankers so as to assure that such facilities and LNG Tankers are compatible for
all purposes and that progress is being made in accordance with the project
timetable agreed to between the Parties. Notwithstanding the foregoing, Buyer
and Seller shall regularly keep the other informed of its progress with the
timely performance of its respective obligations hereunder and in particular
shall immediately inform the other of any significant delay envisaged in its
respective performance.
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ARTICLE 22 - MISCELLANEOUS
22.1 Assignment
Neither this Contract nor any rights or obligations hereunder may be
assigned by Buyer without the prior written consent of Seller, or by
Seller without the prior written consent of Buyer. Any such purported
assignment without the aforesaid consent shall be null and void.
22.2 Amendments and Waiver
(a) This Contract cannot be amended, modified, varied or
supplemented except by an instrument in writing signed by the
Parties.
(b) The failure of any Party at any time to require performance of
any provision of this Contract shall not affect its right to
require subsequent performance of such provision. Waiver by
any Party of any breach of any provision hereof shall not
constitute the waiver of any subsequent breach of such
provision. Performance of any condition or obligation to be
performed hereunder shall not be deemed to have been waived or
postponed except by an instrument in writing signed by the
Party who is claimed to have granted such waiver or
postponement.
22.3 Details of Performance
Details necessary for performance of this Contract shall be mutually
agreed upon by Seller and Buyer.
22.4 Scope
This Contract supersedes and replaces any provisions on the same
subject contained in any other agreement, memorandum or the like
between the Parties, whether written or oral, prior to the date of
execution hereof.
22.5 Language of the Contract
This Contract is made and executed in the English language.
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22.6 Headings and Subheadings
The headings and subheadings in this Contract are inserted solely for
the sake of convenience and shall not affect the interpretation or
construction of this Contract.
22.7 Counterparts
This Contract shall be executed in identical counterparts, each of
which shall have the force and dignity of an original, and all of
which shall constitute but one and the same Contract.
IN WITNESS WHEREOF, each of the Parties has caused this Contract to be executed
in Jakarta by its duly authorized representative as of the date first above
written.
SELLER: BUYER:
PERUSAHAAN PERTAMBANGAN CHINESE PETROLEUM CORPORATION
MINYAK DAN GAS BUMI
NEGARA (PERTAMINA)
By /s/ UNREADABLE By /s/ UNREADABLE
---------------------- ----------------------
President Director Chairman of the Board of Directors
68
LNG SALE AND PURCHASE CONTRACT (BADAK VI)
BETWEEN PERTAMINA AND CHINESE PETROLEUM CORPORATION
The following describes Schedule A to the LNG Sales and Purchase Contract
(Badak VI) between Pertamina and Chinese Petroleum Corporation, which is
omitted herein, but will be furnished upon request:
Schedule A - Testing and Methods
Part I - BTU Quantity Determination (setting forth a table of physical
constants and the formulae for LNG density determination, gross heating
value calculation and total BTU's delivered calculation)
Table I - Example of LNG Density Calculation
Table II - Molar Volumes of Individual Components
Table III - Correction C for Volume Reduction of Mixture
Table IV - Example of Gross Heating Value (Mass Basis) Calculation
Part II - Quality Determinations
Part III - Maximum Permissable Tolerances
Part IV - Rounding
In addition, Side Letters, dated October 25, 1995, to the LNG Sales and
Purchase Contract (Badak VI), (regarding force majeure, additional quantities,
mutual incentive sharing and transportation), are omitted herein, but wil be
furnished upon request.
