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Next Generation PSC Changes Key Issues + Increase relinguishment ¢ Much reduced cost recovery and increased ‘complexity * International Arbitration eliminated in favour of BANI + Enhanced regulatory control on many things from POD approvals, transfer and rom the standardized draft of co- operation contract, which is part of the Bid Document released at the opening of the tender of 26 new Work Areas by the Government/Di- rectorate General of Oil and Gas last February, quite many terms were ac- knowledged to have been renewed. The Indonesian Petroleum Association (IPA) ‘grouped them in four Key Issues as sum- marized above. The complete summary is shown in the following table. financing, ETE So Party BPMIGAS ‘CONTRACTOR etzoleam Operation Gene eae “Consideration ‘The words... willing t enter into this CONTRACT with BPMIGAS under dhe verms and cond tions dscred herein’ ‘Nosimilar wording inthe previous PSC ‘Operatomhip “Liability of ‘CONTRACTOR ‘Commerciality ‘Procedure = One holder of PI shall be appointed as Operator if CONTRACTOR comprises of one or mare PL holder ~The operstor to be proposed to BPMIGAS shall have the accesary sil, experience Financial capability and qualified personne to conduct petroleum operation + Appointment i subject to BPMIGAS and GOL approval ~ Operator shall lio be responsible to BPMIGAS in assuming the responsibilities and lisbiitos of the other PL holders (, 4h and) 'BPMIGAS has the right to directly commanicae, enforce obligation, responsiblity and liabilities of any PI holder ona join and several list basis (166) Total 30 years [Exploration Period :6 yeas extendable wo 4 years Qn, -fpetzoleum is discovered inthe exploration period =~ CONTRACTOR shall report chis to BPMIGAS and GOI for BPMIGAS evaluation and written acknowledgement. = CONTRACTOR, not later than 2 yeas thereafter, shall submit a proposed POD for HPMIGAS lariication, (extendable subject to GSA availabilty and BPMIGAS approval. ~ Am excepeion to the foregoing? years ime mic may be made inthe event of discovery = an exception tothe foregoing 0wo 2) Years time limi maybe made in the even of discovery of Natural Gas field (ut not applicable for feld containing astcited Nara Ga) Hit anicpated ‘hat during such two (2) Years ime limit CONTRACTOR shall ave not saccessilly entered into ‘commercial gassales commitment a the request of CONTRACTOR, BPMIGAS may tts own die cretion exend such to (2) Years time limit toa reasonable pris) of time tobe determined by [BPMIGAS or rjeerany such etenion. Alter POD is approved bythe Minister without any material condition such POD approval shall constitute a declaration of commercality ~ _fprioe expiration of che exploration period and es extension, BPMIGAS doesnot agree to ise 1nacknowledgement of discovery or Minister doesnot approve the POD, chen the CONTRACT shall automatically cerminate after a notification from BPMIGAS + CONTRACT shall automatically terminate sf CONTRACTOR who has received approval ofits POD does nat conduct petroleum operation within a maximum period of 5 consective contract years (unles due tothe absence of 1 GSA) (22-2 -225) Provisions on subvequent petroleum discovery (2.4) ‘No similar provision inthe previous PSC ‘Nosimilar provision inthe previous PSC ‘Sinilar provision (ection I) ‘No similar provision inthe previous PSC Eee Ea Limited = Ifduving the Exploration Period Petaleum is discovered in afield adjacent tothe Contract Area No nila provision in che previous PSC. ‘Commercial ‘which straddles the Contract Area and which in the judgment of BPMIGAS, cannot be produced ‘Contract Area ‘commercially by the Contact Area nits own ther than through unitzation ofthe field with the part of such field located substantially in the other contzact are adjacent to the Contact Ares then ifthe POD of such fed is approved by the Minister, che par ofthe Bld located in the Contract ‘Area wil be declared as a Limited Commercial Contract Ares Upon the commencement of com- ‘mercial production of Petroleum from such Limited Commercial Contract Area, CONTRACTOR shall have the right tothe Petroleum produced from and to recover Operating Cost incurred for ‘the conduct of Petroleum Operations within the Limited Commercial Contract Area ony. ~ CONTRACTOR shall not be ented to recover Operating Cots incurred forthe conduc of Peto- Jeum Operations ouside the Field within che Limited Commercial Contract Area from any reverie derived fom the Feld declared as Limited Commercial Contract Area unt dhe expiration ofthe Exploration Period or its extension under this CONTRACT no Petro- Jeu is discovered ffom athe Held within the Contact Area (ouside the Limited Commercial (Contract Ares) in a quantity which may be produced commercially, then the Limited Commercial Contract Area shall be carved out and separated from the oxginal Contract Ares, and salle rete as producing acreage of the Contract Area, where the terms and conditions of this CONTRACT shall continue to apply, whilst the remaining portion of the Contact Area ouside the Limited ‘Commercial Contract Area shall be relinquished to GOI through EPNIGAS. 3) Subsequent ‘Any petroleum subsequently discovered in the Contace Area shall belmmedialy eeportelto BPMIGAS No similar provisions inthe PSC. petroleum dicovery and GOI for BPMIGAS evaluation. IE BPMIGAS consider that such discovery may be produced commercially, BPMIGAS shall iesue an acknowledgement le No later than years hereafter, CONTRACTOR sal submica proposed POD. ea. 3 as Relinguishment Tita years period: (25%) of Contract Area, nial years period 20%) ofContract Area, ap on, If the frm commisment is not competed ‘Adéitonal 15% fat the end of the 3 year contac fim commitment has not been complete ‘CONTRACTOR is obliged to relingulsh an scditional 159 of orignal Contract Ares. (nor before th end ofthe 6 Contract Yeat:resined aea shall notexceed 20360f the original Contact (82) ‘ea (subject commercial discovery) (Onorteforetheendofthe6* Contac: Year aa, retained area shall not excoed 20 9% of the ‘original Contract Area. (nbject 0 «com Non-compliance with relinguishment requirements will bes basis for EPMIGAS to not approving mercial discovery) Contractor's extension request. 5 @3and3.4) rc) ‘wren “Thereisa firm commitment. Thiscan be ar 42) Similar Provision =i CONTRACTOR submits performance bond tothe Dirgen.Oiland Gas.tocoveritsseismic acquisition The previous PSC doesnot stpulte 2 obligations. The value of the performance bond shal be reduced annually by deducting the seismic _ reduction ofthe performance bond. axtivity budget amount (43) [the exploration period is extended but CONTRACTOR fils to complete the 6 Year Work Program by Nosimilr provision in the previous PSC the 8® Contract Year, CONTRACT shall automatically terminate, (45) Wealth Safty and Inconducting Petroleum Operations, Contractorto implement highest tandardeofcccupationalhealth, No imlar provision inthe previous PSC Environment safety & environmental protection applicable in oil and gar industry, take all easonuble and necessry precaution 035 o prevent injury to or death of person and damage environment and property, and comply with all applicable safety and environmental laws and regulations Gas) cS ‘CONTRACTOR eal nd mannan regi pana on he pedormance ofthe CONTRACT, n~ No nda prvi the revo PSC Sete eer aneScce aeeee 25) a ‘ABandonmest and Accumilton of Finds deosedin an exw account Gna wate owned ban ity controled by ‘Theresanacamlaed fad but atin Rewtoraon Fund _BPMIGASand CONTRACTOR forthe cnductofaundonnentandsuerevradon,Tissalbe ated th fom ofan exrow account whichis (aan Se Oesiny ool eykewereeagd tal eseae eter aaa ipy cone 6260) CONTRACTOR may with the approval of GOI through BPMIGAS, withdraw an amount of AARF re- (6.25) {quired to conduct an abandonment and site restoration prior to the termination ofthe CONTRACT. Ifthe remaining amount ofthe funds not sufficient to nance the restoration and abandonment ofthe site, CONTRACTOR shall ats own account and expenses, be responsible and lable for completing the shandonment snd restoration, 6.2600) Assignment? ~ To lla: with consent of BPMIGAS and GOL [go Alte without consent of transfer of PI ~ To other pares with consent of BPMIGAS and GOL BPMIGAS Provided that during fit 3 contract years, CONTRACTOR remains as a majority holder (greater than 50% = soother panies-with consent 6.274528) FBPMIGAS and GOL =~ Notify and obain BPMIGAS approval to any proposed direct a ndiect change of control. CON- - Except dng fre 3 years, amare TRACTOR shall consinue ro meet the required qualifications and be fllyliableforthe operstion. dominant Polder shall hold 3 operatorshp of the CONTRACT. 2 p29) Tore Draft = Change of consol and operatrship may not rest in any material adltional costs or expenses. ‘CONTRACTOR has no right o recover such addisional costs or expenses unless CONTRACTOR. can demonstrate tht rach changes sall improve efficiency and effectivenes and reduce overall operating cos. 5210) (626an8527) ‘No similar provision in PSC In Kind Tax Payment ‘DMO T7GOl regulates tac the ax obligation of CONTRACTOR mus bo paid in ind, tea the ing enti ‘mentamount of CONTRACTOR shall be determined after deducting the amount equal tothe acrued CONTRACTOR tax obligation 621) For Crd Oi CGleulated as follows (@) Compute 25% of CON ‘om the contrac area (@)_ Price at which Crude Oil be dsivered an sol shall be 25% ofthe price determined Inthe cae that the recoverable operating ost exooed the toa sales proce from Crude Oil produced and saved after being deducted by FTP, the price shall be the weighted average price of allude ol produced and sold from the contact ares duving the Calendar Yar. For Natural Gas [fin the stipulated period GOI doesnot notify CONTRACTOR ofthe exinence of potential domestic x buyer or the negotiations with a domestic potential buyer fi CONTRACTOR shall request the ‘approval of GOI to market and sll the domestic market quantity of Nerural Gas in the international set ‘calulated as follows {@) computing twenty five percent (25%) ofthe quantity of as proven reserves inthe newly discow- fred resenoirin the Cantract Are (©), mukiply theamount stipulated above withthe percentage of CONTRACTOR’: entidement 6219) “There i no stipulation about price. CONTRACTOR recognizes GOI policy o at any time satisfy domestic consumption to its maximum. “The Parties however agree that such poliy shall not be implemented as to prevent or impede CON. "RAGTOR from fling ts obligations porssan to any extng commitmenvagreement to sll Nati ral Gas toa third party; orto materially efode the agreed economic ofthe gas project, (52.20) /RACTOR's entitlement multiplied by tral quantity oferude il produced [annie ponent eras | Similar provision inthe previous PSC 6216) ‘Community Development Tnwurance “Fumish ach othe fund funds and be responsible fr conducting community development programmes “The expenditre shall be forthe account of CONTRACTOR. 622) Any cott and expenses required by CONTRACTOR ta conduct community developmen afer Explort- ‘on Period shall not be incded as Operating Cost a Secure and mainrin sfclene liabiliy and los insurance during che ter inching al flies, max terials, equipment supplies, Petroleum produced and kept in storage before delivery. Without prejudice to the eight ofthe insurance companies to rinse the sis 10 repuableintematonal reinsurance ‘companies al policies fr such insurance shall be effected with reptable insurers established and doing ‘snes in Indonesia on terms and conditions as BPMIGAS may approve, which approval shall not be ‘onreatonaly withheld. The policy shall provide that BPMIGAS is also named as co-insured. CON ‘TRACTOR shall obzain waivers of subrogation in favor of GOI and BPMIGAS and their respective officers diretors,employees, servants agents consultant and appointed representatives. (5.226) [EPMIGAS assumes and discharges (@)_impore duties on materials, equipment and supplies brought into Indonesia, (3) value added tax on goods imported and acually used to conduct exploration activities, (ity shall eisburse CONTRACTOR for value added taxand lary taxon taxable goods and services, (iv) taxes nd retribution imposed by regional Government of the Republic of Indonesia Th the event that pursuant tothe applicable les and regulations CONTRACTOR is required to pay Indonesian tx(s) and retribution directly, BPMIGAS shall reimburse such Indonesian tax and retaibu tion payment only ot of BPMIGAS's share of prodaction hereunder (bt excluing BPMIGAS senile ‘ment to First Tranche Pesrolesm). 632) f fat any time throughout the tenn ofthis CONTRAGT, CONTRACTOR or any ofthe Partipating Ingres Holders a the case may be, ceases tobe subject final tax deduction under Aticle 26 (4 ofthe Indonesia Income Tax Law andlor becomes subject toa tax testy giving right 19 CONTRACTOR or suck Participating Interest Holders) ro pay less chan the amount stipulated in Arile 26 () of the Indonesia Income Tax Law, then such CONTRACTOR or sich Participating Inverets Holders) shall refund to BPMIGAS an amount equal i value othe additonal amount of production share that such CONTRACTOR or such Participating Interests Holder(s) enjoy resulting from the foregoing circum: stances, or alternatively, the share percentages appearing in thls CONTRACT shal be revised in order:0 ‘mainesin the same net income after tax fo all Participating Interest Holders under this CONTRACT. The revision or adjustent of such share may be calclated and coordinated by Operator, or may be exercised individually by the Panicipating lneres Holders) affected, whichever i pacccable and ‘scoeptable ro BPMIGAS “Similar provision in the previous FSC ‘Nosimilar provision inthe previous PSC Similar provisions 632) Gini provision (34)